<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 8, 1995.
1933 ACT REGISTRATION NO. 33-18477
1940 ACT REGISTRATION NO. 811-5385
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM N-1A
<TABLE>
<S> <C>
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 14 /X/
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 16 /X/
</TABLE>
------------------
DREMAN MUTUAL GROUP, INC.
(Exact name of Registrant as Specified in Charter)
<TABLE>
<S> <C>
120 South LaSalle Street, Chicago, Illinois 60603
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: (800) 621-1048
</TABLE>
Copies to:
<TABLE>
<S> <C>
Philip J. Collora, Esquire Charles F. Custer, Esquire
Dreman Mutual Group, Inc., Secretary Vedder, Price, Kaufman & Kammholz
120 South LaSalle Street 222 North LaSalle Street
Chicago, Illinois 60603 Chicago, Illinois 60601
(Name and Address
of Agent for Service)
</TABLE>
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant
has elected to register an indefinite number of shares of common stock under the
Securities Act of 1933. On February 15, 1995, Registrant filed its notice
pursuant to Rule 24f-2 for its fiscal year ended December 31, 1994.
It is proposed that this filing will become effective (check appropriate
box)
immediately upon filing pursuant to paragraph (b)
X on September 11, 1995 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 2
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
ITEMS REQUIRED
BY FORM N-1A LOCATION
<S> <C> <C>
PART A PROSPECTUS
Item 1. Cover Page............................ Cover Page
Item 2. Synopsis.............................. Summary; Summary of Expenses; Supplement to
Prospectus
Item 3. Condensed Financial Information....... Financial Highlights; Supplement to
Prospectus
Item 4. General Description of Registrant..... Cover Page; Summary; Investment Objectives
and Policies; Risk Factors
Item 5. Management of the Fund................ Summary; Investment Manager and Underwriter
Item 6. Capital Stock and Other Securities.... Summary; Investment Manager and Underwriter;
Net Asset Value; Purchase of Shares; Capital
Structure
Item 7. Purchase of Securities Being
Offered............................... Summary; Purchase of Shares
Item 8. Redemption or Repurchase.............. Summary; Redemption or Repurchase of Shares
Item 9. Legal Proceedings..................... Inapplicable
</TABLE>
<PAGE> 3
KEMPER-DREMAN FUND, INC.
SUPPLEMENT TO PROSPECTUS
DATED SEPTEMBER 11, 1995
CLASS I SHARES
Kemper-Dreman Contrarian Fund (the "Contrarian Fund"), Kemper-Dreman High
Return Fund (the "High Return Fund") and Kemper-Dreman Small Cap Value Fund
(the "Small Cap Value Fund") (collectively, the "Funds") currently offer four
classes of shares to provide investors with different purchasing options.
These are Class A, Class B and Class C shares, which are described in the
prospectus, and Class I shares, which are described in the prospectus as
supplemented hereby.
Class I shares are available for purchase exclusively by the following
investors: (a) tax-exempt retirement plans of Kemper Financial Services, Inc.
("KFS"), the parent company of the Funds' investment manager, and its
affiliates; and (b) the following investment advisory clients of KFS and its
investment advisory affiliates (including Kemper Asset Management Company
("KAMCO")) that invest at least $1 million in a Fund: (1) unaffiliated benefit
plans, such as qualified retirement plans (other than individual retirement
accounts and self-directed retirement plans); (2) unaffiliated banks and
insurance companies purchasing for their own accounts; and (3) endowment funds
of unaffiliated non-profit organizations. Class I shares currently are
available for purchase only from Kemper Distributors, Inc., principal
underwriter for the Funds [or Kemper Clearing Corp., an affiliate of KFS and
KAMCO]. Share certificates are not available for Class I shares.
The primary distinctions among the classes of each Fund's shares lie in their
initial and contingent deferred sales charge schedules and in their ongoing
expenses, including asset-based sales charges in the form of Rule 12b-1
distribution fees. Class I shares are offered at net asset value without an
initial sales charge and are not subject to a contingent deferred sales charge
or a Rule 12b-1 distribution fee. Also, there is no administrative services
fee charged to Class I shares. As a result of the relatively lower expenses
for Class I shares, the level of income dividends per share (as a percentage of
net asset value) and, therefore, the overall investment return, will be higher
for Class I shares than for Class A, Class B and Class C shares.
The following information supplements the indicated sections of the prospectus.
SUMMARY OF EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (APPLICABLE TO EACH FUND) CLASS I
-------
<S> <C>
Maximum Sales Charge on Purchases
(as a percentage of offering price) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Maximum Sales Charge on Reinvested Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Redemption Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Deferred Sales Charge (as a percentage of redemption proceeds) . . . . . . . . . . . . . . . . . . None
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
SMALL
HIGH CAP
ANNUAL FUND CONTRARIAN RETURN VALUE
OPERATING EXPENSES FUND FUND FUND
(AS A PERCENTAGE OF AVERAGE NET ASSETS) ---------- ------ -----
<S> <C> <C> <C>
Management Fees (restated) . . . . .75% .75% .75%
12b-1 Fees . . . . . . . . . . . . None None None
Other Expenses (estimated) . . . . .50% .50% .50%
---- ---- ----
Total Operating Expenses . . . . . 1.25% 1.25% 1.25%
==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
Example Fund 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- ---- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
You would pay the following Contrarian $13 $40 $69 $151
expenses on a $1,000 investment, High Return $13 $40 $69 $151
assuming (1) 5% annual return and (2) Small Cap Value $13 $40 $69 $151
redemption at the end of each time
period:
</TABLE>
The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in Class I shares of a Fund will
bear directly or indirectly.
As discussed in the prospectus under "Investment Manager and Underwriter,"
effective August 24, 1995, the investment management fee for each Fund was
changed. "Management Fees" have been restated based upon the new management
fee. "Other Expenses" for Class I shares, which were not available for
purchase prior to September 11, 1995, have been estimated for the current
fiscal year.
The Example assumes a 5% annual rate of return pursuant to requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance of any Fund. The
Example should not be considered to be a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
FINANCIAL HIGHLIGHTS
No financial information is presented for Class I shares since no Class I
shares of any Fund had been issued as of the end of the Funds' fiscal year.
SPECIAL FEATURES
Shareholders of Class I shares who have purchased shares because they are
participants in tax-exempt retirement plans of KFS and its affiliates may
exchange their shares for shares of Kemper Money Market Fund or other Class I
shares for direct purchase at their relative asset values.
September 11, 1995
KDF-1I (9/95)
2
<PAGE> 5
<TABLE>
<S> <C>
TABLE OF CONTENTS
------------------------------------------------
Summary 1
------------------------------------------------
Summary of Expenses 2
------------------------------------------------
Financial Highlights 5
------------------------------------------------
Investments Objectives and Policies 7
------------------------------------------------
Investment Manager and Underwriter 12
------------------------------------------------
Dividends and Taxes 14
------------------------------------------------
Net Asset Value 15
------------------------------------------------
Purchase of Shares 16
------------------------------------------------
Redemption or Repurchase of Shares 20
------------------------------------------------
Special Features 24
------------------------------------------------
Performance 27
------------------------------------------------
Capital Structure 28
------------------------------------------------
</TABLE>
This prospectus of the Kemper-Dreman Fund, Inc. ("KDF") contains information
about KDF that you should know before investing and should be retained for
future reference. A Statement of Additional Information dated September 11,
1995, has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. It is available upon request without charge
from KDF at the address or telephone number on this cover or the firm from which
this prospectus was obtained.
KDF'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
ANY BANK, NOR ARE THEY FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENT IN A
FUND'S SHARES INVOLVES RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
(KEMPER LOGO)
KEMPER-DREMAN
FUND, INC.
PROSPECTUS SEPTEMBER 11, 1995
KEMPER-DREMAN FUND, INC.
120 South LaSalle Street, Chicago, Illinois 60603
1-800-621-1048
This prospectus describes a choice of three portfolios managed by Dreman Value
Advisors, Inc.
KEMPER-DREMAN CONTRARIAN FUND
KEMPER-DREMAN HIGH RETURN FUND
KEMPER-DREMAN SMALL CAP VALUE FUND
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 6
KEMPER-DREMAN FUND, INC.
120 SOUTH LASALLE STREET, CHICAGO, ILLINOIS 60603, TELEPHONE 1-800-621-1048
SUMMARY
INVESTMENT OBJECTIVES. The Kemper-Dreman Fund, Inc. ("KDF") is an open-end,
diversified management investment company. KDF's three portfolios ("Funds")
covered in this prospectus are as follows:
KEMPER-DREMAN CONTRARIAN FUND (the "Contrarian Fund") seeks long-term capital
appreciation with current income as its secondary objective.
KEMPER-DREMAN HIGH RETURN FUND (the "High Return Fund") seeks to achieve a high
rate of total return.
KEMPER-DREMAN SMALL CAP VALUE FUND (the "Small Cap Value Fund") seeks long-term
capital appreciation.
RISK FACTORS. There is no assurance that the investment objective of any Fund
will be achieved and investment in each Fund includes risks that vary in kind
and degree depending upon the investment policies of that Fund. The returns and
net asset value of each Fund will fluctuate. The Funds will invest principally
in securities that, in the judgment of the investment manager, are undervalued.
Investment by the Small Cap Value Fund primarily in smaller companies involves
greater risk than investment in larger, more established companies. The Funds
are authorized to invest in stock index futures and options to buy and sell such
futures. In these investments, the Funds assume the risk, that if the investment
manager's judgment regarding the direction of the securities markets is
incorrect, their investment performance might have been better if they had not
acquired futures contracts. The Funds are authorized to write covered call
options on securities. The High Return and Small Cap Value Funds may write put
options. If the market price of stock subject to a call option rises above the
exercise price of the option, the Funds will lose the opportunity for further
appreciation of that security. In selling a put option, the High Return and
Small Cap Value Funds assume the risk that they might be obligated to acquire
the optioned stock at a price above the current market price. See "Investment
Objectives and Policies."
PURCHASES AND REDEMPTIONS. KDF provides investors with the option of purchasing
shares in the following ways:
Class A Shares..............
Offered at net asset value plus a maximum sales
charge of 5.75% of the offering price. Reduced sales
charges apply to purchases of $50,000 or more. The
redemption within one year of Class A shares
purchased at net asset value under the Large Order
NAV Purchase Privilege may be subject to a 1%
contingent deferred sales charge.
Class B Shares..............
Offered at net asset value, subject to a Rule 12b-1
distribution fee and a contingent deferred sales
charge that declines from 4% to zero on certain
redemptions made within six years of purchase. Class
B shares automatically convert into Class A shares
(which have lower ongoing expenses) six years after
purchase.
Class C Shares..............
Offered at net asset value without an initial or
contingent deferred sales charge, but subject to a
Rule 12b-1 distribution fee. Class C shares do not
convert into another class.
Each class of shares represents interests in the same portfolio of investments
of a Fund. The minimum initial investment is $1,000 and investments thereafter
must be at least $100. Shares are redeemable at net asset value, which may be
more or less than original cost, subject, in the case of Class A shares
purchased under the Large Order NAV Purchase Privilege and for Class B shares,
to any applicable contingent deferred sales charge. See "Purchase of Shares" and
"Redemption or Repurchase of Shares."
1
<PAGE> 7
INVESTMENT MANAGER AND UNDERWRITER. Dreman Value Advisors, Inc. ("DVA") serves
as investment manager for each Fund. DVA is paid an investment management fee by
each Fund based upon average daily net assets of that Fund at an annual rate
ranging from .75% to .62%. Kemper Distributors, Inc. ("KDI"), an affiliate of
DVA, is principal underwriter and administrator for each Fund. For Class B
shares and Class C shares, KDI receives a Rule 12b-1 distribution fee at an
annual rate of .75% of average daily net assets. KDI also receives the amount of
any contingent deferred sales charges paid on the redemption of shares.
Administrative services are provided to shareholders under an administrative
services agreement with KDI. KDF pays an administrative services fee at an
annual rate of up to .25 of 1% of average daily net assets of each class of the
Funds, which KDI pays to financial services firms. See "Investment Manager and
Underwriter."
DIVIDENDS. Each Fund normally distributes dividends of net investment income
quarterly and distributes any net realized capital gains annually. Income and
capital gain dividends of a Fund are automatically reinvested in additional
shares of that Fund, without sales charge, unless the shareholder makes a
different election. See "Dividends and Taxes."
SUMMARY OF EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (APPLICABLE TO ALL
FUNDS)(1) CLASS A CLASS B CLASS C
------- ------------------------ -------
<S> <C> <C> <C>
Maximum Sales Charge on Purchases (as a percentage of
offering price)....................................... 5.75%(2) None None
Maximum Sales Charge on Reinvested Dividends............ None None None
Redemption Fees......................................... None None None
Exchange Fee............................................ None None None
Deferred Sales Charge (as a percentage of redemption
proceeds)............................................. None(3) 4% during the first None
year, 3% during the
second and third years,
2% during the fourth and
fifth years and 1% in
the sixth year
</TABLE>
---------------
(1) Investment dealers and other firms may independently charge additional fees
for shareholder transactions or for advisory services; please see their
materials for details.
(2) Reduced sales charges apply to purchases of $50,000 or more. See "Purchase
of Shares--Initial Sales Charge Alternative--Class A Shares."
(3) The redemption within one year of shares purchased at net asset value under
the Large Order NAV Purchase Privilege may be subject to a 1% contingent
deferred sales charge. See "Purchase of Shares--Initial Sales Charge
Alternative--Class A Shares."
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets and after fee waivers and expense
reimbursements)
<TABLE>
<CAPTION>
CONTRARIAN HIGH RETURN SMALL CAP VALUE
FUND FUND FUND
---------- ----------- ---------------
<S> <C> <C> <C>
CLASS A SHARES
Management Fees (restated)................................... .40% .40% .40%
12b-1 Fees................................................... None None None
Other Expenses (restated).................................... .85% .85% .85%
---------- ----------- -------
Total Operating Expenses..................................... 1.25% 1.25% 1.25%
======== ========= ============
</TABLE>
2
<PAGE> 8
<TABLE>
<CAPTION>
CONTRARIAN HIGH RETURN SMALL CAP VALUE
FUND FUND FUND
---------- ----------- ---------------
<S> <C> <C> <C>
CLASS B SHARES
Management Fees (restated)................................... .40% .40% .40%
12b-1 Fees(4)................................................ .75% .75% .75%
Other Expenses (estimated)................................... .85% .85% .85%
---- ---- ----
Total Operating Expenses..................................... 2.00% 2.00% 2.00%
===== ==== ====
</TABLE>
<TABLE>
<CAPTION>
CONTRARIAN HIGH RETURN SMALL CAP VALUE
FUND FUND FUND
---------- ----------- ---------------
<S> <C> <C> <C>
CLASS C SHARES
Management Fees (restated)................................... .40% .40% .40%
12b-1 Fees(5)................................................ .75% .75% .75%
Other Expenses (estimated)................................... .80% .80% .80%
---- ---- ----
Total Operating Expenses..................................... 1.95% 1.95% 1.95%
==== ==== ====
</TABLE>
---------------
(4) As a result of 12b-1 fees, long-term shareholders may pay more than the
economic equivalent of the maximum initial sales charges permitted by the
National Association of Securities Dealers, although KDI believes that it is
unlikely because of the automatic conversion feature described under
"Purchase of Shares--Deferred Sales Charge Alternative--Class B Shares."
(5) As a result of the accrual of 12b-1 fees, long-term shareholders may pay
more than the economic equivalent of the maximum initial sales charges
permitted by the National Association of Securities Dealers.
EXAMPLE
<TABLE>
<CAPTION>
1 3 5 10
FUND YEAR YEARS YEARS YEARS
-------------------- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
You would pay the following Contrarian Fund $70 $95 $122 $200
expenses on a $1,000 investment, High Return Fund $70 $95 $122 $200
assuming (1) 5% annual return Small Cap Value Fund $70 $95 $122 $200
and (2) redemption at the end of
each time period:
</TABLE>
<TABLE>
<CAPTION>
1 3 5 10
FUND YEAR YEARS YEARS YEARS
-------------------- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C>
CLASS B SHARES(6)
You would pay the following Contrarian Fund $50 $83 $118 $196
expenses on a $1,000 investment, High Return Fund $50 $83 $118 $196
assuming (1) 5% annual return Small Cap Value Fund $50 $83 $118 $196
and (2) redemption at the end of
each time period:
You would pay the following Contrarian Fund $20 $63 $108 $196
expenses on the same investment, High Return Fund $20 $63 $108 $196
assuming no redemption: Small Cap Value Fund $20 $63 $108 $196
</TABLE>
3
<PAGE> 9
EXAMPLE
<TABLE>
<CAPTION>
1 3 5 10
FUND YEAR YEARS YEARS YEARS
-------------------- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C>
CLASS C SHARES
You would pay the following Contrarian Fund $ 20 $ 61 $ 105 $ 227
expenses on a $1,000 investment, High Return Fund $20 $61 $105 $227
assuming (1) 5% annual return Small Cap Value Fund $20 $61 $105 $227
and (2) redemption at the end of
each time period:
</TABLE>
---------------
(6) Assumes conversion to Class A shares six years after purchase and was
calculated based upon the assumption that the shareholder was an owner of
the shares on the first day of the first year and the contingent deferred
sales charge was applied as follows: 1 year (3%), 3 years (2%), 5 years (1%)
and 10 years (0%). See "Redemption or Repurchase of Shares--Contingent
Deferred Sales Charge--Class B Shares" for more information regarding the
calculation of the contingent deferred sales charge.
The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in a Fund will bear directly or
indirectly. See "Investment Manager and Underwriter" for more information.
Although it is anticipated that each Fund will eventually bear all its own
expenses, DVA has agreed to waive its management fee and absorb operating
expenses of each Fund to the extent necessary to limit the Fund's operating
expenses to the following percentage of such Fund's average net assets until
September 11, 1996: Class A shares - 1.25%; Class B shares - 2.00%; and Class C
shares - 1.95%. Without the expense limitation, "Management Fees" for each class
of each Fund would be .75%, "Other Expenses" for the Class A shares of each Fund
would be .85%, Class B would be .95%, and Class C would be .90%, and "Total
Operating Expenses" for the Class A shares of each Fund would be 1.60%, Class B
would be 2.45%, and Class C shares would be 2.40%.
Effective August 24, 1995, the investment management fee for each Fund changed.
"Management Fees" have been restated based upon the new investment management
fee. "Other Expenses" have been restated to reflect different fee schedules for
the current fiscal year. "Other Expenses" for Class B shares and Class C shares,
which were not available for purchase prior to September 11, 1995, have been
estimated for the current fiscal year.
The Example assumes a 5% annual rate of return pursuant to requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance of any Fund. The
Example should not be considered to be a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
4
<PAGE> 10
FINANCIAL HIGHLIGHTS
The tables below show financial information for each Fund expressed in terms of
one Class A share outstanding throughout the period. The information in the
tables, except for the recent six months information for the Funds which is
unaudited, is covered by the report of Tait, Weller & Baker, independent
certified public accountants. The report is contained in KDF's Registration
Statement and is available from KDF. The financial statements contained in the
1994 Annual Report to Shareholders and 1995 Semiannual Report to Shareholders
are incorporated herein by reference and may be obtained by writing or calling
KDF.
CONTRARIAN FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1995 1994 1993 1992 1991 1990 1989 1988(A)
---------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.18 13.62 13.50 12.38 10.11 11.34 10.55 10.00
------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .13 .28 .22 .25 .28 .25 .29 .11
------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses) on
securities 2.33 (.28) .96 1.13 2.38 (.94) 1.60 .54
------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.46 0.00 1.18 1.38 2.66 (.69) 1.89 .65
------------------------------------------------------------------------------------------------------------------------
Less distributions:
Distributions from net investment income (.13) (.28) (.22) (.26) (.28) (.26) (.29) (.10 )
------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains on
investments (.14) (1.16) (.84) (.00) (.11) (.28) (.81) (.00 )
------------------------------------------------------------------------------------------------------------------------
Total distributions (.27) (1.44) (1.06) (.26) (.39) (.54) (1.10) (.10 )
------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 14.37 12.18 13.62 13.50 12.38 10.11 11.34 10.55
------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%): 20.44 (0.03) 9.10 11.32 26.53 (6.08) 18.29 6.96
------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $13,516 12,983 17,157 14,884 14,292 11,782 9,632 5,889
------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets(b)(%) 1.25* 1.25 1.25 1.25 1.25 1.25 1.25 1.34 *
------------------------------------------------------------------------------------------------------------------------
Ratio of net income to average net assets(c)(%) 1.93* 1.89 1.64 2.04 2.35 2.46 2.59 2.42 *
------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(%) 7 16 16 28 36 37 45 39
------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
(a) For the period March 18, 1988 (inception date) to December 31, 1988.
(b) Ratio of expenses to average net assets prior to reimbursement of expenses
was 1.59%*, 1.42%, 1.54%, 1.53%, 1.76%, 1.52%, 1.67% and 2.37%*,
respectively.
(c) Ratio of net investment income to average net assets prior to reimbursement
of expenses was 1.59%*, 1.71%, 1.34%, 1.76%, 1.84%, 2.19%, 2.17% and 1.39%*,
respectively.
5
<PAGE> 11
HIGH RETURN FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1995 1994 1993 1992 1991 1990 1989 1988(a)
---------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.11 15.50 14.62 12.53 8.85 10.14 11.03 10.00
--------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .13 .25 .21 .24 .31 .34 .39 .25
--------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses)
on securities 2.88 (.39) 1.13 2.21 3.87 (1.21) 1.41 1.00
--------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.01 (.14) 1.34 2.45 4.18 (.87) 1.80 1.25
--------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Distributions from net investment income (.13) (.25) (.21) (.24) (.30) (.35) (.43) (.22)
--------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains on
investments (.00) (.00) (.25) (.12) (.20) (.07) (2.26) (.00)
--------------------------------------------------------------------------------------------------------------------------------
Total distributions (.13) (.25) (.46) (.36) (.50) (.42) (2.69) (.22)
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 17.89 15.11 15.50 14.62 12.53 8.85 10.14 11.03
--------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(%): 20.01 (0.99) 9.22 19.80 47.57 (8.63) 18.45 13.04
--------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $44,795 35,005 28,413 14,425 7,238 3,868 3,992 2,413
--------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets(b)(%) 1.25* 1.25 1.25 1.25 1.25 1.25 1.25 .57*
--------------------------------------------------------------------------------------------------------------------------------
Ratio of net income to average net
assets(c)(%) 1.61* 1.58 1.47 1.88 2.52 3.61 3.83 3.75*
--------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(%) 2 12 14 13 37 204 156 107
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
(a) For the period March 18, 1988 (inception date) to December 31, 1988.
(b) Ratio of expenses to average net assets prior to reimbursement of expenses
was 1.40%*, 1.39%, 1.56%, 1.70%, 2.31%, 2.38%, 2.74% and 3.36%*,
respectively.
(c) Ratio of net investment income to average net assets prior to reimbursement
of expenses was 1.45%*, 1.44%, 1.16%, 1.43%, 1.46%, 2.48%, 2.34% and .96%*,
respectively.
SMALL CAP VALUE FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1995 1994 1993 1992(a)
----------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.85 11.23 11.52 10.00
---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .00 .00 .06 .03
---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses) on securities 3.18 .02 .23 1.95
---------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.18 .02 .29 1.98
---------------------------------------------------------------------------------------------------------------------------
Less distributions:
Distributions from net investment income (.00) (.00) (.06) (.03)
---------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains on investments (.13) (.40) (.52) (.43)
---------------------------------------------------------------------------------------------------------------------------
Total distributions (.13) (.40) (.58) (.46)
---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.90 10.85 11.23 11.52
---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(%): 29.55 .15 2.54 32.51*
---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $11,752 6,931 4,875 2,385
---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets(b)(%) 1.25* 1.25 1.25 1.25*
---------------------------------------------------------------------------------------------------------------------------
Ratio of net income to average net assets(c)(%) .10* (.03) .53 .81*
---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(%) 38 140 79 37
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
(a) For the period May 22, 1992 (commencement of operations) to December 31,
1992.
(b) Ratio of expenses to average net assets prior to reimbursement of expenses
was 1.81%*, 1.82%, 2.09% and 4.29%,* respectively.
(c) Ratio of net investment income to average net assets prior to reimbursement
of expenses was (.68)%*, (.61)%, (.32)% and (2.24)%,* respectively.
6
<PAGE> 12
INVESTMENT OBJECTIVES AND POLICIES
The following information sets forth each Fund's investment objective and
policies. The investment objective of each Fund may be changed without the
affirmative vote of a majority of the outstanding securities of that Fund. KDF
has, however, undertaken to certain State Securities Commissioners that it will
not change the investment objective of any Fund without a stockholder vote for
as long as the Fund is registered in those states. Each Fund's returns and net
asset value will fluctuate and there is no assurance that any Fund will meet its
objective. For a description of how DVA selects specific securities for
inclusion in a Fund's portfolio, see "Additional Investment Information."
CONTRARIAN FUND. The Contrarian Fund's primary investment objective is to seek
long-term capital appreciation and its secondary objective is to seek current
income. It will invest principally in a diversified portfolio consisting
primarily of common stocks believed by DVA to be undervalued. Securities of a
company may be undervalued as a result of overreaction by investors to
unfavorable news about a company, industry or the stock markets in general or as
a result of a market decline, poor economic conditions, tax-loss selling or
actual or anticipated unfavorable developments affecting the company.
The Fund will invest primarily in common stocks of larger, listed companies with
a record of earnings and dividends, low price-earnings ratios, reasonable
returns on equity, and sound finances which, in the opinion of DVA, have
intrinsic value. The Fund may, however, from time to time, invest in stocks that
pay no dividends. It is anticipated that most stocks purchased will be listed on
the New York Stock Exchange, but the Fund may also purchase securities listed on
other securities exchanges and in the over-the-counter market. The Fund may sell
call options on securities it holds ("covered call options").
HIGH RETURN FUND. The High Return Fund's investment objective is to achieve a
high rate of total return. The common stocks held by the Fund will have the same
investment characteristics as those held by the Contrarian Fund. The Fund
generally will invest in common stocks that pay relatively high dividends, i.e.
comparable to the dividend yield of Standard & Poor's 500 Composite Stock Index.
In order to enhance its investment return, the Fund may sell covered call
options, and sell put options on securities it may acquire. The Fund will earn
premium income on the sale of these options.
While most investments will be in dividend paying stocks, the Fund may also
acquire stocks that do not pay dividends in anticipation of market appreciation,
future dividends, and when DVA believes that it would be advantageous to write
options on such stocks. The Fund will be managed with a view to achieving a high
rate of total return on investors' capital primarily through appreciation of its
common stock holdings, options transactions and by acquiring and selling stock
index futures and options thereon and, to a lesser extent, through dividend and
interest income, all of which, in DVA's judgment, are elements of "total
return."
SMALL CAP VALUE FUND. The Small Cap Value Fund's investment objective is to seek
long-term capital appreciation. It will invest principally in a diversified
portfolio of equity securities of small companies with market capitalizations
ranging from $100 million to $1 billion that DVA believes to be undervalued.
Securities of a company may be undervalued as a result of overreactions by
investors to unfavorable news about a company, industry or the stock markets in
general or as a result of a market decline, poor economic conditions, tax-loss
selling or actual or anticipated unfavorable developments affecting the company.
Under normal market conditions, at least 65% of the total assets of the Fund
will be invested in securities of companies whose market capitalizations are
less than $1 billion.
The Fund will invest primarily in common stocks of companies with a record of
earnings, low price-earnings ratios, reasonable returns on equity and sound
finances which, in the opinion of DVA, have intrinsic value. Such securities are
generally traded on the New York Stock Exchange, the American Stock Exchange and
in the over-the-counter market. The Fund may also sell covered call options and
put options on securities it may acquire.
ADDITIONAL INVESTMENT INFORMATION. The portfolio turnover rates of the Funds are
listed under "Financial Highlights." A Fund may periodically experience a high
turnover rate (over 100%). The Funds will usually hold
7
<PAGE> 13
stocks acquired for the long-term and will sell stocks when DVA believes that
anticipated price appreciation is no longer probable, alternative investments
offer superior appreciation prospects, or the risk of decline in market prices
is greater than the potential for gain. Portfolio turnover will tend to rise
during periods of economic turbulence and decline during periods of stable
growth. Generally, the Contrarian Fund will exercise the discipline of selling
stocks when their price-earnings ratio ("P/E ratio") rise to a level in excess
of the P/E ratio of the stocks that comprise the S&P 500 Composite Stock Index.
The use of options and futures contracts will tend to increase the portfolio
turnover rate of the High Return Fund. To the extent the investment policies of
that Fund result in a relatively high turnover rate, it will incur greater
expenses and brokerage fees.
SELECTION OF INVESTMENTS. In order to determine whether a security is
"undervalued," the principal factor considered by DVA is the P/E ratio of the
security. DVA believes that the risk in owning stocks can be reduced by
investing in companies with sound finances whose current market prices are low
in relation to earnings. In determining whether a company's finances are sound,
DVA considers among other things, its cash position and current ratio (current
assets compared to current liabilities) and, in this regard, considers a 2:1
ratio to be favorable.
DVA applies quantitative analysis to its research process, and begins by
screening a large number of stocks. Typically, most companies selected for
inclusion in the Contrarian and High Return Funds will have market
capitalizations well in excess of $1 billion and those selected for inclusion in
the Small Cap Value Fund will have market capitalizations ranging from
approximately $100 million to $1 billion. In selecting among stocks with low P/E
ratios, DVA also considers factors such as the following about the issuer:
- Financial strength;
- Book-to-market value;
- Five and ten-year earnings growth rates;
- Five and ten-year dividend growth rates;
- Five and ten-year return on equity;
- Size of institutional ownership; and
- Earnings estimates for the next 12 months.
Fundamental analysis is used on companies that initially look promising.
Earnings and cash flow analysis as well as a company's conventional dividend
payout ratio are important to this process. Generally, with respect to the
Contrarian and High Return Funds, DVA seeks companies with growth rates better
than 10% in the last five and ten-year periods for both earnings and dividends.
Typically, the Funds will consist of approximately 25 to 50 stocks, diversified
by both sector and industry. Most investments will be in securities of domestic
companies, but, the Funds may also invest up to 20% of their assets in
securities of foreign companies through the acquisition of sponsored American
Depository Receipts. ADRs are receipts issued by a U.S. bank or trust company
evidencing ownership of underlying securities issued by a foreign issuer. ADRs
may be listed on a national securities exchange or may be traded in the
over-the-counter market. The Funds may also invest in preferred stocks,
convertible securities and warrants. While it is anticipated that under normal
circumstances all Funds will be fully invested, in order to conserve assets
during periods when DVA believes that the markets for equity securities are
unduly speculative, each Fund may invest up to 50% of its assets in cash or
defensive-type securities, such as high-grade debt securities, securities of the
U.S. Government or its agencies and high quality money market instruments,
including repurchase agreements. Investments in such interest bearing securities
will be for temporary defensive purposes only.
The Funds' policies of investing in securities that may be out of favor differs
from the investment approach followed by many other mutual funds. Companies
reporting poor earnings, whose businesses are cyclically down, whose prices have
declined sharply or that are not widely followed are not typically held by most
investment companies. It is DVA's belief, however, that the securities of sound,
well-managed companies that may be temporarily out of favor due to earnings
declines or other adverse developments are likely to provide a greater total
investment return than securities whose prices appear to reflect anticipated
favorable developments.
REPURCHASE AGREEMENTS. Each Fund may invest in repurchase agreements, under
which it acquires ownership of a security and the broker-dealer or bank agrees
to repurchase the security at a mutually agreed upon time and price,
8
<PAGE> 14
thereby determining the yield during the Fund's holding period. In the event of
a bankruptcy or other default of a seller of a repurchase agreement, the Fund
might have expenses in enforcing its rights, and could experience losses,
including a decline in the value of the underlying securities and loss of
income. The securities underlying a repurchase agreement will be
marked-to-market every business day so that the value of such securities is at
least equal to the investment value of the repurchase agreement, including any
accrued interest thereon. In addition, the Fund must take physical possession of
the security or receive written confirmation of the purchase and a custodial or
safekeeping receipt from a third party or be recorded as the owner of the
security through the Federal Reserve Book-Entry System. Repurchase agreements
will be limited to transactions with financial institutions believed by the
investment manager to present minimal credit risk. The investment manager will
monitor on an on-going basis the creditworthiness of the broker-dealers and
banks with which the Funds may engage in repurchase agreements. Repurchase
agreements maturing in more than seven days will be considered as illiquid for
purposes of the Funds' limitations on illiquid securities. The Funds will not
invest more than 10% of the value of their net assets in illiquid securities
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.
OPTIONS. The High Return Fund and the Small Cap Value Fund may sell covered call
options on securities they own and put options on securities they may acquire.
The sale of a covered call option by the Fund gives the purchaser the right to
purchase a specified number of shares of a company held by the Fund at a
specified price ("strike price") on or before the exercise date. The sale of a
put option by a Fund entitles the purchaser to sell a specified number of shares
of common stock of a company to the Fund at the strike price on or before the
exercise date. The Contrarian Fund also may sell covered call options on
securities it owns when DVA believes it is advantageous for the Fund to do so.
When a Fund sells a covered call option or a put option, the purchaser will pay
the Fund a sum of cash referred to as a "premium". The amount of the premium is
established on the securities exchange on which the option is traded, and will
be determined by the market price of the optioned stock, the strike price of the
option, the length of time remaining until the expiration date, and other market
factors. To the extent that the High Return Fund engages in options
transactions, it may do so to enhance its total return through the receipt of
premiums.
If the market price of the optioned stock exceeds the strike price of a covered
call option prior to the expiration date, the option may be exercised. In this
event, a Fund will either deliver the optioned stock or, at any time prior to
the expiration date, it may purchase an identical option and close out the
transaction (a "closing transaction"). If the market price of the optioned stock
does not exceed the strike price prior to the expiration date the option will
not be exercised and will expire.
If the market price of the stock subject to a put option falls below the strike
price of the put option before the expiration date, the purchaser of the option
may require the Fund to purchase the stock at the strike price. In this event,
the Fund will either purchase the optioned stock or, at any time prior to the
expiration date, the Fund may enter into a closing transaction. If the market
price of the stock subject to the put option does not fall below the strike
price prior to the expiration date, the option will expire unexercised.
The High Return and Small Cap Value Funds will only sell put options and covered
call options that are issued by the Options Clearing Corporation and listed on a
national securities exchange. The Contrarian Fund will only sell covered call
that are issued by the Options Clearing Corporation and listed on a national
securities exchange. The Funds are authorized to sell covered call options on
all of the stocks they hold. No put option will be sold, however, if as a result
the High Return or Small Cap Value Fund would be obligated to purchase
securities whose total value exceeds 50% of the net assets of the Fund. When a
Fund sells a put option, it will establish a segregated account consisting of
short-term high-grade debt obligations to cover its obligation to acquire the
securities underlying the option or will hold on a share-for-share basis a put
on the same security as the put sold where the exercise price of the put held is
equal to or greater than the exercise price of the put sold. The segregated
securities will be "marked to market" daily to equal the current market value of
the optioned stock. By investing in stocks that pay relatively high dividends
and earning premiums from the sale of put and covered call options, a Fund may
seek to earn a
9
<PAGE> 15
current rate of return comparable to that of so-called high yield bonds. A "high
yield" bond (sometimes referred to as a "junk bond") is generally considered to
be a bond that offers a higher yield than a bond with a higher credit rating as
compensation for the greater risk involved. Ordinarily, such bonds are rated BB
-Ba through CC.
FUTURES CONTRACTS. The Funds may purchase and sell stock index futures contracts
and index options as hedges against changes resulting from market conditions in
the values of the securities held by the Funds, or securities that they intend
to purchase or sell, where such transactions are economically appropriate for
the reduction of risks inherent in the ongoing management of the Funds.
The High Return and Small Cap Value Funds may seek to take advantage of
significant declines in the stock markets by selling put options on stocks and
index futures contracts, and during periods of rising prices, all Funds may sell
covered call options on stocks and index futures they hold, thereby availing
themselves of increased options premiums which ordinarily correspond to
significant movements in the market prices of common stocks. The ordinary
spreads between prices in the securities and futures markets, due to the
difference in the nature of those markets, are subject to distortions (e.g., the
margin requirements on futures and the relative liquidity of the respective
markets). The Funds may attempt to take advantage of such disparities. To
compensate for imperfect correlations, a Fund may buy futures contracts in a
greater dollar amount than the dollar amount of the securities being hedged if
the historical volatility of the prices of such securities has been greater than
the historical volatility of the futures contracts. In addition, index futures
contracts may be acquired and sold to facilitate cash management of the
Contrarian, High Return and Small Cap Value Funds pending investment of the
proceeds of large purchases of a Fund's shares and to facilitate large
redemptions of its shares.
While futures contracts provide for the delivery of securities, deliveries
usually do not occur. Contracts are generally terminated by entering into an
off-setting transaction. The Funds will incur brokerage fees when they purchase
futures contracts. At the same time such a purchase is made, the Fund must
provide cash or securities as a deposit ("initial deposit") known as "margin."
Daily thereafter, the futures contract is valued and the payment of "variation
margin" may be required, because each day the Fund must provide or receive cash
reflecting the decline or increase in the value of the contract.
A Fund may not purchase futures contracts or options thereon if, immediately
thereafter the sum of the initial and variation margin deposits on its existing
futures positions would exceed 5% of its total assets (including margin
deposits).
SECURITIES LOANS. The Funds are authorized to lend their portfolio securities to
qualified brokers, dealers, banks and other financial institutions for the
purpose of realizing additional investment income. KDF does not intend to lend
securities of any Fund if as a result more than 5% of the net assets of the Fund
would be on loan.
BORROWING. While all of the Funds are authorized to borrow from banks in amounts
not in excess of 10% of their respective total assets, they do not intend to do
so. If, in the future, they do borrow from banks, they would not purchase
additional securities at any time when such borrowings exceed 5% of their
respective net assets.
SPECIAL RISK FACTORS. The value of the shares of the Funds will fluctuate with
the investment experience of the securities they hold. There can be no
assurance, of course, that any Fund will achieve its investment objective.
OPTIONS AND FINANCIAL FUTURES TRANSACTIONS. When the High Return or Small Cap
Value Fund sells a put option, the Fund may be required to purchase the optioned
stock at a price that exceeds the market price of the stock on or before the
expiration date of the option. Put options will be sold with this possibility in
mind and, therefore, the Fund will sell put options on stocks that DVA believes
would be desirable holdings even if acquired at the strike price of the option.
When a Fund sells a covered call option, the Fund may be required to sell the
optioned stock at a price below the market price of the stock on the expiration
date of the option. In these circumstances, the ability of the Fund to realize a
capital gain on the optioned stock will be limited to the difference between the
price at which the Fund purchased the stock and the strike price of the option,
plus the premium it received for the sale of the option.
10
<PAGE> 16
However, because the investment objective of the High Return Fund is to achieve
a high rate of total return and the Contrarian Fund has a secondary objective of
seeking current income, transactions in covered call options will be effected
with a view to achieving these goals and may limit the Fund's ability to realize
additional capital gains on optioned stocks that have appreciated in value.
An option closing transaction may be effected only on an exchange that provides
a secondary market for an option of the same series. Although the Contrarian,
High Return and Small Cap Value Funds will generally sell only those options for
which DVA believes there is an active market, there is no assurance that a
liquid market on an exchange will exist for any particular option. In such
event, it might not be possible to effect closing transactions in particular
options, with the result that a Fund would be unable to close out an option
position by acquiring an identical option. Moreover, there can be no assurance
that option closing transactions can be effected at prices that are advantageous
to a Fund.
A Fund will not enter into any futures contracts or options on futures contracts
if the aggregate of the contract value of the outstanding futures contracts of
the Fund and futures contracts subject to outstanding options written by the
Fund would exceed 50% of the total assets of the Fund.
Investments in futures contracts entail the risk that, if DVA's investment
judgment about the general direction of the securities markets is incorrect, the
Fund's overall performance may be poorer than if it had not entered into any
such contracts. For example, if a Fund has hedged against the possibility of a
decrease in market prices which would adversely affect the price of securities
held, and market prices increase instead, the Fund will lose part or all of the
benefit of the increased value of its securities because it will have offsetting
losses in its futures position. In addition, in such situations, if the Fund had
insufficient cash, it might have to sell securities from its portfolio to meet
daily variation margin requirements. Such sales of securities may, but will not
necessarily, be at increased prices that reflect the rising market. Therefore, a
Fund may have to sell securities at a time when it may be disadvantageous to do
so.
SMALL CAP SECURITIES. Investments in securities of companies with small market
capitalizations are generally considered to offer greater opportunity for
appreciation and to involve greater risks of depreciation than securities of
companies with larger market capitalizations. Since the securities of such
companies are not as broadly traded as those of companies with larger market
capitalizations, these securities are often subject to wider and more abrupt
fluctuations in market price.
Among the reasons for the greater price volatility of these securities are the
less certain growth prospects of smaller firms, a lower degree of liquidity in
the markets for such stocks compared to larger capitalization stocks, and the
greater sensitivity of small companies to changing economic conditions. In
addition to exhibiting greater volatility, small company stocks may, to a
degree, fluctuate independently of larger company stocks. Small company stocks
may decline in price as large company stock prices rise, or rise in price as
large company stock prices decline. Investors should therefore expect that the
value of the Small Cap Value Fund's shares may be more volatile than the shares
of a fund that invests in larger capitalization stocks.
11
<PAGE> 17
INVESTMENT MANAGER AND UNDERWRITER
INVESTMENT MANAGER. Dreman Value Advisors, Inc. ("DVA"), 10 Exchange Place, 20th
Floor, Jersey City, New Jersey 07302, is the investment manager of each Fund and
provides each Fund with continuous professional investment supervision. DVA,
which was formed in October 1994, began serving as investment manager to the
Funds in August, 1995 when it acquired substantially all the assets of Dreman
Value Management, L.P., KDF's former investment manager. DVA has approximately
$2 billion under management. It is a wholly owned subsidiary of Kemper Financial
Services, Inc. ("KFS"), which is one of the largest investment managers in the
country and has been engaged in the management of investment funds for more than
forty-five years. KFS and its affiliates, including DVA, provide investment
advice and manage investment portfolios for the Kemper Funds, the Kemper
insurance companies, Kemper Corporation and other corporate, pension,
profit-sharing and individual accounts representing approximately $60 billion
under management. KFS acts as investment manager for 25 open-end and seven
closed-end investment companies, with 63 separate investment portfolios,
representing more than 3 million shareholder accounts. KFS is a wholly-owned
subsidiary of Kemper Financial Companies, Inc., which is a financial services
holding company that is more than 99% owned by Kemper Corporation ("Kemper"), a
diversified insurance and financial services holding company.
Kemper has entered into a definitive agreement with an investor group led by
Zurich Insurance Company ("Zurich") pursuant to which Kemper would be acquired
by the investor group in a merger transaction. As part of the transaction,
Zurich or an affiliate would purchase KFS. The Kemper and Zurich boards have
approved the transaction. Consummation of the transaction is subject to a number
of contingencies, including approval by the stockholders of Kemper and
regulatory approvals. Because the transaction would constitute an assignment of
KDF's investment management agreement with DVA and potentially Rule 12b-1
agreement under the Investment Company Act of 1940 and therefore a termination
of such agreements, DVA has received approval of the new agreements from the
Funds' shareholders and Board of Directors. The transaction is expected to close
in the fourth quarter of 1995 or early in 1996.
Responsibility for overall management of KDF rests with its Board of Directors
and officers. Professional investment supervision is provided by DVA. The
investment management agreement provides that DVA shall act as each Fund's
investment adviser, manage its investments and provide it with various services
and facilities.
James Holmes has been the portfolio manager of the Contrarian Fund since
September, 1995. Mr. Holmes is currently a Managing Director of DVA and prior to
its inception, he was associated with KDF's former investment adviser. He
received a B.S. in finance from Marquette University, Milwaukee, Wisconsin and
an M.B.A. in Finance from Northwestern University, Evanston, Illinois.
David Dreman has been the portfolio manager of the High Return Fund since its
inception. He is currently the Chairman and a Director of DVA and a vice
president of KDF and was associated with KDF's former investment adviser. Mr.
Dreman is a pioneer of the philosophy of contrarian investing (buying what is
out of favor) and a leading proponent of the low P/E investment style. He is a
columnist for Forbes and the author of several books on the value style of
investing. He received a Bachelor of Commerce from the University of Manitoba,
Winnipeg, Manitoba, Canada.
Michael Berry has been the portfolio manager of the Small Cap Value Fund since
September, 1995. He is currently a Managing Director of DVA and had been
associated with KDF's former investment adviser since April, 1994. Prior
thereto, he was a Professor at James Madison University, Harrisonburg, Virginia
and at the University of Virginia, Charlottesville, Virginia. He received a
Bachelors in Math from the University of Waterloo, an M.B.A. in Marketing from
the University of Connecticut and a Ph.D. in Finance from Arizona State
University.
Each Fund pays DVA an investment management fee, payable monthly, at the annual
rate of .75 of 1% of the first $250 million of its average daily net assets, .72
of 1% of average daily net assets between $250 million and $1 billion, .70 of 1%
of average daily net assets between $1 billion and $2.5 billion, .68 of 1% of
average daily net assets between $2.5 billion and $5 billion, .65 of 1% of
average daily net assets between $5 billion and $7.5 billion,
12
<PAGE> 18
.64 of 1% of average daily net assets between $7.5 billion and $10 billion, .63
of 1% of average daily net assets between $10 billion and $12.5 billion and .62
of 1% of its average daily net assets over $12.5 billion. To the extent that the
management fee paid to DVA is .75%, it is higher than that paid by most other
mutual funds.
See "Summary of Fund Expenses" for a description of the fee waiver and expense
reimbursement in effect through September 11, 1996.
PRINCIPAL UNDERWRITER. Pursuant to an underwriting and distribution services
agreement ("distribution agreement") with KDF, Kemper Distributors, Inc.
("KDI"), an affiliate of DVA, is the principal underwriter and distributor of
each Funds's shares and acts as agent of each Fund in the sale of its shares.
KDI bears all its expenses of providing services pursuant to the distribution
agreement, including the payment of any commissions. KDI provides for the
preparation of advertising or sales literature and bears the cost of printing
and mailing prospectuses to persons other than shareholders. KDI bears the cost
of qualifying and maintaining the qualification of the Funds' shares for sale
under the securities laws of the various states and KDF bears the expense of
registering its shares with the Securities and Exchange Commission. KDI may
enter into related selling group agreements with various broker-dealers,
including affiliates of KDI, that provide distribution services to investors.
KDI also may provide some of the distribution services.
Class A Shares. KDI receives no compensation from KDF as principal underwriter
for Class A shares and pays all expenses of distribution of KDF's Class A shares
under the distribution agreement not otherwise paid by dealers or other
financial services firms. As indicated under "Purchase of Shares," KDI retains
the sales charge upon the purchase of shares and pays or allows concessions or
discounts to firms for the sale of KDF shares.
Class B Shares. For its services under the distribution agreement, KDI receives
a fee from each Fund, payable monthly, at the annual rate of .75 of 1% of
average daily net assets of such Fund attributable to Class B shares. This fee
is accrued daily as an expense of Class B shares. KDI also receives any
contingent deferred sales charges. See "Redemption or Repurchase of
Shares-Contingent Deferred Sales Charge-Class B Shares." KDI currently
compensates firms for sales of Class B shares at a commission rate of 3.75%.
Class C Shares. For its services under the distribution agreement, KDI receives
a fee from KDF, payable monthly, at the annual rate of .75 of 1% of average
daily net assets of the KDF attributable to Class C shares. This fee is accrued
daily as an expense of Class C shares. KDI currently pays firms for sales of
Class C shares a distribution fee, payable quarterly, at an annual rate of .75
of 1% of net assets attributable to Class C shares maintained and serviced by
the firm. A firm becomes eligible for the distribution fee based upon assets in
accounts in the month of purchase and the fee continues until terminated by KDI
or KDF.
Rule 12b-1 Plan. Since the distribution agreement provides for fees payable as
an expense of the Class B shares and the Class C shares that are used by KDI to
pay for distribution services for those classes, that agreement is approved and
reviewed separately for the Class B shares and the Class C shares in accordance
with Rule 12b-1 under the Investment Company Act of 1940, which regulates the
manner in which an investment company may, directly or indirectly, bear the
expenses of distributing its shares.
If the Rule 12b-1 Plan is terminated in accordance with its terms, the
obligation of KDF to make payments to KDI pursuant to the Plan will cease and
KDF will not be required to make any payments past the termination date. Thus,
there is no legal obligation for KDF to pay any expenses incurred by KDI in
excess of its fees under the Plan, if for any reason the Plan is terminated in
accordance with its terms. Future fees under the Plan may or may not be
sufficient to reimburse KDI for its expenses incurred.
ADMINISTRATIVE SERVICES. KDI also provides information and administrative
services for shareholders of KDF pursuant to an administrative services
agreement ("administrative agreement"). KDI may enter into related arrangements
with various financial services firms, such as broker-dealer firms or banks
("firms"), that provide services and facilities for their customers or clients
who are shareholders of KDF. Such administrative services and assistance may
include, but are not limited to, establishing and maintaining shareholder
accounts and records, processing purchase and redemption transactions, answering
routine inquiries regarding each Fund and its special
13
<PAGE> 19
features, and such other services as may be agreed upon from time to time and
permitted by applicable statute, rule or regulation. KDI bears all its expenses
of providing services pursuant to the administrative agreement, including the
payment of any service fees. For services under the administrative agreement,
KDF pays KDI a fee, payable monthly, at the annual rate of up to .25 of 1% of
average daily net assets of Class A, B and C shares of each Fund. KDI then pays
each firm a service fee at an annual rate of up to .25 of 1% of net assets of
each class of those accounts that it maintains and services for KDF. Firms to
which service fees may be paid include broker-dealers affiliated with KDI. A
firm becomes eligible for the service fee based on assets in the accounts in the
month following the month of purchase (in the month of purchase for Class C
shares) and the fee continues until terminated by KDI or KDF. The fees are
calculated monthly and paid quarterly. KDI may advance to financial services
firms the first year service fee related to Class B shares sold by such firms at
a rate of up to .25 of 1% of the purchase price of such shares. As compensation
therefor, KDI may retain the administrative services fee paid by KDF with
respect to such shares for the first year after purchase. Financial services
firms will become eligible for future service fees with respect to such shares
commencing in the thirteenth month following the month of purchase.
KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreement not paid to firms to compensate
itself for administrative functions performed for KDF. Currently, the
administrative services fee payable to KDI is based only upon KDF assets in
accounts for which there is a firm listed on KDF's records and it is intended
that KDI will pay all the administrative services fee that it receives from KDF
to firms in the form of service fees. The effective administrative services fee
rate to be charged against all assets of KDF while this procedure is in effect
will depend upon the proportion of Fund assets that is in accounts for which
there is a firm of record.
CUSTODIAN AND SHAREHOLDER SERVICE AGENT. Investors Fiduciary Trust Company
("IFTC"), 127 West 10th Street, Kansas City, Missouri 64105, as custodian, and
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02110, as sub-custodian, have custody of all securities and cash of KDF
maintained in the United States. IFTC also is KDF's transfer agent and
dividend-paying agent. Pursuant to a services agreement with IFTC, Kemper
Service Company, an affiliate of DVA, serves as "Shareholder Service Agent" of
KDF and, as such, performs all of IFTC's duties as transfer agent and
dividend-paying agent. For a description of custodian, transfer agent and
shareholder service agent fees, see "Investment Manager and Underwriter" in the
Statement of Additional Information.
PORTFOLIO TRANSACTIONS. DVA places all orders for purchases and sales of a
Fund's securities. Subject to seeking best execution of orders, DVA may consider
sales of shares of a Fund and of funds managed by KFS as a factor in selecting
broker-dealers. See "Portfolio Transactions" in the Statement of Additional
Information.
DIVIDENDS AND TAXES
DIVIDENDS. Each Fund normally distributes dividends of net investment income
quarterly and distributes any net realized short-term and long-term capital
gains at least annually.
Dividends paid by a Fund as to each class of its shares will be calculated in
the same manner, at the same time and on the same day. The level of income
dividends per share (as a percentage of net asset value) will be lower for Class
B and Class C shares than for Class A shares primarily as a result of the
distribution services fee applicable to Class B and Class C shares.
Distributions of capital gains, if any, will be paid in the same amount for each
class.
Income and capital gain dividends, if any, of a Fund will be credited to
shareholder accounts in full and fractional shares of the same class of that
Fund at net asset value on the reinvestment date, except that, upon written
request to the Shareholder Service Agent, a shareholder may select one of the
following options:
(1) To receive income and short-term capital gain dividends in cash and
long-term capital gain dividends in shares of the same class at net asset
value; or
14
<PAGE> 20
(2) To receive income and capital gain dividends in cash.
Any dividends of a Fund that are reinvested normally will be reinvested in
shares of the same class of that same Fund. However, upon written request to the
Shareholder Service Agent, a shareholder may elect to have dividends of a Fund
invested in shares of the same class of another Kemper Fund at the net asset
value of such class of such other fund. See "Special Features--Class A
Shares--Combined Purchases" for a list of such Kemper Funds. To use this
privilege of investing dividends of a Fund in shares of another Kemper Fund,
shareholders must maintain either a minimum account value of $1,000 in the Fund
distributing the dividends or a minimum account value of $1,000 in the Kemper
Fund in which dividends are reinvested. The Funds will reinvest dividend checks
(and future dividends) in shares of that same Fund and class if checks are
returned as undeliverable.
TAXES. Each Fund intends to continue to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code (the "Code") and, if so
qualified, will not be liable for federal income taxes to the extent its
earnings are distributed. Dividends derived from net investment income and net
short-term capital gains are taxable to shareholders as ordinary income and
long-term capital gain dividends are taxable to shareholders as long-term
capital gain regardless of how long the shares have been held and whether
received in cash or shares. Long-term capital gain dividends received by
individual shareholders are currently taxed at a maximum rate of 28%. Dividends
declared in October, November or December to shareholders of record as of a date
in one of those months and paid during the following January are treated as paid
on December 31 of the calendar year declared. A portion of the dividends paid by
a Fund may qualify for the dividends received deduction available to corporate
shareholders.
A dividend received shortly after the purchase of shares reduces the net asset
value of the shares by the amount of the dividend and, although in effect a
return of capital, will be taxable to the shareholder. If the net asset value of
shares were reduced below the shareholder's cost by dividends representing gains
realized on sales of securities, such dividends would be a return of investment
though taxable as stated above.
Each Fund is required by law to withhold 31% of taxable dividends and redemption
proceeds paid to certain shareholders who do not furnish a correct taxpayer
identification number (in the case of individuals, a social security number) and
in certain other circumstances. Trustees of qualified retirement plans and
403(b)(7) accounts are required by law to withhold 20% of the taxable portion of
any distribution that is eligible to be "rolled over". The 20% withholding
requirement does not apply to distributions from Individual Retirement Accounts
(IRAs) or any part of a distribution that is transferred directly to another
qualified retirement plan, 403(b)(7) account, or IRA. Shareholders should
consult with their tax advisers regarding the 20% withholding requirement.
After each transaction, shareholders will receive a confirmation statement
giving complete details of the transaction except that statements will be sent
quarterly for transactions involving reinvestment of dividends, periodic
investment and redemption programs and reinvestment programs for unit investment
trusts underwritten by an affiliate of DVA. Information for income tax purposes
will be provided after the end of the calendar year. Shareholders are encouraged
to retain copies of their account confirmation statements or year-end statements
for tax reporting purposes. However, those who have incomplete records may
obtain historical account transaction information at a reasonable fee.
NET ASSET VALUE
The net asset value per share of a Fund is determined separately for each class
by dividing the value of the Fund's net assets attributable to that class by the
number of shares of that class outstanding. The per share net asset value of the
Class B and Class C shares of a Fund will generally be lower than that of the
Class A shares of the Fund because of the higher expenses borne by Class B and
Class C shares. Fund securities that are primarily traded on a domestic
securities exchange or securities listed on the NASDAQ National Market are
valued at the last sale price on the exchange or market where primarily traded
or listed or, if there is no recent sale price available, at the last current
bid quotation. A security that is listed or traded on more than one exchange is
valued at the quotation on the exchange determined to be the primary market for
such security by the Board of Directors or its delegates. Securities
15
<PAGE> 21
not so traded or listed are valued at the last current bid quotations, or
independent pricing services that use prices provided by market makers or
estimates of market values obtained from yield data relating to instruments or
securities with similar characteristics. Equity options are valued at the last
sale price unless the bid price is higher or the asked price is lower, in which
event such bid or asked price is used. Exchange traded fixed income options are
valued at the last sale price unless there is no sale price, in which event
current prices provided by market makers are used. Financial futures and options
thereon are valued at the settlement price established each day by the board of
trade or exchange on which they are traded. Other securities and assets are
valued at fair value as determined in good faith by the Board of Directors. If
an event were to occur, after the value of a security was so established but
before the net asset value per share was determined, which was likely to
materially change the net asset value, then that security would be valued using
fair value considerations by the Board of Directors or its delegates. On each
day the New York Stock Exchange (the "Exchange") is open for trading, the net
asset value is determined as of the earlier of 3:00 pm. Chicago time or the
close of the Exchange.
PURCHASE OF SHARES
ALTERNATIVE PURCHASE ARRANGEMENTS. Class A shares of each Fund are sold to
investors subject to an initial sales charge. Class B shares are sold without an
initial sales charge but are subject to higher ongoing expenses than Class A
shares and a contingent deferred sales charge payable upon certain redemptions.
Class B shares automatically convert to Class A shares six years after issuance.
Class C shares are sold without an initial or a contingent deferred sales charge
but are subject to higher ongoing expenses than Class A shares and do not
convert into another class. When placing purchase orders, investors must specify
whether the order is for Class A, Class B or Class C shares.
The primary distinctions among the classes of each Fund's shares lie in their
initial and contingent deferred sales charge structures and in their ongoing
expenses, including asset-based sales charges in the form of Rule 12b-1
distribution fees. These differences are summarized in the table below. See,
also, "Summary of Expenses." Each class has distinct advantages and
disadvantages for different investors, and investors may choose the class that
best suits their circumstances and objectives.
<TABLE>
<CAPTION>
ANNUAL 12B-1 FEES
(AS A % OF AVERAGE DAILY
SALES CHARGE NET ASSETS) OTHER INFORMATION
--------------------------------- ------------------------ ---------------------------------
<S> <C> <C> <C>
Class Maximum initial sales charge of None Initial sales charge waived or
A..... 5.75% of the public offering reduced for certain purchases
price
Class Maximum contingent deferred sales 0.75% Shares convert to Class A shares
B..... charge of 4% of redemption six years after issuance
proceeds; declines to zero after
six years
Class None 0.75% No conversion feature
C.....
</TABLE>
The minimum initial investment for each Fund is $1,000 and the minimum
subsequent investment is $100. The minimum initial investment for an Individual
Retirement Account is $250 and the minimum subsequent investment is $50. Under
an automatic investment plan, such as Bank Direct Deposit, Payroll Direct
Deposit or Government Direct Deposit, the minimum initial and subsequent
investment is $50. These minimum amounts may be changed at any time in
management's discretion.
Share certificates will not be issued unless requested in writing. It is
recommended that investors not request share certificates unless needed for a
specific purpose. You cannot redeem shares by telephone or wire transfer or use
the telephone exchange privilege if share certificates have been issued. A lost
or destroyed certificate is difficult to replace and can be expensive to the
shareholder (a bond worth 2% or more of the certificate value is normally
required).
16
<PAGE> 22
SPECIAL PROMOTION. Until at least November 30, 1995 ("Special Offering Period"),
KDI intends to reallow the full applicable sales charge with respect to Class A
shares purchased during the Special Offering Period (not including shares
acquired at net asset value) and to pay an additional commission of .50% with
respect to Class B shares purchased during the Special Offering Period not
including exchanges or other transactions for which commissions are not paid.
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES. The public offering price of
Class A shares for purchasers choosing the initial sales charge alternative is
the net asset value plus a sales charge, as set forth below.
<TABLE>
<CAPTION>
SALES CHARGE
----------------------------------------
ALLOWED
TO
DEALERS
AS A AS A AS A
PERCENTAGE PERCENTAGE PERCENTAGE
OF OF NET OF
OFFERING ASSET OFFERING
AMOUNT OF PURCHASE PRICE VALUE* PRICE
------ ------ ------
<S> <C> <C> <C>
Less than $50,000...................................... 5.75 % 6.10 % 5.20 %
$50,000 but less than $100,000......................... 4.50 4.71 4.00
$100,000 but less than $250,000........................ 3.50 3.63 3.00
$250,000 but less than $500,000........................ 2.60 2.67 2.25
$500,000 but less than $1 million...................... 2.00 2.04 1.75
$1 million and over.................................... .00 ** .00 ** ***
</TABLE>
---------------
* Rounded to the nearest one-hundredth percent.
** Redemption of shares may be subject to a contingent deferred sales charge as
discussed below.
*** Commission is payable by KDI as discussed below.
Each Fund receives the entire net asset value of all its Class A shares sold.
KDI, the Funds' principal underwriter, retains the sales charge on sales of
Class A shares from which it allows discounts from the applicable public
offering price to investment dealers, which discounts are uniform for all
dealers in the United States and its territories. The normal discount allowed to
dealers is set forth in the above table. Upon notice to all dealers with whom it
has sales agreements, KDI may reallow up to the full applicable sales charge, as
shown in the above table, during periods and for transactions specified in such
notice and such reallowances may be based upon attainment of minimum sales
levels. During periods when 90% or more of the sales charge is reallowed, such
dealers may be deemed to be underwriters as that term is defined in the
Securities Act of 1933.
Class A shares of a Fund may be purchased at net asset value to the extent that
the amount invested represents the net proceeds from a redemption of shares of a
mutual fund for which neither DVA nor KFS serve as investment manager
("non-Kemper fund") provided that: (a) the investor has previously paid either
an initial sales charge in connection with the purchase of the non-Kemper fund
shares redeemed or a contingent deferred sales charge in connection with the
redemption of the non-Kemper fund shares, and (b) the purchase of Fund shares is
made within 90 days after the date of such redemption. To make such a purchase
at net asset value, the investor or the investor's dealer must, at the time of
purchase, submit a request that the purchase be processed at net asset value
pursuant to this privilege. During the Special Offering Period, dealers will be
paid a commission of .50% of the amount of shares purchased pursuant to this net
asset value purchase privilege. The redemption of the shares of the non-Kemper
fund is, for federal income tax purposes, a sale upon which a gain or loss may
be realized.
Class A shares of a Fund may be purchased at net asset value by: (a) any
purchaser provided that the amount invested in such Fund or other Kemper Mutual
Funds listed under "Special Features--Class A Shares--Combined Purchases" totals
at least $1,000,000 including purchases of Class A shares pursuant to the
"Combined Purchases," "Letter of Intent" and "Cumulative Discount" features
described under "Special Features"; or (b) a participant-directed qualified
retirement plan described in Code Section 401(a) or a participant-directed
non-qualified deferred compensation plan described in Code Section 457 provided
in either case that such plan has not less than 200 eligible employees (the
"Large Order NAV Purchase Privilege"). Redemption within one year of shares
purchased under the Large Order NAV Purchase Privilege may be subject to a
contingent deferred sales charge. See "Redemption or Repurchase of
Shares--Contingent Deferred Sales Charge--Large Order NAV Purchase Privilege."
17
<PAGE> 23
KDI may in its discretion compensate investment dealers or other financial
services firms in connection with the sale of Class A shares of a Fund to
employer sponsored employee benefit plans using the subaccount recordkeeping
system made available through the Shareholder Service Agent at net asset value
in accordance with the Large Order NAV Purchase Privilege up to the following
amounts: 1.00% of the net asset value of shares sold on amounts up to $5 million
in any calendar year, .50% on the next $5 million and .25% on amounts over $10
million in such calendar year. KDI may in its discretion compensate investment
dealers or other financial services firms in connection with the sale of Class A
shares of each Fund to other purchasers at net asset value in accordance with
the Large Order NAV Purchase Privilege up to the following amounts: 1.00% of the
net asset value of shares sold on amounts up to $3 million, .50% on the next $2
million and .25% on amounts over $5 million. For purposes of determining the
appropriate commission percentage to be applied to a particular sale under the
foregoing schedules, KDI will consider the cumulative amount invested by the
purchaser in a Fund and other Kemper Mutual Funds listed under "Special
Features--Class A Shares--Combined Purchases," including purchases pursuant to
the "Combined Purchases," "Letter of Intent" and "Cumulative Discount" features
referred to above. The privilege of purchasing Class A shares of a Fund at net
asset value under the Large Order NAV Purchase Privilege is not available if
another net asset value purchase privilege is also applicable.
Class A shares may be sold at net asset value in any amount to: (a) officers,
directors, employees (including retirees) and sales representatives of KDF, its
investment manager, its principal underwriter or certain affiliated companies,
for themselves or members of their families; (b) registered representatives and
employees of broker-dealers having selling group agreements with KDI; (c)
officers, directors, and employees of service agents of KDF; (d) shareholders
who owned shares of KDF on September 8, 1995, and have continuously owned shares
of KDF (or a Kemper Fund acquired by exchange of KDF shares) since that date,
for themselves or members of their families; and (e) any trust, pension,
profit-sharing or other benefit plan for only such persons. Class A shares may
be sold at net asset value in any amount to selected employees (including their
spouses and dependent children) of banks and other financial services firms that
provide administrative services related to order placement and payment to
facilitate transactions in shares of KDF for their clients pursuant to an
agreement with KDI or one of its affiliates. Only those employees of such banks
and other firms who as part of their usual duties provide services related to
transactions in Fund shares may purchase a Fund's Class A shares at net asset
value hereunder. Class A shares may be sold at net asset value in any amount to
unit investment trusts underwritten by an affiliate of DVA. In addition,
unitholders of unit investment trusts underwritten by an affiliate of DVA may
purchase a Fund's Class A shares at net asset value through reinvestment
programs described in the prospectuses of such trusts which have such programs.
Class A shares of a Fund may be sold at net asset value through certain
investment advisers registered under the Investment Advisers Act of 1940 and
other financial services firms that adhere to certain standards established by
KDI, including a requirement that such shares be sold for the benefit of their
clients participating in a "wrap account" or similar program under which such
clients pay a fee to the investment advisor or other firm. Such shares are sold
for investment purposes and on the condition that they will not be resold except
through redemption or repurchase by KDF. KDF may also issue Class A shares at
net asset value in connection with the acquisition of the assets of or merger or
consolidation with another investment company, or to shareholders in connection
with the investment or reinvestment of income and capital gain dividends.
The sales charge scale is applicable to purchases made at one time by any
"purchaser" which includes: an individual; or an individual, his or her spouse
and children under the age of 21; or a trustee or other fiduciary of a single
trust estate or single fiduciary account; or an organization exempt from federal
income tax under Section 501(c)(3) or (13) of the Code; or a pension,
profit-sharing or other employee benefit plan whether or not qualified under
Section 401 of the Code; or other organized group of persons whether
incorporated or not, provided the organization has been in existence for at
least six months and has some purpose other than the purchase of redeemable
securities of a registered investment company at a discount. In order to qualify
for a lower sales charge, all orders from an organized group will have to be
placed through a single investment dealer or other firm and identified as
originating from a qualifying purchaser.
18
<PAGE> 24
DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES. Investors choosing the
deferred sales charge alternative may purchase Class B shares at net asset value
per share without any sales charge at the time of purchase. Since Class B shares
are being sold without an initial sales charge, the full amount of the
investor's purchase payment will be invested in Class B shares for his or her
account. A contingent deferred sales charge may be imposed upon redemption of
Class B shares. See "Redemption or Repurchase of Shares--Contingent Deferred
Sales Charge--Class B Shares."
KDI compensates firms for sales of Class B shares at the time of sale at a
commission rate of up to 3.75% of the amount of Class B shares purchased. KDI is
compensated by KDF for services as distributor and principal underwriter for
Class B shares. See "Investment Manager and Underwriter." Class B shares of a
Fund will automatically convert to Class A shares of the same Fund six years
after issuance on the basis of the relative net asset value per share. The
purpose of the conversion feature is to relieve holders of Class B shares from
the distribution services fee when they have been outstanding long enough for
KDI to have been compensated for distribution related expenses. For purposes of
conversion to Class A shares, shares purchased through the reinvestment of
dividends and other distributions paid with respect to Class B shares in a
shareholder's KDF account will be converted to Class A shares on a pro rata
basis.
PURCHASE OF CLASS C SHARES. The public offering price of the Class C shares of a
Fund is the next determined net asset value. No initial or contingent deferred
sales charge is imposed. Since Class C shares are sold without an initial sales
charge, the full amount of the investor's purchase payment will be invested in
Class C shares for his or her account. KDI pays firms for sales of Class C
shares a distribution fee, payable quarterly, at an annual rate of .75 of 1% of
net assets attributable to Class C shares maintained and serviced by the firm.
KDI is compensated by KDF for services as distributor and principal underwriter
for Class C shares. See "Investment Manager and Underwriter."
WHICH ARRANGEMENT IS BETTER FOR YOU? The decision as to which class of shares
provides a more suitable investment for an investor depends on a number of
factors, including the amount and intended length of the investment. Investors
making investments that qualify for reduced sales charges might consider Class A
shares. Investors who prefer not to pay an initial sales charge and who plan to
hold their investment for more than six years might consider Class B shares.
Investors who prefer not to pay an initial sales charge but who plan to redeem
their shares within six years might consider Class C shares. Orders for Class B
shares or Class C shares for $500,000 or more will be declined. Orders for Class
B shares or Class C shares by employer sponsored employee benefit plans using
the subaccount record keeping system made available through the Shareholder
Service Agent will be invested instead in Class A shares at net asset value
where the combined subaccount value in KDF or any Kemper Mutual Fund listed
under "Special Features--Class A Shares--Combined Purchases" is in excess of $5
million including purchases pursuant to the "Combined Purchases," "Letter of
Intent" and "Cumulative Discount" features described under "Special Features."
For more information about the three sales arrangements, consult your financial
representative or the Shareholder Service Agent. Financial services firms may
receive different compensation depending upon which class of shares they sell.
GENERAL. Banks and other financial services firms may provide administrative
services related to order placement and payment to facilitate transactions in
shares of KDF for their clients, and KDI may pay them a transaction fee up to
the level of the discount or commission allowable or payable to dealers, as
described above. Banks are currently prohibited under the Glass-Steagall Act
from providing certain underwriting or distribution services. Banks or other
financial services firms may be subject to various state laws regarding the
services described above and may be required to register as dealers pursuant to
state law. If banking firms were prohibited from acting in any capacity or
providing any of the described services, management would consider what action,
if any, would be appropriate. KDI does not believe that termination of a
relationship with a bank would result in any material adverse consequences to
KDF.
In addition to the discounts or commissions described above, KDI will, from time
to time, pay or allow additional discounts, commissions or promotional
incentives, in the form of cash or other compensation, to firms that sell shares
of KDF. Non-cash compensation includes luxury merchandise and trips to luxury
resorts. In some instances,
19
<PAGE> 25
such discounts, commissions or other incentives will be offered only to certain
firms that sell or are expected to sell during specified time periods certain
minimum amounts of shares of KDF, or other funds underwritten by KDI.
Orders for the purchase of shares of a Fund will be confirmed at a price based
on the net asset value of that Fund next determined after receipt by KDI of the
order accompanied by payment. However, orders received by dealers or other
financial services firms prior to the determination of net asset value (see "Net
Asset Value") and received by KDI prior to the close of its business day will be
confirmed at a price based on the net asset value effective on that day. KDF
reserves the right to determine the net asset value more frequently than once a
day if deemed desirable. Dealers and other financial services firms are
obligated to transmit orders promptly. Collection may take significantly longer
for a check drawn on a foreign bank than for a check drawn on a domestic bank.
Therefore, if an order is accompanied by a check drawn on a foreign bank, funds
must normally be collected before shares will be purchased. See "Purchase and
Redemption of Shares" in the Statement of Additional Information.
Investment dealers and other firms provide varying arrangements for their
clients to purchase and redeem KDF's shares. Some may establish higher minimum
investment requirements than set forth above. Firms may arrange with their
clients for other investment or administrative services. Such firms may
independently establish and charge additional amounts to their clients for such
services, which charges would reduce the clients' return. Firms also may hold
KDF's shares in nominee or street name as agent for and on behalf of their
customers. In such instances, KDF's transfer agent will have no information with
respect to or control over the accounts of specific shareholders. Such
shareholders may obtain access to their accounts and information about their
accounts only from their firm. Certain of these firms may receive compensation
from KDF through the Shareholder Service Agent for recordkeeping and other
expenses relating to these nominee accounts. In addition, certain privileges
with respect to the purchase and redemption of shares or the reinvestment of
dividends may not be available through such firms. Some firms may participate in
a program allowing them access to their clients' accounts for servicing
including, without limitation, transfers of registration and dividend payee
changes; and may perform functions such as generation of confirmation statements
and disbursement of cash dividends. Such firms, including affiliates of KDI, may
receive compensation from KDF through the Shareholder Service Agent for these
services. This prospectus should be read in connection with such firms' material
regarding their fees and services.
KDF reserves the right to withdraw all or any part of the offering made by this
prospectus and to reject purchase orders. Also, from time to time, KDF may
temporarily suspend the offering of shares of any Fund or class of a Fund to new
investors. During the period of such suspension, persons who are already
shareholders of such class of such Fund normally are permitted to continue to
purchase additional shares of such Fund or class and to have dividends
reinvested.
Shareholders should direct their inquiries to Kemper Service Company, 811 Main
Street, Kansas City, Missouri 64105-2005 or to the firm from which they received
this prospectus.
REDEMPTION OR REPURCHASE OF SHARES
GENERAL. Any shareholder may require KDF to redeem his or her shares. When
shares are held for the account of a shareholder by KDF's transfer agent, the
shareholder may redeem them by sending a written request with signatures
guaranteed to Kemper Mutual Funds, Attention: Redemption Department, P.O. Box
419557, Kansas City, Missouri 64141-6557. When certificates for shares have been
issued, they must be mailed to or deposited with the Shareholder Service Agent,
along with a duly endorsed stock power and accompanied by a written request for
redemption. Redemption requests and a stock power must be endorsed by the
account holder with signatures guaranteed by a commercial bank, trust company,
savings and loan association, federal savings bank, member firm of a national
securities exchange or other eligible financial institution. The redemption
request and stock power must be signed exactly as the account is registered
including any special capacity of the registered owner. Additional documentation
may be requested, and a signature guarantee is normally required, from
institutional and fiduciary account holders, such as corporations, custodians
(e.g., under the Uniform Transfers to Minors Act), executors, administrators,
trustees or guardians.
20
<PAGE> 26
The redemption price for shares of a Fund will be the net asset value per share
of that Fund next determined following receipt by the Shareholder Service Agent
of a properly executed request with any required documents as described above.
Payment for shares redeemed will be made in cash as promptly as practicable but
in no event later than seven days after receipt of a properly executed request
accompanied by any outstanding share certificates in proper form for transfer.
When KDF is asked to redeem shares for which it may not have yet received good
payment, it may delay transmittal of redemption proceeds until it has determined
that collected funds have been received for the purchase of such shares, which
will be up to 15 days from receipt by KDF of the purchase amount. The redemption
within one year of Class A shares purchased at net asset value under the Large
Order NAV Purchase Privilege may be subject to a 1% contingent deferred sales
charge (see "Purchase of Shares") and the redemption of Class B shares may be
subject to a contingent deferred sales charge (see "Contingent Deferred Sales
Charge--Class B Shares" below).
Because of the high cost of maintaining small accounts, KDF reserves the right
to redeem an account (and, in the case of Class B shares, impose any applicable
contingent deferred sales charge) that falls below the minimum investment level,
currently $1,000, as a result of redemptions. Currently, Individual Retirement
Accounts and employee benefit plan accounts are not subject to this procedure. A
shareholder will be notified in writing and will be allowed 60 days to make
additional purchases to bring the account value up to the minimum investment
level before KDF redeems the shareholder's account. The investment required to
reach that level may be made at net asset value (without any initial sales
charge in the case of Class A shares).
Shareholders can request the following telephone privileges: expedited wire
transfer redemptions and EXPRESS-Transfer transactions (see "Special Features")
and exchange transactions for individual and institutional accounts and
pre-authorized telephone redemption transactions for certain institutional
accounts. Shareholders may choose these privileges on the account application or
by contacting the Shareholder Service Agent for appropriate instructions. Please
note that the telephone exchange privilege is automatic unless the shareholder
refuses it on the account application. Neither KDF nor its agents will be liable
for any loss, expense or cost arising out of any telephone request pursuant to
these privileges, including any fraudulent or unauthorized request, and the
shareholder will bear the risk of loss, so long as KDF or its agent reasonably
believes, based upon reasonable verification procedures, that the telephonic
instructions are genuine. The verification procedures include recording
instructions, requiring certain identifying information before acting upon
instructions and sending written confirmations.
TELEPHONE REDEMPTIONS. If the proceeds of the redemption (prior to the
imposition of any contingent deferred sales charge in the case of Class B
shares) are $50,000 or less and the proceeds are payable to the shareholder of
record at the address of record, normally a telephone request or a written
request by any one account holder without a signature guarantee is sufficient
for redemptions by individual or joint account holders, and trust, executor and
guardian account holders (excluding custodial accounts for gifts and transfers
to minors), provided the trustee, executor or guardian is named in the account
registration. Other institutional account holders and custodial accounts for
gifts and transfers to minors may exercise this special privilege of redeeming
shares by telephone request or written request without signature guarantee
subject to the same conditions as individual account holders and subject to the
limitations on liability described under "General" above, provided that this
privilege has been pre-authorized by the institutional account holder or
guardian account holder by written instruction to the Shareholder Service Agent
with signatures guaranteed. Telephone requests may be made by calling 1-800-621-
1048. Shares purchased by check or through EXPRESS-Transfer or Bank Direct
Deposit may not be redeemed under this privilege of redeeming shares by
telephone request until such shares have been owned for at least 15 days. This
privilege of redeeming shares by telephone request or by written request without
a signature guarantee may not be used to redeem shares held in certificated form
and may not be used if the shareholder's account has had an address change
within 30 days of the redemption request. During periods when it is difficult to
contact the Shareholder Service Agent by telephone, it may be difficult to use
the telephone redemption privilege, although investors can still redeem by mail.
KDF reserves the right to terminate or modify this privilege at any time.
21
<PAGE> 27
REPURCHASES (CONFIRMED REDEMPTIONS). A request for repurchase may be
communicated by a shareholder through a securities dealer or other financial
services firm to KDI, which KDF has authorized to act as its agent. There is no
charge by KDI with respect to repurchases; however, dealers or other firms may
charge customary commissions for their services. Dealers and other financial
services firms are obligated to transmit orders promptly. The repurchase price
will be the net asset value of the applicable Fund next determined after receipt
of a request by KDI. However, requests for repurchases received by dealers or
other firms prior to the determination of net asset value (see "Net Asset
Value") and received by KDI prior to the close of KDI's business day will be
confirmed at the net asset value effective on that day. The offer to repurchase
may be suspended at any time. Requirements as to stock powers, certificates,
payments and delay of payments are the same as for redemptions.
EXPEDITED WIRE TRANSFER REDEMPTIONS. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares of a Fund can be redeemed and proceeds sent by federal wire
transfer to a single previously designated account. Requests received by the
Shareholder Service Agent prior to the determination of net asset value will
result in shares being redeemed that day at the net asset value of the Fund
effective on that day and normally the proceeds will be sent to the designated
account the following business day. Delivery of the proceeds of a wire
redemption of $250,000 or more may be delayed by KDF for up to seven days if DVA
deems it appropriate under then current market conditions. Once authorization is
on file, the Shareholder Service Agent will honor requests by telephone at
1-800-621-1048 or in writing, subject to the limitations on liability described
under "General" above. KDF is not responsible for the efficiency of the federal
wire system or the account holder's financial services firm or bank. KDF
currently does not charge the account holder for wire transfers. The account
holder is responsible for any charges imposed by the account holder's firm or
bank. There is a $1,000 wire redemption minimum (including any contingent
deferred sales charge). To change the designated account to receive wire
redemption proceeds, send a written request to the Shareholder Service Agent
with signatures guaranteed as described above or contact the firm through which
shares of KDF were purchased. Shares purchased by check or through
EXPRESS-Transfer or Bank Direct Deposit may not be redeemed by wire transfer
until such shares have been owned for at least 15 days. Account holders may not
use this privilege to redeem shares held in certificated form. During periods
when it is difficult to contact the Shareholder Service Agent by telephone, it
may be difficult to use the expedited redemption privilege. KDF reserves the
right to terminate or modify this privilege at any time.
CONTINGENT DEFERRED SALES CHARGE--LARGE ORDER NAV PURCHASE PRIVILEGE. A
contingent deferred sales charge of 1% may be imposed upon redemption of Class A
shares that are purchased under the Large Order NAV Purchase Privilege if they
are redeemed within one year of purchase. The charge will not be imposed upon
redemption of reinvested dividends or share appreciation. The charge is applied
to the value of the shares redeemed excluding amounts not subject to the charge.
The contingent deferred sales charge will be waived in the event of: (a)
redemptions by a participant-directed qualified retirement plan described in
Code Section 401(a) or a participant-directed non-qualified deferred
compensation plan described in Code Section 457; (b) redemptions by employer
sponsored employee benefit plans using the subaccount record keeping system made
available through the Shareholder Service Agent; (c) redemption of shares of a
shareholder (including a registered joint owner) who has died; (d) redemption of
shares of a shareholder (including a registered joint owner) who after purchase
of the shares being redeemed becomes totally disabled (as evidenced by a
determination by the federal Social Security Administration); and (e)
redemptions under KDF's Systematic Withdrawal Plan at a maximum of 10% per year
of the net asset value of the account.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES. A contingent deferred sales
charge may be imposed upon redemption of Class B shares. There is no such charge
upon redemption of any share appreciation or reinvested
22
<PAGE> 28
dividends on Class B shares. The charge is computed at the following rates
applied to the value of the shares redeemed excluding amounts not subject to the
charge.
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES
YEAR OF REDEMPTION AFTER PURCHASE CHARGE
------------------------------------------------------------------------ ----------
<S> <C>
First................................................................... 4%
Second.................................................................. 3%
Third................................................................... 3%
Fourth.................................................................. 2%
Fifth................................................................... 2%
Sixth................................................................... 1%
</TABLE>
The following example will illustrate the operation of the contingent deferred
sales charge. Assume that an investor makes a single purchase of $10,000 of a
Fund's Class B shares and that 16 months later the value of the shares has grown
by $1,000 through reinvested dividends and by an additional $1,000 in
appreciation to a total of $12,000. If the investor were then to redeem the
entire $12,000 in share value, the contingent deferred sales charge would be
payable only with respect to $10,000 because neither the $1,000 of reinvested
dividends nor the $1,000 of share appreciation is subject to the charge. The
charge would be at the rate of 3% ($300) because it was in the second year after
the purchase was made.
The rate of the contingent deferred sales charge under the schedule above is
determined by the length of the period of ownership. Investments are tracked on
a monthly basis. The period of ownership for this purpose begins the first day
of the month in which the order for the investment is received. For example, an
investment made in September, 1995 will be eligible for the 3% charge if
redeemed on or after September 1, 1996. In the event no specific order is
requested, the redemption will be made first from Class B shares representing
reinvested dividends and then from the earliest purchase of Class B shares. KDI
receives any contingent deferred sales charge directly.
The contingent deferred sales charge will be waived: (a) in the event of the
total disability (as evidenced by a determination by the federal Social Security
Administration) of the shareholder (including a registered joint owner)
occurring after the purchase of the shares being redeemed, (b) in the event of
the death of the shareholder (including a registered joint owner), (c) for
redemptions made pursuant to a systematic withdrawal plan (see "Special
Features--Systematic Withdrawal Plan" below), (d) for redemptions made pursuant
to any IRA systematic withdrawal based on the shareholder's life expectancy
including, but not limited to, substantially equal periodic payments described
in Internal Revenue Code Section 72(t)(2)(A)(iv) prior to age 59 1/2 and (e) for
redemptions to satisfy required minimum distributions after age 70 1/2 from an
IRA account (with the maximum amount subject to this waiver being based only
upon the shareholder's Kemper IRA accounts). The contingent deferred sales
charge will also be waived in connection with the following redemptions of
shares held by employer sponsored employee benefit plans maintained on the
subaccount record keeping system made available by the Shareholder Service
Agent: (a) redemptions to satisfy participant loan advances (note that loan
repayments constitute new purchases for purposes of the contingent deferred
sales charge and the conversion privilege), (b) redemptions in connection with
retirement distributions (limited at any one time to 10% of the total value of
plan assets invested in a Fund, (c) redemptions in connection with distributions
qualifying under the hardship provisions of the Internal Revenue Code and (d)
redemptions representing returns of excess contributions to such plans.
REINVESTMENT PRIVILEGE. A shareholder who has redeemed Class A shares of a Fund
or any Kemper Mutual Fund listed under "Special Features--Class A
Shares--Combined Purchases" may reinvest up to the full amount redeemed at net
asset value at the time of the reinvestment in Class A shares of a Fund or of
the other listed Kemper Mutual Funds. A shareholder of a Fund or a Kemper Mutual
Fund who redeems Class A shares purchased under the Large Order NAV Purchase
Privilege (see "Purchase of Shares") or Class B shares and incurs a contingent
deferred sales charge may reinvest up to the full amount redeemed at net asset
value at the time of the reinvestment, in
23
<PAGE> 29
Class A shares or Class B shares, as the case may be, of a Fund or of other
Kemper Mutual Funds. The amount of any contingent deferred sales charge also
will be reinvested. These reinvested shares will retain their original cost and
purchase date for purposes of the contingent deferred sales charge. Also, a
holder of Class B shares who has redeemed shares may reinvest up to the full
amount redeemed, less any applicable contingent deferred sales charge that may
have been imposed upon the redemption of such shares, at net asset value in
Class A shares of a Fund or of the Kemper Mutual Funds listed under "Special
Features--Class A Shares--Combined Purchases." Purchases through the
reinvestment privilege are subject to the minimum investment requirements
applicable to the shares being purchased and may only be made for Kemper Funds
available for sale in the shareholder's state of residence as listed under
"Special Features--Exchange Privilege." The reinvestment privilege can be used
only once as to any specific shares and reinvestment must be effected within six
months of the redemption. If a loss is realized on the redemption of shares of a
Fund, the reinvestment may be subject to the "wash sale" rules if made within 30
days of the redemption, resulting in a postponement of the recognition of such
loss for federal income tax purposes. The reinvestment privilege may be
terminated or modified at any time.
SPECIAL FEATURES
CLASS A SHARES--COMBINED PURCHASES. Each Fund's Class A shares may be purchased
at the rate applicable to the discount bracket attained by combining concurrent
investments in Class A shares of any of the following funds: Kemper Technology
Fund, Kemper Total Return Fund, Kemper Growth Fund, Kemper Small Capitalization
Equity Fund, Kemper Income and Capital Preservation Fund, Kemper Municipal Bond
Fund, Kemper Diversified Income Fund, Kemper High Yield Fund, Kemper U.S.
Government Securities Fund, Kemper International Fund, Kemper State Tax-Free
Income Series, Kemper Adjustable Rate U.S. Government Fund, Kemper Blue Chip
Fund, Kemper Global Income Fund, Kemper Target Equity Fund (series are subject
to a limited offering period), Kemper Intermediate Municipal Bond Fund, Kemper
Cash Reserves Fund (available only upon exchange or conversion from Class A
shares of another Kemper Mutual Fund), Kemper U.S. Mortgage Fund, Kemper
Short-Intermediate Government Fund and Kemper-Dreman Fund, Inc. ("Kemper Mutual
Funds"). Except as noted below, there is no combined purchase credit for direct
purchases of shares of Kemper Money Market Fund, Cash Equivalent Fund,
Tax-Exempt California Money Market Fund, Cash Account Trust, Tax-Exempt New York
Money Market Fund or Investors Cash Trust ("Money Market Funds"), which are not
considered "Kemper Mutual Funds" for purposes hereof. For purposes of the
Combined Purchases feature described above as well as for the Letter of Intent
and Cumulative Discount features described below, employer sponsored employee
benefit plans using the subaccount record keeping system made available through
the Shareholder Service Agent may include: (a) Money Market Funds as "Kemper
Mutual Funds", (b) all classes of shares of any Kemper Mutual Fund and (c) the
value of any other plan investment, such as guaranteed investment contracts and
employer stock, maintained on such subaccount record keeping system.
CLASS A SHARES--LETTER OF INTENT. The same reduced sales charges for Class A
shares, as shown in the applicable prospectus, also apply to the aggregate
amount of purchases of such Kemper Mutual Funds listed above made by any
purchaser within a 24-month period under a written Letter of Intent ("Letter")
provided by KDI. The Letter, which imposes no obligation to purchase or sell
additional Class A shares, provides for a price adjustment depending upon the
actual amount purchased within such period. The Letter provides that the first
purchase following execution of the Letter must be at least 5% of the amount of
the intended purchase, and that 5% of the amount of the intended purchase
normally will be held in escrow in the form of shares pending completion of the
intended purchase. If the total investments under the Letter are less than the
intended amount and thereby qualify only for a higher sales charge than actually
paid, the appropriate number of escrowed shares are redeemed and the proceeds
used toward satisfaction of the obligation to pay the increased sales charge.
The Letter for an employer sponsored employee benefit plan maintained on the
subaccount record keeping system available through the Shareholder Service Agent
may have special provisions regarding payment of any increased sales charge
resulting from a failure to complete the intended purchase under the Letter. A
shareholder may include the value (at the maximum offering price) of all shares
of such Kemper Mutual Funds held of record as of the initial purchase date under
the Letter as an
24
<PAGE> 30
"accumulation credit" toward the completion of the Letter, but no price
adjustment will be made on such shares. Only investments in Class A shares are
included in this privilege.
CLASS A SHARES--CUMULATIVE DISCOUNT. Class A shares of a Fund may also be
purchased at the rate applicable to the discount bracket attained by adding to
the cost of shares of a Fund being purchased, the value of all Class A shares of
the above mentioned Kemper Mutual Funds (computed at the maximum offering price
at the time of the purchase for which the discount is applicable) already owned
by the investor.
CLASS A SHARES--AVAILABILITY OF QUANTITY DISCOUNTS. An investor or the
investor's dealer or other financial services firm must notify the Shareholder
Service Agent or KDI whenever a quantity discount or reduced sales charge is
applicable to a purchase. Upon such notification, the investor will receive the
lowest applicable sales charge. Quantity discounts described above may be
modified or terminated at any time.
EXCHANGE PRIVILEGE. Shareholders of Class A, Class B and Class C shares may
exchange their shares for shares of the corresponding class of Kemper Mutual
Funds in accordance with the provisions below.
Class A Shares. Class A shares of the Kemper Mutual Funds and shares of the
Money Market Funds listed under "Special Features--Class A Shares--Combined
Purchases" above may be exchanged for each other at their relative net asset
values. Shares of Money Market Funds that were acquired by purchase (not
including shares acquired by dividend reinvestment) are subject to the
applicable sales charge on exchange. Series of Kemper Target Equity Fund are
available on exchange only during the Offering Period for such series as
described in the applicable prospectus. Cash Equivalent Fund, Tax-Exempt
California Money Market Fund, Cash Account Trust, Tax-Exempt New York Money
Market Fund and Investors Cash Trust are available on exchange but only through
a financial services firm having a services agreement with KDI. Exchanges may
only be made for funds that are available for sale in the shareholder's state of
residence. Currently, Tax-Exempt California Money Market Fund is available for
sale only in California and Tax-Exempt New York Money Market Fund is available
for sale only in New York, Connecticut, New Jersey and Pennsylvania.
Class A shares of a Fund purchased under the Large Order NAV Purchase Privilege
may be exchanged for Class A shares of any Kemper Mutual Fund or a Money Market
Fund under the exchange privilege described above without paying any contingent
deferred sales charge at the time of exchange. If the Class A shares received on
exchange are redeemed thereafter, a contingent deferred sales charge may be
imposed in accordance with the foregoing requirements provided that the shares
redeemed will retain their original cost and purchase date for purposes of the
contingent deferred sales charge.
Class B Shares. Class B shares of a Fund and Class B shares of any Kemper Mutual
Fund listed under "Special Features--Class A Shares--Combined Purchases" may be
exchanged for each other at their relative net asset values. Class B shares may
be exchanged without a contingent deferred sales charge being imposed at the
time of exchange. For purposes of the contingent deferred sales charge that may
be imposed upon the redemption of the shares received on exchange, amounts
exchanged retain their original cost and purchase date.
Class C Shares. Class C shares of a Fund and Class C shares of any Kemper Mutual
Fund listed under "Special Features--Class A Shares--Combined Purchases" may be
exchanged for each other at their relative net asset values.
General. Shares purchased by check or through EXPRESS-Transfer or Bank Direct
Deposit may not be exchanged until they have been owned for at least 15 days. In
addition, shares of a Kemper Mutual Fund (except Kemper Cash Reserves Fund)
acquired by exchange from another Kemper Mutual Fund, or from a Money Market
Fund, may not be exchanged thereafter until they have been owned for 15 days.
The total value of shares being exchanged must at least equal the minimum
investment requirement of the fund into which they are being exchanged.
Exchanges are made based on relative dollar values of the shares involved in the
exchange. There is no service fee for an exchange; however, dealers or other
firms may charge for their services in effecting exchange transactions.
Exchanges will be effected by redemption of shares of the fund held and purchase
of shares of the other fund. For federal income tax purposes, any such exchange
constitutes a sale upon which a gain or loss may be realized, depending upon
whether
25
<PAGE> 31
the value of the shares being exchanged is more or less than the shareholder's
adjusted cost basis. Shareholders interested in exercising the exchange
privilege may obtain prospectuses of the other funds from dealers, other firms
or KDI. Exchanges may be accomplished by a written request to Kemper Mutual
Funds, Attention: Exchange Department, P.O. Box 419557, Kansas City, Missouri
64141-6557, or by telephone if the shareholder has given authorization. Once the
authorization is on file, the Shareholder Service Agent will honor requests by
telephone at 1-800-621-1048, subject to the limitations on liability under
"Redemption or Repurchase of Shares--General." Any share certificates must be
deposited prior to any exchange of such shares. During periods when it is
difficult to contact the Shareholder Service Agent by telephone, it may be
difficult to use the telephone exchange privilege. The exchange privilege is not
a right and may be suspended, terminated or modified at any time. Except as
otherwise permitted by applicable regulations, 60 days' prior written notice of
any termination or material change will be provided.
SYSTEMATIC EXCHANGE PRIVILEGE. The owner of $1,000 or more of any class of the
shares of a Fund, a Kemper Mutual Fund or Money Market Fund may authorize the
automatic exchange of a specified amount ($100 minimum) of such shares for
shares of the same class of another Kemper Fund. If selected, exchanges will be
made automatically until the privilege is terminated by the shareholder or the
Kemper Fund. Exchanges are subject to the terms and conditions described above
under "Exchange Privilege," including the $1,000 minimum investment requirement
for the Kemper Fund acquired on exchange. This privilege may not be used for the
exchange of shares held in certificated form.
EXPRESS-TRANSFER. EXPRESS-Transfer permits the transfer of money via the
Automated Clearing House System (minimum $100 and maximum $2,500) from a
shareholder's bank, savings and loan, or credit union account to purchase shares
in a Fund. Shareholders can also redeem shares (minimum $500 and maximum $2,500)
from their KDF account and transfer the proceeds to their bank, savings and
loan, or credit union checking account. By enrolling in EXPRESS-Transfer, the
shareholder authorizes the Shareholder Service Agent to rely upon telephone
instructions from ANY PERSON to transfer the specified amounts between the
shareholder's KDF account and the predesignated bank, savings and loan or credit
union account, subject to the limitations on liability under "Redemption or
Repurchase of Shares--General." Once enrolled in EXPRESS-Transfer, a shareholder
can initiate a transaction by calling Kemper Shareholder Services toll free at
1-800-621-1048 Monday through Friday, 8:00 a.m. to 3:00 p.m. Chicago time.
Shareholders may terminate this privilege by sending written notice to Kemper
Service Company, P.O. Box 419415, Kansas City, Missouri 64141-6415. Termination
will become effective as soon as the Shareholder Service Agent has had a
reasonable time to act upon the request. EXPRESS-Transfer cannot be used with
passbook savings accounts or for tax-deferred plans such as Individual
Retirement Accounts ("IRAs").
BANK DIRECT DEPOSIT. A shareholder may purchase additional shares of a Fund
through an automatic investment program. With the Bank Direct Deposit Purchase
Plan, monthly investments are made automatically from the shareholder's account
at a bank, savings and loan or credit union into the shareholder's KDF account.
By enrolling in Bank Direct Deposit, the shareholder authorizes KDF and its
agents to either draw checks or initiate Automated Clearing House debits against
the designated account at a bank or other financial institution. This privilege
may be selected by completing the appropriate section on the Account Application
or by contacting the Shareholder Service Agent for appropriate forms. A
shareholder may terminate his or her Plan by sending written notice to Kemper
Service Company, P.O. Box 419415, Kansas City, Missouri 64141-6415. Termination
by a shareholder will become effective within thirty days after the Shareholder
Service Agent has received the request. KDF may immediately terminate a
shareholder's Plan in the event that any item is unpaid by the shareholder's
financial institution. KDF may terminate or modify this privilege at any time.
PAYROLL DIRECT DEPOSIT AND GOVERNMENT DIRECT DEPOSIT. A shareholder may invest
in a Fund through Payroll Direct Deposit or Government Direct Deposit. Under
these programs, all or a portion of a shareholder's net pay or government check
is automatically invested in a KDF account each payment period. A shareholder
may terminate participation in these programs by giving written notice to the
shareholder's employer or government agency, as appropriate. (A reasonable time
to act is required.) KDF is not responsible for the efficiency of the employer
or government agency making the payment or any financial institutions
transmitting payments.
26
<PAGE> 32
SYSTEMATIC WITHDRAWAL PLAN. The owner of $5,000 or more of a class of a Fund's
shares at the offering price (net asset value plus, in the case of Class A
shares, the initial sales charge) may provide for the payment from the owner's
account of any requested dollar amount to be paid to the owner or a designated
payee monthly, quarterly, semiannually or annually. The $5,000 minimum account
size is not applicable to Individual Retirement Accounts. The minimum periodic
payment is $100. The maximum annual rate at which Class B shares may be redeemed
under a systematic withdrawal plan is 10% of the net asset value of the account.
Shares are redeemed so that the payee will receive payment approximately the
first of the month. Any income and capital gain dividends will be automatically
reinvested at net asset value. A sufficient number of full and fractional shares
will be redeemed to make the designated payment. Depending upon the size of the
payments requested and fluctuations in the net asset value of the shares
redeemed, redemptions for the purpose of making such payments may reduce or even
exhaust the account.
The purchase of Class A shares while participating in a systematic withdrawal
plan will ordinarily be disadvantageous to the investor because the investor
will be paying a sales charge on the purchase of shares at the same time that
the investor is redeeming shares upon which a sales charge may have already been
paid. Therefore, KDF will not knowingly permit additional investments of less
than $2,000 if the investor is at the same time making systematic withdrawals.
KDI will waive the contingent deferred sales charge on redemptions of Class B
shares made pursuant to a systematic withdrawal plan. The right is reserved to
amend the systematic withdrawal plan on 30 days' notice. The plan may be
terminated at any time by the investor or KDF.
TAX-SHELTERED RETIREMENT PLANS. KFS provides retirement plan services and
documents and KDI can establish investor accounts in any of the following types
of retirement plans:
- Individual Retirement Accounts ("IRAs") trusteed by IFTC. This includes
Simplified Employee Pension Plan ("SEP") IRA accounts and prototype documents.
- 403(b)(7) Custodial Accounts also trusteed by IFTC. This type of plan is
available to employees of most non-profit organizations.
- Prototype money purchase pension and profit-sharing plans may be adopted by
employers. The maximum annual contribution per participant is the lesser of
25% of compensation or $30,000.
Brochures describing the above plans as well as model defined benefit plans,
target benefit plans, 457 plans, 401(k) plans and materials for establishing
them are available from KDI upon request. The brochures for plans trusteed by
IFTC describe the current fees payable to IFTC for its services as trustee.
Investors should consult with their own tax advisers before establishing a
retirement plan.
PERFORMANCE
KDF may advertise several types of performance information for a class of
shares, including "average annual total return" and "total return." Performance
information will be computed separately for Class A, Class B and Class C shares.
Each of these figures is based upon historical results and is not necessarily
representative of the future performance of any class of the Funds.
Average annual total return and total return figures measure both the net
investment income generated by, and the effect of any realized and unrealized
appreciation or depreciation of, the underlying investments in a Fund's
portfolio for the period referenced, assuming the reinvestment of all dividends.
Thus, these figures reflect the change in the value of an investment in a Fund
during a specified period. Average annual total return will be quoted for at
least the one, five and ten year periods ending on a recent calendar quarter (or
if such periods have not yet elapsed, at the end of a shorter period
corresponding to the life of the Fund for performance purposes). Average annual
total return figures represent the average annual percentage change over the
period in question. Total return figures represent the aggregate percentage or
dollar value change over the period in question.
27
<PAGE> 33
A Fund's performance may be compared to that of the Consumer Price Index or
various unmanaged equity indexes including, but not limited to, the Dow Jones
Industrial Average, the Standard & Poor's 500 Stock Index, the Standard &
Poor's/Barra Value Index, the Russell 1000 Value Index and the Russell 2000
Value Index. The performance of a Fund may also be compared to the combined
performance of two indexes. The performance of a Fund may also be compared to
the performance of other mutual funds or mutual fund indexes with similar
objectives and policies as reported by independent mutual fund reporting
services such as Lipper Analytical Services, Inc. ("Lipper"). Lipper performance
calculations are based upon changes in net asset value with all dividends
reinvested and do not include the effect of any sales charges.
Information may be quoted from publications such as Morningstar, Inc., The Wall
Street Journal, Money Magazine, Forbes, Barron's, Fortune, The Chicago Tribune,
USA Today, Institutional Investor and Registered Representative. Also, investors
may want to compare the historical returns of various investments, performance
indexes of those investments or economic indicators, including but not limited
to stocks, bonds, certificates of deposit, money market funds and U.S. Treasury
obligations. Bank product performance may be based upon, among other things, the
BANK RATE MONITOR National Index(TM) or various certificate of deposit indexes.
Money market fund performance may be based upon, among other things, the
IBC/Donoghue's Money Fund Report(R) or Money Market Insight(R), reporting
services on money market funds. Performance of U.S. Treasury obligations may be
based upon, among other things, various U.S. Treasury bill indexes. Certain of
these alternative investments may offer fixed rates of return and guaranteed
principal and may be insured.
A Fund may depict the historical performance of the securities in which a Fund
may invest over periods reflecting a variety of market or economic conditions
either alone or in comparison with alternative investments, performance indexes
of those investments or economic indicators. A Fund may also describe its
portfolio holdings and depict its size or relative size compared to other mutual
funds, the number and make-up of its shareholder base and other descriptive
factors concerning the Fund. A Fund may also discuss the relative performance of
growth stocks versus value stocks.
Each Fund's Class A shares are sold at net asset value plus a maximum sales
charge of 5.75% of the offering price. While the maximum sales charge is
normally reflected in the Fund's Class A performance figures, certain total
return calculations may not include such charge and those results would be
reduced if it were included. Class B shares and Class C shares are sold at net
asset value. Redemptions of Class B shares within the first six years after
purchase may be subject to a contingent deferred sales charge that ranges from
4% during the first year to 0% after six years. Average annual total return
figures do, and total return figures may, include the effect of the contingent
deferred sales charge for the Class B shares that may be imposed at the end of
the period in question. Performance figures for the Class B shares not including
the effect of the applicable contingent deferred sales charge would be reduced
if it were included.
Each Fund's returns and net asset value will fluctuate. Shares of a Fund are
redeemable by an investor at the then current net asset value, which may be more
or less than original cost. Redemption of Class B shares may be subject to a
contingent deferred sales charge as described above. Additional information
concerning each Fund's performance appears in the Statement of Additional
Information. Additional information about each Fund's performance also appears
in its Annual Report to Shareholders, which is available without charge from
KDF.
CAPITAL STRUCTURE
KDF was organized as a Maryland corporation in October, 1987 and has an
authorized capitalization of 500,000,000 shares of $.01 par value common stock.
In September, 1995, KDF changed its name from Dreman Mutual Group, Inc. to
Kemper-Dreman Fund, Inc. Since KDF may offer multiple funds, it is known as a
"series company." Currently, KDF offers four classes of shares of each Fund.
These are Class A, Class B and Class C shares, as well as Class I shares, which
are available for purchase exclusively by the following investors: (a)
tax-exempt retirement plans of KFS and its affiliates; and (b) the following
investment advisory clients of KFS and its investment advisory affiliates that
invest at least $1 million in a Fund: (1) unaffiliated benefit plans, such as
qualified
28
<PAGE> 34
retirement plans (other than individual retirement accounts and self-directed
retirement plans); (2) unaffiliated banks and insurance companies purchasing for
their own accounts; and (3) endowment funds of unaffiliated non-profit
organizations. The Board of Directors may authorize the issuance of additional
classes and additional Funds if deemed desirable, each with its own investment
objectives, policies and restrictions. Shares of a Fund have equal noncumulative
voting rights except that Class B and Class C shares have separate and exclusive
voting rights with respect to the Rule 12b-1 Plan. Shares of each class also
have equal rights with respect to dividends, assets and liquidation of such Fund
subject to any preferences (such as resulting from different Rule 12b-1
distribution fees), rights or privileges of any classes of shares of the Fund.
Shares of each Fund are fully paid and nonassessable when issued, are
transferable without restriction and have no preemptive or conversion rights.
The Board of Directors of KDF may, to the extent permitted by applicable law,
have the right at any time to redeem from any shareholder, or from all
shareholders, all or any part of any series or class, or of all series or
classes, of the shares of KDF.
The Funds are not required to hold annual shareholder meetings and do not intend
to do so. However, they will hold special meetings as required or deemed
desirable for such purposes as electing directors, changing fundamental policies
or approving an investment management agreement. KDF will call a meeting of
shareholders, if requested to do so by the holders of at least 10% of KDF's
outstanding shares and, in the case of a meeting called to consider removal of a
director or directors, will assist in communications with other shareholders as
required by Section 16(c) of the Investment Company Act of 1940. If shares of
more than one Fund are outstanding, shareholders will vote by Fund and not in
the aggregate or by class except when voting in the aggregate is required under
the Investment Company Act of 1940, such as for the election of directors, or
when voting by class is appropriate.
29
<PAGE> 35
Prospectus
KEMPER-DREMAN FUND, INC.
SEPTEMBER 11, 1995
KEMPER-DREMAN
CONTRARIAN FUND
KEMPER-DREMAN
HIGH RETURN FUND
KEMPER-DREMAN
SMALL CAP VALUE FUND
KEMPER
[KEMPER MUTUAL FUNDS LOGO]
[KEMPER MUTUAL FUNDS LOGO] INVESTMENT MANAGER:
We're Building Tomorrows Today (SM) Dreman Value Advisors, Inc.
PRINCIPAL UNDERWRITER:
Kemper Distributors, Inc.
120 South LaSalle Street
Chicago, IL 60603
DRE-1 (9/95)
<PAGE> 36
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
ITEMS REQUIRED
BY FORM N-1A LOCATION
------------------------------------- ---------------------------------------------
<S> <C> <C>
PART B STATEMENT OF ADDITIONAL INFORMATION
Item 10. Cover Page........................... Cover Page
Item 11. Table of Contents.................... Table of Contents
Item 12. General Information and History...... Cover Page
Item 13. Investment Objectives and Policies... Investment Restrictions; Investment Policies
and Techniques
Item 14. Management of the Fund............... Investment Manager and Underwriter; Officers
and Directors
Item 15. Control Persons and Principal Holders
of Securities........................ Officers and Directors--Principal Holders of
Securities
Item 16. Investment Advisory and Other
Services............................. Investment Manager and Underwriter;
Distribution and Servicing Arrangements
Item 17. Brokerage Allocation and Other
Practices............................ Portfolio Transactions
Item 18. Capital Stock and Other Securities... Dividends and Taxes; Shareholders Rights
Item 19. Purchase, Redemption and Price of
Securities Being Offered............. Purchase and Redemption of Shares
Item 20. Tax Status........................... Dividends and Taxes
Item 21. Underwriters......................... Investment Manager and Underwriter
Item 22. Calculation of Performance Data...... Performance
Item 23. Financial Statements................. Financial Statements
</TABLE>
<PAGE> 37
KEMPER-DREMAN FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 11, 1995
KEMPER-DREMAN CONTRARIAN FUND ("CONTRARIAN FUND")
KEMPER-DREMAN HIGH RETURN FUND ("HIGH RETURN FUND")
KEMPER SMALL CAP VALUE FUND ("SMALL CAP VALUE FUND")
120 SOUTH LASALLE STREET, CHICAGO, ILLINOIS 60603
1-800-621-1048
This Statement of Additional Information is not a prospectus. It is the
Statement of Additional Information for each of the above funds (the "Funds") of
the Kemper-Dreman Fund, Inc. ("KDF"). It should be read in conjunction with the
prospectus of KDF dated September 11, 1995. The prospectus may be obtained
without charge from KDF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Restrictions................................................. B-2
Investment Policies and Techniques...................................... B-3
Portfolio Transactions.................................................. B-5
Investment Manager and Underwriter...................................... B-6
Purchase and Redemption of Shares....................................... B-9
Dividends and Taxes..................................................... B-9
Performance............................................................. B-11
Officers and Directors.................................................. B-15
</TABLE>
The financial statements appearing in KDF's 1994 Annual Report to Shareholders,
and 1995 Semiannual Report to Shareholders (unaudited), are incorporated herein
by reference. With respect to the unaudited financial statements contained in
the Semiannual Report, all adjustments necessary for a fair statement of the
results of operations for the period covered by the report are included. All
such adjustments are of a normal recurring nature. The financial statements for
KDF (which prior to September 11, 1995 was known as Dreman Mutual Group, Inc.)
accompany this document.
DRE-13
<PAGE> 38
INVESTMENT RESTRICTIONS
Each Fund has adopted certain fundamental investment restrictions which cannot
be changed without approval of a majority of its outstanding voting shares. As
defined in the Investment Company Act of 1940, this means the lesser of the vote
of (a) 67% of the shares of the Fund present at a meeting where more than 50% of
the outstanding shares are present in person or by proxy or (b) more than 50% of
the outstanding shares of the Fund.
A FUND MAY NOT, AS A FUNDAMENTAL POLICY:
(1) Purchase securities of any one issuer other than obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities
collectively ("U.S. Government Securities") if immediately thereafter more than
5% of its total assets would be invested in the securities of any one issuer, or
purchase more than 10% of an issuer's outstanding securities, except that up to
25% of each Fund's total assets may be invested without regard to these
limitations.
(2) Borrow money or issue senior securities, except that each Fund may borrow
from banks for temporary purposes in amounts not in excess of 10% of the value
of its total assets at the time of such borrowing; or mortgage, pledge, or
hypothecate any assets except in connection with any such borrowing in amounts
not in excess of the lesser of the amount borrowed or 10% of the value of its
total assets at the time of such borrowing; provided that the Funds may enter
into futures contracts and related options as described in the prospectus.
Optioned securities are not considered to be pledged for purposes of this
limitation.
(3) Purchase any securities which would cause more than 25% of the value of its
total assets at the time of purchase to be invested in the securities of issuers
conducting their principal activities in the same industry.
(4) Invest more than 10% of the value of its net assets in illiquid securities,
including restricted securities and repurchase agreements with remaining
maturities in excess of seven days, and other securities for which market
quotations are not readily available.
(5) Make loans, except that each Fund may lend securities it owns as described
herein and enter into repurchase agreements pursuant to its investment objective
and policies.
(6) Purchase securities on margin or make short sales of securities, provided
that the Funds may enter into futures contracts and related options and make
initial and variation margin deposits in connection therewith.
(7) Purchase or sell commodities or commodity contracts, except futures
contracts and options thereon as stated in the prospectus, or invest in oil, gas
or mineral exploration or development programs, or in real estate or mortgage
loans provided that the Funds may, to the extent appropriate to their investment
objectives, purchase publicly traded securities of companies engaging in whole
or in part in such activities.
(8) Engage in the business of underwriting securities issued by others, except
that each Fund may acquire securities which are subject to restrictions on
disposition ("restricted securities") within the meaning of the Securities Act
of 1933.
THE FUNDS MAY NOT, AS A NON-FUNDAMENTAL POLICY:
(1) Purchase or retain securities of an issuer if the officers and directors of
KDF and/or the officers and directors of the investment advisor who own more
than 1/2 of 1% of such securities together own more than 5% of such securities.
(2) Invest for the purpose of exercising control over management of any company.
(3) Invest its assets in securities of any investment company, except by open
market purchases, including an ordinary broker's commission, or in connection
with a merger, acquisition of assets, consolidation or reorganization, and any
investments in the securities of other investment companies will be in
compliance with the Investment Company Act of 1940.
B-2
<PAGE> 39
(4) Invest more than 5% of its total assets in securities of companies which
have (with predecessors) a record of less than three years' continuous
operation.
(5) Invest more than 5% of its net assets in warrants, including within that
amount no more than 2% in warrants which are not listed on the New York or
American Stock Exchanges except warrants acquired as a result of its holdings of
common stocks.
(6) Purchase an interest in a real estate investment trust.
(7) Purchase more than 10% of the voting securities of any issuer or purchase
oil, gas or mineral leases.
INVESTMENT POLICIES AND TECHNIQUES
STOCK INDEX FUTURES. A stock index contract is a agreement pursuant to which the
parties agree to take or make delivery of an amount of cash equal to a specified
dollar amount times the difference between the stock index value (which assigns
relative values to the common stocks included in the index) at the close of the
last trading day of the contract and the price at which the futures contract is
originally struck. A Fund may not purchase a futures contract if immediately
thereafter the sum of its margin deposits on its existing futures positions
would exceed 5% of the value of its total assets (including the margin
deposits).
A risk assumed in transactions in futures contracts is the possibility that
Dreman Value Advisors, Inc. ("DVA") may be incorrect in its expectations as to
the extent of various market movements or the time spans within which the
movement takes place. Should the investment manager be incorrect in its
predictions, the Fund's return might have been better had hedging not been
attempted. Further, although the Funds intend to trade in futures contracts only
on exchanges or boards of trade where there appears to be active secondary
markets, there is no assurance that a liquid secondary market on any exchange or
board of trade will exist for any particular contract or at any particular time.
Finally, it is conceivable that, under certain circumstances, a Fund would be
required to sell portfolio securities at a time when it otherwise would not do
so in order to make margin payments on its futures positions, for the reasons
above, the purchase or sale of a futures contract may result in losses in excess
of the amount invested in the futures contract.
While futures contracts provide for the delivery of securities, deliveries
usually do not occur, contracts are generally terminated by entering into an
off-setting transaction. The Funds will incur brokerage fees when they purchase
futures contracts. At the same time such a purchase is made, the Fund must
provide cash or securities as a deposit ("initial deposit") known as "margin."
It is expected that the initial deposit would be approximately 2% of the
contract's face value. Daily, thereafter, the futures contract is valued and the
payment of "variation margin" may he required because each day the Fund must
provide or receive cash reflecting the decline or increase in the value of the
contract.
The liquidity of a market in a futures contract may be adversely affected by
"daily price fluctuation limits" established by commodity exchanges which limit
the amount of fluctuation in a futures contract price during a single trading
day. Once the daily limit has been reached in the contract, no trades may be
entered into at a price beyond the limit thus preventing the liquidation of open
futures positions. Prices have in the past exceeded the daily limit on a number
of consecutive trading days. On any day or days when the price fluctuation
limits have been reached a Fund may be unable to liquidate existing futures
positions or to implement a hedging strategy through the purchase or sale of
particular futures.
The writing of a call option on a futures contract constitutes a partial hedge
against declining prices of the securities which are deliverable upon exercise
of the futures contract. If the futures price at expiration of the option is
below the exercise price, a Fund will retain the full amount of the option
premium which provides a partial hedge against any decline that may have
occurred in the portfolio holdings. The writing of a put option on a futures
contract constitutes a partial hedge against increasing prices of the securities
which are deliverable upon exercise of the futures contract. If the futures
price at expiration of the option is higher than the exercise price, the Fund
will retain
B-3
<PAGE> 40
the full amount of the option premium which provides a partial hedge against any
increase in the price of securities which the Fund intends to purchase. If a put
or call option that the Fund has written is exercised, the Fund will incur a
loss which will be reduced by the amount of the premium it receives. Depending
on the degree of correlation between changes in the value of its portfolio
securities and changes in the value of its futures positions, a Fund's losses
from existing options on futures to some extent may be reduced or increased by
changes in the value of portfolio securities.
LENDING PORTFOLIO SECURITIES. A Fund may lend its portfolio securities to
brokers, dealers and institutional investors who need to borrow securities in
order to complete certain transactions, such as covering short sales, avoiding
failures to deliver securities or completing arbitrage operations. By lending
its securities, a portfolio can increase its income by the receipt of interest
on the loan. Any gain or loss in the market once of the securities loaned that
might occur during the term of the loan would accrue to the Fund. Securities'
loans will be made on terms which require that (a) the borrower pledge and
maintain (on a daily basis) with the Fund collateral consisting of cash, a
letter of credit or United States Government securities having a value at all
times not less than 100% of the value of the securities loaned, (b) the loan can
be terminated by the Fund at any time, (c) the Fund receives reasonable interest
on the loan which may include the Fund's investing any cash collateral in
interest bearing short-term investments), and (d) any distributions on the
loaned securities must be paid to the Fund. The Fund will not lend its
securities if, as a result, the aggregate of such loans exceeds 33% of the value
of the Fund's total assets. Loan arrangements made by a Fund will comply with
all other applicable regulatory requirements, including the rules of the New
York Stock Exchange, which require the borrower, after notice, to redeliver the
securities within the normal settlement time of five business days. All relevant
facts and circumstances, including the credit worthiness of the broker, dealer
or institution, will be considered in making decisions with respect to the
lending of securities, subject to review by KDF's Board of Directors. While
voting rights may pass with the loaned securities, if a material event occurs
affecting an investment on loan, the loan must be called and the securities
voted. KDF does not intend to lend securities of any Fund if as a result more
than 5% of the net assets of the Fund would be on loan.
SELLING COVERED CALL OPTIONS. The Funds may sell covered call options on
securities that they own to reduce the effect of price fluctuations of these
securities and increase their income. Such options will generally be written on
securities which, in the investment manager's opinion, are not expected to make
any major price moves in the near future but which, over the long term, are
deemed to be attractive investments for a Fund.
Until the option expires, the obligation of a Fund continues, requiring the Fund
to deliver the underlying security against payment of the exercise price. This
obligation terminates upon the expiration of the call option, or such earlier
time at which the Fund effects a closing purchase transaction by purchasing an
identical option to the option which it previously sold. To secure its
obligation to deliver the underlying security, a Fund is required to keep the
underlying security in escrow in accordance with the rules of the Options
Clearing Corporation and of the Exchanges.
When selling a covered call option, a Fund, in return for the premium, gives up
an opportunity for profit from a price increase in the optioned security above
the exercise price, and retains the risk of loss should the price of the
security decline. A Fund may, however, close out its obligation to deliver the
optioned securities by purchasing an identical option prior to the expiration
date of the option it has sold. A Fund has no control over when it may be
required to sell the underlying securities, since it may be assigned an exercise
notice at any time prior to the expiration of the option. If a call option which
a Fund has written expires, the Fund will realize a gain in the amount of the
premium; however, such gain may be offset by a decline in the market value of
the underlying security during the option period. If the call option is
exercised, the Fund will realize a gain or loss from the sale of the underlying
security. The security underlying the call will be maintained in a segregated
account of KDF's custodian.
The premium received by a Fund will be the current market value of the option
and will be recorded as a liability in the Fund's statement of assets and
liabilities. This liability will be adjusted daily to the option's current
market value, which will be the latest sale price at the time at which the net
asset value per share of the Fund is computed or, in the absence of such sale,
the mean between the latest bid and latest asked prices. The liability will be
B-4
<PAGE> 41
extinguished upon expiration of the option, the purchase of an identical option
in a closing transaction, or delivery of the underlying security upon the
exercise of the option.
Closing transactions may be effected in order to realize a profit on an
outstanding call option, to prevent an optioned security from being called, or
to permit the sale of the optioned security. There is, of course, no assurance
that a Fund will be able to effect a closing transaction at a favorable price.
If a Fund cannot enter into such a transaction, it may be required to hold a
security that it might otherwise have sold, in which case it would continue to
incur market risk on the security. The Funds will incur brokerage commissions in
connection with options transactions which are normally higher than those
applicable to purchases and sales of other listed securities.
Call options sold by a Fund will normally have expiration dates of less than
nine months from the date written. The exercise price of the options may be
below, equal to, or above the current market values of the underlying securities
at the time the options are written. From time to time, a Fund may purchase an
underlying security for delivery in accordance with an exercise notice of a call
option assigned to it, rather than delivering such security from its portfolio.
In such cases, additional brokerage commissions will be incurred.
The Funds will realize a profit or loss from a closing purchase transaction
depending upon whether the cost of the transaction is less or more than the
premium received from the writing of the option, Because increases in the market
price of a call option will generally reflect increases in the market price of
the underlying security, any loss resulting from the purchase of a call option
is likely to be offset in whole or in part by appreciation of the underlying
security owned by a Fund.
REGULATORY RESTRICTIONS. To the extent required to comply with SEC Release No.
IC-10666, when purchasing a futures contract, writing a put option or entering
into a forward currency exchange purchase, a Fund will maintain in a segregated
account cash, U.S. Government securities or liquid high-grade debt obligations
equal to the value of such contracts. A Fund will use cover in connection with
selling a futures contract.
A Fund will not engage in transactions in financial futures contracts or options
thereon for speculation, but only in an attempt to hedge against changes in
interest rates or market conditions affecting the value of securities that the
Fund holds or intends to purchase.
PORTFOLIO TRANSACTIONS
DVA is the investment manager for the Funds, and DVA, Kemper Financial Services,
Inc. ("KFS") (DVA's parent company), and its affiliates also furnish investment
management services to other clients including the Kemper Funds, Kemper
Corporation and the Kemper insurance companies. DVA is an affiliate of KFS,
Kemper Asset Management Company and Kemper Investment Management Company
Limited. These entities share some common research and trading facilities. At
times investment decisions may be made to purchase or sell the same investment
securities for the Funds and for one or more of the other clients managed by DVA
or its affiliates. When two or more of such clients are simultaneously engaged
in the purchase or sale of the same security through the same trading facility,
the transactions are allocated as to amount and price in a manner considered
equitable to each.
National securities exchanges have established limitations governing the maximum
number of options in each class which may be written by a single investor or
group of investors acting in concert. An exchange may order the liquidation of
positions found to be in violation of these limits, and it may impose certain
other sanctions. These position limits may restrict the number of options KDF
will be able to write on a particular security.
The above mentioned factors may have a detrimental effect on the quantities or
prices of securities, options or futures contracts available to the Funds. On
the other hand, the ability of the Funds to participate in volume transactions
may produce better executions for the Funds in some cases. The Board of
Directors believes that the benefits of DVA's organization outweigh any
limitations that may arise from simultaneous transactions or position
limitations.
B-5
<PAGE> 42
DVA, in effecting purchases and sale of portfolio securities for the account of
the Funds, will implement the Funds' policy of seeking best execution of orders,
which includes best net prices, except to the extent that DVA may be permitted
to pay higher brokerage commissions for research services as described below.
Consistent with this policy, orders for portfolio transactions are placed with
broker-dealer firms giving consideration to the quality, quantity and nature of
each firm's professional services, which include execution, clearance
procedures, wire service quotations and statistical and other research
information provided to the Funds and DVA. Any research benefits derived are
available for all clients, including clients of affiliated companies. Since it
is only supplementary to DVA's own research efforts and must be analyzed and
reviewed by DVA's staff, the receipt of research information is not expected to
materially reduce expenses. In selecting among firms believed to meet the
criteria for handling a particular transaction, DVA may give consideration to
those firms that have sold or are selling shares of the Funds and of other funds
managed by DVA's affiliates, as well as to those firms that provide market,
statistical and other research information to the Funds and DVA, although DVA is
not authorized to pay higher commissions or, in the case of principal trades,
higher prices to firms that provide such services, except as described below.
DVA may in certain instances be permitted to pay higher brokerage commissions
(not including principal trades) solely for receipt of market, statistical and
other research services. Subject to Section 28(e) of the Securities Exchange Act
of 1934 and procedures that may be adopted by the Board of Directors of KDF, the
Funds could pay a firm that provides research services to DVA commissions for
effecting a securities transaction for the Funds in excess of the amount other
firms would have charged for the transaction if DVA determines in good faith
that the greater commission is reasonable in relation to the value of the
research services provided by the executing firm viewed in terms either of a
particular transaction or DVA's overall responsibilities to the Funds or other
clients. Not all of such research services may be useful or of value in advising
the Funds. Research benefits will be available for all clients of DVA and its
affiliates. The investment management fee paid by the Funds to DVA is not
reduced because DVA receives these research services.
The table below shows total brokerage commissions paid by each Fund for the last
three fiscal years.
<TABLE>
<CAPTION>
FUND FISCAL 1994 FISCAL 1993 FISCAL 1992
----------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Contrarian Fund.................................................. $11,121 $ 9,720 $13,495
High Return Fund................................................. $20,565 $33,290 $11,740
Small Cap Value Fund............................................. $31,516 $15,609 $ 5,339
</TABLE>
Due to an increase in the Small Cap Value Fund's portfolio turnover rate in 1994
compared to 1993, in response to market conditions, the dollar amount of
brokerage commissions paid by the Fund during the 1994 fiscal year differed
materially from brokerage commissions paid by the Fund for the 1993 fiscal year.
Due to an increase of new money invested in 1993 compared to 1992 in High Return
Fund and the Small Cap Value Fund, the dollar amount of brokerage commissions
paid by these two Funds during the 1993 fiscal year differed materially from the
dollar amount of brokerage commissions paid by the Fund for the 1992 fiscal
year.
INVESTMENT MANAGER AND UNDERWRITER
INVESTMENT MANAGER. Dreman Value Advisors, Inc. ("DVA"), 10 Exchange Place, 20th
Floor, Jersey City, New Jersey 07302, is KDF's investment manager. DVA is a
wholly-owned subsidiary of Kemper Financial Services, Inc. ("KFS"). Pursuant to
an investment management agreement, DVA acts as each Fund's investment adviser,
manages its investments, administers its business affairs, furnishes office
facilities and equipment, provides clerical, bookkeeping and administrative
services, and permits any of its officers or employees to serve without
compensation as directors or officers of KDF if elected to such positions. Each
investment management agreement provides that each Fund pays the charges and
expenses of its operations, including the fees and expenses of the directors
(except those who are officers or employees of DVA or its affiliates),
independent auditors, counsel, custodian and transfer agent and the cost of
share certificates, reports and notices to shareholders, brokerage commissions
or transaction costs, costs of calculating net asset value, taxes and membership
dues. KDF bears the expenses of
B-6
<PAGE> 43
registration of its shares with the Securities and Exchange Commission, while
Kemper Distributors, Inc., as principal underwriter, pays the cost of qualifying
and maintaining the qualification of each Fund's shares for sale under the
securities laws of the various states. DVA has agreed to reimburse each Fund to
the extent required by applicable state expense limitations should all operating
expenses of each Fund, including the investment management fees of DVA but
excluding taxes, interest, distribution fees, extraordinary expenses, brokerage
commissions or transaction costs and any other properly excludable expenses,
exceed the applicable state expense limitations. KDF believes that the most
restrictive state expense limitation currently in effect would require that such
operating expenses not exceed 2.5% of the first $30 million of average daily net
assets, 2% of the next $70 million and 1.5% of average daily net assets over
$100 million. In addition, DVA has agreed to waive fees and absorb operating
expenses as described in the prospectus.
The investment management agreement provides that DVA shall not be liable for
any error of judgment or of law, or for any loss suffered by a Fund in
connection with the matters to which the agreements relate, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
DVA in the performance of its obligations and duties, or by reason of its
reckless disregard of its obligations and duties under each agreement.
KDF's investment management agreement continues in effect from year to year so
long as its continuation is approved at least annually by (a) a majority of the
directors who are not parties to such agreement or interested persons of any
such party except in their capacity as directors of KDF, and (b) by the
shareholders or the Board of Directors of KDF. The investment management
agreement may be terminated at any time upon 60 days notice by either party, or
by a majority vote of the outstanding shares of each Fund for that Fund, and
will terminate automatically upon assignment.
The table below shows the total advisory fees paid by each Fund to Dreman Value
Management, L.P., the former adviser, for the last three fiscal years.
<TABLE>
<CAPTION>
FUND FISCAL 1994 FISCAL 1993 FISCAL 1992
----------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Contrarian Fund.................................................. $154,696 $160,392 $160,566
High Return...................................................... $319,927 $242,727 $107,538
Small Cap Value Fund............................................. $ 64,342 $ 48,584 $ 7,760*
</TABLE>
---------------
* The Small Cap Value Fund commenced operations on May 22, 1992.
PRINCIPAL UNDERWRITER. Pursuant to an underwriting and distribution services
agreement ("distribution agreement"), Kemper Distributors, Inc. ("KDI"), an
affiliate of DVA, is the principal underwriter and distributor for the shares
KDF and acts as agent of KDF in the continuous offering of its shares. KDI bears
all its expenses of providing services pursuant to the distribution agreement,
including the payment of any commissions. KDF pays the cost for the prospectus
and shareholder reports to be set in type and printed for existing shareholders,
and KDI, as principal underwriter, pays for the printing and distribution of
copies thereof used in connection with the offering of shares to prospective
investors. KDI also pays for supplementary sales literature and advertising
costs.
The distribution agreement continues in effect from year to year so long as such
continuance is approved for each class at least annually by a vote of the Board
of Directors of KDF, including the Directors who are not interested persons of
KDF and who have no direct or indirect financial interest in the agreement. The
agreement automatically terminates in the event of its assignment and may be
terminated for a class at any time without penalty by a Fund for that Fund or by
KDI upon 60 days' notice. Termination by a Fund with respect to a class may be
by vote of a majority of the Board of Directors, or a majority of the Directors
who are not interested persons of KDF and who have no direct or indirect
financial interest in the agreement, or a "majority of the outstanding voting
securities" of the class of KDF, as defined under the Investment Company Act of
1940. The agreement may not be amended for a class to increase the fee to be
paid by a Fund with respect to such class without approval by a majority of the
outstanding voting securities of such class of a Fund and all material
amendments must in any event be approved by the Board of Directors in the manner
described above with respect to the continuation of the agreement.
B-7
<PAGE> 44
Prior to September 11, 1995, Fund/Plan Broker Services, Inc. ("FBS"), served as
the underwriter of KDF's shares, pursuant to an underwriting agreement which
became effective January 4, 1993. Under the agreement, FBS was the exclusive
agent for KDF's continuous offer of shares. Prior to September 11, 1995, shares
of KDF were offered to the public at net asset value, without a sales load. No
underwriting commissions were associated with sales of Fund shares for the
fiscal years ended December 31, 1992, 1993 and 1994.
ADMINISTRATIVE SERVICES. Administrative services are provided to KDF under an
administrative services agreement ("administrative agreement") with KDI, which
became effective September 11, 1995. KDI bears all its expenses of providing
services pursuant to the administrative agreement between KDI and KDF, including
the payment of service fees. KDF pays KDI an administrative services fee,
payable monthly, at an annual rate of up to .25 of average daily net assets of
each Fund.
KDI has entered into related arrangements with various financial services firms,
such as broker-dealers or banks ("firms"), that provide services and facilities
for their customers or clients who are shareholders of KDF. The firms provide
such office space and equipment, telephone facilities and personnel as is
necessary or beneficial for providing information and services to their clients.
Such services and assistance may include, but are not limited to, establishing
and maintaining shareholder accounts and records, processing purchase and
redemption transactions, answering routine inquiries regarding the Funds,
assistance to clients in changing dividend and investment options, account
designations and addresses and such other services as may be agreed upon from
time to time and permitted by applicable statute, rule or regulation. KDI pays
each firm a service fee, payable quarterly, at an annual rate of up to .25 of
the net assets in the Funds' accounts that it maintains and services
attributable to Class A, Class B and Class C shares, respectively, in each case
commencing with the month after investment (month of investment for Class C
shares); provided, however, KDI may advance the first year service fee as
described in the prospectus under "Investment Manager and Underwriter." Firms to
which service fees may be paid include broker-dealers affiliated with KDI.
KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreement not paid to firms to compensate
itself for administrative functions performed for the Funds. Currently, the
administrative services fee payable to KDI is based only upon KDF assets in
accounts for which there is a firm listed on KDF's records and it is intended
that KDI will pay all the administrative services fee that it receives from KDF
to firms in the form of service fees. The effective administrative services fee
rate to be charged against all assets of KDF while this procedure is in effect
will depend upon the proportion of KDF assets that is in accounts for which
there is a firm of record.
Certain directors or officers of KDF are also directors or officers of DVA and
KDI as indicated under "Officers and Directors."
CUSTODIAN AND SHAREHOLDER SERVICE AGENT. Investors Fiduciary Trust Company
("IFTC"), 127 West 10th Street, Kansas City, Missouri 64105, as custodian, and
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02110 as sub-custodian, have custody of all securities and cash of KDF
maintained in the United States. They attend to the collection of principal and
income, and payment for and collection of proceeds of securities bought and sold
by KDF. IFTC is also the KDF transfer agent and dividend-paying agent. Pursuant
to a services agreement with IFTC, Kemper Service Company ("KSvC"), an affiliate
of DVA, serves as "Shareholder Service Agent." IFTC receives an annual fee as
custodian for KDF, payable monthly, at a rate of $.10 per $1,000 of average
monthly net assets of each Fund plus certain transaction charges and
out-of-pocket expense reimbursement. IFTC receives as transfer agent, and pays
to KSvC, annual account fees of $6 per account plus account set up, transaction
and maintenance charges, annual fees associated with the contingent deferred
sales charge (Class B only) and out-of-pocket expense reimbursement. IFTC's fee
is reduced by certain earnings credits in favor of KDF.
INDEPENDENT AUDITORS AND REPORTS TO SHAREHOLDERS. KDF's independent auditors,
Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606, audit and
report on KDF annual financial statements, review certain regulatory reports and
KDF's federal income tax returns, and perform other professional accounting,
B-8
<PAGE> 45
auditing, tax and advisory services when engaged to do so by KDF. Shareholders
will receive annual audited financial statements and semi-annual unaudited
financial statements.
PURCHASE AND REDEMPTION OF SHARES
As described in KDF's prospectus, shares of a Fund are sold at their public
offering price, which is the net asset value per share of the Fund next
determined after an order is received in proper form plus, with respect to Class
A shares, an initial sales charge. The minimum initial investment is $1,000 and
the minimum subsequent investment is $100 but such minimum amounts may be
changed at any time. See the prospectus for certain exceptions to these
minimums. An order for the purchase of shares that is accompanied by a check
drawn on a foreign bank (other than a check drawn on a Canadian bank in U.S.
Dollars) will not be considered in proper form and will not be processed unless
and until KDF determines that it has received payment of the proceeds of the
check. The time required for such a determination will vary and cannot be
determined in advance.
Upon receipt by the Shareholder Service Agent of a request for redemption,
shares of a Fund will be redeemed by KDF at the applicable net asset value per
share of such Fund as described in KDF's prospectus. The redemption within one
year of Class A shares purchased at net asset value under the Large Order NAV
Purchase Privilege described in the prospectus may be subject to a 1% contingent
deferred sales charge (see "Purchase of Shares" in the prospectus). Redemption
of Class B shares may be subject to a contingent deferred sales charge. When KDF
is asked to redeem shares for which it may not yet have received good payment,
it may delay the mailing of a redemption check until it has determined that
collected funds have been received for the purchase of such shares, which will
be up to 15 days.
Scheduled variations in or the elimination of the initial sales charge for
purchases of Class A shares or the contingent deferred sales charge for
redemptions of Class B shares by certain classes of persons or through certain
types of transactions as described in the prospectus is provided because of
anticipated economies in sales and sales related efforts.
KDF may suspend the right of redemption or delay payment more than seven days
(a) during any period when the New York Stock Exchange (the "Exchange") is
closed other than customary weekend and holiday closings or during any period in
which trading on the Exchange is restricted, (b) during any period when an
emergency exists as a result of which (i) disposal of a Fund's investments is
not reasonably practicable, or (ii) it is not reasonably practicable for KDF to
determine the value of a Fund's net assets, or (c) for such other periods as the
Securities and Exchange Commission may by order permit for the protection of
KDF's shareholders.
The conversion of Class B shares to Class A shares may be subject to the
continuing availability of an opinion of counsel or ruling by the Internal
Revenue Service or other assurance acceptable to KDF to the effect that (a) the
assessment of the distribution services fee with respect to Class B shares and
not Class A shares and the assessment of the administrative services fee with
respect to each Class does not result in KDF's dividends constituting
"preferential dividends" under the Internal Revenue Code, and (b) that the
conversion of Class B shares to Class A shares does not constitute a taxable
event under the Internal Revenue Code. The conversion of Class B shares to Class
A shares may be suspended if such assurance is not available. In that event, no
further conversions of Class B shares would occur, and shares might continue to
be subject to the distribution services fee for an indefinite period that may
extend beyond the proposed conversion date as described in the prospectus.
DIVIDENDS AND TAXES
DIVIDENDS. Each Fund normally distributes dividends of net investment income
quarterly. Each Fund distributes any net realized short-term and long-term
capital gains at least annually.
Each Fund may at any time vary the foregoing dividend practices and, therefore,
reserves the right from time to time to either distribute or retain for
reinvestment such of its net investment income and its net short-term and long-
term capital gains as the Board of Directors of KDF determines appropriate under
the then current circumstances. In
B-9
<PAGE> 46
particular, and without limiting the foregoing, a Fund may make additional
distributions of net investment income or capital gain net income in order to
satisfy the minimum distribution requirements contained in the Internal Revenue
Code (the "Code"). Dividends will be reinvested in shares of the Fund paying
such dividends unless shareholders indicate in writing that they wish to receive
them in cash or in shares of Kemper Funds as described in the prospectus.
The level of income dividends per share (as a percentage of net asset value)
will be lower for Class B and Class C shares than for Class A shares primarily
as a result of the distribution services fee applicable to Class B and Class C
shares. Distributions of capital gains, if any, will be paid in the same amount
for each class.
TAXES. Each Fund intends to continue to qualify as a regulated investment
company under Subchapter M of the Code and, if so qualified, will not be liable
for federal income taxes to the extent its earnings are distributed. One of the
Subchapter M requirements to be satisfied is that less than 30% of each Fund's
gross income during its fiscal year must be derived from gains (not reduced by
losses) from the sale or other disposition of securities and certain other
investments held for less than three months. A Fund may be limited in its
options, futures and foreign currency transactions in order to prevent
recognition of such gains.
A Fund's options, futures and foreign currency transactions are subject to
special tax provisions that may accelerate or defer recognition of certain gains
or losses, change the character of certain gains or losses, or alter the holding
periods of certain of a Fund's securities.
The mark-to-market rules of the Code may require a Fund to recognize unrealized
gains and losses on certain options, futures and forward contracts held by the
Fund at the end of the fiscal year. Under these provisions, 60% of any capital
gain net income or loss recognized will generally be treated as long-term and
40% as short-term. However, although certain forward contracts on foreign
currency are marked-to-market, the gain or loss is generally ordinary under
Section 988 of the Code. In addition, the straddle rules of the Code would
require deferral of certain losses realized on positions of a straddle to the
extent that such Fund had unrealized gains in offsetting positions at year end.
A 4% excise tax is imposed on the excess of the required distribution for a
calendar year over the distributed amount for such calendar year. The required
distribution is the sum of 98% of a Fund's net investment income for the
calendar year plus 98% of its capital gain net income for the one-year period
ending October 31, plus any undistributed net investment income from the prior
calendar year, plus any undistributed capital gain net income from the one year
period ended October 31 of the prior calendar year, minus any overdistribution
in the prior calendar year. Each Fund intends to declare or distribute dividends
during the appropriate periods of an amount sufficient to prevent imposition of
the 4% excise tax.
A shareholder who redeems shares of a Fund will recognize capital gain or loss
for federal income tax purposes measured by the difference between the value of
the shares redeemed and the adjusted cost basis of the shares. Any loss
recognized on the redemption of shares held six months or less will be treated
as long-term capital loss to the extent that the shareholder has received any
long-term capital gain dividends on such shares. An exchange of a Fund's shares
for shares of another fund is treated as a redemption and reinvestment for
federal income tax purposes upon which gain or loss may be recognized. A
shareholder who has redeemed shares of a Fund or other Kemper Mutual Fund listed
in the prospectus under "Special Features--Class A Shares--Combined Purchases"
may reinvest the amount redeemed at net asset value at the time of the
reinvestment in shares of a Fund or in shares of a Kemper Mutual Fund within six
months of the redemption as described in the prospectus under "Redemption or
Repurchase of Shares--Reinvestment Privilege." If a shareholder realized a loss
on the redemption or exchange of a Fund's shares and reinvests in shares of the
same Fund 30 days before or after the redemption or exchange, the transactions
may be subject to the wash sale rules resulting in a postponement of the
recognition of such loss for federal income tax purposes. If a shareholder of
Class A shares redeems or otherwise disposes of such Class A shares less than
ninety-one days after they are acquired and subsequently acquires shares of the
Fund or of a Kemper Mutual Fund without payment of any sales charge (or for a
reduced sales charge) pursuant to a reinvestment privilege acquired in
connection with the Class A shares disposed of, then the sales charge on the
Class A shares disposed of (to the extent of the reduction in the sales charge
on the shares subsequently acquired) shall not be
B-10
<PAGE> 47
taken into account in determining gain or loss on the Class A shares disposed
of, but shall be treated as incurred on the acquisition of the shares
subsequently acquired.
Investment income derived from foreign securities may be subject to foreign
income taxes withheld at the source. Because the amount of a Fund's investments
in various countries will change from time to time, it is not possible to
determine the effective rate of such taxes in advance.
Shareholders who are non-resident aliens are subject to U.S. withholding tax on
ordinary income dividends (whether received in cash or shares) at a rate of 30%
or such lower rate as prescribed by any applicable tax treaty.
PERFORMANCE
As described in the prospectus, each Fund's historical performance or return for
a class of shares may be shown in the form of "average annual total return" and
"total return" figures. These various measures of performance are described
below. Performance information will be computed separately for each class.
Each Fund's average annual total return quotation is computed in accordance with
a standardized method prescribed by rules of the Securities and Exchange
Commission. The average annual total return for a Fund for a specific period is
found by first taking a hypothetical $1,000 investment ("initial investment") in
the Fund's shares on the first day of the period, adjusting to deduct the
maximum sales charge (in the case of Class A shares), and computing the
"redeemable value" of that investment at the end of the period. The redeemable
value in the case of Class B shares includes the effect of the applicable
contingent deferred sales charge that may be imposed at the end of the period.
The redeemable value is then divided by the initial investment, and this
quotient is taken to the Nth root (N representing the number of years in the
period) and 1 is subtracted from the result, which is then expressed as a
percentage. The calculation assumes that all income and capital gains dividends
paid by a Fund have been reinvested at net asset value on the reinvestment dates
during the period. Average annual total return may also be calculated without
adjusting to deduct the maximum sales charge. Average annual total return
figures for Class A shares for various periods are set forth in the tables
below.
Calculation of a Fund's total return is not subject to a standardized formula,
except when calculated for purposes of the "Financial Highlights" table in the
KDF's financial statements. Total return performance for a specific period is
calculated by first taking an investment (assumed below to be $10,000) ("initial
investment") in a Fund's shares on the first day of the period, either adjusting
or not adjusting to deduct the maximum sales charge (in the case of Class A
shares), and computing the "ending value" of that investment at the end of the
period. The total return percentage is then determined by subtracting the
initial investment from the ending value and dividing the remainder by the
initial investment and expressing the result as a percentage. The ending value
in the case of Class B shares may or may not include the effect of the
applicable contingent deferred sales charge that may be imposed at the end of
the period. The calculation assumes that all income and capital gains dividends
paid by the Fund have been reinvested at net asset value on the reinvestment
dates during the period. Total return may also be shown as the increased dollar
value of the hypothetical investment over the period. Total return calculations
that do not include the effect of the sales charge for Class A shares or the
contingent deferred sales charge for Class B shares would be reduced if such
charge were included. Total return figures for Class A shares for various
periods are set forth in the tables below.
A Fund's performance figures are based upon historical results and are not
necessarily representative of future performance. A Fund's Class A shares are
sold at net asset value plus a maximum sales charge of 5.75% of the offering
price. Class B shares and Class C shares are sold at net asset value.
Redemptions of Class B shares may be subject to a contingent deferred sales
charge that is 4% in the first year following the purchase, declines by a
specified percentage each year thereafter and becomes zero after six years.
Returns and net asset value will fluctuate. Factors affecting each Fund's
performance include general market conditions, operating expenses and investment
management. Any additional fees charged by a dealer or other financial services
firm would reduce the returns described in this section. Shares of each Fund are
redeemable at the then current net asset value, which may be more or less than
original cost.
B-11
<PAGE> 48
The figures below show performance information for various periods. Comparative
information for certain indices is also included. Please note the differences
and similarities between the investments which a Fund may purchase and the
investments measured by the applicable indices. The net asset values and returns
of each class of shares of the Funds will also fluctuate. No adjustment has been
made for taxes payable on dividends. The periods indicated were ones of
fluctuating securities prices and interest rates.
CONTRARIAN FUND--DECEMBER 31, 1994
<TABLE>
<CAPTION>
Initial Capital Gain Income Ending Percentage Ending Percentage Dow Jones
TOTAL $10,000 Income Dividends Value Increase Value Increase Industrial
RETURN Investment Dividends Reinvested (adjusted) (adjusted) (unadjusted) (unadjusted) Average
TABLE (1) Reinvested (2) (1) (1) (1) (1) (3)
----------------- ---------- ------------ ---------- ---------- ---------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) $ 11,479 $3,755 $1,969 $ 17,203 72.0% $ 18,253 82.5% 141.8%
Five Years 10,124 2,282 1,192 13,598 36.0 14,426 44.3 63.0
One Year 8,429 812 182 9,423 (5.8) 9,997 (0.0) 5.1
<CAPTION>
Lipper
Growth
Standard Consumer Russell and U.S.
TOTAL & Poor's Price 1,000(R) Income Treasury
RETURN 500 Index Value Fund Bill
TABLE (4) (5) (6) (7) (8)
----------------- -------- -------- ------ ------ --------
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 119.8% 28.5% 110.8% 103.5 % 47.2%
Five Years 51.7 18.7 50.9 52 26.9
One Year 1.4 2.7 (2.0) (0.8) 5.5
</TABLE>
<TABLE>
<CAPTION>
Lipper
Growth
Dow Jones Standard Consumer Russell and U.S.
AVERAGE ANNUAL Fund Industrial & Poor's Price 1000(R) Income Treasury
TOTAL RETURN Class A Average 500 Index Value Fund Bill
TABLE Shares (3) (4) (5) (6) (7) (8)
---------------- ------- --------- --------- -------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) 8.3% 14.0% 12.4% 3.8% 11.7% 11.1% 5.9%
Five Years 6.3 10.3 8.7 3.5 8.6 8.7 4.9
One Year (5.8) 5.1 1.4 2.7 (2.0) (0.8) 5.5
</TABLE>
---------------
(+) Since March 18, 1988.
HIGH RETURN FUND--DECEMBER 31, 1994
<TABLE>
<CAPTION>
Initial Income Ending Percentage Ending Percentage
TOTAL $10,000 Capital Gain Dividends Value Increase Value Increase
RETURN Investment Dividends Reinvested (adjusted) (adjusted) (unadjusted) (unadjusted)
TABLE (1) Reinvested (2) (1) (1) (1) (1)
------------------------- ---------- ------------ ---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) $ 14,242 $4,349 $3,455 $ 22,046 120.5% $ 23,390 133.9%
Five Years 14,043 605 1,814 16,462 64.6 17,469 74.7
One Year 9,186 0 144 9,330 (6.7) 9,901 (1.0)
<CAPTION>
Lipper
Dow Jones Standard Consumer S&P/ Equity
TOTAL Industrial & Poor's Price Barra's Income
RETURN Average 500 Index Value Fund
TABLE (3) (4) (5) (9) (12)
------------------------- --------- -------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 141.8% 100.1% 28.5% 109.1% 100.1%
Five Years 63.0 51.7 18.7 48.7 50.0
One Year 5.1 1.4 2.7 (0.6) (0.9)
</TABLE>
<TABLE>
<CAPTION>
S&P/ Lipper
AVERAGE ANNUAL Fund Dow Jones Standard Consumer Barra's Equity
TOTAL RETURN Class A Industrial & Poor's Price Value Income
TABLE Shares Average(3) 500(4) Index(5) (9) Fund(12)
---------------- -------- --------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Life of Fund(+) 12.4% 14.0% 12.4% 3.8% 11.5% 10.8%
Five Years 10.5 10.3 8.7 3.5 8.3 8.5
One Year (6.7) 5.1 1.4 2.7 (0.6) (0.9)
</TABLE>
---------------
(+) Since March 18, 1988
B-12
<PAGE> 49
SMALL CAP VALUE FUND--DECEMBER 31, 1994
<TABLE>
<CAPTION>
Initial Income Ending Percentage Ending Percentage Dow Jones
TOTAL $10,000 Capital Gain Dividends Value Increase Value Increase Industrial
RETURN Investment Dividends Reinvested (adjusted) (adjusted) (unadjusted) (unadjusted) Average
TABLE (1) Reinvested (2) (1) (1) (1) (1) (3)
------------------------ ---------- ------------ ---------- ---------- ---------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) $ 10,226 $1,292 $ 83 $ 11,601 16.0% $ 12,309 23.1% 22.2%
One Year 9,102 333 0 9,435 (5.7) 10,015 (0.2) 5.1
<CAPTION>
Lipper Small
Standard Consumer Russell Company
TOTAL & Poor's Price 2000(R) Growth
RETURN 500 Index Value Fund
TABLE (4) (5) (10) (11)
------------------------ -------- -------- ------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 19.7% 7.2% 31.5% 33.7%
One Year 1.4 2.7 (1.8) (0.4)
</TABLE>
<TABLE>
<CAPTION>
Lipper Small
AVERAGE ANNUAL Fund Dow Jones Standard Consumer Russell Company
TOTAL RETURN Class A Industrial & Poor's Price 2000(R) Growth
TABLE Shares Average(3) 500(4) Index(5) Value(10) Fund(11)
---------------- -------- --------- --------- -------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Life of Fund(+) 5.9% 8.1% 7.2% 2.7% 11.2% 11.9%
One Year (5.7) 5.1 1.4 2.7 (1.8) (0.4)
</TABLE>
---------------
(+) Since May 22, 1992
FOOTNOTES FOR ALL FUNDS
(1) The Initial Investment and adjusted amounts for Class A shares were
adjusted for the maximum initial sales charge at the beginning of the
period, which is 5.75%.
(2) Includes short-term capital gain dividends, if any.
(3) The Dow Jones Industrial Average is an unmanaged weighted average of thirty
blue chip industrial corporations listed on the New York Stock Exchange.
Assumes reinvestment of dividends. Source is Towers Data Systems and Lipper
Analytical Services, Inc.
(4) The Standard & Poor's 500 Stock Index is an unmanaged unweighted average of
500 stocks, over 95% of which are listed on the New York Stock Exchange.
Assumes reinvestment of dividends. Source is Towers Data Systems and Lipper
Analytical Services, Inc.
(5) The Consumer Price Index is a statistical measure of change, over time, in
the prices of goods and services in major expenditure groups for all urban
consumers. Source is Towers Data Systems.
(6) The Russell 1000(R) Value Index is an unmanaged index comprised of common
stocks of larger U.S. companies with less than average growth orientation.
Companies in this index generally have low price to book and price-earnings
ratios, higher dividend yields and lower forecasted growth values. Assumes
reinvestment of dividends. Source is Lipper Analytical Services, Inc.
(7) The Lipper Growth and Income Fund Index is a net asset value weighted index
of the performance of the 30 largest growth and income mutual funds tracked
by Lipper Analytical Services, Inc. Performance is based on changes in net
asset value with all dividends reinvested and with no adjustment for sales
charges. Source is Lipper Analytical Sources, Inc.
(8) The U.S. Treasury Bill Index is an unmanaged index based on the average
monthly yield of Treasury Bills maturing in 6 months. Source is Towers Data
Systems.
(9) The Standard & Poor's/Barra Value Index is constructed by dividing the
stocks in the S&P 500 Index according to a single attribute: book-to-price
ratio. The Value Index contains firms with higher book-to-price ratios and
is capitalization weighted. Source is Lipper Analytical Services, Inc.
(10) The Russell 2000(R) Value Index is an unmanaged index comprised of
securities in the Russell 2000 Index (small companies) with a less than
average growth orientation. Companies in this index generally have low
price to book and price-earnings ratios. Source is Lipper Analytical
Services, Inc.
(11) The Lipper Small Company Growth Fund Index is a net asset value weighted
index of the 30 largest small company growth funds. Performance is based on
changes in net asset value with all dividends reinvested and with no
adjustment for sales charges. Source is Lipper Analytical Services, Inc.
(12) The Lipper Equity Income Fund Index is a net asset value weighted index of
the 30 largest equity income funds. Performance is based on changes in net
asset value with all dividends reinvested and with no adjustment for sales
charges. Source is Lipper Analytical Services, Inc.
Investors may want to compare the performance of a Fund to certificates of
deposit issued by banks and other depository institutions. Certificates of
deposit may offer fixed or variable interest rates and principal is guaranteed
and may be insured. Withdrawal of deposits prior to maturity will normally be
subject to a penalty. Rates offered by banks and other depository institutions
are subject to change at any time specified by the issuing institution.
Information regarding bank products may be based upon, among other things, the
BANK RATE MONITOR National Index(TM) for certificates of deposit, which is an
unmanaged index and is based on stated rates and the annual effective yields of
certificates of deposit in the ten largest banking markets in the United States,
or the CDA Investment Technologies, Inc. Certificate of Deposit Index, which is
an unmanaged index based on the average monthly yields of certificates of
deposit.
B-13
<PAGE> 50
Investors also may want to compare the performance of a Fund to that of U.S.
Treasury bills, notes or bonds. Treasury obligations are issued in selected
denominations. Rates of Treasury obligations are fixed at the time of issuance
and payment of principal and interest is backed by the full faith and credit of
the U.S. Treasury. The market value of such instruments will generally fluctuate
inversely with interest rates prior to maturity and will equal par value at
maturity. Information regarding the performance of Treasury obligations may be
based upon, among other things, the Towers Data Systems U.S. Treasury Bill
index, which is an unmanaged index based on the average monthly yield of
treasury bills maturing in six months. Due to their short maturities, Treasury
bills generally experience very low market value volatility.
Investors may want to compare the performance of a Fund to that of money market
funds. Money market funds seek to maintain a stable net asset value and yield
fluctuates. Information regarding the performance of money market funds may be
based upon, among other things, IBC/Donoghue's Money Fund Averages(R) (All
Taxable). As reported by IBC/Donoghue's, all investment results represent total
return (annualized results for the period net of management fees and expenses)
and one year investment results are effective annual yields assuming
reinvestment of dividends.
The following tables compare the performance of the Class A shares of the Funds
over various periods ended June 30, 1995 with that of other mutual funds within
the categories described below according to data reported by Lipper Analytical
Services, Inc. ("Lipper"), New York, New York, which is a mutual fund reporting
service. Lipper performance figures are based on changes in net asset value,
with all income and capital gain dividends reinvested. Such calculations do not
include the effect of any sales charges. Future performance cannot be
guaranteed. Lipper publishes performance analyses on a regular basis. Each
category includes funds with a variety of objectives, policies and market and
credit risks that should be considered in reviewing these rankings.
<TABLE>
<CAPTION>
GROWTH & INCOME
CONTRARIAN FUND FUNDS
-----------------
<S> <C>
Life (3/31/88-6/30/95)......................................... 109 of 161
Five Years..................................................... 111 of 187
Three Years.................................................... 78 of 235
One Year....................................................... 137 of 374
</TABLE>
The Lipper Growth & Income Funds category includes funds that combine a growth
of earnings orientation and an income requirement for level and/or rising
dividends.
<TABLE>
<CAPTION>
EQUITY INCOME
HIGH RETURN FUND FUNDS
-----------------
<S> <C>
Life (3/31/88-6/30/95)......................................... 1 of 41
Five Years..................................................... 1 of 54
Three Years.................................................... 9 of 68
One Year....................................................... 41 of 109
</TABLE>
The Lipper Equity Income Funds category includes funds that seek relatively high
current income and growth of income through investing 60% or more of its
portfolio in equities.
<TABLE>
<CAPTION>
SMALL COMPANY
SMALL CAP VALUE FUND GROWTH FUNDS
-----------------
<S> <C>
Life (5/31/92-6/30/95)......................................... 51 of 124
Three Years.................................................... 64 of 124
One Year....................................................... 77 of 267
</TABLE>
B-14
<PAGE> 51
The Lipper Small Company Growth Fund category includes funds that by prospectus
or portfolio practice limit investments to companies on the basis of the size of
the company.
OFFICERS AND DIRECTORS
The officers and directors of KDF, their birthdates, their principal occupations
and their affiliations, if any, with Dreman Value Advisors, Inc. ("DVA"), the
investment manager, Kemper Financial Services, Inc. ("KFS"), the parent company
of DVA and Kemper Distributors, Inc. ("KDI"), the principal underwriter, or
their affiliates are as follows (The number following each person's title is the
number of investment companies managed by DVA or KFS ("Kemper funds") for which
he or she holds similar positions):
JAMES B. AKINS (10/15/26), Director (1), 2904 Garfield Terrace N.W., Washington,
D.C.; Consultant on International, Political and Economic Affairs; formerly a
career United States Foreign Service Officer; Energy Adviser for the White
House; United States Ambassador to Saudi Arabia.
FRED B. RENWICK (2/1/30), Director (1), 3 Hanover Square, New York, New York;
Professor of Finance, New York University, Stern School of Business; Director;
TIFF Industrial Program, Inc.; Director, The Wartberg Home Foundation; Chairman
Investment Committee of Morehouse College Board of Trustees; Chairman, American
Bible Society Investment Committee; previously member of the Investment
Committee of Atlanta University Board of Trustees; previously Director of Board
of Pensions Evangelical Lutheran Church in America.
ARTHUR R. GOTTSCHALK (2/13/25), Director (11), 10642 Brookridge Drive,
Frankfort, Illinois; Retired; formerly, President, Illinois Manufacturers
Association; Trustee, Illinois Masonic Medical Center; Member, Board of
Governors, Heartland Institute/Illinois; formerly, Illinois State Senator.
FREDERICK T. KELSEY (4/25/27), Director (11), 3133 Laughing Gull Court, John's
Island, South Carolina; Retired; formerly, consultant to Goldman, Sachs & Co.;
formerly, President, Treasurer and Trustee of Institutional Liquid Assets and
its affiliated mutual funds; Trustee of the Benchmark Fund and the Pilot Fund.
*DAVID B. MATHIS (4/13/38), Director (29), Kemper Center, Long Grove, Illinois;
Chairman, Chief Executive Officer and Director, Kemper Corporation; Director,
KFS, Kemper Financial Companies, Inc., several other Kemper Corporation
subsidiaries and IMC Global, Inc.; Chairman of the Board, Kemper National
Insurance Companies.
*STEPHEN B. TIMBERS (8/8/44), President and Director (32), 120 South LaSalle
Street, Chicago, Illinois; President, Chief Operating Officer, Chief Investment
Officer and Director, Kemper Corporation; Chairman, Chief Executive Officer,
Chief Investment Officer and Director, KFS; Director, Kemper Financial
Companies, Inc., KDI, DVA, several other Kemper Corporation subsidiaries,
Gillett Holdings, Inc. and LTV Corporation.
JOHN B. TINGLEFF (5/4/35), Director (11), 2015 South Lake Shore Drive, Harbor
Springs, Michigan; Retired; formerly, President, Tingleff & Associates
(management consulting firm); formerly, Senior Vice President, Continental
Illinois National Bank & Trust Company.
JOHN G. WEITHERS (8/8/33), Director (11), 311 Spring Lake, Hinsdale, Illinois;
Retired; formerly, Chairman of the Board and Chief Executive Officer, Chicago
Stock Exchange; Director, Federal Life Insurance Company; President of the
Members of the Corporation and Trustee, DePaul University.
*DAVID N. DREMAN (5/6/36), Vice President (1), 10 Exchange Place, 20th Floor,
Jersey City, New Jersey; Chairman and Director, DVA.
*JOHN E. NEAL (3/9/50), Vice President (1), 120 South LaSalle Street, Chicago,
Illinois; President, Chief Operating Officer and Director, KFS; Director, DVA,
KDI and several other Kemper Corporation subsidiaries; prior thereto, Senior
Vice President, Kemper Real Estate Management Company.
*JAMES R. NEEL (4/1/43), Vice President (1), 10 Exchange Place, 20th Floor,
Jersey City, New Jersey; President, Chief Executive Officer and Director, DVA.
B-15
<PAGE> 52
*JOHN E. PETERS (11/4/47), Vice President (32), 120 South LaSalle Street,
Chicago, Illinois; Senior Executive Vice President and Director, KFS; President
and Director, KDI; Director, DVA.
*CHARLES F. CUSTER (8/19/28), Vice President and Assistant Secretary (32), 222
North LaSalle Street, Chicago, Illinois; Partner, Vedder, Price, Kaufman &
Kammholz (attorneys), Legal Counsel to KDF.
*JEROME L. DUFFY (6/29/36), Treasurer (32), 120 South LaSalle Street, Chicago,
Illinois; Senior Vice President, KFS.
*PHILIP J. COLLORA (11/15/45), Vice President and Secretary (32), 120 South
LaSalle Street, Chicago, Illinois; Attorney, Senior Vice President and Assistant
Secretary, KFS.
*ELIZABETH C. WERTH (10/1/47), Assistant Secretary (24), 120 South LaSalle
Street, Chicago, Illinois; Vice President and Director of State Registrations,
KDI and KFS.
---------------
* "Interested persons" as defined in the Investment Company Act of 1940.
The directors and officers who are "interested persons" as designated above
receive no compensation from the Fund, except that Mr. Custer's law firm will
receive fees from KDF as counsel to KDF. The table below shows amounts estimated
to be paid or accrued to those directors who are not designated "interested
persons" during KDF's 1995 fiscal year except that the information in the last
column is for calendar year 1994.
<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION
AGGREGATE RETIREMENT BENEFITS KEMPER FUNDS
COMPENSATION ACCRUED AS PART OF PAID TO
NAME OF BOARD MEMBERS FROM KDF(4) KDF EXPENSES BOARD MEMBERS(3)
---------------------------------------------------- ------------ -------------------- -----------------
<S> <C> <C> <C>
James B. Akins(1)................................... $7,500 $0 $66,600
Arthur R. Gottschalk(2)............................. $7,500 $0 $72,000
Frederick T. Kelsey(2).............................. $7,500 $0 $73,800
Fred B. Renwick(1).................................. $7,500 $0 $66,600
John B. Tingleff.................................... $7,500 $0 $70,500
John G. Weithers.................................... $7,500 $0 $70,100
</TABLE>
---------------
(1) It is anticipated that, at shareholders' meetings scheduled for September
19, 1995, Messrs. Akins and Renwick will be elected to the Boards of 10
additional Kemper funds with 22 fund portfolios.
(2) Includes deferred fees and interest thereon pursuant to deferred
compensation agreements with the Fund. Deferred amounts accrue interest
monthly at a rate equal to the yield of Kemper Money Market Fund -- Money
Market Portfolio.
(3) Includes estimated compensation for service for calendar year 1994 on the
boards of 11 Kemper funds with 25 fund portfolios and amounts for new funds
as if the fund had existed at the beginning of the year and, for KDF as if
it had been affiliated with the Kemper funds for all of 1994 and the Board
Members had been such for all the Kemper funds during the period.
(4) Assumes all Board Members served on KDF Board for all of 1995 fiscal year
and includes estimated compensation for 1995.
As of August 31, 1995, the officers and directors of KDF as a group owned the
following percentages of the Funds: 7.26% of the Contrarian Fund, 6.85% of the
High Return Fund and 0.57% of the Small Cap Value Fund.
B-16
<PAGE> 53
PRINCIPAL HOLDERS OF SECURITIES
As of August 28, 1995 the following owned of record more than 5% of the
outstanding stock of the Funds, as set forth below.
CONTRARIAN FUND
<TABLE>
<CAPTION>
NAME & ADDRESS PERCENTAGE
--------------------------------------------------------------------------------------- ----------
<S> <C>
InterMetro Industries Corporation 23.3%
Salaried Employees Pension Trust
651 N. Washington Street
Wilkes-Bane, PA 18705
David N. Dreman 7.1%
10 Exchange Place
Jersey City, NJ 07302
</TABLE>
HIGH RETURN FUND
<TABLE>
<CAPTION>
NAME & ADDRESS PERCENTAGE
--------------------------------------------------------------------------------------- ----------
<S> <C>
Charles Schwab & Co. Inc.(1) 10.6%
101 Montgomery Street
San Francisco, CA 94104
National Financial Services, Inc.(1) 8.4%
For Exclusive Benefit of Our Customers
Church Street Station
P.O. Box 3730
New York, NY 10008
David N. Dreman 6.3%
10 Exchange Place
Jersey City, NJ 07302
</TABLE>
B-17
<PAGE> 54
SMALL CAP VALUE FUND
<TABLE>
<CAPTION>
NAME & ADDRESS PERCENTAGE
--------------------------------------------------------------------------------------- ----------
<S> <C>
National Financial Services, Inc.(1) 27.5%
For Exclusive Benefit of Our Customers
Church Street Station
P.O. Box 3730
New York, NY 10008
Stockton Trust Nominee Partnership(1) 9.4%
7373 N. Scottsdale Road
STE A-188
Scottsdale, AZ 85253
Richard Maslow(2)
P.O. Box A
Wilkes-Bane, PA 18705
Dreman Value Management, L.P. 5.4%
Profit Sharing Plan
10 Exchange Place
Jersey City, NJ 07302
First Interstate Bank of Nevada, NA 5.1%
TRTE UWL Edward R. Moore
FBO Moore Issue DTD 08-30-52
P.O. Box 9800 Mutual Funds Dept.
Calabasas, CA 91302
</TABLE>
---------------
(1) There are a number of individual accounts included in these accounts of
which, to KDF's knowledge, no one individual owns more than 5% of the
outstanding common stock of the respective Fund.
(2) Individual holds shares jointly in four separate accounts with four
different individuals.
B-18
<PAGE> 55
THE DREMAN CONTRARIAN PORTFOLIO
INVESTMENT PORTFOLIO
DECEMBER 31, 1994
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
-------------------------------------- ------ -----------
<S> <C> <C>
COMMON STOCK--99.73%
APPAREL--5.67%
Fruit Of The Loom Inc.-Class A* 13,000 $ 351,000
Liz Claiborne, Incorporated 15,300 258,188
VF Corporation 2,600 126,425
-----------
735,613
-----------
AUTOMOTIVE--5.52%
Ford Motor Company 25,600 716,800
-----------
BANKS/MONEY CENTER--6.33%
BankAmerica Corporation 5,900 233,050
Bank One Corporation 2,000 50,750
Bankers Trust New York Corp. 4,200 232,575
First Chicago Corporation 6,400 305,600
-----------
821,975
-----------
BANKS/REGIONAL--8.03%
Barnett Banks Incorporated 7,400 283,975
First Fidelity Bancorp 2,700 121,162
First Union Corporation 3,800 157,225
Nationsbank Corporation 1,700 76,713
Norwest Corporation 8,300 194,013
PNC Bank Corporation 9,900 209,137
-----------
1,042,225
-----------
COMPUTERS--11.14%
Apple Computer, Incorporated 10,600 413,400
Compaq Computer Corporation* 13,500 533,250
Hewlett Packard Company 5,000 499,375
-----------
1,446,025
-----------
CONGLOMERATES--4.13%
Hanson PLC (ADR) 29,800 536,400
-----------
DRUGS--10.71%
American Home Products 7,200 451,800
Bristol-Myers Squibb Company 2,600 150,475
Eli Lilly & Company 2,700 177,187
Marion Merrell Dow, Incorporated 6,900 140,588
Merck & Company, Incorporated 6,300 240,187
Upjohn Company 7,500 230,625
-----------
1,390,862
-----------
ELECTRICAL EQUIPMENT--2.83%
General Electric Company 7,200 367,200
-----------
FINANCIAL SERVICES--10.74%
Federal Home Loan Mortgage Corp. 16,500 833,250
Federal National Mortgage Assoc. 7,700 561,138
-----------
1,394,388
-----------
<CAPTION>
SECURITY SHARES VALUE
-------------------------------------- ------ -----------
<S> <C> <C>
FOOD PROCESSING--2.12%
Nestles SA (ADR) 5,800 $ 275,500
-----------
FOREST PRODUCTS--1.87%
Louisiana Pacific Corporation 8,900 242,525
-----------
HOUSEHOLD PRODUCTS--3.77%
Unilever, N.V. 4,200 489,300
-----------
INSURANCE/MULTILINE--1.59%
American General Corporation 7,300 206,225
-----------
INSURANCE/PROPERTY & CASUALTY--2.26%
Ohio Casualty Corporation 10,400 293,800
-----------
MEDICAL SERVICES & SUPPLIES--1.99%
United States Surgical Corporation 13,600 258,400
-----------
NATURAL GAS--3.80%
Columbia Gas System, Incorporated* 21,000 493,500
-----------
PETROLEUM--3.54%
Amoco Corporation 4,500 266,062
Atlantic Richfield Company 1,900 193,325
-----------
459,387
-----------
RETAIL--5.77%
Dayton Hudson Corporation 900 63,675
K Mart Corporation 14,200 184,600
May Department Stores Company 10,200 344,250
TJX Companies, Incorporated 4,800 75,000
Woolworth Corporation 5,400 81,000
-----------
748,525
-----------
THRIFTS--4.29%
Ahmanson (H.F.) & Company 15,300 246,713
Great Western Financial Corp. 19,400 310,400
-----------
557,113
-----------
TOBACCO--3.63%
Philip Morris Cos., Incorporated 8,200 471,500
-----------
Total Investments
(Cost $10,662,443)(a) 99.73% 12,947,263
Other Assets less Liabilities 0.27% 35,350
------ -----------
NET ASSETS 100.00% $12,982,613
====== ===========
NET ASSET value and redemption
price per share
($12,982,613/1,066,314) $12.18
=======
</TABLE>
---------------
* Non-income producing securities.
(a) The aggregate cost of investments for book basis and for Federal income tax
purposes is the same. At December 31, 1994, net unrealized appreciation
consisted of:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $2,750,928
Gross Unrealized Depreciation (466,108)
----------
Net Unrealized Appreciation $2,284,820
==========
</TABLE>
See Notes to Financial Statements
<PAGE> 56
THE DREMAN HIGH RETURN PORTFOLIO
INVESTMENT PORTFOLIO
DECEMBER 31, 1994
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
-------------------------------------- ------- -----------
<S> <C> <C>
COMMON STOCKS--98.42%
AEROSPACE/DEFENSE--0.31%
Boeing Company 2,300 $ 107,525
-----------
APPAREL--6.72%
Burlington Coat Factory* 19,200 225,600
Fruit Of The Loom Inc.--Class A* 28,400 766,800
Leslie Fay Cos., Incorporated* 115,000 79,063
Liz Claiborne, Incorporated 41,400 698,625
VF Corporation 12,000 583,500
-----------
2,353,588
-----------
AUTOMOTIVE--5.04%
Ford Motor Company 63,000 1,764,000
-----------
BANKS/MONEY CENTER--6.77%
BankAmerica Corporation 17,032 672,764
Bankers Trust NY Corporation 13,500 747,562
First Chicago Corporation 12,700 606,425
J.P. Morgan & Co., Incorporated 6,100 341,600
-----------
2,368,351
-----------
BANKS/REGIONAL--12.41%
Barnett Banks Incorporated 13,750 527,656
First Fidelity Bancorp 14,100 632,737
First Union Corporation 18,100 748,888
Fleet Financial Group, Inc. 7,200 234,000
Midlantic Corporation 21,000 556,500
Nationsbank Corporation 8,240 371,830
PNC Bank Corporation 22,300 471,087
Signet Banking Corporation 10,200 291,975
Wells Fargo & Company 3,500 507,500
-----------
4,342,173
-----------
COMPUTERS--8.60%
Apple Computer, Incorporated 20,900 815,100
Compaq Computer Corporation* 40,900 1,615,550
Hewlett Packard Company 5,800 579,275
-----------
3,009,925
-----------
CONGLOMERATES--1.68%
Hanson PLC (ADR) 32,700 588,600
-----------
DRUGS--10.39%
Baxter International Incorporated 12,000 339,000
Eli Lilly & Company 15,200 997,500
Glaxo Holdings PLC (ADR) 20,700 421,762
Marion Merrell Dow, Incorporated 30,600 623,475
Merck & Company, Incorporated 14,500 552,813
Upjohn Company 22,800 701,100
-----------
3,635,650
-----------
ELECTRICAL EQUIPMENT--3.72%
General Electric Company 25,500 1,300,500
-----------
FINANCIAL SERVICES--10.62%
Federal Home Loan Mortgage Corp. 38,100 1,924,050
<CAPTION>
SECURITY SHARES VALUE
-------------------------------------- ------- -----------
<S> <C> <C>
Federal National Mortgage Assoc. 22,300 $ 1,625,112
Travelers Incorporated 5,227 169,878
-----------
3,719,040
-----------
FOREST PRODUCTS--3.74%
Louisiana Pacific Corporation 48,100 1,310,725
-----------
GROCERY--1.36%
Giant Food Incorporated--Class A 21,900 476,325
-----------
INSURANCE/MULTILINE--3.77%
American General Corporation 9,900 279,675
American International Group, Inc. 10,600 1,038,800
-----------
1,318,475
-----------
INSURANCE/PROPERTY & CASUALTY--1.62%
Kemper Corporation 15,000 568,125
-----------
MEDICAL SERVICES & SUPPLIES--5.43%
Becton, Dickinson & Company 9,700 465,600
Columbia/HCA Healthcare Corp. 8,757 319,631
National Medical Enterprises, Inc.* 39,000 550,875
United States Surgical Corporation 29,800 566,200
-----------
1,902,306
-----------
NATURAL GAS--4.51%
Columbia Gas Systems, Inc.* 67,200 1,579,200
-----------
RETAIL--5.23%
Dayton Hudson Corporation 8,100 573,075
TJX Companies, Incorporated 80,500 1,257,812
-----------
1,830,887
-----------
THRIFTS--2.71%
Ahmanson (H.F.) & Co. 24,500 395,063
Great Western Financial Corp. 34,500 552,000
-----------
947,063
-----------
TOBACCO--3.79%
Philip Morris Cos., Incorporated 23,100 1,328,250
-----------
Total Common Stocks
(Cost $31,322,955) 34,450,708
COMMERCIAL PAPER--1.94%
General Motors Acceptance Corp. 5.807%
1/6/95 (Cost $680,000) 680,000 680,000
-----------
Total Investments (Cost
$32,002,955)(a) 100.36% 35,130,708
Liabilities in Excess of Assets (0.36%) (125,802)
------- -----------
NET ASSETS 100.00% $35,004,906
======= ===========
NET ASSET value and redemption
price per share
($35,004,906/2,315,983) $15.11
======
</TABLE>
---------------
* Non-income producing securities.
(a) The aggregate cost of investments for Federal income tax purposes is
$32,015,224. At December 31, 1994, net unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 5,212,005
Gross Unrealized Depreciation (2,096,521)
Net Unrealized Appreciation $ 3,115,484
===========
</TABLE>
See Notes to Financial Statements
<PAGE> 57
THE DREMAN SMALL CAP VALUE PORTFOLIO
INVESTMENT PORTFOLIO
DECEMBER 31, 1994
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
--------------------------------------- ------- ----------
<S> <C> <C>
COMMON STOCKS--98.10%
AIR TRANSPORT--1.95%
Atlantic Southeast Airlines, Inc. 8,700 $ 134,850
BANKS/REGIONAL--7.63%
First Commerce Corporation 7,050 155,100
Midlantic Corporation 7,200 190,800
Roosevelt Financial Group 4,600 69,000
West One Bancorp 4,300 113,950
----------
528,850
----------
COMPUTER SOFTWARE & SERVICES--2.12%
GRC International, Incorporated* 12,900 146,738
----------
ELECTRONICS--2.67%
Magnetek Incorporated* 13,700 184,950
----------
ENVIRONMENTAL SERVICES--2.07%
International Technology Corp.* 47,800 143,400
----------
FINANCIAL SERVICES--2.42%
Imperial Credit Industries, Inc.* 19,700 167,450
----------
HOTEL/GAMING--3.44%
Grand Casinos Incorporated* 17,200 238,650
----------
INDUSTRIAL SERVICES--3.46%
PHH Corporation 6,900 239,775
----------
INSURANCE/DIVERSIFIED--2.00%
Equitable Of Iowa Company 4,900 138,425
----------
INSURANCE/PROPERTY & CASUALTY--2.37%
Transnational Re Corp.-Class A* 7,000 164,500
----------
MANUFACTURING--5.82%
Blount Incorporated-Class A 7,900 367,350
Matthews Int'l. Corp.-Class A 2,600 35,750
----------
403,100
----------
MEDICAL SERVICES & SUPPLIES--9.07%
Research Industries Corporation* 11,400 156,750
Scimed Life Systems Incorporated* 4,100 207,050
Sofamor/Danek Group Incorporated* 20,400 265,200
----------
629,000
----------
MULTI-FORM--6.00%
Mercer International Incorporated* 30,500 415,563
----------
NATURAL GAS--4.03%
Columbia Gas System, Incorporated* 11,900 279,650
----------
<CAPTION>
SECURITY SHARES VALUE
--------------------------------------- ------- ----------
<S> <C> <C>
OIL & GAS--3.22%
Giant Industries Incorporated* 16,000 $ 120,000
Valero Energy Corporation 6,100 102,937
----------
222,937
----------
REAL ESTATE/HOME BUILDING--2.39%
Del Webb Corporation 9,400 165,675
----------
RETAIL/SPECIALTY--17.51%
Blair Corporation 1,800 72,000
C M L Group Incorporated 28,100 284,512
Cato Corporation-Class A 33,900 245,775
J. Baker Incorporated 16,000 240,000
Macfrugal's Bargains Close-Outs Inc.* 10,800 216,000
Phillips Van Heusen Corporation 10,200 155,550
----------
1,213,837
----------
SEMICONDUCTORS--5.32%
Exar Corporation* 15,050 368,725
----------
SPECIALTY CHEMICAL--3.43%
Grow Group, Incorporated 17,000 238,000
----------
THRIFTS/SAVINGS & LOAN--7.07%
Cenfed Financial Corporation 4,100 70,725
Coast Savings Financial, Inc. Dc.* 10,800 156,600
Firstfed Financial Corporation* 6,000 75,750
Irwin Financial Corporation 2,800 74,900
North Side Savings Bank-Bronx, NY 5,900 112,100
----------
490,075
----------
TOILETRIES & COSMETICS--1.21%
Jean Philippe Fragrances, Inc.* 11,200 84,000
----------
TRANSPORTATION--2.90%
Airborne Freight Corporation 9,800 200,900
----------
TOTAL COMMON STOCKS
(Cost $7,284,856) 6,799,050
COMMERCIAL PAPER--5.84%
General Motors Acceptance Corp.
5.807% 1/6/95 (Cost $405,000) 405,000 405,000
----------
TOTAL INVESTMENTS
(Cost $7,689,856)(a) 103.94% 7,204,050
Liabilities in Excess of Assets (3.94%) (273,392)
------- ----------
NET ASSETS 100.00% $6,930,658
======= ==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE
($6,930,658/639,007) $10.85
==========
</TABLE>
---------------
* Non-income producing securities.
(a) The aggregate cost of investments for Federal income tax purposes is
$7,777,889. At December 31, 1994, net unrealized depreciation consisted of:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 237,388
Gross Unrealized Depreciation (811,227)
Net Unrealized Depreciation $(573,839)
=========
</TABLE>
See Notes to Financial Statements
<PAGE> 58
THE DREMAN MUTUAL GROUP, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
<TABLE>
<CAPTION>
THE DREMAN THE DREMAN THE DREMAN
CONTRARIAN HIGH RETURN SMALL CAP VALUE
PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ---------------
<S> <C> <C> <C>
ASSETS
Investments in securities at market value
(Identified Cost $10,662,443,
$32,002,955, $4,612,469 and $7,689,856,
respectively) (Note 1A)................ $12,947,263 $35,130,708 $ 7,204,050
Cash...................................... 8,164 -- 10,106
Receivables:
Investment securities sold............. -- -- 24,127
Capital stock sold..................... 1,000 8,984 10,202
Dividends and interest (Note 1C)....... 35,529 90,307 9,714
----------- ----------- -----------
Total assets...................... 12,991,956 35,229,999 7,258,199
----------- ----------- -----------
LIABILITIES
Payables:
Investment securities purchased........ -- 209,936 326,611
Capital stock redeemed................. 9,343 11,054 930
Accrued expenses....................... -- 4,103 --
----------- ----------- -----------
Total liabilities................. 9,343 225,093 327,541
----------- ----------- -----------
NET ASSETS (applicable to 1,066,314,
2,315,983, 477,827 and 639,007 outstanding
shares, respectively) (Note 2)............ $12,982,613 $35,004,906 $ 6,930,658
=========== =========== ===========
NET ASSET VALUE, offering and redemption
price per share (Net Assets/Shares
Outstanding).............................. $12.18 $15.11 $10.85
=========== =========== ===========
Net Assets consists of:
Paid-in capital........................... $10,547,157 $32,244,545 $ 7,420,207
Undistributed net investment income....... 749 7,401 --
Accumulated net realized gain (loss) on
investments............................ 149,887 (374,793) (3,743)
Net unrealized appreciation (depreciation)
on investments......................... 2,284,820 3,127,753 (485,806)
----------- ----------- -----------
NET ASSETS.................................. $12,982,613 $35,004,906 $ 6,930,658
=========== =========== ===========
</TABLE>
See Notes to Financial Statements
<PAGE> 59
THE DREMAN MUTUAL GROUP, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
THE DREMAN THE DREMAN THE DREMAN
CONTRARIAN HIGH RETURN SMALL CAP VALUE
PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ---------------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest (Note 1C)......................... $ 945 $ 11,451 $ 8,832
Dividends (Note 1C)........................ 483,454 892,910 68,465
Other (Note 2A)............................ 508 1,739 885
----------- ----------- ---------
Total income............................ 484,907 906,100 78,182
----------- ----------- ---------
EXPENSES
Investment advisory fee (Note 4)........... 154,696 319,927 64,342
Custodian fees............................. 4,722 3,743 10,662
Legal and audit fees....................... 11,413 22,173 4,124
Transfer agent fees........................ 27,393 53,065 25,127
Directors' fees............................ 4,820 10,689 2,163
Registration fees.......................... 5,627 12,038 6,132
Insurance.................................. 1,227 2,902 503
Shareholder reports........................ 3,313 7,463 1,569
Miscellaneous.............................. 6,680 13,427 2,691
----------- ----------- ---------
219,891 445,427 117,313
Reimbursement of expenses (Note 4)......... (26,520) (45,518) (36,886)
----------- ----------- ---------
Total expenses............................. 193,371 399,909 80,427
----------- ----------- ---------
Net investment income................... 291,536 506,191 (2,245)
----------- ----------- ---------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) from security
transaction (Note 1C)................... 1,278,455 (362,499) (3,931)
Decrease in unrealized appreciation of
investments............................. (1,545,091) (832,988) (465,018)
----------- ----------- ---------
Net loss on investments................. (266,636) (1,195,487) (468,949)
----------- ----------- ---------
Net increase (decrease) in net assets
resulting from operations.......... $ 24,900 $ (689,296) $(471,194)
=========== =========== =========
</TABLE>
See Notes to Financial Statements
<PAGE> 60
THE DREMAN MUTUAL GROUP, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
THE DREMAN THE DREMAN
CONTRARIAN PORTFOLIO HIGH RETURN PORTFOLIO
-------------------------- --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/94 12/31/93 12/31/94 12/31/93
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income..................... $ 291,536 $ 262,524 $ 506,191 $ 356,918
Net realized gain (loss) from security
transactions........................... 1,278,455 373,363 (362,499) 449,928
Net change in unrealized appreciation on
investments............................ (1,545,091) 747,421 (832,988) 1,170,258
----------- ----------- ----------- -----------
Net increase (decrease) in net assets
from operations...................... 24,900 1,383,308 (689,296) 1,977,104
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment
income................................. (291,740) (262,565) (500,118) (357,416)
Distributions from net realized gains on
investments............................ (1,128,593) (979,520) -- (443,535)
CAPITAL SHARE TRANSACTIONS
Increase (decrease) in net assets
resulting from capital share
transactions (Note 2).................. (2,778,814) 2,131,318 7,780,880 12,812,436
----------- ----------- ----------- -----------
Total increase (decrease)......... (4,174,247) 2,272,541 6,591,466 13,988,589
NET ASSETS
Beginning of year......................... 17,156,860 14,884,319 28,413,440 14,424,851
----------- ----------- ----------- -----------
End of year*.............................. $12,982,613 $17,156,860 $35,004,906 $28,413,440
=========== =========== =========== ===========
---------------
* Including cumulative undistributed net
investment income of: (Note 2B)........... $749 $952 $7,401 $1,330
==== ==== ====== ======
</TABLE>
See Notes to Financial Statements
<PAGE> 61
THE DREMAN MUTUAL GROUP, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
THE DREMAN
SMALL CAP VALUE
PORTFOLIO
------------------------
YEAR ENDED YEAR ENDED
12/31/94 12/31/93
---------- ----------
<S> <C> <C>
OPERATIONS
Net investment income......................... $ (2,245) $ 25,585
Net realized gain (loss) from security
transactions............................... (3,931) 385,639
Net change in unrealized appreciation
(depreciation) on investments.............. (465,018) (248,641)
---------- ----------
Net increase (decrease) in net assets from
operations............................... (471,194) 162,583
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income...... -- (25,563)
Distributions from net realized gains on
investments................................ (172,658) (212,816)
CAPITAL SHARE TRANSACTIONS
Increase (decrease) in net assets resulting
from capital share transactions (Note 2)... 2,699,087 2,566,220
---------- ----------
Total increase (decrease)............. 2,055,235 2,490,424
NET ASSETS
Beginning of year............................. 4,875,423 2,384,999
---------- ----------
End of year*.................................. $6,930,658 $4,875,423
========== ==========
---------------
* Including cumulative undistributed net
investment income of: (Note 2B)............... -- $22
===
</TABLE>
See Notes to Financial Statements
<PAGE> 62
THE DREMAN MUTUAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES--The Dreman Contrarian
Portfolio, The Dreman High Return Portfolio, The Dreman Fixed Income Portfolio
and The Dreman Small Cap Value Portfolio ("The Portfolios") are each a series of
shares of common stock of The Dreman Mutual Group, Inc., ("The Fund") which is
registered under the Investment Company Act of 1940, as amended, as a
diversified open-end management company. The company was incorporated in the
state of Maryland in October 15, 1987. The following is a summary of significant
accounting policies followed by the Fund.
A. SECURITY VALUATION--The Portfolio's investments in securities are
carried at market value. Securities listed on an exchange or quoted on a
national market system are valued at the last sale price. Other securities are
valued at the mean between the most recent bid and asked prices. Fixed income
securities may be valued on the basis provided by a pricing service when such
are believed to reflect the fair market value of such securities. The prices
provided by a pricing service may be determined without regard to bid or last
sale prices but take into account institutional size trading in similar groups
of securities and any development related to specific securities. Short-term
investments are valued at amortized cost which approximates market value. The
market value of other assets and securities for which no quotations are
available are determined in good faith at fair value using methods determined by
the Board of Directors.
B. FEDERAL INCOME TAXES--No provision has been made for Federal income
taxes. It is the policy of the portfolios to comply with the provision of the
Internal Revenue Code applicable to regulated investment companies and to make
sufficient distributions of taxable income to relieve it from all federal income
taxes.
C. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME--Security
transactions are accounted for on the trade date (the date the order to buy or
sell is executed) with gain or loss on the sale of securities being determined
based upon identified cost. Dividend income is recorded on the ex-dividend date
and interest income is recorded on the accrual basis.
D. FUTURES CONTRACTS--Initial margin deposits required upon entering into
futures contracts are made by depositing cash, as collateral, for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the contract are
recognized as unrealized gains or loss by "marking-to-market" on a daily basis
to reflect the market value of the contract at the end of each day's trading.
Variation margin payments are made or received, depending upon whether
unrealized gains or losses are incurred. When the contract is closed the Fund
records a realized gain or loss equal to the difference between the proceeds
from (or cost of) the closing transaction and the Fund's basis in the contract.
The Dreman Contrarian, The Dreman High Return and The Dreman Small Cap
Value Portfolios may purchase and sell stock index futures contracts and index
options as hedges against changes resulting from market conditions in the values
of the securities held by the Portfolios or securities which they intend to
purchase or sell where such transactions are economically appropriate for the
reduction of risks inherent in the ongoing management of the Portfolios. Futures
contracts involve credit and market risk in excess of the amounts reflected in
the Statement of Assets and Liabilities. The contract amounts of these futures
contracts reflect the extent of the Portfolios' exposure to off-balance sheet
risk. Further, to minimize their credit risk, the Portfolios intend to trade in
futures contracts only on exchanges or boards of trade where there appears to be
active secondary markets; however, there is no assurance that a liquid secondary
market on any exchange or board of trade will exist for any particular contract
or at any particular time. The Portfolios' assume the market risk which arises
from any changes in security values.
<PAGE> 63
THE DREMAN MUTUAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
2. CAPITAL STOCK--The Dreman Mutual Group, Inc. has 500,000 shares of .01 par
stock authorized of which each Portfolio was allocated 100,000,000 shares.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
THE DREMAN CONTRARIAN PORTFOLIO
---------------------------------------------------
YEAR ENDED 12/31/94 YEAR ENDED 12/31/93
----------------------- ------------------------
SHARES VALUE SHARES VALUE
-------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares sold....................................... 200,835 $ 2,800,952 247,062 $ 3,347,385
Shares issued in reinvestment of distributions.... 105,352 1,306,831 88,559 1,186,779
-------- ----------- -------- -----------
306,187 4,107,783 335,621 4,534,164
Shares redeemed................................... (499,681) (6,886,597) (177,958) (2,402,846)
-------- ----------- -------- -----------
Net increase (decrease)...................... (193,494) $(2,778,814) 157,663 $ 2,131,318
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
THE DREMAN HIGH RETURN PORTFOLIO
---------------------------------------------------
YEAR ENDED 12/31/94 YEAR ENDED 12/31/93
----------------------- ------------------------
SHARES VALUE SHARES VALUE
-------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares sold...................................... 746,899 $11,989,657 1,358,654 $20,571,427
Shares issued in reinvestment of distributions... 28,805 450,119 48,287 738,922
-------- ----------- --------- -----------
775,704 12,439,776 1,406,941 21,310,349
Shares redeemed.................................. (293,063) (4,658,896) (560,150) (8,497,913)
-------- ----------- --------- -----------
Net increase................................ 482,641 $ 7,780,880 846,791 $12,812,436
======== =========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
THE DREMAN SMALL CAP VALUE PORTFOLIO
---------------------------------------------------
YEAR ENDED 12/31/94 YEAR ENDED 12/31/93
----------------------- ------------------------
SHARES VALUE SHARES VALUE
-------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares sold....................................... 636,591 $ 7,366,377 384,018 $ 4,375,561
Shares issued in reinvestment of distributions.... 15,284 168,584 21,225 235,571
-------- ----------- -------- -----------
651,875 7,534,961 405,243 4,611,132
Shares redeemed................................... (446,924) (4,835,874) (178,272) (2,044,912)
-------- ----------- -------- -----------
Net increase................................. 204,951 $ 2,699,087 226,971 $ 2,566,220
======== =========== ======== ===========
</TABLE>
<PAGE> 64
THE DREMAN MUTUAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
2. A. For the period April 30, 1993 to March 9, 1994, inclusive, a contingent
redemption fee of 1% of the net asset value of shares redeemed, including
exchange redemptions, was charged to shareholders who redeemed shares held less
than one year. The contingent redemption fee was subtracted from the payment to
the shareholder and was deposited in the Fund for the benefit of the remaining
shareholders to offset any transaction costs that were incurred by the
Portfolio. The holding period for these redemptions was determined by first
using shares purchased with the earliest trade date. Shares purchased through
reinvestment of dividends were not subject to the contingent redemption fee. The
contingent redemption fee was not applied to investments made in any Portfolio
prior to April 30, 1993 or after March 9, 1994.
B. During the fiscal year ended December 31, 1993, the Fund adopted
Statement of Position 93-2 Determination, Disclosure, and Financial Statement
Presentation of Income, Capital Gain, and Return of Capital Distribution by
Investment Companies. Accordingly, permanent book and tax basis differences
relating to shareholder distributions have been reclassified to additional
paid-in capital. As of January 1, 1993, the cumulative effects of such
differences totaling $17,119, $17,090, $17,096 and $0 were reclassified from
undistributed net investment income to additional paid-in capital for The Dreman
Contrarian Portfolio, The Dreman High Return Portfolio, The Dreman Fixed Income
Portfolio and The Dreman Small Cap Value Portfolio, respectively, $670 and $667
were reclassified from accumulated net realized gains to additional paid-in
capital for The Dreman High Return Portfolio and The Dreman Small Cap Value
Portfolio, respectively.
3. PURCHASES AND SALES OF SECURITIES--Purchases and sales of securities other
than short-term investments for the year ended December 31, 1994 were as
follows:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- ----------
<S> <C> <C>
The Dreman Contrarian Portfolio................ $2,456,391 $6,292,074
The Dreman High Return Portfolio............... $10,967,623 $3,648,433
The Dreman Fixed Income Portfolio.............. $199,188 $1,216,838
The Dreman Small Cap Value Portfolio........... $11,169,542 $8,745,350
</TABLE>
At December 31, 1994, The Dreman High Return Portfolio and The Dreman Fixed
Income Portfolio had capital loss carryforwards for Federal income tax purposes
of $362,496 and $22,766, respectively, which expire in 2002.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES--The
investment advisory fee was earned by Dreman Value Management, L.P. (formerly
Dreman Value Management, Inc.) under the terms of an investment advisory
agreement which provides that the management fee shall be calculated at the
annual rate of 1% of the average value of net assets of The Dreman Contrarian
Portfolio, The Dreman High Return Portfolio and The Dreman Small Cap Value
Portfolio up to $1 billion and 3/4 of 1% annually of net assets in excess of $1
billion, and 1/2 of 1% of the average value of net assets of The Dreman Fixed
Income Portfolio. Fees were paid monthly and for the year ended December 31,
1994 amounted to:
<TABLE>
<S> <C>
The Dreman Contrarian Portfolio................. $154,696
The Dreman High Return Portfolio................ $319,927
The Dreman Fixed Income Portfolio............... $22,312
The Dreman Small Cap Value Portfolio............ $64,342
</TABLE>
The Adviser has undertaken to reimburse the Fund for its annual operating
expenses, exclusive of taxes, brokerage commissions, interest and extraordinary
expenses such as legal fees, to the extent necessary to satisfy the lowest
expense ratio permitted by any state in which the Fund's shares are qualified
for sale. Presently the most
<PAGE> 65
THE DREMAN MUTUAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
restrictive expense limitation is 2 1/2% on the first $30,000,000 of average
annual net assets, 2% on the next $70,000,000 of such assets, and 1 1/2% on any
excess. However, the Advisor has voluntarily reimbursed more expenses than
contractually obliged.
Reimbursement from the manager for the year ended December 31, 1994 is as
follows:
<TABLE>
<S> <C>
The Dreman Contrarian Portfolio........................ $26,520
The Dreman High Return Portfolio....................... $45,518
The Dreman Fixed Income Portfolio...................... $29,303
The Dreman Small Cap Value Portfolio................... $36,886
</TABLE>
Several individuals who are officers or directors, or both of the
Portfolios, are also officers and directors, or both, of Dreman Value
Management, L.P.
<PAGE> 66
[Letterhead of Tait, Weller & Baker]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Dreman Mutual Group, Inc.
We have audited the accompanying statement of assets and liabilities of The
Dreman Mutual Group, Inc., (comprising, respectively, The Dreman Contrarian, The
Dreman High Return, The Dreman Fixed Income and The Dreman Small Cap Value
Portfolios) including the schedules of portfolio investments as of December 31,
1994 and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years ended December 31,
1994 and the financial highlights for each of the periods indicated thereon.
These financial statements and financial highlights are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994 by correspondence with custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Dreman Mutual Group, Inc. as of December 31, 1994, the results of operations for
the year then ended, the changes in net assets for each of the two years ended
December 31, 1994 and the financial highlights for each of the periods indicated
thereon, in conformity with generally accepted accounting principles.
[SIG]
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 19, 1995
<PAGE> 67
THE DREMAN CONTRARIAN PORTFOLIO
INVESTMENT PORTFOLIO
JUNE 30, 1995
<TABLE>
<CAPTION>
SECURITY SHARES VALUE SECURITY SHARES VALUE
------------------------------------------------------ --------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMON STOCKS -- 98.13%
APPAREL -- 4.84% FOREST PRODUCTS -- 1.53%
Fruit Of The Loom Inc.-Class A* 11,500 $ 242,938 Louisiana Pacific Corporation 7,900 $ 207,375
Liz Claiborne, Incorporated 13,500 286,875 -----------
VF Corporation 2,300 123,625 HOUSEHOLD PRODUCTS -- 3.56%
----------- Unilever, N.V. 3,700 481,463
653,438 -----------
----------- INSURANCE/MULTILINE -- 1.60%
AUTOMOTIVE -- 4.97% American General Corporation 6,400 216,000
Ford Motor Company 22,600 672,350 -----------
----------- INSURANCE/ PROPERTY &
CASUALTY -- 2.14%
BANKS/MONEY CENTER -- 6.63% Ohio Casualty Corporation 9,200 289,800
BankAmerica Corporation 5,200 273,650 -----------
Banc One Corporation 1,800 58,050 MEDICAL SERVICES &
Bankers Trust New York Corp. 3,700 229,400 SUPPLIES -- 0.82%
First Chicago Corporation 5,600 335,300 United States Surgical
----------- Corporation 5,300 110,637
896,400 -----------
----------- NATURAL GAS -- 4.35%
BANKS/REGIONAL -- 8.50% Columbia Gas System,
Barnett Banks Incorporated 6,500 333,125 Incorporated* 18,500 587,375
First Fidelity Bancorp 2,400 141,600 -----------
First Union Corporation 3,400 153,850 PETROLEUM -- 3.35%
Nationsbank Corporation 1,500 80,437 Amoco Corporation 4,000 266,500
Norwest Corporation 7,300 209,875 Atlantic Richfield Company 1,700 186,575
PNC Bank Corporation 8,700 229,462 ------------
----------- 453,075
1,148,349 ------------
-----------
COMPUTERS -- 8.51% RETAIL -- 5.77%
Apple Computer, Incorporated 6,400 297,200 Dayton Hudson Corporation 1,100 78,925
Compaq Computer Corporation* 11,900 539,963 May Department Stores Company 9,000 374,625
Hewlett Packard Company 4,200 312,900 TJX Companies, Incorporated 19,900 263,675
----------- Woolworth Corporation 4,100 62,012
1,150,063 ------------
----------- 779,237
CONGLOMERATES -- 3.56% ------------
Hanson PLC (ADR) 26,300 463,537 THRIFTS -- 4.81%
U.S. Industries Incorporated* 1,315 17,917 Ahmanson (H.F.) & Company 13,500 297,000
----------- Great Western Financial Corp. 17,100 352,687
481,454 ------------
----------- 649,687
------------
TOBACCO -- 3.96%
DRUGS -- 12.42% Philip Morris Cos.,
American Home Products Corp. 6,400 495,200 Incorporated 7,200 535,500
Bristol-Myers Squibb Company 2,300 156,688 ------------
Eli Lilly & Company 2,400 188,400 Total Common Stocks
Marion Merrell Dow, Incorporated 12,300 313,650 (Cost $9,153,894) 13,262,654
Merck & Company, Incorporated 5,600 274,400
Upjohn Company 6,600 249,975 COMMERCIAL PAPER -- 1.48%
----------- General Electric Company
1,678,313 5.980% 7/10/95 (Cost $200,000) 200,000 200,000
----------- ----------
ELECTRICAL EQUIPMENT -- 2.67% Total Investments
General Electric Company 6,400 360,800 (Cost $9,353,894)(a) 99.61% 13,462,654
----------- Other Assets less Liabilities 0.39% 53,085
FINANCIAL SERVICES -- 12.17% -------- -----------
Federal Home Loan Mortgage Corp. 14,600 1,003,750 NET ASSETS 100.00% $13,515,739
Federal National Mortgage Assoc. 6,800 641,750 ======== ===========
----------- NET ASSET value and
1,645,500 redemption price per share
----------- ($13,515,739/940,434) $14.37
FOOD PROCESSING -- 1.97% ======
Nestles SA (ADR) 5,100 265,838
-----------
</TABLE>
------------------
* Non-income producing securities.
(a) The aggregate cost of investments for book basis and for Federal income tax
purposes is the same. At June 30, 1995, net unrealized appreciation
consisted of:
Gross Unrealized Appreciation $4,339,195
Gross Unrealized Depreciation (230,434)
----------
Net Unrealized Appreciation $4,108,761
==========
See Notes to Financial Statements
<PAGE> 68
THE DREMAN HIGH RETURN PORTFOLIO
INVESTMENT PORTFOLIO
JUNE 30, 1995
<TABLE>
<CAPTION>
SECURITY SHARES VALUE SECURITY SHARES VALUE
---------------------------------------------------------- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMON STOCKS - 96.51% FINANCIAL SERVICES - 12.59%
AEROSPACE/DEFENSE - 0.32% Federal Home Loan Mortgage Corp. 38,100 $ 2,619,375
Boeing Company 2,300 $ 144,037 Federal National Mortgage Assoc. 29,600 2,793,500
------------- Travelers Incorporated 5,227 228,681
------------
APPAREL - 5.48% 5,641,556
------------
Burlington Coat Factory* 32,000 332,000 FOREST PRODUCTS - 2.82%
Fruit Of The Loom Inc.-Class A* 28,400 599,950 Louisiana Pacific Corporation 48,100 1,262,625
Liz Claiborne, Incorporated 41,400 879,750 ------------
VF Corporation 12,000 645,000 GROCERY - 1.39%
-------------
2,456,700 Giant Food Incorporated-Class A 21,900 621,413
AUTOMOTIVE - 4.18% ------------- ------------
Ford Motor Company 63,000 1,874,250 INSURANCE/MULTILINE - 3.45%
-------------
American General Corporation 9,900 334,125
BANKS/MONEY CENTER - 7.45% American International Group, Inc. 10,600 1,208,400
------------
BankAmerica Corporation 17,032 896,309 1,542,525
------------
Bankers Trust NY Corporation 20,200 1,252,400 INSURANCE/PROPERTY &
First Chicago Corporation 12,700 760,412 CASUALTY - 1.56%
J.P. Morgan & Co., Incorporated 6,100 427,763 Kemper Corporation 15,000 699,375
------------- ------------
3,336,884
-------------
BANKS/REGIONAL - 12.38% MEDICAL SERVICES &
Barnett Banks Incorporated 13,750 704,687 SUPPLIES - 4.14%
Capital One Financial Corp. 10,200 198,900 Becton, Dickinson & Company 9,700 565,025
First Fidelity Bancorp 14,100 831,900 Columbia/HCA Healthcare Corp. 8,757 378,740
First Union Corporation 18,100 819,025 Tenet Healthcare Corporation* 39,000 560,625
Fleet Financial Group, Inc. 7,200 267,300 United States Surgical Corporation 16,800 350,700
------------
Midlantic Corporation 21,000 840,000 1,855,090
------------
Nationsbank Corporation 8,240 441,870 NATURAL GAS - 4.76%
PNC Bank Corporation 22,300 588,163 Columbia Gas System, Inc.* 67,200 2,133,600
------------
Signet Banking Corporation 10,200 223,125
Wells Fargo & Company 3,500 630,875 RETAIL - 5.58%
-------------
5,545,845 Dayton Hudson Corporation 20,000 1,435,000
-------------
COMPUTERS - 8.24% TJX Companies, Incorporated 80,500 1,066,625
------------
Apple Computer, Incorporated 20,900 970,543 2,501,625
------------
Compaq Computer Corporation* 40,900 1,855,838 THRIFTS - 2.79%
Hewlett Packard Company 11,600 864,200 Ahmanson (H.F.) & Co. 24,500 539,000
-------------
3,690,581 Great Western Financial Corp. 34,500 711,563
------------- ------------
CONGLOMERATES - 1.34% 1,250,563
------------
Hanson PLC (ADR) 32,700 576,337 TOBACCO - 3.84%
U.S. Industries Incorporated* 1,635 22,277 Philip Morris Cos., Incorporated 23,100 1,718,063
------------ ------------
598,614 Total Common Stocks
------------
DRUGS - 10.99% (Cost $32,622,504) 43,233,021
Baxter International 12,000 436,500 COMMERCIAL PAPER - 3.35%
Incorporated
Eli Lilly & Company 15,200 1,193,200 General Electric Company
Glaxo Wellcome PLC (ADR) 20,700 504,563 5.980% 7/10/95 (Cost$1,500,000) 1,500,000 1,500,000
------------
Marion Merrell Dow, 47,600 1,213,800 Total Investments
Incorporated
Merck & Company, Incorporated 14,500 710,500 (Cost $34,122,504)(a) 99.86% 44,733,021
Upjohn Company 22,800 863,550 Liabilities in Excess of Assets 0.14% 61,534
------------ ---------- ------------
4,922,113 NET ASSETS 100.00% $44,794,555
------------ ========== ============
ELECTRICAL EQUIPMENT-3.21% NET ASSET value and
General Electric Company* 25,500 1,437,562 redemption price per share
------------ ($44,794,555/2,490,100) $17.99
======
</TABLE>
---------------
* Non-income producing securities.
(a) The aggregate cost of investments for Federal income tax purposes is
$34,134,773. At June 30, 1995, net unrealized appreciation consisted of:
Gross Unrealized Appreciation $11,868,996
Gross Unrealized Depreciation (1,258,479)
----------
Net Unrealized Appreciation $10,610,517
===========
See Notes to Financial Statements
<PAGE> 69
THE DREMAN SMALL CAP VALUE PORTFOLIO
INVESTMENT PORTFOLIO
JUNE 30, 1995
<TABLE>
<CAPTION>
SECURITY SHARES VALUE SECURITY SHARES VALUE
<S> <C> <C> <C> <C> <C>
COMMON STOCKS -- 92.07%
AIR TRANSPORT -- 2.10% OIL & GAS -- 5.73%
Atlantic Southeast Airlines, Inc. 8,200 $ 247,025 Giant Industries Incorporated 21,700 $ 184,450
----------- KCS Energy Incorporated 14,800 316,350
BANKS/REGIONAL -- 4.16% Valero Energy Corporation 8,500 172,125
-----------
First Commerce Corporation 5,050 148,975 672,925
-----------
Roosevelt Financial Group 10,000 166,875 REAL ESTATE/HOME
West One Bancorp 5,200 173,550 BUILDING -- 1.94%
----------- Del Webb Corporation 9,800 227,850
489,400 -----------
-----------
CEMENT -- 3.80%
Ameron Incorporated 4,200 152,250 RETAIL/SPECIALTY -- 10.09%
Texas Industries Incorporated 7,600 295,450 Blair Corporation 2,200 75,625
----------- C M L Group Incorporated 23,500 185,063
447,700 Cato Corporation - Class A 34,000 276,250
----------- J. Baker Incorporated 25,000 253,125
COMPUTER SOFTWARE & Macfrugal's Bargains Close-Outs Inc.* 22,600 395,500
SERVICES -- 0.54% -----------
GRC International, Incorporated* 4,000 63,000 1,185,563
----------- -----------
ELECTRONICS -- 1.91% SEMICONDUCTORS -- 5.77%
Magnetek Incorporated* 16,500 224,812 Exar Corporation* 15,850 467,575
----------- Cyrix Corporation* 8,700 209,887
-----------
ENVIRONMENTAL SERVICES -- 2.91% 677,462
International Technology Corp.* 114,000 342,000 SPECIALTY CHEMICAL -- 1.47% -----------
----------- Rexene Corporation 14,000 173,250
FINANCIAL SERVICES -- 2.69% -----------
Imperial Credit Industries, Inc.* 25,500 315,562 STEEL/SPECIALTY -- 2.01%
----------- Mueller Industries Inc.* 4,800 236,400
HOTEL/GAMING -- 9.06% -----------
Bally Entertainment Corporation* 48,500 594,125 THRIFTS/SAVINGS & LOAN -- 7.95%
Grand Casinos Incorporated* 13,300 470,488 Brooklyn Bancorp Inc. 6,400 216,000
----------- Cenfed Financial Corporation 7,500 151,875
1,064,613 Coast Savings Financial, Inc. De.* 5,500 113,438
----------- Firstfed Financial Corporation* 8,000 117,000
INDUSTRIAL SERVICES -- 3.37% Irwin Financial Corporation 3,800 131,100
PHH Corporation 8,900 396,050 North Side Savings Bank-Bronx, NY 8,275 204,806
----------- -----------
INSURANCE/PROPERTY & 934,219
CASUALTY -- 2.52% -----------
TOILETRIES & COSMETICS -- 2.78%
Guaranty National Corporation 16,000 296,000 Jean Philippe Fragrances, Inc.* 30,000 326,250
----------- -----------
MANUFACTURING -- 5.84% TRANSPORTATION -- 1.71%
Blount Incorporated- Class A 14,000 624,750 Airborne Freight Corporation 9,900 200,475
Matthews Int'l. Corp.-Class A 3,300 61,875 -----------
----------- Total Common Stocks
686,625 (Cost $9,605,678) 10,820,306
-----------
MEDICAL SERVICES &
SUPPLIES -- 6.46% COMMERCIAL PAPER -- 7.66%
Research Industries Corporation* 10,200 234,600 General Electric Company
Sofamor/Danek Group Incorporated* 23,200 524,900 5.980% 7/10/95 (Cost $900,000) 900,000 900,000
----------- Total Investments ----------
759,500 (Cost $10,505,678)(a) 99.73% 11,720,306
----------- Liabilities in Excess of Assets 0.27% 31,259
MULTI-FORM -- 5.02% -------- ----------
Mercer International Incorporated* 28,100 590,100 NET ASSETS 100.00% $15,751,565
----------- ======== ===========
NATURAL GAS -- 2.24% NET ASSET value and
Columbia Gas System, redemption price per share
Incorporated* 8,300 263,525 ($11,751,565/845,309) $13.90
----------- ======
</TABLE>
---------------
* Non-income producing securities.
(a) The aggregate cost of investments for Federal income tax purposes is
$10,592,473. At June 30, 1995, net unrealized depreciation consisted of:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $1,561,553
Gross Unrealized Depreciation (346,925)
----------
Net Unrealized Depreciation $1,214,628
==========
</TABLE>
See Notes to Financial Statements
<PAGE> 70
THE DREMAN MUTUAL GROUP, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
THE DREMAN
THE DREMAN THE DREMAN SMALL CAP
CONTRARIAN HIGH RETURN VALUE
PORTFOLIO PORTFOLIO PORTFOLIO
---------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Investments in securities at market value
(Identified Cost $9,353,894, $34,122,504,
$2,535,415 and $10,505,678, respectively)
(Note 1A).................................. $13,462,654 $44,733,021 $11,720,306
Cash......................................... 183,345 507,566 352,641
Receivables:
Investment securities sold................. -- 1,001,661 825,981
Capital stock sold......................... 57,234 23,751 8,311
Dividends and interest (Note 1C)........... 31,897 94,221 7,549
----------- ----------- -----------
Total assets............................. 13,735,130 46,360,220 12,914,788
----------- ----------- -----------
LIABILITIES
Payables:
Investment securities purchased......... 200,000 1,500,000 1,144,712
Capital stock redeemed.................. -- 2,796 4,007
Accrued expenses........................ 19,391 62,869 14,504
----------- ----------- -----------
Total liabiltiies..................... 219,391 1,565,665 1,163,223
----------- ----------- -----------
NET ASSETS (applicable to 940,434, 2,490,100,
262,575 and 845,309 outstanding shares,
respectively) (Note 2).................... $13,515,739 $44,794,555 $11,751,565
=========== =========== ===========
NET ASSET VALUE, offering and redemption
price per share (Net Assets/Shares
Outstanding).............................. $14.37 $17.99 $13.90
====== ====== ======
Net Assets consists of:
Paid-in capital........................... $8,857,753 $35,130,727 $10,148,058
Undistributed net investment income....... 2,310 9,808 --
Accumulated net realized gain (loss) on
investments............................. 546,915 (956,497) 388,879
Net unrealized appreciation (depreciation)
on investments.......................... 4,108,761 10,610,517 1,214,628
----------- ----------- -----------
NET ASSETS.................................. $13,515,739 $44,794,555 $11,751,565
=========== =========== ===========
</TABLE>
See Notes to Financial Statements
<PAGE> 71
THE DREMAN MUTUAL GROUP, INC.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
THE DREMAN THE DREMAN THE DREMAN
CONTRARIAN HIGH RETURN SMALL CAP
PORTFOLIO PORTFOLIO VALUE PORTFOLIO
---------- ----------- ---------------
INVESTMENT INCOME
<S> <C> <C> <C>
Interest (Note 1C) ............................. $ 33 $ 19,387 $ 38,236
Dividends (Note 1C)............................. 213,810 545,605 8,205
Other (Note 2A) ................................ -- -- --
----------- ------------ -----------
Total Income ................................. 213,843 564,992 46,441
----------- ------------ -----------
EXPENSES
Investment advisory fees (Note 4)............... 66,822 197,685 40,537
Custodian fees.................................. 3,424 2,123 5,302
Legal and audit fees............................ 1,018 2,743 543
Transfer agent fees............................. 12,673 24,917 12,258
Directors' fees ................................ 1,864 5,024 995
Registration fees .............................. 6,751 8,392 6,382
Accounting fees ................................ 3,309 7,669 2,176
Insurance ...................................... 1,401 3,775 747
Shareholder reports ............................ 5,334 14,379 2,846
Miscellaneous .................................. 4,055 10,932 2,164
----------- ------------ -----------
106,651 277,639 73,950
Reimbursement of expenses (Note 4).............. (22,945) (30,540) (23,278)
----------- ------------ -----------
Total expenses ................................. 83,706 247,099 50,672
----------- ------------ -----------
Net investment income ........................ 130,137 317,893 (4,231)
----------- ------------ -----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) form security
transaction (Note 1C) ........................ 547,099 (581,704) 477,500
Increase in unrealizd appreciation of invesments.. 1,823,941 7,482,764 1,700,434
----------- ------------ -----------
Net gain on investments ...................... 2,370,950 6,901,060 2,177,934
----------- ------------ -----------
Net increase (decrease) in net assets
resulting from operations ................ $2,501,087 $7,218,953 $2,173,703
=========== ============ ===========
</TABLE>
See Notes to Financial Statements
<PAGE> 72
THE DREMAN MUTUAL GROUP, INC.
STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION> THE DREMAN THE DREMAN
CONTRARIAN PORTFOLIO HIGH RETURN PORTFOLIO
-------------------------- --------------------------
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED 6/30/95 12/31/94 ENDED 6/30/95 12/31/94
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income............................. $ 130,137 $ 291,536 $ 317,893 $ 506,191
Net realized gain (loss) from security
transactions.................................. 547,009 1,278,455 (581,704) (362,499)
Net change in unrealized appreciation on
investments................................... 1,823,941 (1,545,091) 7,482,764 (832,988)
----------- ------------ ----------- -----------
Net increase (decrease) in net assets from
operations................................ 2,501,087 24,900 7,218,953 (689,296)
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income.......... (128,576) (291,740) (315,486) (500,118)
Distributions from net realized gains on
investments................................... (149,981) (1,128,593) -- --
CAPITAL SHARE TRANSACTIONS
Increase (decrease) in net assets resulting
from capital share transactions (Note 2)...... (1,689,404) (2,778,814) 2,886,182 7,780,880
----------- ----------- ----------- -----------
Total increase (decrease)................. 533,126 (4,174,247) 9,789,649 6,591,466
NET ASSETS
Beginning of year................................. 12,982,613 17,156,860 35,004,906 28,413,440
----------- ----------- ----------- -----------
End of year*...................................... $13,515,739 $12,982,613 $44,794,555 $35,004,906
=========== =========== =========== ===========
------------------
*Including cumulative undistributed net
investment income of: (Note 2B)................... $2,310 $749 $9,808 $7,401
====== ==== ====== ======
</TABLE>
See Notes to Financial Statements
<PAGE> 73
THE DREMAN MUTUAL GROUP, INC.
STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
THE DREMAN
SMALL CAP VALUE PORTFOLIO
--------------------------------
SIX MONTHS YEAR ENDED
ENDED 6/30/95 12/31/94
------------- -----------
<S> <C> <C>
OPERATIONS
Net investment income. . . . . . . . . $ (4,231) $ (2,245)
Net realized gain (loss) from security
transactions . . . . . . . . . . . . 477,500 (3,931)
Net change in unrealized appreciation
(depreciation) on investments. . . . 1,700,434 (465,018)
---------- ----------
Net increase (decrease) in net assets
from operations . . . . . . . . . 2,173,703 (471,194)
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment
income . . . . . . . . . . . . . . . --- ---
Distributions from net realized gains
on investments . . . . . . . . . . . (84,878) (172,658)
CAPITAL SHARE TRANSACTIONS
Increase (decrease) in net assets
resulting from capital share
transactions (Note 2). . . . . . . . 2,732,082 2,699,087
---------- ----------
Total increase (decrease). . . . . 4,820,907 2,055,235
NET ASSETS
Beginning of year. . . . . . . . . . . 6,930,658 4,875,423
----------- ----------
End of year* . . . . . . . . . . . . . $11,751,565 $6,930,658
=========== ==========
--------------
* Including cumulative undistributed net
investment income of: (Note 2B) . . --- ---
</TABLE>
See Notes to Financial Statements
<PAGE> 74
THE DREMAN MUTUAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
(UNAUDITED)
1. Organization and Significant Accounting Policies - The Dreman Contrarian
Portfolio, The Dreman High Return Portfolio, The Dreman Fixed Income Portfolio
and The Dreman Small Cap Value Portfolio ("The Portfolios") are each a series
of shares of common stock of The Dreman Mutual Group, Inc., ("The Fund") which
is registered under the Investment Company Act of 1940, as amended, as a
diversified open-end management company. The company was incorporated in the
state of Maryland on October 15, 1987. The following is a summary of
significant accounting policies followed by the Fund.
A. Security Valuation - The Portfolios' investments in securities are
carried at market value. Securities listed on an exchange or quoted on a
national market system are valued at the last sale price. Other securities are
valued at the mean between the most recent bid and asked prices. Fixed income
securities may be valued on the basis provided by a pricing service when such
are believed to reflect the fair market value of such securities. The prices
provided by a pricing service may be determined without regard to bid or last
sale prices but take into account institutional size trading in similar groups
of securities and any development related to specific securities. Short-term
investments are valued at amortized cost which approximates market value. The
market value of other assets and securities for which no quotations are
available are determined in good faith at fair value using methods determined
by the Board of Directors.
B. Federal Income Taxes - No provision has been made for Federal income
taxes. It is the policy of the portfolios to comply with the provision of the
Internal Revenue Code applicable to regulated investment companies and to make
sufficient distributions of taxable income to relieve it from all federal
income taxes.
C. Security Transactions and Related Investment Income - Security
transactions are accounted for on the trade date (the date the order to buy or
sell is executed) with gain or loss on the sale of securities being determined
based upon identified cost. Dividend income is recorded on the ex-dividend
date and interest income is recorded on the accrual basis.
D. Futures Contracts - Initial margin deposits required upon entering
into futures contracts are made by depositing cash, as collateral, for the
account of the broker (the Fund's agent in acquiring the futures position).
During the period the futures contracts are open, changes in the value of the
contract are recognized as unrealized gains or loss by "marking-to-market" on a
daily basis to reflect the market value of the contract at the end of each
day's trading. Variation margin payments are made or received, depending upon
whether unrealized gains or losses are incurred. When the contract is closed
the Fund records a realized gain or loss equal to the difference between the
proceeds from (or cost of) the closing transaction and the Fund's basis in the
contract.
The Dreman Contrarian, The Dreman High Return and The Dreman Small Cap
Value Portfolios may purchase and sell stock index futures contracts and index
options as hedges against changes resulting from market conditions in the
values of the securities held by the Portfolios or securities which they intend
to purchase or sell where such transactions are economically appropriate for
the reduction of risks inherent in the ongoing management of the Portfolios.
Futures contracts involve credit and market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The contract amounts of
these futures contracts reflect the extent of the Portfolios' exposure to
off-balance sheet risk. Further, to minimize their credit risk, the Portfolios
intend to trade in futures contracts only on exchanges or boards of trade where
there appears to be active secondary markets; however, there is no assurance
that a liquid secondary market on any exchange or board of trade will exist for
any particular contract or at any particular time. The Portfolios' assume the
market risk which arises from any changes in security values.
<PAGE> 75
THE DREMAN MUTUAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
JUNE 30, 1995
2. Capital Stock - The Dreman Mutual Group, Inc. has 500,000,000 shares of .01
par stock authorized of which each Portfolio was allocated 100,000,000 shares.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
THE DREMAN CONTRARIAN PORTFOLIO
SIX MONTHS ENDED 6/30/95* YEAR ENDED 12/31/94
------------------------- -------------------
SHARES VALUE SHARES VALUE
------ ----- ------ -----
<S> <C> <C> <C> <C>
Shares sold..................................... 60,353 $ 815,310 200,835 $2,800,952
Shares issued in reinvestment of distributions.. 18,826 251,874 105,352 1,306,831
---------- ----------- ---------- -----------
79,179 1,067,184 306,187 4,107,783
Shares redeemed................................. (205,059) (2,756,589) (499,681) (6,886,597)
---------- ----------- ---------- -----------
Net increase (decrease) .................... (125,880) $(1,689,405) 193,494 $(2,778,814)
========== =========== ========== ===========
<CAPTION>
THE DREMAN HIGH RETURN PORTFOLIO
--------------------------------
SIX MONTHS ENDED 6/30/95* YEAR ENDED 12/31/94
------------------------- -------------------
SHARES VALUE SHARES VALUE
------ ----- ------ -----
<S> <C> <C> <C> <C>
Shares sold..................................... 390,037 $6,464,964 746,899 $11,989,657
Shares issued in reinvestment of distributions.. 16,760 286,078 28,805 450,119
---------- ----------- ---------- -----------
406,797 6,751,042 775,704 12,439,776
Shares redeemed ................................ (232,680) (3,864,860) (293,063) (4,658,896)
---------- ----------- ---------- -----------
Net increase................................ 174,117 $ 2,886,182 482,641 $7,780,880
========== =========== ========== ===========
<CAPTION>
THE DREMAN SMALL CAP VALUE PORTFOLIO
------------------------------------
SIX MONTHS ENDED 6/30/95* YEAR ENDED 12/31/94
------------------------- -------------------
SHARES VALUE SHARES VALUE
------ ----- ------ -----
<S> <C> <C> <C> <C>
Shares sold..................................... 415,693 $5,239,122 636,591 $7,366,377
Shares issued in reinvestment of distributions.. 6,592 77,713 15,284 168,584
---------- ----------- ---------- -----------
422,285 5,316,835 651,875 7,534,961
Shares redeemed ................................ (215,983) (2,584,753) (446,924) (4,835,874)
---------- ----------- ---------- -----------
Net increase ............................... 206,302 $2,732,082 204,951 $2,699,087
========== =========== ========== ===========
</TABLE>
-----------------------------
*Unaudited
<PAGE> 76
THE DREMAN MUTUAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
JUNE 30, 1995
(UNAUDITED)
2. A. For the period April 30, 1993 to March 9, 1994, inclusive, a
contingent redemption fee of 1% of the net asset value of shares redeemed,
including exchange redemptions, was charged to shareholders who redeemed shares
held less than one year. The contingent redemption fee was subtracted from the
payment to the shareholder and was deposited in the Fund for the benefit of the
remaining shareholders to offset any transaction costs that were incurred by
the Portfolio. The holding period for these redemptions was determined by
first using shares purchased with the earliest trade date. Shares purchased
through reinvestment of dividends were not subject to the contingent redemption
fee. The contingent redemption fee was not applied to investments made in any
Portfolio prior to April 30, 1993 or after March 9, 1994.
B. During the fiscal year ended December 31, 1993, the Fund adopted
Statement of Position 93-2 Determination, Disclosure, and Financial Statement
Presentation of Income, Capital Gain, and Return of Capital Distribution by
Investment Companies. Accordingly, permanent book and tax basis differences
relating to shareholder distributions have been reclassified to additional
paid-in capital. As of January 1, 1993, the cumulative effects of such
differences totaling $17,119, $17,090, $17,096 and $0 were reclassified from
undistributed net investment income to additional paid-in capital for The
Dreman Contrarian Portfolio, The Dreman High Return Portfolio, The Dreman Fixed
Income Portfolio and The Dreman Small Cap Value Portfolio, respectively, $670
and $667 were reclassified from accumulated net realized gains to additional
paid-in capital for The Dreman High Return Portfolio and The Dreman Small Cap
Value Portfolio, respectively.
3. Purchases and Sales of Securities - Purchases and sales of securities other
than short-term investments for the six months ended June 30, 1995 were as
follows:
<TABLE>
<CAPTION>
PURCHASES SALES
--------- -----
<S> <C> <C>
The Dreman Contrarian Portfolio................ $876,893 $2,932,451
The Dreman High Return Portfolio............... $2,835,371 $954,118
The Dreman Fixed Income Portfolio.............. $449,016 $1,843,359
The Dreman Small Cap Value Portfolio .......... $4,836,862 $2,993,540
</TABLE>
At December 31, 1994, The Dreman High Return Portfolio and The Dreman Fixed
Income Portfolio had capital loss carryforwards for Federal income tax purposes
of $362,496 and $22,766, respectively, which expire in 2002.
4. Investment Advisory Fee and Other Transactions With Affiliates - The
investment advisory fee was earned by Dreman Value Management, L.P. (formerly
Dreman Value Management, Inc.) under the terms of an investment advisory
agreement which provides that the management fee shall be calculated at the
annual rate of 1% of the average value of net assets of The Dreman Contrarian
Portfolio, The Dreman High Return Portfolio and The Dreman Small Cap Value
Portfolio up to $1 billion and 3/4 of 1% annually of net assets in excess of $1
billion, and 1/2 of 1% of the average value of net assets of The Dreman Fixed
Income Portfolio. Fees were paid monthly and for the six months ended June 30,
1995 amounted to:
<TABLE>
<S> <C>
The Dreman Contrarian Portfolio .................... $66,822
The Dreman High Return Portfolio.................... $197,685
The Dreman Fixed Income Portfolio................... $6,283
The Dreman Small Cap Value Portfolio................ $40,537
</TABLE>
<PAGE> 77
THE DREMAN MUTUAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
JUNE 30, 1995
(UNAUDITED)
The Advisor has undertaken to reimburse the Fund for its annual operating
expenses, exclusive of taxes, brokerage commissions, interest and extraordinary
expenses such as legal fees, to the extent necessary to satisfy the lowest
expense ratio permitted by any state in which the Fund's shares are qualified
for sale. Presently the most restrictive expense limitation is 2 1/2 % on the
first $30,000,000 of average annual net assets, 2% on the next $70,000,000 of
such assets, and 1 1/2 % on any excess. However, the Advisor has voluntarily
reimbursed more expenses than contractually obliged.
Reimbursement from the manager for the six months ended June 30, 1995 is as
follows:
<TABLE>
<S> <C>
The Dreman Contrarian Portfolio. . . . . . . . . . . . . . . . . $22,945
The Dreman High Return Portfolio . . . . . . . . . . . . . . . . $30,540
The Dreman Fixed Income Portfolio. . . . . . . . . . . . . . . . $22,946
The Dreman Small Cap Value Portfolio . . . . . . . . . . . . . . $23,278
</TABLE>
Several individuals who are officers or directors, or both of the
Portfolios, are also officers and directors, or both, of Dreman Value
Management, L.P.
<PAGE> 78
PART C: OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<S> <C> <C>
(a) Financial Statements:
(1) Included in Part A of the Registration Statement: Financial Highlights
(2) Report of Independent Accountants and Financial Statements included in Part B of the
Registration Statement:
Statement of Investments:
The Dreman Contrarian Portfolio--December 31, 1994 and June 30, 1995.
The Dreman High Return Portfolio--December 31, 1994 and June 30, 1995.
The Dreman Small Cap Value Portfolio--December 31, 1994 and June 30, 1995.
Statement of Assets and Liabilities:
The Dreman Contrarian Portfolio--December 31, 1994 and June 30, 1995.
The Dreman High Return Portfolio--December 31, 1994 and June 30, 1995.
The Dreman Small Cap Value Portfolio--December 31, 1994 and June 30, 1995.
Statement of Operations:
The Dreman Contrarian Portfolio for the year ended December 31, 1994 and for the six
month period ended June 30, 1995.
The Dreman High Return Portfolio for the year ended December 31, 1994 and for the
six month period ended June 30, 1995.
The Dreman Small Cap Value Portfolio for the year ended December 31, 1994 and for
the six month period ended June 30, 1995.
Statement of Changes in Net Assets:
The Dreman Contrarian Portfolio for the fiscal years ended December 31, 1994 and
December 31, 1993 and for the six month period ended June 30, 1995.
The Dreman High Return Portfolio for the fiscal years ended December 31, 1994 and
December 31, 1993 and for the six month period ended June 30, 1995.
The Dreman Small Cap Value Portfolio for the fiscal years ended December 31, 1994
and December 31, 1993 and for the six month period ended June 30, 1995.
Notes to Financial Statements
(b) Exhibits:
99.B1a Articles of Incorporation of Registrant: (Exhibit to Registration
Statement on Form N-1A filed November 12, 1987)*
99.B1b Articles Supplementary to Articles of Incorporation of Registrant:
(Exhibit to Pre-Effective Amendment No. 1 to the Registration Statement
on Form N-1A filed February 1988).*
99.B1c Articles Supplementary to Articles of Incorporation of the Registrant:
(Exhibit to Registration Statement on Form N-1A filed February 29, 1992)*
99.B2 Bylaws
99.B3 Inapplicable
99.B4 Text of Stock Certificate
99.B5 Investment Management Agreement
99.B6a Underwriting and Distribution Services Agreement
99.B6b Form of Selling Group Agreement
99.B7 Inapplicable
99.B8a Custody Agreement
</TABLE>
C-1
<PAGE> 79
<TABLE>
<S> <C>
99.B9a Agency Agreement
99.B9b Administrative Services Agreement
99.B10 Inapplicable
99.B11 Consent of Tait, Weller & Baker, independent accountants for fiscal year
ended 12/31/94 and prior two fiscal years
99.B12 Inapplicable
99.B13 Inapplicable
99.B14 Model Retirement Plans: IRA and SEP-IRA
(Exhibit to Pre-Effective Amendment Number 1 under the Investment Company
Act of 1940 filed February 4, 1988)*
99.B15 See 6(a) above (Class B and C Shares)
99.B16 Performance Calculations
99.B18. Multi-Distribution System Plan
99.B24. Powers of Attorney
27.1 Contrarian Financial Data Schedule
27.2 High Return Financial Data Schedule
27.3 Small Cap Financial Data Schedule
99.B99 Representation of Counsel (Rule 485(b)).
</TABLE>
---------------
* Previously filed with the Commission and incorporated herein by reference to
the previous filing.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
NUMBER OF RECORD
HOLDERS
FUND AS OF AUGUST 31, 1995
-------------------------------------- ---------------------
<S> <C>
Dreman Contrarian Portfolio 941
Dreman High Return Portfolio 2,604
Dreman Small Cap Value Portfolio 1,109
</TABLE>
ITEM 27. INDEMNIFICATION
The Registrant has obtained from a major insurance carrier a directors' and
officers' liability policy covering certain types of errors and omissions. The
Registrant's Bylaws provide for the indemnification of Registrant's officers and
directors.
In no event will Registrant indemnify any of its directors, officers,
employees, or agents against any liability to which such person would otherwise
be subject by reason of his willful misfeasance, bad faith, gross negligence in
the performance of his duties, or by reason of his reckless disregard of the
duties involved in the conduct of his or her office.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
C-2
<PAGE> 80
ITEM 28A. BUSINESS AND OTHER CONNECTIONS OF OFFICERS AND DIRECTORS OF DREMAN
VALUE ADVISORS, INC., THE INVESTMENT ADVISER
Dreman Value Advisors, Inc., 10 Exchange Place, 20th Floor, Jersey City,
New Jersey 07302, performs investment advisory services for Registrant and other
individual and institutional investment advisory clients and will be a
subadviser for Kemper Value Plus Growth Fund.
DREMAN, DAVID N.
Director, Chairman of the Board, Dreman Value Advisors, Inc.
Vice President, Dreman Mutual Group, Inc.
NEAL, JOHN E.
Director, Dreman Value Advisors, Inc.
Vice President, Dreman Mutual Group, Inc.
Director, President and Chief Operating Officer, Kemper Financial Services,
Inc.
Director, President, Kemper Service Company
Director, Kemper Distributors, Inc.
Director, Kemper Asset Management Company
Director, Ardenwood Financial Corporation
Director, Avondale Redmond, Inc.
Director, Bedford Holding Company
Director, Black Mountain, Inc.
Director, Brannan Resources, Inc.
Director, Butterfield Financial Corporation
Director, Camelot Financial Corporation
Director, Clay Capital, Inc.
Director, Concord Aviation, Inc.
Director, Coast Broadcasting Company
Director, Crow Canyon, Inc.
Director, Hawaii Kai Development Company
Director, Kacor Gateway, Inc.
Director, Kailua Associates, Inc.
Director, Kacor Trust Deed Company
Director, Community Investment Corporation
Director, Continental Community Development Corporation
Director, President, Kemper Real Estate, Inc.
Director, President, Kemper Cymrot, Inc.
Director, President, Kemper Cymrot Management, Inc.
Director, President, FKLA Loire Court, Inc.
Director, Vice President, FKLA Realty Corporation
Director, President, FLA First Nationwide, Inc.
Director, President, FLA Plate Building, Inc.
Director, Vice President, FLA Realty Corporation
Director, Kemper/Lumbermens Properties, Inc.
Director, Senior Vice President, Kemper Real Estate Management Company
Director, KRDC, Inc.
Director, Lafayette Apartments
Director, Lafayette Hills, Inc.
Director, Margarita Village Retirement Community
Director, Mesa Homes
Director, Mesa Homes Brokerage Company
Director, Mount Doloroes Corporation
Director, Montgomery Gallery, Inc.
Director, Monterey Research Park, Inc.
C-3
<PAGE> 81
Director, One Business Centre
Director, Pacific Homes, Inc.
Director, Palomar Triad, Inc.
Director, Pine/Battery Properties, Inc.
Director, Rancho and Industrial Property Brokerage, Inc.
Director, Rancho California, Inc.
Director, Rancho Regional Shopping Center, Inc.
Director, Red Hill Associates, Inc.
Director, Seagate Associates, Inc.
Director, Seattle Gateway, Inc.
Director, Sutter Street, Inc.
Director, Technology Way, Inc.
Director, Time DC, Inc.
Director, Tourelle, Inc.
Director, Two Corporate Center
Director, Venture Way, Inc.
Director, Vice President, Kemper Portfolio Corporation
Director, Vice President, KFC Portfolio Corporation
Director, Vice President, KILICO Realty Corporation
Director, President, KI Arnold Industrial, Inc.
Director, President, KI Canyon Park, Inc.
Director, President, KI Centreville, Inc.
Director, President, KI Colorado Boulevard, Inc.
Director, President, KI Dublin Boulevard, Inc.
Director, President, KI LaFiesta Square, Inc.
Director, President, KI Lewinsville, Inc.
Director, President, KI Monterey Research, Inc.
Director, President, KI Olive Street, Inc.
Director, President, KI Thornton Boulevard, Inc.
Director, President, KI Sutter Street, Inc.
Director, President, KR 77 Fitness Center, Inc.
Director, President, KR Avondale Redmond, Inc.
Director, President, KR Black Mountain, Inc.
Director, President, KR Brannan Resources, Inc.
Director, President, KR Clay Capital, Inc.
Director, President, KR Cranbury, Inc.
Director, President, KR Delta Wetlands, Inc.
Director, President, KR Gainesville, Inc.
Director, President, KR Hotels, Inc.
Director, President, KR Lafayette Apartments, Inc.
Director, President, KR Lafayette BART, Inc.
Director, President, KR Palm Plaza, Inc.
Director, President, KR Red Hill Associates, Inc.
Director, President, KR Seagate/Gateway North, Inc.
Director, President, KR Venture Way, Inc.
Director, President, KR Walnut Creek, Inc.
Director, K-P Greenway, Inc.
Director, K-P Enterprise Centers, Inc.
Director, K-P Plaza Dallas, Inc.
Director, Kemper/Prime Acquisition Fund, Inc.
Director, KRDC, Inc.
Director, RespiteCare
C-4
<PAGE> 82
Director, President, SMS Realty Corp.
Director, Urban Shopping Centers, Inc.
PETERS, JOHN E.
Director, Dreman Value Advisors, Inc.
Director, Senior Executive Vice President, Kemper Financial Services, Inc.
Director, President, Kemper Distributors, Inc.
Vice President, Kemper Asset Management Company
Vice President, Kemper Funds
Director, Kemper Service Company
TIMBERS, STEPHEN B.
Director, Dreman Value Advisors, Inc.
Director, Chairman, Chief Executive Officer and Chief Investment Officer,
Kemper Financial Services, Inc.
Director, Vice President, Kemper Asset Holdings, Inc.
Director, Kemper Distributors, Inc.
Director, Chairman, Kemper Asset Management Company
Director, Chairman, Kemper Service Company
Director, Federal Kemper Life Assurance Company
Director, Vice President, FKLA Loire Court, Inc.
Vice President, FKLA Realty Corporation
Director, President, Galaxy Offshore, Inc.
Director, Vice President, FLA First Nationwide, Inc.
Director, Vice President, FLA Plate Building, Inc.
Vice President, FLA Realty Corp.
Director, President and Chief Operating Officer, Kemper Corporation
Director, Chairman, President and Chief Executive Officer, Kemper Financial
Companies, Inc.
Director, President, Kemper International Management, Inc.
Director, Kemper Investors Life Insurance Company
Trustee and President, Kemper Funds
Vice President, Kemper Portfolio Corp.
Director, Vice President, Kemper Real Estate, Inc.
Director, Kemper Securities, Inc.
Director, Kemper Securities Holdings, Inc.
Director, Vice President, Kemper/Cymrot Management, Inc.
Director, Vice President, Kemper/Cymrot, Inc.
Vice President, KFC Portfolio Corp.
Director, Vice President, KI Arnold Industrial, Inc.
Director, Vice President, KI Canyon Park, Inc.
Director, Vice President, KI Centreville, Inc.
Director, Vice President, KI Colorado Boulevard, Inc.
Director, Vice President, KI Dublin Boulevard, Inc.
Director, Vice President, KI LaFiesta Square, Inc.
Director, Vice President, KI Lewinsville, Inc.
Director, Vice President, KI Monterey Research, Inc.
Director, Vice President, KI Olive Street, Inc.
Director, Vice President, KI Sutter Street, Inc.
Director, Vice President, KI Thornton Boulevard, Inc.
Vice President, KILICO Realty Corporation
Director, Vice President, KR 77 Fitness Center, Inc.
Director, Vice President, KR Avondale Redmond, Inc.
Director, Vice President, KR Black Mountain, Inc.
Director, Vice President, KR Brannan Resources, Inc.
C-5
<PAGE> 83
Director, Vice President, KR Clay Capital, Inc.
Director, Vice President, KR Cranbury, Inc.
Director, Vice President, KR Delta Wetlands, Inc.
Director, Vice President, KR Gainesville, Inc.
Director, Vice President, KR Hotels, Inc.
Director, Vice President, KR Lafayette Apartments, Inc.
Director, Vice President, KR Lafayette BART, Inc.
Director, Vice President, KR Palm Plaza, Inc.
Director, Vice President, KR Red Hill Associates, Inc.
Director, Vice President, KR Seagate/Gateway North, Inc.
Director, Vice President, KR Venture Way, Inc.
Director, Vice President, KR Walnut Creek, Inc.
Director, The LTV Corporation
Director, Gillett Holdings, Inc.
Director, Investment Analysts Society of Chicago
NEEL, JAMES R.
Director, President and Chief Executive Officer, Dreman Value Advisors,
Inc.
Executive Vice President, Kemper Asset Management Company
Vice President, Dreman Mutual Group, Inc.
DUDASIK, PATRICK H.
Executive Vice President, Chief Financial Officer and Treasurer, Dreman
Value Advisors, Inc.
Senior Vice President, Kemper Financial Services, Inc.
Vice President and Treasurer, Kemper Asset Management Company
Treasurer and Chief Financial Officer, Kemper Distributors, Inc.
Treasurer and Chief Financial Officer, Kemper Service Company
Director and Treasurer, Kemper Investment Management Company Limited
BERRY, MICHAEL A.
Managing Director, Dreman Value Advisors, Inc.
COUGHLIN, WILLIAM
Managing Director, Dreman Value Advisors, Inc.
DIERENFELDT, DAVID F.
Secretary, Dreman Value Advisors, Inc.
Senior Vice President, Associate General Counsel, Assistant Secretary and
Compliance Officer, Kemper Financial Services, Inc.
Vice President and Secretary, Kemper Distributors, Inc.
Assistant Secretary, Galaxy Offshore, Inc.
Director, Secretary, INVEST Financial Corporation
Secretary, INVEST Financial Corporation Holding Company
Assistant Secretary, Investors Brokerage Services Insurance Agency, Inc.
Secretary, Kemper Asset Management Company
Assistant Secretary, Kemper International Management, Inc.
Assistant Secretary, Kemper Investment Management Company Limited
Vice President and Assistant Secretary, Kemper Investors Fund
Secretary, Kemper Service Company
FITZSIMONS, EILEEN M.
Managing Director, Dreman Value Advisors, Inc.
HOLMES, JAMES P.
Managing Director, Dreman Value Advisors, Inc.
C-6
<PAGE> 84
MASTAIN, JR., RICHARD K.
Managing Director, Dreman Value Advisors, Inc.
SHIPMAN, STEPHEN
Managing Director, Dreman Value Advisors, Inc.
SILVERMAN, DOROTHY
Senior Vice President, Dreman Value Advisors, Inc.
EPSTEIN, HARRY
Vice President, Operations, Dreman Value Advisors, Inc.
KAY, JONATHAN
Vice President, Dreman Value Advisors, Inc.
McRAE, SUSAN
Vice President, Dreman Value Advisors, Inc.
MORRISSEY, JOSYANE
Vice President, Dreman Value Advisors, Inc.
RIDER, JOSEPH
Vice President, Dreman Value Advisors, Inc.
ITEM 29. PRINCIPAL UNDERWRITER
Kemper Distributors, Inc. ("KDI"), the principal underwriter of the
Registrant's securities, currently acts as principal underwriter for Kemper
Mutual Funds, Kemper Investors Fund, Sterling Funds and Kemper International
Bond Fund. Information on the officers and directors of Kemper Distributors,
Inc., principal underwriter for the Registrant is set forth below. The principal
business address is 120 South LaSalle Street, Chicago, Illinois 60603.
<TABLE>
<CAPTION>
POSITIONS AND
OFFICES WITH
NAME POSITIONS AND OFFICES WITH UNDERWRITER REGISTRANT
------------------------- ----------------------------------------------- --------------------
<S> <C> <C>
John E. Peters Principal, Director and President Vice President
William E. Chapman, II Director and Executive Vice President None
James L. Greenwalt Director and Executive Vice President None
John E. Neal Director Vice President
Stephen B. Timbers Director President, Director
Patrick H. Dudasik Financial Principal, Treasurer and None
Chief Financial Officer
Linda A. Bercher Senior Vice President None
Terry Cunningham Senior Vice President None
Daniel T. O'Lear Senior Vice President None
John H. Robison, Jr. Senior Vice President None
Henry J. Schulthesz Senior Vice President None
David F. Dierenfeldt Vice President and Secretary None
Thomas V. Bruns Vice President None
Carlene D. Merold Vice President None
Jeff M. Warland Vice President None
Elizabeth C. Werth Vice President Assistant Secretary
Kathleen A. Gallichio Assistant Secretary None
Diane E. Ratekin Assistant Secretary None
</TABLE>
C-7
<PAGE> 85
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All such accounts, books and other documents are maintained at the offices
of the Registrant, at the offices of Registrant's investment manager, Dreman
Value Advisors, Inc., 10 Exchange Place, Jersey City, New Jersey 07302, at the
offices of Registrant's principal underwriter, Kemper Distributors, Inc., 120
South LaSalle Street, Chicago, Illinois 60603, at the offices of the
Registrant's custodian and transfer agent, Investors Fiduciary Trust Company,
127 West 10th Street, Kansas City, Missouri 64105 or at the offices of the
Registrant's shareholder service agent, Kemper Service Company, 811 Main Street,
Kansas City, Missouri 64105.
ITEM 31. MANAGEMENT SERVICES
Not Applicable
ITEM 32. UNDERTAKINGS
(a) Inapplicable
(b) Inapplicable
(c) The Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of its latest annual report to shareholders, upon
request and without charge.
C-8
<PAGE> 86
S I G N A T U R E S
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Chicago and State of Illinois, on the 7th day
of September, 1995.
DREMAN MUTUAL GROUP, INC.
By /s/ Stephen B. Timbers
----------------------------------
Stephen B. Timbers, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on September 7, 1995 on behalf of
the following persons in the capacities indicated.
Signature Title
--------- -----
/s/ Stephen B. Timbers President (Principal
---------------------------------------- Executive Officer) and
Stephen B. Timbers Director
/s/James E. Akins* Director
----------------------------------------
/s/Arthur R. Gottschalk* Director
----------------------------------------
/s/Frederick T. Kelsey* Director
----------------------------------------
/s/David B. Mathis* Director
----------------------------------------
/s/Fred B. Renwick* Director
----------------------------------------
/s/John B. Tingleff* Director
----------------------------------------
/s/John G. Weithers* Director
----------------------------------------
/s/Jerome L. Duffy Treasurer (Principal
---------------------------------------- Financial and
Jerome L. Duffy Accounting Officer)
*Philip J. Collora signs this document pursuant to powers of attorney filed
herewith.
/s/ Philip J. Collora
---------------------------------
Philip J. Collora
<PAGE> 87
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
99.B1a Articles of Incorporation of Registrant: (Exhibit to Registration
Statement on Form N-1A filed November 12, 1987)*
99.B1b Articles Supplementary to Articles of Incorporation of Registrant:
(Exhibit to Pre-Effective Amendment No. 1 to the Registration Statement
on Form N-1A filed February 1988).*
99.B1c Articles Supplementary to Articles of Incorporation of the Registrant:
(Exhibit to Registration Statement on Form N-1A filed February 29, 1992)*
99.B2 Bylaws
99.B3 Inapplicable
99.B4 Text of Stock Certificate
99.B5 Investment Management Agreement
99.B6a Underwriting and Distribution Services Agreement
99.B6b Form of Selling Group Agreement
99.B7 Inapplicable
99.B8a Custody Agreement
99.B9a Agency Agreement
99.B9b Administrative Services Agreement
99.B10 Inapplicable
99.B11 Consent of Tait, Weller & Baker, independent accountants for fiscal year
ended 12/31/94 and prior two fiscal years
99.B12 Inapplicable
99.B13 Inapplicable
99.B14 Model Retirement Plans: IRA and SEP-IRA
(Exhibit to Pre-Effective Amendment Number 1 under the Investment Company
Act of 1940 filed February 4, 1988)*
99.B15 See 6(a) above (Class B and C Shares)
99.B16 Performance Calculations
99.B18. Multi-Distribution System Plan
99.B24. Powers of Attorney
27.1 Contrarian Financial Data Schedule
27.2 High Return Financial Data Schedule
27.3 Small Cap Financial Data Schedule
99.B99 Representation of Counsel (Rule 485(b))
</TABLE>
---------------
* Previously filed with the Commission and incorporated herein by reference to
the previous filing.
<PAGE> 1
EX-99.B2
DREMAN MUTUAL GROUP, INC.
BY-LAWS
ARTICLE I.
OFFICES
Section 1. The principal office of the Corporation shall be in the City
of Baltimore, State of Maryland. The Corporation shall also have offices at
such other places as the Board of Directors may from time to time determine or
the business of the Corporation may require.
ARTICLE II.
STOCKHOLDERS AND STOCK CERTIFICATES
Section 1. Every stockholder of record shall be entitled to a stock
certificate representing the shares owned by him. Stock certificates shall be
in such form as may be required by law and as the Board of Directors shall
prescribe. Every stock certificate shall be signed by the Chairman or the
President or a Vice President and by the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary, and sealed with the corporate seal,
which may be a facsimile, either engraved or printed. Stock certificates may
bear the facsimile signatures of the officers authorized to sign such
certificates.
Section 2. Shares of the capital stock of the Corporation shall be
transferable only on the books of the Corporation by the person in whose name
such shares are registered, or by his duly authorized attorney or
representative. In all cases of transfer by an attorney-in-fact, the original
power of attorney, or an official copy thereof duly certified, shall be
deposited and remain with the Corporation or its duly authorized transfer
agent. In case of transfers by executors, administrators, guardians or other
legal representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited and remain with the Corporation
or its duly authorized transfer agent. No transfer shall be made unless and
until the certificate issued to the transferor shall be delivered to the
Corporation or its duly authorized transfer agent, properly endorsed.
Section 3. Any person desiring a certificate for shares of the capital
stock of the Corporation to be issued in lieu of one lost or destroyed shall
make an affidavit or affirmation setting
<PAGE> 2
forth the loss or destruction of such stock certificate, and shall advertise
such loss or destruction in such manner as the Board of Directors may require,
and shall, if the Board of Directors shall so require, qive the Corporation a
bond or indemnity, in such form and with such security as may be satisfactory
to the Board, indemnifying the Corporation against any loss that may result
upon the issuance of a new stock certificate. Upon receipt of such affidavit
and proof of publication of the advertisement of such loss or destruction, and
the bond, if any, required by the Board of Directors, a new stock certificate
may be issued of the same tenor and for the number of shares as the one alleged
to have been lost or destroyed.
Section 4. The Corporation shall be entitled to treat the holder of record of
any share or shares of its capital stock as the owner thereof and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not the
Corporation shall have express or other notice thereof.
ARTICLE III.
MEETINGS OF STOCKHOLDERS
Section 1. An Annual Meeting of the stockholders of the Corporation shall be
held in any year in which action by stockholders is required by the Investment
Company Act of 1940. In any year in which stockholder action is not required by
the Investment Company Act of 1940, no Annual Meeting shall be held unless
called by the Board of Directors of the Corporation.
Section 2. Annual Meetings of the stockholders of the Corporation for the
election of Directors and for the transaction of general business shall be held
at the principal office of the Corporation, or at such other place within or
without the State of Maryland as the Board of Directors may from time to time
prescribe. A notice of any change in the place of the annual meeting shall be
given to each stockholder not less than ten days before the election is held.
Section 3. Special meetings of the stockholders may be called at any time by
the Chairman, President or a majority of the members of the Board of Directors
and shall be called by the Secretary upon the written request of the holders of
at least twenty-five percent of the shares of the capital stock of the
Corporation issued and outstanding and entitled to vote at such meeting;
provided, if the matter proposed to be acted on is substantially the same as a
matter voted on at any special meeting held during the preceding twelve months,
such written request
- 2 -
<PAGE> 3
shall be made by holders of at least a majority of the capital stock of the
Corporation issued and outstanding and entitled to vote at such meetings. Upon
receipt of a written request from such holders entitled to call a special
meeting, which shall state the purpose of the meeting and the matter proposed
to be acted on at it, the Secretary shall inform the holders who made such
request of the reasonably estimated cost of preparing and mailing a notice of a
meeting and upon payment of such costs to the Corporation the Secretary shall
issue notice of such meeting. Special meetings of the stockholders shall be
held at the principal office of the Corporation, or at such other place within
or without the State of Maryland as the Board of Directors may from time to
time direct, or at such place within or without the State of Maryland as shall
be specified in the notice of such meeting.
Section 4. Notice of the time and place of annual or special meetings of the
stockholders shall be given to each stockholder entitled to notice of such
meeting not less than ten days nor more than ninety days prior to the date of
such meeting. In the case of special meetings of the stockholders, the notice
shall specify the object or objects of such meeting, and no business shall be
transacted at such meeting other than that mentioned in the call.
Section 5. The Board of Directors may close the stock transfer books of the
Corporation for a period not exceeding twenty days preceding the date of any
meeting of stockholders, or the date for payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or for a period of
not exceeding twenty days in connection with the obtaining of the consent of
stockholders for any purpose; provided, however, that in lieu of closing the
stock transfer books as aforesaid, the Board of Directors may fix in advance a
date, not exceeding ninety days preceding the date of any meeting of
stockholders, or the date for payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, or a date in connection with obtaining such
consent, as a record date for the determination of the stockholders entitled to
notice of, and to vote at any such meeting and any adjournment thereof, or
entitled to receive payment of any such dividend, or to any such allotment of
rights, or to exercise the rights in respect of any such change, conversion or
exchange of capital stock or to give such consent, and in such case such
stockholders and only such stockholders as shall be stockholders of record on
the date so fixed shall be entitled to such notice of, and to vote at, such
meeting and any adjournment thereof, or to receive payment of such dividend or
to receive such allotment of rights or to exercise such rights, or to
-3-
<PAGE> 4
give such consent, as the case may be, notwithstanding any transfer of any
stock on the books of the Corporation after any such record date fixed as
aforesaid.
Section 6. At all meetings of the stockholders a quorum shall consist
of the holders of a majority of the outstanding shares of the capital stock of
the Corporation entitled to vote at such meeting. In the absence of a quorum no
business shall be transacted except that the stockholders present in person or
by proxy and entitled to vote at such meeting shall have power to adjourn the
meeting from time to time to a date not more than one hundred twenty days after
the original record date without further notice other than announcement at the
meeting. At any such adjourned meeting at which a quorum shall be present any
business may be transacted which might have been transacted at the meeting on
the date specified in the original notice. Unless otherwise required by
applicable law or by the Fund's Articles of Incorporation, a majority of all
the votes cast at a meeting at which a quorum is present is sufficient to
approve any matter which properly comes before the meeting, except that a
plurality of all votes cast at such a meeting shall be sufficient for the
election of a director. The holders of such majority shall also have power to
adjourn the meeting to any specific time or times, and no notice of any such
adjourned meeting need be given to stockholders absent or otherwise.
Section 7. At any meeting of the stockholders of the Corporation every
stockholder having the right to vote shall be entitled, in person or by proxy
appointed by an instrument in writing subscribed by such stockholder and
bearing a date not more than eleven months prior to said meeting unless such
instrument provides for a longer period, to one vote for each share of stock
having voting power registered in his name on the books of the Corporation.
ARTICLE IV.
DIRECTORS
Section 1. The Board of Directors shall consist of not less than three
nor more than twelve members. The Board of Directors may by a vote of the
entire board increase or decrease the number of directors without a vote of the
stockholders. Directors need not hold any shares of the capital stock of the
Corporation.
Section 2. The directors shall be elected by the stockholders of the
Corporation at an annual meeting, if held, or at a special meeting if called
for that purpose, and shall hold
- 4 -
<PAGE> 5
office until their successors shall be duly elected and shall qualify.
Section 3. The Board of Directors shall have the control and management of the
business of the Corporation, and in addition to the powers and authority by
these By-Laws expressly conferred upon them, may exercise, subject to the
provisions of the laws of the State of Maryland and of the Articles of
Incorporation of the Corporation, all such powers of the Corporation and do all
such acts and things as are not required by law or by the Articles of
Incorporation to be exercised or done by the stockholders.
Section 4. The Board of Directors shall have power to fill vacancies occurring
on the Board, whether by death, resignation or otherwise. A vacancy on the
Board of Directors resulting from any cause except an increase in the number of
directors may be filled by a vote of the majority of the remaining members of
the Board, though less than a quorum. A vacancy on the Board of Directors
resulting from an increase in the number of directors may be filled by a
majority of the entire Board of Directors. A director elected by the Board of
Directors to fill a vacancy shall serve until the next annual meeting of
stockholders and until his successor is elected and qualifies. If less than a
majority of the directors in office shall have been elected by the
stockholders, a meeting of the stockholders shall be called as required under
the Investment Company Act of 1940, as amended.
Section 5. The Board of Directors shall have power to appoint, and at its
discretion to remove or suspend, any officers, managers, superintendents,
subordinates, assistants, clerks, agents and employees, permanently or
temporarily, as the Board may think fit, and to determine their duties and to
fix, and from time to time to change, their salaries or emoluments, and to
require security in such instances and in such amounts as it may deem proper.
Section 6. In case of the absence of an officer of the Corporation, or for any
other reason which may seem sufficient to the Board of Directors, the Board may
delegate his powers and duties for the time being to any other officer of the
Corporation or to any director.
Section 7. The Board of Directors may, by resolution or resolutions passed by
a majority of the whole Board, designate one or more committees, each committee
to consist of two or more of the directors of the Corporation which, to the
extent provided in such resolution or resolutions and by applicable law, shall
have and may exercise the powers of the Board of Directors in the management of
the business and affairs of the Corporation. Such
- 5 -
<PAGE> 6
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors. Any such
committee shall keep regular minutes of its proceedings, and shall report the
same to the Board when required.
Section 8. The Board of Directors may hold their meetings and keep the books
of the Corporation, except the original or a duplicate stock ledger and the
original or a certified copy of these By-Laws, outside of the State of
Maryland, at such place or places as they may from time to time determine.
Section 9. The Board of Directors shall have power to fix, and from time to
time to change the compensation, if any, of the directors of the Corporation.
ARTICLE V.
DIRECTORS MEETINGS
Section 1. Regular meetings of the Board of directors shall be held without
notice at such times and places as may be from time to time prescribed by the
Board.
Section 2. Special meetings of the Board of Directors may be called at any
time by the Chairman, and shall be called by the Chairman upon the written
request of a majority of the members of the Board of Directors. Unless notice
is waived by all the members of the Board of Directors, notice of any special
meeting shall be given to each director at least twenty-four hours prior to the
date of such meeting, and such notice shall provide the time and place of such
special meeting.
Section 3. One-third of the entire Board of Directors shall constitute a
quorum for the transaction of business at any meeting; except that if the
number of directors on the Board is less than six, two members shall constitute
a quorum for the transaction of business at any meeting. The act of a majority
of the directors present at any meeting where there is a quorum shall be the
act of the Board of Directors except as may be otherwise required by Maryland
law or the Investment Company Act of 1940.
Section 4. The order of business at meetings of the Board of Directors shall
be prescribed from time to time by the Board.
- 6 -
<PAGE> 7
ARTICLE VI.
OFFICERS AND AGENTS
Section 1. At the first meeting of the Board of Directors after the election
of Directors in each year, the Board shall elect a Chairman, a President
and Chief Executive Officer, one or more Vice Presidents, a Secretary and a
Treasurer and may elect or appoint one or more Assistant Secretaries, one or
more Assistant Treasurers, and such other officers and agents as the Board may
deem necessary and as the business of the Corporation may require.
Section 2. The Chairman of the Board and the President shall be elected from
the membership of the Board of Directors, but other officers need not be
members of the Board of Directors. Any two or more offices may be held by the
same person except the offices of President and Vice President. All officers of
the Corporation shall serve for one year and until their successors shall have
been duly elected and shall have qualified; provided, however, that any officer
may be removed at any time, either with or without cause, by action by the
Board of Directors.
ARTICLE VII.
DUTIES OF OFFICERS
CHAIRMAN OF THE BOARD
Section 1. The Chairman of the Board shall preside at all meetings of the
stockholders and the Board of Directors and shall be a member ex officio of all
standing committees. He shall have those duties and responsibilities as shall
be assigned to him by the Board of Directors. In the absence, resignation,
disability or death of the President, the Chairman shall exercise all the
powers and perform all the duties of the President until his return, or until
such disability shall be removed or until a new President shall have been
elected.
PRESIDENT
Section 2. The President shall be the Chief Executive Officer and head of the
Corporation, and in the recess of the Board of Directors shall have the general
control and management of its business and affairs, subject, however, to the
regulations of the Board of Directors.
The President shall, in the absence of the Chairman, preside at all meetings
of the stockholders and the Board of Directors. In the event of the absence,
resignation, disability
- 7 -
<PAGE> 8
or death of the Chairman, the President shall exercise all powers and perform
all duties of the Chairman until his return, or until such disability shall
have been removed or until a new Chairman shall have been elected.
VICE PRESIDENTS
Section 3. The Vice Presidents shall have those duties and responsibilities as
shall be assigned to them by the Chairman or the President. In the event of the
absence, resignation, disability or death of the Chairman and President, the
Vice President who has been duly authorized to do so by the Chairman or
President, shall exercise all the powers and perform all the duties of the
President or until such disability shall be removed or until a new President
shall have been elected.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 4. The Secretary shall attend all meetings of the stockholders and
shall record all the proceedings thereof in a book to be kept for that purpose,
and he shall be the custodian of the corporate seal of the Corporation. In the
absence of the Secretary, an Assistant Secretary or any other person appointed
or elected by the Board of Directors, as is elsewhere in these Bylaws provided,
may exercise the rights and perform the duties of the Secretary.
Section 5. The Assistant Secretary, or, if there be more than one Assistant
Secretary, then the Assistant Secretaries in the order of their seniority,
shall, in the absence or disability of the Secretary, perform the duties and
exercise the powers of the Secretary. Any Assistant Secretary elected by the
Board shall also perform such other duties and exercise such other powers as
the Board of Directors shall from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 6. The Treasurer shall keep full and correct accounts of the receipts
and expenditures of the Corporation in books belonging to the Corporation, and
shall deposit all monies and valuable effects in the name and to the credit of
the Corporation and in such depositories as may be designated by the Board of
Directors, and shall, if the Board shall so direct, give bond with sufficient
security and in such amount as may be required by the Board of Directors for
the faithful performance of his duties.
He shall disburse funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such
-8-
<PAGE> 9
disbursements, and shall render to the President and Board of Directors at the
regular meetings of the Board, or whenever they may require it, an account of
all his transactions as the chief fiscal officer of the Corporation and of the
financial condition of the Corporation, and shall present each year before the
annual meeting of the stockholders a full financial report of the preceding
fiscal year.
Section 7. The Assistant Treasurer, or, if there be more than one Assistant
Treasurer, then the Assistant Treasurers in the order of their seniority,
shall, in the absence or disability of the Treasurer, perform the duties and
exercise the powers of the Treasurer. Any Assistant Treasurer elected by the
board shall also perform such duties and exercise such powers as the Board of
Directors shall from time to time prescribe.
ARTICLE VIII.
INVESTMENT LIMITATIONS
The following investment limitations may not be changed with respect to any
Portfolio without the approval of a majority of the outstanding voting
securities of the Portfolio. A "majority" is defined as the lesser of: (1) at
least 67% of the voting securities of the Portfolio (to be affected by the
proposed change) present a meeting if the holders of the more than 50% of the
outstanding voting securities of the Portfolio are present or represented by
proxy, or (2) more than 50% of the outstanding voting securities of such
Portfolio.
The Portfolios will not:
1. Purchase securities of any one issuer (other than obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if
immediately thereafter more than 5% of its total assets would be invested in
the securities of any one issuer, or purchase more than 10% of an issuer's
outstanding voting securities, except that up to 25% of each Portfolio's total
assets may be invested without regard to these limitations.
2. Borrow money or issue senior securities, except that each Portfolio may
borrow from banks for temporary purposes in amounts not in excess of 10% of the
value of its total assets at the time of such borrowing; or mortgage, pledge,
or hypothecate any assets except in connection with any such borrowing in
amounts not in excess of the lesser of the amount borrowed or 10% of the value
of its total assets at the time of such borrowing; provided that the Portfolios
may enter into futures contracts and related
- 9 -
<PAGE> 10
options as described in the prospectus. Optioned securities are not considered
to be pledged for purposes of this limitation.
3. Purchase any securities which would cause more than 25% of the value of its
total assets at the time of purchase to be invested in the securities of
issuers conducting their principal activities in the same industry, provided
that the Dreman Cash Portfolio may invest more than 25% of its total assets in
U.S. Government Securities or certificates of deposit or bankers' acceptances.
4. Invest more than 10% of the value of its total assets in illiquid
securities, including, restricted securities and repurchase agreements with
remaining maturities in excess of seven days, and other securities for which
market quotations are not readily available.
5. Make loans, except that each Portfolio may lend securities it owns as
described herein and enter into repurchase agreements pursuant to its
investment objective and policies.
6. Purchase securities on margin, make short sales of securities provided that
the Portfolios may enter into futures contracts and related options and make
initial and variation margin deposits in connection therewith.
7. Purchase or sell commodities or commodity contracts except as stated in the
prospectus, or invest in oil, gas or mineral exploration or development
programs, provided that the Portfolios may, to the extent appropriate to their
investment objectives, purchase publicly traded securities of companies
engaging in whole or in part in such activities.
In addition to the "Investment Limitations" stated above, the Portfolios will
not: (1) purchase or retain securities of an issuer if those officers and
directors of the Fund or its investment advisor owning more than 1/2 of 1% of
such securities together own more than 5% of such securities; (2) engage in the
business of underwriting securities issued by others, except that each
Portfolio may acquire securities which are subject to restrictions on
disposition ("restricted securities") within the meaning of the Securities Act
of 1933, but no such purchase will be made which would result in more than 10%
of the value of the Portfolio's total assets consisting of restricted
securities, repurchase agreements with maturities of greater than seven days,
and other securities without readily available market quotations; (3) invest
for the purpose of exercising control over management of any company; (4)
invest its assets in securities of any investment company, except by open
market purchases at an ordinary
-10-
<PAGE> 11
broker's commission, or in connection with a merger, acquisition of assets,
consolidation or reorganization; (5) invest more than 5% of its total assets in
securities of companies which have (with predecessors) a record of less than
three years' continuous operation; (6) purchase warrants except warrants
acquired as a result of its holdings of common stocks; (7) purchase an interest
in a real estate investment trust.
ARTICLE IX.
OTHER RESTRICTIONS
Section 1. Dealings. The Officers and Directors of the Corporation, its
investment adviser or any sub-adviser shall have no dealings for or on behalf
of the Corporation with themselves as principal or agent, or with any
corporation or partnership in which they have a financial interest, provided
that this Section shall not prevent:
(a) Officers or Directors of the Corporation from having a financial
interest in the Corporation, in any sponsor, manager, investment adviser or
promoter of the Corporation, or in any underwriter of securities issued by the
Corporation;
(b) The purchase of securities for any Portfolio of the Corporation, or
sale of Securities owned by any Portfolio of the Corporation through a
securities dealer, one or more of whose partners, officers, directors or
security holders is an Officer or Director of the Corporation, its investment
adviser or its sub-adviser, provided such transactions are handled in a
brokerage capacity only, and provided commissions charged do not exceed
customary brokerage charges for such service;
(c) The employment of any legal counsel, registrar, transfer agent,
dividend disbursing agent or custodian having a partner, officer, director or
security holder who is an Officer or Director of the Corporation; provided only
customary fees are charged for services rendered to or for the benefit of the
Corporation;
(d) The purchase for any Portfolio of the Corporation of securities
issued by an issuer having an officer, director or security holder who is an
Officer or Director of the Corporation or of any manager of the Corporation,
unless the retention of such securities in the Portfolio of the Corporation
would be a violation of these By-Laws or the Articles of Incorporation of the
Corporation.
-11-
<PAGE> 12
Section 2. Claims Against Portfolio Assets. Each Portfolio of the Corporation
shall provide in any loan agreement and any other agreement to pledge, mortgage
or hypothecate any of its assets that such loan shall be repaid solely by the
Portfolio which borrowed funds, that to the extent such loan may be secured
only by the assets of the Portfolio which obtained the loan, no creditor of
such Portfolio shall have any rights to any assets of the Corporation other
than the specific assets which secure the agreement.
ARTICLE X.
CHECKS, DRAFTS, NOTES, ETC.
Section 1. All checks shall bear the signature of such person or persons as
the Board of Directors may from time to time direct.
Section 2. All notes and other similar obligations and acceptances of drafts
by the Corporation shall be signed by such person or persons as the Board of
Directors may from time to time direct.
Section 3. Any officer of the Corporation or any other employee, as the Board
of Directors may from time to time direct, shall have full power to endorse for
deposit all checks and all negotiable paper drawn payable to his or their order
or to the order of the Corporation.
ARTICLE XI.
CORPORATE SEAL
Section 1. The corporate seal of the Corporation shall have inscribed thereon
the name of the Corporation, the year of its organization, and the words
"Corporate Seal, Maryland." Such seal may be used by causing it or a facsimile
thereof to be impressed or affixed or otherwise reproduced.
ARTICLE XII.
DETERMINATION OF NET ASSET VALUE AND REDEMPTION
Section 1. The Board of Directors shall have power to fix an initial offering
price for the shares of any series which shall yield to the corporation not
less than the par value thereof, at which price the shares of the Common Stock
of the corporation shall be offered for sale, and to determine from time to
time thereafter the offering price which shall yield to the corporation
-12-
<PAGE> 13
not less than the par value thereof from sales of the shares of its Common
Stock; provided, however, that no shares of the Common Stock of the corporation
shall be issued or sold for a consideration which shall yield to the
corporation less than the net asset value of shares of such series determined
as hereinafter provided, as of the business day on which such shares are sold,
or at such other times set by the Board of Directors, except in the case of
shares of such Common Stock issued in payment of a dividend properly declared
and payable.
The net asset value of the property and assets of any
series of the corporation shall be determined at such times as the Board of
Directors may direct, by deducting from the total appraised value of all of
the property and assets of the corporation, determined in the manner
hereinafter provided, all debts, obligations and liabilities of the corporation
(including, but without limitation of the generality of any of the foregoing,
any or all debts, obligations, liabilities or claims of any and every kind and
nature, whether fixed, accrued, or unmatured, and any reserves or charges,
determined in accordance with generally accepted accounting principles, for
any or all thereof, whether for taxes, including estimated taxes or unrealized
book profits, expenses, contingencies or otherwise).
In determining the total appraised value of all the
property and assets of the corporation or belonging to any series thereof:
(a) Securities owned shall be valued at market value
or, in the absence of readily available market quotations, at fair value as
determined in good faith by or as directed by the Board of Directors in
accordance with applicable statutes and regulations.
(b) Dividends declared but not yet received, or
rights, in respect of securities which are quoted ex-dividend or ex-rights,
shall be included in the value of such securities as determined by or pursuant
to the direction of the Board of Directors on the day the particular
securities are first quoted ex-dividend or ex-rights, and on each succeeding
day until the said dividends or rights are received and become part of the
assets of the corporation.
(c) The value of any other assets of the corporation
(and any of the assets mentioned in paragraphs (a) or (b), in the discretion
of the Board of Directors in the event of a national financial emergency, as
hereinafter defined) shall be determined in such manner as may be approved
from time to time by or pursuant to the direction of the Board of Directors.
-13-
<PAGE> 14
The net asset value of each share of the Common
Stock of the corporation shall be determined by dividing the total market
value of the property and assets of the relevant series of the corporation by
the total number of shares of its Common Stock then issued and outstanding for
such series, including any shares sold by the corporation up to and including
the date as of which such net asset value is to be determined whether or not
certificates therefor have actually been issued. In case the net asset value
of each share so determined shall include a fraction of one cent, such net
asset value of each share shall be adjusted to the nearest full cent.
For the purposes of these Articles of Incorporation,
a "national financial emergency" is defined as the whole or any part of any
period (i) during which the New York Stock Exchange is closed other than
customary weekend and holiday closings, (ii) during which trading on the New
York Stock Exchange is restricted, (iii) during which an emergency exists as
a result of which disposal by the corporation of securities owned by such
series is not reasonably practicable or it is not reasonably practicable for
the corporation fairly to determine the value of the net assets of such series,
or (iv) during any other period when the Securities and Exchange Commission
(or any succeeding governmental authority) may for the protection of security
holders of the corporation by order permit suspension of the right of
redemption or postponement of the date of payment on redemption; provided that
applicable rules and regulations of the Securities and Exchange Commission
(or any succeeding governmental authority) shall govern as to whether the
conditions prescribed in (ii), (iii), or (iv) exist. The Board of Directors
may, in its discretion, declare the suspension described in (iv) above at an
end, and such other suspension relating to a natural financial emergency shall
terminate, as the case may be, on the first business day on which said Stock
Exchange shall have reopened or the period specified in (ii) or (iii) shall
have expired (as to which in the absence of an official ruling by said
Commission or succeeding authority, the determination of the Board of
Directors shall be conclusive).
Section 2. To the extent permitted by law, and except in the case of a
national financial emergency, the corporation shall redeem shares of its Common
Stock from its stockholders upon request of the holder thereof received by the
corporation or its designated agent during business hours of any business day,
provided that such request must be accompanied by surrender of outstanding
certificate or certificates for such shares in form for transfer, together with
such proof of the authenticity of signatures as may reasonably be required on
such shares (or, on such request in the event no certificate is outstanding)
by, or
-14-
<PAGE> 15
pursuant to the direction of the Board of Directors of the corporation, and
accompanied by proper stock transfer stamps. Shares redeemed upon any such
request shall be purchased by the corporation at the net asset value of such
shares determined in the manner provided in Paragraph (1) of this Article
Seventh, as of the close of business on the business day during which such
request was received in good order by the corporation.
Payments for shares of its Common Stock so redeemed
by the corporation shall be made from the assets of the applicable series in
cash, except payment for such shares may, at the option of the Board of
Directors, or such officer or officers as they may duly authorize for the
purpose in their complete discretion, be made from the assets of that series
in kind or partially in cash and partially in kind. In case of any payment in
kind the Board of Directors, or their delegate, shall have absolute discretion
as to what security or securities of such series shall be distributed in kind
and the amount of the same; and the securities shall be valued for purposes of
distribution at the value at which they were appraised in computing the
current net asset value of the series of the Fund's shares, provided that any
stockholder who cannot legally acquire securities so distributed in kind by
reason of the prohibitions of the Investment Company Act of 1940 shall
receive cash.
Payment for shares of its Common Stock so redeemed
by the corporation shall be made by the corporation as provided above within
seven days after the date which such shares are deposited; provided, however,
that if payment shall be made by delivery of assets of the corporation, as
provided above, any securities to be delivered as part of such payment shall
be delivered as promptly as any necessary transfers of such securities on the
books of the several corporations whose securities are to be delivered may be
made, but not necessarily within such seven day period.
The right of any holder of shares of the Common
Stock of the corporation to receive dividends thereon and all other rights of
such stockholder with respect to the shares so redeemed by the corporation
shall cease and determine from and after the time as of which the purchase
price of such shares shall be fixed, as provided above, except the right of
such stockholder to receive payment for such shares as provided for herein.
-15-
<PAGE> 16
ARTICLE XIII.
DIVIDENDS
Section 1. Dividends upon the shares of the capital stock of the Corporation
may, subject to the provisions of the Articles of Incorporation of the
Corporation, if any, be declared by the Board of Directors. Dividends may be
paid in cash, in property, or in shares of the capital stock of the
Corporation.
Section 2. Before payment of any dividend there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the Board
of Directors may, from time to time, in their absolute discretion, think proper
as a reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the Board of Directors shall deem to be for the best interests of
the Corporation, and the Board of Directors may abolish any such reserve in the
manner in which it was created.
ARTICLE XIV.
INDEMNIFICATION
Section 1. The corporation shall indemnify its directors and officers to the
fullest extent allowed, and in the manner provided, by Maryland law, including
the advancing of expenses incurred in connection therewith. Such
indemnification shall be in addition to any other right or claim to which any
director or officer may otherwise be entitled. The corporation may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or who, while a director, officer,
employee or agent of the corporation, is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
other enterprise or employee benefit plan, against any liability asserted
against and incurred by such person in any such capacity or arising out of such
person's position, whether or not the corporation would have had the power to
indemnify such liability.
Section 2. Nothing contained in this Article XIV protects or purports to
protect, or may be interpreted or construed to protect, any director or officer
against liability to the corporation or its stockholders to which he or she
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
or her office.
-16-
<PAGE> 17
ARTICLE XV.
FISCAL YEAR
Section 1. The fiscal year of the Corporation shall begin on _______________
of each year, and end on ________________ of each year.
ARTICLE XVI.
NOTICES
Section 1. Whenever under the provisions of these By-Laws notice is required
to be given to any director or stockholder, such notice is deemed given when it
is personally delivered, left at the residence or usual place of business of
the director or stockholder, or mailed to such director or stockholder at
such address as shall appear on the books of the Corporation and such notice,
if mailed, shall be deemed to be given at the time it shall be so deposited in
the United States mail postage prepaid. In the case of directors, such notice
may also be given orally by telephone or by telegraph or cable.
Section 2. Any notice required to be given under these By-Laws may be waived
in writing, signed by the person or persons entitled to such notice, whether
before or after the time stated therein.
ARTICLE XVII.
AMENDMENTS
Section 1. Except as otherwise provided in Article VIII, these By-Laws may be
amended, altered or repealed by the affirmative vote of the holders of a
majority of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote thereon, or by a majority of the Board of
Directors, as the case may be.
-17-
<PAGE> 1
EXHIBIT-99.B4
[Name]
is the owner of [number] shares
of stock in the above noted Fund (the "FUND"), of the series and
class, if any, specified, fully paid and nonassessable, the said
shares being issued and held subject to the provisions of the
Articles of Incorporation of the Fund, and all amendments thereto,
copies of which are on file with the Secretary of The State of
Maryland. The said owner by accepting this certificate agrees to and
is bound by all of the said provisions. The shares represented hereby
are transferable in writing by the owner thereof in person or by
attorney upon surrender of this certificate to the Fund properly
endorsed for transfer. The Fund will furnish to any Shareholder, upon
request and without charge, a full statement of the designations and
any preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms
and conditions of redemption of the stock of each class which the Fund
is authorized to issue. The shares may be subject to a contingent
deferred sales charge. This certificate is not valid unless
countersigned by the Transfer Agent.
<PAGE> 1
EXHIBIT-99.B5
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 24th day of August, 1995, by and between
KEMPER-DREMAN FUND, INC., a Maryland corporation (the "Fund"), and KEMPER
ADVISORS, INC. doing business as DREMAN VALUE ADVISORS, INC., a Delaware
corporation (the "Adviser").
WHEREAS, the Fund is an open-end management investment company
registered under the Investment Company Act of 1940, the shares of stock
("Shares") of which are registered under the Securities Act of 1933;
WHEREAS, the Fund is authorized to issue Shares in separate series or
portfolios with each representing the interests in a separate portfolio of
securities and other assets;
WHEREAS, the Fund currently offers Shares in four portfolios (the
"Initial Portfolios"), called the Kemper-Dreman Contrarian Portfolio, the
Kemper-Dreman High Return Portfolio, the Kemper-Dreman Small Cap Value
Portfolio and the Kemper-Dreman Fixed Income Portfolio, together with any other
Fund portfolios which may be established later and served by the Adviser
hereunder, being herein referred to collectively as the "Portfolios" and
individually referred to as a "Portfolio"; and
WHEREAS, the Fund desires at this time to retain the Adviser to render
investment advisory and management services to the Initial Portfolios, and the
Adviser is willing to render such services;
NOW THEREFORE, in consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:
1. The Fund hereby employs the Adviser to act as the investment adviser for
the Initial Portfolios and other Portfolios hereunder and to manage the
investment and reinvestment of the assets of each such Portfolio in accordance
with the applicable investment objectives and policies and limitations, and to
administer the affairs of each such Portfolio to the extent requested by and
subject to the supervision of the Board of 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 Fund's account with brokers or
dealers selected by it; and, in connection therewith, the Adviser is authorized
as the agent of the Fund to give instructions to the Custodian of the Fund as
to the deliveries of securities and payments of cash for the account of the
Fund. In connection with the selection of such brokers or
<PAGE> 2
dealers and the placing of such orders, the Adviser is directed to seek for the
Fund best execution of orders. Subject to such policies as the Board of
Directors of the Fund determines, the 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 Adviser determined in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer viewed in
terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the clients of the Adviser as to which the
Adviser exercises investment discretion. The Fund recognizes that all research
services and research that the Adviser receives or generates are available for
all clients, and that the Fund and other clients may benefit thereby. The
investment of funds shall be subject to all applicable restrictions of the
Articles of Incorporation and By-Laws of the Fund as may from time to time be
in force.
The Adviser accepts such employment and agrees during such period to
render such services, to furnish office facilities and equipment and clerical,
bookkeeping and administrative services for the Fund, to permit any of its
officers or employees to serve without compensation as directors or officers of
the Fund if elected to such positions and to assume the obligations herein set
forth for the compensation herein provided. The Adviser shall for all purposes
herein provided be deemed to be an independent contractor and, unless otherwise
expressly provided or authorized, shall have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the Fund. It
is understood and agreed that the Adviser, by separate agreements with the
Fund, may also serve the Fund in other capacities.
2. In the event that the Fund establishes one or more portfolios other than
the Initial Portfolios with respect to which it desires to retain the Adviser
to render investment advisory and management services hereunder, it shall
notify the Adviser in writing. If the Adviser is willing to render such
services, it shall notify the Fund in writing whereupon such portfolio or
portfolios shall become a Portfolio or Portfolios hereunder.
3. For the services and facilities described in Section 1, the Fund will pay
to the Adviser at the end of each calendar month, an investment management fee
for each Portfolio computed by applying the annual rates set forth in Appendix
A to the applicable average daily net assets of the Portfolio.
2
<PAGE> 3
The fee as computed in Appendix A shall be computed separately for, and
charged as an expense of, each Portfolio based upon the average daily net
assets of such Portfolio. For the month and year in which this Agreement
becomes effective or terminates, there shall be an appropriate proration on the
basis of the number of days that the Agreement is in effect during the month
and year, respectively.
4. The services of the Adviser to the Fund under this Agreement are not to be
deemed exclusive, and the Adviser shall be free to render similar services
or other services to others so long as its services hereunder are not impaired
thereby.
5. In addition to the fee of the Adviser, the Fund shall assume and pay any
expenses for services rendered by a custodian for the safekeeping of the Fund's
securities or other property, for keeping its books of account, for any other
charges of the custodian, and for calculating the net asset value of the Fund
as provided in the prospectus of the Fund. The Adviser shall not be
required to pay and the Fund shall assume and pay the charges and expenses of
its operations, including compensation of the directors (other than those
affiliated with the Adviser), charges and expenses of independent auditors, of
legal counsel, of any transfer or dividend disbursing agent, and of any
registrar of the Fund, costs of acquiring and disposing of portfolio
securities, interest, if any, on obligations incurred by the Fund, costs of
share certificates and of reports, membership dues in the Investment Company
Institute or any similar organization, costs of reports and notices to
stockholders, other like miscellaneous expenses and all taxes and fees payable
to federal, state or other governmental agencies on account of the registration
of securities issued by the Fund, filing of corporate documents or otherwise.
The Fund shall not pay or incur any obligation for any expenses for which the
Fund intends to seek reimbursement from the Adviser as herein provided without
first obtaining the written approval of the Adviser. The Adviser shall
arrange, if desired by the Fund, for officers or employees of the Adviser to
serve, without compensation from the Fund, as directors, officers or agents of
the Fund if duly elected or appointed to such positions and subject to their
individual consent and to any limitations imposed by law.
If expenses borne by the Fund for those Portfolios which the Adviser
manages in any fiscal year (including the Adviser's fee, but excluding
interest, taxes, fees incurred in acquiring and disposing of portfolio
securities, distribution services fees, extraordinary expenses and any other
expenses excludable under state securities law limitations) exceed any
applicable limitation arising under state securities laws applicable to a
Portfolio, the Adviser will reduce its fee or reimburse the Fund for any excess
to the extent required by such state securities laws. If for any month the
expenses of the Fund properly
3
<PAGE> 4
chargeable to the income account shall exceed 1/12 of the percentage of average
net assets allowable as expenses, the payment to the Adviser for that month
shall be reduced and if necessary the Adviser shall make a refund payment to
the Fund so that the total net expense will not exceed such percentage. As
of the end of the Fund's fiscal year, however, the foregoing computations and
payments shall be readjusted so that the aggregate compensation payable to the
Adviser for the year is equal to the percentage calculated in accordance with
Section 3 hereof of the average net asset value as determined as described
herein throughout the fiscal year, diminished to the extent necessary so that
the total of the aforementioned expense items of the Fund shall not exceed the
expense limitation. The aggregate of repayments, if any, by the Adviser to the
Fund for the year shall be the amount necessary to limit the said net expense
to said percentage in accordance with the foregoing.
The net asset value for each Portfolio shall be calculated in accordance
with the provisions of the Fund's prospectus or as the directors may determine
in accordance with the provisions of the Investment Company Act of 1940. On
each day when net asset value is not calculated, the net asset value of a
Portfolio shall be deemed to be the net asset value of such Portfolio as of
the close of business on the last day on which such calculation was made for
the purpose of the foregoing computations.
6. Subject to applicable statutes and regulations, it is understood that
directors, officers or agents of the Fund are or may be interested in the
Adviser as officers, directors, agents, shareholders or otherwise, and that the
officers, directors, shareholders and agents of the Adviser may be interested
in the Fund otherwise than as a director, officer or agent.
7. The Adviser shall not be liable for any error of judgment or of law or for
any loss suffered by the Fund in connection with the matters to which this
Agreement relates, except loss resulting from willful misfeasance, bad faith or
gross negligence on the part of the Adviser in the performance of its
obligations and duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
8. This Agreement shall become effective with respect to the Initial
Portfolios on the date hereof and shall remain in full force until April 1,
1996, unless sooner terminated as hereinafter provided. This Agreement shall
continue in force from year to year thereafter with respect to each Portfolio,
but only as long as such continuance is specifically approved for each
Portfolio at least annually in the manner required by the Investment Company
Act of 1940 and the rules and regulations thereunder; provided, however, that
if the continuation of this Agreement is not approved for a Portfolio, the
Adviser may continue to serve in such capacity for such Portfolio in the
4
<PAGE> 5
manner and to the extent permitted by the Investment Company Act of 1940
and the rules and regulations thereunder.
This Agreement shall automatically terminate in the event of its
assignment and may be terminated at any time without the payment of any penalty
by the Fund or by the Adviser on sixty (60) days written notice to the other
party. The Fund may effect termination with respect to any Portfolio by action
of the Board of Directors or by vote of a majority of the outstanding voting
securities of such Portfolio.
This Agreement may be terminated with respect to any Portfolio at any
time without the payment of any penalty by the Board of Directors or by vote of
a majority of the outstanding voting securities of such Portfolio in the event
that it shall have been established by a court of competent jurisdiction that
the Adviser or any officer or director of the Adviser has taken any action
which results in a breach of the covenants of the Adviser set forth herein.
The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the Investment Company Act of
1940 and the rules and regulations thereunder.
Termination of this Agreement shall not affect the right of the Adviser
to receive payments on any unpaid balance of the compensation described in
Section 3 earned prior to such termination.
9. The parties agree that the Adviser has a proprietary interest in the names
"Kemper" and "Dreman", and the Fund agrees to promptly take any and all
necessary action to remove the names "Kemper" and "Dreman" from its corporate
name and from the name of its Portfolios upon receipt of written request
therefor from the Adviser.
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 has been executed by and on behalf of the Fund by its
representatives as such representatives and not individually, and the
obligations of the Fund hereunder are not binding upon any of the directors,
officers, or stockholders of the Fund individually but are binding upon only
the assets and property of the Fund. With respect to any claim by the Adviser
for recovery of that portion of the investment management fee (or
5
<PAGE> 6
any other liability of the Fund arising hereunder) allocated to a particular
Portfolio, whether in accordance with the express terms hereof or otherwise,
the Adviser shall have recourse solely against the assets of that Portfolio to
satisfy such claim and shall have no recourse against the assets of any other
Portfolio for such purpose.
13. This Agreement shall be construed in accordance with applicable
federal law and the laws of the State of Illinois.
14. This Agreement is the entire contract between the parties relating to the
subject matter hereof and supersedes all prior agreements between the parties
relating to the subject matter hereof.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement
to be executed as of the day and year first above written.
KEMPER-DREMAN FUND, INC.
By: /s/ Stephen E. Shipman
--------------------------------
Title: Acting President
ATTEST:
/s/ Thomas A. Famigletti
-----------------------------
Title: Secretary
DREMAN VALUE ADVISORS, INC.
By: /s/ Patrick H. Dudasik
--------------------------------
Title: Executive Vice President
ATTEST:
/s/ David F. Dierenfeldt
----------------------------
Title: Secretary
6
<PAGE> 7
APPENDIX A
INVESTMENT MANAGEMENT FEE
Contrarian, High Return and Small Cap Value Portfolios:
<TABLE>
<CAPTION>
Applicable Average
Daily Net Assets
(Thousands) Annual Rate
------------------ -----------
<S> <C>
$0 - $ 250,000 .75 of 1%
$ 250,000 - $ 1,000,000 .72 of 1%
$ 1,000,000 - $ 2,500,000 .70 of 1%
$ 2,500,000 - $ 5,000,000 .68 of 1%
$ 5,000,000 - $ 7,500,000 .65 of 1%
$ 7,500,000 - $10,000,000 .64 of 1%
$10,000,000 - $12,500,000 .63 of 1%
Over $12,500,000 .62 of 1%
</TABLE>
Fixed Income Portfolio:
Annual rate of 0.50% of 1% of the Average Daily Net Assets.
<PAGE> 1
EXHIBIT-99.B6a
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made this 11th day of September, 1995, between KEMPER-DREMAN
FUND, INC. a Maryland corporation (the "Fund"), and KEMPER DISTRIBUTORS, INC.,
a Delaware corporation ("KDI").
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints KDI to act as agent for the distribution of shares
of stock (hereinafter called "shares") of the Fund in jurisdictions wherein
shares of the Fund may legally be offered for sale; provided, however, that
the Fund in its absolute discretion may (a) issue or sell shares directly to
holders of shares of the Fund upon such terms and conditions and for such
consideration, if any, as it may determine, whether in connection with the
distribution of subscription or purchase rights, the payment or reinvestment of
dividends or distributions, or otherwise; or (b) issue or sell shares at net
asset value to the stockholders of any other investment company, for which KDI
shall act as exclusive distributor, who wish to exchange all or a portion of
their investment in shares of such other investment company for shares of the
Fund. KDI shall appoint various financial service firms ("Firms") to provide
distribution services to investors. The Firms shall provide such office space
and equipment, telephone facilities, personnel, literature distribution,
advertising and promotion as is necessary or beneficial for providing
information and distribution services to existing and potential clients of the
Firms. KDI may also provide some of the above services for the Fund.
KDI accepts such appointment as distributor and principal underwriter
and agrees to render such services and to assume the obligations herein set
forth for the compensation herein provided. KDI shall for all purposes herein
provided be deemed to be an independent contractor and, unless expressly
provided herein or otherwise authorized, shall have no authority to act for or
represent the Fund in any way. KDI, by separate agreement with the Fund, may
also serve the Fund in other capacities. The services of KDI to the Fund under
this Agreement are not to be deemed exclusive, and KDI shall be free to render
similar services or other services to others so long as its services hereunder
are not impaired thereby.
In carrying out its duties and responsibilities hereunder, KDI will,
pursuant to separate written contracts, appoint various
<PAGE> 2
Firms to provide advertising, promotion and other distribution services
contemplated hereunder directly to or for the benefit of existing and potential
stockholders who may be clients of such Firms. Such Firms shall at all times
be deemed to be independent contractors retained by KDI and not the Fund.
KDI shall use its best efforts with reasonable promptness to sell such
part of the authorized shares of the Fund remaining unissued as from time to
time shall be effectively registered under the Securities Act of 1933
("Securities Act"), at prices determined as hereinafter provided and on terms
hereinafter set forth, all subject to applicable federal and state laws and
regulations and to the Agreement and Articles of Incorporation of the Fund.
2. KDI shall sell shares of the Fund to or through qualified Firms in such
manner, not inconsistent with the provisions hereof and the then effective
registration statement (and related prospectus) of the Fund under the
Securities Act, as KDI may determine from time to time, provided that no Firm
or other person shall be appointed or authorized to act as agent of the
Fund without the prior consent of the Fund. In addition to sales made by it as
agent of the Fund, KDI may, in its discretion, also sell shares of the Fund as
principal to persons with whom it does not have selling group agreements.
Shares of any class of any series of the Fund offered for sale or sold
by KDI shall be so offered or sold at a price per share determined in
accordance with the then current prospectus. The price the Fund shall receive
for all shares purchased from it shall be the net asset value used in
determining the public offering price applicable to the sale of such shares.
Any excess of the sales price over the net asset value of the shares of the
Fund sold by KDI as agent shall be retained by KDI as a commission for its
services hereunder. KDI may compensate Firms for sales of shares at the
commission levels provided in the Fund's prospectus from time to time. KDI may
pay other commissions, fees or concessions to Firms, and may pay them to others
in its discretion, in such amounts as KDI shall determine from time to time.
KDI shall be entitled to receive and retain any applicable contingent deferred
sales charge as described in the Fund's prospectus. KDI shall also receive any
distribution services fee payable by the Fund as provided in Section 8 hereof.
KDI will require each Firm to conform to the provisions hereof and the
Registration Statement (and related prospectus) at the time in effect under the
Securities Act with respect to the public offering price or net asset value, as
applicable, of the Fund's shares, and neither KDI nor any such Firms shall
withhold the placing of purchase orders so as to make a profit thereby.
2
<PAGE> 3
3. The Fund will use its best efforts to keep effectively registered under the
Securities Act for sale as herein contemplated such shares as KDI shall
reasonably request and as the Securities and Exchange Commission shall permit
to be so registered. Notwithstanding any other provision hereof, the Fund may
terminate, suspend or withdraw the offering of shares whenever, in its sole
discretion, it deems such action to be desirable.
4. The Fund will execute any and all documents and furnish any and all
information that may be reasonably necessary in connection with the
qualification of its shares for sale (including the qualification of the Fund
as a dealer where necessary or advisable) in such states as KDI may reasonably
request (it being understood that the Fund shall not be required without its
consent to comply with any requirement which in its opinion is unduly
burdensome). The Fund will furnish to KDI from time to time such information
with respect to the Fund and its shares as KDI may reasonably request for use
in connection with the sale of shares of the Fund.
5. KDI shall issue and deliver or shall arrange for various Firms to issue and
deliver on behalf of the Fund such confirmations of sales made by it pursuant
to this agreement as may be required. At or prior to the time of issuance of
shares, KDI will pay or cause to be paid to the Fund the amount due the Fund
for the sale of such shares. Certificates shall be issued or shares registered
on the transfer books of the Fund in such names and denominations as KDI may
specify.
6. KDI shall order shares of the Fund from the Fund only to the extent that it
shall have received purchase orders therefor. KDI will not make, or authorize
Firms or others to make (a) any short sales of shares of the Fund; or (b) any
sales of such shares to any director or officer of the Fund or to any officer
or director of KDI or of any corporation or association furnishing investment
advisory, managerial or supervisory services to the Fund, or to any corporation
or association, unless such sales are made in accordance with the then current
prospectus relating to the sale of such shares. KDI, as agent of and for the
account of the Fund, may repurchase the shares of the Fund at such prices and
upon such terms and conditions as shall be specified in the current prospectus
of the Fund. In selling or reacquiring shares of the Fund for the account of
the Fund, KDI will in all respects conform to the requirements of all state and
federal laws and the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., relating to such sale or reacquisition, as the case
may be, and will indemnify and save harmless the Fund from any damage or
expense on account of any wrongful act by KDI or any employee, representative
or agent of KDI. KDI will observe and be bound by all the provisions of the
Agreement and Articles of Incorporation of the Fund (and of any fundamental
policies
3
<PAGE> 4
adopted by the Fund pursuant to the Investment Company Act of 1940, notice of
which shall have been given to KDI) which at the time in any way require,
limit, restrict, prohibit or otherwise regulate any action of the part of KDI
hereunder.
7. The Fund shall assume and pay all charges and expenses of its operations
not specifically assumed or otherwise to be provided by KDI under this
Agreement. The Fund will pay or cause to be paid expenses (including the fees
and disbursements of its own counsel) of any registration of the Fund and its
shares under the United States securities laws and expenses incident to the
issuance of shares of beneficial interest, such as the cost of share
certificates, issue taxes, and fees of the transfer agent. KDI will pay all
expenses (other than expenses which one or more Firms may bear pursuant to any
agreement with KDI) incident to the sale and distribution of the shares issued
or sold hereunder, including, without limiting the generality of the foregoing,
all (a) expenses of printing and distributing any prospectus and of preparing,
printing and distributing or disseminating any other literature, advertising
and selling aids in connection with the offering of the shares for sale (except
that such expenses need not include expenses incurred by the Fund in connection
with the preparation, typesetting, printing and distribution of any
registration statement or prospectus, report or other communication to
stockholders in their capacity as such), (b) expenses of advertising in
connection with such offering and (c) expenses (other than the Fund's auditing
expenses) of qualifying or continuing the qualification of the shares for sale
and, in connection therewith, of qualifying or continuing the qualification of
the Fund as a dealer or broker under the laws of such states as may be
designated by KDI under the conditions herein specified. No transfer taxes, if
any, which may be payable in connection with the issue or delivery of shares
sold as herein contemplated or of the certificates for such shares shall be
borne by the Fund, and KDI will indemnify and hold harmless the Fund against
liability for all such transfer taxes.
8. For the services and facilities described herein in connection with Class B
shares and Class C shares of each series of the Fund, the Fund will pay to KDI
at the end of each calendar month a distribution services fee computed at the
annual rate of .75% of average daily net assets attributable to the Class B
shares and Class C shares of each such series. For the month and year in
which this Agreement becomes effective or terminates, there shall be an
appropriate proration on the basis of the number of days that the Agreement is
in effect during the month and year, respectively. The foregoing fee shall be
in addition to and shall not be reduced or offset by the amount of any
contingent deferred sales charge received by KDI under Section 2 hereof.
4
<PAGE> 5
The net asset value shall be calculated in accordance with the
provisions of the Fund's current prospectus. On each day when net asset value
is not calculated, the net asset value of a share of any class of any series of
the Fund shall be deemed to be the net asset value of such a share as of the
close of business on the last previous day on which such calculation was made.
The distribution services fee for any class of a series of the Fund shall be
based upon average daily net assets of the series attributable to the class and
such fee shall be charged only to such class.
9. KDI shall prepare reports for the Board of Directors of the Fund on a
quarterly basis in connection with the Fund's distribution plan for Class B
shares and Class C shares showing amounts paid to the various Firms and
such other information as from time to time shall be reasonably requested by
the Board of Directors.
10. To the extent applicable, this Agreement constitutes the plan for the
Class B shares and Class C shares of each series of the Fund pursuant to Rule
12b-1 under the Investment Company Act of 1940; and this Agreement and plan
shall be approved and renewed in accordance with Rule 12b-1 for such Class B
shares and Class C shares separately.
This Agreement shall become effective on the date hereof and shall
continue until April 1, 1996; and shall continue from year to year thereafter
only so long as such continuance is approved in the manner required by the
Investment Company Act of 1940.
This Agreement shall automatically terminate in the event of its
assignment and may be terminated at any time without the payment of any penalty
by the Fund or by KDI on sixty (60) days written notice to the other party.
The Fund may effect termination with respect to any class of any series of the
Fund by a vote of (i) a majority of the Board of Directors, (ii) a majority of
the directors who are not interested persons of the Fund and who have no direct
or indirect financial interest in this Agreement or in any agreement related to
this Agreement, or (iii) a majority of the outstanding voting securities of the
class. Without prejudice to any other remedies of the Fund, the Fund may
terminate this Agreement at any time immediately upon KDI's failure to fulfill
any of its obligations hereunder.
This Agreement may not be amended to increase the amount to be paid to
KDI by the Fund for services hereunder with respect to a class of any series of
the Fund without the vote of a majority of the outstanding voting securities of
such class. All material amendments to this Agreement must in any event be
approved by a vote of the Board of Directors of the Fund including the
directors who are not interested persons of the Fund and who have no direct or
indirect financial interest in this Agreement or in
5
<PAGE> 6
any agreement related to this Agreement, cast in person at a meeting called
for such purpose.
The terms "assignment", "interested" and "vote of a majority of the
outstanding voting securities" shall have the meanings set forth in the
Investment Company Act of 1940 and the rules and regulations thereunder.
Termination of this Agreement shall not affect the right of KDI to
receive payments on any unpaid balance of the compensation described in Section
8 earned prior to such termination.
11. KDI will not use or distribute, or authorize the use, distribution or
dissemination by Firms or others in connection with the sale of Fund shares any
statements other than those contained in the Fund's current prospectus, except
such supplemental literature or advertising as shall be lawful under federal
and state securities laws and regulations. KDI will furnish the Fund with
copies of all such material.
12. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
13. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as
such other party may designate for the receipt of such notice.
14. This Agreement has been executed by and on behalf of the Fund by its
representatives as such representatives and not individually, and the
obligations of the Fund hereunder are not binding upon any of the Directors,
officers or stockholders of the Fund individually but are binding upon only the
assets and property of the Fund. With respect to any claim by KDI for
recovery of any liability of the Fund arising hereunder allocated to a
particular series or class, whether in accordance with the express terms hereof
or otherwise, KDI shall have recourse solely against the assets of that series
or class to satisfy such claim and shall have no recourse against the assets of
any other series or class for such purpose.
15. This Agreement shall be construed in accordance with applicable federal
law and the laws of the State of Illinois.
16. This Agreement is the entire contract between the parties relating to the
subject matter hereof and supersedes all prior agreements between the parties
relating to the subject matter hereof.
6
<PAGE> 7
IN WITNESS WHEREOF, the Fund and KDI have caused this Agreement to be
executed as of the day and year first above written.
KEMPER-DREMAN FUND, INC.
By:__________________________
Title:_______________________
ATTEST:
___________________________
Title: ____________________
KEMPER DISTRIBUTORS, INC.
By:__________________________
Title:_______________________
ATTEST:
___________________________
Title:_____________________
7
<PAGE> 1
EXHIBIT-99.B6b
SELLING GROUP AGREEMENT KEMPER DISTRIBUTORS, INC.
120 South LaSalle Street, Chicago, Illinois 60603
Dear Financial Services Firm:
As principal underwriter and distributor, we invite you to join a
Selling Group for the distribution of shares of the Kemper Mutual Funds (herein
called "Funds"), but only in those states in which the shares of the respective
Funds may legally be offered for sale. As exclusive agent of each of the Funds,
we offer to sell to you shares of the Funds on the following terms:
1. In all sales of these shares to the public you shall act as dealer
for your own account, and in no transaction shall you have any authority to
act as agent for the issuer, for us, or for any other member of the Selling
Group.
2. Orders received from you will be accepted by us only at the public
offering price applicable to each order, as established by the Prospectus of
each Fund, subject to the discount, commission or other concession, if any, as
provided in such Prospectus. Upon receipt from you of any order to purchase
shares of a Fund, we shall confirm to you in writing or by wire to be followed
by a confirmation in writing. Additional instructions may be forwarded to you
from time to time. All orders are subject to acceptance or rejection by us in
our sole discretion.
3. You may offer and sell shares to your customers only at the public
offering price determined in the manner described in the applicable Prospectus.
The public offering price is the net asset value per share as provided in the
applicable Prospectus plus, with respect to certain Funds, a sales charge from
which you shall receive a discount equal to a percentage of the applicable
offering price as provided in the applicable Prospectus. You shall receive a
sales commission, with respect to certain Funds, equal to a percentage of the
amount invested as provided in the applicable Prospectus. You shall receive a
distribution service fee, for certain Funds for which such fees are available,
as provided in the applicable Prospectus which fee shall be payable with
respect to such assets, for such periods and at such intervals as are from time
to time specified by us. The discounts or other concessions to which you may be
entitled in connection with sales to your customers pursuant to any special
features of a Fund (such as cumulative discounts, letters of intent, etc., the
terms of which shall be as described in the applicable Prospectus and related
forms) shall be in accordance with the terms of such features. You may receive
an administrative service fee, with respect to certain Funds for which such
fees are available, as provided in the applicable Prospectus, which fee shall
be payable with respect to such
<PAGE> 2
assets, for such periods and at such intervals as are from time to time
specified by us.
4. By accepting this agreement, you agree:
(a) To purchase shares only from us or from your customers.
(b) That you will purchase shares from us only to cover purchase
orders already received from your customers, or for your own bona fide
investments.
(c) That you will not purchase shares from your customers at a
price lower than the bid price then quoted by or for the Fund involved. You
may, however, sell shares for the account of your customer to the Fund, or to
us as agent for the Fund, at the bid price currently quoted by or for the Fund
and charge your customer a fair commission for handling the transaction.
(d) That you will not withhold placing with us orders received from
your customers so as to profit yourself as a result of such withholding.
5. We will not accept from you any conditional orders for shares.
6. If any shares confirmed to you under the terms of this agreement
are repurchased by the issuing Fund or by us as agent for the Fund, or are
tendered for repurchase, within seven business days after the date of our
confirmation of the original purchase order, you shall forthwith refund to us
the full discount, commission, finder's fee or other concession, if any,
allowed or paid to you on such shares.
7. Payment for shares ordered from us shall be in New York clearing
house funds and must be received by the appropriate Fund's shareholder service
agent within seven days after our acceptance of your order (or such shorter
time period as may be required by applicable regulations). If such payment is
not received, we reserve the right, without notice, forthwith to cancel the
sale or, at our option, to sell the shares ordered back to the Fund, in which
case we may hold you responsible for any loss, including loss of profit
suffered by us as a result of your failure to make such payment.
8. Shares sold to you hereunder shall be available in negotiable form
for delivery at the appropriate Fund's shareholder services agent, against
payment, unless other instructions have been given.
9. All sales will be made subject to our receipt of shares from the
Fund. We reserve the right, in our discretion, without notice, to suspend sales
or withdraw the offering of shares entirely. We reserve the right to modify,
cancel or change the terms of this agreement, upon 15 days prior written notice
to you. Also, the sales charges, discounts, commissions or other concessions,
service fees of any kind provided for hereunder are subject to change at any
time by the Funds and us.
10. All communications to us should be sent to the address in the
heading above. Any notice to you shall be duly given if mailed or telegraphed
to you at the address specified by you below.
<PAGE> 3
11. This agreement shall be construed in accordance with the laws of
Illinois. This agreement is subject to the Prospectuses of the Funds from time
to time in effect, and, in the event of a conflict, the terms of the
Prospectuses shall control. References herein to the "Prospectus" of a Fund
shall mean the prospectus and statement of additional information of such Fund
as from time to time in effect. Any changes, modifications or additions
reflected in any such Prospectus shall be effective on the date of such
Prospectus (or supplement thereto) unless specified otherwise.
12. This agreement is subject to the Additional Stipulations and
Conditions on the reverse side hereof, all of which are a part of this
agreement.
Kemper Distributors, Inc.
By____________________________
Authorized Signature
Title_________________________
We have read the foregoing agreement and accept and agree to the terms and
conditions thereof.
Firm _________________________
Witness________________________
By____________________________
Authorized Representative
Dated _________________________ Title_________________________
<PAGE> 4
ADDITIONAL STIPULATIONS AND CONDITIONS
13. No person is authorized to make any representations concerning
shares of any Fund except those contained in the Prospectus of such Fund and in
printed information subsequently issued by the Fund or by us as information
supplemental to such Prospectus. If you wish to use your own advertising with
respect to a Fund, all such advertising must be approved by us or by the Fund
prior to use. You shall be responsible for any required filing of such
advertising.
14. Your acceptance of this agreement constitutes a representation (i)
that you are a registered security dealer and a member in good standing of the
National Association of Securities Dealers, Inc. and that you agree to comply
with all state and federal laws, rules and regulations applicable to
transactions hereunder and to the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., including specifically Section 26,
Article III thereof, or (ii) if you are offering and selling shares of the
Funds only in jurisdictions outside of the several states, territories and
possessions of the United States and are not otherwise required to be a member
of the National Association of Securities Dealers, Inc., that you nevertheless
agree to conduct your business in accordance with the spirit of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc., and to
observe the laws and regulations of the applicable jurisdiction. You likewise
agree that you will not offer to sell shares of any Fund in any state or other
jurisdiction in which they may not lawfully be offered for sale.
15. You shall make available an investment management account for your
customers through the Funds and shall provide such office space and equipment,
telephone facilities, personnel and literature distribution as is necessary or
appropriate for providing information and services to your customer. Such
services and assistance may include, but not be limited to, establishment and
maintenance of shareholder accounts and records, processing purchase and
redemption transactions, answering routine inquiries regarding the Funds, and
such other services as may be agreed upon from time to time and as may be
permitted by applicable statute, rule, or regulation. You agree to release,
indemnify and hold harmless the Funds, us and our respective representatives
and agents from any and all direct or indirect liabilities or losses resulting
from requests, directions, actions or inactions of or by you, your officers,
employees or agents regarding the purchase, redemption or transfer of
registration of shares of the Funds for accounts of you, your customers and
other shareholders or from any unauthorized or improper use of any on-line
computer facilities. You shall prepare such periodic reports for us as shall
reasonably be requested by us. You shall immediately inform the Funds or us of
all written complaints received by you from Fund shareholders relating to the
maintenance of their accounts and shall promptly answer all such complaints and
other similar correspondence. You shall provide the Funds and us on a timely
<PAGE> 5
basis with such information as may be required to complete various
regulatory forms.
16. As a result of the necessity to compute the amount of any
contingent deferred sales charge due with respect to the redemption of shares,
you may not hold shares of a Fund imposing such a charge in an account
registered in your name or in the name of your nominee for the benefit of
certain of your customers except with our prior written consent. Except as
otherwise permitted by us, shares of such a Fund owned by a shareholder must be
in a separate identifiable account for such shareholder.
17. Shares of certain Funds have been divided into separate classes:
Class A Shares, Class B Shares and Class C Shares. Class A shares are offered
at net asset value plus an initial sales charge. Class B Shares are offered at
net asset value without an initial sales charge but are subject to a contingent
deferred sales charge and a Rule 12b-1 fee and have a conversion feature. Class
C Shares are offered at net asset value without an initial sales charge or
contingent deferred sales charge but are subject to a Rule 12b-1 fee and have
no conversion feature. Please see the appropriate Prospectuses for a more
complete description of the distinctions between the classes of shares.
It is important to investors not only to choose Funds appropriate for
their investment objectives, but also to choose the appropriate distribution
arrangement, based on the amount invested and the expected duration of the
investment. To assist investors in these decisions, we have instituted the
following policies with respect to orders for shares of the Funds. The
following policies and procedures with respect to sales of classes of shares of
the Funds apply to each broker/dealer that distributes shares of the Funds.
1. All purchase orders for $500,000 or more (not including street name
or omnibus accounts) should be for class A Shares.
2. Any purchase order of less than $500,000 may be for either Class A,
Class B or Class C Shares in light of the relevant facts and circumstances,
including:
a. the specific purchase order dollar amount;
b. the length of time the investor expects to hold the shares; and
c. any other relevant circumstances such as the availability of
purchases under a Letter of Intent, Combined Purchases or Cumulative Discount
Privilege.
There are instances when one pricing structure may be more appropriate
than another. For example, investors who would qualify for a reduced sales
charge on Class A Shares may determine that payment of a reduced front-end
sales charge is preferable to payment of an ongoing Rule 12b-1 fee. On the
other hand, investors whose orders would not qualify for such a discount and
who plan to hold their investment for more than six years may wish to defer the
sales charge and would consider Class B Shares. Investors who prefer not to pay
an initial sales charge and who plan to redeem their shares within six years
might consider Class C Shares.
Appropriate supervisory personnel within your organization must ensure
that all employees receiving investor inquiries about
<PAGE> 6
the purchase of shares of the Funds advise the investor of the available
pricing structures offered by the Funds and the impact of choosing one method
over another, including breakpoints and the availability of Letters of Intent,
Combined Purchases and Cumulative Discounts. In some instances it may be
appropriate for a supervisory person to discuss a purchase with the
investor.
18. This agreement shall be in substitution of any prior selling group
agreement between you and us regarding these shares. This agreement shall not
be applicable to the provision of services for Cash Equivalent Fund, Tax-Exempt
California Money Market Fund, Tax Exempt New York Money Market Fund, Investors
Cash Trust and similar wholesale money market funds. The payment of related
distribution and services fees, shall be subject to separate services
agreements.
<PAGE> 1
EXHIBIT-99.B8a
CUSTODY AGREEMENT
AGREEMENT, made the 11th day of September, 1995 by and between
Kemper-Dreman Fund, Inc., a Maryland corporation having its principal place of
business at 10 Exchange Place, 20th Floor, Jersey City, New Jersey 07302
("Fund") and Investors Fiduciary Trust Company, a trust company organized and
existing under the laws of Missouri, having its principal place of business at
Kansas City, Missouri ("Custodian").
WHEREAS, Fund wants to appoint Investors Fiduciary Trust Company as
Custodian to have custody of the Fund's portfolio securities and monies
pursuant to this Agreement; and
WHEREAS, Investors Fiduciary Trust Company wants to accept such
appointment;
NOW, THEREFORE, for and in consideration of the mutual promises
contained herein, the parties hereto, intending to be legally bound, mutually
covenant and agree as follows:
1. APPOINTMENT OF CUSTODIAN.
Fund hereby constitutes and appoints Investors Fiduciary Trust
Company as Custodian of Fund which is to include:
A. Custody of the securities and monies at any time owned by
Fund; and
B. Performing certain accounting and record keeping functions
relating to its function as Custodian for Fund and each of its
Portfolios.
2. DELIVERY OF CORPORATE DOCUMENTS.
Fund has delivered or will deliver to Custodian prior to the
effective date of this Agreement, copies of the following documents and
all amendments or supplements thereto, properly certified or
authenticated:
A. Resolutions of the Board of Directors of Fund appointing
Investors Fiduciary Trust Company as Custodian hereunder and approving
the form of this Agreement; and
<PAGE> 2
B. Resolutions of the Board of Directors of Fund authorizing
certain persons to give instructions on behalf of Fund to Custodian and
authorizing Custodian to rely upon written instructions over their
signatures.
3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN.
A. Delivery of Assets
Fund will deliver or cause to be delivered to Custodian on the
effective date of this Agreement, or as soon thereafter as practicable,
and from time to time thereafter, all portfolio securities acquired by
it and monies then owned by it except as permitted by the Investment
Company Act of 1940 ("1940 Act") or from time to time coming into its
possession during the time this Agreement shall continue in effect.
Custodian shall have no responsibility or liability whatsoever for or
on account of securities or monies not so delivered. All securities so
delivered to Custodian (other than bearer securities) shall be
registered in the name of Fund or its nominee, or of a nominee of
Custodian, or shall be properly endorsed and in form for transfer
satisfactory to Custodian.
B. Safekeeping
Custodian will receive delivery of and keep safely the assets
of Fund delivered to it from time to time. Custodian will not deliver
any such assets to any person except as permitted by the provisions of
this Agreement or any agreement executed by it according to the terms
of this Agreement. Custodian shall be responsible only for the monies
and securities of Fund held directly by it or its nominees or
sub-custodian under this Agreement; provided that Custodian's
responsibility for any sub-custodian appointed at the Fund's direction
for purposes of (i) effecting third-party repurchase transactions with
banks, brokers, dealers, or other entities through the use of a common
custodian or sub-custodian; or (ii) providing depository and clearing
agency services with respect to certain variable rate demand note
securities ("special sub-custodian") shall be further limited as set
forth in this Agreement. Custodian may participate directly or
indirectly through a sub-custodian in the Depository Trust Company, the
Treasury/Federal Reserve Book Entry System, the Participants Trust
Company and any other securities depository approved by the Board of
Directors of the Fund, subject to compliance with the provisions of
Rule 17f-4 under the 1940 Act including, without limitation, the
specific provisions of subsections (a) (1) through (d) (4) thereof.
2
<PAGE> 3
C. Registration of Securities
Custodian will hold stocks and other registerable portfolio
securities of Fund registered in the name of Fund or in the name of any
nominee of Custodian for whose fidelity and liabilities Custodian shall
be fully responsible, or in street certificate form, so-called, with or
without any indication of fiduciary capacity. Unless otherwise
instructed, Custodian will register all such portfolio securities in
the name of its authorized nominee.
D. Exchange of Securities
Upon receipt of instructions, Custodian will exchange, or cause
to be exchanged, portfolio securities held by it for the account of
Fund for other securities or cash issued or paid in connection with any
reorganization, recapitalization, merger, consolidation, split-up of
shares, change of par value, conversion or otherwise, and will deposit
any such securities in accordance with the terms of any reorganization
or protective plan. Without instructions, Custodian is authorized to
exchange securities held by it in temporary form for securities in
definitive form, to effect an exchange of shares when the par value of
the stock is changed, and, upon receiving payment therefore, to
surrender bonds or other securities held by it at maturity or when
advised of earlier call for redemption, except that Custodian shall
receive instructions prior to surrendering any convertible security.
E. Purchases or Sales of Investments of Fund
Fund shall, on each business day on which a purchase or sale of
a portfolio security shall be made by it, deliver to Custodian
instructions which shall specify with respect to each such transaction:
(1) The name of the issuer and description of the security;
(2) The number of shares or the principal amount purchased or sold,
and accrued interest, if any;
(3) The trade date;
(4) The settlement date;
(5) The date when the securities sold were purchased by Fund or
other information identifying the securities sold and to be
delivered;
(6) The price per unit and the brokerage commission, taxes and
other expenses in connection with the transaction;
3
<PAGE> 4
(7) The total amount payable or receivable upon such transaction;
and
(8) The name of the person from whom or the broker or dealer
through whom the transaction was made.
In accordance with such purchase instructions, Custodian shall pay for
out of monies held for the account of Fund, but only insofar as monies
are available therein for such purpose, and receive the portfolio
securities so purchased by or for the account of Fund. Such payment
shall be made only upon receipt by Custodian of the securities so
purchased in form for transfer satisfactory to Custodian.
In accordance with such sales instructions, Custodian will deliver or
cause to be delivered the securities thus designated as sold for the
account of Fund to the broker or other person specified in the
instructions relating to such sale, such delivery to be made only
upon receipt of payment therefor in such form as shall be satisfactory
to Custodian, with the understanding that Custodian may deliver or
cause to be delivered securities for payment in accordance with the
customs prevailing among dealers in securities.
F. Purchases or Sales of Options and Futures Transactions
Fund will, on each business day on which a purchase or sale of
the following options and/or futures shall be made by it, deliver to
Custodian instructions which shall specify with respect to each such
purchase or sale:
(1) Securities Options
(a) The underlying security;
(b) The price at which purchased or sold;
(c) The expiration date;
(d) The number of contracts;
(e) The exercise price;
(f) Whether opening, exercising, expiring or closing the
transaction;
(g) Whether the transaction involves a put or call;
(h) Whether the option is written or purchased;
(i) Market on which option traded; and
(j) Name and address of the broker or dealer through whom the
sale or purchase was made.
(2) Options on Indices
(a) The index;
(b) The price at which purchased or sold;
(c) The exercise price;
4
<PAGE> 5
(d) The premium;
(e) The multiple;
(f) The expiration date;
(g) Whether the transaction is an opening, exercising, expiring
or closing transaction;
(h) Whether the transaction involves a put or call;
(i) Whether the option is written or purchased; and
(j) Name and address of the broker or dealer through whom the
sale or purchase was made.
(3) Securities Index Futures Transactions
(a) The last trading date specified in the contract and, when
available, the closing level, thereof;
(b) The index level on the date the contract is entered into;
(c) The multiple;
(d) Any margin requirements;
(e) The need for a segregated margin account (in addition to
instructions; and, if not already in the possession of
Custodian, Fund shall deliver a substantially complete and
executed custodial safekeeping account and procedural
agreement which shall be incorporated into this Custody
Agreement); and
(f) The name and address of the futures commission merchant
through whom the sale or purchase was made.
(4) Options on Index Futures Contracts
(a) The underlying index futures contract;
(b) The premium;
(c) The expiration date;
(d) The number of options;
(e) The exercise price;
(f) Whether the transaction involves an opening, exercising,
expiring or closing transaction;
(g) Whether the transaction involves a put or call;
(h) Whether the option is written or purchased; and
(i) The market on which the option is traded.
G. Securities Pledged to Secure Loans
(1) Upon receipt of instructions, Custodian will release or
cause to be released securities held in custody to the
pledgee designated in such instructions by way of pledge or
hypothecation to secure any loan incurred by Fund; provided,
however, that the securities shall be released only
upon payment to Custodian of the monies borrowed, except that
in cases where additional
5
<PAGE> 6
collateral is required to secure a borrowing already made,
further securities may be released or caused to be
released for that purpose upon receipt of instructions.
Upon receipt of instructions, Custodian will pay, but only
from funds available for such purpose, any such loan upon
redelivery to it of the securities pledged or hypothecated
therefor and upon surrender of the note or notes evidencing
such loan.
(2) Upon receipt of instructions, Custodian will release
securities held in custody to the borrower designated in such
instructions; provided, however, that the securities shall be
released only upon deposit with Custodian of full cash
collateral as specified in such instructions, and that Fund
will retain the right to any dividends, interest or
distribution on such loaned securities. Upon receipt of
instructions and the loaned securities, Custodian will
release the cash collateral to the borrower.
H. Routine Matters
Custodian will, in general, attend to all routine and mechanical
matters in connection with the sale, exchange, substitution, purchase,
transfer, or other dealings with securities or other property of Fund except as
may be otherwise provided in this Agreement or directed from time to time by
the Board of Directors of Fund.
I. Demand Deposit Account
Custodian will open and maintain a demand deposit account or accounts
in the name of Custodian, subject only to draft or order by Custodian upon
receipt of instructions. All monies received by Custodian from or for the
account of Fund shall be deposited in said account or accounts.
When properly authorized by a resolution of the Board of Directors of
Fund, Custodian may open and maintain an additional demand deposit account or
accounts in such other banks or trust companies as may be designated in such
resolution, such accounts, however, to be in the name of Custodian and subject
only to its draft or order.
J. Income and Other Payments to Fund
Custodian will:
(1) collect, claim and receive and deposit for the account of Fund
all income and other payments which become
6
<PAGE> 7
due and payable on or after the effective date of this Agreement with respect
to the securities deposited under this Agreement, and credit the account of
Fund with such income on the payable date;
(2) execute ownership and other certificates and affidavits for all
federal, state and local tax purposes in connection with the collection of bond
and note coupons; and
(3) take such other action as may be necessary or proper in connection
with:
(a) the collection, receipt and deposit of such income and other
payments, including but not limited to the presentation for payment of:
(1) all coupons and other income items requiring presentation;
(2) all other securities which may mature or be called, redeemed,
retired or otherwise become payable and regarding which the
Custodian has actual knowledge, or notice of which is contained
in publications of the type to which it normally subscribes for
such purpose; and
(b) the endorsement for collection, in the name of Fund, of all
checks, drafts or other negotiable instruments.
Custodian, however, shall not be required to institute suit or take
other extraordinary action to enforce collection except upon receipt of
instructions and upon being indemnified to its satisfaction against the costs
and expenses of such suit or other actions. Custodian will receive, claim and
collect all stock dividends, rights and other similar items and deal with the
same pursuant to instructions. Unless prior instructions have been received to
the contrary, Custodian will, without further instructions, sell any rights
held for the account of Fund on the last trade date prior to the date of
expiration of such rights.
K. Payment of Dividends and Other Distributions
On the declaration of any dividend or other distribution on the shares
of stock of any Portfolio ("Portfolio Shares") by the Board of Directors of
Fund, Fund shall deliver to Custodian instructions with respect thereto,
including a copy of the Resolution of said Board of Directors certified by the
Secretary or an Assistant Secretary of Fund wherein there shall be set forth
the
7
<PAGE> 8
record date as of which stockholders are entitled to receive such dividend or
distribution, and the amount payable per share on such dividend or
distribution.
On the date specified in such Resolution for the payment of such
dividend or other distribution, Custodian shall pay out of the monies held for
the account of Fund, insofar as the same shall be available for such purposes,
and credit to the account of the Dividend Disbursing Agent for Fund, such
amount as may be necessary to pay the amount per share payable in cash on
Portfolio Shares issued and outstanding on the record date established by such
Resolution.
L. Portfolio Shares Purchased by Fund
Whenever any Portfolio Shares are purchased by Fund, Fund or its agent
shall advise Custodian of the aggregate dollar amount to be paid for such
shares and shall confirm such advice in writing. Upon receipt of such advice,
Custodian shall charge such aggregate dollar amount to the custody account of
Fund and either deposit the same in the account maintained for the purpose of
paying for the purchase of Portfolio Shares or deliver the same in accordance
with such advice.
M. Portfolio Shares Purchased from Fund
Whenever Portfolio Shares are purchased from Fund, Fund will deposit or
cause to be deposited with Custodian the amount received for such shares.
Custodian shall not have any duty or responsibility to determine that Fund
Shares purchased from Fund have been added to the proper stockholder account or
accounts or that the proper number of such shares have been added to the
stockholder records.
N. Proxies and Notices
Custodian will promptly deliver or mail to Fund all proxies properly
signed, all notices of meetings, all proxy statements and other notices,
requests or announcements affecting or relating to securities held by Custodian
for Fund and will, upon receipt of instructions, execute and deliver or cause
its nominee to execute and deliver such proxies or other authorizations as may
be required. Except as provided by this Agreement or pursuant to instructions
hereafter received by Custodian, neither it nor its nominee shall exercise any
power inherent in any such securities, including any power to vote the same, or
execute any proxy, power of attorney, or other similar instrument voting any of
such securities, or give any consent, approval or waiver with respect thereto,
or take any other similar action.
8
<PAGE> 9
O. Disbursements
Custodian will pay or cause to be paid insofar as funds are available
for the purpose, bills, statements and other obligations of Fund (including but
not limited to obligations in connection with the conversion, exchange or
surrender of securities owned by Fund, interest charges, variation margin,
dividend disbursements, taxes, management fees, administration fees,
distribution fees, custodian fees, legal fees, auditors' fees, transfer agents'
fees, brokerage commissions, compensation to personnel, and other operating
expenses of Fund) pursuant to instructions of Fund setting forth the name of
the person to whom payment is to be made, the amount of the payment, and the
purpose of the payment.
P. Books, Records and Accounts
Custodian acknowledges that all the records it shall prepare and
maintain pursuant to this Agreement shall be the property of Fund and that upon
request of Fund it shall make Fund's records available to it, along with such
other information and data as are reasonably requested by Fund, for inspection,
audit or copying, or turn said records over to Fund.
Custodian shall, within a reasonable time, render to Fund as of the
close of business on each day, a detailed statement of the amounts received or
paid and of securities received or delivered for the account of Fund during
said day. Custodian shall, from time to time, upon request by Fund, render a
detailed statement of the securities and monies held for Fund under this
Agreement, and Custodian shall maintain such books and records as are necessary
to enable it do so and shall permit such persons as are authorized by Fund,
including Fund's independent public accountants, to examine such records or to
confirm the contents of such records; and, if demanded, shall permit federal
and state regulatory agencies to examine said securities, books and records.
Upon the written instructions of Fund or as demanded by federal or state
regulatory agencies, Custodian shall instruct any sub- custodian to permit such
persons as are authorized by Fund to examine the books, records and securities
held by such sub-custodian which relate to Fund.
Q. Appointment of Sub-Custodian
Notwithstanding any other provisions of this Agreement, all or any of
the monies or securities of Fund may be held in Custodian's own custody or in
the custody of one or more other banks or trust companies acting as
sub-custodians as
9
<PAGE> 10
may be approved by resolutions of Fund's Board of Directors, evidenced by a
copy thereof certified by the Secretary or Assistant Secretary of Fund. Any
sub-custodian must have the qualifications required for custodians under the
1940 Act unless exempted therefrom. Any sub-custodian may participate
directly or indirectly in the Depository Trust Company, the Treasury/Reserve
Book Entry System, the Participants Trust Company and any other securities
depository approved by the Board of Directors of the Fund to the same extent
and subject to the same conditions as provided hereunder. Neither Custodian
nor sub-custodian shall be entitled to reimbursement by Fund for any fees or
expenses of any sub-custodian; provided that Custodian shall not be liable for,
and Fund shall hold Custodian harmless from, the expenses of any special
sub-custodian. The appointment of a sub-custodian shall not relieve Custodian
of any of its obligations hereunder; provided that Custodian shall be
responsible to Fund for any loss, damage, or expense suffered or incurred by
Fund resulting from the actions or omissions of a special sub-custodian only to
the extent the special sub-custodian is liable to Custodian.
R. Multiple Portfolios
Custodian agrees that all securities and other assets of Fund shall be
segregated by Portfolio and all books and records, account values or actions
shall be maintained, held, made or taken, as the case may be, separately for
each Portfolio.
4. INSTRUCTIONS.
A. The term "instructions", as used herein, means written or oral
instructions to Custodian from an authorized person of Fund. Certified copies
of resolutions of the Board of Directors of Fund naming one or more persons
authorized to give instructions in the name and on behalf of Fund may be
received and accepted by Custodian as conclusive evidence of the authority of
any person so to act and may be considered to be in full force and effect (and
Custodian shall be fully protected in acting in reliance thereon) until receipt
by Custodian of notice to the contrary. Unless the resolution authorizing any
person to give instructions specifically requires that the approval of anyone
else shall first have been obtained, Custodian shall be under no obligation to
inquire into the right of the person giving such instructions to do so.
Notwithstanding any of the foregoing provisions of this Section 4, no
authorizations or instructions received by Custodian from Fund shall be deemed
to authorize or permit any director, officer, employee, or agent of Fund to
withdraw any of the
10
<PAGE> 11
securities or monies of Fund upon the mere receipt of instructions from such
director, officer, employee or agent.
B. No later than the next business day immediately following each
oral instruction referred to herein, Fund shall give Custodian written
confirmation of each such oral instruction. Either party may electronically
record any oral instruction whether given in person or via telephone.
5. LIMITATION OF LIABILITY OF CUSTODIAN
A. Custodian shall hold harmless and indemnify Fund from and against
any loss or liability arising out of Custodian's failure to comply with the
terms of this Agreement or arising out of Custodian's negligence, willful
misconduct, or bad faith. Custodian may request and obtain the advice and
opinion of counsel for Fund or of its own counsel with respect to questions or
matters of law, and it shall be without liability to Fund for any action taken
or omitted by it in good faith, in conformity with such advice or opinion.
B. If Fund requires Custodian in any capacity to take, with respect
to any securities, any action which involves the payment of money by it, or
which in Custodian's opinion might make it or its nominee liable for payment of
monies or in any other way, Custodian shall be and be kept indemnified by Fund
in an amount and form satisfactory to Custodian against any liability on
account of such action.
C. Custodian shall be entitled to receive, and Fund agrees to pay to
Custodian, on demand, reimbursement for such cash disbursements, costs and
expenses as may be agreed upon from time to time by Custodian and Fund.
D. Custodian shall be protected in acting as custodian hereunder upon
any instructions, advice, notice, request, consent, certificate or other
instrument or paper reasonably appearing to it to be genuine and to have been
properly executed and shall, unless otherwise specifically provided herein, be
entitled to receive as conclusive proof of any fact or matter required to be
ascertained from Fund hereunder, a certificate signed by Fund's President, or
other officer specifically authorized for such purpose.
E. Without limiting the generality of the foregoing, Custodian shall
be under no duty or obligation to inquire into, and shall not be liable for:
11
<PAGE> 12
(1) The validity of the issue of any securities purchased by
or for Fund, the legality of the purchase thereof or evidence of
ownership required by Fund to be received by Custodian, or the
propriety of the decision to purchase or amount paid therefor;
(2) The legality of the sales of any securities by or for
Fund, or the propriety of the amount paid therefor;
(3) The legality of the issue or sale of any shares of Fund,
or the sufficiency of the amount to be received therefore
(4) The legality of the purchase of any shares of Fund, or the
propriety of the amount to be paid therefor; or
(5) The legality of the declaration of any dividend by Fund,
or the legality of the issue of any shares of Fund in payment of any
share dividend.
F. Custodian shall not be liable for, or considered to be the
custodian of, any money represented by any check, draft, wire transfer,
clearing house funds, uncollected funds, or instrument for the payment of money
received by it on behalf of Fund, until Custodian actually receives such money,
provided only that it shall advise Fund promptly if it fails to receive any
such money in the ordinary course of business, and use its best efforts and
cooperate with Fund toward the end that such money shall be received.
G. Subject to the obligations of Custodian under Section 3.B. hereof,
Custodian shall not be responsible for loss occasioned by the acts, neglects,
defaults or insolvency of any broker, bank, trust company, or any other person
with whom Custodian may deal in the absence of negligence, misconduct or bad
faith on the part of Custodian.
H. Custodian or any sub-custodian shall provide Fund for its approval
by its Board of Directors agreements with banks or trust companies which will
act as sub-custodian for Fund pursuant to this Agreement; and, as set forth in
Section 3.B hereof, Custodian shall be responsible for the monies and
securities of the Fund held by it or its nominees or sub-custodians under this
Agreement, but not for monies and securities of the Fund held by any special
sub-custodian except to the extent the special sub-custodian is liable to
Custodian.
12
<PAGE> 13
6. COMPENSATION.
Fund shall pay to Custodian such compensation at such times as may from
time to time be agreed upon in writing by Custodian and Fund. Custodian may
charge such compensation against monies held by it for the account of Fund.
Custodian shall also be entitled, notwithstanding the provisions of Sections 5B
or 5C hereof, to charge against any monies held by it for the account of Fund
the amount of any loss, damage, liability or expense for which it shall be
entitled to reimbursement under the provisions of this Agreement. Custodian
shall not be entitled to reimbursement by Fund for any loss or expenses of any
sub-custodian; provided that Custodian shall not be liable for, and Fund shall
hold Custodian harmless from, the expenses of any special sub-custodian.
7. TERMINATION.
Either party to this Agreement may terminate the same by notice in
writing, delivered or mailed, postage prepaid, to the other party hereto and
received not less than sixty (60) days prior to the date upon which such
termination shall take effect. Upon termination of this Agreement, Fund shall
pay to Custodian such compensation for its reimbursable disbursements, costs
and expenses paid or incurred to such date and Fund shall use its best efforts
to obtain a successor custodian. Unless the holders of a majority of the
outstanding shares of Fund vote to have the securities, funds and other
properties held under this Agreement delivered and paid over to some other
person, firm or corporation specified in the vote, having not less than Two
Million Dollars ($2,000,000) aggregate capital, surplus and undivided profits,
as shown by its last published report, and meeting such other qualifications
for custodian as set forth in the Bylaws of Fund, the Board of Directors of
Fund shall, forthwith upon giving or receiving notice of termination of this
Agreement, appoint as successor custodian a bank or trust company having such
qualifications. Custodian shall, upon termination of this Agreement, deliver
to the successor custodian so specified or appointed, at custodian's office,
all securities then held by Custodian hereunder, duly endorsed and in form for
transfer, and all funds and other properties of Fund deposited with or held by
Custodian hereunder, and shall cooperate in effecting changes in book-entries
at the Depository Trust Company, the Treasury/Federal Reserve Book-Entry
System, the Participants Trust Company and any other securities depository
holding assets of the Fund. In the event no such vote has been adopted by the
stockholders of Fund and no written order designating a successor custodian
shall have been delivered to Custodian on or before the date when such
termination shall become effective, then Custodian shall deliver the
securities, funds and properties of Fund to a bank or trust company at the
selection of Custodian and meeting the qualifications for custodian, if any,
set forth in the Bylaws
13
<PAGE> 14
of Fund and having not less than Two Million Dollars ($2,000,000) aggregate
capital, surplus and undivided profits, as shown by its last published report.
Upon either such delivery to a successor custodian, Custodian shall have no
further obligations or liabilities under this Agreement. Thereafter such bank
or trust company shall be the successor custodian under this Agreement and
shall be entitled to reasonable compensation for its services. In the event
that no such successor custodian can be found, Fund will submit to its
stockholders, before permitting delivery of the cash and securities owned by
Fund to anyone other than a successor custodian, the question of whether Fund
shall be liquidated or shall function without a custodian. Notwithstanding
the foregoing requirement as to delivery upon termination of this Agreement,
Custodian may make any other delivery of the securities, funds and property of
Fund which shall be permitted by the 1940 Act and Fund's Articles of
Incorporation and Bylaws then in effect. Except as otherwise provided herein,
neither this Agreement nor any portion thereof may be assigned by Custodian
without the consent of Fund, authorized or approved by a resolution of its
Board of Directors.
8. NOTICES.
Notices, requests, instructions and other writings received by Fund at
120 South LaSalle Street, Chicago, Illinois 60603, or at such other address as
Fund may have designated by certified resolution of the Board of Directors to
Custodian and notices, requests, instructions and other writings received by
Custodian at its offices at 21 West 10th Street, Kansas City, Missouri 64105,
or at such other address as it may have designated to Fund in writing, shall be
deemed to have been properly given hereunder.
9. MISCELLANEOUS.
A. This Agreement is executed and delivered in the State of
Missouri and shall be governed by the laws of the State of Missouri.
B. All the terms and provisions of this Agreement shall be
binding upon, inure to the benefit of, and be enforceable by the
respective successors and assigns of the parties hereto.
C. No provisions of the Agreement may be amended or modified
in any manner except by a written agreement properly authorized and
executed by both parties hereto.
D. The captions in this Agreement are included for
convenience of reference only, and in no way define or delimit any of
the provisions hereof or otherwise affect their construction or effect.
14
<PAGE> 15
E. This Agreement shall become effective at the close of
business on the date hereof.
F. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
G. If any part, term or provision of this Agreement is by the
courts held to be illegal, in conflict with any law or otherwise
invalid, the remaining portion or portions shall be considered
severable and not be affected, and the rights and obligations of the
parties shall be construed and enforced as if the Agreement did not
contain the particular part, term or provision held to be illegal or
invalid.
H. This Agreement has been executed by and on behalf of Fund
by its representatives as such representatives and not individually,
and the obligations of Fund hereunder are not binding upon any of the
directors, officers or stockholders of Fund individually but are
binding upon only the assets and property of Fund. With respect to any
claim by Custodian for recovery of that portion of the compensation (or
any other liability of Fund arising hereunder) allocated to a
particular Portfolio, whether in accordance with the express terms
hereof or otherwise, Custodian shall have recourse solely against the
assets of that Portfolio to satisfy such claim and shall have no
recourse against the assets of any other Portfolio for such purpose.
I. This Agreement, together with the Fee Schedule, is the
entire contract between the parties relating to the subject matter
hereof and supersedes all prior agreements.
15
<PAGE> 16
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective authorized officers, and their respective seals to
be affixed.
KEMPER-DREMAN FUND, INC.
By:______________________________
Title:___________________________
Attest:_________________________
Title: _________________________
INVESTORS FIDUCIARY TRUST COMPANY
By:______________________________
Title:___________________________
Attest:_________________________
Title:__________________________
16
<PAGE> 1
EXHIBIT-99.B9a
AGENCY AGREEMENT
AGREEMENT dated the 11th day of September, 1995, by and between
KEMPER-DREMAN FUND, INC., a Maryland corporation having its principal place of
business at 10 Exchange Place, 20th Floor, Jersey City, New Jersey 07302
("Fund"), and INVESTORS FIDUCIARY TRUST COMPANY, a state chartered trust
company organized and existing under the laws of the State of Missouri having
its principal place of business at 127 West 10th Street, Kansas City, Missouri
64105 ("IFTC").
WHEREAS, Fund wants to appoint IFTC as Transfer Agent and Dividend
Disbursing Agent, and IFTC wants to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. Documents to be Filed with Appointment.
In connection with the appointment of IFTC as Transfer Agent and
Dividend Disbursing Agent for Fund, there will be filed with
IFTC the following documents:
A. A certified copy of the resolutions of the Board of
Directors of Fund appointing IFTC as Transfer Agent and
Dividend Disbursing Agent, approving the form of this
Agreement, and designating certain persons to give written
instructions and requests on behalf of Fund.
B. A certified copy of the Articles of Incorporation of Fund and
any amendments thereto.
C. A certified copy of the Bylaws of Fund.
D. Copies of Registration Statements filed with the Securities
and Exchange Commission.
E. Specimens of all forms of outstanding share certificates as
approved by the Board of Directors of Fund, with a
certificate of the Secretary of Fund as to such approval.
F. Specimens of the signatures of the officers of the Fund
authorized to sign share certificates and individuals
authorized to sign written instructions and requests on
behalf of the Fund.
<PAGE> 2
G. An opinion of counsel for Fund:
(1) With respect to Fund's organization and existence under
the laws of the State of Maryland.
(2) With respect to the status of all shares of Fund covered
by this appointment under the Securities Act of 1933,
and any other applicable federal or state statute.
(3) To the effect that all issued shares are, and all
unissued shares will be when issued, validly issued,
fully paid and non-assessable.
2. Certain Representations and Warranties of IFTC. IFTC represents
and warrants to Fund that:
A. It is a trust company duly organized and existing and in good
standing under the laws of the State of Missouri.
B. It is duly qualified to carry on its business in the State of
Missouri.
C. It is empowered under applicable laws and by its Articles of
Incorporation and Bylaws to enter into and perform the
services contemplated in this Agreement.
D. All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
E. It has and will continue to have and maintain the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
F. It is, and will continue to be, registered as a transfer
agent under the Securities Exchange Act of 1934.
3. Certain Representations and Warranties of Fund. Fund represents
and warrants to IFTC that:
A. It is a corporation duly organized and existing and in good
standing under the laws of the State of Maryland.
2
<PAGE> 3
B. It is an investment company registered under the Investment
Company Act of 1940.
C. A registration statement under the Securities Act of 1933
has been filed and will be effective with respect to all
shares of Fund being offered for sale at any time and from
time to time.
D. All requisite steps have been or will be taken to register
Fund's shares for sale in all applicable states, including
the District of Columbia.
E. Fund and its Directors are empowered under applicable laws
and by the Fund's Articles of Incorporation and Bylaws to
enter into and perform this Agreement.
4. Scope of Appointment.
A. Subject to the conditions set forth in this Agreement, Fund
hereby employs and appoints IFTC as Transfer Agent and
Dividend Disbursing Agent effective the date hereof.
B. IFTC hereby accepts such employment and appointment and
agrees that it will act as Fund's Transfer Agent and
Dividend Disbursing Agent. IFTC agrees that it will also act
as agent in connection with Fund's periodic withdrawal payment
accounts and other open-account or similar plans for
stockholders, if any.
C. IFTC agrees to provide the necessary facilities, equipment
and personnel to perform its duties and obligations hereunder
in accordance with industry practice.
D. Fund agrees to use all reasonable efforts to deliver to IFTC
in Kansas City, Missouri, as soon as they are available, all
its stockholder account records.
E. Subject to the provisions of Sections 20 and 21 hereof, IFTC
agrees that it will perform all the usual and ordinary
services of Transfer Agent and Dividend Disbursing Agent and
as agent for the various stockholder accounts, including,
without limitation, the following: issuing, transferring
and cancelling share certificates, maintaining all
stockholder accounts, preparing stockholder meeting lists,
mailing proxies, receiving and tabulating proxies, mailing
stockholder reports
3
<PAGE> 4
and prospectuses, withholding federal income taxes, preparing
and mailing checks for disbursement of income and capital
gains dividends, preparing and filing all required U.S.
Treasury Department information returns for all stockholders,
preparing and mailing confirmation forms to stockholders and
dealers with respect to all purchases and liquidations of
Fund shares and other transactions in stockholder accounts
for which confirmations are required, recording
reinvestments of dividends and distributions in Fund
shares, recording redemptions of Fund shares and preparing
and mailing checks for payments upon redemption and for
disbursements to systematic withdrawal plan stockholders.
5. Compensation and Expenses.
A. In consideration for the services provided hereunder by IFTC
as Transfer Agent and Dividend Disbursing Agent, Fund will
pay to IFTC from time to time compensation as agreed upon in
writing by the parties for all services rendered as Agent,
and also, all its reasonable out-of-pocket expenses and other
disbursements incurred in connection with the agency.
B. Fund agrees to promptly reimburse IFTC for all reasonable
out-of-pocket expenses or advances incurred by IFTC in
connection with the performance of services under this
Agreement including, but not limited to, postage (and first
class mail insurance in connection with mailing share
certificates), envelopes, check forms, continuous forms,
forms for reports and statements, stationery, and other
similar items, telephone and telegraph charges incurred in
answering inquiries from dealers or stockholders, microfilm
used each year to record the previous year's transactions in
stockholder accounts and computer tapes used for permanent
storage of records and cost of insertion of materials in
mailing envelopes by outside firms. IFTC may, at its option,
arrange to have various service providers submit invoices
directly to the Fund for payment of out-of-pocket expenses
reimbursable hereunder.
6. Efficient Operation of IFTC System.
A. In connection with the performance of its services under this
Agreement, IFTC is responsible for the
4
<PAGE> 5
accurate and efficient functioning of its system at all
times, including:
(1) The accuracy of the entries in IFTC's records reflecting
purchase and redemption orders and other instructions
received by IFTC from dealers, stockholders, Fund or its
principal underwriter.
(2) The timely availability and the accuracy of stockholder
lists, stockholder account verifications, confirmations
and other stockholder account information to be
produced from IFTC's records or data.
(3) The accurate and timely issuance of dividend and
distribution checks in accordance with instructions
received from Fund.
(4) The accuracy of redemption transactions and payments in
accordance with redemption instructions received from
dealers, stockholders or Fund or other authorized
persons.
(5) The deposit daily in Fund's appropriate special bank
account of all checks and payments received from dealers
or stockholders for investment in shares.
(6) The requiring of proper forms of instructions,
signatures and signature guarantees and any necessary
documents supporting the rightfulness of transfers,
redemptions and other stockholder account transactions,
all in conformance with IFTC's present procedures with
such changes as may be deemed reasonably appropriate by
IFTC or as may be reasonably approved by or on behalf
of Fund.
(7) The maintenance of a current duplicate set of Fund's
essential or required records, as agreed upon from time
to time by Fund and IFTC, at a secure distant location,
in form available and usable forthwith in the event
of any breakdown or disaster disrupting its main
operation.
5
<PAGE> 6
7. Indemnification.
A. Fund shall indemnify and hold IFTC harmless from and against
any and all claims, actions, suits, losses, damages, costs,
charges, counsel fees, payments, expenses and liabilities
arising out of or attributable to any action or omission by
IFTC pursuant to this Agreement or in connection with
the agency relationship created by this Agreement, provided
that IFTC has acted in good faith, without negligence and
without willful misconduct.
B. IFTC shall indemnify and hold Fund harmless from and against
any and all claims, actions, suits, losses, damages, costs,
charges, counsel fees, payments, expenses and liabilities
arising out of or attributable to any action or omission by
IFTC pursuant to this Agreement or in connection with
the agency relationship created by this Agreement, provided
that IFTC has not acted in good faith, without negligence and
without willful misconduct.
C. In order that the indemnification provisions contained in
this Section 7 shall apply, upon the assertion of a claim
for which either party (the "Indemnifying Party") may be
required to provide indemnification hereunder, the party
seeking indemnification (the "Indemnitee") shall promptly
notify the Indemnifying Party of such assertion, and shall
keep such party advised with respect to all developments
concerning such claim. The Indemnifying Party shall be
entitled to assume control of the defense and the
negotiations, if any, regarding settlement of the claim. If
the Indemnifying Party assumes control, the Indemnitee shall
have the option to participate in the defense and
negotiations of such claim at its own expense. The
Indemnitee shall in no event confess, admit to, compromise,
or settle any claim for which the Indemnifying Party may be
required to indemnify it except with the prior written
consent of the Indemnifying Party, which shall not be
unreasonably withheld.
8. Certain Covenants of IFTC and Fund.
A. All requisite steps will be taken by Fund from time to time
when and as necessary to register the Fund's shares for sale
in all states in which Fund's shares shall at the time be
offered for sale and require registration. If at any time
Fund receives notice of any stop order or other
6
<PAGE> 7
proceeding in any such state affecting such registration or
the sale of Fund's shares, or of any stop order or other
proceeding under the Federal securities laws affecting the
sale of Fund's shares, Fund will give prompt notice thereof
to IFTC.
B. IFTC hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to Fund for safekeeping of
share certificates, check forms, and facsimile signature
imprinting devices, if any; and for the preparation or use,
and for keeping account of, such certificates, forms and
devices. Further, IFTC agrees to carry insurance, as
specified in Exhibit A hereto, with insurers reasonably
acceptable to Fund and in minimum amounts that are reasonably
acceptable to Fund, which will not be changed without the
consent of Fund, which consent shall not be unreasonably
withheld, and which will be expanded in coverage or increased
in amounts from time to time if and when reasonably requested
by Fund. If IFTC determines that it is unable to obtain any
such insurance upon commercially reasonable terms, it shall
promptly so advise Fund in writing. In such event, Fund
shall have the right to terminate this Agreement upon 30 days
notice.
C. To the extent required by Section 31 of the Investment
Company Act of 1940 and Rules thereunder, IFTC agrees that
all records maintained by IFTC relating to the services to be
performed by IFTC under this Agreement are the property of
Fund and will be preserved and will be surrendered promptly
to Fund on request.
D. IFTC agrees to furnish Fund semi-annual reports of its
financial condition, consisting of a balance sheet, earnings
statement and any other reasonably available financial
information reasonably requested by Fund. The annual
financial statements will be certified by IFTC's certified
public accountants.
E. IFTC represents and agrees that it will use all reasonable
efforts to keep current on the trends of the investment
company industry relating to stockholder services and will
use all reasonable efforts to continue to modernize and
improve its system without additional cost to Fund.
7
<PAGE> 8
F. IFTC will permit Fund and its authorized representatives to
make periodic inspections of its operations at reasonable
times during business hours.
G. If IFTC is prevented from complying, either totally or in
part, with any of the terms or provisions of this Agreement,
by reason of fire, flood, storm, strike, lockout or other
labor trouble, riot, war, rebellion, accidents, acts of God,
equipment, utility or transmission failure or damage, and/or
any other cause or casualty beyond the reasonable control of
IFTC, whether similar to the foregoing matters or not, then
upon written notice to Fund, the requirements of this
Agreement that are affected by such disability, to the extent
so affected, shall be suspended during the period of such
disability; provided, however, that IFTC shall make
reasonable effort to remove such disability as soon as
possible. During such period, Fund may seek alternate
sources of service without liability hereunder; and IFTC will
use all reasonable efforts to assist Fund to obtain alternate
sources of service. IFTC shall have no liability to Fund for
nonperformance because of the reasons set forth in this
Section 8.G; but if a disability that, in Fund's reasonable
belief, materially affects IFTC's ability to perform its
obligations under this Agreement continues for a period of 30
days, then Fund shall have the right to terminate this
Agreement upon 10 days written notice to IFTC.
9. Adjustment.
In case of any recapitalization, readjustment or other change in
the structure of Fund requiring a change in the form of share
certificates, IFTC will issue or register certificates in the new
form in exchange for, or in transfer of, the outstanding
certificates in the old form, upon receiving the following:
A. Written instructions from an officer of Fund.
B. Certified copy of any amendment to the Articles of
Incorporation or other document effecting the change.
C. Certified copy of any order or consent of each governmental
or regulatory authority required by law for the issuance of
the shares in the new form, and an opinion of counsel that
no order or
8
<PAGE> 9
consent of any other government or regulatory authority is
required.
D. Specimens of the new certificates in the form approved by the
Board of Directors of Fund, with a certificate of the
Secretary of Fund as to such approval.
E. Opinion of counsel for Fund:
(1) With respect to the status of the shares of Fund in the
new form under the Securities Act of 1933, and any other
applicable federal or state laws.
(2) To the effect that the issued shares in the new form
are, and all unissued shares will be when issued,
validly issued, fully paid and non-assessable.
10. Share Certificates.
Fund will furnish IFTC with a sufficient supply of blank share
certificates and from time to time will renew such supply upon the
request of IFTC. Such certificates will be signed manually or by
facsimile signatures of the officers of Fund authorized by law and
Fund's Bylaws to sign share certificates and, if required, will
bear the trust seal or facsimile thereof.
11. Death, Resignation or Removal of Signing Officer.
Fund will file promptly with IFTC written notice of any change in
the officers authorized to sign share certificates, written
instructions or requests, together with two signature cards
bearing the specimen signature of each newly authorized officer,
all as certified by an appropriate officer of the Fund. In
case any officer of Fund who will have signed manually or whose
facsimile signature will have been affixed to blank share
certificates will die, resign, or be removed prior to the issuance
of such certificates, IFTC may issue or register such share
certificates as the share certificates of Fund notwithstanding
such death, resignation, or removal, until specifically directed
to the contrary by Fund in writing. In the absence of such
direction, Fund will file promptly with IFTC such approval,
adoption, or ratification as may be required by law.
9
<PAGE> 10
12. Future Amendments of Articles of Incorporation and Bylaws.
Fund will promptly file with IFTC copies of all material
amendments to its Articles of Incorporation and Bylaws and
Registration Statement made after the date of this Agreement.
13. Instructions, Opinion of Counsel and Signatures.
At any time IFTC may apply to any officer of Fund for
instructions, and may consult with legal counsel for Fund at the
expense of Fund, or with its own legal counsel at its own expense,
with respect to any matter arising in connection with the agency;
and it will not be liable for any action taken or omitted by it in
good faith in reliance upon such instructions or upon the opinion
of such counsel. IFTC is authorized to act on the orders,
directions or instructions of such persons as the Board of
Directors of Fund shall from time to time designate by resolution.
IFTC will be protected in acting upon any paper or document,
including any orders, directions or instructions, reasonably
believed by it to be genuine and to have been signed by the proper
person or persons; and IFTC will not be held to have notice of any
change of authority of any person so authorized by Fund until
receipt of written notice thereof from Fund. IFTC will also be
protected in recognizing share certificates that it reasonably
believes to bear the proper manual or facsimile signatures of the
officers of Fund, and the proper countersignature of any former
Transfer Agent or Registrar, or of a Co-Transfer Agent or
Co-Registrar.
14. Papers Subject to Approval of Counsel.
The acceptance by IFTC of its appointment as Transfer Agent and
Dividend Disbursing Agent, and all documents filed in connection
with such appointment and thereafter in connection with the
agencies, will be subject to the approval of legal counsel for
IFTC, which approval will not be unreasonably withheld.
15. Certification of Documents.
The required copy of the Articles of Incorporation of Fund and
copies of all amendments thereto will be certified by the
appropriate official of the State of Maryland; and if such
Articles of Incorporation and amendments are required by law
to be also filed with a county, city or other officer or official
body, a certificate of such filing will appear on the certified
10
<PAGE> 11
copy submitted to IFTC. A copy of the order or consent of each
governmental or regulatory authority required by law for the
issuance of Fund shares will be certified by the Secretary or
Clerk of such governmental or regulatory authority, under proper
seal of such authority. The copy of the Bylaws and copies of all
amendments thereto and copies of resolutions of the Board of
Directors of Fund will be certified by the Secretary or an
Assistant Secretary of Fund.
16. Records.
IFTC will maintain customary records in connection with its
agency, and particularly will maintain those records required to
be maintained pursuant to sub-paragraph (2)(iv) of paragraph
(b) of Rule 31a-1 under the Investment Company Act of 1940, if
any.
17. Disposition of Books, Records and Cancelled Certificates.
IFTC will send periodically to Fund, or to where designated by the
Secretary or an Assistant Secretary of Fund, all books, documents,
and all records no longer deemed needed for current purposes and
share certificates which have been cancelled in transfer or
in exchange, upon the understanding that such books, documents,
records, and share certificates will not be destroyed by Fund
without the consent of IFTC (which consent will not be
unreasonably withheld), but will be safely stored for possible
future reference.
18. Provisions Relating to IFTC as Transfer Agent.
A. IFTC will make original issues of share certificates upon
written request of an officer of Fund and upon being
furnished with a certified copy of a resolution of the Board
of Directors authorizing such original issue, an opinion of
counsel as outlined in Section 1.G or 9.E of this Agreement,
the certificates required by Section 10 of this Agreement
and any other documents required by Section 1 or 9 of this
Agreement.
B. Before making any original issue of certificates, Fund will
furnish IFTC with sufficient funds to pay any taxes required
on the original issue of the shares. Fund will furnish IFTC
such evidence as may be required by IFTC to show the actual
value of the shares. If no taxes are payable, IFTC will upon
request be furnished with an opinion of outside counsel to
that effect.
11
<PAGE> 12
C. Shares will be transferred and new certificates issued in
transfer, or shares accepted for redemption and funds
remitted therefor, upon surrender of the old certificates in
form deemed by IFTC properly endorsed for transfer or
redemption accompanied by such documents as IFTC may deem
necessary to evidence the authority of the person making the
transfer or redemption, and bearing satisfactory evidence of
the payment of any applicable share transfer taxes. IFTC
reserves the right to refuse to transfer or redeem shares
until it is satisfied that the endorsement or signature on
the certificate or any other document is valid and genuine,
and for that purpose it may require a guarantee of signature
by such persons as may from time to time be specified in the
prospectus related to such shares or otherwise authorized by
Fund. IFTC also reserves the right to refuse to transfer or
redeem shares until it is satisfied that the requested
transfer or redemption is legally authorized, and it will
incur no liability for the refusal in good faith to make
transfers or redemptions which, in its judgment, are
improper, unauthorized, or otherwise not rightful. IFTC may,
in effecting transfers or redemptions, rely upon
Simplification Acts or other statutes which protect it and
Fund in not requiring complete fiduciary documentation.
D. When mail is used for delivery of share certificates, IFTC
will forward share certificates in "nonnegotiable" form as
provided by Fund by first class mail, all such mail
deliveries to be covered while in transit to the addressee by
insurance arranged for by IFTC.
E. IFTC will issue and mail subscription warrants and
certificates provided by Fund and representing share
dividends, exchanges or split-ups, or act as Conversion Agent
upon receiving written instruc- tions from any officer of
Fund and such other documents as IFTC deems necessary.
F. IFTC will issue, transfer, and split-up certificates upon
receiving written instructions from an officer of Fund and
such other documents as IFTC may deem necessary.
G. IFTC may issue new certificates in place of certificates
represented to have been lost, destroyed, stolen or otherwise
wrongfully taken, upon receiving indemnity satisfactory to
IFTC, and
12
<PAGE> 13
may issue new certificates in exchange for, and upon
surrender of, mutilated certificates. Any such issuance
shall be in accordance with the provisions of law governing
such matter and any procedures adopted by the Board of
Directors of the Fund of which IFTC has notice.
H. IFTC will supply a stockholder's list to Fund properly
certified by an officer of IFTC for any stockholder meeting
upon receiving a request from an officer of Fund. It will
also supply lists at such other times as may be reasonably
requested by an officer of Fund.
I. Upon receipt of written instructions of an officer of Fund,
IFTC will address and mail notices to stockholders.
J. In case of any request or demand for the inspection of the
share books of Fund or any other books of Fund in the
possession of IFTC, IFTC will endeavor to notify Fund and to
secure instructions as to permitting or refusing such
inspection. IFTC reserves the right, however, to exhibit the
share books or other books to any person in case it is
advised by its counsel that it may be held responsible for
the failure to exhibit the share books or other books to such
person.
19. Provisions Relating to Dividend Disbursing Agency.
A. IFTC will, at the expense of Fund, provide a special form of
check containing the imprint of any device or other matter
desired by Fund. Said checks must, however, be of a form and
size convenient for use by IFTC.
B. If Fund wants to include additional printed matter, financial
statements, etc., with the dividend checks, the same will be
furnished to IFTC within a reasonable time prior to the date
of mailing of the dividend checks, at the expense of Fund.
C. If Fund wants its distributions mailed in any special form
of envelopes, sufficient supply of the same will be furnished
to IFTC but the size and form of said envelopes will be
subject to the approval of IFTC. If stamped envelopes are
used, they must be furnished by Fund; or, if postage stamps
are to be affixed to the envelopes, the
13
<PAGE> 14
stamps or the cash necessary for such stamps must be
furnished by Fund.
D. IFTC will maintain one or more deposit accounts as Agent for
Fund, into which the funds for payment of dividends,
distributions, redemptions or other disbursements provided
for hereunder will be deposited, and against which checks
will be drawn.
20. Termination of Agreement.
A. This Agreement may be terminated by either party upon sixty
(60) days prior written notice to the other party.
B. Fund, in addition to any other rights and remedies, shall
have the right to terminate this Agreement forthwith upon the
occurrence at any time of any of the following events:
(1) Any interruption or cessation of operations by IFTC or
its assigns which materially interferes with the
business operation of Fund.
(2) The bankruptcy of IFTC or its assigns or the appointment
of a receiver for IFTC or its assigns.
(3) Any merger, consolidation or sale of substantially all
the assets of IFTC or its assigns.
(4) The acquisition of a controlling interest in IFTC or its
assigns, by any broker, dealer, investment adviser or
investment company except as may presently exist.
(5) Failure by IFTC or its assigns to perform its duties in
accordance with this Agreement, which failure materially
adversely affects the business operations of Fund and
which failure continues for thirty (30) days after
written notice from Fund.
(6) The registration of IFTC or its assigns as a transfer
agent under the Securities Exchange Act of 1934 is
revoked, terminated or suspended for any reason.
C. In the event of termination, Fund will promptly pay IFTC all
amounts due to IFTC hereunder. Upon
14
<PAGE> 15
termination of this Agreement, IFTC shall deliver all
stockholder and account records pertaining to Fund either to
Fund or as directed in writing by Fund.
21. Assignment.
A. Except for the assignment of responsibilities pursuant to the
Services Agreement ("Services Agreement") between IFTC and
Kemper Service Company ("KSvC"), which Fund has approved,
neither this Agreement nor any rights or obligations
hereunder may be assigned by IFTC without the written consent
of Fund; provided, however, no assignment will relieve IFTC
of any of its obligations hereunder.
B. This Agreement including, without limitation, the provisions
of Section 7 will inure to the benefit of and be binding upon
the parties and their respective successors and assigns
including KSvC pursuant to the aforesaid Services Agreement.
C. KSvC is authorized by Fund to use the system services of DST
Systems, Inc.
22. Confidentiality.
A. Except as provided in the last sentence of Section 18.J
hereof, or as otherwise required by law, IFTC will keep
confidential all records of and information in its possession
relating to Fund or its stockholders or stockholder
accounts and will not disclose the same to any person except
at the request or with the consent of Fund.
B. Except as otherwise required by law, Fund will keep
confidential all financial statements and other financial
records (other than statements and records relating solely to
Fund's business dealings with IFTC) and all manuals, systems
and other technical information and data, not publicly
disclosed, relating to IFTC's operations and programs
furnished to it by IFTC pursuant to this Agreement and will
not disclose the same to any person except at the request or
with the consent of IFTC. Notwithstanding anything to the
contrary in this Section 22.B, if an attempt is made pursuant
to subpoena or other legal process to require Fund to
disclose or produce any of the aforementioned manuals,
systems or other technical information and data, Fund shall
give IFTC prompt
15
<PAGE> 16
notice thereof prior to disclosure or production so that IFTC
may, at its expense, resist such attempt.
23. Survival of Representations and Warranties.
All representations and warranties by either party herein
contained will survive the execution and delivery of this
Agreement.
24. Miscellaneous.
A. This Agreement is executed and delivered in the State of
Illinois and shall be governed by the laws of said state.
B. No provisions of this Agreement may be amended or modified
in any manner except by a written agreement properly
authorized and executed by both parties hereto.
C. The captions in this Agreement are included for convenience
of reference only, and in no way define or limit any of the
provisions hereof or otherwise affect their construction or
effect.
D. This Agreement shall become effective as of the date hereof.
E. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same
instrument.
F. If any part, term or provision of this Agreement is held by \
the courts to be illegal, in conflict with any law or
otherwise invalid, the remaining portion or portions shall be
considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as
if the Agreement did not contain the particular part, term or
provision held to be illegal or invalid.
G. With respect to any claim by IFTC for recovery of that
portion of the compensation and expenses (or any other
liability of Fund arising hereunder) allocated to a
particular Portfolio, whether in accordance with the express
terms hereof or otherwise, IFTC shall have recourse solely
against the assets of that Portfolio to satisfy such claim
16
<PAGE> 17
and shall have no recourse against the assets of any other
Portfolio for such purpose.
H. This Agreement is the entire contract between the parties
relating to the subject matter hereof and supersedes all
prior agreements between the parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective duly authorized officer as of the day and year first set
forth above.
KEMPER-DREMAN FUND, INC.
By_______________________________
Title:___________________________
ATTEST:
______________________________
Title:________________________
INVESTORS FIDUCIARY TRUST COMPANY
By_______________________________
Title:___________________________
ATTEST:
______________________________
Title:________________________
17
<PAGE> 18
EXHIBIT A
IFTC INSURANCE COVERAGE
DESCRIPTION OF POLICY:
Fidelity Bond
Covers losses caused by dishonesty of employees,
physical loss of securities on or outside of premises
while in possession of authorized person, loss caused
by forgery or alteration of checks or similar
instruments.
Errors and Omissions Insurance
Covers claims made for actual or alleged negligent
acts, errors or omissions committed in the performance
of transfer agency services.
Mail Insurance (applies to all full service operations)
Provides indemnity for the following types of
securities lost in the mails:
Non-negotiable securities mailed to domestic
locations via registered mail.
Non-negotiable securities mailed to domestic
locations via first-class or certified mail.
Non-negotiable securities mailed to foreign
locations via registered mail.
Negotiable securities mailed to all locations via
registered mail.
<PAGE> 19
EXHIBIT B
FEE SCHEDULE (Multiple Classes of Shares)
<TABLE>
<CAPTION>
Transfer Agency Function Fee Payable by Fund
Class A, C and I Class B
<S> <C> <C> <C>
1. Annual open shareholder account
fee (per year per account).
Non-daily dividend series. $6.00 $6.00
2. Annual closed shareholder account
fee (per year per account). $6.00 $6.00
3. Contingent deferred sales charge
account fee (per year per open Not
account). Applicable $2.25
4. Establishment of new shareholder
account (per new account). $4.00 $4.00
5. Payment of dividend (per dividend
per account). $.40 $.40
6. Automated transaction (per
transaction).** $.50 $.50
7. Non-monetary transactions fee
(per year per open account). $2.00 $2.00
8. All other shareholder inquiry,
correspondence and research
transactions (per transaction). $1.25 $1.25
</TABLE>
The out-of-pocket expenses of IFTC will be reimbursed by Fund in accordance
with the provisions of Section 5 of the Agency Agreement. All fees will be
subject to offset by earnings allowances under the Custody Agreement between
Fund and IFTC.
---------------
* The new shareholder account fee is not applicable to Class A Share
accounts established in connection with a conversion from Class B Shares.
** Automated transaction includes, without limitation, systematic exchanges
and conversions from Class B Shares to Class A Shares.
<PAGE> 1
EXHBIT-99.B9b
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT dated this 11th day of September, 1995, by and between KEMPER-DREMAN
FUND, INC. a Maryland corporation (the "Fund"), and KEMPER DISTRIBUTORS,
INC., a Delaware corporation ("KDI").
In consideration of the mutual covenants hereinafter contained, it is hereby
agreed by and between the parties hereto as follows:
1. The Fund hereby appoints KDI to provide information and administrative
services for the benefit of the Fund and its stockholders. In this regard, KDI
shall appoint various broker-dealer firms and other financial services firms
("Firms") to provide related services and facilities for their clients who
are stockholders of the Fund ("clients"). The Firms shall provide such office
space and equipment, telephone facilities and personnel as is necessary or
beneficial for providing information and services to stockholders of the Fund.
Such services and assistance may include, but are not limited to, establishing
and maintaining stockholder accounts and records, processing purchase and
redemption transactions, answering routine client inquiries regarding the Fund
and its special features, assistance to clients in changing dividend and
investment options, account designations and addresses, and such other services
as the Fund or KDI may reasonably request. KDI may also provide some of the
above services for the Fund directly.
KDI accepts such appointment and agrees during such period to render such
services and to assume the obligations herein set forth for the compensation
herein provided. KDI shall for all purposes herein provided be deemed to be an
independent contractor and, unless otherwise expressly provided or
authorized, shall have no authority to act for or represent the Fund in any way
or otherwise be deemed an agent of the Fund. KDI, by separate agreement with
the Fund, may also serve the Fund in other capacities. In carrying out its
duties and responsibilities hereunder, KDI will appoint various Firms to
provide administrative and other services described herein directly to or for
the benefit of stockholders of the Fund who may be clients of such Firms. Such
Firms shall at all times be deemed to be independent contractors retained by
KDI and not the Fund. KDI and not the Fund will be responsible for the payment
of compensation to such Firms for such services.
2. For the services and facilities described in Section 1, the Fund will pay
to KDI at the end of each calendar month an administrative service fee computed
at an annual rate of up to 0.25 of 1% of the average daily net assets of
the Fund (except
<PAGE> 2
assets attributable to Class I Shares). The current fee schedule is set forth
as Appendix I hereto. The administrative service fee will be calculated
separately for each class of each series of the Fund as an expense of each such
class; provided, however, no administrative service fee shall be payable with
respect to Class I Shares. For the month and year in which this Agreement
becomes effective or terminates, there shall be an appropriate proration on the
basis of the number of days that the Agreement is in effect during such month
and year, respectively. The services of KDI to the Fund under this Agreement
are not to be deemed exclusive, and KDI shall be free to render similar
services or other services to others.
The net asset value for each share of the Fund shall be calculated in
accordance with the provisions of the Fund's current prospectus. On each day
when net asset value is not calculated, the net asset value of a share of the
Fund shall be deemed to be the net asset value of such a share as of the
close of business on the last day on which such calculation was made for the
purpose of the foregoing computations.
3. The Fund shall assume and pay all charges and expenses of its operations
not specifically assumed or otherwise to be provided by KDI under this
Agreement.
4. This Agreement may be terminated at any time without the payment of any
penalty by the Fund or by KDI on sixty (60) days written notice to the other
party. Termination of this Agreement shall not affect the right of KDI to
receive payments on any unpaid balance of the compensation described in Section
2 hereof earned prior to such termination. This Agreement may not be amended
for any class of any series of the Fund to increase the amount to be paid to
KDI for services hereunder above .25 of 1% of the average daily net assets of
such class without the vote of a majority of the outstanding voting securities
of such class. All material amendments to this Agreement must in any event be
approved by vote of the Board of Directors of the Fund.
5. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
6. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as
such other party may designate for the receipt of such notice.
7. This Agreement has been executed by and on behalf of the Fund by its
representatives as such representatives and not individually, and the
obligations of the Fund hereunder are not binding upon any of the directors,
officers or stockholders of
2
<PAGE> 3
the Fund individually but are binding upon only the assets and property of the
Fund.
8. This Agreement shall be construed in accordance with applicable federal
law and the laws of the State of Illinois.
IN WITNESS WHEREOF, the Fund and KDI have caused this Agreement to be executed
as of the day and year first above written.
KEMPER-DREMAN FUND, INC. KEMPER DISTRIBUTORS, INC.
By:___________________________ By:_________________________
Title:________________________ Title:______________________
3
<PAGE> 4
APPENDIX I
KEMPER-DREMAN FUND, INC.
FEE SCHEDULE FOR ADMINISTRATIVE
SERVICES AGREEMENT
Pursuant to Section 2 of the Administrative Services Agreement to which this
Appendix is attached, the Fund and KDI agree that the initial administrative
service fee will be computed at an annual rate of .25 of 1% (the "Fee Rate").
For purposes of computing the fee due KDI, the Fee Rate shall be applied
against the amount of assets of the Fund for which a broker-dealer or
other financial services firm is listed on the records of the Fund as "dealer
of record," which shall not include KDI.
Dated:
KEMPER-DREMAN FUND, INC. KEMPER DISTRIBUTORS, INC.
By:___________________________ By:_________________________
Title:________________________ Title: ______________________
<PAGE> 1
EXHIBIT-99.B11
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm in the Registration Statement
(Form N-1A) and related Statement of Additional Information of Kemper Dreman
Fund, Inc. (formerly Dreman Mutual Group, Inc.), and to the inclusion of our
report dated January 19, 1995 to the Shareholders and Board of Directors of
Dreman Mutual Group, Inc.
TAIT, WELLER & BAKER
PHILADELPHIA, PENNSYLVANIA
SEPTEMBER 6, 1995
<PAGE> 1
EXHIBIT 99.B16
PERFORMANCE CALCULATIONS
THIS EXHIBIT REFLECTS THE CALCULATION OF CERTAIN PERFORMANCE FIGURES THAT
APPEAR UNDER "PERFORMANCE" IN THE PART B STATEMENT OF ADDITIONAL INFORMATION
("PART B") OF KEMPER-DREMAN FUND, INC.
A. TOTAL RETURN.
1. Formula. The total return performance of a Portfolio for a specified period
equals the change in the value of a hypothetical $10,000 investment ("Initial
Investment") from the beginning of the period to the end of the period. It is
assumed that all dividends are reinvested. Total return may be computed either
with or without adjustment for sales charge. It may be expressed either as a
dollar value change or as a percentage change. Total return information is set
forth in the Total Return Tables that appear under "Performance" in the Part B.
2. Performance Reflected. The representative total return calculations
reflected in this Section A are for the Kemper-Dreman High Return Fund, Class A
Shares (the "Fund"), for the one-year period ended December 31, 1994.
3. Unadjusted Total Return. The column labeled "Percentage Increase
(unadjusted)" in the Total Return Table shows the total return of the Fund as a
percentage change without adjustment for any sales charge. The percentage
change in value of the Initial Investment for the period (i.e., the unadjusted
total return) is calculated by determining the percentage increase in the net
asset value per share ("NAV") of the Fund over the period and adjusting that
for the dividends reinvested over the period. There were four dividends during
the period. The percentage change is then calculated as follows:
Shares X Ending NAV
Percentage Change = ------------------------- - 1
Beginning NAV
Ending NAV = NAV on December 31, 1994 = $15.11/Share
Beginning NAV = NAV on December 31, 1993 = $15.50/Share
Shares = Number of shares at the end of the period assuming a one share
investment at the beginning of the period and reinvestment of
dividends. "Shares" is computed under the following formula.
DIV(1) DIV(2) DIV(n)
Shares = (1 + ---------) X (1 + ---------)...X (1 + ---------)
RNAV(1) RNAV(2) RNAV(n)
DIV(n) = Dollar amount distributed for the nth dividend of the period. n
equals 4 in the present example since there were four dividends
distributed.
RNAV(n) = NAV on the date that the nth dividend in the period was reinvested.
n equals 4 in the present example.
The following data is presented:
n DIV(n) RNAV(n)
--- ------------ ------------
1 $0.06/Share $15.91/Share
2 0.06 15.39
3 0.07 16.03
4 0.054 15.15
<PAGE> 2
0.06 0.06 0.07 0.054
Shares = (1 + ------) X (1 + ------) X (1 + ------) X (1 + -----) = 1.01569
15.91 15.39 16.03 15.15
1.01569 X $15.11/Share
Percentage Change = ---------------------- - 1 = -0.0099
$15.50/Share
The decimal return is converted to a percentage by multiplying by 100.
-0.0099 X 100 = -0.99%
The column labeled "Ending Value (unadjusted)" in the Total Return Table shows
the total return of the Fund as a dollar value change without adjustment for
any sales charge. The Ending Value (unadjusted) is equal to the initial
investment ($10,000) plus the percentage change of such investment over the
period (calculated as described above).
$10,000 + (-0.99% of $10,000) = $10,000 + (-0.0099 X $10,000) = $9,901
4. Adjusted Total Return. The column labeled "Percentage Increase (adjusted)"
in the Total Return Table shows the total return of the Fund as a percentage
change with adjustment for the maximum sales charge.
The maximum sales charge for the Fund is 5.75% of the offering price. On the
$10,000 Initial Investment, the 5.75% sales charge would equal $575.
5.75% of $10,000 = 0.0575 X $10,000 = $575
The Initial Investment adjusted for the maximum sales charge ("adjusted Initial
Investment") is calculated by deducting the sales charge from the Initial
Investment.
$10,000 - $575 = $9,425
The column labeled "Ending Value (adjusted)" in the Total Return Table shows
the total return of the Fund as a dollar value change with adjustment for the
maximum sales charge. The Ending Value (adjusted) is equal to the adjusted
Initial Investment plus the percentage change of such investment over the
period. The percentage change over the period is calculated in Sub-section 3
above.
$9,425 + (-0.99% of $9,425) = $9,425 + (-0.0099 X $9,425) = $9,332
Percentage Change (adjusted) equals the percentage change of the Ending Value
(adjusted) from the Initial Investment.
$9,332
------------ - 1 = 0.933 - 1 = -0.067
$10,000
The decimal return is converted to a percentage by multiplying by 100.
-0.067 X 100 = -6.7%
B. AVERAGE ANNUAL TOTAL RETURN.
1. Formula. The average annual total return of the Fund for a specific period
is found by taking a hypothetical $1,000 investment ("Initial Investment") at
the beginning of the period, adjusting for the maximum sales charge, and
computing the redeemable value at the end of the period ("Redeemable Value").
The Redeemable Value is then divided by the Initial Investment, and this
quotient is taken to the Nth root (N representing the number of years in the
period) and 1 is subtracted from the result, which is then expressed as a
percentage. Thus, the following formula applies:
Redeemable Value (1/N)
Average Annual Total Return = ( ------------------ ) - 1
Initial Investment
<PAGE> 3
2. Performance Reflected. The representative average annual total return
calculation reflected in this Section B is for the Fund for the period from
commencement of operations (March 18, 1988) to December 31, 1994.
3. Calculation. The maximum sales charge for the Fund is 5.75% of the offering
price. On the $1,000 Initial Investment, the 5.75% sales charge would equal
$57.50.
5.75% of $1,000 = 0.0575 X $1,000 = $57.50
The Initial Investment adjusted for the maximum sales charge ("adjusted Initial
Investment") is calculated by deducting the sales charge from the Initial
Investment.
$1,000 - $57.50 = $942.50
The Redeemable Value is equal to the adjusted Initial Investment plus the
percentage change in the value of such investment over the period. The
percentage change over the period is calculated in the same manner as in
Sub-section 3 of Section A above. The percentage change for the life of the
fund is 133.90%.
Redeemable Value = $942.50 + (133.90% of $942.50) = $942.50 +
(1.3390 X $942.50) = $2,204.51
The period covered is from March 18, 1988 to December 31, 1994 or 6 years and
289 days.
N = number of years in the period = 6 + (289/365) = 6.7918
Using the formula provided above, average annual total return for the period may
then be calculated.
The Redeemable Value is divided by the Initial Investment.
($2,204.51 / $1,000) = 2.2045
This quotient is taken to the Nth root.
The 6.7918th root of 2.2045 = 1.1234
1 is subtracted from the result.
1.1234 - 1 = 0.1234
The decimal return is converted to a percentage by multiplying by 100.
0.1234 X 100 = 12.34%
<PAGE> 1
EXHIBIT 99.B18
KEMPER MUTUAL FUNDS
MULTI-DISTRIBUTION SYSTEM PLAN
WHEREAS, each investment company adopting this Multi-Distribution
System Plan (each a "Fund" and collectively the "Funds") is an open-end
management investment company registered under the Investment Company Act of
1940 (the "1940 Act");
WHEREAS, Kemper Financial Services, Inc. ("KFS") and/or Dreman Value
Advisors, Inc. ("DVA") serves as investment adviser and Kemper Distributors,
Inc. ("KDI") serves as principal underwriter for each Fund;
WHEREAS, each Fund has a non-Rule 12b-1 administrative services
agreement with KDI providing for a service fee at an annual rate of up to .25%
of average daily net assets ("Administrative Plan");
WHEREAS, each Fund has established a Multi-Distribution System enabling
each Fund, as reflected in its prospectus, to offer investors the option of
purchasing shares (a) with a front-end sales load (which may vary among Funds)
and a service fee (the "Front-End Load Option" or "Class A shares"); (b)
without a front-end sales load, but subject to a Contingent Deferred Sales
Charge ("CDSC") (which may vary among Funds), a Rule 12b-1 plan providing for a
distribution fee and a service fee (the "Deferred Option" or "Class B shares");
(c) without a front-end sales load or CDSC but subject to a Rule 12b-1 Plan
providing for a distribution fee and to a service fee (the "Level Load Option"
or "Class C shares"); and (d) for certain Funds, without a front-end load,
CDSC, distribution fee or service fee ("Institutional Option" or "Class I
shares"); and
WHEREAS, Rule 18f-3 under the 1940 Act permits open-end management
investment companies to issue multiple classes of voting stock representing
interests in the same portfolio notwithstanding Sections 18(f)(1) and 18(i)
under the 1940 Act if, among other things, such investment companies adopt a
written plan setting forth the separate arrangement and expense allocation of
each class and any related conversion features or exchange privileges;
NOW, THEREFORE, each Fund, wishing to be governed by Rule 18f-3 under
the 1940 Act, hereby adopts this Multi-Distribution System Plan as follows:
<PAGE> 2
1. Each class of shares will represent interests in the same
portfolio of investments of a Fund (or series), and be identical in all
respects to each other class, except as set forth below. The only differences
among the various classes of shares of the same Fund (or series) will relate
solely to: (a) different distribution fee payments associated with any Rule
12b-1 Plan for a particular class of shares and any other costs relating to
implementing or amending such Plan (including obtaining shareholder approval of
such Plan or any amendment thereto), which will be borne solely by shareholders
of such classes; (b) different service fees; (c) different shareholder
servicing fees; (d) different Class Expenses, which will be limited to the
following expenses determined by the Trustees to be attributable to a specific
class of shares: (i) printing and postage expenses related to preparing and
distributing materials such as shareholder reports, prospectuses, and proxy
statements to current shareholders of a specific class; (ii) Securities and
Exchange Commission (the "Commission") registration fees incurred by a specific
class; (iii) litigation or other legal expenses relating to a specific class;
(iv) Trustee fees or expenses incurred as a result of issues relating to a
specific class; and (v) accounting expenses relating to a specific class; (e)
the voting rights related to any 12b-1 Plan affecting a specific class of
shares; (f) conversion features; (g) exchange privileges; and (h) class names
or designations. Any additional incremental expenses not specifically
identified above that are subsequently identified and determined to be properly
applied to one class of shares of a Fund (or series) shall be so applied upon
approval by a majority of the Trustees of such Fund, including a majority of
the Trustees who are not interested persons of the Fund.
2. Under the Multi-Distribution System, certain expenses may be
attributable to a Fund, but not to a particular series or class thereof. All
such expenses will be borne by each class on the basis of the relative
aggregate net assets of the classes, except in the case of a Fund that has
series, in which case they will first be allocated among series, based upon the
relative aggregate net assets of such series. Expenses that are attributable
to a particular series, but not to a particular class thereof, will be borne by
each class of such series on the basis of the relative aggregate net assets of
the classes. Notwithstanding the foregoing, the underwriter, the investment
manager or other provider of services to any Fund may waive or reimburse the
expenses of a specific class or classes to the extent permitted under Rule
18f-3 under the 1940 Act.
A class of shares may be permitted to bear expenses that are directly
attributable to such class including: (a) any distribution fees associated with
any Rule 12b-1 Plan for a particular class and any other costs relating to
implementing or amending such Plan (including obtaining shareholder approval of
such Plan or any amendment thereto); (b) any service fees attributable to such
class; (c) any shareholder servicing fees
<PAGE> 3
attributable to such class; and (d) any Class Expenses determined by the
Trustees to be attributable to such class.
3. After a shareholder's Class B shares have been outstanding for six
years, they will automatically convert to Class A shares of the same Fund (or
series) at the relative net asset values of the two classes and will thereafter
not be subject to a Rule 12b-1 Plan; provided, however, that any Class B Shares
issued in exchange for shares originally classified as Initial Shares of Kemper
Portfolios, formerly known as Kemper Investment Portfolios (KP), whether in
connection with a reorganization with a series of KP or otherwise, shall
convert to Class A shares seven years after issuance of such Initial Shares if
such Initial Shares were issued prior to February 1, 1991. Class B shares
issued upon reinvestment of income and capital gain dividends and other
distributions will be converted to Class A shares on a pro rata basis with the
Class B shares.
4. Any conversion of shares of one class to shares of another class
is subject to the continuing availability of a ruling of the Internal Revenue
Service or an opinion of counsel to the effect that the conversion of shares
does not constitute a taxable event under federal income tax law. Any such
conversion may be suspended if such a ruling or opinion is no longer available.
5. To the extent exchanges are permitted, shares of any class of a
Fund will be exchangeable with shares of the same class of another Fund, or
with money market fund shares as described in the applicable prospectus.
Exchanges will comply with all applicable provisions of Rule 11a-3 under the
1940 Act. For purposes of calculating the time period remaining on the
conversion of Class B shares to Class A shares, Class B shares received on
exchange retain their original purchase date.
6. Dividends paid by a Fund (or series) as to each class of its
shares, to the extent any dividends are paid, will be calculated in the same
manner, at the same time, on the same day, and will be in the same amount,
except that any distribution fees, service fees, shareholder servicing fees and
Class Expenses allocated to a class will be borne exclusively by that class.
7. Any distribution arrangement of a Fund, including distribution
fees and front-end and deferred sales loads, will comply with Article III,
Section 26, of the Rules of Fair Practice of the National Association of
Securities Dealers, Inc.
8. All material amendments to this Plan for a Fund must be approved
by a majority of the members of the Fund's governing board, including a
majority of the board members who are not interested persons of the Fund.
<PAGE> 4
Any open-end investment company may establish a Multi-Distribution
System and adopt this Multi-Distribution System Plan by approval of a majority
of the members of any such company's governing board, including a majority of
the board members who are not interested persons of such company.
<PAGE> 1
EXHIBIT-99.B24
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as his attorney-in-fact to sign and
file on his behalf individually and in the capacity stated below such
registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission or
any other regulatory authority as may be desirable or necessary in connection
with the public offering of shares of Dreman Mutual Group, Inc.
Signature Title Date
--------- ----- ----
/s/ Stephen B. Timbers Director September 7, 1995
----------------------
<PAGE> 2
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as such person's attorney-in-fact to
sign and file on such person's behalf individually and in the capacity stated
below such registration statements, amendments, post-effective amendments,
exhibits, applications and other documents with the Securities and Exchange
Commission or any other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Dreman Mutual Group, Inc.
Signature Title Date
--------- ----- ----
/s/ James E. Akins Director September 7, 1995
------------------
<PAGE> 3
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as his attorney-in-fact to sign and
file on his behalf individually and in the capacity stated below such
registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission or
any other regulatory authority as may be desirable or necessary in connection
with the public offering of shares of Dreman Mutual Group, Inc.
Signature Title Date
--------- ----- ----
/s/ Arthur R. Gottschalk Director September 7, 1995
------------------------
<PAGE> 4
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as his attorney-in-fact to sign and
file on his behalf individually and in the capacity stated below such
registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission or
any other regulatory authority as may be desirable or necessary in connection
with the public offering of shares of Dreman Mutual Group, Inc.
Signature Title Date
--------- ----- ----
/s/ Frederick T. Kelsey Director September 7, 1995
-----------------------
<PAGE> 5
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as such person's attorney-in-fact to
sign and file on such person's behalf individually and in the capacity stated
below such registration statements, amendments, post-effective amendments,
exhibits, applications and other documents with the Securities and Exchange
Commission or any other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Dreman Mutual Group, Inc.
Signature Title Date
--------- ----- ----
/s/ David B. Mathis Director September 7, 1995
-------------------
<PAGE> 6
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as his attorney-in-fact to sign and
file on his behalf individually and in the capacity stated below such
registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission or
any other regulatory authority as may be desirable or necessary in connection
with the public offering of shares of Dreman Mutual Group, Inc.
Signature Title Date
--------- ----- ----
/s/ Fred B. Renwick Director September 7, 1995
--------------------------
<PAGE> 7
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as his attorney-in-fact to sign and
file on his behalf individually and in the capacity stated below such
registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission or
any other regulatory authority as may be desirable or necessary in connection
with the public offering of shares of Dreman Mutual Group, Inc.
Signature Title Date
--------- ----- ----
/s/ John B. Tingleff Director September 7, 1995
--------------------------
<PAGE> 8
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as his attorney-in-fact to sign and
file on his behalf individually and in the capacity stated below such
registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission or
any other regulatory authority as may be desirable or necessary in connection
with the public offering of shares of Dreman Mutual Group, Inc.
Signature Title Date
--------- ----- ----
/s/ John G. Weithers Director September 7, 1995
------------------------
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1995
SEMI-ANNUAL REPORT TO SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000825062
<NAME> DREMAN MUTUAL GROUP, INC.
<SERIES>
<NUMBER> 001
<NAME> DREMAN CONTRARIAN PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 9,354
<INVESTMENTS-AT-VALUE> 13,463
<RECEIVABLES> 89
<ASSETS-OTHER> 183
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 13,735
<PAYABLE-FOR-SECURITIES> 200
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 19
<TOTAL-LIABILITIES> 219
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,858
<SHARES-COMMON-STOCK> 940
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 547
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,109
<NET-ASSETS> 13,516
<DIVIDEND-INCOME> 214
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (84)
<NET-INVESTMENT-INCOME> 130
<REALIZED-GAINS-CURRENT> 547
<APPREC-INCREASE-CURRENT> 1,824
<NET-CHANGE-FROM-OPS> 2,501
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (129)
<DISTRIBUTIONS-OF-GAINS> (150)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 60
<NUMBER-OF-SHARES-REDEEMED> (205)
<SHARES-REINVESTED> 19
<NET-CHANGE-IN-ASSETS> 533
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (67)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (107)
<AVERAGE-NET-ASSETS> 13,507
<PER-SHARE-NAV-BEGIN> 12.18
<PER-SHARE-NII> .13
<PER-SHARE-GAIN-APPREC> 2.33
<PER-SHARE-DIVIDEND> (.13)
<PER-SHARE-DISTRIBUTIONS> (.14)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.37
<EXPENSE-RATIO> .013
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1995
SEMI-ANNUAL REPORT TO SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000825062
<NAME> DREMAN MUTUAL GROUP, INC.
<SERIES>
<NUMBER> 002
<NAME> DREMAN HIGH RETURN PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 34,123
<INVESTMENTS-AT-VALUE> 44,733
<RECEIVABLES> 1,120
<ASSETS-OTHER> 508
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 46,361
<PAYABLE-FOR-SECURITIES> 1,500
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 66
<TOTAL-LIABILITIES> 1,566
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 35,131
<SHARES-COMMON-STOCK> 2,490
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 10
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (956)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10,610
<NET-ASSETS> 44,795
<DIVIDEND-INCOME> 546
<INTEREST-INCOME> 19
<OTHER-INCOME> 0
<EXPENSES-NET> (247)
<NET-INVESTMENT-INCOME> 318
<REALIZED-GAINS-CURRENT> (582)
<APPREC-INCREASE-CURRENT> 7,483
<NET-CHANGE-FROM-OPS> 7,219
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (315)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 390
<NUMBER-OF-SHARES-REDEEMED> (233)
<SHARES-REINVESTED> 17
<NET-CHANGE-IN-ASSETS> 9,790
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (198)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (278)
<AVERAGE-NET-ASSETS> 39,918
<PER-SHARE-NAV-BEGIN> 15.11
<PER-SHARE-NII> .13
<PER-SHARE-GAIN-APPREC> 2.88
<PER-SHARE-DIVIDEND> (.13)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.99
<EXPENSE-RATIO> .013
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FIANCIAL INFORMATION EXTRACTED FROM THE 1995
SEMI-ANNUAL REPORT TO SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000825062
<NAME> DREMAN MUTUAL GROUP, INC.
<SERIES>
<NUMBER> 005
<NAME> DREMAN SMALL CAP VALUE PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 10,505
<INVESTMENTS-AT-VALUE> 11,720
<RECEIVABLES> 842
<ASSETS-OTHER> 353
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12,915
<PAYABLE-FOR-SECURITIES> 1,145
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 18
<TOTAL-LIABILITIES> 1,163
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,148
<SHARES-COMMON-STOCK> 845
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 389
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,215
<NET-ASSETS> 11,752
<DIVIDEND-INCOME> 8
<INTEREST-INCOME> 38
<OTHER-INCOME> 0
<EXPENSES-NET> (50)
<NET-INVESTMENT-INCOME> (4)
<REALIZED-GAINS-CURRENT> 478
<APPREC-INCREASE-CURRENT> 1,700
<NET-CHANGE-FROM-OPS> 2,174
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (85)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 416
<NUMBER-OF-SHARES-REDEEMED> (216)
<SHARES-REINVESTED> 6
<NET-CHANGE-IN-ASSETS> 4,821
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (41)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (74)
<AVERAGE-NET-ASSETS> 8,201
<PER-SHARE-NAV-BEGIN> 10.85
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 3.18
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.13)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.90
<EXPENSE-RATIO> .013
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE> 1
EXHIBIT-99.B99
REPRESENTATION OF COUNSEL PURSUANT TO RULE
485(b) UNDER THE SECURITIES ACT OF 1933
We hereby represent that Post-Effective Amendment No. 14 to the
Registration Statement on Form N-1A of the Dreman Mutual Group, Inc.
(Registration No. 33-18477) filed with the Securities and Exchange Commission
under the Securities Act of 1933 and the Investment Company Act of 1940
contains no disclosures which would render it ineligible to become effective
pursuant to paragraph (b) of Rule 485 under the Securities Act of 1933.
BALLARD SPAHR ANDREWS & INGERSOLL
---------------------------------
Ballard Spahr Andrews & Ingersoll
September 8, 1995
