KEMPER DREMAN FUND INC, 485APOS, 1996-02-29

KEMPER DREMAN FUND INC
485APOS, 1996-02-29

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 29, 1996.

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. 15 /X/
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 17 /X/
</TABLE>

------------------

KEMPER-DREMAN FUND, INC.

(formerly named "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
Kemper-Dreman Fund, 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 27, 1996, Registrant filed its notice
pursuant to Rule 24f-2 for its fiscal year ended December 31, 1995.

It is proposed that this filing will become effective (check appropriate
box)

immediately upon filing pursuant to paragraph (b)

on (date) pursuant to paragraph (b)

60 days after filing pursuant to paragraph (a)(1)

X on May 1, 1996 pursuant to paragraph (a)(1)

75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of rule 485

If appropriate, check the following box:
this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

KEMPER-DREMAN FUND, INC.

CROSS-REFERENCE SHEET

<TABLE>
<CAPTION>
ITEMS REQUIRED
BY FORM N-1A LOCATION
<S> <C> <C>
PART A PROSPECTUS
Item 1. Cover Page............................ Cover Page
Item 2. Synopsis.............................. Summary; Summary of Expenses; Supplement to
Prospectus
Item 3. Condensed Financial Information....... Financial Highlights; Supplement to
Prospectus
Item 4. General Description of Registrant..... Cover Page; Summary; Investment Objectives,
Policies and Risk Factors
Item 5. Management of the Fund................ Summary; Investment Manager and Underwriter
Item 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 MAY 1, 1996

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 Zurich Kemper Investments, Inc.
(formerly named Kemper Financial Services, Inc.) ("ZKI"), and its affiliates;
and (b) the following investment advisory clients of ZKI and its investment
advisory affiliates (including Zurich Investment Management, Inc. and Dreman
Value Advisors, Inc.) that invest at least $1 million in a Fund: (1)
unaffiliated benefit plans, such as qualified retirement plans (other than
individual retirement accounts and self-directed retirement plans); (2)
unaffiliated banks and insurance companies purchasing for their own accounts;
and (3) endowment funds of unaffiliated non-profit organizations. Class I
shares currently are available for purchase only from Kemper Distributors,
Inc., principal underwriter for the Funds. Share certificates are not
available for Class I shares.

The primary distinctions among the classes of each Fund's shares lie in their
initial and contingent deferred sales charge schedules and in their ongoing
expenses, including asset-based sales charges in the form of Rule 12b-1
distribution fees. Class I shares are offered at net asset value without an
initial sales charge and are not subject to a contingent deferred sales charge
or a Rule 12b-1 distribution fee. Also, there is no administrative services
fee charged to Class I shares. As a result of the relatively lower expenses
for Class I shares, the level of income dividends per share (as a percentage of
net asset value) and, therefore, the overall investment return, will 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) . . . . . . . . . . .40% .40% .40%
12b-1 Fees . . . . . . . . . . . . . . . . . . None None None
Other Expenses * . . . . . . . . . . . . . . .
---- ---- ----
Total Operating Expenses . . . . . . . . . . .
==== ==== ====
</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
expenses on a $1,000 investment, High Return
assuming (1) 5% annual return and (2) Small Cap Value
redemption at the end of each time
period:
</TABLE>

* "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 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.

Although it is anticipated that each Fund will bear all its own expenses, the
investment manager has agreed to reduce the management fee of each Fund to the
extent necessary to limit the operating expenses of the Class A, B and C shares
of the Fund as described in the prospectus. The management fee to be paid by
the Class I shares will be at the same level as that paid for the Class A, B
and C shares after the fee reduction for the A, B and C shares. Without the
fee reduction, "Management Fees" for each Fund would be .75% and "Total
Operating Expenses" would be __%.

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

[to be inserted]

SPECIAL FEATURES

Shareholders of a Fund's Class I shares may exchange their shares for (i) shares
of Kemper Money Funds--Kemper Money Market Fund if the shareholders of Class I
shares have purchased shares because they are participants in tax-exempt
retirement plans of ZKI and its affiliates and (ii) Class I shares of any other
"Kemper Mutual Fund" listed under "Special Features--Class A Shares--Combined
Purchases" in the prospectus. Conversely, shareholders of Kemper Money
Funds--Kemper Money Market Fund who have purchased shares because they are
participants in tax-exempt retirement plans of ZKI and its affiliates may
exchange their shares for Class I shares of "Kemper Mutual Funds" to the extent
that they are available through their plan. Exchanges will be made at the
shares relative net asset values. Exchanges are subject to the limitations set
forth in the prospectus under "Special Features--Exchange Privilege--General."

May 1, 1996
KDF-1I (5/96)

2
<PAGE> 5

<TABLE>
<S> <C>
TABLE OF CONTENTS
- ------------------------------------------------
Summary 1
- ------------------------------------------------
Summary of Expenses 2
- ------------------------------------------------
Financial Highlights 5
- ------------------------------------------------
Investments Objectives, Policies and Risk
Factors 9
- ------------------------------------------------
Investment Manager and Underwriter 14
- ------------------------------------------------
Dividends and Taxes 17
- ------------------------------------------------
Net Asset Value 18
- ------------------------------------------------
Purchase of Shares 18
- ------------------------------------------------
Redemption or Repurchase of Shares 23
- ------------------------------------------------
Special Features 27
- ------------------------------------------------
Performance 31
- ------------------------------------------------
Capital Structure 32
- ------------------------------------------------
</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 May 1, 1996, 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.
LOGO

KEMPER-DREMAN
FUND, INC.

PROSPECTUS MAY 1, 1996

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, Policies and Risk Factors."

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 sales
charge, but subject to a Rule 12b-1 distribution fee
and a 1% contingent deferred sales charge on
redemptions made within one year of purchase. Class C
shares do not convert into another class.

Each class of shares represents interests in the same portfolio of investments
of a Fund. The minimum initial investment is $1,000 and investments thereafter
must be at least $100. Shares are redeemable at net asset value,

1
<PAGE> 7

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 and Class C shares, to any applicable contingent deferred sales charge.
See "Purchase of Shares" and "Redemption or Repurchase of Shares."

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 average daily net assets of each class of the
Funds, which KDI pays to financial services firms. See "Investment Manager and
Underwriter."

DIVIDENDS. The Contrarian and High Return Funds normally distribute quarterly
dividends of net investment income, the Small Cap Value Fund normally
distributes annual dividends of net investment income and each Fund distributes
any net realized capital gains at least annually. Income and capital gain
dividends of a Fund are automatically reinvested in additional shares of that
Fund, without sales charge, unless the shareholder makes a different election.
See "Dividends and Taxes."

SUMMARY OF EXPENSES

<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
(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 1% during the
year, 3% during the first year
second and third years,
2% during the fourth and
fifth years and 1% in
the sixth year
</TABLE>

- ---------------
(1) Investment dealers and other firms may independently charge additional fees
for shareholder transactions or for advisory services; please see their
materials for details.
(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."

2
<PAGE> 8

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.............................................. .40% .40% .40%
12b-1 Fees................................................... None None None
Other Expenses............................................... % % %
---------- ----------- ---------------
Total Operating Expenses..................................... % % %
======== ========= ============
</TABLE>

<TABLE>
<CAPTION>
CONTRARIAN HIGH RETURN SMALL CAP VALUE
FUND FUND FUND
---------- ----------- ---------------
<S> <C> <C> <C>
CLASS B SHARES
Management Fees.............................................. .40% .40% .40%
12b-1 Fees(4)................................................ .75% .75% .75%
Other Expenses............................................... % % %
---------- ----------- ---------------
Total Operating Expenses..................................... % % %
======== ========= ============
</TABLE>

<TABLE>
<CAPTION>
CONTRARIAN HIGH RETURN SMALL CAP VALUE
FUND FUND FUND
---------- ----------- ---------------
<S> <C> <C> <C>
CLASS C SHARES
Management Fees.............................................. .40% .40% .40%
12b-1 Fees(5)................................................ .75% .75% .75%
Other Expenses............................................... % % %
---------- ----------- ---------------
Total Operating Expenses..................................... % % %
======== ========= ============
</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 $ $ $ $
expenses on a $1,000 High Return Fund $ $ $ $
investment, assuming (1) 5% Small Cap Value Fund $ $ $ $
annual return and (2)
redemption at the end of each
time period:
</TABLE>

3
<PAGE> 9

EXAMPLE

<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 $ $ $ $
expenses on a $1,000 High Return Fund $ $ $ $
investment, assuming (1) 5% Small Cap Value Fund $ $ $ $
annual return and (2)
redemption at the end of each
time period:
You would pay the following Contrarian Fund $ $ $ $
expenses on the same High Return Fund $ $ $ $
investment, assuming no Small Cap Value Fund $ $ $ $
redemption:
</TABLE>

<TABLE>
<CAPTION>
1 3 5 10
FUND YEAR YEARS YEARS YEARS
-------------------- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C>
CLASS C SHARES(7)
You would pay the following Contrarian Fund $ $ $ $
expenses on a $1,000 High Return Fund $ $ $ $
investment, assuming (1) 5% Small Cap Value Fund $ $ $ $
annual return 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.

(7) Assumes that the shareholder was the owner on the first day of the first
year and the contingent deferred sales charge was not applicable for any of
the periods shown. See "Redemption or Repurchase of Shares--Contingent
Deferred Sales Charge--Class C Shares."

The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in a Fund will bear directly or
indirectly. See "Investment Manager and Underwriter" for more information.

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%].

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, is covered by the report of the Funds' independent auditors. The report
is contained in KDF's Registration Statement and is available from KDF. The
financial statements contained in the Fund's 1995 Annual Report to Shareholders
are incorporated herein by reference and may be obtained by writing or calling
KDF.

CONTRARIAN FUND

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993 1992 1991 1990 1989 1988(A)
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value, beginning of period $ 13.62 13.50 12.38 10.11 11.34 10.55 10.00
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .28 .22 .25 .28 .25 .29 .11
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.28) .96 1.13 2.38 (.94) 1.60 .54
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.00 1.18 1.38 2.66 (.69) 1.89 .65
- ------------------------------------------------------------------------------------------------------------------------
Less distributions:
Distributions from net investment income (.28) (.22) (.26) (.28) (.26) (.29) (.10 )
- ------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains on investments (1.16) (.84) (.00) (.11) (.28) (.81) (.00 )
- ------------------------------------------------------------------------------------------------------------------------
Total distributions (1.44) (1.06) (.26) (.39) (.54) (1.10) (.10 )
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.18 13.62 13.50 12.38 10.11 11.34 10.55
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED): % (0.03) 9.10 11.32 26.53 (6.08) 18.29 6.96
- ------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $ 12,983 17,157 14,884 14,292 11,782 9,632 5,889
- ------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets(b)(annualized) % 1.25 1.25 1.25 1.25 1.25 1.25 1.34 *
- ------------------------------------------------------------------------------------------------------------------------
Ratio of net income to average net assets(c)(annualized) % 1.89 1.64 2.04 2.35 2.46 2.59 2.42 *
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(%) 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 %*, 1.42%, 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 %*, 1.71%, 1.34%, 1.76%, 1.84%, 2.19%, 2.17% and 1.39%*,
respectively.

<PAGE> 11

<TABLE>
<CAPTION>
CLASS B CLASS C
------------------ ------------------
SEPTEMBER 11, 1995 SEPTEMBER 11, 1995
TO TO
DECEMBER 31, 1995 DECEMBER 31, 1995
---------------------------------------
<S> <C> <C>
CLASS B AND C SHARES
Net asset value, beginning of period $
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations
- ------------------------------------------------------------------------------------------------------------------------
Less distributions:
Distributions from net investment income
- ------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains on investments
- ------------------------------------------------------------------------------------------------------------------------
Total distributions
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED): %
- ------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $
- ------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets(a)(annualized) %
- ------------------------------------------------------------------------------------------------------------------------
Ratio of net income to average net assets(b)(annualized) %
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(%)
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) Ratio of expenses to average net assets prior to reimbursement of expenses
was %.

(b) Ratio of net investment income to average net assets prior to reimbursement
of expenses was %.

ALL CLASSES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------- MARCH 18, 1988 TO
1995 1994 1993 1992 1991 1990 1989 DECEMBER 31, 1988
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $
Portfolio turnover rate %
</TABLE>

6
<PAGE> 12

HIGH RETURN FUND

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993 1992 1991 1990 1989 1988(A)
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value, beginning of period $ 15.50 14.62 12.53 8.85 10.14 11.03 10.00
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .25 .21 .24 .31 .34 .39 .25
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.39) 1.13 2.21 3.87 (1.21) 1.41 1.00
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.14) 1.34 2.45 4.18 (.87) 1.80 1.25
- ------------------------------------------------------------------------------------------------------------------------
Less distributions:
Distributions from net investment income (.25) (.21) (.24) (.30) (.35) (.43) (.22)
- ------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains on
investments (.00) (.25) (.12) (.20) (.07) (2.26) (.00)
- ------------------------------------------------------------------------------------------------------------------------
Total distributions (.25) (.46) (.36) (.50) (.42) (2.69) (.22)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 15.11 15.50 14.62 12.53 8.85 10.14 11.03
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED): % (0.99) 9.22 19.80 47.57 (8.63) 18.45 13.04
- ------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $ 35,005 28,413 14,425 7,238 3,868 3,992 2,413
- ------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net
assets(b)(annualized) % 1.25 1.25 1.25 1.25 1.25 1.25 .57*
- ------------------------------------------------------------------------------------------------------------------------
Ratio of net income to average net
assets(c)(annualized) % 1.58 1.47 1.88 2.52 3.61 3.83 3.75*
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(%) 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 %*, 1.39%, 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 %*, 1.44%, 1.16%, 1.43%, 1.46%, 2.48%, 2.34% and .96%*,
respectively.

<TABLE>
<CAPTION>
CLASS B CLASS C
--------------------- ---------------------
SEPTEMBER 11, 1995 TO SEPTEMBER 11, 1995 TO
DECEMBER 31, 1995 DECEMBER 31, 1995
---------------------------------------------
<S> <C> <C>
CLASS B AND C SHARES
Net asset value, beginning of period $
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations
- ------------------------------------------------------------------------------------------------------------------------
Less distributions:
Distributions from net investment income
- ------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains on investments
- ------------------------------------------------------------------------------------------------------------------------
Total distributions
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED): %
- ------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $
- ------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets(a)(annualized) %
- ------------------------------------------------------------------------------------------------------------------------
Ratio of net income to average net assets(b)(annualized) %
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(%)
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) Ratio of expenses to average net assets prior to reimbursement of expenses
was %.

(b) Ratio of net investment income to average net assets prior to reimbursement
of expenses was %.

ALL CLASSES

7
<PAGE> 13

SMALL CAP VALUE FUND

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993 1992(A)
----------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Net asset value, beginning of period $ 11.23 11.52 10.00
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .00 .06 .03
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .02 .23 1.95
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations .02 .29 1.98
- ------------------------------------------------------------------------------------------------------------------------
Less distributions:
Distributions from net investment income (.00) (.06) (.03)
- ------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains on investments (.40) (.52) (.43)
- ------------------------------------------------------------------------------------------------------------------------
Total distributions (.40) (.58) (.46)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.85 11.23 11.52
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED): % .15 2.54 32.51*
- ------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $ 6,931 4,875 2,385
- ------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets(b)(annualized) % 1.25 1.25 1.25*
- ------------------------------------------------------------------------------------------------------------------------
Ratio of net income to average net assets(c)(annualized) % (.03) .53 .81*
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(%) 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.

(a) Ratio of expenses to average net assets prior to reimbursement of expenses
was %.

(b) Ratio of net investment income to average net assets prior to reimbursement
of expenses was %.

ALL CLASSES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------- MAY 22, 1992 TO
1995 1994 1993 DECEMBER 31, 1992
---------------------------------------------
<S> <C> <C> <C> <C>
SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $
Portfolio turnover rate %
</TABLE>

8
<PAGE> 14

INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS

The following information sets forth each Fund's investment objective and
policies. The investment objective of each Fund may be changed without the
affirmative vote of a majority of the outstanding securities of that Fund. 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.

9
<PAGE> 15

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 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, for 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"). 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

10
<PAGE> 16

greater total investment return than securities whose prices appear to reflect
anticipated favorable developments.

REPURCHASE AGREEMENTS. Each Fund may invest in repurchase agreements, under
which it acquires ownership of a security and the broker-dealer or bank agrees
to repurchase the security at a mutually agreed upon time and price, thereby
determining the yield during the Fund's holding period. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, the Fund
might have expenses in enforcing its rights, and could experience losses,
including a decline in the value of the underlying securities and loss of
income. The securities underlying a repurchase agreement will be
marked-to-market every business day so that the value of such securities is at
least equal to the investment value of the repurchase agreement, including any
accrued interest thereon. In addition, the Fund must take physical possession of
the security or receive written confirmation of the purchase and a custodial or
safekeeping receipt from a third party or be recorded as the owner of the
security through the Federal Reserve Book-Entry System. Repurchase agreements
will be limited to transactions with financial institutions believed by the
investment manager to present minimal credit risk. The investment manager will
monitor on an on-going basis the creditworthiness of the broker-dealers and
banks with which the Funds may engage in repurchase agreements. Repurchase
agreements maturing in more than seven days will be considered as illiquid for
purposes of the Funds' limitations on illiquid securities. The Funds will not
invest more than 10% of the value of their net assets in illiquid securities
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

11
<PAGE> 17

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 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

12
<PAGE> 18

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. 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.

13
<PAGE> 19

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 Zurich Kemper
Investments, Inc., (formerly named Kemper Financial Services, Inc.) ("ZKI"),
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.
ZKI and its affiliates, including DVA, provide investment advice and manage
investment portfolios for the Kemper Funds, affiliated insurance companies and
other corporate, pension, profit-sharing and individual accounts representing
approximately $63 billion under management. ZKI and its affiliates (including
DVA) act as investment manager for 29 open-end and seven closed-end investment
companies, with 69 separate investment portfolios, representing more than 3
million shareholder accounts. ZKI is an indirect subsidiary of Zurich Insurance
Company, an internationally recognized company providing services in life and
non-life insurance, reinsurance and asset management.

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.

Christian C. Bertelsen has been the manager of the Contrarian Fund since March,
1996. Mr. Bertelsen joined DVA in March, 1996 as Chief Investment Officer. Prior
to joining DVA, he served from April, 1993 as a senior vice president and a
portfolio manager of an unaffiliated investment management firm where he
continues to serve on a temporary part-time basis. Prior thereto, he was a
senior vice president of another unaffiliated investment management firm. Mr.
Bertelsen received a B.A. degree from Boston University, Boston, Massachusetts.

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 a vice president
of KDF and was 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 the first $250 million of its average daily net assets, .72% of
average daily net assets between $250 million and $1 billion, .70% of average
daily net assets between $1 billion and $2.5 billion, .68% of average daily net
assets between $2.5 billion and $5 billion, .65% of average daily net assets
between $5 billion and $7.5 billion, .64% of average daily net assets between
$7.5 billion and $10 billion, .63% of average daily net assets between $10
billion and $12.5 billion and .62% of its average daily net assets over $12.5
billion. To the extent that the management fee paid to 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"), 120 South LaSalle Street, Chicago, Illinois 60603, an

14
<PAGE> 20

affiliate of DVA and a wholly owned subsidiary of ZKI, 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 average
daily net assets of such Fund attributable to Class B shares. This fee is
accrued daily as an expense of Class B shares. KDI also receives any contingent
deferred sales charges. See "Redemption or Repurchase of Shares-Contingent
Deferred Sales Charge-Class B Shares." KDI currently compensates firms for sales
of Class B shares at a commission rate of 3.75%.

Class C Shares. For its services under the distribution agreement, KDI receives
a fee from each Fund, payable monthly, at the annual rate of .75% of average
daily net assets of such Fund attributable to Class C shares. This fee is
accrued daily as an expense of Class C shares. Effective for Class C shares
purchased on or after April 1, 1996, KDI currently advances to firms the first
year distribution fee at a rate of .75% of the purchase price of such shares.
For periods after the first year, KDI currently intends to pay firms for sales
of Class C shares a distribution fee, payable quarterly, at an annual rate of
.75% of net assets attributable to Class C shares maintained and serviced by the
firm. A firm becomes eligible for the quarterly distribution fee commencing in
the twelfth month after the month of purchase and the fee continues until
terminated by KDI or KDF. KDI also receives any contingent deferred sales
charges. See "Redemption or Repurchase of Shares--Contingent Deferred
Charge--Class C Shares."

Rule 12b-1 Plan. Since the distribution agreement provides for fees payable as
an expense of the Class B shares and the Class C shares that are used by KDI to
pay for distribution services for those classes, that agreement is approved and
reviewed separately for the Class B shares and the Class C shares in accordance
with Rule 12b-1 under the Investment Company Act of 1940, which regulates the
manner in which an investment company may, directly or indirectly, bear the
expenses of distributing its shares. The table below shows amounts paid in
connection with each Fund's Rule 12b-1 Plan for the period September 11, 1995 to
December 31, 1995.

<TABLE>
<CAPTION>
DISTRIBUTION
EXPENSES DISTRIBUTION FEES CONTINGENT DEFERRED
INCURRED BY PAID BY FUND SALES CHARGE PAID TO
UNDERWRITER TO UNDERWRITER UNDERWRITER
-------------------- -------------------- --------------------
FUND CLASS B CLASS C CLASS B CLASS C CLASS B CLASS C
- -------------------------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Contrarian.................................. $
High Return................................. $
Small Cap Value............................. $
</TABLE>

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.

15
<PAGE> 21

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 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 an annual rate of up to .25% of average daily net assets of
Class A, B and C shares of each Fund. KDI then pays each firm a service fee at
an annual rate of up to .25% 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.

Class A and Class B Shares. For Class A and Class B shares, a firm becomes
eligible for the service fee based upon assets in the accounts in the month
following the month of purchase and the fee continues until terminated by KDI or
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 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.

Class C Shares. Effective for Class C shares purchased on or after April 1,
1996, KDI currently advances to firms the first-year service fee at a rate of up
to .25% of the purchase price of such shares. For periods after the first year,
KDI currently intends to pay firms a service fee at a rate of up to .25%
(calculated monthly and paid quarterly) of the net assets attributable to Class
C shares maintained and serviced by the firm. A firm becomes eligible for the
quarterly service fee commencing in the twelfth month after the month of
purchase and the fee continues until terminated by KDI or KDF.

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.

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 ZKI or its affiliates as a
factor in selecting broker-dealers. See "Portfolio Transactions" in the
Statement of Additional Information.

16
<PAGE> 22

DIVIDENDS AND TAXES

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

(2) To receive income and capital gain dividends in cash.

Any dividends of a Fund that are reinvested will normally be reinvested in
shares of the same class of that same Fund. However, upon written request to the
Shareholder Service Agent, a shareholder may elect to have dividends of a Fund
invested in shares of the same class of another Kemper Fund at the net asset
value of such class of such other fund. See "Special Features--Class A
Shares--Combined Purchases" for a list of such Kemper Funds. To use this
privilege of investing dividends of a Fund in shares of another Kemper Fund,
shareholders must maintain 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,

17
<PAGE> 23

403(b)(7) account, or IRA. Shareholders should consult with their tax advisers
regarding the 20% withholding requirement.

After each transaction, shareholders will receive a confirmation statement
giving complete details of the transaction except that statements will be sent
quarterly for transactions involving dividend reinvestment and periodic
investment and redemption programs. Information for income tax purposes will be
provided after the end of the calendar year. Shareholders are encouraged to
retain copies of their account confirmation statements or year-end statements
for tax reporting purposes. However, those who have incomplete records may
obtain historical account transaction information at a reasonable fee.

NET ASSET VALUE

The net asset value per share of a Fund is determined separately for each class
by dividing the value of the Fund's net assets attributable to that class by the
number of shares of that class outstanding. The per share net asset value of the
Class B and Class C shares of a Fund will generally be lower than that of the
Class A shares of the Fund because of the higher expenses borne by Class B and
Class C shares. Fund securities that are primarily traded on a domestic
securities exchange or securities listed on the NASDAQ National Market are
valued at the last sale price on the exchange or market where primarily traded
or listed or, if there is no recent sale price available, at the last current
bid quotation. A security that is listed or traded on more than one exchange is
valued at the quotation on the exchange determined to be the primary market for
such security by the Board of Directors or its delegates. Securities not so
traded or listed are valued at the last current bid 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 sales charge but are subject to
higher ongoing expenses than Class A shares, are subject to a contingent
deferred sales charge payable upon certain redemptions within the first year
following purchase, and do not convert into another class. When placing purchase
orders, investors must specify whether the order is for Class A, Class B or
Class C shares.

The primary distinctions among the classes of each Fund's shares lie in their
initial and contingent deferred sales charge structures and in their ongoing
expenses, including asset-based sales charges in the form of Rule 12b-1
distribution fees. These differences are summarized in the table below. See,
also, "Summary of Expenses." Each

18
<PAGE> 24

class has distinct advantages and disadvantages for different investors, and
investors may choose the class that best suits their circumstances and
objectives.

<TABLE>
<CAPTION>
ANNUAL 12B-1 FEES
(AS A % OF AVERAGE DAILY
SALES CHARGE NET ASSETS) OTHER INFORMATION
--------------------------------- ------------------------ ---------------------------------
<S> <C> <C> <C>
Class Maximum initial sales charge of None Initial sales charge waived or
A..... 5.75% of the public offering reduced for certain purchases
price
Class Maximum contingent deferred sales 0.75% Shares convert to Class A shares
B..... charge of 4% of redemption six years after issuance
proceeds; declines to zero after
six years
Class Contingent deferred sales charge 0.75% No conversion feature
C..... of 1% of redemption proceeds for
redemptions made during first
year after purchase
</TABLE>

The minimum initial investment for each Fund is $1,000 and the minimum
subsequent investment is $100. The minimum initial investment for an Individual
Retirement Account is $250 and the minimum subsequent investment is $50. Under
an automatic investment plan, such as Bank Direct Deposit, Payroll Direct
Deposit or Government Direct Deposit, the minimum initial and subsequent
investment is $50. These minimum amounts may be changed at any time in
management's discretion.

Share certificates will not be issued unless requested in writing. It is
recommended that investors not request share certificates unless needed for a
specific purpose. You cannot redeem shares by telephone or wire transfer or use
the telephone exchange privilege if share certificates have been issued. A lost
or destroyed certificate is difficult to replace and can be expensive to the
shareholder (a bond worth 2% or more of the certificate value is normally
required).

INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES. The public offering price of
Class A shares for purchasers choosing the initial sales charge alternative is
the net asset value plus a sales charge, as set forth below.

<TABLE>
<CAPTION>
SALES CHARGE
----------------------------------------
ALLOWED
TO
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.

19
<PAGE> 25

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 ZKI serve as investment manager
("non-Kemper fund") provided that: (a) the investor has previously paid either
an initial sales charge in connection with the purchase of the non-Kemper fund
shares redeemed or a contingent deferred sales charge in connection with the
redemption of the non-Kemper fund shares, and (b) the purchase of Fund shares is
made within 90 days after the date of such redemption. To make such a purchase
at net asset value, the investor or the investor's dealer must, at the time of
purchase, submit a request that the purchase be processed at net asset value
pursuant to this privilege. The redemption of the shares of the non-Kemper fund
is, for federal income tax purposes, a sale upon which a gain or loss may be
realized. KDI may in its discretion compensate firms for sales of Class A shares
under this privilege at a commission rate of .50% of the amount of Class A
shares purchased.

Class A shares of a Fund may be purchased at net asset value by: (a) any
purchaser provided that the amount invested in such Fund or other Kemper Mutual
Funds listed under "Special Features--Class A Shares--Combined Purchases" totals
at least $1,000,000 including purchases of Class A shares pursuant to the
"Combined Purchases," "Letter of Intent" and "Cumulative Discount" features
described under "Special Features"; or (b) a participant-directed qualified
retirement plan described in Code Section 401(a) or a participant-directed
non-qualified deferred compensation plan described in Code Section 457 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."

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.

Effective on February 1, 1996, Class A shares of a Fund or any other Kemper
Mutual Fund listed under "Special Features--Class A Shares--Combined Purchases"
may be purchased at net asset value in any amount

20
<PAGE> 26

by members of the plaintiff class in the proceeding known as Howard and Audrey
Tabankin, et al. v. Kemper Short-Term Global Income Fund, et. al., Case No. 93 C
5231 (N.D.IL). This privilege is generally non-transferrable and continues for
the lifetime of individual class members and for a ten year period for non-
individual class members. To make a purchase at net asset value under this
privilege, the investor must, at the time of purchase, submit a written request
that the purchase be processed at net asset value pursuant to this privilege
specifically indentifying the purchaser as a member of the "Tabankin Class."
Shares purchased under this privilege will be maintained in a separate account
that includes only shares purchased under this privilege. For more details
concerning this privilege, class members should refer to the Notice of (1)
Proposed Settlement with Defendants; and (2) Hearing to Determine Fairness of
Proposed Settlement dated August 31, 1995, issued in connection with the
aforementioned court proceeding. For sales of Fund shares at net asset value
pursuant to this privilege, KDI may in its discretion pay investment dealers and
other financial services firms a concession, payable quarterly, at an annual
rate of up to .25% of net assets attributable to such shares maintained and
serviced by the firm. A firm becomes eligible for the concession based upon
assets in accounts attributable to shares purchased under this privilege in the
month after the month of purchase and the concession continues until terminated
by KDI. The privilege of purchasing Class A shares of the Fund at net asset
value under this privilege is not available if another net asset value purchase
privilege also applies.

Class A shares may be sold at net asset value in any amount to: (a) officers,
directors, employees (including retirees) and sales representatives of 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 sponsored by Everen Securities, Inc. In addition,
unitholders of unit investment trusts sponsored by Everen Securities, Inc. or
its predecessors may purchase a Fund's Class A shares at net asset value through
reinvestment programs described in the prospectuses of such trusts that have
such programs. Class A shares of a Fund may be sold at net asset value through
certain investment advisers registered under the Investment Advisers Act of 1940
and other financial services firms that adhere to certain standards established
by KDI, including a requirement that such shares be sold for the benefit of
their clients participating in 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.

21
<PAGE> 27

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 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. Effective for Class C shares purchased on or after April 1, 1996, a
contingent deferred sales charge may be imposed upon redemption of Class C
shares within one year of purchase. See "Redemption or Repurchase of
Shares--Contingent Deferred Sales Charge--Class C Shares." Effective for Class C
shares purchased on or after April 1, 1996, KDI currently advances to firms the
first year distribution fee at a rate of .75% of the purchase price of such
shares. For periods after the first year, KDI currently intends to pay firms for
sales of Class C shares a distribution fee, payable quarterly, at an annual rate
of .75% of net assets attributable to Class C shares maintained and serviced by
the firm. KDI is compensated by 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

22
<PAGE> 28

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, 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 ("trade
date"). 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

23
<PAGE> 29

City, Missouri 64141-6557. When certificates for shares have been issued, they
must be mailed to or deposited with the Shareholder Service Agent, along with a
duly endorsed stock power and accompanied by a written request for redemption.
Redemption requests and a stock power must be endorsed by the account holder
with signatures guaranteed by a commercial bank, trust company, savings and loan
association, federal savings bank, member firm of a national securities exchange
or other eligible financial institution. The redemption request and stock power
must be signed exactly as the account is registered including any special
capacity of the registered owner. Additional documentation may be requested, and
a signature guarantee is normally required, from institutional and fiduciary
account holders, such as corporations, custodians (e.g., under the Uniform
Transfers to Minors Act), executors, administrators, trustees or guardians.

The redemption price for shares of a Fund will be the net asset value per share
of that Fund next determined following receipt by the Shareholder Service Agent
of a properly executed request with any required documents as described above.
Payment for shares redeemed will be made in cash as promptly as practicable but
in no event later than seven days after receipt of a properly executed request
accompanied by any outstanding share certificates in proper form for transfer.
When 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--Initial Sales Charge Alternative--Class A
Shares"), the redemption of Class B shares may be subject to a contingent
deferred sales charge (see "Contingent Deferred Sales Charge--Class B Shares"
below) and the redemption of Class C shares within the first year following
purchase may be subject to a contingent deferred sales charge (see "Contingent
Deferred Sales Charge--Class C Shares" below).

Because of the high cost of maintaining small accounts, KDF reserves the right
to redeem an account (and, in the case of Class B shares or Class C 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. KDF or its agents may be liable for any
losses, expenses or costs arising out of fraudulent or unauthorized telephone
requests pursuant to these privileges, unless KDF or its agents reasonably
believe, based upon reasonable verification procedures, that the telephone
instructions are genuine. THE SHAREHOLDER WILL BEAR THE RISK OF LOSS, including
loss resulting from fraudulent or unauthorized transactions, so long as the
reasonable verification procedures are followed. The verification procedures
include recording instructions, requiring certain identifying information before
acting upon instructions and sending written confirmations.

TELEPHONE REDEMPTIONS. If the proceeds of the redemption (prior to the
imposition of any contingent deferred sales charge in the case of Class B shares
or Class C 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 guardian
account holders of custodial accounts for gifts and transfers to minors may

24
<PAGE> 30

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.

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 wire transfer 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;

25
<PAGE> 31

(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 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 of share
appreciation to a total of $12,000. If the investor were then to redeem the
entire $12,000 in share value, the contingent deferred sales charge would be
payable only with respect to $10,000 because neither the $1,000 of reinvested
dividends nor the $1,000 of share appreciation is subject to the charge. The
charge would be at the rate of 3% ($300) because it was in the second year after
the purchase was made.

The rate of the contingent deferred sales charge under the schedule above is
determined by the length of the period of ownership. Investments are tracked on
a monthly basis. The period of ownership for this purpose begins the first day
of the month in which the order for the investment is received. For example, an
investment made in May, 1996 will be eligible for the 3% charge if redeemed on
or after May 1, 1997. 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

26
<PAGE> 32

privilege), (b) redemptions in connection with retirement distributions (limited
at any one time to 10% of the total value of plan assets invested in a Fund, (c)
redemptions in connection with distributions qualifying under the hardship
provisions of the Internal Revenue Code and (d) redemptions representing returns
of excess contributions to such plans.

CONTINGENT DEFERRED SALES CHARGE--CLASS C SHARES. For Class C shares purchased
on or after April 1, 1996, a contingent deferred sales charge of 1% may be
imposed 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. Investments are tracked on a monthly basis for purposes
of the contingent deferred sales charge and the period of ownership for this
purpose begins the first day of the month in which the order for the purchase of
shares is received. A redemption will be made first from Class C shares
representing reinvested dividends and then from the earliest purchase of Class C
shares. 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.

REINVESTMENT PRIVILEGE. A shareholder who has redeemed Class A shares of a Fund
or any Kemper Mutual Fund listed under "Special Features--Class A
Shares--Combined Purchases" (other than shares of Kemper Cash Reserves Fund
purchased directly at net asset value) may reinvest up to the full amount
redeemed at net asset value at the time of the reinvestment in Class A shares of
a Fund or of the other listed Kemper Mutual Funds. A shareholder of a Fund or a
Kemper Mutual Fund who redeems Class A shares purchased under the Large Order
NAV Purchase Privilege (see "Purchase of Shares--Initial Sales Charge
Alternative--Class A Shares"), Class B shares or Class C shares and incurs a
contingent deferred sales charge may reinvest up to the full amount redeemed at
net asset value at the time of the reinvestment, in Class A, Class B or Class C
shares, as the case may be, of a Fund or of other Kemper Mutual Funds. The
amount of any contingent deferred sales charge also will be reinvested. These
reinvested shares will retain their original cost and purchase date for purposes
of the contingent deferred sales charge. Also, a holder of Class B shares who
has redeemed shares may reinvest up to the full amount redeemed, less any
applicable contingent deferred sales charge that may have been imposed upon the
redemption of such shares, at net asset value in Class A shares of a Fund or of
the Kemper Mutual Funds listed under "Special Features--Class A Shares--Combined
Purchases." Purchases through the reinvestment privilege are subject to the
minimum investment requirements applicable to the shares being purchased and may
only be made for Kemper Mutual Funds available for sale in the shareholder's
state of residence as listed under "Special Features--Exchange Privilege." The
reinvestment privilege can be used only once as to any specific shares and
reinvestment must be effected within six months of the redemption. If a loss is
realized on the redemption of shares of a Fund, the reinvestment in the same
Fund may be subject to the "wash sale" rules if made within 30 days of the
redemption, resulting in a postponement of the recognition of such loss for
federal income tax purposes. The reinvestment privilege may be terminated or
modified at any time.

SPECIAL FEATURES

CLASS A SHARES--COMBINED PURCHASES. Each Fund's Class A shares (or the
equivalent) may be purchased at the rate applicable to the discount bracket
attained by combining concurrent investments in Class A shares of any of the
following funds: Kemper Technology Fund, Kemper Total Return Fund, Kemper Growth
Fund, Kemper Small Capitalization Equity Fund, Kemper Income and Capital
Preservation Fund, Kemper Municipal Bond Fund, Kemper Diversified Income Fund,
Kemper High Yield Fund, Kemper U.S. Government Securities Fund,

27
<PAGE> 33

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 Value+Growth Fund, Kemper
Quantitative Equity Fund and Kemper Horizon Fund ("Kemper Mutual Funds"). Except
as noted below, there is no combined purchase credit for direct purchases of
shares of Kemper Money Funds, 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 "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 and Kemper Cash Reserves Fund that were
acquired by purchase (not including shares acquired by dividend reinvestment)
are subject to the applicable sales charge on exchange. Series of Kemper Target
Equity Fund are available on exchange only during the

28
<PAGE> 34

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. Class C shares may
be exchanged without a contingent deferred sales charge being imposed at the
time of exchange. For purposes of the contingent deferred sales charge that may
be imposed upon the redemption of the shares received on exchange, amounts
exchanged retain their original cost and purchase date.

General. Shares 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 Kemper Fund into which they are being exchanged.
Exchanges are made based on relative dollar values of the shares involved in the
exchange. There is no service fee for an exchange; however, dealers or other
firms may charge for their services in effecting exchange transactions.
Exchanges will be effected by redemption of shares of the fund held and purchase
of shares of the other fund. For federal income tax purposes, any such exchange
constitutes a sale upon which a gain or loss may be realized, depending upon
whether the value of the shares being exchanged is more or less than the
shareholder's adjusted cost basis. 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. Exchanges may
only be made for Kemper Funds that are eligible for sale in the shareholder's
state of residence. Currently, Tax-Exempt California Money Market Fund is
available for sale only in California and Tax-Exempt New York Money Market Fund
is available for sale only in New York, Connecticut, New Jersey and
Pennsylvania. Except as otherwise permitted by applicable regulations, 60 days'
prior written notice of any termination or material change will be provided.

29
<PAGE> 35

SYSTEMATIC EXCHANGE PRIVILEGE. The owner of $1,000 or more of any class of the
shares of a Fund, a Kemper Mutual Fund or Money Market Fund may authorize the
automatic exchange of a specified amount ($100 minimum) of such shares for
shares of the same class of another Kemper Fund. If selected, exchanges will be
made automatically until the privilege is terminated by the shareholder or the
other Kemper Fund. Exchanges are subject to the terms and conditions described
above under "Exchange Privilege," 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.

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

30
<PAGE> 36
PROSPECTUS

KEMPER-DREMAN
FUND, INC.

MAY 1, 1996

KEMPER-DREMAN
CONTRARIAN FUND

KEMPER DREMAN
SMALL CAP VALUE FUND

INVESTMENT MANAGER:
Dreman Value Advisors, Inc.
PRINCIPAL UNDERWRITER:
Kemper Distributors, Inc.
120 South LaSalle Street
Chicago, IL 60603

[KEMPER FUNDS LOGO]

DRE-1 (5/96) [RECYCLED PAPER LOGO]

<PAGE> 37

KEMPER-DREMAN FUND, INC.

CROSS-REFERENCE SHEET

<TABLE>
<CAPTION>
ITEMS REQUIRED
BY FORM N-1A LOCATION
------------------------------------- ---------------------------------------------
<S> <C> <C>
PART B STATEMENT OF ADDITIONAL INFORMATION
Item 10. Cover Page........................... Cover Page
Item 11. Table of Contents.................... Table of Contents
Item 12. General Information and History...... Cover Page
Item 13. Investment Objectives and Policies... Investment Restrictions; Investment Policies
and Techniques
Item 14. Management of the Fund............... Investment Manager and Underwriter; Officers
and Directors
Item 15. Control Persons and Principal Holders
of Securities........................ Officers and Directors--Principal Holders of
Securities
Item 16. Investment Advisory and Other
Services............................. Investment Manager and Underwriter;
Distribution and Servicing Arrangements
Item 17. Brokerage Allocation and Other
Practices............................ Portfolio Transactions
Item 18. Capital Stock and Other Securities... Dividends and Taxes; Shareholders Rights
Item 19. Purchase, Redemption and Price of
Securities Being Offered............. Purchase and Redemption of Shares
Item 20. Tax Status........................... Dividends and Taxes
Item 21. Underwriters......................... Investment Manager and Underwriter
Item 22. Calculation of Performance Data...... Performance
Item 23. Financial Statements................. Financial Statements
</TABLE>
<PAGE> 38

KEMPER-DREMAN FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION

MAY 1, 1996

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 May 1, 1996. 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-10
Performance............................................................. B-11
Officers and Directors.................................................. B-16
</TABLE>

The financial statements appearing in KDF's 1995 Annual Report to Shareholders
are incorporated herein by reference. The financial statements for KDF accompany
this document.

DRE-13 (5/96) (LOGO)printed on recycled paper

<PAGE> 39

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

B-2
<PAGE> 40

reorganization, and any investments in the securities of other investment
companies will be in compliance with the Investment Company Act of 1940.

(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

B-3
<PAGE> 41

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 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.

B-4
<PAGE> 42

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
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, Zurich Kemper Investments,
Inc. (formerly named Kemper Financial Services, Inc.) ("ZKI") (DVA's parent
company), and its affiliates also furnish investment management services to
other clients including the Kemper Funds and affiliated insurance companies. ZKI
is the sole shareholder of Zurich Investment Management, Inc. and Zurich
Investment Management 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.

B-5
<PAGE> 43

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.

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 1995 FISCAL 1994 FISCAL 1993
- ----------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Contrarian Fund.................................................. $ $11,121 $ 9,720
High Return Fund................................................. $ $20,565 $33,290
Small Cap Value Fund............................................. $ $31,516 $15,609
</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.

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 Zurich Kemper Investments, Inc. (formerly named
Kemper Financial Services, Inc.) ("ZKI"). ZKI is wholly owned by ZKI Holding
Corp. ZKI Holding Corp. is more than 90% owned subsidiary of Zurich Holding
Company of America, Inc., which is a wholly owned subsidiary of Zurich Insurance
Company, an internationally recognized company providing services in life and
non-life insurance, reinsurance and asset management. Pursuant to an

B-6
<PAGE> 44

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 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 DVA (or its
predecessor) for the last three fiscal years.

<TABLE>
<CAPTION>
FUND FISCAL 1995 FISCAL 1994 FISCAL 1993
- ---------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Contrarian Fund................................................. $ 154,696 $ 160,392
High Return..................................................... $ 319,927 $ 242,727
Small Cap Value Fund............................................ $ 64,342 $ 48,584
</TABLE>

PRINCIPAL UNDERWRITER. Pursuant to an underwriting and distribution services
agreement ("distribution agreement"), Kemper Distributors, Inc. ("KDI"), an
affiliate of DVA and a wholly owned subsidiary of ZKI, 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

B-7
<PAGE> 45

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.

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, 1993 and 1994 and for the period January 1, 1995
to September 10, 1995.

CLASS A SHARES. The following information concerns the underwriting commissions
paid in connection with the distribution of each Fund's Class A shares for the
period September 11, 1995 to December 31, 1995.

<TABLE>
<CAPTION>
COMMISSIONS
COMMISSIONS PAID TO KEMPER
COMMISSIONS RETAINED UNDERWRITER AFFILIATED
FUND BY UNDERWRITER PAID TO ALL FIRMS FIRMS
- --------------------------------------------------- -------------------- ----------------- --------------
<S> <C> <C> <C>
Contrarian Fund.................................... $ $ $
High Return Fund................................... $ $ $
Small Cap Value Fund............................... $ $ $
</TABLE>

CLASS B SHARES AND CLASS C SHARES. Since the distribution agreement provides
for fees charged to Class B and Class C shares that are used by KDI to pay for
distribution services (see the prospectus under "Investment Manager and
Underwriter"), the agreement (the "Plan") is approved and renewed separately for
the Class B and Class C shares in accordance with Rule 12b-1 under the
Investment Company Act of 1940, which regulates the manner in which an
investment company may, directly or indirectly, bear expenses of distributing
its shares. Expenses of the Funds and of KDI in connection with the Rule 12b-1
Plans for the Class B and Class C Shares are set forth below for the period
September 11, 1995 to December 31, 1995. A portion of the marketing, sales and
operating expenses shown below could be considered overhead expense.

<TABLE>
<CAPTION>
OTHER DISTRIBUTION EXPENSES PAID BY UNDERWRITER
FUND DISTRIBUTION CONTINGENT TOTAL --------------------------------------------------------
CLASS FEES PAID DEFERRED COMMISSIONS COMMISSIONS ADVERTISING MARKETING MIS.
B BY FUND TO SALES CHARGES PAID BY UNDERWRITER PAID BY UNDERWRITER AND PROSPECTUS AND SALES OPERATING INTEREST
SHARES UNDERWRITER TO UNDERWRITER TO FIRMS TO AFFILIATED FIRMS LITERATURE PRINTING EXPENSES EXPENSES EXPENSES
- --- ----------- -------------- ------------------- ------------------- ----------- ---------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Contrarian
Fund... $
High
Return
Fund... $
Small
Cap
Value
Fund... $
</TABLE>

B-8
<PAGE> 46

<TABLE>
<CAPTION>
DISTRIBUTION
TOTAL FEES PAID
CONTINGENT DISTRIBUTION BY OTHER DISTRIBUTION EXPENSES PAID BY UNDERWRITER
FUND DISTRIBUTION DEFERRED FEES PAID UNDERWRITER ---------------------------------------------------------------
CLASS FEES PAID SALES BY TO ADVERTISING MARKETING MIS.
C BY FUND TO CHARGES TO UNDERWRITER AFFILIATED AND PROSPECTUS AND SALES OPERATING INTEREST
SHARES UNDERWRITER UNDERWRITER(1) TO FIRMS FIRMS LITERATURE PRINTING EXPENSES EXPENSES EXPENSES
- --- ----------- ------------ ----------- ----------- ----------- ---------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Contrarian
Fund... $
High
Return
Fund... $
Small
Cap
Value
Fund... $
</TABLE>

- ---------------

(1) No contingent deferred sales charges have been imposed on Class C shares
purchased prior to April 1, 1996.

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 and Class B shares, respectively, in each case
commencing with the month after investment. Effective for Class C shares
purchased on or after April 1, 1996, KDI currently advances to firms the
first-year service fee at a rate of up to .25% of the purchase price of such
shares. For periods after the first year, KDI currently intends to pay firms a
service fee at a rate of up to .25% (calculated monthly and paid quarterly) of
the net assets attributable to Class C shares maintained and serviced by the
firm. A firm becomes eligible for the quarterly service fee commencing in the
twelfth month after the month of purchase and the fee continues until terminated
by KDI or KDF. Firms to which service fees may be paid include broker-dealers
affiliated with KDI.

The following information concerns the administrative services fee paid by each
Fund for the period September 11, 1995 to December 31, 1995.

<TABLE>
<CAPTION>
ADMINISTRATIVE SERVICE FEES
PAID BY FUND SERVICE FEES SERVICE FEES
---------------------------------- PAID BY ADMINISTRATOR PAID BY ADMINISTRATOR
FUND CLASS A CLASS B CLASS C TO FIRMS TO AFFILIATED FIRMS
- --------------------------- ---------- --------- --------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Contrarian Fund............ $
High Return Fund........... $
Small Cap Value Fund....... $
</TABLE>

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."

B-9
<PAGE> 47

CUSTODIAN, TRANSFER AGENT 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 of the Funds, and as
such, performs all of IFTC's duties as transfer agent and dividend paying
agent." IFTC receives as transfer agent, and pays to KSvC, annual account fees
of $6 per account plus account set up, transaction and maintenance charges,
annual fees associated with the contingent deferred sales charge (Class B and
Class C only) and out-of-pocket expense reimbursement. IFTC's fee is reduced by
certain earnings credits in favor of KDF. The following shows for each Fund, for
the period September 11, 1995 to December 31, 1995, the shareholder service fees
IFTC remitted to KSvC.

<TABLE>
<CAPTION>
FEES IFTC
FUND PAID TO KSVC
------------
<S> <C>
Contrarian Fund..................................................................... $
High Return Fund.................................................................... $
Small Cap Value Fund................................................................ $
</TABLE>

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,
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 and Class C 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 or Class C 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

B-10
<PAGE> 48

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. The Contrarian and High Return Funds normally distribute quarterly
dividends of net investment income and the Small Cap Value Fund normally
distributes annual dividends of net investment income. Each Fund distributes any
net realized short-term and long-term capital gains at least annually.

Each Fund may at any time vary the foregoing dividend practices and, therefore,
reserves the right from time to time to either distribute or retain for
reinvestment such of its net investment income and its net short-term and
long-term capital gains as the Board of Directors of KDF determines appropriate
under the then current circumstances. In particular, and without limiting the
foregoing, a Fund may make additional distributions of net investment income or
capital gain net income in order to satisfy the minimum distribution
requirements contained in the Internal Revenue Code (the "Code"). Dividends will
be reinvested in shares of the Fund paying such dividends unless shareholders
indicate in writing that they wish to receive them in cash or in shares of
Kemper Funds as described in the prospectus.

The level of income dividends per share (as a percentage of net asset value)
will be lower for Class B and Class C shares than for Class A shares primarily
as a result of the distribution services fee applicable to Class B and Class C
shares. Distributions of capital gains, if any, will be paid in the same amount
for each class.

TAXES. Each Fund intends to continue to qualify as a regulated investment
company under Subchapter M of the Code and, if so qualified, will not be liable
for federal income taxes to the extent its earnings are distributed. 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.

B-11
<PAGE> 49

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"
(other than shares of Kemper Cash Reserves Fund not acquired by exchange from
another Kemper Mutual Fund) may reinvest the amount redeemed at net asset value
at the time of the reinvestment in shares of a Fund or in shares of a Kemper
Mutual Fund within six months of the redemption as described in the prospectus
under "Redemption or Repurchase of Shares--Reinvestment Privilege." If a
shareholder realized a loss on the redemption or exchange of a Fund's shares and
reinvests in shares of the same Fund 30 days before or after the redemption or
exchange, the transactions may be subject to the wash sale rules resulting in a
postponement of the recognition of such loss for federal income tax purposes. If
a shareholder of Class A shares redeems or otherwise disposes of such Class A
shares less than ninety-one days after they are acquired and subsequently
acquires shares of the Fund or of a Kemper Mutual Fund without payment of any
sales charge (or for a reduced sales charge) pursuant to a reinvestment
privilege acquired in connection with the Class A shares disposed of, then the
sales charge on the Class A shares disposed of (to the extent of the reduction
in the sales charge on the shares subsequently acquired) shall not be taken into
account in determining gain or loss on the Class A shares disposed of, but shall
be treated as incurred on the acquisition of the shares subsequently acquired.

Investment income derived from 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 and Class C shares includes the effect of the
applicable contingent deferred sales charge that may be imposed at the end of
the period. The redeemable value is then divided by the initial investment, and
this quotient is taken to the Nth root (N representing the number of years in
the period) and 1 is subtracted from the result, which is then expressed as a
percentage. The calculation assumes that all income

B-12
<PAGE> 50

and capital gains dividends paid by a Fund have been reinvested at net asset
value on the reinvestment dates during the period. Average annual total return
may also be calculated without adjusting to deduct the maximum sales charge.

Calculation of a Fund's total return is not subject to a standardized formula,
except when calculated for purposes of the "Financial Highlights" table in the
KDF's financial statements and prospectus. Total return performance for a
specific period is calculated by first taking a hypothetical investment
("initial investment") in a Fund's shares on the first day of the period, either
adjusting or not adjusting to deduct the maximum sales charge (in the case of
Class A shares), and computing the "ending value" of that investment at the end
of the period. The total return percentage is then determined by subtracting the
initial investment from the ending value and dividing the remainder by the
initial investment and expressing the result as a percentage. The ending value
in the case of Class B shares and Class C shares may or may not include the
effect of the applicable contingent deferred sales charge that may be imposed at
the end of the period. The calculation assumes that all income and capital gains
dividends paid by the Fund have been reinvested at net asset value on the
reinvestment dates during the period. Total return may also be shown as the
increased dollar value of the hypothetical investment over the period. Total
return calculations that do not include the effect of the sales charge for Class
A shares or the contingent deferred sales charge for Class B shares and Class C
shares would be reduced if such charge were included.

A Fund's performance figures are based upon historical results and are not
representative of future performance. A Fund's Class A shares are sold at net
asset value plus a maximum sales charge of 5.75% of the offering price. Class B
shares and Class C shares are sold at net asset value. Redemptions of Class B
shares may be subject to a contingent deferred sales charge that is 4% in the
first year following the purchase, declines by a specified percentage each year
thereafter and becomes zero after six years. Redemption of Class C shares may be
subject to a 1% contingent deferred sales charge in the first year following the
purchase. Returns and net asset value will fluctuate. Factors affecting each
Fund's performance include general market conditions, operating expenses and
investment management. Any additional fees charged by a dealer or other
financial services firm would reduce the returns described in this section.
Shares of each Fund are redeemable at the then current net asset value, which
may be more or less than original cost.

B-13
<PAGE> 51

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, 1995

<TABLE>
<CAPTION>
Initial Capital Gain Income Ending Percentage Ending Percentage Dow Jones Standard
TOTAL $10,000 Income Dividends Value Increase Value Increase Industrial & Poor's
RETURN Investment Dividends Reinvested (adjusted) (adjusted) (unadjusted) (unadjusted) Average 500
TABLE (1) Reinvested (2) (1) (1) (1) (1) (3) (4)
- ------------- ---------- ------------ ---------- ---------- ---------- ------------ ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of
Fund(+) $ $ $ $ % $ % % %
Five Years
One Year
CLASS B SHARES
Life of
Fund(++) $ $ $ $ % $ % % %
One Year
CLASS C SHARES
Life of
Fund(++) $ $ $ $ % $ % % %
One Year

<CAPTION>
Lipper
Growth
Consumer Russell and U.S.
TOTAL Price 1,000(R) Income Treasury
RETURN Index Value Fund Bill
TABLE (5) (6) (7) (8)
- ------------- -------- ------ ------ --------
<S> <C> <C> <C> <C>
CLASS A SHARE
Life of
Fund(+) % % % %
Five Years
One Year
CLASS B SHARE
Life of
Fund(++) % % % %
One Year
CLASS C SHARE
Life of
Fund(++) % % % %
One Year
</TABLE>

<TABLE>
<CAPTION>
Lipper
Growth
Dow Jones Standard Consumer Russell and U.S.
AVERAGE ANNUAL Fund Fund Fund Industrial & Poor's Price 1000(R) Income Treasury
TOTAL RETURN Class A Class B Class C Average 500 Index Value Fund Bill
TABLE Shares Shares Shares (3) (4) (5) (6) (7) (8)
- ---------------- ------- ------- ------- --------- --------- -------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) % % % % % % %
Life of Fund(++)
Five Years
Three Years
One Year
</TABLE>

- ---------------
(+) Since March 18, 1988.

(++) Since September 11, 1995 for Class B and Class C shares.

B-14
<PAGE> 52

HIGH RETURN FUND--DECEMBER 31, 1995

<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(+) $ $ $ $ % $ % %
Five Years
One Year
CLASS B SHARES
Life of Fund(++) $ $ $ $ % $ % %
One Year
CLASS C SHARES
Life of Fund(++) $ $ $ $ % $ % %
One Year

<CAPTION>
Lipper
Standard Consumer S&P/ Equity
TOTAL & Poor's Price Barra's Income
RETURN 500 Index Value Fund
TABLE (4) (5) (9) (12)
- ---------------------- -------- -------- ------- ------
<S> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) % % % %
Five Years
One Year
CLASS B SHARES
Life of Fund(++) % % % %
One Year
CLASS C SHARES
Life of Fund(++) % % % %
One Year
</TABLE>

<TABLE>
<CAPTION>
Standard Consumer S&P/ Lipper
AVERAGE ANNUAL Fund Fund Fund Dow Jones & Poor's Price Barra's Equity
TOTAL RETURN Class A Class B Class C Industrial 500 Index Value Income
TABLE Shares Shares Shares Average(3) (4) (5) (9) Fund(12)
- ---------------- ------- ------- ------- --------- --------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) % % % % % % % %
Life of Fund(++)
Five Years
Three Years
One Year
</TABLE>

- ---------------
(+) Since March 18, 1988.

(++) Since September 11, 1995 for Class B and Class C shares.

B-15
<PAGE> 53

SMALL CAP VALUE FUND--DECEMBER 31, 1995

<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(+) $ $ $ $ % $ % %
One Year
CLASS B SHARES
Life of Fund(++)
One Year
CLASS C SHARES
Life of Fund(++)
One Year

<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(+) % % % %
One Year
CLASS B SHARES
Life of Fund(++)
One Year
CLASS C SHARES
Life of Fund(++)
One Year
</TABLE>

<TABLE>
<CAPTION>
Lipper Small
AVERAGE ANNUAL Fund Fund Fund Dow Jones Standard Consumer Russell Company
TOTAL RETURN Class A Class B Class C Industrial & Poor's Price 2000(R) Growth
TABLE Shares Shares Shares Average(3) 500(4) Index(5) Value(10) Fund(11)
- ---------------- -------- -------- -------- --------- --------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) % % % % % % % %
Life of Fund(++)
Five Years
Three Years
One Year
</TABLE>

- ---------------
(+) Since May 22, 1992

(++) Since September 11, 1995 for Class B and Class C shares.

B-16
<PAGE> 54

FOOTNOTES FOR ALL FUNDS

(1) The Initial Investment and adjusted amounts for Class A shares were
adjusted for the maximum initial sales charge at the beginning of the
period, which is 5.75%. The Initial Investment for Class B and Class C
shares was not adjusted. Amounts were adjusted for Class B and Class C
shares for the contingent deferred sales charge that may be imposed at the
end of the period based upon the schedule for shares sold currently; see
"Redemption or Repurchase of Shares" in the prospectus.

(2) Includes short-term capital gain dividends, if any.
(3) The Dow Jones Industrial Average is an unmanaged weighted average of thirty
blue chip industrial corporations listed on the New York Stock Exchange.
Assumes reinvestment of dividends. Source is Towers Data Systems 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.

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.

B-17
<PAGE> 55

The following tables compare the performance of the Class A shares of the Funds
over various periods ended December 31, 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 (3/31/88-12/31/95)........................................ of
Five Years..................................................... of
Three Years.................................................... of
One Year....................................................... of
</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 (3/31/88-12/31/95)........................................ of
Five Years..................................................... of
Three Years.................................................... of
One Year....................................................... of
</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 (5/31/92-21/31/95)........................................ of
Three Years.................................................... of
One Year....................................................... of
</TABLE>

The Lipper Small Company Growth Fund category includes funds that by prospectus
or portfolio practice limit investments to companies on the basis of the size of
the company.

OFFICERS AND DIRECTORS

The officers and directors of KDF, their birthdates, their principal occupations
and their affiliations, if any, with Dreman Value Advisors, Inc. ("DVA"), the
investment manager, Zurich Kemper Investments, Inc. ("ZKI"), 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 ZKI ("Kemper funds") for which
he or she holds similar positions):

JAMES E. AKINS (10/15/26), Director (13), 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.

B-18
<PAGE> 56

ARTHUR R. GOTTSCHALK (2/13/25), Director (13), 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 (13), 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.

FRED B. RENWICK (2/1/30), Director (13), 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.

*STEPHEN B. TIMBERS (8/8/44), President and Director (36), 120 South LaSalle
Street, Chicago, Illinois; President, Chief Executive Officer, Chief Investment
Officer and Director, ZKI; Director, KDI, DVA and LTV Corporation.

JOHN B. TINGLEFF (5/4/35), Director (13), 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 (13), 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; Director, Systems
Imagineering.

*MICHAEL A. BERRY ( ), Vice President (1), 10 Exchange Place, 20th Floor,
Jersey City, New Jersey; Managing Director, DVA.

*DAVID N. DREMAN (5/6/36), Vice President (1), 10 Exchange Place, 20th Floor,
Jersey City, New Jersey; Chairman and Director, DVA.

*JAMES P. HOLMES ( ), Vice President (1), 10 Exchange Place, 20th Floor,
Jersey City, New Jersey; Managing Director, DVA.

*JOHN E. NEAL (3/9/50), Vice President (1), 120 South LaSalle Street, Chicago,
Illinois; President, Chief Operating Officer and Director, ZKI; 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.

*JOHN E. PETERS (11/4/47), Vice President (36), 120 South LaSalle Street,
Chicago, Illinois; Senior Executive Vice President and Director, ZKI; President
and Director, KDI; Director, DVA.

*CHARLES F. CUSTER (8/19/28), Vice President and Assistant Secretary (36), 222
North LaSalle Street, Chicago, Illinois; Partner, Vedder, Price, Kaufman &
Kammholz (attorneys), Legal Counsel to KDF.

*JEROME L. DUFFY (6/29/36), Treasurer (36), 120 South LaSalle Street, Chicago,
Illinois; Senior Vice President, ZKI.

*PHILIP J. COLLORA (11/15/45), Vice President and Secretary (36), 120 South
LaSalle Street, Chicago, Illinois; Attorney, Senior Vice President and Assistant
Secretary, ZKI.

*ELIZABETH C. WERTH (10/1/47), Assistant Secretary (28), 120 South LaSalle
Street, Chicago, Illinois; Vice President, ZKI; Vice President and Director of
State Registrations, KDI.

- ---------------

* "Interested persons" as defined in the Investment Company Act of 1940.

B-19
<PAGE> 57

The directors and officers who are "interested persons" as designated above
receive no compensation from KDF, except that Mr. Custer's law firm receives
fees from KDF as counsel to KDF. The table below shows amounts paid or accrued
to those directors who are not designated "interested persons" during the 1995
calendar year.

<TABLE>
<CAPTION>
TOTAL
COMPENSATION FROM
PENSION OR KDF AND KEMPER
AGGREGATE RETIREMENT BENEFITS FUND COMPLEX PAID
COMPENSATION ACCRUED AS PART OF TO BOARD
NAME OF BOARD MEMBERS FROM KDF KDF EXPENSES MEMBERS(3)
- --------------------------------------------------- ------------ -------------------- -----------------
<S> <C> <C> <C>
James E. Akins..................................... $0 $29,600
Arthur R. Gottschalk(1)(2)......................... $0 $98,600
Frederick T. Kelsey(1)(2).......................... $0 $99,000
Fred B. Renwick.................................... $0 $29,600
John B. Tingleff(1)................................ $0 $90,000
John G. Weithers(1)................................ $0 $90,200
</TABLE>

- ---------------

(1) Elected to the Board on September [ ], 1995.

(2) Includes deferred fees and interest thereon pursuant to deferred
compensation agreements with certain Kemper funds. Deferred amounts accrue
interest monthly at a rate equal to the yield of Kemper Money Funds - Kemper
Money Market Fund. Total deferred fees and interest accrued for KDF for the
latest and all prior fiscal years are $ for Mr. Gottschalk and $
for Mr. Kelsey.

(3) Includes compensation for service 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. Messrs. Akins and Renwick were members of the board
of only KDF until September 19, 1995.

As of [January 31,] 1996, the officers and directors of KDF as a group owned the
following percentages of the Funds: % of the Contrarian Fund, % of the
High Return Fund and % of the Small Cap Value Fund.

PRINCIPAL HOLDERS OF SECURITIES

As of [January 31,] 1996 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>
[ to be inserted ]
</TABLE>

B-20
<PAGE> 58

HIGH RETURN FUND

<TABLE>
<CAPTION>
NAME & ADDRESS PERCENTAGE
- --------------------------------------------------------------------------------------- ----------
<S> <C>
[ to be inserted ]
</TABLE>

SMALL CAP VALUE FUND

<TABLE>
<CAPTION>
NAME & ADDRESS PERCENTAGE
- --------------------------------------------------------------------------------------- ----------
<S> <C>

[ to be inserted ]

</TABLE>

- ---------------

* Record and beneficial owner.

** Record owner only.

B-21
<PAGE> 59

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, 1995.
The Dreman High Return Portfolio--December 31, 1995.
The Dreman Small Cap Value Portfolio--December 31, 1995.
Statement of Assets and Liabilities:
The Dreman Contrarian Portfolio--December 31, 1995.
The Dreman High Return Portfolio--December 31, 1995.
The Dreman Small Cap Value Portfolio--December 31, 1995.
Statement of Operations:
The Dreman Contrarian Portfolio for the year ended December 31, 1995.
The Dreman High Return Portfolio for the year ended December 31, 1995.
The Dreman Small Cap Value Portfolio for the year ended December 31, 1995.
Statement of Changes in Net Assets:
The Dreman Contrarian Portfolio for the fiscal years ended December 31, 1995 and
December 31, 1994.
The Dreman High Return Portfolio for the fiscal years ended December 31, 1995 and
December 31, 1994.
The Dreman Small Cap Value Portfolio for the fiscal years ended December 31, 1995
and December 31, 1994.
Notes to Financial Statements
(b) Exhibits:
99.B1a Articles of Incorporation of Registrant
99.B1b Articles Supplementary to Articles of Incorporation of Registrant
99.B1c Articles Supplementary to Articles of Incorporation of the Registrant
99.B1d Articles Supplementary to Articles of Incorporation of Registrant
99.B1e Articles Supplementary to Articles of Incorporation of Registrant
99.B1f Articles Supplementary to Articles of Incorporation of Registrant
99.B1g Articles of Amendment to Articles of Incorporation of the Registrant
99.B2 Bylaws(1)
99.B3 Inapplicable
99.B4 Text of Stock Certificate(1)
99.B5 Investment Management Agreement(2)
99.B6a Underwriting and Distribution Services Agreement(2)
99.B6b Form of Selling Group Agreement(1)
99.B7 Inapplicable
99.B8a Custody Agreement(1)
99.B9a Agency Agreement(1)
99.B9b Administrative Services Agreement(1)
</TABLE>

C-1
<PAGE> 60

<TABLE>
<S> <C> <C>
99.B10 Inapplicable
99.B11 Consent and Report of Ernst & Young LLP(2)
99.B12 Inapplicable
99.B13 Inapplicable
99.B14 Model Retirement Plans: IRA and SEP-IRA(2)
99.B15 See 6(a) above (Class B and C Shares)
99.B16 Performance Calculations(1)
99.B18. Multi-Distribution System Plan
99.B24. Powers of Attorney(1)
27.1 Financial Data Schedule (Contrarian)(2)
27.2 Financial Data Schedule (High Return)(2)
27.3 Financial Data Schedule (Small Cap)(2)
99.B99 Not Applicable
</TABLE>

- ---------------

(1) Incorporated herein by reference to Post-Effective Amendment No. 14 to the
Registration Statement of Registrant on Form N-1A filed on or about
September 8, 1995.

(2) To be filed before the effective date of Post-Effective Amendment No. 15.

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 JANUARY 31, 1996
- -------------------------------------- ----------------------
<S> <C>
Dreman Contrarian Portfolio
Dreman High Return Portfolio
Dreman Small Cap Value Portfolio
</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> 61

ITEM 28(A) BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

Information pertaining to business and other connections of Registrant's
investment adviser is hereby incorporated by reference to the sections of the
Prospectus captioned "Summary" and "Investment Manager and Underwriter" and to
the section of the Statement of Additional Information captioned "Investment
Manager and Underwriter."

Dreman Value Advisors, Inc., 10 Exchange Place, 20th Floor, Jersey City,
New Jersey 07302, performs investment advisory services for Registrant,
institutional investment advisory clients and certain Portfolios of Kemper
Investors Fund. Dreman Value Advisers, Inc. is also a subadviser for Kemper
Value Plus Growth Fund and Kemper Horizon Fund and for certain Portfolios of

Kemper Investors Fund.

C-3
<PAGE> 62
Item 28(b)(i) Business and Other Connections of Officers and Directors
of Dreman Value Advisors, Inc., the Investment Sub-Advisor

DREMAN, DAVID N.
Director, Chairman of the Board, Dreman Value Advisors, Inc.
Vice President, Kemper Value Plus Growth Fund
Vice President, Kemper-Dreman Fund, Inc.

NEAL, JOHN E.
Director, Dreman Value Advisors, Inc.
Director, Kemper Financial Services, Inc.
President, Kemper Funds Group, a unit of KFS
Director, President, Kemper Service Company
Director, Kemper Distributors, Inc.
Director, Zurich Investment Management, Inc.
Director, Camelot Financial Corporation
Director, Coast Broadcasting Company
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, Mesa Homes
Director, Mesa Homes Brokerage Company

C - 4

<PAGE> 63
Director, Mount Doloroes Corporation
Director, Montgomery Gallery, Inc.
Director, Monterey Research Park, Inc.
Director, One Corporate Centre, Inc.
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, Tourelle, Inc.
Director, Two Corporate Center
Director, Vice President, Kemper Portfolio Corporation
Director, Vice President, KFC Portfolio Corporation
Director, Vice Presidnet, 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 Plaza Dallas, Inc.
Director, Kemper/Prime Acquisition Fund, Inc.
Director, KRDC, Inc.

C - 5
<PAGE> 64
Director, RespiteCare
Director, President, SMS Realty Corp.
Vice President, Kemper Funds
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, Zurich Investment Management, Inc.
Vice President, Kemper Funds
Director, Kemper Service Company

TIMBERS, STEPHEN B.
Director, Dreman Value Advisors, Inc.
Director, President, Chief Executive Officer and Chief Investment
Officer, Kemper Financial Services, Inc.
Director, Kemper Distributors, Inc.
Director, Zurich Investment Management, Inc.
Director, Chairman, Kemper Service Company
Director, President, Kemper International Management, Inc.
Trustee and President, Kemper Funds
Director, The LTV Corporation
Director, Investment Analysts Society of Chicago

C - 6
<PAGE> 65

NEEL, JAMES R.
Director, President and Chief Executive Officer, Dreman Value Advisors, Inc.
Vice President, Kemper-Dreman Fund, 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, Zurich Investment Management, Inc.
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 F.
Managing Director, Dreman Value Advisors, Inc.

DIERENFELDT, DAVID F.
Secretary, Dreman Value Advisors, Inc.
Senior Vice President, Compliance Officer, Associate General Counsel and
Assistant Secretary, 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.
Assistant Secretary, Investors Brokerage Services, Inc.
Secretary, Zurich Investment Management, Inc.

C - 7

<PAGE> 66
Assistant Secretary, Kemper International Management, Inc.
Assistant Secretary, Zurich Investment Management 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.

MASTAIN, JR., RICHARD K.
Managing Director, Dreman Value Advisors, Inc.

SHIPMAN, STEPHEN
Managing Director, 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.

C - 8

<PAGE> 67

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 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
Thomas V. Bruns 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
Carlene D. Merold Vice President None
Elizabeth C. Werth Vice President Assistant Secretary
Diane E. Ratekin Assistant Secretary None
</TABLE>

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-9
<PAGE> 68

S I G N A T U R E S

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Chicago and State of Illinois, on the 29th day
of February, 1996.

KEMPER-DREMAN FUND, 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 February 29, 1996 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/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> 69

EXHIBIT INDEX

<TABLE>
<S> <C> <C>
99.B1a Articles of Incorporation of Registrant
99.B1b Articles Supplementary to Articles of Incorporation of Registrant
99.B1c Articles Supplementary to Articles of Incorporation of the Registrant
99.B1d Articles Supplementary to Articles of Incorporation of Registrant
99.B1e Articles Supplementary to Articles of Incorporation of Registrant
99.B1f Articles Supplementary to Articles of Incorporation of Registrant
99.B1g Articles of Amendment to Articles of Incorporation of the Registrant
99.B2 Bylaws(1)
99.B3 Inapplicable
99.B4 Text of Stock Certificate(1)
99.B5 Investment Management Agreement(2)
99.B6a Underwriting and Distribution Services Agreement(2)
99.B6b Form of Selling Group Agreement(1)
99.B7 Inapplicable
99.B8a Custody Agreement(1)
99.B9a Agency Agreement(1)
99.B9b Administrative Services Agreement(1)
99.B10 Inapplicable
99.B11 Consent and Report of Ernst & Young LLP(2)
99.B12 Inapplicable
99.B13 Inapplicable
99.B14 Model Retirement Plans(2)
99.B15 See 6(a) above (Class B and C Shares)
99.B16 Performance Calculations(1)
99.B18. Multi-Distribution System Plan
99.B24. Powers of Attorney(1)
27.1 Financial Data Schedule (Contrarian)(2)
27.2 Financial Data Schedule (High Return)(2)
27.3 Financial Data Schedule (Small Cap)(2)
99.B99 Not Applicable
</TABLE>

- ---------------

(1) Incorporated herein by reference to Post-Effective Amendment No. 14 to the
Registration Statement of Registrant on Form N-1A filed on or about
September 8, 1995.

(2) To be filed before the effective date of Post-Effective Amendment No. 15.

<PAGE> 1
EXHIBIT 99.B1a

ARTICLES OF INCORPORATION
OF
DREMAN MUTUAL GROUP, INC.

FIRST: The undersigned, Bruce G. Leto, whose post office address is
1100 One Franklin Plaza, Philadelphia, Pennsylvania 19102, and being at least
eighteen years of age, does hereby cause to be filed these Articles of
Incorporation for the purpose of forming a corporation under the General
Corporation Law of the State of Maryland.

SECOND: The name of the corporation is Dreman Mutual Group, Inc.

THIRD: The purpose for which the corporation is formed is to operate
as an investment company and to exercise all of the powers and to do any and
all of the things as fully and to the same extent as any other corporation
incorporated under the laws of the State of Maryland, now or hereinafter in
force, including, without limitation, the following:

1. To purchase, hold, invest and reinvest in, sell,
exchange, transfer, mortgage, and otherwise acquire and dispose of securities
of every kind, character and description.

2. To exercise all rights, powers and privileges with
reference to or incident to ownership, use and enjoyment of any of such
securities, including, but without limitation, the right, power and privilege
to own, vote, hold, purchase, sell, negotiate, assign, exchange, transfer,
mortgage, pledge or otherwise deal with, dispose of, use, exercise or enjoy any
rights, title, interest, powers or privileges under or with reference to any,
of such securities; and to do any and all acts and things for the preservation,
protection, improvement and enhancement in value of any of such securities.

3. To purchase or otherwise acquire, own, hold, sell,
exchange, assign, transfer, mortgage, pledge or otherwise dispose of, property
of all kinds.

4. To buy, sell, mortgage, encumber, hold, own,
exchange, rent or otherwise acquire and dispose of, and to develop, improve,
manage, subdivide, and generally to deal and trade in real property, improved
and unimproved, and wheresoever situate; and to build, erect, construct, alter
and maintain buildings, structures, and other improvements on real property.

5. To borrow or raise moneys for any of the purposes of
the corporation, and to mortgage or pledge the whole or any part of the
property and franchises of the corporation, real, personal, and mixed, tangible
or intangible, and wheresoever situate.

6. To enter into, make and perform contracts and
undertakings of every kind for any lawful purpose, without limit as to amount.
<PAGE> 2
7. To issue, purchase, sell and transfer, reacquire,
hold, trade and deal in, to the extent permitted under the General Corporation
Law of the State of Maryland, capital stock, bonds, debentures and other
securities of the corporation, from time to time, to such extent as the Board
of Directors shall, consistent with the provisions of these Articles of
Incorporation, determine; and to repurchase, re-acquire and redeem, to the
extent permitted under the General Corporation Law of the State of Maryland,
from time to time, the shares of its own capital stock, bonds, debentures and
other securities.

The foregoing clauses shall each be construed as purposes,
objects and powers, and it is hereby expressly provided that the foregoing
enumeration of specific purposes, objects and power shall not be held to limit
or restrict in any manner the powers of the corporation, and that they are in
furtherance of, and in addition to, and not in limitation of, the general
powers conferred upon the corporation by the laws of the State of Maryland or
otherwise; nor shall the enumeration of one thing be deemed to exclude another,
although it be of like nature, not expressed.

FOURTH: The post office address of the principal office of the
corporation in the State of Maryland is:

c/o The Corporation Trust, Incorporated
32 South Street
Baltimore, Maryland 21202

The name and post office address of the initial resident agent
of the corporation in the State of Maryland is:

The Corporation Trust, Incorporated
32 South Street
Baltimore, Maryland 21202

FIFTH: The total number of shares of stock which the
corporation shall have authority to issue is Five Hundred Million (500,000,000)
shares of stock, with a par value of One Cent ($.01) per share, to be known and
designated as Common Stock, such shares of Common Stock having an aggregate par
value of Five Million Dollars ($5,000,000).

Subject to the provisions of these Articles of Incorporation,
the Board of Directors shall have the power to issue shares of Common Stock of
the corporation from time to time, at a price not less than the par value
thereof, or for such consideration as may be fixed from time to time pursuant
to the direction of the Board of Directors.

Pursuant to Section 2-105 of the Maryland General Corporation
Law, the Board of Directors of the corporation shall have the power to
designate one or more series of shares of Common Stock and to classify or
reclassify any unissued shares with respect to such series and such series
(subject to any applicable rule, regulation or order of the Securities and

2
<PAGE> 3
Exchange Commission or other applicable law or regulation) shall have such
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, terms and conditions of redemption
and other characteristics as the Board may determine in the absence of contrary
determination set forth herein. Subject to the aforesaid power of the Board of
Directors, two series of shares are hereby initially designated as the:

"Dreman Contrarian Portfolio" and One Hundred Million
(100,000,000) shares of Common Stock are hereby initially classified
and allocated to such series; and

"Dreman High Income Portfolio" and One Hundred Million
(100,000,000) shares of Common Stock are hereby initially classified
and allocated to such series; and

"Dreman Cash Portfolio" and Three Hundred Million
(300,000,000) shares of Common Stock are hereby initially classified
and allocated to such series.

At any time when there are no shares outstanding or subscribed
for a particular series previously established and designated herein or by the
Board of Directors, the series may be liquidated by similar means. Each share
of a series shall have equal rights with each other share of that series with
respect to the assets of the corporation pertaining to that series. The
dividends payable to the holders of any series (subject to any applicable rule,
regulation or order of the Securities and Exchange Commission or any other
applicable law or regulation) shall be determined by the Board and need not be
individually declared, but may be declared and paid in accordance with a
formula adopted by the Board. Except as otherwise provided herein, all
references in these Articles of Incorporation to Common Stock or series of
stock shall apply without discrimination to the shares of each series of stock.

The holder of each share of stock of the corporation shall be
entitled to one vote for each full share, and a fractional vote for each
fractional share of stock, irrespective of the series then standing in his or
her name in the books of the corporation. On any matter submitted to a vote of
shareholders, all shares of the corporation then issued and outstanding and
entitled to vote, irrespective of the series, shall be voted in the aggregate
and not by series except (1) when otherwise expressly provided by the Maryland
General Corporation Law, or (2) when required by the Investment Company Act of
1940, as amended, shares shall be voted by individual series; and (3) when the
matter does not affect any interest of a particular series, then only
shareholders of affected series shall be entitled to vote thereon. Holders of
shares of stock of the corporation shall not be entitled to cumulative voting
in the election of directors or on any other matter.

Each series of stock of the corporation shall have the
following powers, preferences and participating, voting, or other special
rights and the qualifications, restrictions, and limitations thereof shall be
as follows:

1. All consideration received by the corporation for the
issue of sale of stock of each series, together with all assets, income,
earnings, profits, and proceeds thereof,

3
<PAGE> 4
including any proceeds derived from the sale, exchange or liquidation thereof,
and any funds or payments derived from any reinvestment of such assets and
proceeds in whatever form the same may be, shall irrevocably belong to the
series of shares of stock with respect to which such consideration, assets,
payments or funds were received by the corporation for all purposes, subject
only to the rights of creditors, and shall be so recorded upon the books of
account of the corporation. Such assets, income, earnings, profits and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation thereof and any assets derived from any reinvestment of such
proceeds, in whatever form the same may be, are herein referred to as "assets
belonging to" such series.

2. The Board of Directors may from time to time declare
and pay dividends or distributions, in stock or in cash, on any or all series
of stock; provided, such dividends or distributions on shares of any series of
stock shall be paid only out of earnings, surplus, or other lawfully available
assets belonging to such series.

3. The Board of Directors shall have the power in its
discretion to distribute to the shareholders of the corporation or to the
shareholders of any series thereof in any fiscal year as dividends, including
dividends designated in whole or in part as capital gain distributions, amounts
sufficient, in the opinion of the Board of Directors, to enable the corporation
or any series thereof to qualify as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended, or any successor or comparable
statute thereto, and regulations promulgated thereunder (collectively, the
"IRC"), and to avoid liability of the corporation or any series thereof for
Federal income tax in respect of that year and to make other appropriate
adjustments in connection therewith.

4. In the event of the liquidation or dissolution of the
corporation, shareholders of each series shall be entitled to receive, as a
series, out of the assets of the corporation available for distribution to
shareholders, but other than general assets not belonging to any particular
series of stock, the assets belonging to such series, and the assets so
distributable to the shareholders of any series shall be distributed among such
shareholders in proportion to the number of shares of such series held by them
and recorded on the books of the corporation. In the event that there are any
general assets not belonging to any particular series of stock and available
for distribution, such distribution shall be made to the holders of stock of
all series in proportion to the net asset value of the respective series
determined as hereinafter provided.

5. The assets belonging to any series of stock shall be
charged with the liabilities in respect to such series, and each series shall
also be charged with its share of the general liabilities of the corporation,
as determined by the Board of Directors, which shall be conclusive as to the
amount of liabilities, including accrued expenses and reserves, as to the
allocation of the same as to a given series, and as to whether the same or
general assets of the corporation are allocable to one or more series.

4
<PAGE> 5
The net asset value per share of each series of the
corporation's common stock shall be determined in accordance the By-Laws of the
corporation.

6. The Board of Directors may provide for a holder of
any series of stock of the corporation, who surrenders his certificate in good
form for transfer to the corporation or, if the shares in question are not
represented by certificates, who delivers to the corporation a written request
in good order signed by the shareholder, to convert the shares in question on
such basis as the Board may provide, into shares of stock of any other series
of the corporation.

7. The holders of the shares of Common Stock or other
securities of the corporation shall have no preemptive rights to subscribe to
new or additional shares of its Common Stock or other securities.

SIXTH: The number of directors of the corporation shall be
such number as may from time to time be fixed by the By-Laws of the corporation
or pursuant to authorization contained in such By-Laws; provided,
notwithstanding anything herein to the contrary, the board of directors shall
initially consist of 3 directors until such time as the number of directors is
fixed as stated above. The names of the directors who shall act as such until
successors are duly chosen and qualify are:

David N. Dreman
Murat H. Davidson, Jr.
Thomas A. Famigletti

SEVENTH: The corporation shall, as provided in its By-Laws,
redeem the shares of any series from its stockholders at the request of the
holder thereof.

The Board of Directors may, from time to time,
without the vote or consent of stockholders, establish uniform standards with
respect to the minimum net asset value of a stockholder account or a minimum
investment which may be made by a stockholder. the Board of Directors may
authorize the redemption of all shares in those stockholder accounts when the
value of the accounts does not meet the specified minimum standards of net
asset value, provided there is mailed to each affected stockholder, at least
thirty (30) days prior to the planned redemption date, a notice setting forth
the minimum account size requirement and the date on which the account will be
closed if the minimum size requirement is not met prior to said closing date.

EIGHTH: Subject to the Investment Company Act of 1940, as
amended, and notwithstanding any provision of Maryland law requiring more than
a majority vote of the Common Stock, or any class thereof, in connection with
any corporate action (including, but not limited to each of the following
actions: (i) Amendment or amendment and restatement of the Articles; (ii)
Reduction of stated capital; (iii) Consolidation, merger, share exchange or
transfer of assets; (iv) Distribution in partial liquidation; or (v) Voluntary
dissolution), unless otherwise provided in these Articles of Incorporation, the
Corporation may take or authorize such action

5
<PAGE> 6
upon the favorable vote of the holders of a majority of the outstanding shares
of Common Stock entitled to vote thereon.

NINTH: The duration of the corporation shall be perpetual.

TENTH: The corporation expressly reserves the right to amend, alter,
change or repeal any provision contained in these Articles of Incorporation,
and all rights, contract and otherwise, conferred herein upon the stockholders
are granted subject to such reservation.

IN WITNESS WHEREOF, the undersigned incorporator of Dreman Mutual
Group, Inc. who executed the foregoing Articles of Incorporation hereby
acknowledges the same to be his act and further acknowledges that, to the best
of his knowledge the matters and facts set forth therein are true in all
material respects under the penalties of perjury.

Dated on the 11th day of October, 1987.

/s/Bruce G. Leto
---------------------------
Bruce G. Leto

<PAGE> 1
EXHIBIT 99.B1b

Filed January 25, 1988

DREMAN MUTUAL GROUP, INC.

ARTICLES SUPPLEMENTARY TO THE CHARTER

DREMAN MUTUAL GROUP, INC., a Maryland corporation having its principal
office in Baltimore City, Maryland (hereinafter called the "Corporation")
hereby certifies to the State Department of Assessments and Taxation of
Maryland, in accordance with the requirements of Section 2-208 of the Maryland
General Corporation Law that:

FIRST: The allocation of shares of each of its three existing
Portfolios is as follows: The Dreman Contrarian Portfolio, one hundred million
(100,000,000) shares of common stock (par value $.01 per share); The Dreman
High Income Portfolio, one hundred million (100,000,000) shares of common stock
(par value $.01 per share); The Dreman Cash Portfolio, one hundred million
(100,000,000) shares of common stock (par value $.01 per share). The Board of
Directors of the Corporation at a meeting duly convened and held on January 13,
1988, adopted resolutions classifying one hundred million (100,000,000)
unallocated and unissued shares of common stock of the Corporation as "The
Dreman Bond Portfolio." This classification of shares was effected by setting
or changing before the issuance of such shares, the preferences, rights, voting
powers, limitations as to dividends, qualification or terms of redemption of,
the conversions and other rights, thereof as hereinafter set forth.

SECOND: A description of the shares so classified, with the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption as set or changed by the Board of Directors of the Corporation is as
follows:

The holders of shares of each class of the Corporation so classified
and allocated shall be entitled to one vote for each full share, and a
fractional vote for each fractional share of stock then standing in his or her
name on the books of the Corporation. All shares of the Corporation then
issued and outstanding and entitled to vote, irrespective of class, shall be
voted in the aggregate and not by class, except: (1) when otherwise expressly
provided by the Maryland General Corporation Law; (2) when required by the
Investment Company Act of 1940, as amended, shares shall be voted by class; and
(3) when a matter to be voted upon does not affect any interest of a particular
class then only shareholders of the affected class or classes shall be entitled
to vote thereon.

Each of The Dreman Contrarian Portfolio shares, The Dreman High Income
Portfolio shares, The Dreman Cash Portfolio shares, and The Dreman Bond
Portfolio shares and classes of stock of the Corporation shall have,
respectively, the following preferences and special rights, restrictions, and
limitations:

(1) All consideration received by the Corporation for the
issue or sale of stock of such classes, together with all income,
earnings, profits, and proceeds thereof, and any funds or payments
derived from any reinvestment of such proceeds in whatever form
<PAGE> 2
the same may be, shall irrevocably belong to such class of shares of
stock, subject only to the rights of creditors.

(2) Dividends or distributions on shares of each such
class of stock and redemptions of such class of stock shall be paid
only out of earnings, surplus, or other lawfully available assets
belonging to such class.

(3) The Corporation may deduct from the proceeds of
redemption of shares of each such class of stock the cost incurred in
liquidating investment securities to pay redemptions in cash as set
forth in the Bylaws.

(4) In the event of the liquidation or dissolution of the
Corporation, holders of each such class of stock shall be entitled to
receive, as a class, out of the assets of the Corporation available
for distribution to shareholders, but other than general assets not
belonging to any particular class of stock, the assets belonging to
such class; and the assets so distributable to such shareholders shall
be distributed among such shareholders in proportion to the asset
value of such shares. In addition, such holders shall be entitled to
receive their proportionate share of assets of the Corporation which
do not belong solely to any particular class of shares of stock, as
determined by the Board of Directors; and

(5) The assets belonging to each such class of stock
shall be charged with the liabilities in respect to such class, and
shall also be charged with their share of the general liabilities of
the Corporation as determined by the Board of Directors, such
determination shall be conclusive for all purposes.

THIRD: The shares aforesaid have been duly classified by the Board of
Directors pursuant to authority and power contained in the Charter of the
Corporation.

IN WITNESS WHEREOF, DREMAN MUTUAL GROUP, INC. has caused these
presents to be signed in its name and on its behalf by its President and
attested by its Secretary on ________________________, 1988.

DREMAN MUTUAL GROUP, INC.

By: /s/David N. Dreman
----------------------
David N. Dreman
President
Attest:

/s/Murat H. Davidson, Jr.
- ----------------------------------
Murat H. Davidson, Jr.
Secretary

2
<PAGE> 3
THE UNDERSIGNED, President of DREMAN MUTUAL GROUP, INC., who executed
on behalf of said Corporation the foregoing Articles Supplementary to the
Charter of which the certificate is made a part, hereby acknowledges in the
name and on behalf of said Corporation, the foregoing Articles Supplementary to
the Charter to be the corporate act of said Corporation and further certifies
that, to the best of his knowledge, information and belief, the matters and
facts set forth therein with respect to the approval thereof are true in all
material respects, under the penalties of perjury.

/s/David N. Dreman
--------------------
David N. Dreman
President

<PAGE> 1
EXHIBIT 99.B1c

Filed February 26, 1988

DREMAN MUTUAL GROUP, INC.

ARTICLES SUPPLEMENTARY TO THE CHARTER

The Board of Directors, by unanimous consent, also adopted a
resolution reclassifying two hundred million (200,000,000) authorized by
unissued shares of the par value of one cent ($.01) per share of the common
stock of The Dreman Cash Portfolio. One hundred million (100,000,000) shares
of the unissued stock of The Dreman Cash Portfolio were reclassified into a new
separate class of stock of the Corporation designated "The Dreman Bond
Portfolio Shares," such class having a par value of one cent ($.01) per share
and after giving effect to such reclassification, consisting of one hundred
million (100,000,000) shares of stock. The other one hundred million
(100,000,000) shares of stock were restored to the status of authorized but
unissued and unclassified shares of stock of the Corporation. This
reclassification of shares was effected by setting or changing before the
issuance of such shares, the preferences, rights, voting powers, limitations as
to dividends, qualification or terms of redemption of, the conversions and
other rights, thereof as hereinafter set forth.

The holders of shares of each class of the Corporation so classified
and allocated shall be entitled to one vote for each full share, and a
fractional vote for each fractional share of stock then standing in his or her
name on the books of the Corporation. All shares of the Corporation then
issued and outstanding and entitled to vote, irrespective of class, shall be
voted in the aggregate and not by class, except: (1) when otherwise expressly
provided by the Maryland General Corporation Law; (2) when required by the
Investment Company Act of 1940,
<PAGE> 2
as amended, shares shall be voted by class; and (3) when a matter to be voted
upon does not affect any interest of a particular class then only shareholders
of the affected class or classes shall be entitled to vote thereon.

Each of The Dreman Contrarian Portfolio shares, The Dreman High Return
Portfolio shares, The Dreman Cash Portfolio shares, and The Dreman Bond
Portfolio shares and classes of stock of the Corporation shall have,
respectively, the following preferences and special rights, restrictions, and
limitations:

(1) All consideration received by the Corporation for the
issue or sale of stock of such classes, together with all income,
earnings, profits, and proceeds thereof, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the
same may be, shall irrevocably belong to such class of shares of
stock, subject only to the rights of creditors.

THIRD: The shares aforesaid have been duly classified by the Board of
Directors pursuant to authority and power contained in the Charter of the
Corporation.

2
<PAGE> 3
IN WITNESS WHEREOF, DREMAN MUTUAL GROUP, INC. has caused these
presents to be signed in its name and on its behalf by its Vice President and
attested by its Secretary on February 25, 1988.

DREMAN MUTUAL GROUP, INC.

By: /s/Edward C. McCarthy
---------------------
Edward C. McCarthy

Attest:

/s/Murat H. Davidson, Jr.
- -------------------------------------------
Murat H. Davidson, Jr.
Secretary

3
<PAGE> 4
THE UNDERSIGNED, Vice president of DREMAN MUTUAL GROUP, INC., who
executed on behalf of said Corporation the foregoing Articles Supplementary to
the Charter of which the certificate is made a part, hereby acknowledges in the
name and on behalf of said Corporation, the foregoing Articles Supplementary to
the Charter to be the corporate act of said Corporation and further certifies
that, to the best of his knowledge, information and belief, the matters and
facts set forth therein with respect to the approval thereof are true in all
material respects, under the penalties of perjury.

/s/Edward C. McCarthy
----------------------
Edward C. McCarthy
Vice President

<PAGE> 1
EXHIBIT 99.B1d

Filed December 28, 1990

DREMAN MUTUAL GROUP, INC.

ARTICLES SUPPLEMENTARY TO THE CHARTER

FIRST: The allocation of shares of each of its three existing
Portfolios is as follows: The Dreman Contrarian Portfolio, one hundred million
(100,000,000) shares of common stock (par value $.01 per share); The Dreman
High Return Portfolio, one hundred million (100,000,000) shares of common stock
(par value $.01 per share); The Dreman Cash Portfolio, one hundred million
(100,000,000) shares of common stock (par value $.01 per share); The Dreman
Bond Portfolio, one hundred million (100,000,000) shares of common stock (par
value $.01 per share). The Board of Directors of the Corporation at a meeting
duly convened and held on December 7, 1990, adopted resolutions declassifying
the one hundred million (100,000,000) shares that are currently classified as
and allocated to The Dreman Cash Portfolio and restoring them to the status of
authorized but unissued and unclassified shares of the Corporation at the time
that there are no shares of the Cash Portfolio issued and outstanding.

SECOND: A description of the shares that have been previously
classified by the Board of Directors, with the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption as set or changed by the
Board of Directors of the Corporation is as follows:

Each of The Dreman Contrarian Portfolio shares, The Dreman High Return
Portfolio shares, and The Dreman Bond Portfolio shares and classes of stock of
the Corporation shall have, respectively, the following preferences and special
rights, restrictions, and limitations:

THIRD: The shares aforesaid have been duly declassified by the Board
of Directors pursuant to authority and power contained in the Charter of the
Corporation.

IN WITNESS WHEREOF, DREMAN MUTUAL GROUP, INC. has caused these
presents to be signed in its name and on its behalf by its President and
attested by its Secretary on December 27, 1990.

DREMAN MUTUAL GROUP, INC.

By: /s/Wayne D. Thornbrough
------------------------
Wayne D. Thornbrough
President
Attest:

/s/Thomas A. Famigletti
- --------------------------
Thomas A. Famigletti
Secretary

/s/Wayne D. Thornbrough
----------------------------------
Wayne D. Thornbrough
President

<PAGE> 1
EXHIBIT 99.B1e

Filed March 24, 1992

DREMAN MUTUAL GROUP, INC.

ARTICLES SUPPLEMENTARY TO THE CHARTER

FIRST: The allocation of shares of each of its three existing
Portfolios is as follows: The Dreman Contrarian Portfolio, one hundred million
(100,000,000) shares of common stock (par value $.01 per share); The Dreman
High Return Portfolio, one hundred million (100,000,000) shares of common stock
(par value $.01 per share); The Dreman Bond Portfolio, one hundred million
(100,000,000) shares of common stock (par value $.01 per share). The Board of
Directors of the Corporation at a meeting duly convened and held on March 19,
1992, adopted resolutions declassifying one hundred million (100,000,000)
unallocated and unissued shares of common stock of the Corporation (par value
$.01 per share) as "The Dreman Small Cap Value Portfolio." This classification
of shares was effected by setting or changing before the issuance of such
shares, the preferences, rights, voting powers, limitations as to dividends,
qualification or terms of redemption of, the conversions and other rights,
thereof as hereinafter set forth.

SECOND: A description of the shares so classified by the Board of
Directors, with the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption as set or changed by the Board of Directors of the
Corporation is as follows:

The holders of shares of each class of the Corporation classified and
allocated shall be entitled to one vote for each full share, and a fractional
vote for each fractional share of stock then standing in his or her name on the
books of the Corporation. All shares of the Corporation then issued and
outstanding and entitled to vote, irrespective of class, shall be voted in the
aggregate and not by class, except: (1) when otherwise expressly provided by
the Maryland General Corporation Law; (2) when required by the Investment
Company Act of 1940, as amended, shares shall be voted by class; and (3) when a
matter to be voted upon does not affect any interest of a particular class then
only shares of the affected class or classes shall be entitled to vote thereon.

Each of The Dreman Contrarian Portfolio shares, The Dreman High Return
Portfolio shares, The Dreman Bond Portfolio shares, and the Dreman Small Cap
Value Portfolio shares and classes of stock of the Corporation shall have,
respectively, the following preferences and special rights, restrictions, and
limitations:
<PAGE> 2
(1) All consideration received by the Corporation for the
issue or sale of stock of such classes, together with all income,
earnings, profits, and proceeds thereof, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the
same may be, shall irrevocably belong to such class of shares of
stock, subject only to the rights of creditors.

THIRD: The shares aforesaid have been duly declassified by the Board
of Directors pursuant to authority and power contained in the Charter of the
Corporation.

2
<PAGE> 3
IN WITNESS WHEREOF, DREMAN MUTUAL GROUP, INC. has caused these
presents to be signed in its name and on its behalf by its President and
attested by its Secretary on March 19, 1992.

DREMAN MUTUAL GROUP, INC.

By: /s/Thomas F. Sassi
----------------------
Thomas F. Sassi
President

Attest:

/s/Thomas A. Famigletti
- --------------------------
Thomas A. Famigletti
Secretary

3
<PAGE> 4
THE UNDERSIGNED, President of DREMAN MUTUAL GROUP, INC., who executed
on behalf of said Corporation the foregoing Articles Supplementary to the
Charter of which the certificate is made a part, hereby acknowledges in the
name and on behalf of said Corporation, the foregoing Articles Supplementary to
the Charter to be the corporate act of said Corporation and further certifies
that, to the best of his knowledge, information and belief, the matters and
facts set forth therein with respect to the approval thereof are true in all
material respects, under the penalties of perjury.

/s/Thomas F. Sassi
------------------------
Thomas F. Sassi
President

<PAGE> 1
EXHIBIT 99.B1f

Filed September 8, 1995

KEMPER-DREMAN FUND, INC.

ARTICLES SUPPLEMENTARY

Kemper-Dreman Fund, Inc., a Maryland Corporation registered as an
open-end investment company under the Investment Company Act of 1940 having its
principal office in the State of Maryland in Baltimore City (hereinafter called
the "Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:

FIRST: Immediately prior to the filing of these Articles
Supplementary, the Corporation had authority to issue 500,000,000 shares with a
par value of $.01 each, of which one hundred million (100,000,000) shares have
been classified as the Kemper-Dreman Contrarian Fund Class A Shares, one
hundred million (100,000,000) shares have been classified as the Kemper-Dreman
High Return Fund Class A Shares, one hundred million (100,000,000) shares have
been classified as the Kemper-Dreman Small Cap Value Fund Class A Shares, and
one hundred million (100,000,000) shares have been classified as the
Kemper-Dreman Fixed-Income Fund Class A Shares.

SECOND: As of the filing of the Articles Supplementary, the
Corporation shall have authority to issue 500,000,000 shares with a par value
of $.01 each. Of these shares:

a. 60,000 shares (including all previously issued and
outstanding Kemper-Dreman Contrarian Fund Class A Shares) are
classified as Kemper-Dreman Contrarian Fund Class A Shares, 60,000,000
shares are classified as Kemper-Dreman Contrarian Fund Class B Shares,
15,000,000 shares are classified as Kemper-Dreman Contrarian Fund
Class C Shares, 15,000,000 shares are classified as Kemper-Dreman
Contrarian Fund Class I Shares;

b. 60,000,000 shares (including all previously issued
and outstanding Kemper-Dreman High Return Fund Class A Shares) are
classified as Kemper-Dreman High Return Fund Class A Shares,
60,000,000 shares are classified as Kemper-Dreman High Return Fund
Class B Shares, 15,000,000 shares are classified as Kemper-Dreman High
Return Fund Class C Shares, 15,000,000 shares are classified as
Kemper-Dreman High Return Fund Class I Shares;

c. 60,000,000 shares (including all previously issued
and outstanding Kemper-Dreman Small Cap Value Fund Class A Shares) are
classified as Kemper-Dreman High Small Cap Fund Class A Shares,
60,000,000 shares are classified as Kemper-Dreman Small Cap Fund Class
B Shares, 15,000,000 shares are classified as Kemper-Dreman Small Cap
Fund Class C Shares, 15,000,000 shares are classified as Kemper-Dreman
Small Cap Fund Class I Shares;
<PAGE> 2
d. 1,000,000 shares (including all previously issued and
outstanding Kemper-Dreman Fixed-Income Fund Class A Shares) are
classified as Kemper-Dreman Fixed-Income Class A Shares;

e. 49,000,000 are unclassified.

THIRD: All the shares of common stock of the Corporation, both
classified and unclassified, collectively have an aggregate par value of
$5,000,000.

FOURTH: The preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of the Class A Shares of each Fund as set forth in
ARTICLE FIFTH of the Corporation's Charter, and in the provisions of the
Charter relating to stock of the Corporation generally, remain unchanged.

FIFTH: Except as set forth below, the Class B, C and I Shares of each
Fund of the Corporation shall have the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption as set forth in ARTICLE
FIFTH of the Corporation's Charter and shall be subject to all provisions of
the Charter relating to stock of the Corporation generally. In addition, the
following voting powers and conversion rights shall apply:

(a) any voting rights with respect to Rule 12b-1 Plan of
the Class B or Class C Shares of a Fund shall be exercisable by such
Class only.

(b) the Class B Shares of each Fund shall convert into
Class A Shares of the same Fund within a period of six years.

SIXTH: The Board of Directors of the Corporation has authorized,
classified or reclassified the Class A, B, C and I Shares under the authority
contained in the Charter of the Corporation.

SEVENTH: The Corporation is registered as an open-end company under
the Investment Company Act of 1940.

EIGHTH: The total number of shares of each of the Classes of Shares
of the Funds has been increased or decreased, as applicable, by the Board of
Directors of the Corporation in accordance with section 2-105(c) of the
Maryland General Corporation Law.

The undersigned President acknowledges these Articles Supplementary to
be the corporate act of the Corporation and states that to the best of his or
her knowledge, information and belief, the matters and facts set forth in these
Articles with respect to authorization and approval are true in all material
respects and that this statement is made under the penalties for perjury.

<PAGE> 1
EXHIBIT 99.B1g

Filed September 8, 1995

DREMAN MUTUAL GROUP, INC.

ARTICLES OF AMENDMENT

Dreman Mutual Group, Inc., a Maryland Corporation registered as an
open-end investment company under the Investment Company Act of 1940 having its
principal office in the State of Maryland in Baltimore City (hereinafter called
the "Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:

FIRST: Article SECOND of the Corporation's charter (the "Charter") is
hereby amended as follows:

Article SECOND: The name of the Corporation is Kemper-Dreman
Fund, Inc.

SECOND: In Article FIFTH of the Charter, the one hundred million
(100,000,000) shares of the Dreman Contrarian Portfolio shall be redesignated
as the Kemper-Dreman Contrarian Fund Class A Shares, the one hundred million
(100,000,000) shares of the Dreman High Return Portfolio shall be redesignated
as the Kemper-Dreman High Return Fund Class A Shares, the one hundred million
(100,000,000) shares of the Dreman Small Cap Value Portfolio shall be
redesignated as the Kemper-Dreman Small Cap Value Fund Class A Shares, and the
one hundred million (100,000,000) shares of the Dreman Fixed-Income Portfolio
shall be redesignated as the Kemper-Dreman Fixed-Income Fund Class A Shares.

THIRD: Article SEVENTH of the Charter is hereby amended to insert
after the last paragraph as follows:

The Corporation shall, to the extent permitted by applicable
law, have the right at any time to redeem all or any part of any
series or class, or all series or classes, of the shares of the
Corporation, subject to such terms and conditions as the Board of
Directors may from time to time approve.

FOURTH: The Board of Directors of the Corporation has duly adopted
resolutions on June 21, 1995 which set forth the foregoing amendments to the
Charter.

FIFTH: Articles FIRST and SECOND of these Articles of Amendment are
limited to changes expressly permitted by section 2-605(a)(4) of the Maryland
General Corporation Law to be made without action by stockholders, and the
Corporation is an open-end company under the Investment Company Act of 1940.

SIXTH: Article Third of these Articles of Amendment was approved by
the stockholders of the Corporation at a meeting held on August 1, 1995 and
concluded after adjournments on August 18, 1995.
<PAGE> 2
The undersigned President acknowledges these Articles of Amendment to
be the corporate act of the Corporation and states that to the best of his or
her knowledge, information and belief, the matters and facts set forth in these
Articles with respect to authorization and approval are true in all material
respects and that this statement is made under the penalties for perjury.

IN WITNESS WHEREOF, DREMAN MUTUAL GROUP, INC. has caused these
Articles of Amendment to be executed in its name and on its behalf by its
President and witnessed by its Secretary on September 8, 1995.

[SEAL] DREMAN MUTUAL GROUP, INC.

Attest: /s/Philip J. Collora By: /s/Stephen B. Timbers
---------------------------------- ------------------------
Secretary President

2
<PAGE> 3
IN WITNESS WHEREOF, KEMPER-DREMAN FUND, INC. has caused these Articles
Supplementary to be executed in its name and on its behalf by its President and
witnessed by its Secretary on September 8, 1995.

[SEAL] KEMPER-DREMAN FUND, INC

Attest: /s/Philip J. Collora By: /s/Stephen B. Timbers
---------------------------------- ----------------------
Secretary President

<PAGE> 1
EXHIBIT 99.18

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, Zurich Kemper Investments, Inc. and/or Dreman Value Advisors, Inc.
serves as investment adviser and Kemper Distributors, Inc. serves as principal
underwriter for each Fund;

WHEREAS, each Fund has a non-Rule 12b-1 administrative services agreement
providing for a service fee at an annual rate of up to .25% of average daily
net assets;

WHEREAS, each Fund has established a Multi-Distribution System enabling each
Fund, as more fully 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 ("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 ("Class B shares"); (c) without a front-end sales load, but subject
to a CDSC (applicable to shares purchased on or after April 1, 1996 and which
may vary among Funds), a Rule 12b-1 Plan providing for a distribution fee, and
a service fee ("Class C shares"); and (d) for certain Funds, without a
front-end load, a CDSC, a distribution fee or a service fee ("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:

1. Each class of shares will represent interests in the same portfolio of
investments of the 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 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
Rule 12b-1 Plan (including obtaining shareholder approval of such Rule 12b-1
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 Fund board to be attributable to a specific class of
shares:

<PAGE> 2
(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 registration fees incurred by a specific class; (iii) litigation or
other legal expenses relating to a specific class; (iv) board member 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 the Fund (or a series) shall be so applied upon approval by a
majority of the members of the Fund's board, including a majority of the board
members who are not interested persons of the Fund.

2. Under the Multi-Distribution System, certain expenses may be attributable
to the 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 that, if the Fund has series, expenses will first
be allocated among series, based upon their relative aggregate net assets.
Expenses that are attributable to a particular series, but not to a particular
class thereof, will be borne by each class of that 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 the
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 that 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 Rule 12b-1 Plan (including obtaining shareholder
approval of such Rule 12b-1 Plan or any amendment thereto); (b) any service
fees attributable to such class; (c) any shareholder servicing fees
attributable to such class; and (d) any class expenses determined by the Fund
board 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 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

2
<PAGE> 3
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 the 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 the 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 the Fund, including distribution fees,
front-end sales loads and CDSCs, 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 must be approved by a majority of the
members of the Fund's board, including a majority of the board members who are
not interested persons of the Fund.

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.

For use on or after: April 1, 1996