<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 26, 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. 16 /X/
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 18 /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)
X on May 1, 1996 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
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. The Class A,
Class B and Class C shares are described in the prospectus; and Class I shares
are described in the prospectus as supplemented hereby.
Class I shares are available for purchase exclusively by the following
investors: (a) tax-exempt retirement plans of 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
SHAREHOLDER TRANSACTION EXPENSES (APPLICABLE TO EACH FUND)
<TABLE>
<CAPTION>
CLASS
I
-----
<S> <C>
Maximum Sales Charge on Purchases (as a percentage of offering price)................ None
Maximum Sales Charge on Reinvested Dividends......................................... None
Redemption Fees...................................................................... None
Exchange Fee......................................................................... None
Deferred Sales Charge (as a percentage of redemption proceeds)....................... None
</TABLE>
<PAGE> 4
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
CONTRARIAN HIGH RETURN SMALL CAP VALUE
FUND FUND FUND
---------- ----------- ---------------
<S> <C> <C> <C>
Management Fees (restated)................................... .75% .75% .75%
12b-1 Fees................................................... None None None
Other Expenses (estimated)................................... .10% .10% .10%
-------- -------- ----------
Total Operating Expenses..................................... .85% .85% .85%
======== ========= ==========
</TABLE>
EXAMPLE
<TABLE>
<CAPTION>
1 3 5 10
FUND YEAR YEARS YEARS YEARS
-------------------- --- ---- ---- -----
<S> <C> <C> <C> <C> <C>
You would pay the following Contrarian $ 9 $ 27 $ 47 $ 105
expenses on a $1,000 investment, High Return $ 9 $ 27 $ 47 $ 105
assuming (1) 5% annual return and Small Cap Value $ 9 $ 27 $ 47 $ 105
(2) redemption at the end of each
time period:
</TABLE>
- ---------------
The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in Class I shares of a Fund will
bear directly or indirectly.
"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.
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 I shares - .47%. The tables for these Funds reflect
the full management fee rate without any waiver.
The Example assumes a 5% annual rate of return pursuant to requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance of any Fund. The
Example should not be considered to be a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
FINANCIAL HIGHLIGHTS
HIGH RETURN FUND
<TABLE>
<CAPTION>
CLASS I
----------------
NOV. 1, 1995
TO DEC. 31, 1995
----------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $19.90
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .04
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 2.03
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.07
- --------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .06
- --------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .40
- --------------------------------------------------------------------------------------------------------------------------
Total dividends .46
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $21.51
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 10.47%
- --------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses absorbed by the Fund .47%
- --------------------------------------------------------------------------------------------------------------------------
Net investment income 1.99%
- --------------------------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses .85%
- --------------------------------------------------------------------------------------------------------------------------
Net investment income 1.61%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 5
SMALL CAP VALUE FUND
<TABLE>
<CAPTION>
CLASS I
----------------
NOV. 1, 1995
TO DEC. 31, 1995
----------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $14.25
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 1.11
- --------------------------------------------------------------------------------------------------------------------------
Less distribution from net realized gain .84
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.52
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 8.03%
- --------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses absorbed by the Fund .47%
- --------------------------------------------------------------------------------------------------------------------------
Net investment income .28%
- --------------------------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses .90%
- --------------------------------------------------------------------------------------------------------------------------
Net investment loss (.15)%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Total return does not reflect the effect of any sales charges. The
investment manager agreed to waive its management fee and absorb operating
expenses of the Funds. The "Other Ratios to Average Net Assets" are
completed without this expense waiver or absorption.
No financial information is presented for Class I shares of the Contrarian Fund
since no Class I shares have been issued as of such Fund's fiscal year end.
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)
3
<PAGE> 6
<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 28
- ------------------------------------------------
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.
KEMPER FUNDS 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> 7
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> 8
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 Class A, B and C shares
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> 9
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
CONTRARIAN HIGH RETURN SMALL CAP VALUE
FUND FUND FUND
---------- ----------- ---------------
<S> <C> <C> <C>
CLASS A SHARES
Management Fees (restated)................................... .75% .75% .75%
12b-1 Fees................................................... None None None
Other Expenses (restated).................................... .91% .82% 1.08%
-------- --------- ------------
Total Operating Expenses..................................... 1.66% 1.57% 1.83%
======== ========= ============
</TABLE>
<TABLE>
<CAPTION>
CONTRARIAN HIGH RETURN SMALL CAP VALUE
FUND FUND FUND
---------- ----------- ---------------
<S> <C> <C> <C>
CLASS B SHARES
Management Fees (restated)................................... .75% .75% .75%
12b-1 Fees(4)................................................ .75% .75% .75%
Other Expenses (estimated)................................... .86% .85% .89%
-------- --------- ------------
Total Operating Expenses..................................... 2.36% 2.35% 2.39%
======== ========= ============
</TABLE>
<TABLE>
<CAPTION>
CONTRARIAN HIGH RETURN SMALL CAP VALUE
FUND FUND FUND
---------- ----------- ---------------
<S> <C> <C> <C>
CLASS C SHARES
Management Fees (restated)................................... .75% .75% .75%
12b-1 Fees(5)................................................ .75% .75% .75%
Other Expenses (estimated)................................... .81% .80% .85%
-------- --------- ------------
Total Operating Expenses..................................... 2.31% 2.30% 2.35%
======== ========= ============
</TABLE>
- ---------------
(4) As a result of 12b-1 fees, long-term shareholders may pay more than the
economic equivalent of the maximum initial sales charges permitted by the
National Association of Securities Dealers, although KDI believes that it is
unlikely because of the automatic conversion feature described under
"Purchase of Shares--Deferred Sales Charge Alternative--Class B Shares."
(5) As a result of the accrual of 12b-1 fees, long-term shareholders may pay
more than the economic equivalent of the maximum initial sales charges
permitted by the National Association of Securities Dealers.
EXAMPLE
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
You would pay the following Contrarian Fund $73 $107 $143 $243
expenses on a $1,000 High Return Fund $73 $104 $138 $234
investment, assuming (1) Small Cap Value Fund $75 $112 $151 $260
5% annual return and (2)
redemption at the end of
each time period:
</TABLE>
3
<PAGE> 10
EXAMPLE
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
CLASS B SHARES(6)
You would pay the following Contrarian Fund $54 $94 $136 $236
expenses on a $1,000 High Return Fund $54 $93 $136 $231
investment, assuming (1) Small Cap Value Fund $54 $95 $138 $246
5% annual return and (2)
redemption at the end of
each time period:
You would pay the following Contrarian Fund $24 $74 $126 $236
expenses on the same High Return Fund $24 $73 $126 $231
investment, assuming no Small Cap Value Fund $24 $75 $128 $246
redemption:
</TABLE>
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
CLASS C SHARES(7)
You would pay the following Contrarian Fund $23 $72 $124 $265
expenses on a $1,000 High Return Fund $23 $72 $123 $264
investment, assuming (1) Small Cap Value Fund $24 $73 $126 $269
5% 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.
Effective August 24, 1995, the investment management fee for each Fund changed.
"Management Fees" have been restated based upon the new investment management
fee. "Other Expenses" for Class A shares have been restated to reflect different
fee schedules for the current fiscal year. "Other Expenses" for Class B shares
and Class C shares, which were not available for purchase prior to September 11,
1995, have been estimated for the current fiscal year.
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%. The tables for these Funds reflect the full management fee rate
without any waiver.
The Example assumes a 5% annual rate of return pursuant to requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance of any Fund. THE
EXAMPLE SHOULD NOT BE CONSIDERED TO BE A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
4
<PAGE> 11
FINANCIAL HIGHLIGHTS
The tables below show financial information for each Fund expressed in terms of
one share outstanding throughout the period. The information in the tables is
covered by the reports of the Funds' independent auditors. The report is
contained in KDF's Registration Statement and is available from KDF. The
financial statements contained in each 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 $12.18 13.62 13.50 12.38 10.11 11.34 10.55 10.00
- -------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .26 .28 .22 .25 .28 .25 .29 .11
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 5.05 (.28) .96 1.13 2.38 (.94) 1.60 .54
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 5.31 -- 1.18 1.38 2.66 (.69) 1.89 .65
- -------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distributions from net investment income .24 .28 .22 .26 .28 .26 .29 .10
- -------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains 1.05 1.16 .84 -- .11 .28 .81 --
- -------------------------------------------------------------------------------------------------------------------------------
Total dividends 1.29 1.44 1.06 .26 .39 .54 1.10 .10
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $16.20 12.18 13.62 13.50 12.38 10.11 11.34 10.55
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 44.57% (.03) 9.10 11.32 26.53 (6.08) 18.29 6.96
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses absorbed by the Fund 1.25% 1.25 1.25 1.25 1.25 1.25 1.25 1.34
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.85% 1.89 1.64 2.04 2.35 2.46 2.59 2.42
- -------------------------------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 1.66% 1.42 1.54 1.53 1.76 1.52 1.67 2.37
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.44% 1.71 1.34 1.76 1.84 2.19 2.17 1.39
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period March 18, 1988 (inception date) to December 31, 1988.
5
<PAGE> 12
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------ ------------------
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 $15.26 15.26
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .07 .08
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 1.85 1.85
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.92 1.93
- --------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distributions from net investment income .07 .08
- --------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains .91 .91
- --------------------------------------------------------------------------------------------------------------------------
Total dividends .98 .99
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $16.20 16.20
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 12.83% 12.85
- --------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses absorbed by the Fund 2.00% 1.95
- --------------------------------------------------------------------------------------------------------------------------
Net investment income .88% .93
- --------------------------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 2.36% 2.31
- --------------------------------------------------------------------------------------------------------------------------
Net investment income .52% .57
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
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) $25,482 12,983 17,157 14,884 14,292 11,782 9,632 5,889
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 30% 16 16 28 36 37 45 39
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 13
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 $15.11 15.50 14.62 12.53 8.85 10.14 11.03 10.00
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .26 .25 .21 .24 .31 .34 .39 .25
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 6.76 (.39) 1.13 2.21 3.87 (1.21) 1.41 1.00
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 7.02 (.14) 1.34 2.45 4.18 (.87) 1.80 1.25
- --------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distributions from net investment income .24 .25 .21 .24 .30 .35 .43 .22
- --------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains .40 -- .25 .12 .20 .07 2.26 --
- --------------------------------------------------------------------------------------------------------------------------------
Total dividends .64 .25 .46 .36 .50 .42 2.69 .22
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $21.49 15.11 15.50 14.62 12.53 8.85 10.14 11.03
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 46.86% (.99) 9.22 19.80 47.57 (8.63) 18.45 13.04
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses absorbed by the Fund 1.25% 1.25 1.25 1.25 1.25 1.25 1.25 .57
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.55% 1.58 1.47 1.88 2.52 3.61 3.83 3.75
- --------------------------------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 1.57% 1.39 1.56 1.70 2.31 2.38 2.74 3.36
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.23% 1.44 1.16 1.43 1.46 2.48 2.34 .96
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period March 18, 1988 (inception date) to December 31, 1988.
<TABLE>
<CAPTION>
CLASS B CLASS C
--------------------- ---------------------
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 $ 19.45 19.45
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .07 .09
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 2.41 2.41
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.48 2.50
- --------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distributions from net investment income .06 .07
- --------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains .40 .40
- --------------------------------------------------------------------------------------------------------------------------
Total dividends .46 .47
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 21.47 21.48
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 12.88% 12.94
- --------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses absorbed by the Fund 2.00% 1.95
- --------------------------------------------------------------------------------------------------------------------------
Net investment income .61% .66
- --------------------------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 2.35% 2.30
- --------------------------------------------------------------------------------------------------------------------------
Net investment income .26% .31
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
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) $98,196 35,005 28,413 14,425 7,238 3,868 3,992 2,413
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 18% 12 14 13 37 204 156 107
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 14
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 $10.85 11.23 11.52 10.00
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.02) -- .06 .03
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 4.64 .02 .23 1.95
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations 4.62 .02 .29 1.98
- ----------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distributions from net investment income -- -- .06 .03
- ----------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains .97 .40 .52 .43
- ----------------------------------------------------------------------------------------------------------------------------
Total dividends .97 .40 .58 .46
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.50 10.85 11.23 11.52
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 43.29% .15 2.54 32.51*
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses absorbed by the Fund 1.25% 1.25 1.25 1.25
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.16)% (.03) .53 .81
- ----------------------------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 1.83% 1.82 2.09 4.29
- ----------------------------------------------------------------------------------------------------------------------------
Net investment loss (.74)% (.61) (.32) (2.24)
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
(a) For the period May 22, 1992 (commencement of operations) to December 31,
1992.
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------ ------------------
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 $15.75 15.75
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.02) (.02)
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized loss (.41) (.41)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.43) (.43)
- --------------------------------------------------------------------------------------------------------------------------
Less distributions from net realized gains .84 .84
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.48 14.48
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) (2.52)% (2.51)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses absorbed by the Fund 2.00% 1.95
- --------------------------------------------------------------------------------------------------------------------------
Net investment loss (.99)% (.94)
- --------------------------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 2.39% 2.35
- --------------------------------------------------------------------------------------------------------------------------
Net investment loss (1.38)% (1.34)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
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) $31,606 6,931 4,875 2,385
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 86% 140 79 37
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Total return does not reflect the effect of any sales charges. The
investment manager agreed to waive its management fee and absorb operating
expenses of the Funds. The "Other Ratios to Average Net Assets" are computed
without this expense waiver or absorption.
8
<PAGE> 15
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> 16
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> 17
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> 18
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> 19
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> 20
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-six 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 $79 billion under management. ZKI and its affiliates (including
DVA) act as investment manager for 29 open-end and seven closed-end investment
companies, with 76 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 Bachelor's 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> 21
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 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.................................. $231,000 1,000 7,000 0 0 0
High Return................................. $594,000 20,000 15,000 1,000 1,000 0
Small Cap Value............................. $278,000 18,000 8,000 1,000 1,000 0
</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> 22
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 SHARES. For Class A shares, a firm becomes eligible for the service fee
based upon assets in the accounts in the month following the month of purchase
and the fee continues until terminated by KDI or KDF. The fees are calculated
monthly and paid quarterly.
CLASS B AND CLASS C SHARES. For Class B shares and 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 B and Class C shares maintained and serviced by the
firm. After the first year, a firm becomes eligible for the quarterly service
fee and the fee continues until terminated by KDI or 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. In addition, KDI may, from time to time, from its own
resources pay certain firms additional amounts for ongoing administrative
services and assistance provided to their customers and clients who are
shareholders of each Fund.
CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICE AGENT. Investors Fiduciary
Trust Company ("IFTC"), 127 West 10th Street, Kansas City, Missouri 64105, as
custodian, and State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, as sub-custodian, have custody of all securities and cash
of KDF maintained in the United States. IFTC also is KDF's transfer agent and
dividend-paying agent. Pursuant to a services agreement with IFTC, Kemper
Service Company, an affiliate of DVA, serves as "Shareholder Service Agent" of
KDF and, as such, performs all of IFTC's duties as transfer agent and
dividend-paying agent. For a description of transfer agent and shareholder
service agent fees, see "Investment Manager and Underwriter" in the Statement of
Additional Information.
PORTFOLIO TRANSACTIONS. DVA places all orders for purchases and sales of a
Fund's securities. Subject to seeking best execution of orders, DVA may consider
sales of shares of a Fund and of funds managed by ZKI or its affiliates as a
factor in selecting broker-dealers. See "Portfolio Transactions" in the
Statement of Additional Information.
16
<PAGE> 23
DIVIDENDS AND TAXES
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 short-term and long-term capital gains at least annually.
Dividends paid by a Fund as to each class of its shares will be calculated in
the same manner, at the same time and on the same day. The level of income
dividends per share (as a percentage of net asset value) will be lower for Class
B and Class C shares than for Class A shares primarily as a result of the
distribution services fee applicable to Class B and Class C shares.
Distributions of capital gains, if any, will be paid in the same amount for each
class.
Income and capital gain dividends, if any, of a Fund will be credited to
shareholder accounts in full and fractional shares of the same class of that
Fund at net asset value on the reinvestment date, except that, upon written
request to the Shareholder Service Agent, a shareholder may select one of the
following options:
(1) To receive income and short-term capital gain dividends in cash and
long-term capital gain dividends in shares of the same class at net asset
value; or
(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> 24
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> 25
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 A Maximum initial sales charge of None Initial sales charge waived or
5.75% of the public offering reduced for certain purchases
price
Class B Maximum contingent deferred sales 0.75% Shares convert to Class A shares
charge of 4% of redemption six years after issuance
proceeds; declines to zero after
six years
Class C Contingent deferred sales charge 0.75% No conversion feature
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> 26
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 by members of the plaintiff
class in the proceeding known as HOWARD AND AUDREY TABANKIN, ET AL. V. KEMPER
20
<PAGE> 27
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
identifying the purchaser as a member of the "Tabankin Class." Shares purchased
under this privilege will be maintained in a separate account that includes only
shares purchased under this privilege. For more details concerning this
privilege, class members should refer to the Notice of (1) Proposed Settlement
with Defendants; and (2) Hearing to Determine Fairness of Proposed Settlement
dated August 31, 1995, issued in connection with the aforementioned court
proceeding. For sales of Fund shares at net asset value pursuant to this
privilege, KDI may in its discretion pay investment dealers and other financial
services firms a concession, payable quarterly, at an annual rate of up to .25%
of net assets attributable to such shares maintained and serviced by the firm. A
firm becomes eligible for the concession based upon assets in accounts
attributable to shares purchased under this privilege in the month after the
month of purchase and the concession continues until terminated by KDI. The
privilege of purchasing Class A shares of the Fund at net asset value under this
privilege is not available if another net asset value purchase privilege also
applies.
Class A shares may be sold at net asset value in any amount to: (a) officers,
directors, employees (including retirees) and sales representatives of 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> 28
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." 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> 29
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
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<PAGE> 30
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> 31
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;
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<PAGE> 32
(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> 33
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. The contingent deferred sales charge will be waived in
the event of: (a) redemptions by a participant-directed qualified retirement
plan described in Code Section 401(a) or a participant-directed non-qualified
deferred compensation plan described in Code Section 457; (b) redemptions by
employer sponsored employee benefit plans using the subaccount record keeping
system made available through the Shareholder Service Agent; (c) redemption of
shares of a shareholder (including a registered joint owner) who has died; (d)
redemption of shares of a shareholder (including a registered joint owner) who
after purchase of the shares being redeemed becomes totally disabled (as
evidenced by a determination by the federal Social Security Administration); (e)
redemptions under KDF's Systematic Withdrawal Plan at a maximum of 10% per year
of the net asset value of the account; and (f) for any participant-directed
redemption of shares held by employer sponsored employee benefit plans
maintained on the subaccount record keeping system made available by the
Shareholder Service Agent.
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 purchased prior to
April 1, 1996, then from Class C shares representing reinvested dividends and
then from the purchases of Class C shares made on or after April 1, 1996.
Class C shares may be exchanged without any contingent deferred sales charge
being imposed at the time of exchange. For determining whether there is a
contingent deferred sales charge that may be imposed upon redemption of the
Class C shares received by exchange; they retain the cost and purchase date of
the shares that were originally purchased and exchanged.
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.
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<PAGE> 34
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, 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, Kemper Horizon Fund and Kemper Europe 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.
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<PAGE> 35
EXCHANGE PRIVILEGE. Shareholders of Class A, Class B and Class C shares may
exchange their shares for shares of the corresponding class of Kemper Mutual
Funds in accordance with the provisions below.
CLASS A SHARES. Class A shares of the Kemper Mutual Funds and shares of the
Money Market Funds listed under "Special Features--Class A Shares--Combined
Purchases" above may be exchanged for each other at their relative net asset
values. Shares of Money Market Funds and Kemper Cash Reserves Fund that were
acquired by purchase (not including shares acquired by dividend reinvestment)
are subject to the applicable sales charge on exchange. Series of Kemper Target
Equity Fund are available on exchange only during the Offering Period for such
series as described in the applicable prospectus. Cash Equivalent Fund,
Tax-Exempt California Money Market Fund, Cash Account Trust, 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
Service Company, 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
29
<PAGE> 36
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.
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, 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
30
<PAGE> 37
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 (and Class C shares in the first year following the purchase) may be
redeemed under a systematic withdrawal plan is 10% of the net asset value of the
account. Shares are redeemed so that the payee will receive payment
approximately the first of the month. Any income and capital gain dividends will
be automatically reinvested at net asset value. A sufficient number of full and
fractional shares will be redeemed to make the designated payment. Depending
upon the size of the payments requested and fluctuations in the net asset value
of the shares redeemed, redemptions for the purpose of making such payments may
reduce or even exhaust the account.
The purchase of Class A shares while participating in a systematic withdrawal
plan will ordinarily be disadvantageous to the investor because the investor
will be paying a sales charge on the purchase of shares at the same time that
the investor is redeeming shares upon which a sales charge may have already been
paid. Therefore, KDF will not knowingly permit additional investments of less
than $2,000 if the investor is at the same time making systematic withdrawals.
KDI will waive the contingent deferred sales charge on redemptions of Class B
and Class C shares made pursuant to a systematic withdrawal plan. The right is
reserved to amend the systematic withdrawal plan on 30 days' notice. The plan
may be terminated at any time by the investor or KDF.
TAX-SHELTERED RETIREMENT PLANS. The Shareholder Service Agent provides
retirement plan services and documents and KDI can establish investor accounts
in any of the following types of retirement plans:
- - Individual Retirement Accounts ("IRAs") trusteed by IFTC. This includes
Simplified Employee Pension Plan ("SEP") IRA accounts and prototype documents.
- - 403(b)(7) Custodial Accounts also trusteed by IFTC. This type of plan is
available to employees of most non-profit organizations.
- - Prototype money purchase pension and profit-sharing plans may be adopted by
employers. The maximum annual contribution per participant is the lesser of
25% of compensation or $30,000.
Brochures describing the above plans as well as model defined benefit plans,
target benefit plans, 457 plans, 401(k) plans and materials for establishing
them are available from the Shareholder Service Agent upon request. The
brochures for plans trusteed by IFTC describe the current fees payable to IFTC
for its services as trustee. Investors should consult with their own tax
advisers before establishing a retirement plan.
PERFORMANCE
KDF may advertise several types of performance information for a class of
shares, including "average annual total return" and "total return." Performance
information will be computed separately for Class A, Class B and Class C shares.
Each of these figures is based upon historical results and is not representative
of the future performance of any class of the Funds.
Average annual total return and total return figures measure both the net
investment income generated by, and the effect of any realized and unrealized
appreciation or depreciation of, the underlying investments in a Fund's
portfolio for the period referenced, assuming the reinvestment of all dividends.
Thus, these figures reflect the change in the value of an investment in a Fund
during a specified period. Average annual total return will be quoted for at
least the one, five and ten year periods ending on a recent calendar quarter (or
if such periods have not yet elapsed, at the end of a shorter period
corresponding to the life of the Fund for performance purposes). Average annual
total return figures represent the average annual percentage change over the
period in question. Total return figures represent the aggregate percentage or
dollar value change over the period in question.
A Fund's performance may be compared to that of the Consumer Price Index or
various unmanaged equity indexes including, but not limited to, the Dow Jones
Industrial Average, the Standard & Poor's 500 Stock
31
<PAGE> 38
Index, the Standard & Poor's/Barra Value Index, the Russell 1000 Value Index and
the Russell 2000 Value Index. The performance of a Fund may also be compared to
the combined performance of two indexes. The performance of a Fund may also be
compared to the performance of other mutual funds or mutual fund indexes with
similar objectives and policies as reported by independent mutual fund reporting
services such as Lipper Analytical Services, Inc. ("Lipper"). Lipper performance
calculations are based upon changes in net asset value with all dividends
reinvested and do not include the effect of any sales charges.
Information may be quoted from publications such as MORNINGSTAR, INC., THE WALL
STREET JOURNAL, MONEY MAGAZINE, FORBES, BARRON'S, FORTUNE, THE CHICAGO TRIBUNE,
USA TODAY, INSTITUTIONAL INVESTOR and REGISTERED REPRESENTATIVE. Also, investors
may want to compare the historical returns of various investments, performance
indexes of those investments or economic indicators, including but not limited
to stocks, bonds, certificates of deposit, money market funds and U.S. Treasury
obligations. Bank product performance may be based upon, among other things, the
BANK RATE MONITOR National Index(TM) or various certificate of deposit indexes.
Money market fund performance may be based upon, among other things, the
IBC/Donoghue's Money Fund Report(R) or Money Market Insight(R), reporting
services on money market funds. Performance of U.S. Treasury obligations may be
based upon, among other things, various U.S. Treasury bill indexes. Certain of
these alternative investments may offer fixed rates of return and guaranteed
principal and may be insured.
A Fund may depict the historical performance of the securities in which a Fund
may invest over periods reflecting a variety of market or economic conditions
either alone or in comparison with alternative investments, performance indexes
of those investments or economic indicators. A Fund may also describe its
portfolio holdings and depict its size or relative size compared to other mutual
funds, the number and make-up of its shareholder base and other descriptive
factors concerning the Fund. A Fund may also discuss the relative performance of
growth stocks versus value stocks.
Each Fund's Class A shares are sold at net asset value plus a maximum sales
charge of 5.75% of the offering price. While the maximum sales charge is
normally reflected in the Fund's Class A performance figures, certain total
return calculations may not include such charge and those results would be
reduced if it were included. Class B shares and Class C shares are sold at net
asset value. Redemptions of Class B shares within the first six years after
purchase may be subject to a contingent deferred sales charge that ranges from
4% during the first year to 0% after six years. Redemption of the Class C shares
within the first year after purchase may be subject to a 1% contingent deferred
sales charge. Average annual total return figures do, and total return figures
may, include the effect of the contingent deferred sales charge for the Class B
shares and Class C shares that may be imposed at the end of the period in
question. Performance figures for the Class B shares and Class C shares not
including the effect of the applicable contingent deferred sales charge would be
reduced if it were included.
Each Fund's returns and net asset value will fluctuate. Shares of a Fund are
redeemable by an investor at the then current net asset value, which may be more
or less than original cost. Redemption of Class B shares and Class C shares may
be subject to a contingent deferred sales charge as described above. Additional
information concerning each Fund's performance appears in the Statement of
Additional Information. Additional information about each Fund's performance
also appears in its Annual Report to Shareholders, which is available without
charge from KDF.
CAPITAL STRUCTURE
KDF was organized as a Maryland corporation in October, 1987 and has an
authorized capitalization of 500,000,000 shares of $.01 par value common stock.
In September, 1995, KDF changed its name from Dreman Mutual Group, Inc. to
Kemper-Dreman Fund, Inc. Since KDF may offer multiple funds, it is known as a
"series company." Currently, KDF offers four classes of shares of each Fund.
These are Class A, Class B and Class C shares, as well as Class I shares, which
are available for purchase exclusively by the following investors: (a) tax-
exempt retirement plans of ZKI and its affiliates; and (b) the following
investment advisory clients of ZKI and its investment advisory affiliates that
invest at least $1 million in a Fund: (1) unaffiliated benefit plans, such as
32
<PAGE> 39
qualified retirement plans (other than individual retirement accounts and
self-directed retirement plans); (2) unaffiliated banks and insurance companies
purchasing for their own accounts; and (3) endowment funds of unaffiliated
non-profit organizations. The Board of Directors may authorize the issuance of
additional classes and additional Funds if deemed desirable, each with its own
investment objectives, policies and restrictions. Shares of a Fund have equal
noncumulative voting rights except that Class B and Class C shares have separate
and exclusive voting rights with respect to the Rule 12b-1 Plan. Shares of each
class also have equal rights with respect to dividends, assets and liquidation
of such Fund subject to any preferences (such as resulting from different Rule
12b-1 distribution fees), rights or privileges of any classes of shares of the
Fund. Shares of each Fund are fully paid and nonassessable when issued, are
transferable without restriction and have no preemptive or conversion rights.
The Board of Directors of KDF may, to the extent permitted by applicable law,
have the right at any time to redeem from any shareholder, or from all
shareholders, all or any part of any series or class, or of all series or
classes, of the shares of KDF.
The Funds are not required to hold annual shareholder meetings and do not intend
to do so. However, they will hold special meetings as required or deemed
desirable for such purposes as electing directors, changing fundamental policies
or approving an investment management agreement. KDF will call a meeting of
shareholders, if requested to do so by the holders of at least 10% of KDF's
outstanding shares and, in the case of a meeting called to consider removal of a
director or directors, will assist in communications with other shareholders as
required by Section 16(c) of the Investment Company Act of 1940. If shares of
more than one Fund are outstanding, shareholders will vote by Fund and not in
the aggregate or by class except when voting in the aggregate is required under
the Investment Company Act of 1940, such as for the election of directors, or
when voting by class is appropriate.
33
<PAGE> 40
PROSPECTUS
KEMPER-DREMAN
FUND, INC.
MAY 1, 1996
KEMPER-DREMAN
CONTRARIAN FUND
KEMPER-DREMAN
HIGH RETURN FUND
KEMPER DREMAN
SMALL CAP VALUE FUND
Kemper Distributors, Inc.
120 South LaSalle Street
Chicago, IL 60603
[KEMPER FUNDS LOGO]
DRE-1 (5/96) [RECYCLED PAPER LOGO]
<PAGE> 41
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> 42
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-10
Dividends and Taxes..................................................... B-11
Performance............................................................. B-12
Officers and Directors.................................................. B-18
</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> 43
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> 44
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> 45
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> 46
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> 47
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 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.................................................. $15,000 $11,000 $10,000
High Return Fund................................................. $40,000 $21,000 $33,000
Small Cap Value Fund............................................. $58,000 $32,000 $16,000
</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.
The increase in the dollar amount of brokerage commissions paid by the High
Return Fund and the Small Cap Value Fund during the 1995 fiscal year was
primarily due to the increase in the amount of assets under management of each
Fund.
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 KFS
B-6
<PAGE> 48
Holding Corp. KFS 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
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 current investment management fee rates paid by the Funds are in the
prospectus under "Investment Manager and Underwriter." Prior to August 24, 1995,
each Fund paid the former adviser an investment management fee at the annual
rate of 1.00% of average daily net assets of the Fund up to $1 billion in net
assets and .75% thereafter. The table below shows the total investment
management fees paid by each Fund to DVA (or the former adviser for the Funds)
for the last three fiscal years.
<TABLE>
<CAPTION>
FUND FISCAL 1995 FISCAL 1994 FISCAL 1993
- ---------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Contrarian Fund................................................. $ 119,000 $ 155,000 $ 160,000
High Return..................................................... $ 369,000 $ 320,000 $ 243,000
Small Cap Value Fund............................................ $ 90,000 $ 64,000 $ 49,000
</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
B-7
<PAGE> 49
set in type and printed for existing shareholders, and KDI, as principal
underwriter, pays for the printing and distribution of copies thereof used in
connection with the offering of shares to prospective investors. KDI also pays
for supplementary sales literature and advertising costs.
The distribution agreement continues in effect from year to year so long as such
continuance is approved for each class at least annually by a vote of the Board
of Directors of KDF, including the Directors who are not interested persons of
KDF and who have no direct or indirect financial interest in the agreement. The
agreement automatically terminates in the event of its assignment and may be
terminated for a class at any time without penalty by a Fund for that Fund or by
KDI upon 60 days' notice. Termination by a Fund with respect to a class may be
by vote of a majority of the Board of Directors, or a majority of the Directors
who are not interested persons of KDF and who have no direct or indirect
financial interest in the agreement, or a "majority of the outstanding voting
securities" of the class of KDF, as defined under the Investment Company Act of
1940. The agreement may not be amended for a class to increase the fee to be
paid by a Fund with respect to such class without approval by a majority of the
outstanding voting securities of such class of a Fund and all material
amendments must in any event be approved by the Board of Directors in the manner
described above with respect to the continuation of the agreement.
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
COMMISSIONS RETAINED UNDERWRITER AFFILIATED
FUND BY UNDERWRITER PAID TO ALL FIRMS FIRMS
- --------------------------------------------------- -------------------- ----------------- --------------
<S> <C> <C> <C>
Contrarian Fund.................................... $0 $ 117,000 $ 6,000
High Return Fund................................... $0 $ 427,000 $ 52,000
Small Cap Value Fund............................... $0 $ 178,000 $ 13,000
</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...... $ 7,000 0 172,000 12,000 14,000 3,000 34,000 5,000 3,000
High
Return
Fund...... $15,000 1,000 455,000 57,000 35,000 9,000 75,000 13,000 7,000
Small
Cap
Value
Fund...... $ 8,000 1,000 208,000 13,000 17,000 4,000 39,000 6,000 4,000
</TABLE>
B-8
<PAGE> 50
<TABLE>
<CAPTION>
DISTRIBUTION OTHER DISTRIBUTION
TOTAL FEES PAID EXPENSES PAID BY
CONTINGENT DISTRIBUTION BY UNDERWRITER
DISTRIBUTION DEFERRED FEES PAID UNDERWRITER -------------------------
FEES PAID SALES BY TO ADVERTISING
BY FUND TO CHARGES TO UNDERWRITER AFFILIATED AND PROSPECTUS
FUND CLASS C SHARES UNDERWRITER UNDERWRITER(1) TO FIRMS FIRMS LITERATURE PRINTING
- --------------------------------- ----------- ------------ ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Contrarian Fund.................. $ 0 0 0 0 0 0
High Return Fund................. $ 1,000 0 1,000 0 5,000 1,000
Small Cap Value Fund............. $ 1,000 0 1,000 0 4,000 1,000
<CAPTION>
OTHER DISTRIBUTION
EXPENSES PAID BY
UNDERWRITER
---------------------------------
MARKETING MIS.
AND SALES OPERATING INTEREST
FUND CLASS C SHARES EXPENSES EXPENSES EXPENSES
- --------------------------------- --------- --------- --------
<S> <C> <C> <C>
Contrarian Fund.................. 1,000 0 0
High Return Fund................. 11,000 2,000 0
Small Cap Value Fund............. 10,000 2,000 0
</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
the Class A, B and C shares 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. With
respect to Class A shares, 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 shares, commencing with the month
after investment. With respect to Class B and 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 B and C shares maintained and serviced by the firm. After the first
year, a firm becomes eligible for the quarterly service fee and the fee
continues until terminated by KDI or 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...................... $ 5,000 3,000 0 16,000 1,000
High Return Fund..................... $19,000 6,000 0 41,000 4,000
Small Cap Value Fund................. $ 7,000 3,000 0 20,000 1,000
</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> 51
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 shares 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..................................................................... $ 8,000
High Return Fund.................................................................... $ 25,000
Small Cap Value Fund................................................................ $ 14,000
</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> 52
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> 53
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 certain American Depository Receipts may be
subject to foreign income taxes withheld at the source. Because the amount of a
Fund's investments in various countries will change from time to time, it is not
possible to determine the effective rate of such taxes in advance.
Shareholders who are non-resident aliens are subject to U.S. withholding tax on
ordinary income dividends (whether received in cash or shares) at a rate of 30%
or such lower rate as prescribed by any applicable tax treaty.
PERFORMANCE
As described in the prospectus, each Fund's historical performance or return for
a class of shares may be shown in the form of "average annual total return" and
"total return" figures. These various measures of performance are described
below. Performance information will be computed separately for each class.
Each Fund's average annual total return quotation is computed in accordance with
a standardized method prescribed by rules of the Securities and Exchange
Commission. The average annual total return for a Fund for a specific period is
found by first taking a hypothetical $1,000 investment ("initial investment") in
the Fund's shares on the first day of the period, adjusting to deduct the
maximum sales charge (in the case of Class A shares), and computing the
"redeemable value" of that investment at the end of the period. The redeemable
value in the case of Class B and Class C shares 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> 54
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 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> 55
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(+) $ 15,240 $6,454 $3,130 $ 24,824 148.2% $ 26,335 163.4% 218.0% 191.0%
Five Years 15,099 4,062 1,761 20,922 109.2 22,205 122.1 124.2 115.0
One Year 12,539 806 284 13,629 36.3 14,457 44.6 36.8 37.5
CLASS B SHARES
Life of
Fund(++) $ 10,615 $ 556 $ 112 $ 10,883 8.8% $ 11,283 12.8% 10.1% 8.6%
CLASS C SHARES
Life of
Fund(++) $ 10,616 $ 556 $ 113 $ NA NA% $ 11,285 12.9% 10.1% 8.6%
<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(+) 31.8% 191.7% 166.6 % 55.0%
Five Years 14.7 127.1 108.7 24.5
One Year 2.5 38.4 31.0 5.3
CLASS B SHARE
Life of
Fund(++) 0.4% 10.5% 7.6 % 2.5%
CLASS C SHARE
Life of
Fund(++) 0.4% 10.5% 7.6 % 2.5%
</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(+) 12.4% NA% NA% 16.0% 14.7% 3.6% 14.8% 13.4 5.8
Life of Fund(++) NA 31.4 47.7 36.3 30.4 1.3 34.9 26.6 8.4
Five Years 15.9 NA NA 17.5 16.5 2.8 17.8 15.9 4.5
One Year 36.3 NA NA 36.8 37.5 2.5 38.4 31.0 5.3
</TABLE>
- ---------------
(+) Since March 18, 1988, except for the Russell 1,000(R) Value which is since
March 31, 1988.
(++) Since September 11, 1995 for Class B and Class C shares, except for the
Russell 1,000(R) Value which is since August 31, 1995.
NA - Not Available.
B-14
<PAGE> 56
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(+) $ 20,217 $6,782 $5,317 $ 32,316 223.2% $ 34,283 242.8% 218.0%
Five Years 22,886 1,440 2,136 26,462 164.6 28,077 180.8 124.2
One Year 13,406 261 176 13,843 38.4 14,686 46.9 36.8
CLASS B SHARES
Life of Fund(++) $ 11,039 $ 213 $ 36 $ 10,888 8.9% $ 11,288 12.9% 10.1%
CLASS C SHARES
Life of Fund(++) $ 11,044 $ 213 $ 37 $ NA NA% $ 11,294 12.9% 10.1%
<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(+) 191.0% 31.8% 186.4% 159.6 %
Five Years 115.0 14.7 118.7 105.1
One Year 37.5 2.5 37.0 29.7
CLASS B SHARES
Life of Fund(++) 8.6% 0.4% 10.2% 8.5 %
CLASS C SHARES
Life of Fund(++) 8.6% 0.4% 10.2% 8.5 %
</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(+) 16.3% NA% NA% 16.0% 14.7% 3.6% 14.5% 13.0%
Life of Fund(++) NA 31.6 48.1 36.3 30.4 1.3 10.2 30.1
Five Years 21.5 NA NA 17.5 16.5 2.8 16.9 15.5
One Year 38.4 NA NA 36.8 37.5 2.5 37.0 29.7
</TABLE>
- ---------------
(+) Since March 18, 1988, except for the S&P/Barra's Value which is since March
31, 1988.
(++) Since September 11, 1995 for Class B and Class C shares, except for the
S&P/Barra's Value which is since August 31, 1995.
NA - Not Available.
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(+) $ 13,666 $2,093 $864 $ 16,623 66.2% $ 17,637 76.4% 67.8%
One Year 12,598 297 612 13,507 35.1 14,329 43.3 36.8
CLASS B SHARES
Life of
Fund(++) 9,193 112 443 9,380 (6.2) 9,748 (2.5) 10.1
CLASS C SHARES
Life of
Fund(++) 9,194 112 443 NA NA 9,749 (2.5) 10.1
<CAPTION>
Lipper Small
Standard Consumer Russell Company
TOTAL & Poor's Price 2000(R) Growth
RETURN 500 Index Value Fund
TABLE (4) (5) (10) (11)
- --------------- -------- -------- ------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 65.0% 9.9% 68.9% 75.7%
One Year 37.5 2.5 28.5 31.4
CLASS B SHARES
Life of
Fund(++) 8.6 0.4 4.0 4.1
CLASS C SHARES
Life of
Fund(++) 8.6 0.4 4.0 4.1
</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(+) 15.1% NA% NA% 15.4% 14.9% 2.6% 15.6% 17.0%
Life of Fund(++) NA (18.6) (7.9) 36.3 30.4 1.3 13.5 12.8
One Year 35.1 NA NA 36.8 37.5 2.5 28.5 31.4
</TABLE>
- ---------------
(+) Since May 22, 1992, except for the Lipper Small Company Growth Fund which
is since May 31, 1992.
(++) Since September 11, 1995 for Class B and Class C shares, except for the
Lipper Small Company Growth Fund which is since August 31, 1995.
NA - Not Available.
B-15
<PAGE> 57
FOOTNOTES FOR ALL FUNDS
(1) The Initial Investment and adjusted amounts for Class A shares were
adjusted for the maximum initial sales charge at the beginning of the
period, which is 5.75%. The Initial Investment for Class B and Class C
shares was not adjusted. Amounts were adjusted for Class B and Class C
shares for the contingent deferred sales charge that may be imposed at the
end of the period based upon the schedule for shares sold currently; see
"Redemption or Repurchase of Shares" in the prospectus.
(2) Includes short-term capital gain dividends, if any.
(3) The Dow Jones Industrial Average is an unmanaged weighted average of thirty
blue chip industrial corporations listed on the New York Stock Exchange.
Assumes reinvestment of dividends. Source is Towers Data Systems.
(4) The Standard & Poor's 500 Stock Index is an unmanaged unweighted average of
500 stocks, over 95% of which are listed on the New York Stock Exchange.
Assumes reinvestment of dividends. Source is Towers Data Systems.
(5) The Consumer Price Index is a statistical measure of change, over time, in
the prices of goods and services in major expenditure groups for all urban
consumers. Source is Towers Data Systems.
(6) The Russell 1000(R) Value Index is an unmanaged index comprised of common
stocks of larger U.S. companies with less than average growth orientation.
Companies in this index generally have low price to book and price-earnings
ratios, higher dividend yields and lower forecasted growth values. Assumes
reinvestment of dividends. Source is Lipper Analytical Services, Inc.
(7) The Lipper Growth and Income Fund Index is a net asset value weighted index
of the performance of the 30 largest growth and income mutual funds tracked
by Lipper Analytical Services, Inc. Performance is based on changes in net
asset value with all dividends reinvested and with no adjustment for sales
charges. Source is Towers Data Systems.
(8) The U.S. Treasury Bill Index is an unmanaged index based on the average
monthly yield of Treasury Bills maturing in 6 months. Source is Towers Data
Systems.
(9) The Standard & Poor's/Barra Value Index is constructed by dividing the
stocks in the S&P 500 Index according to a single attribute: book-to-price
ratio. The Value Index contains firms with higher book-to-price ratios and
is capitalization weighted. Source is Lipper Analytical Services, Inc.
(10) The Russell 2000(R) Value Index is an unmanaged index comprised of
securities in the Russell 2000 Index (small companies) with a less than
average growth orientation. Companies in this index generally have low
price to book and price-earnings ratios. Source is Towers Data Systems.
(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 Towers Data Systems.
The following tables illustrate an assumed $10,000 investment in Class A
shares of each Fund, which includes the current maximum sales charge of
5.75%, with income and capital gain dividends reinvested in additional
shares. Each table covers the period from commencement of operations of the
Fund to December 31, 1995.
CONTRARIAN FUND (3/18/88)
<TABLE>
<CAPTION>
---------- DIVIDENDS
----------
ANNUAL ---------- CUMULATIVE VALUE OF SHARES ACQUIRED
ANNUAL CAPITAL REINVESTED
YEAR INCOME GAIN ---------- REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
12/31 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1988 $ 132 $ 0 $ 9,925 $ 137 $ 0 $10,062
1989 285 785 10,668 429 806 11,903
1990 277 303 9,512 649 1,019 11,180
1991 307 126 11,645 1,119 1,381 14,145
1992 303 0 12,700 1,542 1,505 15,747
1993 267 1,001 12,812 1,827 2,537 17,176
1994 360 1,483 11,458 1,965 3,748 17,171
1995 473 1,385 15,240 3,130 6,454 24,824
</TABLE>
B-16
<PAGE> 58
HIGH RETURN FUND (3/18/88)
<TABLE>
<CAPTION>
---------- DIVIDENDS
----------
ANNUAL ---------- CUMULATIVE VALUE OF SHARES ACQUIRED
ANNUAL CAPITAL REINVESTED
YEAR INCOME GAIN ---------- REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
12/31 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1988 $ 247 $ 0 $ 10,376 $ 258 $ 0 $10,634
1989 468 2,331 9,539 687 2,370 12,596
1990 524 0 8,326 1,115 2,069 11,510
1991 387 265 11,786 1,990 3,208 16,984
1992 370 123 13,753 2,722 3,872 20,347
1993 298 345 14,581 3,189 4,453 22,223
1994 352 0 14,214 3,449 4,341 22,004
1995 351 589 20,216 5,317 6,782 32,315
</TABLE>
SMALL CAP VALUE FUND (5/22/92)
<TABLE>
<CAPTION>
---------- DIVIDENDS
----------
ANNUAL ---------- CUMULATIVE VALUE OF SHARES ACQUIRED
ANNUAL CAPITAL REINVESTED
YEAR INCOME GAIN ---------- REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
12/31 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1992 $ 28 $405 $ 10,857 $ 29 $ 411 $11,297
1993 58 507 10,584 86 914 11,584
1994 0 416 10,226 83 1,292 11,601
1995 724 326 13,666 864 2,093 16,623
</TABLE>
* Includes short-term capital gain dividends.
Investors may want to compare the performance of a Fund to certificates of
deposit issued by banks and other depository institutions. Certificates of
deposit may offer fixed or variable interest rates and principal is guaranteed
and may be insured. Withdrawal of deposits prior to maturity will normally be
subject to a penalty. Rates offered by banks and other depository institutions
are subject to change at any time specified by the issuing institution.
Information regarding bank products may be based upon, among other things, the
BANK RATE MONITOR National Index(TM) for certificates of deposit, which is an
unmanaged index and is based on stated rates and the annual effective yields of
certificates of deposit in the ten largest banking markets in the United States,
or the CDA Investment Technologies, Inc. Certificate of Deposit Index, which is
an unmanaged index based on the average monthly yields of certificates of
deposit.
Investors also may want to compare the performance of a Fund to that of U.S.
Treasury bills, notes or bonds. Treasury obligations are issued in selected
denominations. Rates of Treasury obligations are fixed at the time of issuance
and payment of principal and interest is backed by the full faith and credit of
the U.S. Treasury. The market value of such instruments will generally fluctuate
inversely with interest rates prior to maturity and will equal par value at
maturity. Information regarding the performance of Treasury obligations may be
based upon, among other things, the Towers Data Systems U.S. Treasury Bill
index, which is an unmanaged index based on 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).
B-17
<PAGE> 59
As reported by IBC/Donoghue's, all investment results represent total return
(annualized results for the period net of management fees and expenses) and one
year investment results are effective annual yields assuming reinvestment of
dividends.
The following tables compare the performance of the Class A shares of the Funds
over various periods ended 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>
Five Years..................................................... 36 of 188
One Year....................................................... 2 of 445
</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>
Five Years..................................................... 1 of 54
One Year....................................................... 1 of 127
</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>
One Year....................................................... 54 of 299
</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, 1973-1976.
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.
B-18
<PAGE> 60
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.
*DOMINIQUE P. MORAX (10/2/48), Director (36), 120 South LaSalle Street, Chicago,
Illinois; Member, Extended Corporate Executive Board, Zurich Insurance Company;
Director, ZKI.
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 (5/29/47), Vice President (2), 10 Exchange Place, 20th Floor,
Jersey City, New Jersey; Managing Director, DVA.
*CHRISTIAN C. BERTELSEN (1/20/43), Vice President (1), 10 Exchange Place, 20th
Floor, Jersey City, New Jersey; Senior Managing Director and Chief Investment
Officer, DVA.
*DAVID N. DREMAN (5/6/36), Vice President (3), 10 Exchange Place, 20th Floor,
Jersey City, New Jersey; Chairman and Director, DVA.
*JOHN E. NEAL (3/9/50), Vice President (36), 120 South LaSalle Street, Chicago,
Illinois; President, Kemper Funds Group, a unit of ZKI; Director, ZKI, DVA and
KDI.
*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.
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.
B-19
<PAGE> 61
<TABLE>
<CAPTION>
TOTAL
COMPENSATION FROM
AGGREGATE KEMPER FUND
COMPENSATION COMPLEX PAID TO
NAME OF BOARD MEMBERS FROM KDF BOARD MEMBERS(3)
- --------------------------------------------------------------- ------------ -----------------
<S> <C> <C>
James E. Akins................................................. $8,200 $26,100
Arthur R. Gottschalk(1)(2)..................................... $3,800 $90,300
Frederick T. Kelsey(1)(2)...................................... $3,800 $90,700
Fred B. Renwick................................................ $8,200 $26,100
John B. Tingleff(1)............................................ $3,800 $81,700
John G. Weithers(1)............................................ $3,800 $81,900
</TABLE>
- ---------------
(1) Elected to the Board in 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.
(3) Includes compensation for service on the boards of 11 Kemper funds with 25
fund portfolios. Messrs. Akins and Renwick were members of the board of only
KDF until September 19, 1995. Each board member currently serves as a board
member of 13 Kemper Funds with 36 fund portfolios.
As of April 4, 1996, except for John E. Peters (who owned 1.51% of the
outstanding shares of the Small Cap Value Fund) the officers and directors of
KDF as a group owned less than 1% of each Fund.
B-20
<PAGE> 62
PRINCIPAL HOLDERS OF SECURITIES
As of April 4, 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 CLASS PERCENTAGE
----------------------------------------------------------------------- ----- ----------
<S> <C> <C>
**Louis T. Alesi & Dennis J. Fiore &................................... A 12.01
Norene Bradshaw Trustees
FBO Intermetro Industries
Salaried Employees Pension Tr.
651 N. Washington St.
Wilkes Barre PA 18705
**NFSC FESO............................................................ B 9.90
Crispin P. Spencer and
Karen R. Spencer
13906 N.W. 56th Avenue
Gainesville FL 32653
*Everen Clearing Corp.................................................. B 10.52
FBO Robert K. Duncan IRA
815 N. Water St.
Milwaukee WI 53202
*Donaldson Lufkin Jenrette............................................. C 14.80
Securities Corporation, Inc.
P.O. Box 2052
Jersey City NJ 07303
</TABLE>
B-21
<PAGE> 63
HIGH RETURN FUND
<TABLE>
<CAPTION>
NAME & ADDRESS CLASS PERCENTAGE
------------------------------------------------------------------------- ----- ----------
<S> <C> <C>
**NFSC FEBO.............................................................. A 5.02
Craig K. Hambelton
P.O. Box 24-25
Tainan Taiwan China
**Charles Schwab & Co Inc................................................ A 5.59
Cash Account
Attn Mutual Funds Dept
101 Montgonery St
San Francisco CA 94104
**NFSC FEBO.............................................................. B 11.00
NFSC/FMTC IRA Rollover
FBO James Smith
208 Glenmont Ave
Columbus OH 43214
**Donaldson Lufkin Jenrette.............................................. B 5.33
Securities Corporation Inc
P.O. Box 2052
Jersey City NJ 07303
**Everen Clearing Corp................................................... B 8.48
FBO Michael L Williard R/O IRA
8766 Polaris Dr
Rockford IL 61115
**Donaldson Lufkin Jenrette.............................................. C 6.59
Securities Corporation Inc.
P.O. Box 2052
Jersey City NJ 07303
**Raymond James & Assoc Inc.............................................. C 9.44
Roy I Frekse IRA
5554 Devonshire Ave
St. Louis MO 63109
**Sterling Trust Co...................................................... C 5.09
FBO Carl F C Schleunes IRA
3235
P.O. Box 2526
Waco TX 76702
**Zurich Kemper Investments, Inc......................................... I 12.78
Profit Sharing Plan
811 Main
Kansas City MO 64105
</TABLE>
B-22
<PAGE> 64
SMALL CAP VALUE FUND
<TABLE>
<CAPTION>
NAME & ADDRESS CLASS PERCENTAGE
- ------------------------------------------------------------------------- ----- ----------
<S> <C> <C>
**NFSC FEBO.............................................................. A 11.81
Church Street Station
P.O. Box 3730
New York NY 10008
*John R. Kasmarick....................................................... B 8.29
Jeanne Kasmarick
3579 Loch Bend
Commerce Township MI 48382
**Everen Clearing Corp................................................... B 7.87
FBO Scott D Smith IRA
305 Hopinton Culver NE
Hopinton IA 52237
**Investors Fiduciary TR CO.............................................. C 5.75
IRA A/C John R Wintermute
18 Kendall Dr
Westborough MA 01581
**Donaldson Lufkin Jenrette.............................................. C 6.96
Securities Corporation Inc.
P.O. Box 2052
Jersey City NJ 07303
**Sterling Trust Co Cust................................................. C 13.73
FBO William Eberhart IRA
ACCT 8791
P.O. Box 2526
Waco TX 76702
**First Trust Corp....................................................... C 5.23
FBO Doris J. Olechna IRA
P.O. Box 173301
Denver CO 80217
**R Duffield & C R Player Jr Cotr........................................ C 8.23
Crut for Lives of Donor Ruth
McCormick Tankersley &
Kristie Miller
P.O. Box 401
Barnesville MD 20838
**R Duffield & C R Player Cotr Crut...................................... C 8.23
For Lives of Donor Ruth McCormick
Tankersley & Tiffany Wolfe
P.O. Box 401
Barnesville MD 20838
**Zurich Kemper Investments, Inc......................................... I 27.54
Profit Sharing Plan
811 Main
Kansas City MO 64105
</TABLE>
- ---------------
* Record and beneficial owner.
** Record owner only.
B-23
<PAGE> 65
Portfolio Of Investments
KEMPER-DREMAN CONTRARIAN FUND
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
APPAREL -- 8.7% (a) Fruit of the Loom 39,700 $ 968
Liz Claiborne 14,300 397
V.F. Corp. 16,200 855
======================================================================
2,220
- -----------------------------------------------------------------------------------------------------------
AUTOMOTIVE -- 3.0% Ford Motor Co. 26,800 777
- -----------------------------------------------------------------------------------------------------------
BANKS -- 19.3% Banc One Corporation 3,800 143
BankAmerica Corp. 9,000 583
Bankers Trust New York Corp. 9,500 632
Barnett Banks 8,600 507
First Chicago NBD Corp. 16,471 651
First Fidelity Bancorp 2,500 188
First Union Corp. 3,600 200
KeyCorp 5,900 214
NationsBank 11,200 780
Norwest Corp. 14,300 472
PNC Bank Corp. 16,600 535
======================================================================
4,905
- -----------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS Nestle S.A., ADR 8,900 491
AND SERVICES -- 11.5% Philip Morris Companies 11,500 1,041
Unilever N.V., ADR 5,800 816
UST, Inc. 17,200 574
======================================================================
2,922
- -----------------------------------------------------------------------------------------------------------
DRUGS AND American Home Products 6,800 660
HEALTH CARE -- 14.7% Bristol-Myers Squibb Co. 2,400 206
(a) Humana, Inc. 37,000 1,013
Eli Lilly & Co. 5,000 281
Merck & Co., Inc. 5,900 388
Pharmacia & Upjohn Inc. 10,170 394
U.S. Healthcare 17,200 800
======================================================================
3,742
- -----------------------------------------------------------------------------------------------------------
ELECTRICAL General Electric Co. 9,900 713
EQUIPMENT -- 2.8%
- -----------------------------------------------------------------------------------------------------------
ENERGY -- 11.2% AMOCO Corp. 12,500 898
Atlantic Richfield Co. 7,300 808
(a) Columbia Gas System 26,000 1,141
======================================================================
2,847
- -----------------------------------------------------------------------------------------------------------
FINANCIAL H.F. Ahmanson & Co. 14,300 379
SERVICES -- 18.8% American General Corp. 12,600 439
Federal Home Loan Mortgage Corp. 18,100 1,511
Federal National Mortgage Association 9,900 1,229
Great Western Financial Corp. 18,100 462
Hanson PLC, ADR 26,300 401
Ohio Casualty Corp. 9,700 376
======================================================================
4,797
- -----------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 66
Portfolio of Investments
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE
<S> <C> <C> <C>
PAPER AND FOREST
PRODUCTS--2.9%
Louisiana-Pacific Corp. 30,800 $ 747
- -----------------------------------------------------------------------------------------------------------------------
RETAILING--5.5%
Dayton Hudson Corp. 1,100 83
Dillard Department Stores 16,100 459
May Department Stores Co. 9,500 401
TJX Companies, Inc. 21,100 398
Woolworth Corp. 4,100 53
=============================================================================
1,394
=============================================================================
TOTAL COMMON STOCKS--98.4%
(Cost: $18,353) 25,064
=============================================================================
OTHER ASSETS, LESS LIABILITIES--1.6% 418
=============================================================================
NET ASSETS--100% $25,482
=============================================================================
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
Based on the cost of investments of $18,353,000 for federal income tax purposes
at December 31, 1995, the aggregate gross unrealized appreciation was
$6,939,000, the aggregate gross unrealized depreciation was $228,000 and the net
unrealized appreciation on investments was $6,711,000.
See accompanying Notes to Financial Statements.
12
<PAGE> 67
Report of Independent Auditors
THE BOARD OF DIRECTORS AND SHAREHOLDERS
KEMPER-DREMAN CONTRARIAN FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper-Dreman Contrarian Fund as of
December 31, 1995 and the related statements of operations and changes in net
assets and the financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The statement of changes
in net assets for the year ended December 31, 1994 and the financial highlights
for each of the four years in the period then ended were audited by other
auditors whose report dated January 19, 1995 expressed an unqualified opinion on
that financial statement and financial highlights.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
December 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Kemper-Dreman Contrarian Fund at December 31, 1995 and the results of its
operations, changes in its net assets and financial highlights for the year then
ended, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
February 16, 1996
13
<PAGE> 68
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
(in thousands)
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------
Investments, at value
(Cost: $18,353) $25,064
Receivable for:
Fund shares sold 631
Dividends 49
TOTAL ASSETS 25,744
=======================================================================================================
- -------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- -------------------------------------------------------------------------------------------------------
Cash overdraft 211
Payable for:
Management fee 8
Distribution services fee 3
Administrative services fee 2
Custodian and transfer agent fees and related expenses 9
Other 29
Total liabilities 262
NET ASSETS $25,482
=======================================================================================================
- -------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -------------------------------------------------------------------------------------------------------
Paid-in capital $18,760
Net unrealized appreciation on investments 6,711
Undistributed net investment income 11
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $25,482
=======================================================================================================
- -------------------------------------------------------------------------------------------------------
THE PRICING OF SHARES
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($19,301,000 / 1,192,000 shares outstanding) $16.20
- -------------------------------------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $17.19
- -------------------------------------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($6,020,000 / 371,000 shares outstanding) $16.20
- -------------------------------------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price per share
($161,000 / 10,000 shares outstanding) $16.20
- -------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
14
<PAGE> 69
Financial Statements
STATEMENT OF OPERATIONS
Year ended December 31, 1995
(in thousands)
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME
- ---------------------------------------------------------------------------------------------------
Dividends $ 482
Interest 6
Total investment income 488
Expenses:
Management fee 142
Distribution services fee 7
Administrative services fee 8
Custodian and transfer agent fees and related expenses 55
Professional fees 10
Reports to shareholders 18
Registration fees 9
Directors' fees and other 21
Total expenses before expense waiver 270
Less expenses waived by investment manager 59
Total expenses after expense waiver 211
NET INVESTMENT INCOME 277
===================================================================================================
- ---------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
- ---------------------------------------------------------------------------------------------------
Net realized gain on sales of investments 1,306
Change in net unrealized appreciation on investments 4,426
Net gain on investments 5,732
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $6,009
===================================================================================================
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
- -----------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- -----------------------------------------------------------------------------------------------------
Net investment income $ 277 292
Net realized gain 1,306 1,278
Change in net unrealized appreciation 4,426 (1,545)
Net increase in net assets resulting from operations 6,009 25
Distribution from net investment income (248) (292)
Distribution from net realized gain (1,475) (1,128)
Total dividends to shareholders (1,723) (1,420)
Net increase (decrease) from capital share transactions 8,213 (2,779)
TOTAL INCREASE (DECREASE) IN NET ASSETS 12,499 (4,174)
=====================================================================================================
- -----------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------
Beginning of year 12,983 17,157
END OF YEAR (including undistributed net investment income of
$11 in 1995) $25,482 12,983
=====================================================================================================
</TABLE>
See accompanying Notes to Financial Statements.
15
<PAGE> 70
Notes to Financial Statements
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE FUND Kemper-Dreman Contrarian Fund (the Fund) is a
separate series of Kemper-Dreman Fund, Inc. (KDF),
an open-end management investment company organized
as a corporation in the state of Maryland. Prior to
September 11, 1995, KDF was known as Dreman Mutual
Group, Inc.
On September 11, 1995, the Fund began offering four
classes of shares. Class A shares are sold to
investors subject to an initial sales charge. Class
B shares are sold without an initial sales charge
but are subject to higher ongoing expenses than
Class A shares and a contingent deferred sales
charge payable upon certain redemptions. Class B
shares automatically convert to Class A shares six
years after issuance. Class C shares are sold
without an initial or a contingent deferred sales
charge but are subject to higher ongoing expenses
than Class A shares and do not convert into another
class. Class I shares (none sold through December
31, 1995) are offered to a limited group of
investors, are not subject to initial or contingent
deferred sales charges and have lower ongoing
expenses than other classes. Differences in class
expenses will result in the payment of different
per share income dividends by class. Each share
represents an identical interest in the investments
of the Fund and has the same rights.
- --------------------------------------------------------------------------------
2 SIGNIFICANT ACCOUNTING INVESTMENT VALUATION. Investments are stated at
POLICIES value. Portfolio securities that are traded on a
domestic securities exchange or securities listed
on the NASDAQ National Market are valued at the
last sale price on the exchange or market where
primarily traded or listed or, if there is no
recent sale, at the last current bid quotation.
Fixed income securities are valued by using market
quotations, or independent pricing services that
use prices provided by market makers or estimates
of market values obtained from yield data relating
to instruments or securities with similar
characteristics. Equity options are valued at the
last sale price unless the bid price is higher or
the asked price is lower, in which event such bid
or asked price is used. Financial futures and
options thereon are valued at the settlement price
established each day by the board of trade or
exchange on which they are traded. Other securities
and assets are valued at fair value as determined
in good faith by the Board of Directors.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date (date the order to buy or sell is
executed). Dividend income is recorded on the
ex-dividend date, and interest income is recorded
on the accrual basis and includes amortization of
money market instrument premium and discount.
Realized gains and losses from investment
transactions are reported on an identified cost
basis.
FUND SHARE VALUATION. Fund shares are sold and
redeemed on a continuous basis at net asset value
(plus an initial sales charge on most sales of
Class A shares). Proceeds payable on redemption of
Class B shares will be reduced by the amount of any
applicable contingent deferred sales charge. On
each day the New York Stock Exchange is open for
trading, the net asset value per share is
determined as of the earlier of 3:00 p.m.
16
<PAGE> 71
Notes to Financial Statements
Chicago time or the close of the Exchange. The net
asset value per share is determined separately for
each class by dividing the Fund's net assets
attributable to that class by the number of shares
of the class outstanding.
FEDERAL INCOME TAXES. The Fund has complied with
the special provisions of the Internal Revenue Code
available to investment companies and therefore no
federal income tax provision is required.
DIVIDENDS TO SHAREHOLDERS. The Fund declares and
pays dividends of net investment income quarterly
and net realized capital gains annually, which are
recorded on the ex-dividend date. Dividends are
determined in accordance with income tax principles
which may treat certain transactions differently
from generally accepted accounting principles.
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH MANAGEMENT AGREEMENT. On August 24, 1995, KDF
AFFILIATES entered into a management agreement with Dreman
Value Advisors, Inc. (DVA), a wholly owned
subsidiary of Kemper Financial Services, Inc. The
Fund currently pays a management fee at an annual
rate of .75% of the first $250 million of average
daily net assets declining to .62% of average daily
net assets in excess of $12.5 billion. The Fund
incurred a management fee of $54,000 to DVA for the
period from August 24, 1995 to December 31, 1995.
Prior to August 24, 1995, KDF had entered into an
investment management agreement with Dreman Value
Management, L.P. (DVM), the Fund's former
investment manager. The Fund paid a management fee
at an annual rate of 1% of the first $1 billion of
average net assets declining to .75% of average net
assets in excess of $1 billion to DVM. The Fund
incurred a management fee of $88,000 to DVM for the
period from January 1, 1995 to August 23, 1995.
DVA has agreed to waive its management fee and
absorb operating expenses to the extent necessary
to limit the Fund's operating expenses to the
following percentages of average daily net assets
until September 11, 1996: Class A, 1.25%, Class B,
2.00% and Class C, 1.95%. Under this arrangement,
DVA waived expenses of $36,000 for the period from
August 24, 1995 to December 31, 1995. In addition,
DVM had agreed to reimburse the Fund for certain
operating expenses, which amounted to $23,000 from
January 1, 1995 to August 23, 1995.
UNDERWRITING AND DISTRIBUTION SERVICES
AGREEMENT. Effective September 11, 1995, KDF
entered into an underwriting and distribution
services agreement with Kemper Distributors, Inc.
(KDI), an affiliate of DVA. Underwriting
commissions paid in connection with the
distribution of Class A shares are as follows:
<TABLE>
<CAPTION>
COMMISSIONS
ALLOWED BY KDI
COMMISSIONS ------------------------------
RETAINED BY KDI TO ALL FIRMS TO AFFILIATES
--------------- ------------- --------------
<S> <C> <C> <C>
For the period from
September 11, 1995 to
December 31, 1995 -- $ 117,000 6,000
</TABLE>
For services under the distribution services
agreement, the Fund pays KDI a fee of .75% of
average daily net assets of the Class B and Class C
17
<PAGE> 72
Notes to Financial Statements
shares. Pursuant to the agreement, KDI enters into
related selling group agreements with various firms
at various rates for sales of Class B and Class C
shares. In addition, KDI receives any contingent
deferred sales charges (CDSC) from redemptions of
Class B shares. Distribution fees and commissions
paid in connection with the sale of Class B and
Class C shares are as follows:
<TABLE>
<CAPTION>
COMMISSIONS AND
DISTRIBUTION FEES
DISTRIBUTION PAID BY KDI
FEES RECEIVED BY ------------------------------
KDI TO ALL FIRMS TO AFFILIATES
---------------- ------------- --------------
<S> <C> <C> <C>
For the period from
September 11, 1995
to December 31, 1995 $7,000 172,000 12,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. Effective
September 11, 1995 KDF entered into an
administrative services agreement with KDI. For
providing information and administrative services
to Class A, Class B and Class C shareholders, the
Fund pays KDI a fee at an annual rate of up to .25%
of average daily net assets of each class. KDI in
turn has various agreements with financial services
firms that provide these services and pays these
firms based on assets of Fund accounts the firms
service. Administrative services fees (ASF) paid by
the Fund are as follows:
<TABLE>
<CAPTION>
ASF PAID BY KDI
ASF PAID BY ------------------------------
THE FUND TO KDI TO ALL FIRMS TO AFFILIATES
---------------- ------------- --------------
<S> <C> <C> <C>
For the period from
September 11, 1995
to December 31, 1995 $8,000 16,000 1,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement effective September 11, 1995
with KDF's transfer agent, Kemper Service Company
(KSvC), an affiliate of DVA, is the shareholder
service agent of the Fund. For the period from
September 11, 1995 to December 31, 1995, the
transfer agent remitted shareholder services fees
to KSvC of $8,000 with respect to the Fund.
OFFICERS AND DIRECTORS. Certain officers or
directors of the Fund are also officers or
directors of DVA. During the year ended December
31, 1995, the Fund made no payments to its officers
and incurred directors' fees of $10,000 to
independent directors.
- --------------------------------------------------------------------------------
4 INVESTMENT For the year ended December 31, 1995, investment
TRANSACTIONS transactions (excluding short-term instruments) are
as follows (in thousands):
<TABLE>
<S> <C>
Purchases $11,625
Proceeds from sales 5,238
</TABLE>
18
<PAGE> 73
Notes to Financial Statements
5 CAPITAL SHARE The following table summarizes the activity in
TRANSACTIONS capital shares of the Fund (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994
------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
------------------------------------------------------------------------------
Class A 526 $8,157 201 $ 2,801
Class B 362 5,736 -- --
Class C 10 159 -- --
------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
------------------------------------------------------------------------------
Class A 85 1,290 105 1,307
Class B 17 274 -- --
------------------------------------------------------------------------------
SHARES REDEEMED
------------------------------------------------------------------------------
Class A (485) (7,279) (500) (6,887)
Class B (8) (124) -- --
==============================================================================
NET INCREASE (DECREASE) FROM
CAPITAL SHARE TRANSACTIONS $8,213 $(2,779)
==============================================================================
</TABLE>
19
<PAGE> 74
`````````````````````````````````````````FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------------------------
CLASS A
--------------------------------------------------
YEAR ENDED DECEMBER 31,
1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------------
Net asset value, beginning of year $12.18 13.62 13.50 12.38 10.11
Income from investment operations:
Net investment income .26 .28 .22 .25 .28
Net realized and unrealized gain (loss) 5.05 (.28) .96 1.13 2.38
Total from investment operations 5.31 -- 1.18 1.38 2.66
Less dividends:
Distribution from net investment income .24 .28 .22 .26 .28
Distribution from net realized gain 1.05 1.16 .84 -- .11
Total dividends 1.29 1.44 1.06 .26 .39
Net asset value, end of year $16.20 12.18 13.62 13.50 12.38
=======================================================================================================
TOTAL RETURN 44.57% (.03) 9.10 11.32 26.53
- -------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
=======================================================================================================
Expenses absorbed by the Fund 1.25% 1.25 1.25 1.25 1.25
Net investment income 1.85% 1.89 1.64 2.04 2.35
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------------------
Expenses 1.66% 1.42 1.54 1.53 1.76
- -------------------------------------------------------------------------------------------------------
Net investment income 1.44% 1.71 1.34 1.76 1.84
- -------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 75
Financial Highlights
<TABLE>
<CAPTION>
-----------------------------------------
CLASS B CLASS C
-----------------------------------------
SEPT. 11, 1995 SEPT. 11, 1995
TO DEC. 31, 1995 TO DEC. 31, 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $15.26 15.26
Income from investment operations:
Net investment income .07 .08
Net realized and unrealized gain 1.85 1.85
Total from investment operations 1.92 1.93
Less dividends:
Distribution from net investment income .07 .08
Distribution from net realized gain .91 .91
Total dividends .98 .99
Net asset value, end of period $16.20 16.20
=================================================================================================================
TOTAL RETURN (NOT ANNUALIZED) 12.83% 12.85
- -----------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
=================================================================================================================
Expenses absorbed by the Fund 2.00% 1.95
Net investment income .88% .93
- -----------------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------------------------------
Expenses 2.36% 2.31
Net investment income .52% .57
- -----------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net assets at end of year (in thousands) $25,482 12,983 17,157 14,884 14,292
Portfolio turnover rate 30% 16 16 28 36
</TABLE>
NOTE: Total return does not reflect the effect of any sales charges. The
investment manager agreed to waive its management fee and absorb operating
expenses of the Fund. The Other Ratios to Average Net Assets are computed
without this expense waiver or absorption.
21
<PAGE> 76
PORTFOLIO OF INVESTMENTS
KEMPER-DREMAN HIGH RETURN FUND
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS
APPAREL--5.7% (a)Fruit of the Loom 94,300 $ 2,299
Liz Claiborne 47,400 1,315
V.F. Corp. 37,000 1,952
==========================================================================
5,566
--------------------------------------------------------------------------
AUTOMOTIVE--2.6% Ford Motor Co. 88,000 2,552
--------------------------------------------------------------------------
BANKS--15.5% BankAmerica Corp. 29,232 1,893
Bankers Trust New York Corp. 39,800 2,647
Barnett Banks 15,350 906
First Chicago NBD Corp. 49,232 1,945
First Fidelity Bancorp 15,300 1,153
First Union Corp. 19,600 1,090
KeyCorp 32,900 1,193
NationsBank 22,440 1,562
PNC Bank Corp. 88,600 2,857
==========================================================================
15,246
--------------------------------------------------------------------------
CONSUMER PRODUCTS AND Philip Morris Companies 25,800 2,335
SERVICES--3.7% UST, Inc. 39,100 1,305
==========================================================================
3,640
--------------------------------------------------------------------------
DRUGS AND Baxter International 12,600 528
HEALTH CARE--13.0% Becton Dickinson & Co. 10,800 810
Columbia/HCA Healthcare Corp. 9,257 470
Eli Lilly & Co. 34,000 1,913
Glaxo Wellcome PLC, ADR 21,700 613
(a)Humana, Inc. 81,200 2,223
Merck & Co., Inc. 16,100 1,058
Pharmacia & Upjohn Inc. 36,960 1,432
(a)Tenet Healthcare Corporation 71,600 1,486
U.S. Healthcare 47,600 2,213
==========================================================================
12,746
--------------------------------------------------------------------------
ELECTRICAL
EQUIPMENT--2.7% General Electric Co. 36,500 2,628
--------------------------------------------------------------------------
ENERGY--6.6% AMOCO Corp. 16,800 1,207
Atlantic Richfield Co. 12,300 1,362
(a)Columbia Gas System 89,400 3,922
==========================================================================
6,491
--------------------------------------------------------------------------
FINANCIAL SERVICES--19.8% H.F. Ahmanson & Co. 33,200 880
American General Corp. 45,100 1,573
American International Group, Inc. 18,300 1,693
Capital One Financial Corp. 10,200 244
Federal Home Loan Mortgage Corp. 55,900 4,668
Federal National Mortgage Association 39,400 4,890
Fleet Financial Group, Inc. 7,300 297
Great Western Financial Corp. 48,900 1,247
Hanson PLC, ADR 33,700 514
J.P. Morgan & Company 6,400 514
Midlantic Corp. 22,700 1,490
Signet Banking Corp. 10,200 242
Transport Holdings, Inc. 26 1
Travelers Group 5,327 335
Wells Fargo & Co. 3,800 821
==========================================================================
19,409
--------------------------------------------------------------------------
</TABLE>
11
<PAGE> 77
Portfolio of Investments
<TABLE>
<CAPTION>
(Dollars in thousands)
- -----------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PAPER AND FOREST
PRODUCTS--2.2%
Louisiana-Pacific Corp. 90,400 $ 2,192
- -----------------------------------------------------------------------------------------------------------
RETAILING--5.8%
(a)Burlington Coat Factory 63,000 646
Dayton Hudson Corp. 22,300 1,672
Dillard Department Stores 49,100 1,399
May Department Stores Co. 7,300 308
TJX Companies, Inc. 90,000 1,699
==========================================================================
5,724
--------------------------------------------------------------------------
TOTAL COMMON STOCKS--77.6%
(Cost: $56,241) 76,194
==========================================================================
<CAPTION>
NUMBER OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET
INSTRUMENTS--.8%
Yield--4.44% to 5.68%
Due--February and March 1996
(Cost: $793) $ 800 793
==========================================================================
TOTAL INVESTMENTS--78.4%
(Cost: $57,034) 76,987
==========================================================================
CASH AND OTHER ASSETS, LESS LIABILITIES--21.6% 21,209
==========================================================================
NET ASSETS--100% $98,196
==========================================================================
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
Based on the cost of investments of $57,034,000 for federal income tax
purposes at December 31, 1995, the aggregate gross unrealized appreciation
was $20,467,000, the aggregate gross unrealized depreciation was $514,000
and the net unrealized appreciation on investments was $19,953,000.
See accompanying Notes to Financial Statements.
12
<PAGE> 78
Report of Independent Auditors
THE BOARD OF DIRECTORS AND SHAREHOLDERS
KEMPER-DREMAN HIGH RETURN FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper-Dreman High Return Fund as of
December 31, 1995 and the related statements of operations and changes in net
assets and the financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The statement of changes
in net assets for the year ended December 31, 1994 and the financial highlights
for each of the four years in the period then ended were audited by other
auditors whose report dated January 19, 1995 expressed an unqualified opinion on
that financial statement and financial highlights.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
December 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Kemper-Dreman High Return Fund at December 31, 1995 and the results of its
operations, changes in its net assets and financial highlights for the year then
ended, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
February 16, 1996
13
<PAGE> 79
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
(in thousands)
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------
Investments, at value
(Cost: $57,034) $76,987
Cash 20,391
Receivable for:
Fund shares sold 2,132
Investments sold 19
Dividends 149
TOTAL ASSETS 99,678
=======================================================================================================
- -------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- -------------------------------------------------------------------------------------------------------
Payable for:
Fund shares redeemed 1,302
Management fee 30
Distribution services fee 9
Administrative services fee 7
Custodian and transfer agent fees and related expenses 10
Other 124
Total liabilities 1,482
NET ASSETS $98,196
=======================================================================================================
- -------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -------------------------------------------------------------------------------------------------------
Paid-in capital $78,222
Accumulated net realized loss on investments (73)
Net unrealized appreciation on investments 19,953
Undistributed net investment income 94
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $98,196
=======================================================================================================
- -------------------------------------------------------------------------------------------------------
THE PRICING OF SHARES
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($76,152,000 / 3,543,000 shares outstanding) $21.49
=======================================================================================================
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $22.80
=======================================================================================================
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($16,667,000 / 777,000 shares outstanding) $21.47
=======================================================================================================
CLASS C SHARES
Net asset value and redemption price per share
($1,948,000 / 91,000 shares outstanding) $21.48
=======================================================================================================
CLASS I SHARES
Net asset value and redemption price per share
($3,429,000 / 159,000 shares outstanding) $21.51
=======================================================================================================
</TABLE>
See accompanying Notes to Financial Statements.
14
<PAGE> 80
Financial Statements
STATEMENT OF OPERATIONS
Year ended December 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
- ---------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME
- ---------------------------------------------------------------------------------------------------
Dividends $ 1,338
Interest 43
Total investment income 1,381
Expenses:
Management fee 441
Distribution services fee 16
Administrative services fee 25
Custodian and transfer agent fees and related expenses 161
Professional fees 30
Reports to shareholders 53
Registration fees 25
Directors' fees and other 40
Total expenses before expense waiver 791
Less expenses waived by investment manager 140
Total expenses after waiver 651
NET INVESTMENT INCOME 730
===================================================================================================
- ---------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ---------------------------------------------------------------------------------------------------
Net realized gain on sales of investments 1,967
Net realized loss from futures transactions (28)
Net realized gain 1,939
Change in net unrealized appreciation on investments 16,825
Net gain on investments 18,764
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $19,494
===================================================================================================
<CAPTION>
- ---------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- -----------------------------------------------------------------------------------------------------
Net investment income $ 730 506
Net realized gain (loss) 1,939 (362)
Change in net unrealized appreciation 16,825 (833)
Net increase (decrease) in net assets resulting from operations 19,494 (689)
Distribution from net investment income (643) (500)
Distribution from net realized gain (1,637) --
Total dividends to shareholders (2,280) (500)
Net increase from capital share transactions 45,977 7,781
TOTAL INCREASE IN NET ASSETS 63,191 6,592
=====================================================================================================
- -----------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------
Beginning of year 35,005 28,413
END OF YEAR (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$94 AND $7, RESPECTIVELY) $98,196 35,005
=====================================================================================================
</TABLE>
See accompanying Notes to Financial Statements.
15
<PAGE> 81
Notes to Financial Statements
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE FUND Kemper-Dreman High Return Fund (the Fund) is a
separate series of Kemper-Dreman Fund, Inc. (KDF),
an open-end management investment company organized
as a corporation in the state of Maryland. Prior to
September 11, 1995, KDF was known as Dreman Mutual
Group, Inc.
On September 11, 1995, the Fund began offering four
classes of shares. Class A shares are sold to
investors subject to an initial sales charge. Class
B shares are sold without an initial sales charge
but are subject to higher ongoing expenses than
Class A shares and a contingent deferred sales
charge payable upon certain redemptions. Class B
shares automatically convert to Class A shares six
years after issuance. Class C shares are sold
without an initial or a contingent deferred sales
charge but are subject to higher ongoing expenses
than Class A shares and do not convert into another
class. Class I shares, which are sold to a limited
group of investors, are not subject to initial or
contingent deferred sales charges and have lower
ongoing expenses than other classes. Differences in
class expenses will result in the payment of
different per share income dividends by class. Each
share represents an identical interest in the
investments of the Fund and has the same rights.
- --------------------------------------------------------------------------------
2 SIGNIFICANT ACCOUNTING
POLICIES INVESTMENT VALUATION. Investments are stated at
value. Portfolio securities that are traded on a
domestic securities exchange or securities listed
on the NASDAQ National Market are valued at the
last sale price on the exchange or market where
primarily traded or listed or, if there is no
recent sale, at the last current bid quotation.
Fixed income securities are valued by using market
quotations, or independent pricing services that
use prices provided by market makers or estimates
of market values obtained from yield data relating
to instruments or securities with similar
characteristics. Equity options are valued at the
last sale price unless the bid price is higher or
the asked price is lower, in which event such bid
or asked price is used. Financial futures and
options thereon are valued at the settlement price
established each day by the board of trade or
exchange on which they are traded. Other securities
and assets are valued at fair value as determined
in good faith by the Board of Directors.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date (date the order to buy or sell is
executed). Dividend income is recorded on the
ex-dividend date, and interest income is recorded
on the accrual basis and includes amortization of
money market instrument premium and discount.
Realized gains and losses from investment
transactions are reported on an identified cost
basis.
FUND SHARE VALUATION. Fund shares are sold and
redeemed on a continuous basis at net asset value
(plus an initial sales charge on most sales of
Class A shares). Proceeds payable on redemption of
Class B shares will be reduced by the amount of any
applicable contingent deferred sales charge. On
each day the New York Stock Exchange is open for
trading, the net asset value per share is
determined as of the earlier of 3:00 p.m. Chicago
time or the close of the Exchange. The net asset
value per share
16
<PAGE> 82
Notes to Financial Statements
is determined separately for each class by dividing
the Fund's net assets attributable to that class by
the number of shares of the class outstanding.
FEDERAL INCOME TAXES. The Fund has complied with
the special provisions of the Internal Revenue Code
available to investment companies and therefore no
federal income tax provision is required.
DIVIDENDS TO SHAREHOLDERS. The Fund declares and
pays dividends of net investment income quarterly
and net realized capital gains annually, which are
recorded on the ex-dividend date. Dividends are
determined in accordance with income tax principles
which may treat certain transactions differently
from generally accepted accounting principles.
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. On August 24, 1995, KDF
entered into a management agreement with Dreman
Value Advisors, Inc. (DVA), a wholly owned
subsidiary of Kemper Financial Services, Inc. The
Fund currently pays a management fee at an annual
rate of .75% of the first $250 million of average
daily net assets declining to .62% of average daily
net assets in excess of $12.5 billion. The Fund
incurred a management fee of $173,000 to DVA for
the period from August 24, 1995 to December 31,
1995.
Prior to August 24, 1995, KDF had entered into an
investment management agreement with Dreman Value
Management, L.P. (DVM), the Fund's former
investment manager. The Fund paid a management fee
at an annual rate of 1% of the first $1 billion of
average net assets declining to .75% of average net
assets in excess of $1 billion to DVM. The Fund
incurred a management fee of $268,000 to DVM for
the period from January 1, 1995 to August 23, 1995.
DVA has agreed to waive its management fee and
absorb operating expenses to the extent necessary
to limit the Fund's operating expenses to the
following percentages of average daily net assets
until September 11, 1996: Class A, 1.25%, Class B,
2.00% and Class C, 1.95%. Under this arrangement,
DVA waived expenses of $109,000 for the period from
August 24, 1995 to December 31, 1995. In addition,
DVM had agreed to reimburse the Fund for certain
operating expenses, which amounted to $31,000 from
January 1, 1995 to August 23, 1995.
UNDERWRITING AND DISTRIBUTION SERVICES
AGREEMENT. Effective September 11, 1995, KDF
entered into an underwriting and distribution
services agreement with Kemper Distributors, Inc.
(KDI), an affiliate of DVA. Underwriting
commissions paid in connection with the
distribution of Class A shares are as follows:
<TABLE>
<CAPTION>
COMMISSIONS
ALLOWED BY KDI
COMMISSIONS ------------------------------
RETAINED BY KDI TO ALL FIRMS TO AFFILIATES
--------------- ------------- --------------
<S> <C> <C> <C>
For the period from September
11, 1995 to December 31, 1995 -- $ 427,000 52,000
</TABLE>
For services under the distribution services
agreement, the Fund pays KDI a fee of .75% of
average daily net assets of the Class B and Class C
17
<PAGE> 83
Notes to Financial Statements
shares. Pursuant to the agreement, KDI enters into
related selling group agreements with various firms
at various rates for sales of Class B and Class C
shares. In addition, KDI receives any contingent
deferred sales charges (CDSC) from redemptions of
Class B shares. Distribution fees and commissions
paid in connection with the sale of Class B and
Class C shares and the CDSC received in connection
with the redemption of Class B shares are as
follows:
<TABLE>
<CAPTION>
COMMISSIONS AND
DISTRIBUTION FEES
DISTRIBUTION FEES PAID BY KDI
AND CDSC RECEIVED ------------------------------
BY KDI TO ALL FIRMS TO AFFILIATES
----------------- ------------- --------------
<S> <C> <C> <C>
For the period from September
11, 1995 to December 31, 1995 $17,000 456,000 57,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. Effective
September 11, 1995, KDF entered into an
administrative services agreement with KDI. For
providing information and administrative services
to Class A, Class B and Class C shareholders, the
Fund pays KDI a fee at an annual rate of up to .25%
of average daily net assets of each class. KDI in
turn has various agreements with financial services
firms that provide these services and pays these
firms based on assets of Fund accounts the firms
service. Administrative services fees (ASF) paid by
the Fund are as follows:
<TABLE>
<CAPTION>
ASF PAID BY KDI
ASF PAID BY ----------------------------
THE FUND TO KDI TO ALL FIRMS TO AFFILIATES
---------------- ------------ -------------
<S> <C> <C> <C>
For the period from September
11, 1995 to December 31, 1995 $ 25,000 41,000 4,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement effective September 11, 1995
with KDF's transfer agent, Kemper Service Company
(KSvC), an affiliate of DVA, is the shareholder
service agent of the Fund. For the period from
September 11, 1995 to December 31, 1995, the
transfer agent remitted shareholder services fees
to KSvC of $25,000 with respect to the Fund.
OFFICERS AND DIRECTORS. Certain officers or
directors of the Fund are also officers or
directors of DVA. During the year ended December
31, 1995, the Fund made no payments to its officers
and incurred directors' fees of $13,000 to
independent directors.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the year ended December 31, 1995, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $33,438
Proceeds from sales 10,487
18
<PAGE> 84
Notes to Financial Statements
5 CAPITAL SHARE The following table summarizes the activity in
TRANSACTIONS capital shares of the Fund (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994
--------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
-----------------------------------------------------------------------------
Class A 1,797 $ 35,340 747 $ 11,990
Class B 772 15,914 -- --
Class C 93 1,919 -- --
Class I 161 3,376 -- --
-----------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
-----------------------------------------------------------------------------
Class A 89 1,788 29 450
Class B 12 246 -- --
Class C 1 25 -- --
Class I 3 64 -- --
-----------------------------------------------------------------------------
SHARES REDEEMED
-----------------------------------------------------------------------------
Class A (659) (12,361) (293) (4,659)
Class B (7) (167) -- --
Class C (3) (64) -- --
Class I (5) (103) -- --
=============================================================================
NET INCREASE FROM CAPITAL
SHARE TRANSACTIONS $ 45,977 $ 7,781
=============================================================================
</TABLE>
6 FINANCIAL FUTURES
CONTRACTS The Fund has entered into exchange traded financial
futures contracts to take advantage of anticipated
market conditions and bears the risk that arises
from owning these contracts.
At the time the Fund enters into a futures
contract, it is required to make a margin deposit
with its custodian. Subsequently, gain or loss is
recognized and payments are made on a daily basis
between the Fund and the broker as the market value
of the futures contract changes. At December 31,
1995, the market value of investments pledged by
the Fund to cover margin requirements for open
futures positions was $695,000 for the following
financial futures contracts owned by the Fund.
<TABLE>
<CAPTION>
CONTRACT EXPIRATION LOSS AT
TYPE AMOUNT POSITION MONTH 12/31/95
---------------------------- ----------- -------- ---------- ----------
<S> <C> <C> <C> <C>
S&P 500 Index $20,409,000 Long March '96 $ 123,000
</TABLE>
19
<PAGE> 85
Financial Highlights
<TABLE>
<CAPTION>
---------------------------------------------
CLASS A
---------------------------------------------
YEAR ENDED DECEMBER 31,
1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------------------------
Net asset value, beginning of year $15.11 15.50 14.62 12.53 8.85
Income from investment operations:
Net investment income .26 .25 .21 .24 .31
Net realized and unrealized gain (loss) 6.76 (.39) 1.13 2.21 3.87
Total from investment operations 7.02 (.14) 1.34 2.45 4.18
Less dividends:
Distribution from net investment income .24 .25 .21 .24 .30
Distribution from net realized gain .40 -- .25 .12 .20
Total dividends .64 .25 .46 .36 .50
Net asset value, end of year $21.49 15.11 15.50 14.62 12.53
==================================================================================================
TOTAL RETURN 46.86% (.99) 9.22 19.80 47.57
- --------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
==================================================================================================
Expenses absorbed by the Fund 1.25% 1.25 1.25 1.25 1.25
Net investment income 1.55% 1.58 1.47 1.88 2.52
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------------
Expenses 1.57% 1.39 1.56 1.70 2.31
Net investment income 1.23% 1.44 1.16 1.43 1.46
</TABLE>
20
<PAGE> 86
Financial Highlights
<TABLE>
<CAPTION>
---------------------------------------------------------
CLASS B CLASS C CLASS I
---------------------------------------------------------
SEPT. 11, 1995 SEPT. 11, 1995 NOV. 1, 1995
TO DEC. 31, 1995 TO DEC. 31, 1995 TO DEC. 31, 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $19.45 19.45 19.90
Income from investment operations:
Net investment income .07 .09 .04
Net realized and unrealized gain 2.41 2.41 2.03
Total from investment operations 2.48 2.50 2.07
Less dividends:
Distribution from net investment income .06 .07 .06
Distribution from net realized gain .40 .40 .40
Total dividends .46 .47 .46
Net asset value, end of period $21.47 21.48 21.51
===================================================================================================================
TOTAL RETURN (NOT ANNUALIZED) 12.88% 12.94 10.47
- -------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
===================================================================================================================
Expenses absorbed by the Fund 2.00% 1.95 .47
Net investment income .61% .66 1.99
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------------------------------------
Expenses 2.35% 2.30 .85
Net investment income .26% .31 1.61
- -------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net assets at end of year (in thousands) $98,196 35,005 28,413 14,425 7,238
Portfolio turnover rate 18% 12 14 13 37
</TABLE>
Note: Total return does not reflect the effect of any sales charges. The
investment manager agreed to waive its management fee and absorb operating
expenses of the Fund. The Other Ratios to Average Net Assets are computed
without this expense waiver or absorption.
21
<PAGE> 87
PORTFOLIO OF INVESTMENTS
KEMPER-DREMAN SMALL CAP VALUE FUND
Portfolio of Investments at December 31, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS NUMBER OF SHARES VALUE
BANKS--6.7%
Brooklyn Bancorp, Inc. 6,900 $ 281
CENFED Financial Corp. 12,500 300
(a)Coast Savings Financial 8,500 294
Compass Bancshares 15,000 495
Liberty Bancorp 12,000 447
North Side Savings Bank 9,600 293
------------------------------------------------------------------------------
2,110
- ----------------------------------------------------------------------------------------------------------------
CHEMICALS--2.8%
Freeport-McMoRan Inc. 23,866 883
- ----------------------------------------------------------------------------------------------------------------
COMMUNICATIONS--3.1%
(a)Atlantic Tele-Network 90,200 975
- ----------------------------------------------------------------------------------------------------------------
ENERGY AND RELATED
SERVICES--9.4%
Central Maine Power Co. 30,500 438
Giant Industries 60,600 742
(a)International Technology Corp. 105,900 278
KCS Energy 80,700 1,211
Stewart & Stevenson Services 11,700 295
-----------------------------------------------------------------------------
2,964
- ----------------------------------------------------------------------------------------------------------------
ENTERTAINMENT--12.2%
Bally Entertainment Corp. 142,800 1,999
(a)Casino Data Systems 73,900 1,848
-----------------------------------------------------------------------------
3,847
- ----------------------------------------------------------------------------------------------------------------
FINANCIAL
SERVICES--22.5%
Del Webb Corp. 36,000 725
First Commerce Corp. 16,900 541
First Financial Caribbean Corp. 16,200 304
Guaranty National Insurance 27,300 420
Imperial Credit Industries 67,100 1,459
(a)Insurance Auto Auctions 24,000 258
(a)Mercer International, Inc. 66,600 1,365
PHH Corporation 21,700 1,014
Roosevelt Financial Group 31,400 608
T.R. Financial Corp. 16,300 416
-----------------------------------------------------------------------------
7,110
- ----------------------------------------------------------------------------------------------------------------
MANUFACTURING--22.0%
(a)ACX Technologies, Inc. 39,400 596
Ameron, Inc. 9,700 365
Blount, Inc. 60,650 1,592
(a)Duracraft Corp. 16,500 415
Matthews International Corp. 8,300 162
(a)Mueller Industries, Inc. 24,200 708
Rexene Corp. 63,500 683
(a)Sofamor-Danek Group 53,700 1,524
Sturm Ruger & Co. 16,200 443
Texas Industries 8,800 466
-----------------------------------------------------------------------------
6,954
</TABLE>
10
<PAGE> 88
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(Dollars in thousands)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NUMBER OF SHARES VALUE
RETAILING--8.0%
J. Baker, Inc. 70,300 $ 404
Cato Corp. 84,700 656
Haggar Apparel Co. 13,800 248
(a)Jean Philippe Fragrances 77,800 632
(a)Sports & Recreation 84,600 603
-----------------------------------------------------------------------------
2,543
- ----------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS--2.5%
(a)EXAR Corporation 53,800 794
- ----------------------------------------------------------------------------------------------------------------
TRANSPORTATION--2.2%
Airborne Freight Corp. 26,300 700
-------------------------------------------------------------------------------
TOTAL COMMON STOCKS--91.4%
(Cost: $27,350) 28,880
-------------------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS
LIABILITIES--8.6% 2,726
-------------------------------------------------------------------------------
NET ASSETS--100% $31,606
-------------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
Based on the cost of investments of $27,350,000 for federal income tax purposes
at December 31, 1995, the aggregate gross unrealized appreciation was
$2,760,000, the aggregate gross unrealized depreciation was $1,230,000 and the
net unrealized appreciation on investments was $1,530,000.
See accompanying Notes to Financial Statements.
11
<PAGE> 89
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SHAREHOLDERS
KEMPER-DREMAN SMALL CAP VALUE FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper-Dreman Small Cap Value Fund as
of December 31, 1995 and the related statements of operations and changes in net
assets and the financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The statement of changes
in net assets for the year ended December 31, 1994 and the financial highlights
for each of the four years in the period then ended were audited by other
auditors whose report dated January 19, 1995 expressed an unqualified opinion on
that financial statement and financial highlights.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
December 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Kemper-Dreman Small Cap Value Fund at December 31, 1995 and the results of its
operations, changes in its net assets and financial highlights for the year then
ended, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
February 16, 1996
12
<PAGE> 90
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
(in thousands)
ASSETS
<TABLE>
<S> <C>
Investments, at value
(Cost: $27,350) $28,880
- -------------------------------------------------------------------------------------------------------
Cash 3,464
- -------------------------------------------------------------------------------------------------------
Receivable for:
Fund shares sold 2,679
- -------------------------------------------------------------------------------------------------------
Investments sold 133
- -------------------------------------------------------------------------------------------------------
Dividends 17
- -------------------------------------------------------------------------------------------------------
TOTAL ASSETS 35,173
- -------------------------------------------------------------------------------------------------------
</TABLE>
LIABILITIES AND NET ASSETS
<TABLE>
<S> <C>
Payable for:
Fund shares redeemed 496
- -------------------------------------------------------------------------------------------------------
Investments purchased 3,019
- -------------------------------------------------------------------------------------------------------
Management fee 9
- -------------------------------------------------------------------------------------------------------
Distribution services fee 5
- -------------------------------------------------------------------------------------------------------
Administrative services fee 3
- -------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 7
- -------------------------------------------------------------------------------------------------------
Other 28
- -------------------------------------------------------------------------------------------------------
Total liabilities 3,567
- -------------------------------------------------------------------------------------------------------
NET ASSETS $31,606
- -------------------------------------------------------------------------------------------------------
</TABLE>
ANALYSIS OF NET ASSETS
<TABLE>
<S> <C>
Paid-in capital $29,769
- -------------------------------------------------------------------------------------------------------
Undistributed net realized gain on investments 307
- -------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 1,530
- -------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $31,606
- -------------------------------------------------------------------------------------------------------
</TABLE>
THE PRICING OF SHARES
<TABLE>
<S> <C>
CLASS A SHARES
Net asset value and redemption price per share
($20,684,000 divided by 1,427,000 shares outstanding) $14.50
- -------------------------------------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $15.38
- --------------------------------------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($8,072,000 divided by 557,000 shares outstanding) $14.48
- --------------------------------------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price per share
($985,000 divided by 68,000 shares outstanding) $14.48
- --------------------------------------------------------------------------------------------------------
CLASS I SHARES
Net asset value and redemption price per share
($1,865,000 divided by 128,000 shares outstanding) $14.52
- --------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
13
<PAGE> 91
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Year ended December 31, 1995
(in thousands)
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME
<TABLE>
<S> <C>
Dividends $ 123
- ---------------------------------------------------------------------------------------------------
Interest 16
- ---------------------------------------------------------------------------------------------------
Total investment income 139
- ---------------------------------------------------------------------------------------------------
Expenses:
Management fee 113
- ---------------------------------------------------------------------------------------------------
Distribution services fee 9
- ---------------------------------------------------------------------------------------------------
Administrative services fee 10
- ---------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 60
- ---------------------------------------------------------------------------------------------------
Professional fees 9
- ---------------------------------------------------------------------------------------------------
Reports to shareholders 15
- ---------------------------------------------------------------------------------------------------
Registration fees 15
- ---------------------------------------------------------------------------------------------------
Directors' fees and other 10
- ---------------------------------------------------------------------------------------------------
Total expenses before expense waiver 241
- ---------------------------------------------------------------------------------------------------
Less expenses waived by investment manager 62
- ---------------------------------------------------------------------------------------------------
Total expenses after waiver 179
- ---------------------------------------------------------------------------------------------------
NET INVESTMENT LOSS (40)
- ----------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
<TABLE>
<S> <C>
Net realized gain on sales of investments 1,914
- ---------------------------------------------------------------------------------------------------
Change in net unrealized appreciation on investments 2,016
- ---------------------------------------------------------------------------------------------------
Net gain on investments 3,930
- ---------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,890
- ---------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
Net investment loss $ (40) (2)
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) 1,914 (4)
- ------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation 2,016 (465)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 3,890 (471)
- ------------------------------------------------------------------------------------------------------
Distribution from net realized gain (1,603) (173)
- ------------------------------------------------------------------------------------------------------
Net increase from capital share transactions 22,388 2,699
- ------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 24,675 2,055
- ------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
NET ASSETS
<TABLE>
<S> <C> <C>
Beginning of year 6,931 4,876
- ------------------------------------------------------------------------------------------------------
END OF YEAR $31,606 6,931
- ------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
14
<PAGE> 92
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE FUND Kemper-Dreman Small Cap Value Fund (the Fund) is a
separate series of Kemper-Dreman Fund, Inc. (KDF),
an open-end management investment company organized
as a corporation in the state of Maryland. Prior to
September 11, 1995, KDF was known as Dreman Mutual
Group, Inc.
On September 11, 1995, the Fund began offering four
classes of shares. Class A shares are sold to
investors subject to an initial sales charge. Class
B shares are sold without an initial sales charge
but are subject to higher ongoing expenses than
Class A shares and a contingent deferred sales
charge payable upon certain redemptions. Class B
shares automatically convert to Class A shares six
years after issuance. Class C shares are sold
without an initial or a contingent deferred sales
charge but are subject to higher ongoing expenses
than Class A shares and do not convert into another
class. Class I shares, which are sold to a limited
group of investors, are not subject to initial or
contingent deferred sales charges and have lower
ongoing expenses than other classes. Differences in
class expenses will result in the payment of
different per share income dividends by class. Each
share represents an identical interest in the
investments of the Fund and has the same rights.
- --------------------------------------------------------------------------------
2 SIGNIFICANT ACCOUNTING
POLICIES INVESTMENT VALUATION. Investments are stated at
value. Portfolio securities that are traded on a
domestic securities exchange or securities listed
on the NASDAQ National Market are valued at the
last sale price on the exchange or market where
primarily traded or listed or, if there is no
recent sale, at the last current bid quotation.
Fixed income securities are valued by using market
quotations, or independent pricing services that
use prices provided by market makers or estimates
of market values obtained from yield data relating
to instruments or securities with similar
characteristics. Equity options are valued at the
last sale price unless the bid price is higher or
the asked price is lower, in which event such bid
or asked price is used. Financial futures and
options thereon are valued at the settlement price
established each day by the board of trade or
exchange on which they are traded. Other securities
and assets are valued at fair value as determined
in good faith by the Board of Directors.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on the
trade date (date the order to buy or sell is
executed). Dividend income is recorded on the
ex-dividend date, and interest income is recorded
on the accrual basis and includes amortization of
money market instrument premium and discount.
Realized gains and losses from investment
transactions are reported on an identified cost
basis.
FUND SHARE VALUATION. Fund shares are sold and
redeemed on a continuous basis at net asset value
(plus an initial sales charge on most sales of
Class A shares). Proceeds payable on redemption of
Class B shares will be reduced by the amount of any
applicable contingent deferred sales charge. On
each day the New York Stock Exchange is open for
trading, the net asset value per share is
determined as of the earlier of 3:00 p.m. Chicago
time or the close of the Exchange. The net asset
value per share is determined
15
<PAGE> 93
NOTES TO FINANCIAL STATEMENTS
separately for each class by dividing the Fund's
net assets attributable to that class by the number
of shares of the class outstanding.
FEDERAL INCOME TAXES. The Fund has complied with
the special provisions of the Internal Revenue Code
available to investment companies and therefore no
federal income tax provision is required.
DIVIDENDS TO SHAREHOLDERS. The Fund declares and
pays dividends of net investment income and net
realized capital gains annually, which are recorded
on the ex-dividend date. Dividends are determined
in accordance with income tax principles which may
treat certain transactions differently from
generally accepted accounting principles.
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. On August 24, 1995, KDF
entered into a management agreement with Dreman
Value Advisors, Inc. (DVA), a wholly owned
subsidiary of Kemper Financial Services, Inc. The
Fund currently pays a management fee at an annual
rate of .75% of the first $250 million of average
daily net assets declining to .62% of average daily
net assets in excess of $12.5 billion. The Fund
incurred a management fee of $54,000 to DVA for the
period from August 24, 1995 to December 31, 1995.
Prior to August 24, 1995, KDF had entered into an
investment management agreement with Dreman Value
Management, L.P. (DVM), the Fund's former
investment manager. The Fund paid a management fee
at an annual rate of 1% of the first $1 billion of
average net assets declining to .75% of average net
assets in excess of $1 billion to DVM. The Fund
incurred a management fee of $59,000 to DVM for the
period from January 1, 1995 to August 23, 1995.
DVA has agreed to waive its management fee and
absorb operating expenses to the extent necessary
to limit the Fund's operating expenses to the
following percentages of average daily net assets
until September 11, 1996: Class A, 1.25%, Class B,
2.00% and Class C, 1.95%. Under this arrangement,
DVA waived expenses of $39,000 for the period from
August 24, 1995 to December 31, 1995. In addition,
DVM had agreed to reimburse the Fund for certain
operating expenses, which amounted to $23,000 from
January 1, 1995 to August 23, 1995.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
Effective September 11, 1995, KDF entered into an
underwriting and distribution services agreement
with Kemper Distributors, Inc. (KDI), an affiliate
of DVA. Underwriting commissions paid in connection
with the distribution of Class A shares are as
follows:
<TABLE>
<CAPTION>
COMMISSIONS
ALLOWED BY KDI
COMMISSIONS ------------------------------
RETAINED BY KDI TO ALL FIRMS TO AFFILIATES
--------------- ------------- --------------
<S> <C> <C> <C>
For the period from September 11,
1995 to December 31, 1995 -- $ 178,000 13,000
</TABLE>
For services under the distribution services
agreement, the Fund pays KDI a fee of .75% of
average daily net assets of the Class B and Class C
shares. Pursuant to the agreement, KDI enters into
related selling group
16
<PAGE> 94
NOTES TO FINANCIAL STATEMENTS
agreements with various firms at various rates for
sales of Class B and Class C shares. In addition,
KDI receives any contingent deferred sales charges
(CDSC) from redemptions of Class B shares.
Distribution fees and commissions paid in
connection with the sale of Class B and Class C
shares and the CDSC received in connection with the
redemption of Class B shares are as follows:
<TABLE>
<CAPTION>
COMMISSIONS AND
DISTRIBUTION FEES
DISTRIBUTION FEES PAID BY KDI
AND CDSC RECEIVED ------------------------------
BY KDI TO ALL FIRMS TO AFFILIATES
----------------- ------------- --------------
<S> <C> <C> <C>
For the period from September 11,
1995 to December 31, 1995 $10,000 209,000 13,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. Effective
September 11, 1995, KDF entered into an
administrative services agreement with KDI. For
providing information and administrative services
to Class A, Class B and Class C shareholders, the
Fund pays KDI a fee at an annual rate of up to .25%
of average daily net assets of each class. KDI in
turn has various agreements with financial services
firms that provide these services and pays these
firms based on assets of Fund accounts the firms
service. Administrative services fees (ASF) paid by
the Fund are as follows:
<TABLE>
<CAPTION>
ASF PAID BY KDI
ASF PAID BY ----------------------------
THE FUND TO KDI TO ALL FIRMS TO AFFILIATES
---------------- ------------ -------------
<S> <C> <C> <C>
For the period from September 11,
1995 to December 31, 1995 $ 10,000 20,000 1,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement effective September 11, 1995
with KDF's transfer agent, Kemper Service Company
(KSvC), an affiliate of DVA, is the shareholder
service agent of the Fund. For the period from
September 11, 1995 to December 31, 1995, the
transfer agent remitted shareholder services fees
to KSvC of $14,000 with respect to the Fund.
OFFICERS AND DIRECTORS. Certain officers or
directors of the Fund are also officers or
directors of DVA. During the year ended December
31, 1995, the Fund made no payments to its officers
and incurred directors' fees of $9,000 to
independent directors.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the year ended December 31, 1995, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $28,858
Proceeds from sales 10,707
17
<PAGE> 95
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund (in thousands):
<TABLE>
<CAPTION> Year Ended December 31,
1995 1994
-------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------
SHARES SOLD
Class A 1,364 $19,337 637 $ 7,366
-------------------------------------------------------------------------------
Class B 544 7,969 -- --
-------------------------------------------------------------------------------
Class C 91 1,360 -- --
-------------------------------------------------------------------------------
Class I 141 2,045 -- --
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 77 1,060 15 169
-------------------------------------------------------------------------------
Class B 23 333 -- --
-------------------------------------------------------------------------------
Class C 3 44 -- --
-------------------------------------------------------------------------------
Class I 6 92 -- --
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
SHARES REDEEMED
Class A (653) (9,016) (447) (4,836)
-------------------------------------------------------------------------------
Class B (10) (155) -- --
-------------------------------------------------------------------------------
Class C (26) (400) -- --
-------------------------------------------------------------------------------
Class I (19) (281) -- --
-------------------------------------------------------------------------------
NET INCREASE FROM CAPITAL SHARE
TRANSACTIONS $22,388 $ 2,699
-------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 96
CLASS A
<TABLE>
<CAPTION>
--------------------------------------------------
YEAR ENDED DECEMBER 31, MAY 22, 1992
1995 1994 1993 TO DEC. 31, 1992
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.85 11.23 11.52 10.00
- --------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.02) -- .06 .03
- --------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 4.64 .02 .23 1.95
- --------------------------------------------------------------------------------------------------------------
Total from investment operations 4.62 .02 .29 1.98
- --------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- -- .06 .03
- --------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .97 .40 .52 .43
- --------------------------------------------------------------------------------------------------------------
Total dividends .97 .40 .58 .46
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.50 10.85 11.23 11.52
- --------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 43.29% .15 2.54 32.51
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------------------------------------
Expenses absorbed by the Fund 1.25% 1.25 1.25 1.25
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.16)% (.03) .53 .81
- --------------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------------------------------------
Expenses 1.83% 1.82 2.09 4.29
- --------------------------------------------------------------------------------------------------------------
Net investment loss (.74)% (.61) (.32) (2.24)
- --------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 97
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS B CLASS C CLASS I
--------------- -------------- ------------
SEPT. 11, 1995 SEPT. 11, 1995 NOV. 1, 1995
TO DEC. 31, 1995 TO DEC. 31, 1995 TO DEC. 31, 1995
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $15.75 15.75 14.25
- ------------------------------------------------------------------------- ---------------- ----------------------
Income from investment operations:
Net investment loss (.02) (.02) --
- ------------------------------------------------------------------------- ---------------- ----------------------
Net realized and unrealized gain (loss) (.41) (.41) 1.11
- ------------------------------------------------------------------------- ---------------- ----------------------
Total from investment operations (.43) (.43) 1.11
- ------------------------------------------------------------------------- ---------------- ----------------------
Less distribution from net realized gain .84 .84 .84
- ------------------------------------------------------------------------- ---------------- ----------------------
Net asset value, end of period $14.48 14.48 14.52
- ------------------------------------------------------------------------- ---------------- ---------------------
TOTAL RETURN (NOT ANNUALIZED) (2.52)% (2.51) 8.03
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------- ---------------- ----------------------
Expenses absorbed by the Fund 2.00% 1.95 .47
- ------------------------------------------------------------------------- ---------------- ----------------------
Net investment income (loss) (.99)% (.94) .28
- ------------------------------------------------------------------------- ---------------- ----------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 2.39% 2.35 .90
- ------------------------------------------------------------------------- ---------------- ----------------------
Net investment loss (1.38)% (1.34) (.15)
- ------------------------------------------------------------------------- ---------------- ----------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
YEAR ENDED DECEMBER 31, MAY 22, 1992
1995 1994 1993 TO DEC. 31, 1992
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $31,606 6,931 4,875 2,385
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 86% 140 79 37
- ----------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Total return does not reflect the effect of any sales charges. The
investment manager agreed to waive its management fee and absorb operating
expenses of the Fund. The Other Ratios to Average Net Assets are computed
without this expense waiver or absorption.
20
<PAGE> 98
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
</TABLE>
<TABLE>
<S> <C> <C>
(b) Exhibits:
99.B1a Articles of Incorporation of Registrant*
99.B1b Articles Supplementary to Articles of Incorporation of Registrant*
99.B1c Articles Supplementary to Articles of Incorporation of Registrant*
99.B1d Articles Supplementary to Articles of Incorporation of Registrant*
99.B1e Articles Supplementary to Articles of Incorporation of Registrant*
99.B1f Articles Supplementary to Articles of Incorporation of Registrant*
99.B1g Articles of Amendment to Articles of Incorporation of Registrant*
99.B2 Bylaws*
99.B3 Inapplicable
99.B4 Text of Stock Certificate*
99.B5 Investment Management Agreement
99.B6a Underwriting and Distribution Services Agreement
99.B6b Form of Selling Group Agreement*
99.B7 Inapplicable
99.B8 Custody Agreement*
99.B9a Agency Agreement*
</TABLE>
C-1
<PAGE> 99
<TABLE>
<S> <C> <C>
99.B9b Administrative Services Agreement*
99.B10 Inapplicable
99.B11(a) Consent and Reports of Ernst & Young LLP
99.B11(b) Consent and Report of Tait, Weller & Baker
99.B12 Inapplicable
99.B13 Inapplicable
99.B14 Model Retirement Plans: IRA and SEP-IRA
99.B15 See 6(a) above (Class B and C Shares)
99.B16 Performance Calculations*
99.B18. Multi-Distribution System Plan*
99.B24. Powers of Attorney
27.1 Financial Data Schedule (Contrarian)
27.2 Financial Data Schedule (High Return)
27.3 Financial Data Schedule (Small Cap)
485.B Representation of Counsel (Rule 485)
</TABLE>
- ---------------
* Incorporated herein by reference to the Post-Effective Amendment to
Registrant's Registration Statement on Form N-1A identified below.
<TABLE>
<CAPTION>
EXHIBIT NO. POST-EFFECTIVE AMENDMENT NO. FILING DATE
- ----------------------------------- ---------------------------- -----------
<S> <C> <C>
B1(a), (b), (c), (d), (e), (f),
(g), B18 15 2/29/96
B2, B4, B6b, B8, B9a, B9b, B16 14 9/8/95
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
NUMBER OF RECORD HOLDERS
AS OF APRIL 4, 1996
-----------------------------------------
FUND CLASS A CLASS B CLASS C CLASS I
- ----------------------------------------------------------- ------- -------- ------- -------
<S> <C> <C> <C> <C>
Dreman Contrarian Portfolio 3,120 1,578 237 0
Dreman High Return Portfolio 11,025 6,001 796 1,486
Dreman Small Cap Value Portfolio 4,766 3,602 317 1,099
</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> 100
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 Advisors, 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> 101
Item 28(b)(i) Business and Other Connections of Officers and Directors
of Dreman Value Advisors, Inc., the Investment 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.
Vice President, Kemper Investors Fund
NEAL, JOHN E.
Director, Dreman Value Advisors, Inc.
Director, Zurich Kemper Investments, Inc.
President, Kemper Funds Group, a unit of
Zurich Kemper Investments, Inc.
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> 102
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> 103
Director, RespiteCare
Director, President, SMS Realty Corp.
Vice President, Kemper Funds
Director, Urban Shopping Centers, Inc.
PETERS, JOHN E.
Director, Dreman Value Advisors, Inc.
Senior Executive Vice President, Zurich Kemper Investments, 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, Zurich Kemper Investments, 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
Governor, Investment Company Institute
C - 6
<PAGE> 104
NEEL, JAMES R.
Director, President and Chief Executive Officer, Dreman Value Advisors, Inc.
Vice President, Kemper-Dreman Fund, Inc.
BERTELSEN, CHRISTIAN C.
Senior Managing Director and Chief Investment 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, Zurich Kemper Investments, 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.
Vice President, Kemper-Dreman Fund, Inc.
Vice President, Kemper Investors Fund
COUGHLIN, WILLIAM F.
Managing Director, Dreman Value Advisors, Inc.
C - 7
<PAGE> 105
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.
COLLORA, PHILIP J.
Assistant Secretary, Dreman Value Advisors, Inc.
Senior Vice President and Assistant Secretary,
Zurich Kemper Investments, Inc.
Vice President and Secretary, Kemper Funds
Assistant Secretary, Kemper International Management, Inc.
Assistant Secretary, Zurich Investment Management, Inc.
C - 8
<PAGE> 106
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
John H. Robison, Jr. Senior Vice President None
Henry J. Schulthesz Senior Vice President None
Carlene D. Merold Vice President None
Elizabeth C. Werth Vice President Assistant Secretary
Diane E. Ratekin Assistant Secretary None
</TABLE>
(c) Not Applicable
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> 107
S I G N A T U R E S
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago and State of Illinois, on the 26th day of
April, 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 April 26, 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/Dominique P. Morax* 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> 108
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
99.B1a Articles of Incorporation of Registrant*
99.B1b Articles Supplementary to Articles of Incorporation of Registrant*
99.B1c Articles Supplementary to Articles of Incorporation of Registrant*
99.B1d Articles Supplementary to Articles of Incorporation of Registrant*
99.B1e Articles Supplementary to Articles of Incorporation of Registrant*
99.B1f Articles Supplementary to Articles of Incorporation of Registrant*
99.B1g Articles of Amendment to Articles of Incorporation of Registrant*
99.B2 Bylaws*
99.B3 Inapplicable
99.B4 Text of Stock Certificate*
99.B5 Investment Management Agreement
99.B6a Underwriting and Distribution Services Agreement
99.B6b Form of Selling Group Agreement*
99.B7 Inapplicable
99.B8 Custody Agreement*
99.B9a Agency Agreement*
99.B9b Administrative Services Agreement*
99.B10 Inapplicable
99.B11(a) Consent and Reports of Ernst & Young LLP
99.B11(b) Consent and Report of Tait, Weller & Baker
99.B12 Inapplicable
99.B13 Inapplicable
99.B14 Model Retirement Plans: IRA and SEP-IRA
99.B15 See 6(a) above (Class B and C Shares)
99.B16 Performance Calculations*
99.B18. Multi-Distribution System Plan*
99.B24. Powers of Attorney
27.1 Financial Data Schedule (Contrarian)
27.2 Financial Data Schedule (High Return)
27.3 Financial Data Schedule (Small Cap)
485.B Representation of Counsel (Rule 485)
</TABLE>
- ---------------
* Incorporated herein by reference to the Post-Effective Amendment to
Registrant's Registration Statement on Form N-1A identified below.
<TABLE>
<CAPTION>
EXHIBIT NO. POST-EFFECTIVE AMENDMENT NO. FILING DATE
- ------------------------------------- ---------------------------- -----------
<S> <C> <C>
B1(a), (b), (c), (d), (e), (f), (g),
B18 15 2/29/96
B2, B4, B6b, B8, B9a, B9b, B16 14 9/8/95
</TABLE>
<PAGE> 1
EXHIBIT 99.B5
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 4th day of January, 1996, by and between KEMPER-DREMAN
FUND, INC., a Maryland corporation (the "Fund"), and DREMAN VALUE ADVISORS,
INC., a Delaware corporation (the "Adviser").
WHEREAS, the Fund is an open-end management investment company registered
under the Investment Company Act of 1940, the shares of stock ("Shares") of
which are registered under the Securities Act of 1933;
WHEREAS, the Fund is authorized to issue Shares in separate series or
portfolios with each representing the interests in a separate portfolio of
securities and other assets;
WHEREAS, the Fund currently offers Shares in three portfolios (the
"Initial Portfolios"), called the Kemper-Dreman Contrarian Fund, the
Kemper-Dreman High Return Fund and the Kemper-Dreman Small Cap Value Fund,
together with any other Fund portfolios which may be established later and
served by the Adviser hereunder, being herein referred to collectively as the
"Portfolios" and individually referred to as a "Portfolio"; and
WHEREAS, the Fund desires at this time to retain the Adviser to render
investment advisory and management services to the Initial Portfolios, and the
Adviser is willing to render such services;
NOW THEREFORE, in consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:
1. The Fund hereby employs the Adviser to act as the investment adviser for
the Initial Portfolios and other Portfolios hereunder and to manage the
investment and reinvestment of the assets of each such Portfolio in accordance
with the applicable investment objectives and policies and limitations, and to
administer the affairs of each such Portfolio to the extent requested by and
subject to the supervision of the Board of Directors of the Fund for the period
and upon the terms herein set forth, and to place orders for the purchase or
sale of portfolio securities for the Fund's account with brokers or dealers
selected by it; and, in connection therewith, the Adviser is authorized as the
agent of the Fund to give instructions to the Custodian of the Fund as to the
deliveries of securities and payments of cash for the account of the Fund. In
connection with the selection of such brokers or dealers and the placing of
such orders, the Adviser is directed to seek for the Fund best execution of
orders. Subject to such
<PAGE> 2
policies as the Board of Directors of the Fund determines, the Adviser shall
not be deemed to have acted unlawfully or to have breached any duty, created by
this Agreement or otherwise, solely by reason of its having caused the Fund to
pay a broker or dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction, if the Adviser determined in
good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer
viewed in terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the clients of the Adviser as to which the
Adviser exercises investment discretion. The Fund recognizes that all research
services and research that the Adviser receives or generates are available for
all clients, and that the Fund and other clients may benefit thereby. The
investment of funds shall be subject to all applicable restrictions of the
Articles of Incorporation and By-Laws of the Fund as may from time to time be
in force.
The Adviser accepts such employment and agrees during such period to
render such services, to furnish office facilities and equipment and clerical,
bookkeeping and administrative services for the Fund, to permit any of its
officers or employees to serve without compensation as directors or officers of
the Fund if elected to such positions and to assume the obligations herein set
forth for the compensation herein provided. The Adviser shall for all purposes
herein provided be deemed to be an independent contractor and, unless otherwise
expressly provided or authorized, shall have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the Fund. It
is understood and agreed that the Adviser, by separate agreements with the
Fund, may also serve the Fund in other capacities.
2. In the event that the Fund establishes one or more portfolios other than
the Initial Portfolios with respect to which it desires to retain the Adviser
to render investment advisory and management services hereunder, it shall
notify the Adviser in writing. If the Adviser is willing to render such
services, it shall notify the Fund in writing whereupon such portfolio or
portfolios shall become a Portfolio or Portfolios hereunder.
3. For the services and facilities described in Section 1, the Fund will pay
to the Adviser at the end of each calendar month, an investment management fee
for each Portfolio computed by applying the annual rates set forth in Appendix
A to the applicable average daily net assets of the Portfolio.
The fee as computed in Appendix A shall be computed separately for, and
charged as an expense of, each Portfolio
2
<PAGE> 3
based upon the average daily net assets of such Portfolio. For the month and
year in which this Agreement becomes effective or terminates, there shall be an
appropriate proration on the basis of the number of days that the Agreement is
in effect during the month and year, respectively.
4. The services of the Adviser to the Fund under this Agreement are not to be
deemed exclusive, and the Adviser shall be free to render similar services or
other services to others so long as its services hereunder are not impaired
thereby.
5. In addition to the fee of the Adviser, the Fund shall assume and pay any
expenses for services rendered by a custodian for the safekeeping of the Fund's
securities or other property, for keeping its books of account, for any other
charges of the custodian, and for calculating the net asset value of the Fund
as provided in the prospectus of the Fund. The Adviser shall not be required
to pay and the Fund shall assume and pay the charges and expenses of its
operations, including compensation of the directors (other than those
affiliated with the Adviser), charges and expenses of independent auditors, of
legal counsel, of any transfer or dividend disbursing agent, and of any
registrar of the Fund, costs of acquiring and disposing of portfolio
securities, interest, if any, on obligations incurred by the Fund, costs of
share certificates and of reports, membership dues in the Investment Company
Institute or any similar organization, costs of reports and notices to
stockholders, other like miscellaneous expenses and all taxes and fees payable
to federal, state or other governmental agencies on account of the registration
of securities issued by the Fund, filing of corporate documents or otherwise.
The Fund shall not pay or incur any obligation for any expenses for which the
Fund intends to seek reimbursement from the Adviser as herein provided without
first obtaining the written approval of the Adviser. The Adviser shall
arrange, if desired by the Fund, for officers or employees of the Adviser to
serve, without compensation from the Fund, as directors, officers or agents of
the Fund if duly elected or appointed to such positions and subject to their
individual consent and to any limitations imposed by law.
If expenses borne by the Fund for those Portfolios which the Adviser
manages in any fiscal year (including the Adviser's fee, but excluding
interest, taxes, fees incurred in acquiring and disposing of portfolio
securities, distribution services fees, extraordinary expenses and any other
expenses excludable under state securities law limitations) exceed any
applicable limitation arising under state securities laws applicable to a
Portfolio, the Adviser will reduce its fee or reimburse the Fund for any excess
to the extent required by such state securities laws. If for any month the
expenses of the Fund properly chargeable to the income account shall exceed
1/12 of the percentage of average net assets allowable as expenses, the
3
<PAGE> 4
payment to the Adviser for that month shall be reduced and if necessary the
Adviser shall make a refund payment to the Fund so that the total net expense
will not exceed such percentage. As of the end of the Fund's fiscal year,
however, the foregoing computations and payments shall be readjusted so that
the aggregate compensation payable to the Adviser for the year is equal to the
percentage calculated in accordance with Section 3 hereof of the average net
asset value as determined as described herein throughout the fiscal year,
diminished to the extent necessary so that the total of the aforementioned
expense items of the Fund shall not exceed the expense limitation. The
aggregate of repayments, if any, by the Adviser to the Fund for the year shall
be the amount necessary to limit the said net expense to said percentage in
accordance with the foregoing.
The net asset value for each Portfolio shall be calculated in accordance
with the provisions of the Fund's prospectus or as the directors may determine
in accordance with the provisions of the Investment Company Act of 1940. On
each day when net asset value is not calculated, the net asset value of a
Portfolio shall be deemed to be the net asset value of such Portfolio as of the
close of business on the last day on which such calculation was made for the
purpose of the foregoing computations.
6. Subject to applicable statutes and regulations, it is understood that
directors, officers or agents of the Fund are or may be interested in the
Adviser as officers, directors, agents, shareholders or otherwise, and that the
officers, directors, shareholders and agents of the Adviser may be interested
in the Fund otherwise than as a director, officer or agent.
7. The Adviser shall not be liable for any error of judgment or of law or for
any loss suffered by the Fund in connection with the matters to which this
Agreement relates, except loss resulting from willful misfeasance, bad faith or
gross negligence on the part of the Adviser in the performance of its
obligations and duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
8. This Agreement shall become effective with respect to the Initial
Portfolios on the date hereof and shall remain in full force until April 1,
1996, unless sooner terminated as hereinafter provided. This Agreement shall
continue in force from year to year thereafter with respect to each Portfolio,
but only as long as such continuance is specifically approved for each
Portfolio at least annually in the manner required by the Investment Company
Act of 1940 and the rules and regulations thereunder; provided, however, that
if the continuation of this Agreement is not approved for a Portfolio, the
Adviser may continue to serve in such capacity for such Portfolio in the manner
and to the extent permitted by the Investment Company Act of 1940 and the rules
and regulations thereunder.
4
<PAGE> 5
This Agreement shall automatically terminate in the event of its
assignment and may be terminated at any time without the payment of any penalty
by the Fund or by the Adviser on sixty (60) days written notice to the other
party. The Fund may effect termination with respect to any Portfolio by action
of the Board of Directors or by vote of a majority of the outstanding voting
securities of such Portfolio.
This Agreement may be terminated with respect to any Portfolio at any time
without the payment of any penalty by the Board of Directors or by vote of a
majority of the outstanding voting securities of such Portfolio in the event
that it shall have been established by a court of competent jurisdiction that
the Adviser or any officer or director of the Adviser has taken any action
which results in a breach of the covenants of the Adviser set forth herein.
The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the Investment Company Act of
1940 and the rules and regulations thereunder.
Termination of this Agreement shall not affect the right of the Adviser to
receive payments on any unpaid balance of the compensation described in Section
3 earned prior to such termination.
9. The parties agree that the Adviser has a proprietary interest in the names
"Kemper" and "Dreman", and the Fund agrees to promptly take any and all
necessary action to remove the names "Kemper" and "Dreman" from its corporate
name and from the name of its Portfolios upon receipt of written request
therefor from the Adviser.
10. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
11. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as
such other party may designate for the receipt of such notice.
12. This Agreement has been executed by and on behalf of the Fund by its
representatives as such representatives and not individually, and the
obligations of the Fund hereunder are not binding upon any of the directors,
officers, or stockholders of the Fund individually but are binding upon only
the assets and property of the Fund. With respect to any claim by the Adviser
for recovery of that portion of the investment management fee (or any other
liability of the Fund arising hereunder) allocated to a particular Portfolio,
whether in accordance with the express
5
<PAGE> 6
terms hereof or otherwise, the Adviser shall have recourse solely against the
assets of that Portfolio to satisfy such claim and shall have no recourse
against the assets of any other Portfolio for such purpose.
13. This Agreement shall be construed in accordance with applicable federal
law and the laws of the State of Illinois.
14. This Agreement is the entire contract between the parties relating to the
subject matter hereof and supersedes all prior agreements between the parties
relating to the subject matter hereof.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to
be executed as of the day and year first above written.
KEMPER-DREMAN FUND, INC.
By: /s/ John E. Peters
-------------------------
Title: Vice President
ATTEST:
/s/ Philip J. Collora
- -------------------------
Title: Secretary
DREMAN VALUE ADVISORS, INC.
By: /s/ Patrick Dudasik
-----------------------------
Title: Executive Vice President
ATTEST:
/s/ David F. Dierenfeldt
- -------------------------
Title: Secretary
6
<PAGE> 7
APPENDIX A
INVESTMENT MANAGEMENT FEE
Contrarian, High Return and Small Cap Value Portfolios:
<TABLE>
<CAPTION>
Applicable Average
Daily Net Assets
(Thousands) Annual Rate
------------------ -----------
<S> <C>
$0 - $ 250,000 .75 of 1%
$ 250,000 - $ 1,000,000 .72 of 1%
$ 1,000,000 - $ 2,500,000 .70 of 1%
$ 2,500,000 - $ 5,000,000 .68 of 1%
$ 5,000,000 - $ 7,500,000 .65 of 1%
$ 7,500,000 - $10,000,000 .64 of 1%
$10,000,000 - $12,500,000 .63 of 1%
Over $12,500,000 .62 of 1%
</TABLE>
A-1
<PAGE> 1
EXHIBIT 99.B6(a)
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made this 4th day of January, 1996, between KEMPER-DREMAN FUND,
INC. a Maryland corporation (the "Fund"), and KEMPER DISTRIBUTORS, INC., a
Delaware corporation ("KDI").
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints KDI to act as agent for the distribution of
shares of stock (hereinafter called "shares") of the Fund in jurisdictions
wherein shares of the Fund may legally be offered for sale; provided, however,
that the Fund in its absolute discretion may (a) issue or sell shares directly
to holders of shares of the Fund upon such terms and conditions and for such
consideration, if any, as it may determine, whether in connection with the
distribution of subscription or purchase rights, the payment or reinvestment of
dividends or distributions, or otherwise; or (b) issue or sell shares at net
asset value to the stockholders of any other investment company, for which KDI
shall act as exclusive distributor, who wish to exchange all or a portion of
their investment in shares of such other investment company for shares of the
Fund. KDI shall appoint various financial service firms ("Firms") to provide
distribution services to investors. The Firms shall provide such office space
and equipment, telephone facilities, personnel, literature distribution,
advertising and promotion as is necessary or beneficial for providing
information and distribution services to existing and potential clients of the
Firms. KDI may also provide some of the above services for the Fund.
KDI accepts such appointment as distributor and principal underwriter and
agrees to render such services and to assume the obligations herein set forth
for the compensation herein provided. KDI shall for all purposes herein
provided be deemed to be an independent contractor and, unless expressly
provided herein or otherwise authorized, shall have no authority to act for or
represent the Fund in any way. KDI, by separate agreement with the Fund, may
also serve the Fund in other capacities. The services of KDI to the Fund under
this Agreement are not to be deemed exclusive, and KDI shall be free to render
similar services or other services to others so long as its services hereunder
are not impaired thereby.
In carrying out its duties and responsibilities hereunder, KDI will,
pursuant to separate written contracts, appoint various Firms to provide
advertising, promotion and other distribution
<PAGE> 2
services contemplated hereunder directly to or for the benefit of existing and
potential stockholders who may be clients of such Firms. Such Firms shall at
all times be deemed to be independent contractors retained by KDI and not the
Fund.
KDI shall use its best efforts with reasonable promptness to sell such
part of the authorized shares of the Fund remaining unissued as from time to
time shall be effectively registered under the Securities Act of 1933
("Securities Act"), at prices determined as hereinafter provided and on terms
hereinafter set forth, all subject to applicable federal and state laws and
regulations and to the Agreement and Articles of Incorporation of the Fund.
2. KDI shall sell shares of the Fund to or through qualified Firms in such
manner, not inconsistent with the provisions hereof and the then effective
registration statement (and related prospectus) of the Fund under the
Securities Act, as KDI may determine from time to time, provided that no Firm
or other person shall be appointed or authorized to act as agent of the Fund
without the prior consent of the Fund. In addition to sales made by it as
agent of the Fund, KDI may, in its discretion, also sell shares of the Fund as
principal to persons with whom it does not have selling group agreements.
Shares of any class of any series of the Fund offered for sale or sold by
KDI shall be so offered or sold at a price per share determined in accordance
with the then current prospectus. The price the Fund shall receive for all
shares purchased from it shall be the net asset value used in determining the
public offering price applicable to the sale of such shares. Any excess of the
sales price over the net asset value of the shares of the Fund sold by KDI as
agent shall be retained by KDI as a commission for its services hereunder. KDI
may compensate Firms for sales of shares at the commission levels provided in
the Fund's prospectus from time to time. KDI may pay other commissions, fees
or concessions to Firms, and may pay them to others in its discretion, in such
amounts as KDI shall determine from time to time. KDI shall be entitled to
receive and retain any applicable contingent deferred sales charge as described
in the Fund's prospectus. KDI shall also receive any distribution services fee
payable by the Fund as provided in Section 8 hereof.
KDI will require each Firm to conform to the provisions hereof and the
Registration Statement (and related prospectus) at the time in effect under the
Securities Act with respect to the public offering price or net asset value, as
applicable, of the Fund's shares, and neither KDI nor any such Firms shall
withhold the placing of purchase orders so as to make a profit thereby.
3. The Fund will use its best efforts to keep effectively registered under
the Securities Act for sale as herein
2
<PAGE> 3
contemplated such shares as KDI shall reasonably request and as the Securities
and Exchange Commission shall permit to be so registered. Notwithstanding any
other provision hereof, the Fund may terminate, suspend or withdraw the
offering of shares whenever, in its sole discretion, it deems such action to be
desirable.
4. The Fund will execute any and all documents and furnish any and all
information that may be reasonably necessary in connection with the
qualification of its shares for sale (including the qualification of the Fund
as a dealer where necessary or advisable) in such states as KDI may reasonably
request (it being understood that the Fund shall not be required without its
consent to comply with any requirement which in its opinion is unduly
burdensome). The Fund will furnish to KDI from time to time such information
with respect to the Fund and its shares as KDI may reasonably request for use
in connection with the sale of shares of the Fund.
5. KDI shall issue and deliver or shall arrange for various Firms to issue
and deliver on behalf of the Fund such confirmations of sales made by it
pursuant to this agreement as may be required. At or prior to the time of
issuance of shares, KDI will pay or cause to be paid to the Fund the amount due
the Fund for the sale of such shares. Certificates shall be issued or shares
registered on the transfer books of the Fund in such names and denominations as
KDI may specify.
6. KDI shall order shares of the Fund from the Fund only to the extent that
it shall have received purchase orders therefor. KDI will not make, or
authorize Firms or others to make (a) any short sales of shares of the Fund; or
(b) any sales of such shares to any director or officer of the Fund or to any
officer or director of KDI or of any corporation or association furnishing
investment advisory, managerial or supervisory services to the Fund, or to any
corporation or association, unless such sales are made in accordance with the
then current prospectus relating to the sale of such shares. KDI, as agent of
and for the account of the Fund, may repurchase the shares of the Fund at such
prices and upon such terms and conditions as shall be specified in the current
prospectus of the Fund. In selling or reacquiring shares of the Fund for the
account of the Fund, KDI will in all respects conform to the requirements of
all state and federal laws and the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., relating to such sale or
reacquisition, as the case may be, and will indemnify and save harmless the
Fund from any damage or expense on account of any wrongful act by KDI or any
employee, representative or agent of KDI. KDI will observe and be bound by all
the provisions of the Agreement and Articles of Incorporation of the Fund (and
of any fundamental policies adopted by the Fund pursuant to the Investment
Company Act of 1940, notice of which shall have been given to KDI) which at the
3
<PAGE> 4
time in any way require, limit, restrict, prohibit or otherwise regulate any
action of the part of KDI hereunder.
7. The Fund shall assume and pay all charges and expenses of its operations
not specifically assumed or otherwise to be provided by KDI under this
Agreement. The Fund will pay or cause to be paid expenses (including the fees
and disbursements of its own counsel) of any registration of the Fund and its
shares under the United States securities laws and expenses incident to the
issuance of shares of beneficial interest, such as the cost of share
certificates, issue taxes, and fees of the transfer agent. KDI will pay all
expenses (other than expenses which one or more Firms may bear pursuant to any
agreement with KDI) incident to the sale and distribution of the shares issued
or sold hereunder, including, without limiting the generality of the foregoing,
all (a) expenses of printing and distributing any prospectus and of preparing,
printing and distributing or disseminating any other literature, advertising
and selling aids in connection with the offering of the shares for sale (except
that such expenses need not include expenses incurred by the Fund in connection
with the preparation, typesetting, printing and distribution of any
registration statement or prospectus, report or other communication to
stockholders in their capacity as such), (b) expenses of advertising in
connection with such offering and (c) expenses (other than the Fund's auditing
expenses) of qualifying or continuing the qualification of the shares for sale
and, in connection therewith, of qualifying or continuing the qualification of
the Fund as a dealer or broker under the laws of such states as may be
designated by KDI under the conditions herein specified. No transfer taxes, if
any, which may be payable in connection with the issue or delivery of shares
sold as herein contemplated or of the certificates for such shares shall be
borne by the Fund, and KDI will indemnify and hold harmless the Fund against
liability for all such transfer taxes.
8. For the services and facilities described herein in connection with Class
B shares and Class C shares of each series of the Fund, the Fund will pay to
KDI at the end of each calendar month a distribution services fee computed at
the annual rate of .75% of average daily net assets attributable to the Class B
shares and Class C shares of each such series. For the month and year in which
this Agreement becomes effective or terminates, there shall be an appropriate
proration on the basis of the number of days that the Agreement is in effect
during the month and year, respectively. The foregoing fee shall be in
addition to and shall not be reduced or offset by the amount of any contingent
deferred sales charge received by KDI under Section 2 hereof.
The net asset value shall be calculated in accordance with the provisions
of the Fund's current prospectus. On each day when net asset value is not
calculated, the net asset value of a
4
<PAGE> 5
share of any class of any series of the Fund shall be deemed to be the net
asset value of such a share as of the close of business on the last previous
day on which such calculation was made. The distribution services fee for any
class of a series of the Fund shall be based upon average daily net assets of
the series attributable to the class and such fee shall be charged only to such
class.
9. KDI shall prepare reports for the Board of Directors of the Fund on a
quarterly basis in connection with the Fund's distribution plan for Class B
shares and Class C shares showing amounts paid to the various Firms and such
other information as from time to time shall be reasonably requested by the
Board of Directors.
10. To the extent applicable, this Agreement constitutes the plan for the
Class B shares and Class C shares of each series of the Fund pursuant to Rule
12b-1 under the Investment Company Act of 1940; and this Agreement and plan
shall be approved and renewed in accordance with Rule 12b-1 for such Class B
shares and Class C shares separately.
This Agreement shall become effective on the date hereof and shall
continue until April 1, 1996; and shall continue from year to year thereafter
only so long as such continuance is approved in the manner required by the
Investment Company Act of 1940.
This Agreement shall automatically terminate in the event of its
assignment and may be terminated at any time without the payment of any penalty
by the Fund or by KDI on sixty (60) days written notice to the other party.
The Fund may effect termination with respect to any class of any series of the
Fund by a vote of (i) a majority of the Board of Directors, (ii) a majority of
the directors who are not interested persons of the Fund and who have no direct
or indirect financial interest in this Agreement or in any agreement related to
this Agreement, or (iii) a majority of the outstanding voting securities of the
class. Without prejudice to any other remedies of the Fund, the Fund may
terminate this Agreement at any time immediately upon KDI's failure to fulfill
any of its obligations hereunder.
This Agreement may not be amended to increase the amount to be paid to KDI
by the Fund for services hereunder with respect to a class of any series of the
Fund without the vote of a majority of the outstanding voting securities of
such class. All material amendments to this Agreement must in any event be
approved by a vote of the Board of Directors of the Fund including the
directors who are not interested persons of the Fund and who have no direct or
indirect financial interest in this Agreement or in any agreement related to
this Agreement, cast in person at a meeting called for such purpose.
5
<PAGE> 6
The terms "assignment", "interested" and "vote of a majority of the
outstanding voting securities" shall have the meanings set forth in the
Investment Company Act of 1940 and the rules and regulations thereunder.
Termination of this Agreement shall not affect the right of KDI to receive
payments on any unpaid balance of the compensation described in Section 8
earned prior to such termination.
11. KDI will not use or distribute, or authorize the use, distribution or
dissemination by Firms or others in connection with the sale of Fund shares any
statements other than those contained in the Fund's current prospectus, except
such supplemental literature or advertising as shall be lawful under federal
and state securities laws and regulations. KDI will furnish the Fund with
copies of all such material.
12. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
13. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as
such other party may designate for the receipt of such notice.
14. This Agreement has been executed by and on behalf of the Fund by its
representatives as such representatives and not individually, and the
obligations of the Fund hereunder are not binding upon any of the Directors,
officers or stockholders of the Fund individually but are binding upon only the
assets and property of the Fund. With respect to any claim by KDI for recovery
of any liability of the Fund arising hereunder allocated to a particular series
or class, whether in accordance with the express terms hereof or otherwise, KDI
shall have recourse solely against the assets of that series or class to
satisfy such claim and shall have no recourse against the assets of any other
series or class for such purpose.
15. This Agreement shall be construed in accordance with applicable federal
law and the laws of the State of Illinois.
6
<PAGE> 7
16. This Agreement is the entire contract between the parties relating to the
subject matter hereof and supersedes all prior agreements between the parties
relating to the subject matter hereof.
IN WITNESS WHEREOF, the Fund and KDI have caused this Agreement to be
executed as of the day and year first above written.
KEMPER-DREMAN FUND, INC.
By: /s/ John E. Peters
----------------------
Title: Vice President
ATTEST:
/s/ Philip J. Collora
- ----------------------
Title: Secretary
KEMPER DISTRIBUTORS, INC.
By: /s/ Patrick Dudasik
------------------------------------------
Title: Chief Financial Officer and Treasurer
ATTEST:
/s/ David F. Dierenfeldt
- ---------------------------
Title: Secretary
7
<PAGE> 1
EXHIBIT 99.B11(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Independent Auditors and Reports to Shareholders" and to the
incorporation by reference of our reports on Kemper-Dreman Contrarian Fund,
Kemper-Dreman High Return Fund and Kemper-Dreman Small Cap Value Fund, dated
February 16, 1996 in the Registration Statement of Kemper-Dreman Fund, Inc. on
Form N-1A and the related Prospectus filed with the Securities and Exchange
Commission in this Post-Effective Amendment No. 16 to the Registration
Statement under the Securities Act of 1933 (File No. 33-18477) and in this
Amendment No. 18 to the Registration Statement under the Investment Company Act
of 1940 (File No. 811-5385).
Ernst & Young LLP
ERNST & YOUNG LLP
Chicago, Illinois
April 23, 1996
<PAGE> 2
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Kemper-Dreman Contrarian Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Kemper-Dreman Contrarian Fund as of December
31, 1995 and the related statements of operations and changes in net assets and
the financial highlights for the year then ended. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The statement of changes in net assets
for the year ended December 31, 1994 and the financial highlights for each of
the four years in the period then ended were audited by other auditors whose
report dated January 19, 1995 expressed an unqualified opinion on that
financial statement and financial highlights.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
December 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Kemper-Dreman contrarian Fund at December 31, 1995 and the results of its
operations, changes in its net assets and financial highlights for the year then
ended, in conformity with generally accepted accounting principles.
Ernst & Young LLP
ERNST & YOUNG LLP
Chicago, Illinois
February 16, 1996
<PAGE> 3
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Kemper-Dreman High Return Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Kemper-Dreman High Return Fund as of December
31, 1995 and the related statements of operations and changes in net assets and
the financial highlights for the year then ended. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The statement of changes in net assets
for the year ended December 31, 1994 and the financial highlights for each of
the four years in the period then ended were audited by other auditors whose
report dated January 19, 1995 expressed an unqualified opinion on that
financial statement and financial highlights.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
December 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion , the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Kemper-Dreman High Return Fund at December 31, 1995 and the results of its
operations, changes in its net assets and financial highlights for the year then
ended, in conformity with generally accepted accounting principles.
Ernst & Young LLP
ERNST & YOUNG LLP
Chicago, Illinois
February 16, 1996
<PAGE> 4
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Kemper-Dreman Small Cap Value Fund
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper-Dreman Small Cap Value Fund
as of December 31, 1995 and the related statements of operations and changes in
net assets and the financial highlights for the year then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit. The statement
of changes in net assets for the year ended December 31, 1994 and the financial
highlights for each of the four years in the period then ended were audited by
other auditors whose report dated January 19, 1995 expressed an unqualified
opinion on that financial statement and financial highlights.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
December 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Kemper-Dreman Small Cap Value Fund at December 31, 1995 and the results of its
operations, changes in its net assets and financial highlights for the year then
ended, in conformity with generally accepted accounting principles.
Ernst & Young LLP
ERNST & YOUNG LLP
Chicago, Illinois
February 16, 1996
<PAGE> 1
EXHIBIT 99.B11(b)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the inclusion of our report dated January 19, 1995 to the
Shareholders and Board of Directors of Kemper-Dreman Fund, Inc. in the
Registration Statement, (Form N-1A), and related Statement of Additional
Information of Kemper-Dreman Fund, Inc.
Tait, Weller & Baker
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
April 23, 1996
<PAGE> 2
TAIT, WELLER & BAKER
Certified Public Accountants
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
KEMPER-DREMAN FUND, INC.
We have audited the statement of changes in net assets of Kemper-Dreman Fund,
Inc. (comprising, respectively, Kemper-Dreman Contrarian Fund, Kemper-Dreman
High Return Fund and Kemper-Dreman Small Cap Value Fund, formerly known as,
respectively, The Dreman Contrarian Portfolio, The Dreman High Return Portfolio
and The Dreman Small Cap Value Portfolio), for the year ended December 31,
1994, and the financial highlights for each of the fiscal periods ended December
31, 1988 through December 31, 1994 for Kemper-Dreman Contrarian Fund and
Kemper-Dreman High Return Fund, and each of the fiscal periods ended December
31, 1992 through December 31, 1994 for Kemper-Dreman Small Cap Value Fund. This
financial statement and the financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on this
financial statement and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the statement of changes in net
assets and the financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the statement of changes in net assets. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the statement of changes in net assets and the financial
highlights referred to above present fairly, in all material respects, the
changes in net assets of Kemper-Dreman Fund, Inc. for the year ended December
31, 1994, and the financial highlights for each of the periods indicated above,
in conformity with generally accepted accounting principles.
Tait, Weller & Baker
PHILADELPHIA, PENNSYLVANIA
JANUARY 19, 1995
<PAGE> 1
EXHIBIT 99.B14.(a)
KEMPER
RETIREMENT PLAN PROTOTYPE
A Keogh/Corporate Retirement
Plan for Professionals and
Small Corporations
THE KEMPER RED BOOK
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
CHOOSING YOUR PLAN................................... SECTION 1
PLAN INSTALLATION FORMS.............................. SECTION 2
PARTICIPANT RECORDS ................................. SECTION 3
PLAN DOCUMENT ....................................... SECTION 4
</TABLE>
<PAGE> 3
CHOOSING YOUR PLAN
RETIREMENT PLANNING SOLUTIONS THAT BENEFIT BOTH YOU AND YOUR EMPLOYEES
Providing for retirement is an increasing concern for employers, as well
as employees. With a shrinking work force, employers will have to be more
competitive than ever to attract a qualified staff. The rising costs of
traditional pension plans, however, can be a significant financial drain
on a company's profits. So how can a company remain competitive and not
risk its bottom line?
Many employers have discovered that defined contribution plans such as
Money Purchase and Profit Sharing plans provide a viable solution that can
benefit both the company and its employees.
FIND OUT IF ONE OF THESE PLANS IS RIGHT FOR YOU...
With the variety of retirement plans available today, it's often difficult
to know which one is best for your company's needs. If you're a sole
proprietor, independent contractor, owner of a small business or in
private practice, with few or no employees, and are looking for a way to
save for retirement and reduce your tax liabilities, consider one of these
plans.
PROFIT SHARING PLAN
A profit sharing plan is just that - a plan that enables the
employees to participate in the profits of the company. The
flexibility of contribution limits and the relative ease of
maintenance make profit sharing plans an attractive alternative for
both employers and employees.
A profit sharing plan allows employees to participate in the
company's success, thereby giving further incentive for employee
productivity and loyalty. More profits mean higher contributions, up
to legal limits.
MONEY PURCHASE PLAN
A money purchase plan shares many of the same advantages and features
of a profit sharing plan, but has a higher contribution level. It
has the same eligibility requirements, tax benefits and distribution
choices. The difference is in the contribution limits and
requirements.
- Allows for higher contribution levels
- Contribution levels are fixed
Because there is a fixed contribution formula, required contributions
can be easily computed and budgeted. Once a percentage has been
determined, contributions are mandatory each year, and for the same
percentage level - regardless of whether the company is profitable
that year. Failure to contribute the required amount in a year could
result in stiff tax penalties, and jeopardize the qualified status of
the plan.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
TYPE OF PLAN PROFIT SHARING MONEY PURCHASE COMBINATION
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TYPE OF CONTRIBUTION Flexible Fixed Flexible/Fixed
- ------------------------------------------------------------------------------------------------------------
MAXIMUM ANNUAL 15% of 25% of 25% of
CONTRIBUTION LIMIT Eligible Payroll Eligible Payroll Eligible Payroll
- ------------------------------------------------------------------------------------------------------------
PARTICIPANT 25% of Compensation 25% of Compensation 25% of Compensation
ANNUAL LIMIT not to Exceed $30,000 not to Exceed $30,000 not to Exceed $30,000
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 4
COMBINED MONEY PURCHASE AND PROFIT SHARING PLAN
Many employers like the idea of making contributions as high as 25% of
eligible payroll, but are not comfortable committing to this every year.
Fortunately, the IRS allows a combination or "paired" plan that gives the
"best of both worlds."
- Higher contribution levels of a money purchase plan
- Flexible contribution limits of a profit sharing plan
Paired plans combine the flexibility of a profit sharing plan with the
higher contribution limits of a money purchase pension plan. A combined
plan lets you enjoy control over a portion of the contribution similar to
a profit sharing plan, but also offers the higher contribution limits
found in a money purchase plan. Employees are assured that they will be
provided with at least some level of retirement benefit.
Typically, if an employer wishes to maximize the contribution, he or she
would set the money purchase plan contribution at 10%, which would be
mandatory each year, and allow the remaining 15% to be a part of the
profit sharing plan, which is contingent on whether or not the company can
afford it. That way, the employer is only locked into a 10% mandatory
contribution rather than 25%.
THE KEMPER RED BOOK KEOGH PROTOTYPE
The Plan Document, contained in the last section of this booklet, provides
the plan parameters for self-employed partnerships and corporations, and
has been amended for the Tax Reform Act of 1986. Investors Fiduciary Trust
Company (IFTC) will act as trustee for a plan using Kemper mutual funds.
Kemper Investors Life Insurance Company (KILICO) annuities do not require
a trustee. Before any contributions can be made to the plan, an Adoption
Agreement (see section entitled "Plan Installation Forms") that outlines
the plan parameters must be signed and dated.
ELIGIBILITY
Since the plan is employer-sponsored, the employer has the ability to
establish minimum requirements for plan participation, generally based on
age and years of service. As the employer, you decide how flexible plan
participation will be, keeping within certain minimum requirements set by
the IRS. Of course, eligibility requirements may be lower. Those who must
be eligible for the plan are:
- Any employee over age 21, AND
- Employees who have had at least two years of service, AND
- Employees who are not covered by a collective bargaining agreement.
All employees (including leased and control group) who fulfill eligibility
requirements, except for union employees covered under a collective
bargaining agreement, are eligible participants in the plan. Entry dates
for the plan are semi-annual.
CONTRIBUTIONS
One of the most important benefits of the plan is that the employer's
contributions are a tax-deductible business expense. This special tax
treatment makes it one of the few remaining tax shelters available.
All plan participants employed on the last day of the plan year will share
in the employer's contribution regardless of the hours worked during the
plan year. Terminated participants will share in the employer's
contribution only if they completed at least 501 hours of service during
the plan year in which they terminated.
Compensation is defined as an employee's total gross salary earned while
the employee was actually a plan participant. Rollover contributions are
allowed if the Employer wishes. Employee after-tax contributions are not
allowed under this plan document.
<PAGE> 5
CHOOSING YOUR PLAN
DISTRIBUTIONS
Terminated participants will receive their distribution on the 60th day of
the plan year following separation of service. If the value of the account
is more than $3,500 the participant must agree to take his or her money,
and the participant can choose lump sum or installment payments. If the
account value is $3,500 or less, the participant receives a lump sum
payment. Participants are always 100% vested.
Kemper Financial Services, Inc. will provide self-trusteed, variable
documents which allow you to vary the plan parameters. Please contact your
representative or Kemper Financial Services, Inc. at 1-800-621-5027.
QUESTIONS AND ANSWERS
Q. WHAT IS THE DEADLINE FOR ESTABLISHING A RETIREMENT PLAN?
A. The plan must be established on or before the last day of the taxable
year for which a deduction is to be taken.
Q. DOES "ESTABLISH" MEAN THERE MUST BE ASSETS IN THE PLAN?
A. Yes, at least $250 is required to open and establish the account in
the tax year. The balance of the contribution must comply with tax
deadlines.
Q. WHAT IS THE DEADLINE FOR MAKING CONTRIBUTIONS ONCE THE PLAN IS
ESTABLISHED?
A. Contributions for any year must be made before the latest possible
filing date for the Employer's federal income tax return for that
year, including extensions.
Q. SHOULD I BE BONDED?
A. Yes, Employers should be bonded if the plan covers employees other
than the owner(s) and the owner(s) spouse; the bond must cover at
least 10% of the plan's assets; the face value of the bond may not be
less than $1,000.
Q. WHAT IS MEANT BY "YEAR OF SERVICE" WHEN DETERMINING WHO IS ELIGIBLE
TO PARTICIPATE IN THE PLAN?
A. "Year of Service" for purposes of eligibility means 12 consecutive
months during which an employee completes at least 1,000 hours of
service. The 12-month period begins on the day an employee performs
his or her first hour of service.
Q. WHEN DOES AN EMPLOYEE PARTICIPATE ONCE ELIGIBILITY REQUIREMENTS ARE
MET?
A. The employee becomes a Participant on the first day of the Plan Year,
or the first day of the seventh month of the Plan Year, following
satisfaction of the eligibility requirement. For example, if the Plan
Year is a calendar year and an employee satisfies the eligibility
requirement on March 1, he or she will enter the plan on July 1.
Q. CAN THE EMPLOYEE CONTRIBUTE UNDER THIS PLAN?
A. Pre-tax employee salary reduction contributions may be allowed, but
only if you elect to include the 401(k) arrangement found in Article
XIII of the Profit Sharing Adoption Agreement. After-tax
contributions are not allowed.
Q. WHAT IS SOCIAL SECURITY INTEGRATION?
A. When your overall retirement plan scheme combines Social Security
with your private retirement plan, this is called integration.
Integration allows you to take advantage of the Social Security tax
payments you already make when designing your private retirement
plan's formula. The result favors the highly paid employees because
they receive a larger portion of the total contribution.
Contribution formulas and worksheets for self-employed participants
in integrated plans are available from Kemper Financial Services upon
request.
Q. WHAT IS THE COMPENSATION FOR A SOLE PROPRIETOR?
A. If you are a sole proprietor or your business is a partnership, you
must base contributions on earned income, which is defined as net
profits minus the amount you contributed to the plan. Your net
profits are shown on the Schedule C form for a sole proprietor, and
the schedule K-1 form for a partnership. Contributions for all other
employees are based on gross earnings actually paid for services
rendered.
<PAGE> 6
Q. WHAT DOES IT MEAN TO "AMEND AND RESTATE" A PLAN?
A. To amend and restate your plan means you have updated your plan in
its entirety by replacing the plan document with a new plan document.
This may be necessary if your existing plan document prohibits plan
investments with Kemper or because of changes in the laws governing
qualified retirement plans.
Many employers are now formally updating their plans to comply with
the Tax Reform Act of 1986. These amendments must be retroactive to
the first day of your 1987 plan year unless interim amendments were
adopted for the 1987 and 1988 plan years.
INVESTING YOUR PLAN ASSETS
One of the most important decisions you have to make is where to invest
your plan's assets. The better your plan's investment performance, the
easier it will be for you and your employees to retire in comfort. You'll
want to select investments with a broad range of objectives to meet the
diverse investment needs of your employees, and take great care in
choosing the company that will manage your plan's assets.
...WITH KEMPER
That's why many plans like yours invest their plan assets with Kemper.
Kemper Financial Services, Inc. has managed investments for over 40 years
and has more than $67 billion in assets under management. Kemper offers a
variety of investment products to fit almost every investment objective.
Kemper's mutual funds and annuities provide investments to suit the needs
of either the aggressive or the conservative investor. Employees can
select the investments that best match their specific needs and
requirements. Consider Kemper's experience and professional managers when
choosing the investments for your plan.
FUNDING THE PLAN
...WITH MUTUAL FUNDS
The Employer completes the Employer Contribution Schedule. Each eligible
employee completes an Employee Enrollment Form. All necessary forms and a
check made payable to IFTC should be sent to:
Investors Fiduciary Trust Company
Attn: Retirement Plans
P.O. Box 419356
Kansas City, MO 64141-6356
The IFTC Trustee fee is $12 per account, per participant, per year, with a
$24 maximum charge per participant.
...WITH ANNUITIES
A KILICO Enrollment Application is completed for each plan participant.
Please call Policyholder Services for the proper forms at 1-800-554-5426.
The check should be made payable to Kemper Investors Life Insurance
Company and mailed to:
Kemper Investors Life Insurance Company
P.O. Box 95963
Chicago, IL 60694
There are no trustee fees when using KILICO products.
<PAGE> 7
CHOOSING YOUR PLAN
...WITH UNIT INVESTMENT TRUSTS
For a Kemper Capital Markets enrollment kit, please call Kemper
Capital Markets at 1-800-621-5024. Applications and a check made
payable to IFTC should be sent to:
Investors Fiduciary Trust Company
Attn: Retirement Plans
P.O. Box 419430
Kansas City, MO 64141-6430
The IFTC Trustee fee is $12 per account, per participant, per year,
with a $24 maximum charge per participant.
To obtain additional prospectuses for any of the Kemper products,
containing more complete information including management fees and
expenses, please contact your representative or Kemper Financial Services,
Inc. at 1-800-621-5027. Please read the prospectus carefully before you
invest or send money.
GETTING STARTED
The next two sections, "Plan Installation Forms" and "Participant
Records," provide the necessary forms to complete the installation of
the plan. Please read the instructions at the beginning of each
section carefully before completing the applicable forms.
If you are a sole proprietor and do not have any covered employees,
complete the Adoption Agreement only.
The last section, "Plan Document," is provided for your reference
only.
<PAGE> 8
PLAN INSTALLATION FORMS
GETTING STARTED
COMPLETE THE FOLLOWING DOCUMENTS AND RETURN ORIGINALS TO THE APPROPRIATE
ADDRESS SHOWN UNDER THE PRECEDING SECTION ENTITLED "FUNDING THE PLAN."
REMEMBER TO RETAIN A PHOTOCOPY FOR YOUR RECORDS.
ADOPTION AGREEMENT
Complete the information requested ONLY for the particular type
of plan you've selected (either profit sharing, money purchase or a
combination).
ENROLLMENT FORM
Photocopy and complete an enrollment form for EACH eligible participant.
SUMMARY PLAN DESCRIPTION CARD
Complete this card ONLY if you have Employees.
ASSET TRANSFER FORM
Complete this form ONLY if there are existing plan assets.
<PAGE> 9
"LINE-BY-LINE" INSTRUCTIONS FOR COMPLETING YOUR ADOPTION AGREEMENT
- Specify the type of business entity adopting the plan by checking the
appropriate box.
- Enter the address of the business. This may be a home address if there is
no separate business address.
- Enter the Employer's Taxpayer Identification Number (TIN). If you do not
presently have a TIN for your business, you should apply for one using IRS
Form SS-4. Form SS-4 is available from Kemper Financial Services upon
request.
- Enter the name of the Employer on the blank line provided. If the
Employer is a sole proprietor who does not have a formal business name,
enter the name of the individual adopting the plan.
ARTICLE I
1.17 (A) In most situations the Plan Year End will be December 31, but if
the Employer operates on a fiscal year, then enter the
appropriate date.
(B) If item (b) is left blank, the Limitation Year will be the same
as the Plan Year.
1.18 (A) If this Adoption Agreement is used to establish a new plan,
rather than amend an older plan, check item l.18(a) and skip
item 1.18(b).
(B) Complete item 1.18(b) if this is a restatement of an older plan.
ARTICLE II
2.01 (A) Check (1) or (2) to define the minimum age requirement (if any)
that must be attained before an employee is eligible to
participate in the plan.
(B) Check (1), (2) or (3) to define the minimum service (if any)
that must be completed before an employee is eligible to
participate in the plan. The plan defines a Year of Service as a
12 consecutive month period in which the employee works 1,000
hours or more. The 12 consecutive month period begins on the
date the employee first performs an Hour of Service and each
anniversary thereof.
ARTICLE III
3.01 If this is a MONEY PURCHASE PENSION PLAN, indicate the base
contribution rate in the first blank. The base contribution rate
must equal or exceed 3%. If the plan will be integrated with
Social Security, enter the integration rate in the second blank
and complete the integration level section.
3.04 If this is a PROFIT SHARING PLAN and the contribution allocation
will be integrated with Social Security, complete the
integration level section 13.00. If this is a PROFIT SHARING
PLAN, check here if you wish to include employee salary deferral
contributions. If you do NOT want to allow employee salary
deferral contributions, skip this item and go directly to the
"Effective Date Addendum" of Article V.
ARTICLE XIII
13.00 If this is a Profit Sharing Plan, check here if you wish to
include employee salary deferral contributions. If you do not
want to allow employee salary deferral contributions, skip this
item and go directly to the "Effective Date Addendum."
13.05 Enter a date, which is no later than April 15th, by which a
participant must notify you if he or she has exceeded the dollar
limit for employee salary deferral contributions. For
administrative ease, March 1 is recommended.
13.08(A) Leave blank and skip to item 13.09 if the Employer will not make
regular matching contributions to the plan. Check 13.08(a) if
the Employer intends to match the salary deferral contributions
of ALL participants.
(B) Check 13.08(b) if Highly Compensated Employees will not receive
the Employer's regular matching contribution.
(C) Enter the amount of the Employer's matching contribution on the
line provided. Note that the employer is REQUIRED to make this
matching contribution each year.
(D) If 13.08(d) is left blank, all of a participant's salary
deferral contributions will be matched by the Employer.
Enter a dollar amount and/or percentage on the blank lines
provided to limit the salary deferral contributions eligible for
the matching contribution.
13.09(A) Leave blank and skip to item 13.12 if the Employer will not make
Qualified Matching Contributions to the Plan.
Check 13.09(a) if the Employer intends to contribute Qualified
Matching Contributions for ALL participants.
<PAGE> 10
PLAN INSTALLATION FORMS
(B) Check 13.09 (b) if Highly Compensated Employees will not
receive the Qualified Matching Contribution.
(C) Enter the amount of the Employer's Qualified Matching
Contribution on the line provided. Note that the employer is
REQUIRED to make this Qualified Matching Contribution each
year.
(D) If (d) is left blank, all of a participant's salary deferral
contributions will be eligible for the qualified matching
contribution.
Enter a dollar amount and/or percentage on the blank lines
provided to limit the salary deferral contributions eligible
for the Qualified Matching Contribution.
13.12(A) Check 13.12 (a) if the Employer intends to contribute Qualified
Nonelective Contributions for ALL participants.
(B) Check 13.12 (b) if Highly Compensated Employees will not
receive Qualified Nonelective Contributions.
(C) If (c) is checked, a participant's share of the qualified
nonelective contribution will be based on the participant's
total compensation.
(D) If (d) is checked, only compensation up to the stated dollar
amount will be used to calculate a participant's share of the
qualified nonelective contribution.
SPECIAL RULES FOR SALARY REDUCTION AGREEMENTS
(A)(1) Check (1) and enter a percentage on the line provided if
you wish to establish a maximum deferral percentage.
(2) Check (2) and enter a percentage on the line provided if
you wish to establish a minimum deferral percentage.
(3) Check (3) if no restrictions are imposed on a participant's
salary reduction contributions.
(B) Check (1), (2), (3) OR (4) to restrict when a participant
may stop their salary deferral contributions.
(C) Check (1), (2), (3) OR (4) to indicate when a participant
may resume making salary deferral contributions.
(D) Check (1), (2), (3) OR (4) to indicate how frequently a
participant may change the amount of his or her salary
deferral contributions.
ARTICLE V
EFFECTIVE DATE ADDENDUM
If you are restating an older plan, complete only if the
effective date of the restatement is before January 1,1989
AND these specific provisions have changed as a result of
the restatement. If a provision listed below has changed, the
date on which that provision begins to apply may be later
than your restated effective date if you check the applicable
box. Indicate the later effective date by inserting a date
on the line provided.
If this is a NEW PLAN, skip the Effective Date Addendum and go
directly to "Participation Agreement."
PARTICIPATION AGREEMENT
If the Employer has an ownership interest in another business
which results in a controlled group of businesses as defined
by the Internal Revenue Code, then each related business must
sign the Participation Agreement as a Participating Employer.
The "Signatory Employer" is the Employer who also signs the
Execution Page of the adoption agreement.
If the employer sponsoring this plan has no ownership interest
in any other business, skip the Participation Agreement and go
directly to "Execution Page."
EXECUTION PAGE
The Employer should sign and date the appropriate Adoption
Agreement. The signature of the sole proprietor, general
partner or corporate officer belongs on the line above
"Employer." Whoever witnesses the Employer's signature should
sign on the line beside "Attest."
The Dealer/Agent should complete the dealer information section.
<PAGE> 11
ADOPTION AGREEMENT #001
STANDARDIZED PROFIT SHARING/401(K) PLAN
(PAIRED PROFIT SHARING PLAN)
THE EMPLOYER IS A:
/ / sole proprietorship
/ / partnership
/ / corporation
EMPLOYER'S ADDRESS:
________________________________________________________________________________
Street Address City State Zip Code
EMPLOYER'S FEDERAL TAXPAYER IDENTIFICATION NUMBER (TIN):________________________
THE EMPLOYER HEREBY ESTABLISHES THE ____________________________________________
Name of Employer
PROFIT SHARING PLAN in accordance with all the terms of the KEMPER RETIREMENT
PLAN PROTOTYPE KEOGH/CORPORATE AND TRUST AGREEMENT attached hereto, which the
Employer has received, read, accepts and hereby incorporates into this
STANDARDIZED PROFIT SHARING/401(K) PLAN ADOPTION AGREEMENT #001 with the
following additional terms and conditions:
ARTICLE I
DEFINITIONS
1.17 PLAN YEAR/LIMITATION YEAR
/ / (A) Plan Year means the 12 consecutive month period ending ________.
/ / (B) The Limitation Year is the Plan Year unless the following month
is designated as the last month of the limitation year: ________.
1.18 EFFECTIVE DATE (CHOOSE ONE)
/ / (A) NEW PLAN. The Effective Date of the Plan is the first day of the
Plan Year in which the Plan is adopted.
/ / (B) RESTATED PLAN. The restated Effective Date is _________. This Plan
is a substitution and amendment of an existing retirement plan
originally established _____________. [Note: If the restated
Effective Date is earlier than January 1, 1989, see the Effective
Date Addendum immediately preceding the Participation Agreement.]
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY
ELIGIBILITY CONDITIONS. To become a Participant in the Plan,
an Employee must satisfy the following eligibility conditions:
(A) Age requirement. (Choose one)
/ / (1) Age __________ (specify age, not exceeding 21).
/ / (2) No age requirement.
(B) Service requirement. (Choose one)
/ / (1) One Year of Service.
/ / (2) Two Years of Service without an intervening Break
in Service. See Section 2.03(a) of the Plan.
/ / (3) No service requirement.
ENTRY DATE. Any Employee other than a Member of a Collective
Bargaining Unit will become a Participant on the Plan Entry Date (if
employed on that date) coincident with or immediately following the
date the Employee completes the eligibility conditions described in
Options (a) and (b) of this Adoption Agreement Section 2.01.
<PAGE> 12
PLAN INSTALLATION FORMS
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT
The amount of the Employer's annual contribution to the Trust will
equal the amount (or additional amount) the Employer may from time to
time deem advisable, irrespective of whether the Employer has Net
Profits.
3.04 CONTRIBUTION ALLOCATION
Profit Sharing plan - Employer contributions for the plan year will
be allocated to participants' accounts as follows: [NOTE: IF THE
EMPLOYER WILL NOT BE INTEGRATING THE PLAN WITH SOCIAL SECURITY OR
ADOPTING THE PAIRED MONEY PURCHASE PENSION PLAN #002, SKIP STEPS ONE,
TWO AND THREE BELOW AND GO DIRECTLY TO STEP FOUR.]
STEP ONE: Contributions will be allocated to each participant's
account in the ratio that each participant's total compensation bears
to all participants' total compensation, but not in excess of 3% of
each participant's total compensation.
STEP TWO: Any contributions remaining after the allocation in Step
One will be allocated to each participant's account in the ratio
that each participant's compensation for the plan year in excess of
the integration level bears to the excess compensation of all
participants, but not in excess of 3%.
STEP THREE: Any contributions remaining after the allocation in Step
Two will be allocated to each participant's account in the ratio that
the sum of each participant's total compensation plus excess
compensation bears to the sum of all participant's total compensation
plus total excess compensation, but not in excess of the
profit-sharing maximum disparity rate.
STEP FOUR: Any remaining employer contributions or forfeitures will
be allocated to each participant's account in the ratio that each
participant's total compensation for the plan year bears to all
participants' total compensation for that year.
The integration level shall be equal to the amount elected by the
employer in the Adoption Agreement. The taxable wage base (TWB) is
the maximum amount of earnings which may be considered wages for a
year under Section 3121(a)(1) of the Code in effect as of the
beginning of the plan year.
Compensation shall mean compensation as defined in Section 1.12 of
the plan.
The integration level is equal to (Choose one):
/ / Taxable Wage Base (TWB)
/ / $_______ (a dollar amount less than the TWB)
/ / ________ % of TWB (not to exceed 100%)
The maximum Profit Sharing disparity rate is equal to the lesser of:
(a) 2.7% or
(b) the applicable percentage determined in accordance with the
table below:
<TABLE>
<CAPTION>
IF THE INTEGRATION LEVEL:
IS MORE THAN: BUT NOT MORE THAN: THE APPLICABLE PERCENTAGE IS:
- ------------------------ ------------------ -----------------------------
<S> <C> <C>
$0 X(*) 2.7%
X(*) of TWB 80% of TWB 1.3%
80% of TWB Y(**) of TWB 2.4%
</TABLE>
* X = the greater of $10,000 or 20% of the TWB.
**Y = any amount more than 80% of the TWB but less than 100% of the TWB.
If the integration level used is equal to the TWB, the applicable
percentage is 2.7%.
3.17 DEFINED BENEFIT PLAN LIMITATION
If a Participant is or has ever been a participant in a defined
benefit plan maintained by the Employer:
________________________________________________________________
________________________________________________________________
(In the space above, provide language which will satisfy the 1.0
limitation under Code Section 415(e). Such language must preclude
employer discretion.)
<PAGE> 13
ARTICLE XIII
401(k) ARRANGEMENT
13.00 / / CHECK THIS BOX IF THIS PLAN IS A 401(k) PLAN AND COMPLETE THE
FOLLOWING:
13.01 ELIGIBILITY
If the service requirement elected by the Employer at Section 2.01 of
this Adoption Agreement is two (2) years, an Employee's eligibility
to make elective deferrals will be determined as if the service
requirement at Section 2.01 were one (1) year.
13.05 DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS
Participants who claim Excess Elective Deferrals for the preceding
taxable year must submit their claims in writing to the plan
administrator by ___________________________________________________.
Specify a date no later than April 15
13.06 ACTUAL DEFERRAL PERCENTAGE TEST
Qualified Matching Contributions and Qualified Nonelective
Contributions may be taken into account as Elective Deferrals for
purposes of calculating the Actual Deferral Percentages. In
determining Elective Deferrals for the purpose of the ADP test, the
employer shall include Qualified Matching Contributions and Qualified
Nonelective Contributions under this plan or any other plan of the
employer, as provided by regulations under the Code.
The amount of Qualified Matching Contributions taken into account as
Elective Deferrals for purposes of calculating the Actual Deferral
Percentage, subject to such other requirements as may be prescribed
by the Secretary of the Treasury, shall be all such Qualified
Matching Contributions.
The amount of Qualified Nonelective Contributions taken into account
as Elective Deferrals for purposes of calculating the Actual Deferral
Percentages, subject to such other requirements as may be prescribed
by the Secretary of the Treasury, shall be all such Qualified
Nonelective Contributions.
13.08 MATCHING CONTRIBUTIONS
The employer will make Matching Contributions to the plan on behalf
of [ELECT (a) or (b) plus (c) and/or (d)]:
/ / (A) All participants.
/ / (B) All participants who are Non Highly Compensated Employees
who make Elective Deferrals to the plan.
/ / (C) The Employer shall contribute and allocate to each
participant's Matching Contribution account an amount equal
to [______] percent of the participant's Elective Deferrals.
/ / (D) The Employer shall not match amounts provided above in
excess of [$______], or in excess of [______] percent, of
the participant's Compensation.
13.09 QUALIFIED MATCHING CONTRIBUTIONS
The Employer will make Qualified Matching Contributions to the plan
on behalf of [ELECT (a) or (b) plus (c) and/or (d)]:
/ / (A) All participants.
/ / (B) All participants who are Non Highly Compensated Employees
who make Elective Deferrals to the plan.
/ / (C) The Employer shall contribute and allocate to each
participant's Qualified Matching Contribution account an
amount equal to [_____] percent of the participant's
Elective Deferrals.
/ / (D) The Employer shall not match amounts provided above in
excess of [$________], or in excess of [_______] percent, of
the participant's Compensation.
<PAGE> 14
PLAN INSTALLATION FORMS
13.10 LIMITATIONS ON MATCHING CONTRIBUTIONS
In computing the Average Contribution Percentage, the Employer shall
take into account, and include as Contribution Percentage Amounts
Elective Deferrals and Qualified Nonelective Contributions under this
plan or any other plan of the Employer, as provided by regulations.
The amount of Qualified Nonelective Contributions that are taken into
account as Contribution Percentage Amounts for purposes of
calculating the Average Contribution Percentage, subject to such
other requirements as may be prescribed by the Secretary of the
Treasury, shall be an amount determined by the Employer.
The amount of Elective Deferrals taken into account as Contribution
Percentage Amounts for purposes of calculating the Average
Contribution Percentage, subject to such other requirements as may be
prescribed by the Secretary of the Treasury, shall be an amount
determined by the Employer.
13.12 QUALIFIED NONELECTIVE CONTRIBUTIONS
The Employer will make Qualified Nonelective Contributions to the
plan. If the Employer does make such contributions to the plan, then
the amount of such contributions for each Plan Year shall be an
amount determined by the Employer.
Allocation of Qualified Nonelective Contributions shall be made to
the accounts of [ELECT ONE]:
/ / (A) All participants
/ / (B) Only Nonhighly Compensated participants
Allocation of Qualified Nonelective Contributions shall be made
[ELECT ONE]:
/ / (C) In the ratio that each participant's Compensation for the
Plan Year bears to the total Compensation of all
participants for such Plan Year.
/ / (D) In the ratio that each participant's Compensation not in
excess of [$______] for the Plan Year bears to the total
Compensation of all participants not in excess of [$______]
for such Plan Year.
SPECIAL RULES FOR SALARY REDUCTION AGREEMENTS
The following rules and restrictions apply to an Employee's salary
reduction agreement:
(A) Limitation on Amount. The Employee's salary reduction
contributions: (Choose at least one)
/ / (1) May not exceed _________% of Compensation for the
Plan Year, subject to the annual additions
limitation described in Part 2 of Article III of
the Plan.
/ / (2) Based on percentages of Compensation must equal at
least _________% of Compensation for the
reduction period.
/ / (3) No maximum limitation other than the annual
additions limitation.
(B) An Employee may revoke, on a prospective basis, a salary
reduction agreement: (Choose one)
/ / (1) Once during any Plan Year but not later than _________
of the Plan Year.
/ / (2) As of any Plan Entry Date.
/ / (3) As of the first day of any month.
/ / (4) Other (specify, but must be at least once per Plan
Year).
(C) An Employee who revokes his or her salary reduction agreement
may file a new salary reduction agreement with an effective
date: (Choose one):
/ / (1) No earlier than the first day of the next Plan Year.
/ / (2) As of any subsequent Plan Entry Date.
/ / (3) As of the first day of any month subsequent to the
month in which he or she revoked an Agreement.
/ / (4) Other (specify, but must be at least once per Plan
Year following the Plan Year of revocation).
(D) A Participant may increase or may decrease, on a prospective
basis, his salary reduction percentage or dollar amount:
/ / (1) As of the beginning of each payroll period.
/ / (2) As of the first day of each month.
/ / (3) As of any Plan Entry Date.
/ / (4) Other (specify, but must permit an increase or a
decrease at least once per Plan Year).
<PAGE> 15
ARTICLE V
EFFECTIVE DATE ADDENDUM
(RESTATED PLANS ONLY)
The Employer must complete this addendum only if the restated
Effective Date specified in Adoption Agreement Section 1.18 is
earlier than January 1,1989, and if a different restated effective
date applies to at least one of the provisions listed in this
addendum.
IDENTIFICATION OF SPECIAL EFFECTIVE DATES
In lieu of the restated Effective Date in Adoption Agreement Section
1.18, the following Special Effective Dates apply:
(Choose whichever elections apply)
/ / (A) COMPENSATION DEFINITION
The Compensation definition of Section 1.12 (other than
the $200,000 limitation) is effective for Plan Years
beginning after ______. [Note: May not be effective
later than the first day of the first Plan Year beginning
after the Employer executes this Adoption Agreement to
restate the Plan for the Tax Reform Act of 1986.]
/ / (B) ELIGIBILITY CONDITIONS
The eligibility conditions specified in Adoption Agreement
Section 2.01 are effective for Plan Years beginning after
December 31, 1988.
/ / (C) CONTRIBUTION/ALLOCATION FORMULA
The contribution formula elected under Adoption Agreement
Section 3.01 is effective for Plan Years beginning after
December 31, 1988.
/ / (D) ELIMINATION OF NET PROFITS
The requirement for the Employer not to have net profits
to contribute to this Plan is effective for Plan Years
beginning after __________________. [Note: The date
specified may not be earlier than December 31, 1985.]
For Plan Years prior to the Special Effective Date, the terms of the
Plan prior to its restatement under this Adoption Agreement will
control for purposes of the designated provisions.
<PAGE> 16
PLAN INSTALLATION FORMS
PARTICIPATION AGREEMENT
FOR PARTICIPATION BY RELATED GROUP MEMBERS (PLAN SECTION 1.30)
The undersigned Employer, by executing this Participation Agreement,
elects to become a Participating Employer in the
____________________________________________________________________
Name of Employer
PROFIT SHARING PLAN as if the Participating Employer were a signatory
to that Agreement. The Participating Employer accepts, and agrees to
be bound by, all of the elections granted under the provisions of the
Plan as made by ________________, the Signatory Employer to the
Execution Page of the Adoption Agreement.
1. The Effective Date of the undersigned Employer's participation in the
designated Plan is: _________________.
2. The undersigned Employer's adoption of this Plan constitutes:
/ / (A) the adoption of a new plan by the Employer.
/ / (B) the adoption of an amendment and restatement of a plan
currently maintained by the Employer, identified as
_________________________________________________________________
and having an original effective date of __________________________.
Dated this ______ day of _______ ,19__.
Attest:__________________________ By: ___________________________
Participating Employer
ACCEPTANCE BY THE SIGNATORY EMPLOYER TO THE EXECUTION PAGE OF THE
ADOPTION AGREEMENT AND BY THE TRUSTEE.
Accepted:________________________ By:____________________________
Date Signatory Employer
Accepted:________________________ Investors Fiduciary Trust Company
Date
By:____________________________
Authorized Signature
EACH PARTICIPATING EMPLOYER MUST COMPLETE A SEPARATE PARTICIPATION AGREEMENT.
TURN THE PAGE FOR IMPORTANT PLAN INFORMATION.
<PAGE> 17
EXECUTION PAGE
The Trustee, by executing this Adoption Agreement, accepts its position and
agrees to all of the obligations, responsibilities and duties imposed upon the
Trustee under this Plan and Trust. The Employer hereby agrees to the provisions
of this Plan and Trust, and in witness of its agreement, the Employer by its
duly authorized officers, has executed this Adoption Agreement on this _______
day of _________,19__.
Attest:______________________________ By:__________________________________
Employer
Investors Fiduciary Trust Company
Accepted:____________________________ By:__________________________________
Date Authorized Signature
USE OF ADOPTION AGREEMENT
Failure to properly complete the elections in this Adoption Agreement may
result in disqualification of the Employer's Plan. The 3-digit number assigned
to this Adoption Agreement is solely for the Plan Sponsor's record keeping
purposes and does not necessarily correspond to the plan number the Employer
assigns to its plan for ERISA reporting purposes. The Plan Sponsor offers the
following Paired Pension Plan with this Paired Profit Sharing Plan, identified
by 3-digit Adoption Agreement number: 002. This Adoption Agreement may be used
only in conjunction with Basic Plan Document 01.
PLAN SPONSOR
The Plan Sponsor identified on the first page of the basic plan document will
notify all adopting Employers of any amendment to this Plan or of any
abandonment or discontinuance by the Plan Sponsor of its maintenance of this
Plan. For inquiries regarding the adoption of the Plan, the Plan Sponsor's
intended meaning of any plan provisions or the effect of the opinion letter
issued to the Plan Sponsor, please contact the Plan Sponsor at the following
address and telephone number: Kemper Financial Services, Inc., 120 South LaSalle
Street, Chicago, Illinois 60603, 1-800-621-1148.
RELIANCE ON OPINION LETTER
If the Employer does not maintain (and has never maintained) any plan other
than this Plan and a Paired Pension Plan, it may rely on the Plan Sponsor's
opinion letter covering this Plan for purposes of plan qualification. For this
purpose, the Employer has not maintained another plan if this Plan, or the
Paired Pension Plan, amended and restated that prior plan and the prior plan
was the same type of plan as the restated plan. If the Employer maintains or
has maintained another plan other than a Paired Pension Plan, including a
welfare benefit fund, as defined in Code Section 419(e), which provides post-
retirement medical benefits for key employees (as defined in Code Section
419A(d)(3)), or an individual medical account (as defined in Code Section
415(1)(2)), the Employer may not rely on this Plan's qualified status unless
it obtains a determination letter from the applicable IRS Key District office.
==============================================================================
FOR DEALER USE ONLY
______________________________________________________________________________
Name or Number of Dealer Address
______________________________________________________________________________
Name or Number of Dealer's Representative
______________________________________________________________________________
Representative's Phone Number
______________________________________________________________________________
Location of Dealer Office in Which Plan Opened
______________________________________________________________________________
Authorized Signature of Dealer Date
<PAGE> 18
PLAN INSTALLATION FORMS
ADOPTION AGREEMENT #002
STANDARDIZED MONEY PURCHASE PENSION PLAN
(PAIRED PENSION PLAN)
THE EMPLOYER IS A:
/ / sole proprietorship
/ / partnership
/ / corporation
EMPLOYER'S ADDRESS:____________________________________________________________
Street Address City State Zip Code
EMPLOYER'S FEDERAL TAXPAYER IDENTIFICATION NUMBER (TIN): ______________________
THE EMPLOYER HEREBY ESTABLISHES THE ___________________________________________
Name of Employer
MONEY PURCHASE PENSION PLAN in accordance with all the terms of the KEMPER
RETIREMENT PLAN PROTOTYPE KEOGH/CORPORATE and TRUST AGREEMENT attached hereto,
which the Employer has received, read, accepts and hereby incorporates into
this STANDARDIZED MONEY PURCHASE PENSION PLAN ADOPTION AGREEMENT #002 with the
following additional terms and conditions:
ARTICLE I
DEFINITIONS
1.17 PLAN YEAR/LIMITATION YEAR
/ / (A) Plan Year means the 12 consecutive month period ending
every __________.
/ / (B) The Limitation Year is the Plan Year unless the following month
is designated as the last month of the limitation year: _______.
1.18 EFFECTIVE DATE (CHOOSE ONE)
/ / (A) NEW PLAN. The "Effective Date" of the Plan is the first day of
the Plan Year in which the Plan is adopted.
/ / (B) RESTATED PLAN. The restated Effective Date is _________. This
Plan is a substitution and amendment of an existing retirement
plan originally established _____________. [Note: If the restated
Effective Date is earlier than January 1, 1989, see the Effective
Date Addendum immediately preceding the Participation
Agreement.]
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY
ELIGIBILITY CONDITIONS. To become a Participant in the Plan, an
Employee must satisfy the following eligibility conditions:
/ / (A) Age requirement: (Choose one)
/ / (1) Age ______ (specify age, not exceeding 21).
/ / (2) No age requirement.
/ / (B) Service Requirement: (Choose one)
/ / (1) One Year of Service.
/ / (2) Two Years of Service, without an intervening Break in
Service. See Section 2.03(A) of the Plan.
/ / (3) No service requirement.
ENTRY DATE. Any Employee other than a Member of a Collective
Bargaining Unit will become a Participant on the Plan Entry Date
(if employed on that date) coincident with or immediately
following the date the Employee completes the eligibility
conditions described in Options (a) and (b) of this Adoption
Agreement Section 2.01.
<PAGE> 19
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT
The Employer will contribute for each participant who either
completes more than 500 hours of service during the Plan Year, or is
employed by the Employer on the last day of the Plan Year, an amount
equal to ______% (base contribution percentage, not less than 3%) of
each Participant's Compensation (as defined in Section 1.12 of the
Plan) for the Plan Year, plus _________% (not to exceed the base
contribution percentage by more than the lesser of: (1) the base
contribution percentage, or (2) the maximum disparity rate of such
Participant's Compensation in excess of the integration level.
NOTE: IF THE EMPLOYER ALSO MAINTAINS PAIRED PROFIT SHARING PLAN
#001, ONLY ONE OF THE PLANS MAY BE INTEGRATED.
The integration level shall be equal to the amount elected by the
Employer. The taxable wage base is the maximum amount of earnings
which may be considered wages for a year under Section 3121(a)(1) of
the Code in effect as of the beginning of the Plan Year.
The integration level is equal to: (Choose one)
/ / Taxable Wage Base (TWB)
/ / $_________ (a dollar amount less than the taxable wage base)
/ / __________ % of TWB (not to exceed 100%)
The maximum disparity rate is equal to the lesser of:
(A) 5.7%
(B) the applicable percentage determined in accordance with the
table below.
<TABLE>
<CAPTION>
IF THE INTEGRATION LEVEL:
IS MORE THAN BUT NOT MORE THAN THE APPLICABLE PERCENTAGE IS
- ------------------------- ----------------- ----------------------------
<S> <C> <C>
$0 X(*) 5.7%
X(*) of TWB 80% of TWB 4.3%
80% of TWB Y(**) 5.4%
(*) X = the greater of $10,000 or 20% of the TWB.
(**) Y = any more than 80% of the TWB but less than 100% of the TWB.
</TABLE>
If the integration level is equal to taxable wage base the
applicable percentage is 5.7%.
3.17 DEFINED BENEFIT PLAN LIMITATION
If a Participant is or has ever been a participant in a defined
benefit plan maintained by the Employer:
______________________________________________________________________
______________________________________________________________________
(In the space above, provide language which will satisfy the 1.0
limitation under Code Section 415(e). Such language must preclude
Employer discretion.)
EFFECTIVE DATE ADDENDUM
(RESTATED PLANS ONLY)
The Employer must complete this addendum only if the restated Effective Date
specified in Adoption Agreement Section 1.18 is earlier than January 1, 1989,
and a different restated effective date applies to at least one of the
provisions listed in this addendum.
IDENTIFICATION OF SPECIAL EFFECTIVE DATES. In lieu of the restated Effective
Date in Adoption Agreement Section 1.18, the following Special Effective Dates
apply: (Choose whichever elections apply)
/ / (A) COMPENSATION DEFINITION. The Compensation definition of Section
1.12 (other than the $200,000 limitation) is effective for Plan
Years beginning after ____________. [Note: May not be effective
later than the first day of the first Plan Year beginning after
the Employer executes this Adoption Agreement to restate the
Plan for the Tax Reform Act of 1986.]
/ / (B) ELIGIBILITY CONDITIONS. The eligibility conditions specified in
Adoption Agreement Section 2.01 are effective for Plan Years
beginning after December 31, 1988.
/ / (C) CONTRIBUTION/ALLOCATION FORMULA. The contribution formula
elected under Adoption Agreement Section 3.01 is effective for
Plan Years beginning after December 31, 1988.
For Plan Years prior to the Special Effective Date, the terms of the Plan prior
to its restatement under this Adoption Agreement will control for purposes of
the designated provisions.
<PAGE> 20
PLAN INSTALLATION FORMS
PARTICIPATION AGREEMENT
FOR PARTICIPATION BY RELATED GROUP MEMBERS (PLAN SECTION 1.30)
The undersigned Employer, by executing this Participation Agreement, elects to
become a Participating Employer in the
_______________________________________________________________________________
Name of Employer
MONEY PURCHASE PENSION PLAN as if the Participating Employer were a signatory
to that Agreement. The Participating Employer accepts, and agrees to be bound
by, all of the elections granted under the provisions of the Plan as made
by _________, the Signatory Employer to the Execution Page of the Adoption
Agreement.
1. The Effective Date of the undersigned Employer's participation in the
designated Plan is: ___________________________________.
2. The undersigned Employer's adoption of this Plan constitutes:
/ / (A) The adoption of a new plan by the Employer.
/ / (B) The adoption of an amendment and restatement of a plan
currently maintained by the Employer, identified as
______________________________________________________________________
and having an original effective date of ___________. Dated this ____
day of ______________, 19__.
Attest: ________________________ By: ______________________________
Participating Employer
ACCEPTANCE BY THE SIGNATORY EMPLOYER TO THE EXECUTION PAGE OF THE
ADOPTION AGREEMENT AND BY THE TRUSTEE.
Accepted: ______________________ By: _____________________________
Date Signatory Employer
Accepted: ______________________ Investors Fiduciary Trust Company
Date
BY: _____________________________
Authorized Signature
EACH PARTICIPATING EMPLOYER MUST COMPLETE A SEPARATE PARTICIPATION AGREEMENT.
TURN THE PAGE FOR IMPORTANT PLAN INFORMATION.
<PAGE> 21
EXECUTION PAGE
The Trustee, by executing this Adoption Agreement, accepts its position and
agrees to all of the obligations, responsibilities and duties imposed upon the
Trustee under this Plan and Trust. The Employer hereby agrees to the provisions
of this Plan and Trust, and in witness of its agreement, the Employer, by its
duly authorized officers, has executed this Adoption Agreement on this
__________ day of _______, 19__.
Attest:________________________________ By:__________________________________
Employer
Investors Fiduciary Trust Company
Accepted:______________________________ By:__________________________________
Authorized Signature
USE OF ADOPTION AGREEMENT
Failure to properly complete the elections in this Adoption Agreement may
result in disqualification of the Employer's Plan. The 3-digit number assigned
to this Adoption Agreement is solely for the Plan Sponsor's record keeping
purposes and does not necessarily correspond to the plan number the Employer
assigns to its Plan for ERISA reporting purposes. The Plan Sponsor offers the
following Paired Profit Sharing Plan with this Paired Pension Plan, identified
by 3-digit Adoption Agreement number 001. This Adoption Agreement may be only
used in conjunction with Basic Plan Document 01.
PLAN SPONSOR
The Plan Sponsor identified on the first page of the basic plan document will
notify all adopting Employers of any amendment to this Plan or of any
abandonment or discontinuance by the Plan Sponsor of its maintenance of this
Plan. For inquiries regarding the adoption of the Plan, the Plan Sponsor's
intended meaning of any plan provisions or the effect of the opinion letter
issued to the Plan Sponsor, please contact the Plan Sponsor at the following
address and telephone number: Kemper Financial Services, Inc., 120 South LaSalle
Street, Chicago, Illinois 60603, 1-800-621-1148.
RELIANCE ON OPINION LETTER
If the Employer does not maintain (and has never maintained) any plan other
than this Plan and a Paired Profit Sharing Plan, it may rely on the Plan
Sponsor's opinion letter covering this Plan for purposes of plan qualification.
For this purpose, the Employer has not maintained another plan if this Plan, or
the Paired Profit Sharing Plan, amended and restated that prior plan and the
prior plan was the same type of plan as the restated plan. If the Employer
maintains or later adopts or has maintained another plan other than a Paired
Profit Sharing Plan, including a welfare benefit fund, as defined in Code
Section 419(e), which provides post-retirement medical benefits for key
employees (as defined in Code Section 419A(d)(3)), or an individual medical
account (as defined in Code Section 415(1)(2)), the Employer may not rely on
this Plan's qualified status unless it obtains a determination letter from the
applicable IRS Key District office.
==============================================================================
FOR DEALER USE ONLY
______________________________________________________________________________
Name or Number of Dealer Address
______________________________________________________________________________
Name or Number of Dealer's Representative
______________________________________________________________________________
Representative's Phone Number
______________________________________________________________________________
Location of Dealer Office in Which Plan Opened
______________________________________________________________________________
Authorized Signature of Dealer Date
<PAGE> 22
PLAN INSTALLATION FORMS
EMPLOYEE ENROLLMENT FORM FOR MUTUAL FUNDS
INSTRUCTIONS:
1. Complete this form for each participant.
2. Enclose a check for the sum of all contributions made payable to
Investors Fiduciary Trust Company.
3. Deliver a prospectus(es) to each participant. (Participants should be
provided with a prospectus for each fund in which they are invested.)
Note: If you are enrolling more than five participants or if you are
enrolling participants for a 401(k) plan, you should use the KemFlex
Employer Master Account Application (Form-07) and a separate KemFlex
Employee Enrollment Form (Form-36) for each employee.
PARTICIPANT INFORMATION
______________________________________________________________________________
Name of Plan Date
______________________________________________________________________________
Participant Name
______________________________________________________________________________
Participant Social Security Number Participant Birthday
______________________________________________________________________________
Statement Mailing Address
______________________________________________________________________________
City State Zip Code
INVESTMENT SELECTION
FUND NAME AMOUNT
$
_______________________________________ ______________________
_______________________________________ ______________________
_______________________________________ ______________________
TOTAL $
______________________
THIS FORM SHOULD BE USED ONLY FOR MUTUAL FUND PURCHASES. TO FUND WITH
ANNUITIES, CALL KILICO CUSTOMER SERVICE AT 1-800-554-5426 AND REQUEST FORM
L-1004 (FORM L-1005 FOR 401(k) PLANS). TO FUND WITH UNIT INVESTMENT TRUSTS
CONTACT UIT CUSTOMER SERVICE AT 1-800-422-2848 AND REQUEST A UIT RETIREMENT
PLAN APPLICATION.
<PAGE> 23
PLAN INSTALLATION FORMS
ASSET TRANSFER FORM
INSTRUCTIONS:
This form is provided for your use in substituting the Kemper Red Book
Keogh Retirement Plan Prototype for your present qualified defined
contribution (profit sharing or money purchase pension plan).
1. Consult with your attorney or other tax advisor as to the
consequences of such an amendment.
2. Contact the present custodian bank, trustee or insurance company to
determine their requirements with respect to such transfer of assets.
3. Fill out the appropriate Kemper Red Book Keogh Retirement Plan
Prototype Adoption Agreement and Employee Enrollment Form for Mutual
Funds. Attach this Statement to it, and submit them to Investors
Fiduciary Trust Company, P.O. Box 419356, Kansas City, MO 64141-6356.
4. This statement and a letter of acceptance will be sent to the former
custodian, trustee or insurance company by IFTC. This statement
should suffice as instruction with respect to transmitting the funds
to Investors Fiduciary Trust Company, but the present custodian,
trustee, or insurance company may ask you to use its own form or
instructions, or impose additional requirements.
5. Indicate the total amount transferred on behalf of each participant
in the "Total Account Balance" column opposite the name of each
participant.
We hope this information will be useful to you; if you have any questions,
call Kemper's Sales Support Department at 1-800-621-5027.
To:____________________________________________________________________________
Current Custodian, Trustee or Insurance Company
_______________________________________________________________________________
Street Address
_______________________________________________________________________________
City State Zip Code
The undersigned Employer previously established a qualified retirement plan on
____________, 19____ described as:
_______________________________________________________________________________
Indicate Plan Name - for example, ABC, Inc. Profit Sharing Plan
The undersigned Employer has amended and restated the plan and named Investors
Fiduciary Trust Company as a trustee of the Plan effective ___________, 19____.
The undersigned employer hereby directs the above named custodian bank, trustee
or insurance company now holding assets of the Plan to liquidate all said
assets and transfer the proceeds directly to Investors Fiduciary Trust Company,
P.O. Box 419356, Kansas City, MO 64141-6356, as trustee of the Plan, as amended
and restated.
The following is an accurate description of the allocations of Plan assets. If
you are transferring any voluntary contributions, please notify us of each
account balance.
Participant Total Account Balance
_______________________________________ _____________________________________
_______________________________________ _____________________________________
_______________________________________ _____________________________________
_______________________________________ _____________________________________
Employer's Signature Date
AFTER MAKING A COPY FOR YOUR RECORDS, ATTACH THIS FORM TO THE ADOPTION
AGREEMENT AND THE EMPLOYEE ENROLLMENT FORM FOR MUTUAL FUNDS (PREVIOUS PAGE).
MAIL ALL FORMS TO INVESTORS FIDUCIARY TRUST COMPANY, P.O. BOX 419356,
KANSAS CITY, MO 64141-6356.
<PAGE> 24
PARTICIPANT RECORDS
PARTICIPANT RECORDS
The following forms allow you to complete the administrative details
that are required of you as a plan sponsor. After they have been distributed to
and completed by your employees, they should be kept on record in your
files and should NOT be returned to Kemper.
NOTICE TO INTERESTED PARTIES
If you have employees, this notice should be posted
with other labor relations information bulletins.
BENEFICIARY FORMS
Photocopy and distribute to EACH participant.
Collect and file with other plan records.
PRE-RETIREMENT NOTICE AND WAIVER
Distribute to each affected participant (see instructions).
Collect and file Waiver.
DISTRIBUTION ELECTION FORM
Photocopy and distribute ONLY to employees terminating employment.
Collect and file with other plan records.
<PAGE> 25
NOTICE TO INTERESTED PARTIES
1. Notice To: All Employees of ______________________________________________
Name of Employer
2. _______________________________ has ______________________________________
Name of Employer Adopted/Amended
the plan described below on ______________________________________________
Date
3. Name of Plan _____________________________________________________________
4. 3-Digit Plan Identification Number _______________________________________
5. Opinion Letter Number
/ / PS-D257426a
/ / MP-D257427a
6. Sponsor: Kemper Growth Fund, Inc., 120 South LaSalle Street, Chicago, IL
60603
7. Employer's TIN __________________________________________________________
8. Address of Employer _____________________________________________________
_________________________________________________________________________
9. Address of Key Director having jurisdiction of plan _____________________
_________________________________________________________________________
10. It ____________________ contemplated that the Plan will be submitted to
is/is not
the Internal Revenue Service for an advance determination as to whether
or not it meets the qualification requirements of section 401 of the
Internal Revenue Code with respect to its _______________________________
_________________________________________________________________________
Initial Qualification/Amendment
11. All Employees who have completed ___ Years of Service and attained age ___
are eligible to participate.
12. The IRS _________________ previously issued a determination letter with
has/has not
respect to the qualification of this Plan.
13. You have the right to submit to the Key District Director, at the above
address, either individually or jointly with other interested parties,
your comments as to whether this Plan meets the qualification requirements
of the Internal Revenue Code. You may instead, individually or jointly
with other interested parties, request the Department of Labor to submit,
on your behalf, comments to the Key District Director regarding
qualification of the Plan. If the Department declines to comment on all or
some of the matters you raise, you may, individually, or jointly if your
request was made to the Department jointly, submit your comments on these
matters to the Key District Director.
<PAGE> 26
PARTICIPANT RECORDS
14. The Department of Labor may not comment on behalf of interested parties
unless requested to do so by the lesser of 10 Employees or 10 percent of
the Employees who qualify as interested parties. The number of persons
needed for the Department to comment with respect to this Plan is ______.
If you request the Department to comment, your comment must in writing and
must specify the matters upon which comments are requested, and must also
include: (1) the information contained in items 2 through 9 of this
Notice; and (2) the number of persons needed for the Department to
comment. A request to the Department to comment should be addressed as
follows: Administrator of Pension and Welfare Benefit Programs, U.S.
Department of Labor, 200 Constitution Avenue, N.W., Washington, DC 20216,
Attn: 3001 Comment Request.
15. Comments submitted by you to the Key District Director must be in writing
and received by him by
_________________________________________________________________________
75 days after adoption date
However, if there are matters that you request the Department of Labor to
comment upon on your behalf, and the Department declines, you may submit
comments on these matters to the Key District Director to be received by
him within 15 days from the time the Department notifies you that it will
not comment on a particular matter, or by ___________________________,
75 days after adoption date
whichever is later, but in no event later than ___________________________.
90 days after adoption date
A request to the Department to comment on your behalf must be received by
it by ___________________________ if you wish to preserve your right to
45 days after adoption date
comment on a matter upon which the Department declines to comment, or by
_____________________________ if you wish to waive that right.
55 days after adoption date
16. Detailed instructions regarding the requirements for notification of
interested parties may be found in Sections 16, 17, and 18 of Revenue
Procedure 92-6. Additional information concerning this __________________
adoption/amendment
(including where applicable, an updated copy of the Plan and related Trust
Agreement, a copy of the Adoption Agreement establishing the Plan, and
copies of Section 16 of Revenue Procedure 92-6) is available during the
hours of __________ for inspection and copying. (There is a nominal charge
for copying and mailing.)
<PAGE> 27
DESIGNATION OF BENEFICIARY
ALL PARTICIPANTS MUST COMPLETE. RETURN TO YOUR EMPLOYER.
_______________________________________________________________________________
Name of Plan Date
_______________________________________________________________________________
Last Name First Name MI
_______________________________________________________________________________
Social Security Number
_______________________________________________________________________________
Date of Birth (month, day, year) Sex
I hereby designate the person(s) named below as the beneficiary of my vested
account(s) payable under the Plan by reason of my death. I UNDERSTAND THAT IF I
DESIGNATE ANYONE OTHER THAN MY SPOUSE AS THE SOLE BENEFICIARY, THE SPOUSAL
CONSENT PORTION OF THIS FORM MUST BE SIGNED IN THE PRESENCE OF A NOTARY PUBLIC
OR A REPRESENTATIVE OF THE PLAN.
_______________________________________________________________________________
Name of Beneficiary (Full given name)
_______________________________________________________________________________
Relation to Participant
_______________________________________________________________________________
Address (if different from Participant)
If more than one person is named as beneficiary, any payments to which they may
be entitled will be paid in equal shares to such of the designated persons as
shall then be living; or if none, then pursuant to the terms of Section 8.02 of
the Plan.
I RESERVE THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY DESIGNATION. I HEREBY
REVOKE ALL PRIOR DESIGNATIONS (IF ANY) OF PRIMARY BENEFICIARIES AND CONTINGENT
BENEFICIARIES.
____________________________________ ____________________________
Date of this Designation Signature of Participant
CONSENT OF SPOUSE
I, the undersigned spouse of the Participant named in the foregoing
"Designation of Beneficiary," hereby consent to and accept the beneficiary
designation, without regard to whether I survive or predecease my spouse. I
understand this consent allows the beneficiary(ies) named above to be paid
amounts which would otherwise be paid to me. This consent is irrevocable unless
my spouse changes the designation. If my spouse changes the designation I
understand I must file a similar consent to the new designation, or my consent
is no longer effective.
___________________________________ ____________________________________
Date Signature of Spouse
___________________________________________________________________________
Signature of Witness Title
COMPLETE AND RETURN TO EMPLOYER
<PAGE> 28
PARTICIPANT RECORDS
PRE-RETIREMENT SURVIVOR ANNUITY MEMORANDUM
INSTRUCTIONS:
This memorandum must be provided to married money purchase pension plan and
certain profit sharing plan participants unless their spouse is the beneficiary
of at least 50% of the participant's account balance. A participant should
receive this memorandum during the Plan Year in which they turn age 32. They
will have the right to waive it, with spousal consent, during the Plan Year in
which the participant turns age 35. A married participant age 35 or older
should immediately be given this memorandum and the Waiver of Pre-retirement
Survivor Annuity form.
________________________________________________________________________ Plan
Name of Employer
PRE-RETIREMENT SURVIVOR ANNUITY. The Plan requires the Employer to distribute a
pre-retirement survivor annuity to your surviving spouse if your death occurs
before distributions have begun and you and your spouse are married during the
one year period ending on the date of your death.
Under the pre-retirement survivor annuity, your spouse will receive lifetime
monthly annuity payments. The Employer will purchase the annuity contract from
an insurance company using 50% of your vested account balance (including the
proceeds, if any, of life insurance contracts purchased on your behalf under
the Plan). The contract will be given to your surviving spouse as evidence of a
right to receive the annuity payments from the insurance company. Generally,
the Employer may not begin payment of the annuity prior to the date a
participant would have reached age 65 without the surviving spouse's consent.
However, the surviving spouse may elect to have distribution of the
pre-retirement survivor annuity at any time following the participant's death.
If, at the time of your death, 50% of your account balance is less than
$3,500, the Employer will pay your spouse a lump sum payment instead of the
annuity.
WAIVER ELECTION. The Plan requires payment of the pre-retirement survivor
annuity unless you have a valid waiver election in effect on the date of your
death. To have a valid waiver you and your spouse must complete the waiver
election form. YOUR WAIVER ELECTION IS NOT VALID UNLESS YOUR SPOUSE, DURING THE
ELECTION PERIOD, ALSO CONSENTS IN WRITING TO YOUR BENEFICIARY DESIGNATION,
UNLESS YOUR SPOUSE IS THE SOLE PRIMARY BENEFICIARY. Your waiver election is not
valid unless you and your spouse make the election within the election period.
The election period begins on the first day of the Plan Year immediately before
your 35th birthday or, if later, the date you receive this notice. The election
period ends on the date of your death. If you wish, you may waive the
pre-retirement survivor annuity prior to the beginning of the election period.
However, on the first day of the election period mentioned above, you and your
spouse would have to complete a second waiver form. If you terminate
employment, you may waive the pre-retirement survivor annuity at any time after
the date of your termination. You may revoke or make a new waiver election as
often as you like during the election period. You may revoke a waiver election
without your spouse's consent, but your spouse would have to consent to a new
waiver. A waiver election is valid only for the spouse consenting to the
waiver. Therefore, you should inform the Employer of any change in your marital
status.
FINANCIAL EFFECT OF YOUR ELECTION. If you and your spouse do NOT waive the
pre-retirement survivor annuity, the Employer will pay your surviving spouse
the pre-retirement survivor annuity and pay the remaining value of the account
to your designated beneficiary. If the Employer pays your spouse the annuity,
the Plan does not need your spouse's consent to the beneficiary designation.
Under a pre-retirement survivor annuity, your surviving spouse will receive
lifetime income. Benefits will not continue to other beneficiaries after your
spouse's death. Your surviving spouse can choose a lump sum or installment
payments instead of the pre-retirement survivor annuity.
If you and your spouse waive the pre-retirement survivor annuity, the Employer
will pay your entire vested account balance to your designated beneficiary. The
Plan generally requires payment of the death benefit in lump sum. If your
beneficiary receives a lump sum payment, the Employer will provide the
beneficiary a notice of the special tax benefits, if any, available for the
distribution. If your vested account balance at the time of your death exceeds
$3,500, your beneficiary may choose a lump sum or installment payments. Under
the installment method, the Employer will continue payments from your account
until the entire account has been depleted. Furthermore, your vested account
balance will continue to earn investment income. If a vested account balance
remains in the Plan at the time of your primary beneficiary's death, the Plan
will pay the remaining account balance to your primary beneficiary's estate,
unless your beneficiary designation directs otherwise. If you and your spouse
waive the pre-retirement survivor annuity, your spouse must consent to the
identity of the designated beneficiary but does not have to consent to the form
of payment made to the beneficiary.
PROCEDURE. If you and your spouse wish to have the pre-retirement survivor
annuity apply, YOU DO NOT NEED TO MAKE ANY ELECTION. If you and your spouse do
NOT wish to have the pre-retirement survivor annuity apply, sign the enclosed
Waiver of Pre-retirement Survivor Annuity election form within the election
period. We also have enclosed a Designation of Beneficiary Form.
PARTICIPANTS SHOULD RETAIN THIS IN THEIR FILES
<PAGE> 29
WAIVER OF PRE-RETIREMENT SURVIVOR ANNUITY
MARRIED PARTICIPANTS MUST COMPLETE THIS FORM IF THEY WISH TO WAIVE PAYMENT OF A
PRE-RETIREMENT SURVIVOR ANNUITY. RETURN TO YOUR EMPLOYER.
__________________________________________________________________________ Plan
Name of Employer
I elect to waive payment of a pre-retirement survivor annuity if my death
occurs before distributions have begun under the Plan. The Employer has given
me an explanation of the terms of the Pre-retirement Survivor Annuity, my right
to make this waiver election, the time period during which I may make this
waiver election, and the financial effect of my election not to receive the
Pre-retirement Survivor Annuity. I understand I may revoke this election at any
time during the election period.
______________________________________ _______________________________________
Date Signature of Participant
CONSENT OF SPOUSE
I, the undersigned spouse of the Participant named above, consent to the Waiver
of the Pre-retirement Survivor Annuity form of payment. I understand the terms
of the Pre-retirement Survivor Annuity, my right not to consent to this waiver
election, the time period during which my spouse and I may make this waiver
election, and the financial effect of my election not to receive the
Pre-retirement Survivor Annuity. I understand my consent is irrevocable unless
my spouse revokes the waiver election. I further understand my consent is valid
only if I consent, in writing, to my spouse's beneficiary designation or any
change in my spouse's beneficiary designation, unless my spouse has designated
me as sole primary beneficiary.
________________________________ ___________________________________________
Date Signature of Spouse
____________________________________________________________________________
Signature of Witness Title
COMPLETE AND RETURN TO EMPLOYER
<PAGE> 30
PARTICIPANT RECORDS
DISTRIBUTION ELECTION
PARTICIPANTS MUST COMPLETE THIS FORM ONLY IF THEIR ACCOUNT(S) IS OVER $3,500.
RETURN TO YOUR EMPLOYER.
_______________________________________________________________________ Plan
Name of Employer
A. INDICATE THE FORM OF DISTRIBUTION PAYMENT.
I, the undersigned Participant, elect payment of my account balance in
the following manner:
(1) / / I elect to transfer my distribution directly to a Kemper
IRA and defer taxes until I actually receive the money.
(Complete a Kemper IRA application if electing this
option.)
(2) / / In a lump sum.
(3) / / In a series of _______________________________
(monthly, quarterly, or annual)
installments over ____ years.
(4) / / In a qualified joint and survivor annuity contract.
(5) / / I elect to postpone distribution until the age of 65.
___________________________________ __________________________________
Date Signature of Participant
NOTE TO MARRIED MONEY PURCHASE PENSION PLAN AND CERTAIN PROFIT SHARING
PLAN PARTICIPANTS: If you requested payment of your account balance in a
form other than a qualified joint and survivor annuity, your spouse must
consent by signing Section B.
B. CONSENT OF SPOUSE
I, __________________________, spouse of the Participant, hereby consent
to the form of distribution payment elected above. I understand that by
giving this consent I am giving up the right to receive annuity benefit
payments which would otherwise be payable to me for my lifetime. I
understand my consent is irrevocable unless my spouse changes the form of
distribution payment. I understand any change is subject to my consent,
unless my spouse elects to receive the qualified joint and survivor
annuity.
___________________________________ ______________________________________
Date Signature of Participant
___________________________________ ______________________________________
Signature of Witness Title
IMPORTANT NOTE: A PARTICIPANT MAY WAIVE A QUALIFIED JOINT AND SURVIVOR
ANNUITY CONTRACT, AND A SPOUSE MAY CONSENT TO SUCH WAIVER PROVIDED THIS
ELECTION IS MADE WITHIN 90 DAYS OF THE FIRST PLAN DISTRIBUTION.
COMPLETE AND RETURN TO EMPLOYER
<PAGE> 31
PLAN DOCUMENT
RETIREMENT PLAN
PROTOTYPE DOCUMENT
The following Plan Document and Opinion Letters
are part of your permanent plan records and may be consulted to
reference specific plan provisions.
<PAGE> 32
KEMPER RED BOOK
KEOGH RETIREMENT PLAN PROTOTYPE TRUST AGREEMENT
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE I, DEFINITIONS
1.01 EMPLOYEE.............................................1
1.02 TRUSTEE..............................................1
1.03 PLAN ................................................1
1.04 ADOPTION AGREEMENT ..................................1
1.05 PLAN ADMINISTRATOR ..................................1
1.06 ADVISORY COMMITTEE...................................1
1.07 EMPLOYEE.............................................1
1.08 SELF-EMPLOYED INDIVIDUAL/OWNER-EMPLOYEE .............1
1.09 HIGHLY COMPENSATED EMPLOYEE..........................1
1.10 PARTICIPANT..........................................2
1.11 BENEFICIARY..........................................2
1.12 COMPENSATION.........................................2
1.13 EARNED INCOME .......................................3
1.14 ACCOUNT..............................................3
1.15 ACCRUED bENEFIT .....................................3
1.16 NONFORFEITABLE.......................................3
1.17 PLAN YEAR/LIMITATION YEAR............................3
1.18 EFFECTIVE DATE ......................................3
1.19 PLAN ENTRY DATE .....................................3
1.20 ACCOUNTING DATE .....................................3
1.21 TRUST................................................3
1.22 TRUST FUND ..........................................3
1.23 NONTRANSFERABLE ANNUITY .............................3
1.24 ERISA ...............................................3
1 25 CODE.................................................3
1 26 SERVICE .............................................3
1 27 HOUR OF SERVICE .....................................3
1.28 DISABILITY...........................................4
1.29 SERVICE FOR PREDECESSOR EMPLOYER ....................4
1.30 RELATED EMPLOYERS....................................4
1.31 LEASED EMPLOYEES ....................................5
1.32 SPECIAL RULES FOR OWNER-EMPLOYEES ...................5
1.33 TAXABLE WAGE BASE ...................................5
1.34 PAIRED PLANS ........................................5
1.35 MEMBER OF A COLLECTIVE BARGAINING UNIT ..............6
1.36 DESIGNATED INVESTMENT COMPANY .......................6
ARTICLE II, EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY..........................................6
2.02 YEAR OF SERVICE - PARTICIPATION .....................6
2.03 BREAK IN SERVICE - PARTICIPATION.....................6
2.04 PARTICIPATION UPON RE-EMPLOYMENT ....................6
2.05 CHANGE IN EMPLOYEE STATUS ...........................6
2.06 ELECTION NOT TO PARTICIPATE .........................6
</TABLE>
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PLAN DOCUMENT
<TABLE>
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ARTICLE III, EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT ..............................................7
3.02 DETERMINATION OF CONTRIBUTION .......................7
3.03 TIME OF PAYMENT OF CONTRIBUTION .....................7
3.04 RESERVED ............................................7
3.05 ACCRUAL OF BENEFIT ..................................7
3.06 .....................................................7
3.07 .....................................................7
3.08 .....................................................7
3.09 .....................................................7
3.10 .....................................................8
3.11 .....................................................8
3.12 .....................................................8
3.13 .....................................................8
3.14 .....................................................8
3.15 LIMITATIONS ON ALLOCATIONS ..........................8
3.16 SPECIAL ALLOCATION LIMITATION .......................9
3.17 DEFINED BENEFIT PLAN LIMITATION .....................9
3.18 DEFINITIONS - ARTICLE III ........................9-11
ARTICLE IV, PARTICIPANT CONTRIBUTIONS
4.01 PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS ............11
4.02 PARTICIPANT DEDUCTIBLE CONTRIBUTIONS ...............11
4.03 PARTICIPANT ROLLOVER CONTRIBUTIONS .................11
4.04 PARTICIPANT CONTRIBUTION - FORFEITABILITY...........12
4.05 PARTICIPANT CONTRIBUTION - WITHDRAWAL/DISTRIBUTION .12
4.06 PARTICIPANT CONTRIBUTION - ACCRUED BENEFIT..........12
ARTICLE V, TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 NORMAL RETIREMENT AGE ..............................12
5.02 VESTING ............................................12
ARTICLE VI, TIME AND METHOD OF PAYMENT OF BENEFITS
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT ..............13-15
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT ............15-17
6.03 BENEFIT PAYMENT ELECTIONS...........................17
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND
SURVIVING SPOUSES ...............................17-19
6.05 WAIVER ELECTION - QUALIFIED JOINT AND
SURVIVOR ANNUITY ...................................19
6.06 WAIVER ELECTION - PRE-RETIREMENT
SURVIVOR ANNUITY ................................19-20
6.07 DISTRIBUTIONS UNDER DOMESTIC RELATIONS ORDERS.......20
ARTICLE VII, TRUSTEE, POWERS AND DUTIES
7.01 INVESTMENT OF TRUST ASSETS .........................21
7.02 VOTING AND OTHER ACTION ............................21
7.03 REPORTS OF THE TRUSTEE AND EMPLOYER ................21
7.04 TRUSTEE FEES AND EXPENSES OF THE ACCOUNT ...........21
7.05 CONCERNING THE TRUSTEE .............................22
7.06 AMENDMENT ..........................................22
7.07 RESIGNATION OR REMOVAL OF TRUSTEE...................22
7.08 TERMINATION OF TRUST ...............................22
7.09 MISCELLANEOUS ......................................22
ARTICLE VIII, PARTICIPANT ADMINISTRATIVE PROVISIONS
8.01 BENEFICIARY DESIGNATION ............................23
8.02 NO BENEFICIARY DESIGNATION..........................23
8.03 PERSONAL DATA TO COMMITTEE..........................23
8.04 ADDRESS FOR NOTIFICATION............................23
8.05 ASSIGNMENT OR ALIENATION ...........................23
8.06 NOTICE OF CHANGE IN TERMS ..........................24
</TABLE>
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<TABLE>
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8.07 LITIGATION AGAINST THE TRUST .......................24
8.08 INFORMATION AVAILABLE...............................24
8.09 APPEAL PROCEDURE FOR DENIAL OF BENEFITS ............24
8.10 PARTICIPANT DIRECTION OF INVESTMENT ................24
ARTICLE IX, ADVISORY COMMITTEE - DUTIES WITH RESPECT TO
PARTICIPANT'S ACCOUNTS
9.01 MEMBERS' COMPENSATION, EXPENSES ....................25
9.02 TERM ...............................................25
9.03 POWERS .............................................25
9.04 GENERAL ............................................25
9.05 FUNDING POLICY .....................................25
9.06 MANNER OF ACTION ...................................25
9.07 INTERESTED MEMBER ..................................25
9.08 INDIVIDUAL ACCOUNTS ................................25
9.09 VALUE OF PARTICIPANT'S ACCRUED BENEFIT .............26
9.10 ALLOCATIONS AND DISTRIBUTION OF NET INCOME
GAIN OR lOSS .......................................26
9.11 INDIVIDUAL STATEMENT................................26
9.12 ACCOUNT CHARGED ....................................26
9.13 MISSING BENEFICIARY ................................26
ARTICLE X, PROVISIONS RELATING TO INSURANCE
10.01 INSURANCE BENEFIT OR ANNUITY ......................27
10.02 FORM OF CONTRACT AND PREMIUM ......................27
10.03 LIMITATION OF LIFE INSURANCE PROTECTION ...........27
ARTICLE XI, MISCELLANEOUS
11.01 EVIDENCE ..........................................28
11.02 NO RESPONSIBILITY FOR EMPLOYER ACTION .............28
11.03 FIDUCIARIES NOT INSURERS ..........................28
11.04 WAIVER OF NOTICE ..................................28
11.05 SUCCESSORS.........................................28
11.06 WORD USAGE ........................................28
11.07 EMPLOYER'S RIGHT TO PARTICIPATE....................28
11.08 EMPLOYMENT NOT GUARANTEED .........................28
ARTICLE XII, EXCLUSIVE BENEFIT, AMENDMENT, TERMINATION
12.01 EXCLUSIVE BENEFIT .................................29
12.02 AMENDMENT BY EMPLOYER..............................29
12.03 AMENDMENT BY PLAN SPONSOR..........................30
12.04 DISCONTINUANCE.....................................30
12.05 MERGER/DIRECT TRANSFER.............................30
12.06 TERMINATION........................................31
ARTICLE XIII, CODE SECTION 401(k) ARRANGEMENTS
13.01 ELIGIBILITY........................................32
13.02 SALARY REDUCTION AGREEMENT ........................32
13.03 DEFINITIONS ....................................32-33
13.04 ELECTIVE DEFERRALS - CONTRIBUTION LIMITATION ......33
13.05 DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS ......33-34
13.06 ACTUAL DEFERRAL PERCENTAGE TEST ...................34
13.07 DISTRIBUTION OF EXCESS CONTRIBUTIONS...............35
13.08 MATCHING CONTRIBUTIONS ............................35
13.09 QUALIFIED MATCHING CONTRIBUTIONS ..................35
13.10 LIMITATIONS ON MATCHING CONTRIBUTIONS ..........35-36
13.11 DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS ....36
13.12 QUALIFIED NONELECTIVE CONTRIBUTIONS ...............36
13.13 DISTRIBUTION REQUIREMENTS..........................37
</TABLE>
<PAGE> 35
PLAN DOCUMENT
ARTICLE I
DEFINITIONS
1.01 "EMPLOYER" means each employer who adopts this Plan by executing an
Adoption Agreement.
1.02 "TRUSTEE" means Investors Fiduciary Trust Company.
1.03 "PLAN" means the retirement plan established or continued by the
Employer in the form of this Agreement, including the Adoption Agreement
which the Employer has executed.
1.04 "ADOPTION AGREEMENT" means the document executed by the Employer and the
Trustee by which the Employer establishes or continues this Plan.
1.05 "PLAN ADMINISTRATOR" is the Employer unless the Employer designates
another person to hold the position of Plan Administrator. In addition
to his other duties, the Plan Administrator has full responsibility for
compliance with the reporting and disclosure rules under ERISA with
respect to this Agreement.
1.06 "ADVISORY COMMITTEE" means the Employer's Advisory Committee as from
time to time constituted.
1.07 "EMPLOYEE" means any employee of the employer maintaining the Plan or of
any other employer required to be aggregated with such employer under
Code Section 4l4(b), (c), (m) or (o). The term employee shall also
include any leased employee deemed to be an employee of any employer
described in the previous paragraph as provided in Code Section 4l4(n)
or (o).
1.08 "SELF-EMPLOYED INDIVIDUAL/OWNER-EMPLOYEE." "Self-Employed Individual"
means an individual who has Earned Income (or who would have had Earned
Income but for the fact that the trade or business did not have net
earnings) for the taxable year from the trade or business for which the
Plan is established. "Owner-Employee" means a Self-Employed Individual
who is the sole proprietor in the case of a sole proprietorship. If the
Employer is a partnership, "Owner-Employee" means a Self-Employed
Individual who is a partner and owns more than 10% of either the capital
or profits interest of the partnership.
1.09 "HIGHLY COMPENSATED EMPLOYEE" means an Employee who, during the Plan
Year or during the preceding 12-month period:
(A) is a 5% owner of the Employer (applying the constructive
ownership rules of Code Section 318, and applying the principles
of Code Section 318, for an unincorporated entity);
(B) has Compensation in excess of $75,000 (as adjusted by the
Commissioner of Internal Revenue for the relevant year);
(C) has Compensation in excess of $50,000 (as adjusted by the
Commissioner of Internal Revenue for the relevant year) and is
part of the top-paid 20% group of Employees (based on
Compensation for the relevant year);
(D) has Compensation in excess of 50% of the dollar amount prescribed
in Code Section 415(b)(1)(A) (relating to defined benefit plans)
and is an officer of the Employer.
If the Employee satisfies the definition in clause (b), (c) or (d) in
the Plan Year but not during the preceding 12-month period and does not
satisfy clause (a) in either period, the Employee is a Highly
Compensated Employee only if he is one of the 100 most highly
compensated Employees for the Plan Year. The number of officers taken
into account under clause (d) will not exceed the greater of 3 or 10% of
the total number (after application of the Code Section 414(q)
exclusions) of Employees, but no more than 50 officers. If no Employee
satisfies the Compensation requirement in clause (d) for the relevant
year, the Advisory Committee will treat the highest paid officer as
satisfying clause (d) for that year.
For purposes of this Section, "Compensation" means Compensation as
defined in Section 1.12, and Compensation must include: (i) elective
deferrals under a Code Section 401(k) arrangement or under a Simplified
Employee Pension maintained by the Employer; and (ii) amounts paid by
the Employer which are not currently includible in the Employee's gross
income because of Code Sections 125 (cafeteria plans) or 403(b)
(tax-sheltered annuities). The Advisory Committee must make the
determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of the top paid 20% group, the
top 100 paid Employees, the number of officers includible in clause (d)
and the relevant Compensation, consistent with Code Section 414(q) and
regulations issued under that Code section. The Employer may make a
calendar year election to determine the Highly Compensated Employees for
the Plan Year, as prescribed by Treasury regulations. A calendar year
election must apply to all plans and arrangements of the Employer. For
purposes of applying any nondiscrimination test required under the Plan
or under the Code, in a manner consistent with applicable Treasury
regulations, the Advisory Committee will not treat as a separate
Employee a family member (a spouse, a lineal ascendant or descendant, or
a spouse of lineal ascendant or descendant) of a Highly Compensated
Employee described in clause (a) of this Section, or a family member of
one of the ten Highly Compensated Employees with the greatest
Compensation for the Plan Year, but will treat the Highly Compensated
Employee and all family members as a single Highly Compensated Employee.
This aggregation rule applies to a family member even if that family
member is a Highly Compensated Employee without family aggregation.
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<PAGE> 36
The term "Highly Compensated Employee" also includes any former Employee
who separated from Service (or has a deemed Separation from Service, as
determined under Treasury regulations) prior to the Plan Year, performs
no Service for the Employer during the Plan Year, and was a Highly
Compensated Employee either for the separation year or any Plan Year
ending on or after his 55th birthday. If the former Employee's
Separation from Service occurred prior to January 1, 1987, he is a
Highly Compensated Employee only if he satisfied clause (a) of this
Section 1.09 or received Compensation in excess of $50,000 during: (1)
the year of his Separation from Service (or the prior year); or (2) any
year ending after his 54th birthday.
The determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of Employees in the top-paid
group, the top 100 Employees, the number of Employees treated as
officers and the Compensation that is considered, will be made in
accordance with Code Section 414(q) and the regulations thereunder.
1.10 "PARTICIPANT" is any Employee other than a Member of a Collective
Bargaining Unit who is eligible to be and becomes a Participant in
accordance with the provisions of Section 2.01.
1.11 "BENEFICIARY" is a person designated by a Participant who is or may
become entitled to a benefit under the Plan. A Beneficiary who becomes
entitled to a benefit under the Plan remains a Beneficiary under the
Plan until the Trustee has fully distributed his benefit to him. A
Beneficiary's right to (and the Plan Administrator's, the Advisory
Committee's or a Trustee's duty to provide to the Beneficiary)
information or data concerning the Plan does not arise until he first
becomes entitled to receive a benefit under the Plan.
1.12 "COMPENSATION" means compensation as that term is defined in Section
3.18(b) of the Plan. If compensation for any prior plan year is taken
into account in determining an employee's contributions or benefits for
the current year, the compensation for such prior year is subject to the
applicable annual compensation limit in effect for that prior year. For
this purpose, for years beginning before January 1, 1990, the applicable
annual compensation limit is $200,000. For any self-employed individual
covered under the plan, compensation will mean earned income.
Compensation shall include only that compensation which is actually paid
to the participant during the applicable period. Except as provided
elsewhere in this plan, the applicable period shall be the plan year.
Furthermore, notwithstanding the above, the definition of compensation
includes elective contributions made by the Employer on the Employee's
behalf. "Elective contributions" are amounts excludible from the
Employee's gross income under Code Section 402(a)(8) (relating to a Code
Section 401(k) arrangement), Code Section 402(h) (relating to a
Simplified Employee Pension), Code Section 125 (relating to a cafeteria
plan) or Code Section 403(b) (relating to a tax-sheltered annuity) and
contributed at the Employee's election. The term "Compensation" does
not include:
(A) Employer contributions (other than "elective contributions") to a
plan of deferred compensation to the extent the contributions are
not included in the gross income of the Employee for the taxable
year in which contributed, on behalf of an Employee to a
Simplified Employee Pension Plan to the extent such contributions
are excludible from the Employee's gross income, and any
distributions from a plan of deferred compensation, regardless of
whether such amounts are includible in the gross income of the
Employee when distributed.
(B) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by an
Employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture.
(C) Amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option.
(D) Other amounts which receive special tax benefits, such as
premiums for group term life insurance (but only to the extent
that the premiums are not includible in the gross income of the
Employee), or contributions made by an Employer (whether or not
under a salary reduction agreement) towards the purchase of an
annuity contract described in Code Section 403(b) (whether or
not the contributions are excludible from the gross income of the
Employee), other than "elective contributions," if elected in the
Employer's Adoption Agreement.
Any reference in this Plan to Compensation is a reference to the
definition in this Section 1.12, unless the Plan reference specifies a
modification to this definition. The Advisory Committee will take into
account only Compensation actually paid for the relevant period.
For any Plan Year beginning after December 31, 1988, the Advisory
Committee must take into account only the first $200,000 (or such larger
amount as the Commissioner of Internal Revenue may prescribe under Code
Section 415(d)) of any Participant's Compensation, except that the dollar
increase in effect on January 1 of any calendar year is effective for
years beginning in such calendar year and the first adjustment to the
$200,000 limitation is effected on January 1,1990. If a plan determines
compensation on a period of time that contains fewer than 12 calendar
months, then the annual compensation limit is an amount equal to the
annual compensation limit for the calendar year in which the
compensation period begins multiplied by the ratio obtained by dividing
the number of full months in the period by 12. The $200,000
Compensation limitation applies to the combined Compensation of the
Employee and of any family member aggregated with the Employee under
Section 1.09 and who is either (i) the Employee's spouse; or (ii) the
Employee's lineal descendant who has not attained age 19 before the
close of the year. If, as a result of the application of such rules, the
adjusted $200,000 limitation is exceeded, then (except for purposes of
determining the portion of compensation up to the integration level if
this plan provides for permitted disparity, the Advisory Committee will
apply the contribution and allocation provisions of Article III by
prorating the $200,000 (or adjusted) limitation among the affected
individuals in proportion to each such individual's Compensation
determined prior to application of this limitation.
2
<PAGE> 37
PLAN DOCUMENT
NONDISCRIMINATION. For purposes of determining whether the Plan
discriminates in favor of Highly Compensated Employees: Compensation
means Compensation as defined in this Section 1.12.
Notwithstanding the preceding sentence, compensation for a participant
in a defined contribution plan who is permanently and totally disabled
(as defined in Code Section 22(e)(3)) is the compensation such
Participant would have received for the limitation year if the
participant had been paid at the rate of compensation paid immediately
before becoming permanently and totally disabled; such imputed
compensation for the disabled Participant may be taken into account
only if the participant is not a highly compensated employee (as
defined in Code Section 414(g)) and contributions made on behalf of
such participant are nonforfeitable when made.
1.13 "EARNED INCOME" means net earnings from self-employment in the trade
or business with respect to which the Employer has established the
Plan, provided personal services of the individual are a material
income producing factor. The Advisory Committee will determine net
earnings without regard to items excluded from gross income and the
deductions allocable to those items. Net earnings are reduced by
contributions by the employer to a qualified plan to the extent
deductible under Code Section 404. The Advisory Committee will
determine net earnings after the deduction allowed to the
Self-Employed Individual for all contributions made by the Employer
to a qualified plan and, for Plan Years beginning after December 31,
1989, the deduction allowed to the Self-Employed under Code
Section 164(f) for self-employment taxes.
1.14 "ACCOUNT" means the separate account(s) which the Advisory Committee
or the Trustee maintains for a Participant under the Employer's Plan.
1.15 "ACCRUED BENEFIT" means the amount standing in a Participant's
Account(s) as of any date derived from both Employer contributions and
Employee contributions and earnings thereon including rollovers
whether vested before or after death and including the proceeds of
insurance contracts on the participant's life, if any.
1.16 "NONFORFEITABLE" means a Participant's or Beneficiary's unconditional
claim, legally enforceable against the Plan, to the Participant's
Accrued Benefit.
1.17 "PLAN YEAR" means the fiscal year, of the Plan, the consecutive month
period specified in the Employer's Adoption Agreement. The Employer's
Adoption Agreement also must specify the "Limitation Year" applicable
to the limitations on allocations described in Article III. If the
Employer maintains Paired Plans, each Plan must have the same Plan
Year.
1.18 "EFFECTIVE DATE" of this Plan is the date specified in the Employer's
Adoption Agreement.
1.19 "PLAN ENTRY DATE" means the first day of the Plan Year or the first
day of the sixth month of the Plan Year.
1.20 "ACCOUNTING DATE" is the last day of an Employer's Plan Year. Unless
otherwise specified in the Plan, the Advisory Committee will make all
Plan allocations for a particular Plan Year as of the Accounting Date
of that Plan Year.
1.21 "TRUST" means the separate Trust created under the Employer's Plan.
1.22 "TRUST FUND" means all property of every kind held or acquired by the
Trustee under the Employer's Plan, other than incidental benefit
insurance contracts.
1.23 "NONTRANSFERABLE ANNUITY" means an annuity which by its terms provides
that it may not be sold, assigned, discounted, pledged as collateral
for a loan or security for the performance of an obligation or for any
purpose to any person other than Kemper Investors Life Insurance
Company. If the Trustee distributes an annuity contract, the contract
must be a Nontransferable Annuity.
1.24 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
l.25 "CODE" means the Internal Revenue Code of 1986, as amended.
1.26 "SERVICE" means any period of time the Employee is in the employ of
the Employer, including any period the Employee is on an unpaid leave
of absence authorized by the Employer under a uniform,
nondiscriminatory policy applicable to all Employees. "Separation from
Service" means a separation from Service with the Employer maintaining
this Plan.
1.27 "HOUR OF SERVICE" means:
(A) Each Hour of Service for which the Employer, either directly
or indirectly, pays an Employee, or for which the Employee is
entitled to payment, for the performance of duties for the
Employer. The Advisory Committee credits Hours of Service
under this paragraph (a) to the Employee for the computation
period in which the Employee performs the duties, irrespective
of when paid;
(B) Each Hour of Service for back pay, irrespective of mitigation
of damages, to which the Employer has agreed or for which the
Employee has received an award. The Advisory Committee credits
Hours of Service under this paragraph (b) to the Employee for
the computation period(s) to which the award or the agreement
pertains rather than for the computation period in which the
award, agreement or payment is made; and
3
<PAGE> 38
(C) Each Hour of Service for which the Employer, either directly
or indirectly, pays an Employee, or for which the Employee is
entitled to payment (irrespective of whether the employment
relationship is terminated) for reasons other than for the
performance of duties during a computation period, such as
leave of absence, vacation, holiday, sick leave, illness,
incapacity (including disability), layoff, jury duty or
military duty. The Advisory Committee will credit no more than
501 Hours of Service under this paragraph (c) to an Employee
on account of any single continuous period during which the
Employee does not perform any duties (whether or not such
period occurs during a single computation period). The
Advisory Committee credits Hours of Service under this
paragraph (c) in accordance with the rules of paragraphs (b)
and (c) of Labor Reg. Section 2530.200b-2, which the Plan, by
this reference, specifically incorporates in full within this
paragraph (c).
The Advisory Committee will not credit an Hour of Service under more
than one of the above paragraphs. A computation period for purposes of
this Section 1.27 is the Plan Year, Year of Service period, Break in
Service period or other period, as determined under the Plan provision
for which the Advisory Committee is measuring an Employee's Hours of
Service. The Advisory Committee will resolve any ambiguity with
respect to the crediting of an Hour of Service in favor of the
Employee.
An Employee for whom a record of hours worked is not maintained shall
be credited with 45 Hours of Service for each week in which he or she
completes at least one Hour of Service.
Solely for purposes of determining whether the Employee incurs a Break
in Service under any provision of this Plan, the Advisory Committee
must credit Hours of Service during an Employee's unpaid absence
period due to maternity or paternity leave. The Advisory Committee
considers an Employee on maternity or paternity leave if the
Employee's absence is due to the Employee's pregnancy, the birth of
the Employee's child, the placement with the Employee of an adopted
child, or the care of the Employee's child immediately following the
child's birth or placement. The Advisory Committee credits Hours of
Service under this paragraph on the basis of the number of Hours of
Service the Employee would receive if he were paid during the absence
period or, if the Advisory Committee cannot determine the number of
Hours of Service the Employee would receive, on the basis of 8 hours
per day during the absence period. The Advisory Committee will credit
only the number (not exceeding 501) of Hours of Service necessary to
prevent an Employee's Break in Service. The Advisory Committee credits
all Hours of Service described in this paragraph to the computation
period in which the absence period begins or, if the Employee does not
need these Hours of Service to prevent a Break in Service in the
computation period in which his absence period begins, the Advisory
Committee credits these Hours of Service to the immediately following
computation period.
Hours of service will also be credited for any individual considered
an employee for purposes of this Plan under Code Section 414(n) or
Section 414(o) and the regulations thereunder.
1.28 "DISABILITY" means inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than 12
months. The permanence and degree of such impairment shall be
supported by medical evidence. The Plan considers a Participant
disabled on the date the Advisory Committee determines the Participant
satisfies the definition of disability. The Advisory Committee may
require a Participant to submit to a physical examination in order to
confirm disability. The Advisory Committee will apply the provisions
of this Section 1.28 in a nondiscriminatory, consistent and uniform
manner.
1.29 "SERVICE FOR PREDECESSOR EMPLOYER"
If the Employer maintains the plan of a predecessor employer, the Plan
treats service of the Employee with the predecessor employer as
service with the Employer. If the Employer does not maintain the plan
of a predecessor employer, the Plan does not credit service with the
predecessor employer.
1.30 "RELATED EMPLOYERS"
A related group is a controlled group of corporations (as
defined in Code Section 414(b)), trades or businesses (whether or not
incorporated) which are under common control (as defined in Code
Section 414(c)), or an affiliated service group (as defined in Code
Section 414(m) or in Code Section 414(o)). If the Employer is a member
of a related group, the term "Employer" includes the related group
members for purposes of crediting Hours of Service, determining Years
of Service and Breaks in Service under Articles II and V, applying the
limitations on allocations in Part 2 of Article III, applying the top
heavy rules and the minimum allocation requirements of Article III,
the definitions of Employee, Highly Compensated Employee, Compensation
and Leased Employee, and for any other purpose required by the
applicable Code section or by a Plan provision. However, an Employer
may contribute to the Plan only by being a signatory to the Execution
Page of the Adoption Agreement or to a Participation Agreement to the
Employer's Adoption Agreement. If one or more of the Employer's
related group members becomes Participating Employers by executing a
Participation Agreement to the Employer's Adoption Agreement, the term
"Employer" includes the participating related group members, for all
purposes of the Plan, and "Plan Administrator" means the Employer that
is the signatory to the Execution Page of the Adoption Agreement.
All Employees of the Employer or of any member of the Employer's
related group, are eligible to participate in the Plan, irrespective
of whether the related group member directly employing the Employee is
a Participating Employer.
4
<PAGE> 39
PLAN DOCUMENT
1.31 "LEASED EMPLOYEES"
The Plan treats a Leased Employee as an Employee of the Employer. A
Leased Employee is an individual (who otherwise is not an Employee of
the Employer) who, pursuant to a leasing agreement between the
Employer and any other person, has performed services for the Employer
(or for the Employer and any persons related to the Employer
determined in accordance with Code Section 414(n)(6) on a substantially
full-time basis for at least one year and who performs services
historically performed by employees in the Employer's business field.
If a Leased Employee is treated as an Employee by reason of this
Section 1.31 of the Plan, "Compensation" includes Compensation from
the leasing organization which is attributable to services performed
for the Employer. Contributions or benefits provided a leased employee
by the leasing organization which are attributable to services
performed for the recipient employer shall be treated as provided by
the recipient employer.
SAFE HARBOR PLAN EXCEPTION. The Plan does not treat a Leased Employee
as an Employee if the leasing organization covers the employee in a
safe harbor plan and, prior to application of this safe harbor plan
exception, 20% or less of the Employer's Employees (other than Highly
Compensated Employees) are Leased Employees. A safe harbor plan is a
money purchase pension plan providing immediate participation, full
and immediate vesting, and a nonintegrated contribution formula equal
to at least 10% of the employee's compensation without regard to
employment by the leasing organization on a specified date. The safe
harbor plan must determine the 10% contribution on the basis of
compensation as defined in Code Section 415(c)(3) plus elective
contributions (as defined in Section 1.12).
OTHER REQUIREMENTS. The Advisory Committee must apply this Section
1.31 in a manner consistent with Code Sections 414(n) and 414(o) and
the regulations issued under those Code sections. If a Leased
Employee is a Participant in the Plan and also participates in a
defined contribution plan maintained by the leasing organization,
then the Advisory Committee will determine the Leased Employee's
allocation of Employer contributions under Article III without
taking into account the Leased Employee's allocation, if any, under
the leasing organization's plan.
1.32 "SPECIAL RULES FOR OWNER-EMPLOYEES"
The following special provisions and restrictions apply to
Owner-Employees:
If this plan provides contributions or benefits for one or more
owner-employees who control both the business for which this plan is
established and one or more other trades or businesses, this plan and
the plan established for other trades or businesses must, when looked
at as a single plan, satisfy sections 401(a) and (d) for the
employees of this and all other trades or businesses.
If the plan provides contributions or benefits for one or more
owner-employees who control one or more other trades or businesses,
the employees of the other trades or businesses must be included in a
plan which satisfies sections 401(a) and (d) and which provides
contributions and benefits not less favorable than provided for
owner-employees under this plan.
If an individual is covered as an owner-employee under the plans of
two or more trades or businesses which are not controlled and the
individual controls a trade or business, then the contributions or
benefits of the employees under the plan of the trades or businesses
which are controlled must be as favorable as those provided for him
under the most favorable plan of the trade or business which is not
controlled.
For purposes of the preceding paragraphs, an owner-employee, or two or
more owner-employees, will be considered to control a trade or
business if the owner-employee, or two or more owner-employees
together:
(1) own the entire interest in an unincorporated trade or
business, or
(2) in the case of a partnership, own more than 50 percent of
either the capital interest or the profits interest in the
partnership.
For purposes of the preceding sentence, an owner-employee, or two or
more owner-employees shall be treated as owning any interest in a
partnership which is owned, directly or indirectly, by a partnership
which such owner-employee, or such two or more owner-employees, are
considered to control within the meaning of the preceding sentence.
1.33 "TAXABLE WAGE BASE" means 100% of the taxable wage base as determined
under Section 230 of the Social Security Act in effect on the first
day of the plan year.
1.34 "PAIRED PLANS" means the Employer has adopted two Standardized Plan
Adoption Agreements offered with this Kemper Retirement Plan Prototype
Keogh/Corporate, one Adoption Agreement being a Paired Profit Sharing
Plan and one Adoption Agreement being a Paired Pension Plan. A Paired
Profit Sharing Plan may include a Code Section 401(k) arrangement. A
Paired Pension Plan must be a money purchase pension plan. Paired
Plans must be the subject of a favorable opinion letter issued by
the National Office of the Internal Revenue Service.
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1.35 "MEMBER OF A COLLECTIVE BARGAINING UNIT" means any employee who is
included in a unit and whose terms and conditions of employment are
covered by a collective bargaining agreement between the Employer and
employee representatives which does not provide for participation in
the Plan, provided that there is evidence that, in connection with
such agreement, retirement benefits were the subject of good-faith
bargaining. For this purpose, the term "employee representatives" does
not include any organization more than half of whose members are
employees who are owners, officers or executives of the Employer.
1.36 "DESIGNATED INVESTMENT COMPANY" means any registered investment
company the investment manager or principal underwriter of which is
Kemper Financial Services, Inc. or an affiliate.
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 "ELIGIBILITY"
Each Employee becomes a Participant in the Plan in accordance with the
participation option selected by the Employer in its Adoption
Agreement. If this Plan is a restated Plan, each Employee who was a
Participant in the Plan on the day before the Effective Date continues
as a Participant in the Plan.
2.02 "YEAR OF SERVICE - PARTICIPATION"
For purposes of an Employee's participation in the Plan under Adoption
Agreement Section 2.01, the Plan takes into account all of his Years
of Service with the Employer, except that if an Employee has a Break
in Service before satisfying the Plan's requirement for eligibility,
Service before such break will not be taken into account. "Year of
Service" means a 12 consecutive month period during which the Employee
completes not less than 1,000 Hours of Service, measuring the
beginning of the first 12 month period from the Employment
Commencement Date, and each anniversary thereof. "Employment
Commencement Date" means the date on which the Employee first performs
an Hour of Service for the Employer.
2.03 "BREAK IN SERVICE - PARTICIPATION"
An Employee incurs a "Break in Service" if during any 12 consecutive
month period he does not complete more than 500 Hours of Service with
the Employer. The "12 consecutive month period" under this Section 2.03
is the same 12 consecutive month period for which the Plan measures
"Years of Service" under Section 2.02.
TWO-YEAR ELIGIBILITY. If the Employer elects a 2 years of service
condition for eligibility purposes under Adoption Agreement Section
2.01, the Plan treats an Employee who incurs a one year Break in
Service and who has never become a Participant as a new Employee on
the date he first performs an Hour of Service for the Employer after
the Break in Service.
2.04 "PARTICIPATION UPON RE-EMPLOYMENT"
A Participant whose employment terminates re-enters the Plan as a
Participant on the date of his re-employment. An Employee who
satisfies the Plans' eligibility conditions but who terminates
employment prior to becoming a Participant becomes a Participant on
the later of the Plan Entry Date on which he would have entered the
Plan had he not terminated employment or the date of his
re-employment. Any Employee who terminates employment prior to
satisfying the Plan's eligibility conditions becomes a Participant in
accordance with Adoption Agreement Section 2.01.
2.05 "CHANGE IN EMPLOYEE STATUS"
If a Participant has not incurred a Separation from Service but ceases
to be eligible to participate in the Plan, by reason of becoming a
member of a Collective Bargaining Unit, the Advisory Committee must
treat the Participant as an excluded employee during the period such a
Participant is a Member of a Collective Bargaining Unit. The Advisory
Committee determines a Participant's sharing in the allocation of
Employer contributions by disregarding his Compensation paid by the
Employer for services rendered in his capacity as a Member of a
Collective Bargaining Unit. However, during such period of exclusion,
the Participant, without regard to employment classification,
continues to receive credit for vesting under Article V for each
included Year of Service and the Participant' Account continues to
share fully in Trust Fund allocations under Section 9.11.
If an excluded employee who is not a Participant becomes eligible to
participate in the Plan by reason of a change in employment
classification, he will participate in the Plan immediately if he has
satisfied the eligibility conditions of Section 2.01 and would have
been a Participant had he not been an excluded employee during his
period of Service. Furthermore, the Plan takes into account all of the
Participant's included Years of Service with the Employer as an
Excluded Employee for purposes of vesting credit under Article V.
In the event a participant is no longer a member of an eligible class
of employees and becomes ineligible to participate but has not
incurred a break in service, such employee will participate
immediately upon returning to an eligible class of employees. If such
participant incurs a break in service, eligibility will be determined
under the break in service rules of the plan.
2.06 "ELECTION NOT TO PARTICIPATE"
The Plan does not permit an otherwise eligible Employee nor any
Participant to elect not to participate in the Plan.
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PLAN DOCUMENT
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
PART 1. AMOUNT OF EMPLOYER CONTRIBUTIONS AND PLAN ALLOCATIONS:
SECTIONS 3.01 THROUGH 3.06
3.01 "AMOUNT"
For each Plan Year, the Employer contributes to the Trust the amount
determined by application of the contribution option selected by the
Employer in its Adoption Agreement. The Employer may not make a
contribution to the Trust for any Plan Year to the extent the
contribution would exceed the Participants' Maximum Permissible
Amounts.
The Trustee, upon written request from the Employer, must return to
the Employer the amount of the Employer's contribution made by the
Employer by mistake of fact or the amount of the Employer's
contribution disallowed as a deduction under Code Section 404. The
Trustee will not return any portion of the Employer's contribution
under the provisions of this paragraph more than one year after:
(A) The Employer made the contribution by mistake of fact; or
(B) The disallowance of the contribution as a deduction, and then,
only to the extent of the disallowance.
The Trustee will not increase the amount of the Employer contribution
returnable under this Section 3.01 for any earnings attributable to
the contribution, but the Trustee will decrease the Employer
contribution returnable for any losses attributable to it. The Trustee
may require the Employer to furnish it whatever evidence the Trustee
deems necessary to enable the Trustee to confirm the amount the
Employer has requested be returned is properly returnable under ERISA.
3.02 "DETERMINATION OF CONTRIBUTION"
The Employer, from its records, determines the amount of any
contributions to be made by it to the Trust under the terms of the
Plan.
3.03 "TIME OF PAYMENT OF CONTRIBUTION"
The Employer may pay its contribution for each Plan Year in one or
more installments without interest. The Employer must make its
contribution to the Trustee within the time prescribed by the Code or
applicable Treasury regulations.
3.04 "RESERVED"
3.05 "ACCRUAL OF BENEFIT"
The accrual of benefit shall be determined on the basis of the Plan
Year. In determining the amount of the Employer contribution to a
participant's account, only compensation with respect to that part of
a Plan Year the employee is actually a participant shall be taken into
account.
Employer contributions will be allocated to each Participant who
either completes 500 hours of service during the Plan Year or who is
employed by the Employer on the last day of the Plan Year.
PART 2. LIMITATIONS ON ALLOCATIONS: SECTIONS 3.06 THROUGH 3.09
[Note: Sections 3.06 through 3.09 apply only to Participants in this
Plan who do not participate, and who have never participated, in
another qualified plan or in a welfare benefit fund as defined in Code
Section 419(e) or an individual medical account as defined in Code
Section 415(1)(2) maintained by the Employer.
3.06 The amount of Annual Additions which the Advisory Committee may
allocate under this Plan on a Participant's behalf for a Limitation
Year may not exceed the Maximum Permissible Amount. If the amount the
Employer otherwise would contribute to the Participant's Account would
cause the Annual Additions for the Limitation Year to exceed the
Maximum Permissible Amount, the Employer will reduce the amount of its
contribution so the Annual Additions for the Limitation Year will
equal the Maximum Permissible Amount.
3.07 Prior to the determination of the Participant's actual Compensation
for a Limitation Year, the Advisory Committee may determine the
Maximum Permissible Amount on the basis of the Participant's estimated
annual Compensation for such Limitation Year. The Advisory Committee
must make this determination on a reasonable and uniform basis for all
Participants similarly situated.
3.08 As soon as is administratively feasible after the end of the
Limitation Year, the Advisory Committee will determine the Maximum
Permissible Amount for such Limitation Year on the basis of the
Participant's actual Compensation for such Limitation Year.
3.09 If, pursuant to Section 3.08 there is an Excess Amount with respect to
a Participant for a Limitation Year, the Advisory Committee will
dispose of such Excess Amount as follows:
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<PAGE> 42
(A) The Advisory Committee will return any nondeductible voluntary
Employee contributions to the Participant to the extent the
return would reduce the Excess Amount.
(B) If after the application of paragraph (a) an excess amount
still exists, and the Participant is covered by the Plan at
the end of the Limitation Year, the Excess Amount in the
Participant's account will be used to reduce Employer
Contributions (including any allocation of forfeitures) for
such Participant in the next Limitation Year, and each
succeeding Limitation Year if necessary.
(C) If, after the application of paragraph (b), an Excess Amount
still exists, and the Plan does not cover the Participant at
the end of the Limitation Year, then the Advisory Committee
will hold the Excess Amount unallocated in a suspense account.
The Advisory Committee will apply the suspense account to
reduce Employer Contributions for all remaining Participants
in the next Limitation Year, and in each succeeding Limitation
Year if necessary.
(D) The Advisory Committee will not distribute any Excess
Amount(s) to Participants or to former Participants. If a
suspense account is in existence at any time during a
limitation year pursuant to this section, it will not
participate in the allocation of the trust's investment gains
and losses. If a suspense account is in existence at any time
during a particular limitation year, all amounts in the
suspense account must be allocated and reallocated to
participants' accounts before any employer or any employee
contributions may be made to the plan for that limitation
year.
[Note: Sections 3.10 through 3.15 apply if, in addition to this Plan,
the Participant is covered under another qualified master or prototype
defined contribution plan maintained by the Employer, a welfare
benefit fund, as defined in Code Section 419(e) maintained by the
Employer or an individual medical account, as defined in Code Section
415(1)(2) maintained by the Employer which provides an annual
addition during any Limitation Year.]
3.10 The annual additions which may be credited to a participant's account
under this plan for any such limitation year will not exceed the
maximum permissible amount reduced by the annual additions credited to
a participant's account under the other plans and welfare benefit
funds for the same limitation year. If the annual additions with
respect to the participant under other defined contribution plans and
welfare benefit funds maintained by the employer are less than the
maximum permissible amount and the employer contribution that would
otherwise be contributed or allocated to the participant's account
under this plan would cause the annual additions for the limitation
year to exceed this limitation, the amount contributed or allocated
will be reduced so that the annual additions under all such plans and
funds for the limitation year will equal the maximum permissible
amount. If the annual additions with respect to the participant under
such other defined contribution plans and welfare benefit funds in the
aggregate are equal to or greater than the maximum permissible amount,
no amount will be contributed or allocated to the participant's
account under this plan for the limitation year.
3.11 Prior to the determination of the Participant's actual Compensation
for the Limitation Year, the Advisory Committee may determine the
amounts referred to in 3.10 above on the basis of the Participant's
estimated annual Compensation for such Limitation Year. The Advisory
Committee will make this determination on a reasonable and uniform
basis for all Participants similarly situated.
3.12 As soon as is administratively feasible after the end of the
Limitation Year, the Advisory Committee will determine the amounts
referred to in 3.10 on the basis of the Participant's actual
Compensation for such Limitation Year.
3.13 If pursuant to Section 3.12, a Participant's Annual Additions under
this Plan and all such other plans result in an Excess Amount, such
Excess Amount will consist of the Amounts last allocated. The Advisory
Committee will determine the Amounts last allocated by treating the
Annual Additions attributable to a welfare benefit fund or individual
medical account as allocated first, irrespective of the actual
allocation date under the welfare benefit fund.
3.14 If the Advisory Committee allocates an Excess Amount to a Participant
on an allocation date of this Plan which coincides with an allocation
date of another plan, the Excess Amount attributed to this Plan equals
the product of:
(i) the total Excess Amount allocated as of such date (including
any amount which the Advisory Committee would have allocated
but for the limitations of Code Section 415), times
(ii) the ratio of (1) the amount allocated to the Participant as of
such date under this Plan divided by (2) the total amount
allocated as of such date under all qualified master or
prototype defined contribution plans (determined without
regard to the limitations of Code Section 415).
3.15 The Advisory Committee will dispose of any Excess Amounts attributed
to this Plan as provided in Section 3.09.
[Note: Section 3.16 applies only to Participants who, in addition to
this Plan, participate in one or more qualified plans which are
qualified defined contribution plans other than a Master or Prototype
plan maintained by the Employer during the Limitation Year.]
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PLAN DOCUMENT
3.16 "SPECIAL ALLOCATION LIMITATION"
The amount of Annual Additions which the Advisory Committee may
allocate under this Plan on behalf of any Participant are limited in
accordance with the provisions of Section 3.10 through 3.15, as though
the other plan were a Master or Prototype plan.
3.17 "DEFINED BENEFIT PLAN LIMITATION"
If the Employer maintains a defined benefit plan, or has ever
maintained a defined benefit plan which the Employer has terminated,
then the sum of the defined benefit plan fraction and the defined
contribution plan fraction for any Participant for any Limitation Year
must not exceed 1.0. The annual additions which may be credited to the
participant's account under this plan for any limitation year will be
limited in accordance with Section 3.17 of the adoption agreement. To
the extent necessary to satisfy the limitations of this Section 3.17,
the Employer will reduce the Participant's projected annual benefit
under the defined benefit plan under which the Participant
participates. The Employer also must provide in an addendum to its
Adoption Agreement the manner in which the Plan will satisfy the
top-heavy requirements of Code Section 416 after taking into account
the existence (or prior maintenance) of the defined benefit plan.
3.18 "DEFINITIONS - ARTICLE III"
For purposes of this Article III, the following terms mean:
(A) "ANNUAL ADDITION" - The sum of the following amounts
allocated on behalf of a Participant for a Limitation Year, of
(i) all Employer contributions; (ii) all forfeitures; and
(iii) all Employee contributions. Except to the extent
provided in Treasury regulations, Annual Additions include
excess contributions described in Code Section 401(k), excess
aggregate contributions described in Code Section 401(m) and
excess deferrals described in Code Section 402(g),
irrespective of whether the plan distributes or forfeits such
excess amounts. Annual Additions also include Excess Amounts
reapplied to reduce Employer contributions under Section 3.09.
Amounts allocated after March 31, 1984, to an individual
medical account (as defined in Code Section 415(1)(2))
included as part of a defined benefit pension or annuity plan
maintained by the Employer are Annual Additions. Furthermore,
Annual Additions include contributions paid or accrued after
December 31, 1985, for taxable years ending after December
31,1985, attributable to post-retirement medical benefits
allocated to the separate account of a key employee (as
defined in Code Section 419A(d)(3)) under a welfare benefit
fund (as defined in Code Section 419(e)) maintained by the
Employer. For this purpose, any excess amount applied in the
limitation year to reduce employer contributions will be
considered annual additions for such limitation year.
(B) "COMPENSATION" - For purposes of applying the limitations of
Part 2 of this Article III, "Compensation" means a
participant's earned income, wages, salaries, and fees for
professional services and other amounts received (without
regard to whether or not an amount is paid in cash) for
personal services actually rendered in the course of
employment with the employer maintaining the plan to the
extent that the amounts are includible in gross income
(including, but not limited to, commissions paid salesmen,
compensation for services on the basis of a percentage of
profits, commissions on insurance premiums, tips, bonuses,
fringe benefits, reimbursements and expense allowances), and
excluding the following:
(I) Employer contributions to a plan of deferred
compensation which are not includible in the
employee's gross income for the taxable year in which
contributed, or employer contributions under a
simplified employee pension plan to the extent such
contributions are deductible by the employee, or any
distributions from a plan of deferred compensation;
(II) Amounts realized from the exercise of a nonqualified
stock option, or when restricted stock (or property)
held by the employee either becomes freely
transferable or is no longer subject to a substantial
risk of forfeiture;
(III) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock
option; and
(IV) other amounts which received special tax benefits, or
contributions made by the employer (whether or not
under a salary reduction agreement) towards the
purchase of an annuity described in section 403(b) of
the Internal Revenue Code (whether or not the amounts
are actually excludible from the gross income of the
employee).
For purposes of applying the limitations of this article,
compensation for a limitation year is the compensation actually paid
or includible in gross income during such limitation year.
Notwithstanding the preceding sentence, compensation for a participant
in a defined contribution plan who is permanently and totally disabled
(as defined in Section 22(e)(3) of the Code) is the compensation such
participant would have received for the limitation year if the
participant would have received for the limitation year if the
participant had been paid at the rate of compensation paid immediately
before becoming permanently and totally disabled; such imputed
compensation for the disabled participant may be taken into account
only if the participant is not a highly compensated employee (as
defined in Section 414(g) of the Code) and contributions made on
behalf of such participant are nonforfeitable when made.
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<PAGE> 44
(C) "EMPLOYER" - The Employer that adopts this Plan and any
related employers described in Section 1.30. Solely for
purposes of applying the limitations of Part 2 of this Article
III, the Advisory Committee will determine related employers
described in Section 1.30 by modifying Code Sections 414(b)
and (c) in accordance with Code Section 415(h).
(D) "EXCESS AMOUNT" - The excess of the Participant's Annual
Additions for the Limitation Year over the Maximum Permissible
Amount.
(E) "LIMITATION YEAR" - The period selected by the Employer under
Adoption Agreement Section 1.17. All qualified plans of the
Employer must use the same Limitation Year. If the Employer
amends the Limitation Year to a different 12 consecutive
month period, the new Limitation Year must begin on a date
within the Limitation Year for which the Employer makes the
amendment, creating a short Limitation Year.
(F) "MASTER OR PROTOTYPE PLAN" - A plan the form of which is the
subject of a favorable opinion letter from the Internal
Revenue Service.
(G) "MAXIMUM PERMISSIBLE AMOUNT" - The lesser of (i) $30,000 (or,
if greater, one-fourth of the defined benefit dollar
limitation under Code Section 415(b)(1)(A)), or (ii) 25% of the
Participant's Compensation for the Limitation Year. If there
is a short Limitation Year because of a change in Limitation
Year, the Advisory Committee will multiply the $30,000 (or
adjusted) limitation by the following fraction:
Number of months in the short Limitation Year: 12
The 25% compensation limitation shall not apply to any
contribution for medical benefits (within the meaning of Code
Section 401(h) or 419A(f)(2) which is otherwise treated as an
annual addition under Code Section 415(l)(1) or 419A(d)(2).
(H) "DEFINED CONTRIBUTION PLAN" - A retirement plan which
provides for an individual account for each participant and
for benefits based solely on the amount contributed to the
participant's account, and any income, expenses, gains and
losses, and any forfeitures of accounts of other participants
which the plan may allocate to such participant's account. The
Advisory Committee must treat all defined contribution plans
(whether or not terminated) maintained by the Employer as a
single plan. Solely for purposes of the limitations of Part 2
of this Article III, the Advisory Committee will treat
employee contributions made to a defined benefit plan
maintained by the Employer as a separate defined contribution
plan. The Advisory Committee also will treat as a defined
contribution plan an individual medical account (as defined in
Code Section 415(1)(2)) included as part of a defined benefit
plan maintained by the Employer and, for taxable years ending
after December 31,1985, a welfare benefit fund under Code
Section 419(e) maintained by the Employer to the extent there
are post-retirement medical benefits allocated to the separate
account of a key employee (as defined in Code Section
419A(d)(3)).
(I) "DEFINED BENEFIT PLAN" - A retirement plan which does not
provide for individual accounts for Employer contributions.
The Advisory Committee must treat all defined benefit plans
(whether or not terminated) maintained by the Employer as a
single plan.
[Note: The definitions in paragraphs (j) and (k) apply only if
the limitation described in Section 3.17 applies to the
Employer's Plan.]
(J) "DEFINED BENEFIT PLAN FRACTION" -PROJECTED annual benefit of
the Participant under the defined benefit plan(s) The lesser of
(I) 125% of the dollar limitation determined under
Code Section 415 (b) and (d) for the Limitation Year,
or
(II) 140% of the Participant's average Compensation
for his high three (3) consecutive Years of Service
To determine the denominator of this fraction, the
Advisory Committee will make any adjustment required under
Code Section 415(b) and will determine a Year of Service,
unless otherwise provided in an addendum to Adoption Agreement
Section 3.06, as a Plan Year in which the Employee completed
at least 1,000 Hours of Service. The "projected annual
benefit" is the annual retirement benefit (adjusted to an
actuarially equivalent straight life annuity if the plan
expresses such benefit in a form other than a straight life
annuity or qualified joint and survivor annuity) of the
Participant under the terms of the defined benefit plan on the
assumptions he continues employment until his normal
retirement age (or current age, if later) as stated in the
defined benefit plan, his compensation continues at the same
rate as in effect in the Limitation Year under consideration
until the date of his normal retirement age and all other
relevant factors used to determine benefits under the defined
benefit plan remain constant as of the current Limitation Year
for all future Limitation Years.
CURRENT ACCRUED BENEFIT. If the Participant accrued benefits
in one or more defined benefit plans maintained by the
Employer which were in existence on May 6, 1986, the dollar
limitation used in the denominator of this fraction will not
be less than the Participant's Current Accrued Benefit. A
Participant's Current Accrued Benefit is the sum of the annual
benefits under such defined benefit plans which the
Participant had accrued as of the end of the 1986 Limitation
Year (the last Limitation Year beginning before January
1, 1987), determined without regard to any cost of living
adjustment occurring after May 5, 1986. This Current Accrued
Benefit rule applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements
of Code Section 415 as in effect at the end of the 1986
Limitation Year.
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<PAGE> 45
PLAN DOCUMENT
Notwithstanding the above, if the participant was a
participant as of the first day of the first limitation year
beginning after December 31, 1986, in one or more defined
benefit plans maintained by the employer which were in
existence on May 6, 1986, the denominator of this fraction
will not be less than 125 percent of the sum of the annual
benefits under such plans which the participant had accrued as
of the close of the last limitation year beginning before
January 1,1987, disregarding any changes in the terms and
conditions of the plan after May 5, 1986. The preceding
sentence applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements of
Section 415 for all limitation years beginning before January
1, 1987
(k) "DEFINED CONTRIBUTION PLAN FRACTION" - Section 5.5 Defined
contribution fraction: A fraction, the numerator of which is
the sum of the annual additions to the participant's account
under all the defined contribution plans (whether or not
terminated) maintained by the employer for the current and all
prior limitation years (including the annual additions
attributable to the participant's nondeductible employee
contributions to all defined benefit plans, whether or not
terminated, maintained by the employer, and the annual
additions attributable to all welfare benefit funds, as
defined in Section 419(e) of the Code, and individual medical
accounts, as defined in Section 415(1)(2) of the Code,
maintained by the employer), and the denominator of which is
the sum of the maximum aggregate amounts for the current and
all prior limitation years of service with the employer
(regardless of whether a defined contribution plan was
maintained by the employer). The maximum aggregate amount in
any limitation year is the lesser of 125 percent of the
dollar limitation determined under Sections 415(b) and (d) of
the Code in effect under Section 415(c)(1)(A) of the Code or
35 percent of the participant 's compensation for such year.
If the employee was a participant as of the end of the first
day of the first limitation year beginning after December 31,
1986, in one or more defined contribution plans maintained by
the employer which were in existence on May 6, 1986, the
numerator of this fraction will be adjusted if the sum of this
fraction and the defined benefit fraction would otherwise
exceed 1.0 under the terms of this plan. Under the adjustment,
an amount equal to the product of (l) the excess of the sum of
the fractions over 1.0 times (2) the denominator of this
fraction, will be permanently subtracted from the numerator of
this fraction. The adjustment is calculated using the
fractions as they would be computed as of the end of the last
limitation year beginning before January 1, 1987, and
disregarding any changes in the terms and conditions of the
plan made after May 5, 1986, but using the Section 415
limitation applicable to the first limitation year beginning
on or after January 1, 1987.
The annual addition for any limitation year beginning before
January 1, 1987, shall not be recomputed to treat all employee
contributions as annual additions.
The average compensation for the three consecutive years of
service with the employer that produces the highest average.
ARTICLE IV
PARTICIPANT CONTRIBUTIONS
4.01 "PARTICIPANT ON DEDUCTIBLE CONTRIBUTIONS"
This Plan does not permit Participant nondeductible contributions. If,
prior to the adoption of this Plan, the Plan accepted Participant
nondeductible contributions for a Plan Year beginning after December
31, 1986, those contributions must satisfy the requirements of Code
Section 401(m) and must be maintained in a separate account which
will be nonforfeitable at all times. This Section 4.01 does not
prohibit the Plan's acceptance of Participant nondeductible
contributions prior to the first Plan Year commencing after the Plan
Year in which the Employer adopts this Plan.
4.02 "PARTICIPANT DEDUCTIBLE CONTRIBUTIONS"
The Plan will not accept Participant deductible contributions which
are made for a taxable year beginning after December 31, 1986.
Contributions made prior to that date will be maintained in a separate
account which will be nonforfeitable at all times. The account will
share in the gains and losses of the trust in the same manner as
described in Section 9.10 of the Plan. No part of the deductible
voluntary contribution account will be used to purchase life
insurance. Subject to Article VI, joint and survivor annuity
requirements (if applicable), the participant may withdraw any part of
the deductible voluntary contribution account by making a written
application to the Advisory Committee.
4.03 "PARTICIPANT ROLLOVER CONTRIBUTIONS"
Any Participant, with the Employer's written consent and after filing
with the Employer the form prescribed by the Advisory Committee, may
contribute cash or other property to the Trust other than as a
voluntary contribution if the contribution is a "rollover
contribution" which the Code permits an employee to transfer either
directly or indirectly from one qualified plan to another qualified
plan. Before accepting a rollover contribution, the Trustee may
require an Employee to furnish satisfactory evidence that the proposed
transfer is in fact a "rollover contribution" which the Code permits
an employee to make to a qualified plan. A rollover contribution is
not an Annual Addition under Part 2 of Article III.
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<PAGE> 46
The Employer will invest the rollover contribution in a segregated
investment Account for the Participant's sole benefit unless the
Employer in its sole discretion, agrees to invest the rollover
contribution as part of the Trust Fund. The Employer will not have
any investment responsibility with respect to a Participant's
segregated rollover Account. The Participant, however, from time to
time, may direct the Employer in writing as to the investment of his
segregated rollover Account in shares of a Designated Investment
Company, annuity contract(s) or life insurance sold or distributed by
Kemper Financial Services, Inc. A Participant's segregated rollover
Account alone will bear any extraordinary expenses resulting from
investments made at the direction of the Participant. As of the
Accounting Date (or other valuation date) for each Plan Year, the
Advisory Committee will allocate and credit the net income (or net
loss) from a Participant's segregated rollover Account and the
increase or decrease in the fair market value of the assets of a
segregated rollover Account solely to that Account. The Employer is
not liable nor responsible for any loss resulting to any Beneficiary,
nor to any Participant, by reason of any sale or investment made or
other action taken pursuant to and in accordance with the direction of
the Participant. In all other respects, the Employer will administer
and distribute a rollover contribution in the same manner as any
Employer contribution made to the Trust.
An eligible Employee, prior to satisfying the Plan's eligibility
conditions, may make a rollover contribution to the Trust to the same
extent and in the same manner as a Participant. If an Employee makes a
rollover contribution to the Trust prior to satisfying the Plan's
eligibility conditions, the Advisory Committee and Trustee must treat
the Employee as a Participant for all purposes of the Plan except the
Employee is not a Participant for purposes of sharing in Employer
contributions under the Plan until he actually becomes a Participant
in the Plan. If the Employee has a Separation from Service prior to
becoming a Participant, the Trustee will distribute his rollover
contribution Account to him as if it were an Employer contribution
Account.
4.04 "PARTICIPANT CONTRIBUTION - FORFEITABILITY"
A Participant's Accrued Benefit is, at all times, 100% Nonforfeitable.
4.05 "PARTICIPANT CONTRIBUTION - WITHDRAWAL/DISTRIBUTION"
A Participant, by giving prior written notice to the Trustee, may
withdraw all or any part of the value of his Accrued Benefit derived
from his Participant contributions described in this Article IV. A
distribution of Participant contributions must comply with the joint
and survivor requirements described in Article VI, if those
requirements apply to the Participant. A Participant may not exercise
his right to withdrawn the value of his Accrued Benefit derived from
his Participant contributions more than once during any Plan Year. The
Trustee, in accordance with the direction of the Advisory Committee,
will distribute a Participant's unwithdrawn Accrued Benefit
attributable to his Participant contributions in accordance with the
provisions of Article VI applicable to the distribution of the
Participant's Nonforfeitable Accrued Benefit.
4.06 "PARTICIPANT CONTRIBUTION - ACCRUED BENEFIT"
The Advisory Committee must maintain, or must direct the Trustee to
maintain, a separate Account(s) in the name of each Participant to
reflect the Participant's Accrued Benefit under the Plan derived from
his Participant contributions. A Participant's Accrued Benefit derived
from his Participant contributions as of any applicable date is the
balance of his separate Participant contribution Account(s). A
separate account will be maintained by the trustee for the
nondeductible employee contribution of each participant.
ARTICLE V
TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 "NORMAL RETIREMENT AGE"
Normal Retirement Age is age 65.
5.02 "VESTING"
All contributions made by or on behalf of each participant, together
with all earnings thereon, shall immediately become, and at all times
shall remain, fully vested in such participant, and nonforfeitable.
The minimum allocation required (to the extent required to be
nonforfeitable under Section 416(b)) may not be forfeited under Code
Sections 411(a)(3)(B) or 411(a)(3)(D).
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PLAN DOCUMENT
ARTICLE VI
TIME AND METHOD OF PAYMENT OF BENEFITS
6.01 "TIME OF PAYMENT OF ACCRUED BENEFIT"
Unless, pursuant to Section 6.03, the Participant or the Beneficiary
elects in writing to a different time or method of payment, the
Advisory Committee will direct the Trustee to commence distribution of
a Participant's Nonforfeitable Accrued Benefit in accordance with this
Section 6.01. A Participant must consent, in writing, to any
distribution required under this Section 6.01 if the present value of
the Participant's Nonforfeitable Accrued Benefit, at the time of the
distribution to the Participant, exceeds $3,500 and the Participant
has not attained the later of Normal Retirement Age or age 62.
Furthermore, the Participant's spouse also must consent, in writing,
to any distribution, for which Section 6.04 requires the spouse's
consent. For all purposes of this Article VI, the term "annuity
starting date" means the first day of the first period for which the
Plan pays an amount as an annuity or in any other form. A distribution
date under this Article VI unless otherwise specified within the Plan,
is the 60th day of the Plan Year, or as soon as administratively
practicable following that distribution date. For purposes of the
consent requirements under this Article VI, if the present value of
the Participant's Nonforfeitable Accrued Benefit, at the time of any
distribution, exceeds $3,500, the Advisory Committee must treat that
present value as exceeding $3,500 for purposes of all subsequent Plan
distributions to the Participant.
If the value of a participant's vested account balance derived from
employer and employee contribution exceeds (or at the time of any
prior distribution exceeded) $3,500, and the account balance is
immediately distributable, the participant and the participant's
spouse (or where either the participant or the spouse has died, the
survivor) must consent to any distribution of such account balance.
The consent of the participant and the participant's spouse shall be
obtained in writing within the 90-day period ending on the annuity
starting date. The annuity starting date is the first day of the first
period for which an amount is paid an annuity or any other form. The
plan administrator shall notify the participant and the participant's
spouse of the right to defer any distribution until the participant's
account balance is no longer immediately distributable. Such
notification shall include a general description of the material
features, and explanation of the relative values of, the optional
forms of benefit available under the plan in a manner that would
satisfy the notice requirements of Code Section 417(a)(3), and shall be
provided no less than 30 days and no more than 90 days prior to the
annuity starting date. Notwithstanding the foregoing, only the
participant need consent to the commencement of a distribution in the
form of a qualified joint and survivor annuity while the account
balance is immediately distributable. (Furthermore, if payment in the
form of a qualified joint and survivor annuity is not required with
respect to the participant pursuant to Section 6.04(E) of the plan,
only the participant need consent to the distribution of an account
balance that is immediately distributable.) Neither the consent of the
participant nor the participant's spouse shall be required to the
extent that a distribution is required to satisfy Code Section
401(a)(9) or to the extent that a distribution is required to satisfy
Code Sections 401(a)(9) or 415. In addition, upon termination of this
plan, if the plan does not offer an annuity option (purchased from a
commercial provider) and if the employer or any entity within the same
controlled group as the employer does not maintain another defined
contribution plan (other than an employee stock ownership plan as
defined in section 4975(e)(7) of the Code), the participant's account
balance may, without the participant's consent, be distributed
to the participant. However, if any entity within the same controlled
group as the employer maintains another defined contribution plan
(other than an employee stock ownership plan as defined in section
4975(e)(7) of the Code) then the participant's account balance will be
transferred, without the participant's consent, to the other plan if
the participant does not consent to an immediate distribution.
Notwithstanding the foregoing, only the participant need consent to
the commencement of a distribution in the form of a qualified joint
and survivor annuity while the account balance is immediately
distributable. (Furthermore, if payment in the form of a qualified
joint and survivor annuity is not required with respect to the
participant pursuant to Section 6.04(E) of the plan, only the
participant need consent to the distribution for an account balance
that is immediately distributable). Neither the consent of the
participant nor the participant's spouse shall be required to the
extent that a distribution is required to satisfy Section 401(a)(9)
or Section 415 of the Code. In addition, upon termination of this
plan, if the plan does not offer an annuity option (purchased from a
commercial provider), the participant's account balance may, without
the participant's consent, be distributed to the participant or
transferred to another defined contribution plan (other than an
employee stock ownership plan as defined in Section 4975(e)(7) of the
Code) within the same controlled group.
An account balance is immediately distributable if any part of the
account balance could be distributed to the participant (or surviving
spouse) before the participant attains or would have attained if not
deceased the later of normal retirement age or age 62.
For purposes of determining the applicability of the foregoing consent
requirements to distributions made before the first day of the first
plan year beginning after December 31, 1988, the participant's vested
account balance shall not include amounts attributable to accumulated
deductible employee contributions within the meaning of Section
72(o)(5)(B) of the Code.
(A) SEPARATION FROM SERVICE FOR A REASON OTHER THAN DEATH. For a
Participant who separates from Service with the Employer for a
reason other than death, the Advisory Committee will direct
the Trustee to commence distribution of the Participant's
Accrued Benefit, as follows:
(1) PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT NOT
EXCEEDING $3,500. In a lump sum, on the 60th day
following the close of the Plan Year in which the
Participant's Separation from Service occurs.
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<PAGE> 48
(2) PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT EXCEEDS
$3,500. In a form and at the time elected by the
Participant, pursuant to Section 6.03. In the absence
of an election by the Participant, the Advisory
Committee will direct the Trustee to distribute the
Participant's Nonforfeitable Accrued Benefit in a
lump sum (or, if applicable, the normal annuity form
of distribution required under Section 6.04), on the
60th day following the close of the Plan Year in
which the latest of the following events occurs: (a)
the Participant attains Normal Retirement Age; (b)
the Participant attains age 62; or (c) the
Participant separates from Service. Notwithstanding
the foregoing, the failure of a participant and
spouse to consent to a distribution while a benefit
is immediately distributable shall be deemed to be an
election to defer commencement of payment of any
benefit sufficient to satisfy this section.
(3) DISABILITY. If the Participant terminates employment
because of disability, in lump sum, no later than the
60th day following the close of the Plan Year in
which the participant terminates employment because
of disability, subject to the requirements of this
Article VI and subject to the applicable mandatory
commencement dates described in Paragraphs (1) and
(2).
(B) REQUIRED BEGINNING DATE. If any distribution commencement date
described under Paragraph (A) of this Section 6.01, either by
Plan provision or by Participant election (or nonelection), is
later than the Participant's Required Beginning Date, the
Advisory Committee instead must direct the Trustee to make
distribution under this Section 6.01 on the Participant's
Required Beginning Date. A Participant's Required Beginning
Date is the April 1 following the close of the calendar year
in which the Participant attains age 70-1/2. However, if the
Participant, prior to incurring a Separation from Service,
attained age 70-1/2 by January 1, 1988, and, for the five Plan
Year period ending in the calendar year in which he attained
age 70-1/2 and for all subsequent years, the Participant was
not a more than 5% owner (as defined in Section 1.09(a)), the
Required Beginning Date is the April 1 following the close of
the calendar year in which the Participant separates from
Service, or, if earlier, the April 1 following the close of
the calendar year in which the Participant becomes a more than
5% owner. Furthermore, if a Participant attained age 70-1/2
during 1988 and did not incur a Separation from Service prior
to January 1,1989, his Required Beginning Date is April 1,
1990. A mandatory distribution at the Participant's Required
Beginning Date will be in lump sum (or, if applicable, the
normal annuity form of distribution required under Section
6.04) unless the Participant, pursuant to the provisions of
this Article VI, makes a valid election to receive an
alternative form of payment.
(1) GENERAL RULE. The required beginning date of a
participant is the first day of April of the calendar
year following the calendar year in which the
participant attains age 70-1/2.
(2) TRANSITIONAL RULES. The required beginning date of a
participant who attains age 70-1/2 before January
1, 1988, shall be determined in accordance with (a) or
(b) below:
(A) NON-FIVE PERCENT OWNERS. The required
beginning date of a participant who is not a
five-percent owner is the first day of April
of the calendar year following the calendar
year in which the later of retirement or
attainment of age 70-1/2 occurs.
(B) FIVE-PERCENT OWNERS. The required beginning
date of a participant who is a five-percent
owner during any year beginning after
December 31, 1979, is the first day of April
following the later of:
(i) the calendar year in which the
participant attains age 70-1/2, or
(ii) the earlier of the calendar year
with or within which ends the plan
year in which the participant
becomes a five-percent owner, or the
calendar year in which the
participant retires.
The required beginning date of a participant who is not a
five-percent owner who attains age 70-1/2 during 1988 and who
has not retired as of January 1, 1989, is April 1, 1990.
(3) FIVE-PERCENT OWNER. A participant is treated as a
five-percent owner for purposes of this section if
such participant is a five-percent owner as defined
in Section 416(i) of the Code (determined in
accordance with Section 416 but without regard to
whether the plan is top-heavy) at any time during
the plan year ending with or within the calendar
year in which such owner attains age 66-1/2 or any
subsequent plan year.
(4) Once distributions have begun to a five-percent owner
under this section, they must continue to be
distributed, even if the participant ceases to be a
five-percent owner in a subsequent year.
(C) DEATH OF THE PARTICIPANT. The Advisory Committee will direct
the Trustee, in accordance with this Section 6.01(C), to
distribute to the Participant's Beneficiary the Participant's
Nonforfeitable Accrued Benefit remaining in the Trust at the
time of the Participant's death.
(1) DECEASED PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT
DOES NOT EXCEED $3,500. The Advisory Committee,
subject to the requirements of Section 6.04, must
direct the Trustee to pay the deceased Participant's
Nonforfeitable Accrued Benefit in a single cash sum,
as soon as administratively practicable following the
Participant's death or, if later, the date on which
the Advisory Committee receives notification of or
otherwise confirms the Participant's death.
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<PAGE> 49
PLAN DOCUMENT
(2) DECEASED PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT EXCEED
$3,500. The Advisory Committee will direct the Trustee to pay
the deceased Participant's Nonforfeitable Accrued Benefit at
the time and in the form elected by the Participant or, if
applicable by the Beneficiary, as permitted under this Article
VI. In the absence of an election, subject to the requirements
of Section 6.04, the Advisory Committee will direct the
Trustee to distribute the Participant's undistributed
Nonforfeitable Accrued Benefit in a lump sum on the first
distribution date following the close of the Plan Year in
which the Participant's death occurs or, if later, the first
distribution date following the date the Advisory Committee
receives notification of or otherwise confirms the
Participant's death.
If the death benefit is payable to the Participant's surviving
spouse in full, the surviving spouse, in addition to the
distribution options provided in this Section 6.01(C), may
elect distribution at any time or in any form (other than a
joint and survivor annuity) this Article VI would permit for a
Participant.
Subject to Article VI Joint and Survivor Annuity Requirements,
the requirements of this Article shall apply to any
distribution of a participant's interest and will take
precedence over any inconsistent provisions of this plan.
Unless otherwise specified, the provisions of this Article
apply to the calendar year beginning after December 31, 1984.
All distributions required under this Article shall be
determined and made in accordance with the proposed
regulations under Section 401(a)(9), including the minimum
distribution incidental benefit requirement of Section
1.401(a)(9)-2 of the proposed regulations.
6.02 "METHOD OF PAYMENT OF ACCRUED BENEFIT"
Subject to the annuity distribution requirements, if any, prescribed
by Section 6.04, and any restrictions prescribed by Section 6.03, a
Participant or Beneficiary may elect distribution under one, or any
combination, of the following methods: (a) by payment in a lump sum;
or (b) by payment in monthly, quarterly or annual installments over a
fixed reasonable period of time, not exceeding the life or life
expectancy of the Participant, or the joint and last survivor life or
life expectancy of the Participant and an individual the Participant
designates as his Beneficiary (his "designated Beneficiary").
The distribution options permitted under this Section 6.02 are
available only if the present value of the Participant Nonforfeitable
Accrued Benefit, at the time of the distribution to the Participant,
exceeds $3,500. To facilitate installment payments under this Article
VI, the Advisory Committee may direct the Trustee to segregate all or
any part of the Participant's Accrued Benefit in a separate Account.
The Trustee will invest the Participant's segregated Account in
Federally insured interest bearing savings account(s) or time
deposit(s) (or a combination of both), or in other fixed income
investments. A segregated Account remains a part of the Trust, but it
alone shares in any income it earns, and it alone bears any expense or
loss it incurs. A Participant or Beneficiary may elect to receive an
installment distribution in the form of a Nontransferable Annuity
Contract. Under an installment distribution, the Participant or
Beneficiary, at any time, may elect to accelerate the payment of all,
or any portion, of the Participant's unpaid Nonforfeitable Accrued
Benefit, subject to the requirements of Section 6.04.
(A) MINIMUM DISTRIBUTION REQUIREMENTS FOR PARTICIPANTS.
The Advisory Committee may not direct the Trustee to
distribute the Participant's Nonforfeitable Accrued Benefit,
nor may the Participant elect to have the Trustee distribute
his Nonforfeitable Accrued Benefit, under a method of
payment which, as of the Required Beginning Date, does not
satisfy the minimum distribution requirements under Code
Section 401(a)(9) and the applicable Treasury regulations. The
minimum distribution for a calendar year equals the
Participant's Nonforfeitable Accrued Benefit as of the latest
valuation date preceding the beginning of the calendar year
divided by the Participant's life expectancy or, if
applicable, the joint and last survivor expectancy of the
Participant and his designated Beneficiary (as determined
under Section 8.01, subject to the requirements of the Code
Section 401(a)(9) regulations). The Advisory Committee will
increase the Participant's Nonforfeitable Accrued Benefit, as
determined on the relevant valuation date, for contributions
allocated after the valuation date and by December 31 of the
valuation calendar year, and will decrease the valuation by
distributions made after the valuation date and by December 31
of the valuation calendar year. For purposes of this
valuation, the Advisory Committee will treat any portion of
the minimum distribution for the first distribution calendar
year made after the close of that year as a distribution
occurring in that first distribution calendar year. In
computing a minimum distribution the Advisory Committee must
use the unisex life expectancy multiples under Treas. Reg.
Section 1.72-9. The Advisory Committee, only upon the
participant's written request, will not compute the minimum
distribution for a calendar year subsequent to the first
calendar year for which the Plan requires a minimum
distribution by redetermining the applicable life expectancy.
Otherwise, the Advisory Committee will redetermine the joint
life and last survivor expectancy of the Participant and a
nonspouse designated Beneficiary in a manner which takes into
account any adjustment to a life expectancy other than the
Participant's life expectancy.
If the Participant's spouse is not his designated Beneficiary,
a method of payment to the Participant (whether by Participant
election or by Advisory Committee direction) may not provide
more than incidental benefits to the Beneficiary. For Plan
Year beginning after December 31, 1988, the Plan must satisfy
the minimum distribution incidental benefit ("MDIB")
requirement in the Treasury regulations issued under Code
Section 401(a)(9) for distributions made on or after the
Participant's Required Beginning Date and before the
Participant's death. To satisfy the MDIB requirement, the
Advisory Committee will compute the minimum distribution
required by this Section 6.02(A) by substituting the
applicable MDIB divisor for the applicable life expectancy
factor, if the MDIB divisor is a lesser number. Following the
Participant's death, the Advisory Committee will compute the
minimum distribution required by this Section 6.02(A) solely
on the basis of the applicable life expectancy factor and will
disregard the MDIB factor.
15
<PAGE> 50
For Plan Years beginning prior to January l, 1989, the Plan
satisfies the incidental benefits requirement if the
distributions to the Participant satisfied the MDIB
requirement or if the present value of the retirement benefits
payable solely to the Participant is greater than 50% of the
present value of the total benefits payable to the Participant
and his Beneficiaries. The Advisory Committee must determine
whether benefits to the Beneficiary are incidental as of the
date the Trustee is to commence payment of the retirement
benefits to the Participant, or as of any date the Trustee
redetermines the payment period to the Participant.
The minimum distribution for the first distribution calendar
year is due by the Participant's Required Beginning Date. The
minimum distribution for each subsequent distribution calendar
year, including the calendar year in which the Participant's
Required Beginning Date falls, is due by December 31 of that
year. If the Participant receives distribution in the form of
a Nontransferable Annuity Contract, the distribution satisfies
this Section 6.02(A) if the contract complies with the
requirements of Code Section 401(a)(9) and the applicable
Treasury regulations.
(B) MINIMUM DISTRIBUTION REQUIREMENTS FOR BENEFICIARIES.
If any portion of the Participant's interest is payable to a
designated beneficiary, method of distribution to the
Participant's Beneficiary must satisfy Code Section 401(a)(9)
and the applicable Treasury regulations. If the Participant's
death occurs after his Required Beginning Date or, if earlier,
the date the Participant commences an irrevocable annuity
pursuant to Section 6.04, the method of payment to the
Beneficiary must provide for completion of payment over a
period which does not exceed the payment period which had
commenced for the Participant. If the Participant's death
occurs prior to his Required Beginning Date, and the
Participant had not commenced an irrevocable annuity pursuant
to section 6.04, the method of payment to the Beneficiary,
subject to Section 6.04, must provide for completion of
payment to the Beneficiary over a period not exceeding (i) by
December 31 of the calendar year containing the fifth
anniversary of the Participant's; or (ii) if the Beneficiary
is a designated Beneficiary, the designated Beneficiary's life
expectancy. The Advisory Committee may not direct payment of
the Participant's Nonforfeitable Accrued Benefit over a period
described in clause (ii) unless the Trustee will commence
payment to the designated Beneficiary no later than the
December 31 following the close of the calendar year in which
the Participant's death occurred or, if later, and the
designated Beneficiary is the Participant's surviving spouse,
December 31 of the calendar year in which the Participant
would have attained age 70-1/2. If the Trustee will make
distribution in accordance with clause (ii), the minimum
distribution for a calendar year equals the Participant's
Nonforfeitable Accrued Benefit as of the latest valuation date
preceding the beginning of the calendar year divided by the
designated Beneficiary's life expectancy. The Advisory
Committee must use the unisex life expectancy multiples under
Treas. Section Reg. 1.72-9 for purposes of applying this
paragraph. The Advisory Committee, only upon the written
request of the Participant or of the Participant's surviving
spouse, may recalculate the life expectancy of the
Participant's surviving spouse no more frequently than
annually, but may not recalculate the life expectancy of a
nonspouse designated Beneficiary after the Trustee commences
payment to the designated Beneficiary. The Advisory Committee
will apply this paragraph by treating any amount paid to the
Participant's child, which becomes payable to the
Participant's surviving spouse upon the child's attaining the
age of majority, as paid to the Participant' surviving spouse.
Upon the Beneficiary's written request, the Advisory Committee
must direct the Trustee to accelerate payment of all, or any
portion, of the Participant's unpaid Accrued Benefit, as soon
as administratively practicable following the effective date
of that request.
If the participant has not made an election pursuant to this
Section 6.02 by the time of his or her death, the
participant's designated beneficiary must elect the method of
distribution no later than the earlier of (1) December 31 of
the calendar year in which distributions would be required to
begin under this Section, or (2) December 31 of the calendar
year which contains the fifth anniversary of the date of death
of the participant. If the participant has no designated
beneficiary, or if the designated beneficiary does not elect a
method of distribution, distribution of the participant's
entire interest must be completed by December 31 of the
calendar year containing the fifth anniversary of the
participant's death.
For purposes of this Section 6.02, if the surviving spouse
dies after the participant, but before payments to such spouse
begin, the provisions of this Section 6.02, with the exception
of paragraph (b) therein, shall be applied as if the surviving
spouse were the participant.
For the purposes of this Section 6.02, distribution of a
participant's interest is considered to begin on the
Participant's required beginning date (or the date
distribution is required to begin to the surviving spouse). If
distribution in the form of an annuity irrevocably commences
to the Participant before the required beginning date, the
date distribution is considered to begin is the date
distribution actually commences.
APPLICABLE LIFE EXPECTANCY. The life expectancy (or joint and
last survivor expectancy) calculated using the attained age of
the Participant (or designated Beneficiary as of the
Participant's (or designated Beneficiary's) birthday in the
applicable calendar year reduced by one for each calendar year
which has elapsed since the date life expectancy was first
calculated. If life expectancy is being recalculated, the
applicable life expectancy shall be the life expectancy as so
recalculated. The applicable calendar year shall be the first
distribution calendar year, and if life expectancy is being
recalculated such succeeding calendar year.
16
<PAGE> 51
PLAN DOCUMENT
DISTRIBUTION CALENDAR YEAR. A calendar year for which a
minimum distribution is required. For distributions beginning
before the participant's death, the first distribution
calendar year is the calendar year immediately preceding the
calendar year which contains the participant's required
beginning date. For distributions beginning after the
participant's death, the first distribution calendar year is
the calendar year in which distributions are required to begin
pursuant to this Section 6.02 above.
6.03 "BENEFIT PAYMENT ELECTIONS"
Not earlier than 90 days before nor later than 30 days before the
Participant's annuity starting date, the Plan Administrator must
provide a benefit notice to a Participant who is eligible to make an
election under this Section 6.03. The benefit notice must explain the
optional forms of benefit in the Plan, including the material features
and relative values of those options, and the Participant's right to
defer distribution until he attains the later of Normal Retirement Age
or age 62.
If a Participant or Beneficiary makes an election prescribed by this
Section 6.03, the Advisory Committee will direct the Trustee to
distribute the Participant's Nonforfeitable Accrued Benefit in
accordance with that election. Any election under this Section 6.03 is
subject to the requirements of Section 6.02 and of Section 6.04. The
Participant or Beneficiary must make an election under this Section
6.03 by filing his election with the Advisory Committee at any time
before the Trustee otherwise would commence to pay a Participant's
Accrued Benefit in accordance with the requirements of Article VI.
(A) PARTICIPANT ELECTIONS AFTER SEPARATE FROM SERVICE. If the
present value of a Participant's Nonforfeitable Accrued
Benefit exceeds $3,500, he may elect to have the Trustee
commence distribution as of any distribution date, but not
earlier than the first distribution date of the first Plan
Year following the Participant's separation from service. The
Participant may reconsider an election at any time prior to
the annuity starting date and elect to commence distribution
as of any other distribution date. A Participant who has not
separated from Service may elect distribution as of any
distribution date following his attainment of Normal
Retirement Age.
(B) PARTICIPANT ELECTIONS PRIOR TO TERMINATION OF EMPLOYMENT. No
distribution options are permitted prior to a Participant's
Separation of Service.
(C) DEATH BENEFIT ELECTIONS. If the present value of the deceased
Participant's Nonforfeitable Accrued Benefit exceeds $3,500,
the Participant's Beneficiary may elect to have the Trustee
distribute the Participant's Nonforfeitable Accrued Benefit in
a form and within a period permitted under Section 6.02. The
Beneficiary's election is subject to any restrictions
designated in writing by the Participant and not revoked as of
his date of death.
(D) TRANSITIONAL ELECTIONS. Notwithstanding the provisions of
Section 6.01 and 6.02, if the Participant (or Beneficiary)
signed a written distribution designation prior to January 1,
1984, the Advisory Committee must distribute the Participant's
Nonforfeitable Accrued Benefit in accordance with that
designation, subject however, to the requirements, if
applicable, of Sections 6.04, 6.05 and 6.06. This Section
6.03(D) does not apply to a pre-1984 distribution designation,
and the Advisory Committee will not comply with that
designation, if any of the following applies: (1) the method
of distribution would have disqualified the Plan under Code
Section 401(a)(9) as in effect on December 31, 1983; (2) the
Participant did not have an Accrued Benefit as of December
31, 1983; (3) the distribution designation does not specify the
timing and form of the distribution and the death
Beneficiaries (in order of priority); (4) the substitution of
a Beneficiary modifies the payment period of the distribution;
or, (5) the Participant (or Beneficiary) modifies or revokes
the distribution designation. In the event of a revocation,
the Plan must distribute, no later than December 31 of the
calendar year following the year of revocation, the amount
which the Participant would have received under Section
6.02(A) if the election had not been in effect or, if the
Beneficiary revokes the election, the amount which the
Beneficiary would have received under Section 6.02(B) if the
election had not been in effect. The Advisory Committee will
apply this Section 6.03(D) to rollovers and transfers in
accordance with Part J of the Code Section 401(a)(9)
regulations.
6.04 "ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES"
(A) JOINT AND SURVIVOR ANNUITY. The Advisory Committee must direct
the Trustee to distribute a married or unmarried Participant's
Nonforfeitable Accrued Benefit in the form of a qualified
joint and survivor annuity, unless the Participant makes a
valid waiver election (described in Section 6.05) within the
90 day period ending on the annuity starting date. The
participant may elect to have such annuity distributed upon
attainment of the earliest retirement age under the plan. The
earliest retirement age is the earliest date on which, under
the plan, the participant could elect to receive retirement
benefits. If, as of the annuity starting date, the participant
is married, a qualified joint and survivor annuity is an
immediate annuity which is purchasable with the Participant's
Nonforfeitable Accrued Benefit and which provides a life
annuity for the Participant and a survivor annuity payable for
the remaining life of the Participant's surviving spouse equal
to not less than 50% and not more than 100% of the amount of
the annuity payable during the life of the Participant. If, as
of the annuity starting date, the Participant is not married,
a qualified joint and survivor annuity is an immediate life
annuity for the Participant which is purchasable with the
Participant's Nonforfeitable Accrued Benefit. On or before the
annuity starting date, the Advisory Committee, without
Participant or spousal consent, must direct the Trustee to pay
the Participant's Nonforfeitable Accrued Benefit in a lump
sum, in lieu of a qualified joint and survivor annuity, in
accordance with Section 6.01, if the Participant's
Nonforfeitable Accrued Benefit is not greater than $3,500.
This Section 6.04(A) applies only to a Participant who has
completed at least one Hour of Service with the Employer after
August 23, 1984.
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(B) PRE-RETIREMENT SURVIVOR ANNUITY. If a married Participant dies
prior to his annuity starting date, the Advisory Committee
will direct the Trustee to distribute a portion of the
Participant's Nonforfeitable Accrued Benefit to the
Participant's surviving spouse in the form of a pre-retirement
survivor annuity, unless the Participant has a valid waiver
election (as described in Section 6.06) in effect within the
election period, or unless the Participant and his spouse were
not married throughout the one year period ending on the date
of his death. The surviving spouse may elect to have such
annuity distributed within a reasonable period after the
participant's death. The period which begins on the first day
of the plan year in which the participant attains age 35 and
ends on the date of the participant's death. If a participant
separates from service prior to the first day of the plan
year in which age 35 is attained, with respect to the account
balance as of the date of separation, the election period
shall begin on the date of separation. A pre-retirement
survivor annuity is an annuity which is purchasable with 50%
of the Participant's Nonforfeitable Accrued Benefit
(determined as of the date of the Participant's death) and
which is payable for the life of the Participant's surviving
spouse. The value of the pre-retirement survivor annuity is
attributable to Employer contributions and to Employee
contributions in the same proportion as the Participant's
Nonforfeitable Accrued Benefit is attributable to those
contributions. If the present value of the pre-retirement
survivor annuity does not exceed $3,500, the Advisory
Committee, on or before the annuity starting date (as
determined under Section 6.01(C)), must direct the Trustee to
make a lump sum distribution to the Participant's surviving
spouse, in lieu of a pre-retirement survivor annuity. This
Section 6.04(B) applies only to a Participant who dies after
August 22, 1984, and either (i) completes at least one Hour of
Service with the Employer after August 22, 1984, or (ii)
separated from Service with at least 10 Years of Service (as
defined in Section 5.06) and completed at least one Hour of
Service with the Employer in a Plan Year beginning after
December 31, 1975.
(C) SURVIVING SPOUSE ELECTIONS. If the present value of the
pre-retirement survivor annuity exceeds $3,500, the
Participant's surviving spouse may elect to have the Trustee
commence payment of the pre-retirement survivor annuity at any
time following the date of the Participant's death, but not
later than the mandatory distribution periods described in
Section 6.02, and may elect either or any combination of the
two forms of payment described in Section 6.02, in lieu of the
pre-retirement survivor annuity. In the absence of an election
by the surviving spouse, the Advisory Committee must direct
the Trustee to distribute the pre-retirement survivor annuity
on the first distribution date following the close of the Plan
Year in which the latest of the following events occurs (i)
the Participant's death; (ii) the date the Advisory Committee
receives notification of or otherwise confirms the
Participant's death; (iii) the date the Participant would have
attained Normal Retirement Age; or (iv) the date the
Participant would have attained age 62.
(D) SPECIAL RULES. If the Participant has in effect a valid waiver
election regarding the qualified joint and survivor annuity or
the pre-retirement survivor annuity, the Advisory Committee
must direct the Trustee to distribute the Participant's
Nonforfeitable Accrued Benefit in accordance with Sections
6.01, 6.02 and 6.03. For purposes of applying this Article VI,
the Advisory Committee treats a former spouse as the
Participant's spouse or surviving spouse, and a current spouse
will not be treated as the spouse or surviving spouse, to the
extent provided under a qualified domestic relations order
described in Section 6.07. The provisions of this Section
6.04, and of Sections 6.05 and 6.06, apply separately to the
portion of the Participant's Nonforfeitable Accrued Benefit
subject to the qualified domestic relations order and to the
portion of the Participant's Nonforfeitable Accrued Benefit
not subject to that order. The spouse (surviving spouse) is
the spouse or surviving spouse of the participant, provided
that a former spouse will be treated as the spouse or
surviving spouse and a current spouse will not be treated as
the spouse or surviving spouse to the extent provided under a
qualified domestic relations order as described in Section
414(p) of the Code.
(E) PROFIT SHARING PLAN EXCEPTION. If the Plan is a profit sharing
plan, the preceding provisions of this Section 6.04 do not
apply to any Participant in the Plan except: (1) a Participant
as respects whom the Plan is a direct or indirect transferee
from a plan subject to the Code Section 417 requirements and
the Plan received the transfer after December 31, 1984, unless
the transfer is an elective transfer described in Section
12.06; (2) a Participant who elects a life annuity
distribution (if Section 12.02 of the Plan requires the Plan
to provide a life annuity distribution option); and (3) a
Participant whose benefits under a defined benefit plan
maintained by the Employer are offset by benefits provided
under this Plan. Sections 6.05 and 6.06 only apply to
Participants to whom the preceding provisions of this Section
6.04 apply.
This Section shall apply to a participant in a profit-sharing
plan, and to any distribution, made on or after the first day
of the first plan year beginning after December 31, 1988, from
or under a separate account attributable solely to accumulated
deductible employee contributions, as defined in Section
72(o)(5)(B) of the Code, and maintained on behalf of a
participant in a money purchase pension plan (including a
target benefit plan), if the following conditions are
satisfied: (1) the participant does not or cannot elect
payments in the form of a life annuity; and (2) on the death
of a participant, the participant's vested account balance
will be paid to the participant's surviving spouse, but if
there is no surviving spouse, or if the surviving spouse has
consented in a manner conforming to a qualified election, then
to the participant's designated beneficiary. The surviving
spouse may elect to have distribution of the vested account
balance commence within the 90-day period following the date
of the participant's death. The account balance shall be
adjusted for gains or losses occurring after the participant's
death in accordance with the provision of the plan governing
the adjustment of account balances for other types of
distributions. This section Section 6.04(E) shall not be
operative with respect to a participant in a profit-sharing
plan if the plan is a direct or indirect transferee of a
defined benefit plan, money purchase plan, a target benefit
plan, stock bonus, or profit-sharing plan which is subject to
the survivor annuity requirements of Section 401(a)(11) and
Section 417. If this Section 6.04(E) is operative, then the
provisions of this Article, other than this Section 6.04,
shall be inoperative.
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The participant may waive the spousal death benefit described in this
Section at any time provided that no such waiver shall be effective
unless it satisfies the conditions of Section 6.05 (other than the
notification requirement referred to therein) that would apply to the
participant's waiver of the qualified pre-retirement survivor annuity.
For purposes of this Section 6.04(E), vested account balance shall
mean, in the case of a money purchase pension plan or a target benefit
plan, the participant's separate account balance attributable solely
to accumulated deductible employee contributions within the meaning of
Section 72(o)(5)(B) of the Code. In the case of a profit-sharing plan,
vested account balance shall have the same meaning as Nonforfeitable
Accrued Benefit.
6.05 "WAIVER ELECTION - QUALIFIED JOINT AND SURVIVOR ANNUITY"
Not earlier than 90 days before nor later than 30 days before the
Participant's annuity starting date, the Plan Administrator must
provide the Participant a written explanation of the terms and
conditions of the qualified joint and survivor annuity, the
Participant's right to make, and the effect of, an election to waive
the joint and survivor form of benefit, the rights of the
Participant's spouse regarding the waiver election and the
Participant's right to make, and the effect of, a revocation of a
waiver election. The Plan does not limit the number of times the
Participant may revoke a waiver of the qualified joint and survivor
annuity or make a new waiver during the election period.
A married Participant's waiver election is not valid unless (a) the
Participant's spouse (to whom the survivor annuity is payable under
the qualified joint and survivor annuity) has consented in writing to
the waiver election, the spouse's consent acknowledges the effect of
the election, and a notary public or the Plan Administrator (or his
representative) witnesses the spouse's consent, (b) the election
designates a specific beneficiary, including any class of
beneficiaries or any contingent beneficiaries, which may not be
changed without spousal consent (or the spouse expressly permits
designations by the participant without any further spousal consent;
(c) the spouse consents to the alternate form of payment designated by
the Participant or to any change in that designated form of payment,
and (d) unless the spouse is the Participant's sole primary
Beneficiary, the spouse consents to the Participant's Beneficiary
designation or to any change in the Participant's Beneficiary
designation. The spouse's consent to a waiver of the qualified joint
and survivor annuity is irrevocable, unless the Participant revokes
the waiver election. The spouse may execute a blanket consent to any
form of payment designation or to any Beneficiary designation made by
the Participant, if the spouse acknowledges the right to limit that
consent to a specific designation but, in writing, waives that right.
The consent requirements of this Section 6.05 apply to a former spouse
of the Participant, to the extent required under a qualified domestic
relations order described in Section 6.07. A revocation of a prior
waiver may be made by a participant without the consent of the spouse
at any time before the commencement of benefits. The number of
revocations shall not be limited. No consent obtained under this
provision shall be valid unless the participant has received notice as
provided in this Section 6.05.
The Plan Administrator will accept as valid a waiver election which
does not satisfy the spousal consent requirements if the Plan
Administrator establishes the Participant does not have a spouse, the
Plan Administrator is not able to locate the Participant's spouse, the
Participant is legally separated or has been abandoned (within the
meaning of State law) and the Participant has a court order to that
effect, or other circumstances exist under which the Secretary of the
Treasury will excuse the consent requirement. If the Participant's
spouse is legally incompetent to give consent, the spouse's legal
guardian (even if the guardian is the Participant) may give consent.
Any consent obtained from a spouse shall be effective only with
respect to such spouse.
6.06 "WAIVER ELECTION - PRE-RETIREMENT SURVIVOR ANNUITY"
The Plan Administrator must provide a written explanation of the
pre-retirement survivor annuity to each married Participant, within
the following period which ends last: (1) the period beginning on the
first day of the Plan Year in which the Participant attains age 32 and
ending on the last day of the Plan Year in which the Participant
attains age 35; (2) a reasonable period ending after an Employee
becomes a Participant; (3) a reasonable period ending after the joint
and survivor rules become applicable to the Participant; or (4) a
reasonable period ending after a fully subsidized pre-retirement
survivor annuity no longer satisfies the requirements for a fully
subsidized benefit. A reasonable period described in clauses (2), (3)
and (4) is the two-year period beginning one year before and ending
one year after the applicable event. If the Participant separates from
Service before attaining age 35, clauses (1), (2), (3) and (4) do not
apply and the Plan Administrator must provide the written explanation
within the two-year period beginning one year before and ending one
year after the Separation from Service. The written explanation must
describe, in a manner consistent with Treasury regulations, the terms
and conditions of the pre-retirement survivor annuity comparable to
the explanation of the qualified joint and survivor annuity required
under Section 6.05. The Plan does not limit the number of times the
Participant may revoke a waiver of the pre-retirement survivor annuity
or make a new waiver during the election period.
A Participant's waiver election of the pre-retirement survivor annuity
is not valid unless (a) the Participant makes the waiver election no
earlier than the first day of the Plan Year in which he attains age 35
and (b) the Participant's spouse (to whom the pre-retirement survivor
annuity is payable) satisfies the consent requirements described in
Section 6.05, except the spouse need not consent to the form of
benefit payable to the designated Beneficiary. The spouse's consent to
the waiver of the pre-retirement survivor annuity is irrevocable,
unless the Participant revokes the waiver election. Irrespective of
the time of election requirement described in clause (a), if the
Participant separates from Service prior to the first day of the Plan
Year in which he attains age 35, the Plan Administrator will accept a
waiver election as respects the Participant's Accrued Benefit
attributable to his Service prior to his Separation from Service. If
the participant thereafter returns to employment with the employer,
the applicable period for such participant shall be redetermined.
Pre-age 35
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<PAGE> 54
waiver: A participant who will not yet attain age 35 as of the end of
any current Plan Year may make a special qualified election to waive
the qualified pre-retirement survivor annuity for the period beginning
on the date of such election and ending on the first day of the Plan
Year in which the participant will attain age 35. Such election shall
not be valid unless the participant receives a written explanation of
the qualified pre-retirement survivor annuity in such terms as are
comparable to the explanation required under Section 6.05. Qualified
pre-retirement survivor annuity coverage will be automatically
reinstated as of the first day of the Plan Year in which the
participant attains age 35. Any new waiver on or after such date shall
be subject to the full requirements of this Article.
Notwithstanding the other requirements of this Section 6.06, the
respective notices prescribed by this Section need not be given to a
participant if (1) the plan "fully subsidizes" the costs of a
qualified joint and survivor annuity or qualified pre-retirement
survivor annuity, and (2) the plan does not allow the participant to
waive the qualified joint and survivor annuity or qualified
pre-retirement survivor annuity and does not allow a married
participant to designate a nonspouse beneficiary. For purposes of this
Section 6.06, a plan fully subsidizes the costs of a benefit if no
increase in cost, or decrease in benefits to the participant may
result from the participant's failure to elect another benefit. Any
consent obtained from a spouse shall be effective only with respect to
such spouse.
6.07 "DISTRIBUTIONS UNDER DOMESTIC RELATIONS ORDERS"
Nothing contained in this Plan prevents the Trustee, in accordance
with the direction of the Advisory Committee, from complying with the
provisions of a qualified domestic relations order (as defined in Code
Section 414(p)). This Plan specifically permits distribution to an
alternate payee under a qualified domestic relations order at any time,
irrespective of whether the Participant has attained his earliest
retirement age (as defined under Code Section 414(p)) under the Plan.
A distribution to an alternate payee prior to the Participant's
attainment of earliest retirement age is available only if: (l) the
order specifies distribution at that time or permits an agreement
between the Plan and the alternate payee to authorize an earlier
distribution; and (2) if the present value of the alternate payee's
benefits under the Plan exceeds $3,500, and if the order requires, the
alternate payee consents to any distribution occurring prior to the
Participant's attainment of earliest retirement age. Nothing in this
Section 6.07 permits a Participant a right to receive distribution at
a time otherwise not permitted under the Plan nor does it permit the
alternate payee to receive a form of payment not permitted under the
Plan.
The Plan Administrator must establish reasonable procedures to
determine the qualified status of a domestic relations order. Upon
receiving a domestic relations order, the Plan Administrator promptly
will notify the Participant and any alternate payee named in the
order, in writing, of the receipt of the order and the Plan's
procedures for determining the qualified status of the order. Within a
reasonable period of time after receiving the domestic relations
order, the Plan Administrator must determine the qualified status of
the order and must notify the Participant and each alternate payee, in
writing, of its determination. The Plan Administrator must provide
notice under this paragraph by mailing to the individual's address
specified in the domestic relations order, or in a manner consistent
with Department of Labor regulations.
If any portion of the Participant's Nonforfeitable Accrued Benefit is
payable during the period the Plan Administrator is making its
determination of the qualified status of the domestic relations order,
the Advisory Committee must make a separate accounting of the amounts
payable. If the Plan Administrator determines the order is a qualified
domestic relations order within 18 months of the date amounts first
are payable following receipt of the order, the Advisory Committee
will direct the Trustee to distribute the payable amounts in
accordance with the order. If the Plan Administrator does not make its
determination of the qualified status of the order within the 18-month
determination period, the Advisory Committee will direct the Trustee
to distribute the payable amounts in the manner the Plan would
distribute if the order did not exist and will apply the order
prospectively if the Plan Administrator later determines the order is
a qualified domestic relations order.
To the extent it is not inconsistent with the provisions of the
qualified domestic relations order, the Advisory Committee may direct
the Trustee to invest any partitioned amount in a segregated
subaccount or separate account and to invest the account in Federally
insured, interest-bearing savings account(s) or time deposit(s) (or a
combination of both), or in other fixed income investments. A
segregated subaccount remains a part of the Trust, but it alone shares
in any income it earns, and it alone bears any expense or loss it
incurs. The Trustee will make any payments or distributions required
under this Section 6.07 by separate benefit checks of other separate
distribution to the alternate payee(s).
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<PAGE> 55
PLAN DOCUMENT
ARTICLE VII
TRUSTEE, POWERS AND DUTIES
7.01 "INVESTMENT OF TRUST ASSETS"
The Trustee shall accept and hold in the Trust such contributions of
money on behalf of the Employer and Participants as it may receive
from time to time, but not more frequently than once each month, from
the Employer. All such contributions of money shall be accompanied by
written instructions from the Employer specifying the Participants'
sub-accounts to which they are to be credited, the amount to be
invested in and the choice of Designated Investment Company stock, and
by furnishing such instructions the Employer represents to the Trustee
that the same are in accordance with any uniform rules adopted by the
Employer and made known to Participants. If written instructions are
not received, or if received, are in the opinion of the Trustee
unclear, the Trustee may hold all or a portion of the contributions in
cash without liability for rising security prices or distributions,
pending receipt of written instructions or clarification. A
Participant, through his Employer, may request an exchange of all or
part of the investment company shares held hereunder for any other
investment company shares eligible for purchase under the Plan, upon
terms and conditions and within the limitations imposed by the then
current prospectuses of the respective investment companies.
Investment in shares of the Designated Investment Company shall be
made at the price and in the manner in which such shares are then
being publicly offered by such investment company. All dividends and
capital gain distributions received on such shares shall be reinvested
in such shares. If any distribution on shares of the fund may be
received at the election of the shareholder in additional shares or in
cash or other property, the Trustee shall elect to receive it in
additional shares. Sales charges attributable to the acquisition of
shares shall be charged to the account of the Participant for which
such shares are acquired. All investment company shares acquired by
the Trustee shall be registered in the name of the Trustee or of its
registered nominee.
The Employer shall remit directly to the insurance company any
premiums life insurance or annuities which constitute contributions
under the Plan, and the Trustee shall have no duty to account
therefor. Any such life insurance and/or annuity contracts shall be
issued in restricted and nontransferable form and be held by the
Employer.
7.02 "VOTING AND OTHER ACTIONS"
The Trustee shall deliver, or cause to be executed and delivered, to
the Employer all notices, prospectuses, financial statements, proxies,
and proxy soliciting material relating to shares of Designated
Investment Company stock held pursuant to the Plan. The Trustee shall
not vote any of the shares of the Fund held hereunder.
7.03 "REPORTS OF THE TRUSTEE AND EMPLOYER"
The Trustee shall keep accurate and detailed records of all receipts,
investments, disbursements and other transactions under this Trust.
Not later than forty-five (45) days after the close of each Plan Year
(or after the Trustee's resignation or removal pursuant to Section XI
hereof), the Trustee shall file with the Employer and each Participant
or Beneficiary for whom account is maintained by the Trustee under
this Agreement a written report or reports reflecting the receipts,
disbursements and other transactions effected by it during such Plan
Year (or period ending with such resignation or removal) and the
assets and liabilities of such account at its close. Upon the
expiration of a period of sixty (60) days immediately following the
date on which such reports are filed, the Trustee shall be forever
released and discharged from all liability and accountability to
anyone with respect to its acts, transactions, duties, obligations or
responsibility as shown in or reflected by such reports, except with
respect to any such acts or transactions as to which written
objections have been filed with the Trustee within such sixty day
period.
The Employer shall furnish to the Trustee, and the Trustee shall
furnish to the Employer, such information relevant to the Plan and
Trust as may be required under the Internal Revenue Code and any
Regulations issued or forms adopted by the Treasury Department
thereunder.
The Trustee shall keep such records, make such identifications, and
file with the Internal Revenue Service such returns and other
information concerning the Trust as may be required of it under the
Internal Revenue Code and any Regulations issued or forms adopted by
the Treasury Department thereunder.
7.04 "TRUSTEE FEES AND EXPENSES OF THE ACCOUNT"
Any income taxes or other taxes of any kind whatsoever that may be
levied or assessed upon or in respect of the Trust, any transfer taxes
incurred in connection with the investment and reinvestment of the
assets of the Trust, all other administrative expenses incurred by the
Trustee in the performance of its duties including fees for legal
services rendered to the Trustee, and such compensation to the Trustee
as may be agreed upon from time to time between the Trustee and the
Employer shall be paid from the assets of the Trust and shall, unless
allocable to the Accounts of specific Participants, be charged
proportionately to their respective accounts.
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7.05 "CONCERNING THE TRUSTEE"
The Trustee shall not be responsible in any way for the collection of
contributions provided for under the Plan, the purpose or propriety of
any distribution made pursuant to Section V hereof, or any other
action taken at the Employer's request. Nor shall the Trustee be
responsible for the administration of the Plan, its validity or
effect, or the qualification of the Plan or of the Trust Agreement
under the provisions of the Internal Revenue Code. The Trustee shall
not be required to examine the Plan or be charged with notice of its
provisions. The Trustee shall not be required to take any action upon
receipt of any notice from the Internal Revenue Service except to
forward a copy thereof to the Employer with a request for written
instructions. The Employer shall at all times fully indemnify and save
harmless the Trustee, its successors and assigns, from and against any
and all loss resulting from liability to which the Trustee may be
subject by reason of any act or conduct (except willful misconduct or
gross negligence) in its capacity as Trustee hereunder, including all
expenses reasonably incurred in its defense, in case the Employer
fails to provide such defense. The Trustee shall be under no duty to
take any action other than as herein specified with respect to the
Trust unless the Employer shall furnish the Trustee with instructions
in proper form and as authorized by the terms of the Plan; or to
defend or engage in any suit with respect to the Trust unless the
Trustee shall have first agreed in writing to do so and shall have
been fully indemnified to the satisfaction of the Trustee. The Trustee
shall be protected in acting upon any written order from the Employer
or any other notice, request, consent, certificate or other instrument
or paper believed by it to be genuine and to have been properly
executed, and, so long as it acts in good faith, in taking or omitting
to take any other action. The Trustee shall not be liable for interest
on any cash or cash balances maintained in the Trust pending
investment in accordance with appropriate directions from the
Employer.
7.06 "AMENDMENT"
If the Employer's plan fails to attain or retain qualification, such
plan will no longer participate in the prototype Plan and will be
considered an individually designed plan.
7.07 "RESIGNATION OR REMOVAL OF TRUSTEE"
The Trustee may resign at any time upon thirty (30) days notice in
writing to the Employer, and may be removed by the Employer at any
time upon thirty (30) days notice in writing to the Trustee. Upon such
resignation or removal, the Employer shall appoint a successor
Trustee. Upon receipt by the Trustee of written acceptance of such
appointment by the successor Trustee, the Trustee shall transfer and
pay over to such successor the assets of the Trust Account and all
records pertaining thereto. The Trustee is authorized, however, to
reserve such sum of money as it may deem advisable for payment of all
its fees, compensation, costs and expenses, or for payment of any
other liability constituting a charge on or against the assets of the
Trust or on or against the Trustee, with any balance of such reserve
remaining after the payment of all such items to be paid over to the
successor Trustee. The successor Trustee shall hold the assets paid
over to it under terms similar to those of this Agreement that qualify
under section 401 of the Code. If within thirty (30) days after the
Trustee's resignation or removal the Employer has not appointed a
successor Trustee which has accepted such appointment, the Trustee
shall, unless it elects to terminate the Trust pursuant to Section
XII, appoint such successor itself.
7.08 "TERMINATION OF TRUST"
The Trustee may elect to terminate the Trust if within thirty (30)
days after its resignation or removal pursuant to Section X the
Employer has not appointed a successor Trustee which has accepted such
appointment. The Trustee shall terminate the Trust upon receiving
notice of the Employer's death, if the Employer is a sole proprietor,
or upon receiving notice of the termination of the partnership, if the
Employer is a partnership, or upon receiving notice of the dissolution
of the corporation, if the Employer is a corporation, unless provision
is made by a successor to the business of the Employer for the
continuation of the Plan and this Agreement upon terms satisfactory to
the Trustee.
Termination of the Trust shall be effected by distributing all assets
thereof to the Participants and their designated beneficiaries
pursuant to the direction of the Employer (or in the absence of such
direction as determined by the Trustee), as on the termination of the
Plan. Upon the completion of such distribution, the Trustee shall be
relieved from all further liability with respect to all amounts so
paid.
7.09 "MISCELLANEOUS"
At no time shall it be possible for any part of the assets of the
Trust to be used for or diverted to purposes other than for the
exclusive benefit of Participants and Beneficiaries.
Any notice from the Trustee to the Employer, Participant or
Beneficiary provided for in this Agreement shall be effective if sent
by first class mail to the last address of record.
Upon receipt of a written request from the Employer, the Trustee shall
transfer the assets in the Trust for a Participant to any other
qualified plan maintained by the Employer for the benefit of such
Participant; and the Trustee shall have no further liability under the
Plan and Trust with respect to any assets so transferred.
This Agreement shall bind and inure to the benefit of the personal
representatives, successors and assigns of the Employer and the
Trustee.
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PLAN DOCUMENT
ARTICLE VIII
PARTICIPANT ADMINISTRATIVE PROVISIONS
8.01 "BENEFICIARY DESIGNATION"
Any Participant may from time to time designate, in writing, any
person or persons, contingently or successively, to whom the Trustee
will pay his Accrued Benefit (including any life insurance proceeds
payable to the Participant's Account) on event of his death and the
Participant may designate the form and method of payment. The Advisory
Committee will prescribe the form for the written designation of
Beneficiary and, upon the Participant's filing the form with the
Advisory Committee, the form effectively revokes all designations
filed prior to that date by the same Participant.
COORDINATION WITH SURVIVOR REQUIREMENTS. If the joint and survivor
requirements of Article VI apply to the Participant, this Section 8.01
does not impose any special spousal consent requirements on the
Participant's Beneficiary designation. However, in the absence of
spousal consent (as required by Article VI) to the Beneficiary
designation: (1) any waiver of the joint and survivor annuity or of
the pre-retirement survivor annuity is not valid; and (2) if the
Participant dies prior to his annuity starting date, the Beneficiary
designation will apply only to the portion of the death benefit which
is not payable as a pre-retirement survivor annuity.
PROFIT SHARING PLAN EXCEPTION. If the Plan is a profit sharing plan,
and the Employer elects to apply the joint and survivor requirements
only to Participants described in Section 6.04(E), the Beneficiary
designation of a married Participant who is not described in Section
6.04(E) is not valid unless the Participant's spouse consents (in a
manner described in Section 6.05) to the Beneficiary designation. The
spousal consent requirement in this paragraph does not apply if the
Participant and his spouse are not married throughout the one year
period ending on the date of the Participant's death, or if the
Participant's spouse is the Participant's sole primary Beneficiary.
8.02 "NO BENEFICIARY DESIGNATION"
If a Participant fails to name a Beneficiary in accordance with
Section 8.01, or if the Beneficiary named by a Participant predeceases
him or dies before complete distribution of the Participant's Accrued
Benefit as prescribed by the Participant's Beneficiary form, then the
Trustee will pay the Participant's Accrued Benefit in accordance with
Section 6.02 in the following order of priority:
(A) The Participant's surviving spouse;
(B) The Participant's surviving children, including adopted
children, in equal shares;
(C) The Participant's surviving parents, in equal shares; or
(D) The legal representative of the estate of the last to die of
the Participant and his Beneficiary.
The Advisory Committee will direct the Trustee as to the method and to
whom the Trustee will make payment under this Section 8.02. If a
benefit is forfeited because the participant or beneficiary cannot be
found, such benefit will be reinstated if a claim is made by the
participant or beneficiary.
8.03 "PERSONAL DATA TO COMMITTEE"
Each Participant and each Beneficiary of a deceased Participant must
furnish to the Advisory Committee such evidence, data or information
as the Advisory Committee considers necessary or desirable for the
purpose of administering the Plan. The provisions of this Plan are
effective for the benefit of each Participant upon the condition
precedent that each Participant will furnish promptly full, true and
complete evidence, data and information when requested by the Advisory
Committee, provided the Advisory Committee advises each Participant of
the effect of his failure to comply with its request.
8.04 "ADDRESS FOR NOTIFICATION"
Each Participant and each Beneficiary of a deceased Participant must
file with the Advisory Committee from time to time, in writing, his
post office address and any change of post office address. Any
communication, statement or notice addressed to a Participant, or
Beneficiary, at his last post office address filed with the Advisory
Committee, or as shown on the records of the Employer, binds the
Participant, or Beneficiary, for all purposes of this Plan.
8.05 "ASSIGNMENT OR ALIENATION"
Subject to Code Section 414(p) relating to qualified domestic
relations orders or domestic relations orders entered into before
January 1, 1985, neither a Participant nor a Beneficiary may
anticipate, assign or alienate voluntarily or involuntarily (either at
law or in equity) any benefit provided under the Plan, and the Trustee
will not recognize any such anticipation, assignment or alienation.
Furthermore, a benefit under the Plan is not subject to attachment,
garnishment, levy, execution or other legal or equitable process.
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8.06 "NOTICE OF CHANGE IN TERMS"
The Plan Administrator, within the time prescribed by ERISA and the
applicable regulations, must furnish all Participants and
Beneficiaries a summary description of any material amendment to the
Plan or notice of discontinuance of the Plan and all other information
required by ERISA to be furnished without charge.
8.07 "LITIGATION AGAINST THE TRUST"
A court of competent jurisdiction may authorize any appropriate
equitable relief to redress violations of ERISA or to enforce any
provisions of ERISA or the terms of the Plan. A fiduciary may receive
reimbursement of expenses properly and actually incurred in the
performance of his duties with the Plan.
8.08 "INFORMATION AVAILABLE"
Any Participant in the Plan or any Beneficiary may examine copies of
the Plan description, latest annual report, any bargaining agreement,
this Plan and Trust, contract or any other instrument under which the
Plan was established or is operated. The Plan Administrator will
maintain all of the items listed in this Section 8.08 in his office,
or in such other place or places as he may designate from time to time
in order to comply with the regulations issued under ERISA, for
examination during reasonable business hours. Upon the written request
of a Participant or Beneficiary the Plan Administrator must furnish
him with a copy of any item listed in this Section 8.08. The Plan
Administrator may make a reasonable charge to the requesting person
for the copy so furnished.
8.09 "APPEAL PROCEDURE FOR DENIAL OF BENEFITS"
The Plan Administrator must provide adequate notice in writing to any
Participant or to any Beneficiary ("Claimant") whose claim for
benefits under the Plan the Advisory Committee has denied. The Plan
Administrator's notice to the Claimant must set forth:
(A) The specific reason for the denial;
(B) Specific references to pertinent Plan provisions on which the
Advisory Committee based its denial;
(C) A description of any additional material and information
needed for the Claimant to perfect his claim and an
explanation of why the material or information is needed; and
(D) That any appeal the Claimant wishes to make of the adverse
determination must be in writing to the Advisory Committee
within 75 days after receipt of the Plan Administrator's
notice of denial of benefits. The Plan Administrator's notice
must further advise the Claimant that his failure to appeal
the action to the Advisory Committee in writing within the
75-day period will render the Advisory Committee's
determination final, binding and conclusive.
If the Claimant should appeal to the Advisory Committee, he, or his
duly authorized representative, may submit, in writing, whatever
issues and comments he, or his duly authorized representative, feels
are pertinent. The Claimant, or his duly authorized representative,
may review pertinent Plan documents. The Advisory Committee will
re-examine all facts related to the appeal and make a final
determination as to whether the denial of benefits is justified under
the circumstances. The Advisory Committee must advise the Claimant of
its decision within 60 days of the Claimant's written request for
review, unless special circumstances (such as a hearing) would make
the rendering of a decision within the 60-day limit unfeasible, but in
no event may the Advisory Committee render a decision respecting a
denial for a claim for benefits later than 120 days after its receipt
of a request for review.
The Plan Administrator's notice of denial of benefit must identify the
name of each member of the Advisory Committee and the name and address
of the Advisory Committee member to whom the Claimant may forward
his appeal.
8.10 "PARTICIPANT DIRECTION OF INVESTMENT"
A Participant has the right to direct the Employer with respect to the
investment or re-investment of the assets comprising the Participant's
individual Account only if the Employer consents in writing to permit
such direction. If the Employer consents to Participant direction of
investment, the Employer and each Participant must execute a letter
agreement as a part of this Plan containing such conditions,
limitations and other provisions they deem appropriate before the
Employer will follow any Participant direction as respects the
investment or re-investment of any part of the Participant's
individual Account. The Employer is not liable for any loss, nor is
liable for any breach, resulting from a Participant's direction of the
investment of any part of his individual Account.
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PLAN DOCUMENT
ARTICLE IX
ADVISORY COMMITTEE -
DUTIES WITH RESPECT TO PARTICIPANTS' ACCOUNTS
9.01 "MEMBERS' COMPENSATION, EXPENSES"
The Employer must appoint an Advisory Committee to administer the
Plan, the members of which may or may not be Participants in the Plan,
or which may be the Plan Administrator acting alone. The members of
the Advisory Committee will serve without compensation for services as
such, but the Employer will pay all expenses of the Advisory
Committee, including the expense for any bond required under ERISA.
9.02 "TERM"
Each member of the Advisory Committee serves until the appointment of
his successor.
9.03 "POWERS"
In case of a vacancy in the membership of the Advisory Committee, the
remaining members of the Advisory Committee may exercise any and all
of the powers, authority, duties and discretion conferred upon the
Advisory Committee pending the filling of the vacancy.
9.04 "GENERAL"
The Advisory Committee has the following powers and duties:
(A) To select a Secretary, who need not be a member of
the Advisory Committee;
(B) To determine the rights of eligibility of an Employee
to participate in the Plan, the value of a
Participant's Accrued Benefit and the Nonforfeitable
percentage of each Participant's Accrued Benefit;
(C) To adopt rules of procedure and regulations necessary
for the proper and efficient administration of the
Plan provided the rules are not inconsistent with the
terms of this Agreement;
(D) To enforce the terms of the Plan and the rules and
regulations it adopts;
(E) To direct the Trustee as respects the crediting and
distribution of the Trust;
(F) To review and render decisions respecting a claim for
(or denial of a claim for) a benefit under the Plan;
(G) To furnish the Employer with information which the
Employer may require for tax or other purposes;
(H) To engage the service of agents whom it may deem
advisable to assist it with the performance of its
duties;
(I) To establish and maintain a funding standard account
and to make credits and charges to the account to the
extent required by and in accordance with the
provisions of the Code.
The Advisory Committee must exercise all of its powers, duties
and discretion under the Plan in a uniform and
nondiscriminatory manner.
9.05 "FUNDING POLICY"
The Advisory Committee will review, not less often than annually, all
pertinent Employee information and Plan data in order to establish the
funding policy of the Plan and to determine the appropriate methods of
carrying out the Plan's objectives.
9.06 "MANNER OF ACTION"
The decision of a majority of the members appointed and qualified
controls.
9.07 "INTERESTED MEMBER"
No member of the Advisory Committee may decide or determine any matter
concerning the distribution, nature or method of settlement of his own
benefits under the Plan, except in exercising an election available to
that member in his capacity as a Participant, unless the Plan
Administrator is acting alone in the capacity of the Advisory
Committee.
9.08 "INDIVIDUAL ACCOUNTS"
The Advisory Committee will maintain, or direct the Trustee to
maintain, a separate Account, or multiple Accounts, in the name of
each Participant to reflect the Participant's Accrued Benefit under
the Plan.
The Advisory Committee will make its allocations, or request the
Trustee to make its allocations, to the Accounts of the Participants
in accordance with the provisions of Section 9.11. The Advisory
Committee may direct the Trustee to maintain a temporary segregated
investment Account in the name of a Participant to prevent a
distortion of income, gain or loss allocations under Section 9.11. The
Advisory Committee must maintain records of its activities.
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9.09 "VALUE OF PARTICIPANT'S ACCRUED BENEFIT"
The value of each Participant's Accrued Benefit consists of that
proportion of the net worth (at fair market value) of the Employer's
Trust Fund which the net credit balance in his Account (exclusive of
the cash value of incidental benefit insurance contracts) bears to the
total net credit balance in the Accounts (exclusive of the cash value
of the incidental benefit insurance contracts) of all Participants
plus the cash surrender value of any incidental benefit insurance
contracts held by the Employer on the Participant's life.
For purposes of a distribution under the Plan, the value of a
Participant's Accrued Benefit is its value as of the valuation date
immediately preceding the date of the distribution.
9.10 "ALLOCATIONS AND DISTRIBUTION OF NET INCOME GAIN OR LOSS"
A "valuation date" under this Plan is each Accounting Date. As of each
valuation date, the Advisory Committee must adjust Accounts to reflect
net income, gain or loss since the last valuation date. The valuation
period is the period beginning the day after the last valuation date
and ending on the current valuation date.
The assets of the trust will be valued annually at fair market value
as of the last day of the plan year. On such date, the earnings and
losses of the trust will be allocated to each participant's account in
the ratio that such account balance bears to all account balances.
TRUST FUND ACCOUNTS. The allocation provisions of this paragraph apply
to all Participant Accounts other than segregated investment Accounts.
The Advisory Committee first will adjust the Participant Accounts, as
those Accounts stood at the beginning of the current valuation period,
for amounts charged during the valuation period to the Accounts in
accordance with Section 9.12 (relating to distributions) and Section
10.01 (relating to insurance premiums), for the cash value of
incidental benefit insurance contracts and for the amount of any
Account which the Trustee has fully distributed since the immediately
preceding valuation date. The Advisory Committee subject to Section
9.12, will allocate the net income, gain or loss pro rata to the
adjusted Participant Accounts. The allocable net income, gain or loss
is the net income (or net loss), including the increase or decrease in
the fair market value of assets, since the last valuation date.
SEGREGATED INVESTMENT ACCOUNTS. A segregated investment Account
receives all income it earns and bears all expense or loss it incurs.
ADDITIONAL RULES. An Excess Amount or suspense account
described in Part 2 of Article III does not share in the allocation of
net income, gain or loss described in this Section 9.10. If the
Employer's Plan includes a Code Section 401(k) arrangement, the
Employer may specify in its Adoption Agreement alternate valuation
provisions authorized by that Adoption Agreement. This Section 9.10
applies solely to the allocation of net income, gain or loss of the
Trust. The Advisory Committee will allocate the Employer contributions
in accordance with Article III.
9.11 "INDIVIDUAL STATEMENT"
As soon as practicable after the Accounting Date of each Plan Year,
but within the time prescribed by ERISA and the regulations under
ERISA, the Plan Administrator will deliver to each Participant (and to
each Beneficiary) a statement reflecting the condition of his Accrued
Benefit in the Trust as of that date and such other information ERISA
requires be furnished the Participant or Beneficiary. No Participant,
except a member of the Advisory Committee, has the right to inspect
the records reflecting the Account of any other Participant.
9.12 "ACCOUNT CHARGED"
The Advisory Committee will charge all distributions made to a
Participant or to his Beneficiary from his Account against the Account
of the Participant when made.
9.13 "MISSING BENEFICIARY"
If the Employer shall be unable to locate any Beneficiary entitled to
receive payment of any death benefit payable hereunder, after
reasonable search, for a period of two years after such benefit
becomes payable, the amount of such benefit shall cease to be payable
to such Beneficiary, and shall become payable instead to the personal
representative of such former Participant.
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PLAN DOCUMENT
ARTICLE X
PROVISIONS RELATING TO INSURANCE
10.01 "INSURANCE BENEFIT ANNUITY"
The Employer in accordance with the direction of the respective
Participants in accordance with any uniform rules adopted by the
Employer and made known to Participants may elect to invest
contributions to the Plan in incidental life insurance benefits or
one or more annuity contracts distributed by Kemper Financial
Services, Inc. or an affiliate, provided, however, that:
(A) ORDINARY LIFE. The premiums paid for ordinary life
insurance on the life of a Participant must at all times
be less than 50% of the Employer contributions made on
behalf of such Participant. For purposes of these
incidental insurance provisions, ordinary life insurance
contracts are contracts with both nondecreasing death
benefits and nonincreasing premiums.
(B) TERM. The premiums paid for term, universal and all
other life insurance which is not ordinary life insurance
on the life of any Participant may not exceed 25% of the
Employer contributions made on behalf of such
Participant.
(C) COMBINATION. If both ordinary life and term insurance are
purchased on the life of any Participant, the sum of the term
insurance premium plus one-half of the ordinary life premiums
may not exceed 25% of the Employer contributions made on
behalf of such Participant.
(D) ANNUITIES. The terms of any annuity contract purchased
and distributed by the Plan to a Participant shall comply
with the requirements of this Plan.
Such direction of the participant's creates a segregated
asset account. Except as provided in this Section 10.01
and Section 8.10, each participant will have a ratable
interest in all assets of the trust. It will be the
Employer's responsibility to see that the limitations of
this Article X are not exceeded.
10.02 "FORM OF CONTRACT AND PREMIUM"
The Employer shall apply for any contract under this Article X and
each application for contract, and the contracts themselves, shall
nominate and designate the Participant as sole owner, but each
contract shall be held by the Employer and shall be restricted and
not transferable.
The Employer shall pay directly to the insurance company all
amounts pursuant to an election under this Article X and shall
charge the premiums on any such contract(s) against the
contributions by or on behalf of such Participant. After payment
of any premium, the Employer shall remit the balance of such
contributions to the Trustee hereunder. The Employer shall hold
all contracts issued under the Plan and fully account for same to
the Trustee upon written request.
In the event of any conflicts between the terms of this Plan and
the terms of any insurance contracts hereunder, the Plan provisions
shall control.
Any dividends or credits earned on insurance contracts will be
allocated to the participant's account derived from employer
contributions for whose benefit the contract is held.
10.03 "LIMITATION OF LIFE INSURANCE PROTECTION"
The Employer shall not continue any life insurance protection for
any Participant beyond his actual termination of employment.
If the Employer holds any insurance contract(s) on the life of a
Participant when the Participant terminates his employment, subject
to Article VI, the Employer shall transfer the contract(s) to the
Participant endorsed so as to vest in the transferee all right,
title and interest to the contract(s), free and clear of the Plan;
subject, however, to restrictions as to surrender or payment of
benefits as the issuing insurance company may permit and as the
Employer shall direct.
Subject to Article VI, Joint and Survivor Annuity Requirements, the
contracts on a participant's life will be converted to cash or an
annuity or distributed to the participant upon commencement of
benefits.
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ARTICLE XI MISCELLANEOUS
11.01 "EVIDENCE"
Anyone required to give evidence under the terms of the Plan may do
so by certificate, affidavit, document or other information which the
person to act in reliance may consider pertinent, reliable and
genuine, and to have been signed, made or presented by the proper
party or parties. Both the Advisory Committee and the Trustee are
fully protected in acting and relying upon any evidence described
under the immediately preceding sentence.
11.02 "NO RESPONSIBILITY FOR EMPLOYER ACTION"
Neither the Trustee nor the Advisory Committee has any obligation or
responsibility with respect to any action required by the Plan to be
taken by the Employer, any Participant or eligible Employee, or for
the failure of any of the above persons to act or make any payment or
contribution, or to otherwise provide any benefit contemplated under
this Plan. Furthermore, the Plan does not require the Trustee or the
Advisory Committee to collect any contribution required under the
Plan, or to determine the correctness of the amount of any Employer
contribution. Neither the Trustee nor the Advisory Committee need
inquire into or be responsible for any action or failure to act on
the part of the others. Any action required of a corporate Employer
must be by its Board of Directors or its designate.
11.03 "FIDUCIARIES NOT INSURERS"
The Trustee, the Advisory Committee, the Plan Administrator and the
Employer in no way guarantee the Trust Fund from loss or
depreciation. The Employer does not guarantee the payment of any
money which may be or becomes due to any person from the Trust Fund.
The liability of the Advisory Committee and the Trustee to make any
payment from the Trust Fund at any time and all times is limited to
the then available assets of the Trust.
11.04 "WAIVER OF NOTICE"
Any person entitled to notice under the Plan may waive the notice.
11.05 "SUCCESSORS"
The Plan is binding upon all persons entitled to benefits under the
Plan, their respective heirs and legal representatives, upon the
Employer, its successors and assigns, and upon the Trustee, the
Advisory Committee, the Plan Administrator and their successors.
11.06 "WORD USAGE"
Words used in the masculine also apply to the feminine where
applicable, and wherever the context of the Employer's Plan dictates,
the plural includes the singular and the singular includes the
plural.
11.07 "EMPLOYER'S RIGHT TO PARTICIPATE"
If the Employer's Plan fails to attain or retain qualification under
section 401 of the Code, the Plan will no longer participate in this
Kemper Simplified Prototype Retirement Plan and will be considered an
individually-designed plan.
11.08 "EMPLOYMENT NOT GUARANTEED"
Nothing contained in this Plan, or with respect to the establishment
of the Trust, or any modification of amendment to the Plan or Trust,
or in the creation of any Account, or the payment of any benefit,
gives any Employee, Employee-Participant or any Beneficiary any right
to continue employment, any legal or equitable right against the
Employer, or Employee of the Employer, or against the Trustee, or its
agents or employees, or against the Plan Administrator, except as
expressly provided by the Plan, the Trust, ERISA or by a separate
agreement.
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PLAN DOCUMENT
ARTICLE XII
EXCLUSIVE BENEFIT, AMENDMENT, TERMINATION
12.01 "EXCLUSIVE BENEFIT"
Any contribution made by the employer because of a mistake of fact
must be returned to the employer within one year of the contribution.
In the event that the Commissioner of Internal Revenue determines
that the plan is not initially qualified under the Internal Revenue
Code, any contribution made incident to that initial qualification by
the employer must be returned to the employer within one year after
the date the initial qualification is denied, but only if the
application for the qualification is made by the time prescribed by
law for filing the employer's return for the taxable year in which
the plan is adopted, or such later date as the Secretary of the
Treasury may prescribe.
12.02 "AMENDMENT BY EMPLOYER"
The Employer may change the choice of options in the adoption
agreement and add overriding language in the adoption agreement when
such language is necessary to satisfy Section 415 or Section 416 of
the Code because of the required aggregation of multiple plans, and
add certain model amendments published by the Internal Revenue
Service which specifically provide that their adoption will not cause
the plan to be treated as individually designed. An employer that
amends the plan for any other reason, including a waiver of the
minimum funding requirement under Section 412(d), will no longer
participate in this master or prototype plan and will be considered
to have an individually designed plan.
No amendment may authorize or permit any of the Trust Fund (other
than the part which is required to pay taxes and administration
expenses) to be used for or diverted to purposes other than for the
exclusive benefit of the Participants or their Beneficiaries or
estates. No amendment may cause or permit any portion of the Trust
Fund to revert to or become a property of the Employer. The Employer
also may not make any amendment which affects the rights, duties or
responsibilities of the Trustee, the Plan Administrator or the
Advisory Committee without the written consent of the affected
Trustee, the Plan Administrator or the affected member of the
Advisory Committee.
If the plan's vesting schedule is amended, or the plan is amended in
any way that directly or indirectly affects the computation of the
participant's nonforfeitable percentage or if the plan is deemed
amended by an automatic change to or from a top-heavy vesting
schedule, each participant with at least 3 years of service with the
employer may elect, within a reasonable period after the adoption of
the amendment or change, to have the nonforfeitable percentage
computed under the plan without regard to such amendment or change.
For participants who do not have at least one hour of service in any
plan year beginning after December 31, 1988, the preceding sentence
shall be applied by substituting "five years of service" for "three
years of service" where such language appears.
The period during which the election may be made shall commence with
the date the amendment is adopted or deemed to be made and shall end
on the latest of:
(1) 60 days after the amendment is adopted;
(2) 60 days after the amendment becomes effective; or
(3) 60 days after the participant is issued written notice of
the amendment by the employer or plan administrator.
Furthermore, if the vesting schedule of a plan is amended, in the
case of an employee who is a participant as of the later of the date
such amendment is adopted or the date it becomes effective, the
nonforfeitable percentage (determined as of such date) of such
employee's right to his employer-derived accrued benefit will not be
less than his percentage computed under the plan without regard to
such amendment.
CODE SECTION 411(D)(6) PROTECTED BENEFITS. An amendment (including
the adoption of this Plan as a restatement of an existing plan) may
not decrease a Participant's Accrued Benefit, except to the extent
permitted under Code Section 412(c)(8), and may not reduce or
eliminate Code Section 411 (d)(6) protected benefits determined
immediately prior to the adoption date (or, if later, the effective
date) of the amendment. An amendment reduces or eliminates Code
Section 411 (d)(6) protected benefits if the amendment has the effect
of either (1) eliminating or reducing an early retirement benefit or
a retirement-type subsidy (as defined in Treasury regulations), or
(2) except as provided by Treasury regulations, eliminating an
optional form of benefit. The Advisory Committee must disregard an
amendment to the extent application of the amendment would fail to
satisfy this paragraph. If the Advisory Committee must disregard an
amendment because the amendment would violate clause (1) or clause
(2), the Advisory Committee must maintain a schedule of the early
retirement option or other optional forms of benefit the Plan must
continue for the affected Participants.
The Employer must make all amendments in writing. Each amendment must
state the date to which it is either retroactively or prospectively
effective. See Section 11.08 for the effect of certain amendments
adopted by the Employer.
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12.03 "AMENDMENT BY PLAN SPONSOR"
The Plan Sponsor, without the Employer's consent, may amend the Plan
and Trust, from time to time, in order to conform the Plan and Trust
to any requirement for qualification of the Plan and Trust under the
Internal Revenue Code. The Plan Sponsor may not amend the Plan in any
manner which would modify any election made by the Employer under the
Plan without the Employer's written consent.
For purposes of sponsoring organization amendments, the mass
submitter shall be recognized as the agent of the sponsoring
organization. If the sponsoring organization does not adopt the
amendments made by the mass submitter, it will no longer be identical
to or a minor modifier of the mass submitter plan.
12.04 "DISCONTINUANCE"
The Employer has the right, at any time, to suspend or discontinue
its contributions under the Plan, and to terminate, at any time, this
Plan and the Trust created under this Agreement. The Plan will
terminate upon the first to occur of the following:
(A) The date terminated by action of the Employer;
(B) The date the Employer is judicially declared bankrupt or
insolvent, unless the proceeding authorizes continued
maintenance of the Plan;
(C) The dissolution, merger, consolidation or reorganization
of the Employer or the sale by the Employer of all or
substantially all of its assets, unless the successor or
purchaser makes provision to continue the Plan, in which
event the successor or purchaser must substitute itself
as the Employer under this Plan.
In the event of a complete discontinuance of contributions under the
plan, the account balance of each affected participant will be
nonforfeitable.
12.05 "MERGER/DIRECT TRANSFER"
The Trustee may not consent to, or be a party to, any merger or
consolidation with another plan, or to a transfer of assets or
liabilities to another plan, unless immediately after the merger,
consolidation or transfer (if the plan is then terminated), the
surviving Plan provides each Participant a benefit equal to or
greater than the benefit each Participant would have received had the
Plan terminated immediately before the merger or consolidation or
transfer. The Trustee possesses the specific authority to enter into
merger agreements or direct transfer of assets agreements with the
trustees of other retirement plans described in Code Section 401(a),
including an elective transfer, and to accept the direct transfer of
plan assets, or to transfer plan assets, as a party to any such
agreement.
The Trustee may accept a direct transfer of plan assets on behalf of
an Employee prior to the date the Employee satisfies the Plan's
eligibility conditions. If the Trustee accepts such a direct transfer
of plan assets, the Advisory Committee and Trustee must treat the
Employee as a Participant for all purposes of the Plan except the
Employee is not a Participant for purposes of sharing in Employer
contributions under the Plan until he actually becomes a Participant
in the Plan.
The Trustee, after August 9,1988, may not consent to, or be a
party to a merger, consolidation or transfer of assets with a defined
benefit plan, except with respect to an elective transfer. The
Trustee will hold, administer and distribute the transferred assets
as a part of the Trust Fund and the Trustee must maintain a separate
Employer contribution Account for the benefit of the Employee on
whose behalf the Trustee accepted the transfer in order to reflect
the value of the transferred assets. Unless a transfer of assets to
this Plan is an elective transfer, the Plan will preserve all Code
Section 411(d)(6) protected benefits with respect to those
transferred assets, in the manner described in Section 13.02. A
transfer is an elective transfer if: (1) the transfer satisfies the
first paragraph of this Section 13.06; (2) the transfer is voluntary,
under a fully informed election by the Participant; (3) the
Participant has an alternative that retains his Code Section
411(d)(6) protected benefits (including an option to leave his
benefit in the transferor plan, if that plan is not terminating); (4)
the transfer satisfies the applicable spousal consent requirements of
the Code; (5) the transferor plan satisfies the joint and survivor
notice requirements of the Code, if the Participant's transferred
benefit is subject to those requirements; (6) the Participant has a
right to immediate distribution from the transferor plan, in lieu of
the elective transfer; (7) the transferred benefit is at least the
greater of the single sum distribution provided by the transferor
plan for which the Participant is eligible or the present value of
the Participant's accrued benefit under the transferor plan payable
at that plan's normal retirement age; (8) the Participant has a 100%
Nonforfeitable interest in the transferred benefit; and (9) the
transfer otherwise satisfies applicable Treasury regulations. An
elective transfer may occur between qualified plans of any type. Any
direct transfer of assets from a defined benefit plan after August 9,
1988, which is not an elective transfer will render the Employer's
Plan individually designed.
DISTRIBUTION RESTRICTIONS UNDER CODE SECTION 401(K). If the Plan
receives a direct transfer (by merger or otherwise) of elective
contributions (or amounts treated as elective contributions) under a
Plan with a Code Section 401(k) arrangement, the distribution
restrictions of Code Sections 401(k)(2) and (10) continue to apply
to those transferred elective contributions.
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<PAGE> 65
PLAN DOCUMENT
12.06 "TERMINATION"
Upon termination of the Plan, the distribution provisions of Article
VI remain operative, with the following exceptions:
(1) If the present value of the Participant's Nonforfeitable
Accrued Benefit does not exceed $3,500, the Advisory
Committee will direct the Trustee to distribute the
Participant's Nonforfeitable Accrued Benefit to him in
lump sum as soon as administratively practicable after
the Plan terminates; and
(2) If the present value of the Participant's Nonforfeitable
Accrued Benefit exceeds $3,500, the Participant or the
Beneficiary, in addition may elect to have the Trustee
commence distribution of his Nonforfeitable Accrued
Benefit as soon as administratively practicable after the
Plan terminates.
To liquidate the Trust, the Advisory Committee will
purchase a deferred annuity contract for each Participant
which protects the Participant's distribution rights
under the Plan, if the Participant's Nonforfeitable
Accrued Benefit exceeds $3,500 and the Participant does
not elect an immediate distribution pursuant to Paragraph
(2). The Trust will continue until the Trustee in
accordance with the direction of the Advisory Committee
has distributed all of the benefits under the Plan.
On each valuation date, the Advisory Committee will
credit any part of a Participant's Accrued Benefit
retained in the Trust with its proportionate share of the
Trust's income, expenses, gains and losses, both realized
and unrealized. Upon termination of the Plan, the Amount,
if any, in a suspense account under Article III will
revert to the Employer, subject to the conditions of the
Treasury regulations permitting such a reversion. A
resolution or amendment to freeze all future benefit
accrual but otherwise to continue maintenance of this
Plan, is not a termination for purposes of this Section
12.06.
DISTRIBUTION RESTRICTIONS UNDER CODE SECTION 401(K). If
the Employer's Plan includes a Code Section 401(k)
arrangement or if transferred assets described in Section
13.06 are subject to the distribution restrictions of Code
Sections 401(k)(2) and (10), the special distribution
provisions of this Section 12.06 are subject to the
restrictions of this paragraph. The portion of the Participant's
Nonforfeitable Accrued Benefit attributable to elective
contributions (or to amounts treated under the Code
Section 401(k) arrangement as elective contributions) is
not distributable on account of Plan termination, as
described in this Section 12.06, unless: (a) the
Participant otherwise is entitled under the Plan to a
distribution of that portion of his Nonforfeitable
Accrued Benefit; or (b) the Plan termination occurs
without the establishment of a successor plan. A
successor plan under clause (b) is a defined contribution
plan (other than an ESOP) maintained by the Employer (or
by a related employer) at the time of the termination of
the Plan or within the period ending twelve months after
the final distribution of assets. A distribution made
after March 31, 1988, pursuant to clause (b), must be part
of a lump sum distribution to the Participant of his
Nonforfeitable Accrued Benefit.
In the event of the termination or partial termination of
the plan, the account balance of each affected
participant will be nonforfeitable.
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<PAGE> 66
ARTICLE XIII
CODE SECTION 401(k) ARRANGEMENTS
13.01 "ELIGIBILITY"
This Article XIII applies to an Employer's Plan only if the Plan
includes a Code Section 401(k) arrangement.
An employee's eligibility to make Elective Deferrals may not be
conditioned upon the completion of more than one (1) year of service
or the attainment of more than age twenty-one (21). An employee's
eligibility to receive Matching Contributions, Qualified Matching
Contributions, or Qualified Nonelective Contributions may be
conditioned upon the completion of up to two (2) years of service. No
contributions or benefits (other than Matching Contributions or
Qualified Matching Contributions) may be conditioned upon an
employee's Elective Deferrals.
The Employer must specify a reasonable period in the Adoption
Agreement of at least once each calendar year during which a
participant may elect to commence Elective Deferrals. Such election
may not be made retroactively. A participant's election to commence
elective Deferrals must remain in effect until modified or
terminated.
The Employer must also specify in the Adoption Agreement a reasonable
period at least once each calendar year to terminate an election or
to modify the amount or frequency of his or her Elective Deferrals.
13.02 "SALARY REDUCTION AGREEMENT"
The Employer will elect in its Adoption Agreement the terms of the
Code Section 401(k) arrangement under the Plan.
Any Employee eligible to participate in the Plan may file a salary
reduction agreement with the Advisory Committee. The salary reduction
agreement may not be effective earlier than the following date which
occurs last: (i) the Employee's Plan Entry Date (or, in the case of
a reemployed Employee, his reparticipation date under Article II);
(ii) the execution date of the Employee's salary reduction agreement;
(iii) the date the Employer adopts the Code Section 401(k)
arrangement by executing the Adoption Agreement; or (iv) the
effective date of the Code Section 401(k) arrangement, as specified
in the Employer's Adoption Agreement. A salary reduction agreement
must specify the amount of Compensation (as defined in Section 1.12)
or percentage of Compensation the Employee wishes to defer. The
salary reduction agreement will apply only to Compensation which
becomes currently available to the Employee after the effective
date of the salary reduction agreement. The Employer will apply a
reduction election to all Compensation (and to increases in such
Compensation) unless the Employee specifies in his salary reduction
agreement to limit the election to certain Compensation. The Employer
will specify in Adoption Agreement Section 3.01 the rules and
restrictions applicable to the Employee's salary reduction
agreements, however, under no circumstances, may a salary reduction
agreement or other deferral mechanism be adopted retroactively.
13.03 "DEFINITIONS"
For purposes of this Article XIII:
(1) "ACTUAL DEFERRAL PERCENTAGE" shall mean, for a specified
group of participants for a Plan Year, the average of the
ratios (calculated separately for each participant in
such group) of (1) the amount of employer contributions
actually paid over to the trust on behalf of such
participant for the Plan Year to (2) the participant's
Compensation for such Plan Year to (whether or not the
employee was a participant for the entire Plan Year).
Employer contributions on behalf of any participant shall
include: (1) any Elective Deferrals made pursuant to the
participant's deferral election, including Excess
Elective Deferrals of Highly Compensated Employees, but
excluding Elective Deferrals that are taken into account
in the Contribution Percentage test (provided the ADP
test is satisfied both with and without exclusion of
these Elective Deferrals); and (2) at the election of the
employer, Qualified Nonelective Contributions and
Qualified Matching Contributions. For purposes of
computing Actual Deferral Percentages, an employee who
would be a participant but for the failure to make
Elective Deferrals shall be treated as a participant on
whose behalf no Elective Deferrals are made.
(2) "AGGREGATE LIMIT" shall mean the sum of (i) 125 percent
of the greater of the ADP of the Nonhighly Compensated
Employees for the Plan Year or the ACP of Nonhighly
Compensated Employees under the plan subject to Code
Section 401(m) for the Plan Year beginning with or
within the Plan Year of the CODA and (ii) the lesser of
200% or two plus the lesser of such ADP or ACP. "Lesser"
is substituted for "greater" in (i) above, and "greater"
is substituted for "lesser" after "two plus the" in (ii),
if it would result in a larger Aggregate Limit.
(3) "AVERAGE CONTRIBUTION PERCENTAGE" shall mean the average
of the Contribution Percentages of the Eligible
Participants in a group.
(4) "CONTRIBUTION PERCENTAGE" shall mean the ratio (expressed
as a percentage) of the participant's Contribution
Percentage Amounts to the participant's Compensation for
the Plan Year (whether or not the employee was a
participant for the entire Plan Year).
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<PAGE> 67
PLAN DOCUMENT
(5) "CONTRIBUTION PERCENTAGE AMOUNTS" shall mean the sum of
the Employee Contributions, Matching Contributions, and
Qualified Matching Contributions (to the extent not taken
into account for purposes of the ADP test) made under the
plan on behalf of the participant for the Plan Year. If
so elected in the adoption agreement the employer may
include Qualified Nonelective Contributions in the
Contribution Percentage Amounts. The employer also may
elect to use Elective Deferrals in the Contribution
Percentage Amounts so long as the ADP test is met before
the Elective Deferrals are used in the ACP test and
continues to be met following the exclusion of those
Elective Deferrals that are used to meet the ACP test.
(6) "ELECTIVE DEFERRALS" shall mean any employer
contributions made to the plan at the election of the
participant, in lieu of cash compensation, and shall
include contributions made pursuant to a salary reduction
agreement or other deferral mechanism. With respect to
any taxable year, a participant's Elective Deferral is
the sum of all Employer contributions made on behalf of
such participant pursuant to an election to defer under
any qualified CODA as described in Code Section 401(k),
any simplified employee pension cash or deferred
arrangement as described in Code Section 402(h)(1)(B),
any eligible deferred compensation plan under Code
Section 457, any plan as described under Code Section
501(c)(18), and any employer contributions made on behalf
of a participant for the purchase of an annuity contract
under Code Section 403(b) pursuant to a salary reduction
agreement.
(7) "ELIGIBLE PARTICIPANT" shall mean any employee who is
eligible to make an Employee Contribution, or an Elective
Deferral (if the employer takes such contributions into
account in the calculation of the Contribution
Percentage), or to receive a Matching Contribution
(including forfeitures) or a Qualified Matching
Contribution.
(8) "EXCESS AGGREGATE CONTRIBUTIONS" shall mean, with respect
to any Plan Year, the excess of:
(a) The aggregate Contribution Percentage Amounts
taken into account in computing the numerator of
the Contribution Percentage actually made on
behalf of Highly Compensated Employees for such
Plan Year, over
(b) The maximum Contribution Percentage Amounts
permitted by the ACP test (determined by
reducing contributions made on behalf of Highly
Compensated Employees in order of their
Contribution Percentages beginning with the
highest of such percentages).
(9) "EXCESS CONTRIBUTIONS" shall mean, with respect to any
Plan Year, the excess of:
(a) The aggregate amount of employer contributions
actually taken into account in computing the ADP
of Highly Compensated Employees for such Plan
Year, over
(b) The maximum amount of such contributions
permitted by the ADP test (determined by
reducing contributions made on behalf of Highly
Compensated Employees in order of the ADPs,
beginning with the highest of such percentages).
(10) "EXCESS ELECTIVE DEFERRALS" shall mean those Elective
Deferrals that are includible in a participant's gross
income under Section 402(g) of the Code to the extent such
participant's Elective Deferrals for a taxable year
exceed the dollar limitation under such Code section.
Excess Elective Deferrals shall be treated as annual
additions under the plan.
(11) "MATCHING CONTRIBUTION" shall mean an employer
contribution made to this or any other defined
contribution plan on behalf of a participant on account
of an Employee Contribution made by such participant, or
on account of a participant's Elective Deferral, under a
plan maintained by the employer.
(12) "QUALIFIED NONELECTIVE CONTRIBUTIONS" shall mean
contributions (other than Matching Contributions or
Qualified Matching Contributions) made by the employer
and allocated to participants' accounts that the
participants may not elect to receive in cash until
distributed from the plan; that are nonforfeitable when
made; and that are distributable only in accordance with
the distribution provisions that are applicable to
Elective Deferrals and Qualified Matching Contributions.
13.04 "ELECTIVE DEFERRALS - CONTRIBUTION LIMITATION"
No participant shall be permitted to have Elective Deferrals made
under this plan, or any other qualified plan maintained by the
Employer, during any taxable year, in excess of the dollar limitation
contained in Section 402(g) of the Code in effect at the beginning of
such taxable year.
13.05 "DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS"
A participant may assign to this plan any Excess Elective Deferrals
made during a taxable year of the participant by notifying the plan
administrator on or before the date specified in the adoption
agreement of the amount of the Excess Elective Deferrals to be
assigned to the plan.
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<PAGE> 68
Notwithstanding any other provision of the plan, Excess Elective
Deferrals, plus any income and minus any loss allocable thereto,
shall be distributed no later than April 15 to any participant to
whose account Excess Elective Deferrals were assigned for the
preceding year and who claims Excess Elective Deferrals for such
taxable year.
Determination of income or loss: Excess Elective Deferrals shall be
adjusted for any income or loss up to the date of distribution. The
income or loss allocable to Excess Elective Deferrals is the sum of:
(1) income or loss allocable to the participant's Elective Deferral
account for the taxable year multiplied by a fraction, the numerator
of which is such participant's Excess Elective Deferrals for the year
and the denominator is the participant's account balance attributable
to Elective Deferrals without regard to any income or loss occurring
during such taxable year; and (2) ten percent of the amount
determined under (1) multiplied by the number of whole calendar
months between the end of the participant's taxable year and the date
of distribution, counting the month of distribution if distribution
occurs after the 15th of such month.
13.06 "ACTUAL DEFERRAL PERCENTAGE TEST"
The Actual Deferral Percentage (hereinafter "ADP") for participants
who are Highly Compensated Employees for each Plan Year and the ADP
for participants who are Nonhighly Compensated Employees for the same
Plan Year must satisfy one of the following tests:
(1) The ADP for participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ADP for
participants who are Nonhighly Compensated Employees for
the same Plan Year multiplied by 1.25; or
(2) The ADP for participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ADP for
participants who are Nonhighly Compensated Employees for
the same Plan Year multiplied by 2.0, provided that the
ADP for participants who are Highly Compensated Employees
does not exceed the ADP for participants who are
Nonhighly Compensated Employees by more than two (2)
percentage points.
SPECIAL RULES:
1. The ADP for any participant who is a Highly
Compensated Employee for the Plan Year and who
is eligible to have Elective Deferrals (and
Qualified Nonelective Contributions or Qualified
Matching Contributions, or both, if treated as
Elective Deferrals for purposes of the ADP test)
allocated to his or her accounts under two or
more arrangements described in Section 401(k)
of the Code, that are maintained by the
employer, shall be determined as if such
Elective Deferrals (and, if applicable, such
Qualified Nonelective Contributions or Qualified
Matching Contributions, or both) were made under
a single arrangement. If a Highly Compensated
Employee participates in two or more cash or
deferred arrangements that have different Plan
Years, all cash or deferred arrangements ending
with or within the same calendar year shall be
treated as a single arrangement.
2. In the event that this plan satisfies the
requirements of Ssections 401(k), 401(a)(4), or
410(b) of the Code only if aggregated with one
or more other plans, or if one or more other
plans satisfy the requirements of such sections
of the Code only if aggregated with this plan,
then this Section shall be applied by determin-
ing the ADP of employees as if all such plans
were a single plan. For Plan Years beginning
after December 31, 1989, plans may be aggregated
in order to satisfy Section 401(k) of the Code
only if they have the same Plan Year.
3. For purposes of determining the ADP of a
participant who is a five-percent owner or one
of the ten most highly paid Highly Compensated
Employees, the Elective Deferrals (and Qualified
Nonelective Contributions or Qualified Matching
Contributions, or both, if treated as Elective
Deferrals for purposes of the ADP test) and
Compensation of such participant shall include
the Elective Deferrals (and, if applicable
Qualified Nonelective Contributions and
Qualified Matching Contributions, or both) and
Compensation for the Plan Year of Family Members
(as defined in Section 414(g)(6) of the Code).
Family Members, with respect to such Highly
Compensated Employees, shall be disregarded as
separate employees in determining the ADP both
for participants who are Nonhighly Compensated
Employees and for participants who are Highly
Compensated Employees.
4. For purposes of determining the ADP test,
Elective Deferrals, Qualified Nonelective
Contributions and Qualified Matching
Contributions must be made before the last day
of the twelve-month period immediately following
the Plan Year to which contributions relate.
5. The employer shall maintain records sufficient
to demonstrate satisfaction of the ADP test and
the amount of Qualified Nonelective
Contributions of Qualified Matching
Contributions, or both, used in such test.
6. The determination and treatment of the ADP
amounts of any participant shall satisfy such
other requirements as may be prescribed by the
Secretary of the Treasury.
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<PAGE> 69
PLAN DOCUMENT
13.07 "DISTRIBUTION OF EXCESS CONTRIBUTIONS"
Notwithstanding any other provision of this plan, Excess
Contributions, plus any income and minus any loss allocable thereto,
shall be distributed no later than the last day of each Plan Year to
participants to whose accounts such Excess Contributions were
allocated for the preceding Plan Year. If such excess amounts are
distributed more than 2-1/2 months after the last day of the Plan
Year in which such excess amounts arose, a ten (10) percent excise
tax will be imposed on the employer maintaining the plan with respect
to such amounts. Such distributions shall be made to Highly
Compensated Employees on the basis of the respective portions of the
Excess Contributions attributable to each of such employees. Excess
Contributions shall be allocated to Participants who are subject to
the family member aggregation rules of Section 414(g)(6) of the Code
in the manner prescribed by the regulations.
Excess Contributions (including the amounts recharacterized) shall be
treated as annual additions under the plan.
Determination of Income or Loss: Excess Contributions shall be
adjusted for any income or loss up to the date of distribution. The
income or loss allocable to Excess Contributions is the sum of: (1)
income or loss allocable to the participant's Elective Deferral
account (and, if applicable, the Qualified Nonelective Contribution
account or the Qualified Matching Contribution account or both) for
the Plan Year multiplied by a fraction, the numerator of which is
such participant's Excess contributions for the year and the
denominator is the participant's account balance attributable to
Elective Deferrals (and Qualified Nonelective Contributions or
Qualified Matching Contributions, or both, if any of such
contributions are included in the ADP test) without regard to any
income or loss occurring during such Plan Year; and (2) ten percent
of the amount determined under (1) multiplied by the number of whole
calendar months between the end of the Plan Year and the date of
distribution, counting the month of distribution if distribution
occurs after the 15th of such month.
Accounting for Excess Contributions: Excess Contributions shall be
distributed from the participant's Elective Deferral account and
Qualified Matching Contribution account (if applicable) in proportion
to the participant's Elective Deferrals and Qualified Matching
Contributions (to the extent used in the ADP test) for the Plan Year.
Excess Contributions shall be distributed from the participant's
Qualified Nonelective Contribution account only to the extent that
such Excess Contributions exceed the balance in the participant's
Elective Deferral account and Qualified Matching Contribution
account.
13.08 "MATCHING CONTRIBUTIONS"
If elected by the employer in the adoption agreement, the employer
will make Matching Contributions to the plan.
13.09 "QUALIFIED MATCHING CONTRIBUTIONS"
If elected by the employer in the adoption agreement, the employer
will make Qualified Matching Contributions to the plan.
13.10 "LIMITATIONS ON MATCHING CONTRIBUTIONS"
The ACP for participants who are Highly Compensated Employees for
each Plan Year and the ACP for participants who are Nonhighly
Compensated Employees for the same Plan Year must satisfy one of the
following tests:
(A) The ACP for participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ACP for
participants who are Nonhighly Compensated Employees for
the same Plan Year multiplied by 1.25; or
(B) The ACP for participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ACP for
participants who are Nonhighly Compensated Employees for
the same Plan Year multiplied by two (2), provided that
the ACP for participants who are Highly Compensated
Employees does not exceed the ACP for participants who
are Nonhighly Compensated Employees by more than two (2)
percentage points.
SPECIAL RULES:
1. Multiple Use: If one or more Highly Compensated
Employees participate in both a CODA and a plan
subject to the ACP test maintained by the
employer and the sum of the ADP or ACP of those
Highly Compensated Employees subject to either
or both tests exceeds the Aggregate Limit, then
the ACP of those Highly Compensated Employees
who also participate in a CODA will be reduced
(beginning with such Highly Compensated Employee
whose ACP is the highest) so that the limit is
not exceeded. The amount by which each Highly
Compensated Employee's Contribution Percentage
Amounts is reduced shall be treated as an Excess
Aggregate Contribution. The ADP or ACP of the
Highly Compensated Employees are determined
after any corrections required to meet the ADP
or ACP tests. Multiple use does not occur if
either the ADP or ACP of the Highly Compensated
Employees does not exceed 1.25 multiplied by the
ADP or ACP of the Nonhighly Compensated
Employees.
2. For purposes of this Section, the Contribution
Percentage for any participant who is a Highly
Compensated Employee and who is eligible to have
Contribution Percentage Amounts allocated to his
or her account under two or more plans described
in Section 401(a) of the Code, or arrangements
described in Section 401(k) of the Code that are
maintained by the employer, shall be determined
as if the total of such Contribution Percentage
Amounts was made under each plan. If a Highly
Compensated Employee participates in two or more
cash or deferred arrangements that have
different plan years, all cash or deferred
arrangements ending with or within the same
calendar year shall be treated as a single
arrangement.
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<PAGE> 70
3. In the event that this plan satisfies the
requirements of Sections 401(m), 401(a)(4) or
410(b) of the Code only if aggregated with one
or more other plans, or if one or more other
plans satisfy the requirements of such sections
of the Code only if aggregated with this plan,
then this Section shall be applied by
determining the Contribution Percentage of
employees as if all such plans were a single
plan. For plan years beginning after December
31, 1989, plans may be aggregated in order to
satisfy Section 401(m) of the Code only if they
have the same Plan Year.
4. For purposes of determining the Contribution
percentage of a participant who is a
five-percent owner or one of the most highly
paid Highly Compensated Employees, the
Contribution Percentage Amounts and Compensation
of such participant shall include the
Contribution Percentage Amounts and Compensation
for the Plan Year of Family Members (as defined
in Section 414(g)(6) of the Code). Family
Members, with respect to Highly Compensated
Employees, shall be disregarded as separate
employees in determining the Contribution
Percentage both for participants who are
Nonhighly Compensated Employees and for
participants who are Highly Compensated
Employees.
5. For purposes of determining the Contribution
Percentage test, Employee Contributions are
considered to have been made in the Plan Year in
which contributed to the trust. Matching
Contributions and Qualified Nonelective
Contributions will be considered made for a Plan
Year if made no later than the end of the
twelve-month period beginning on the day after
the close of the Plan Year.
6. The employer shall maintain records sufficient
to demonstrate satisfaction of the ACP test and
the amount of Qualified Nonelective
Contributions or Qualified Matching
Contributions, or both, used in such test.
7. The determination and treatment of the
Contribution Percentage of any participant shall
satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
13.11 "DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS"
Notwithstanding any other provision of this plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable
thereto, shall be distributed no later than the last day of each Plan
Year to participants whose accounts such Excess Aggregate
Contributions were allocated for the preceding Plan Year. Excess
Aggregate Contributions shall be allocated to participants who are
subject to the family member aggregation rules of Section 414(g)(6)
of the Code in the manner prescribed by the regulations. If such
Excess Aggregate Contributions are distributed more than 2-1/2 months
after the last day of the Plan Year in which such excess amounts
arose, a ten (10) percent excise tax will be imposed on the employer
maintaining the plan with respect to those amounts. Excess Aggregate
Contributions shall be treated as annual additions under the plan.
Determination of Income or Loss: Excess Aggregate Contributions shall
be adjusted for any income or loss up to the date of distribution.
The income or loss allocable to Excess Aggregate Contributions is the
sum of: (1) income or loss allocable to the participant's Employee
Contribution account, Matching Contribution account (if any, and if
all amounts therein are not used in the ADP test) and, if applicable,
Qualified Nonelective Contribution account and Elective Deferral
account for the Plan Year multiplied by a fraction, the numerator of
which is such participant's Excess Aggregate Contributions for the
year and the denominator is the participant's account balance(s)
attributable to Contribution Percentage Amounts without regard to any
income or loss occurring during such Plan Year; and (2) ten percent
of the amount determined under (1) multiplied by the number of whole
calendar months between the end of the Plan Year and the date of
distribution, counting the month of distribution if distribution
occurs after the 15th of such month.
Accounting for Excess Aggregate Contributions: Excess Aggregate
Contributions shall be distributed on a pro rata basis from the
participant's Matching Contribution account and qualified Matching
Contribution account (and, if applicable, the participant's Qualified
Nonelective Contribution account or Elective Deferral account, or
both).
Such determination shall be made after first determining Excess
Elective Deferrals pursuant to Section 13.03(10) and then
determining Excess Contributions pursuant to Section 13.03(9).
13.12 "QUALIFIED NONELECTIVE CONTRIBUTIONS"
The employer may elect to make Qualified Nonelective Contributions
under the plan on behalf of employees as provided in the adoption
agreement.
In addition, in lieu of distributing Excess Contributions as provided
in Section 13.07 of the plan, or Excess Aggregate Contributions as
provided in Section 13.11 of the plan, and to the extent elected by
the employer in the adoption agreement, the employer may make
Qualified Nonelective Contributions on behalf of Nonhighly
Compensated Employees that are sufficient to satisfy either the
Actual Deferral Percentage test or the Average Contribution
Percentage test, or both, pursuant to regulations under the Code.
36
<PAGE> 71
PLAN DOCUMENT
13.13 "DISTRIBUTION REQUIREMENTS"
Elective Deferrals, Qualified Nonelective Contributions, and
Qualified Matching Contributions, and income allocable to each are
not distributable to a participant or his or her beneficiary or
beneficiaries, in accordance with such participant's or beneficiary
or beneficiaries election, earlier than upon separation from service,
death, or disability.
Such amounts may also be distributed upon:
1. Termination of the plan without the establishment of
another defined contribution plan.
2. The disposition by a corporation to an unrelated
corporation of substantially all of the assets (within
the meaning of Section 409(d)(2) of the Code) used in a
trade or business of such corporation if such corporation
continues to maintain this plan after the disposition,
but only with respect to employees who continue
employment with the corporation acquiring such assets.
3. The disposition by a corporation to an unrelated entity
of such corporation's interest in a subsidiary (within
the meaning of Section 409(d)(3) of the Code) if such
corporation continues to maintain this plan, but only
with respect to employees who continue employment with
such subsidiary.
4. The attainment of age 59-1/2.
All distributions that may be made pursuant to one or
more of the foregoing distributable events are subject to
the spousal and participant consent requirements (if
applicable) contained in Sections 401(a)(11) and 417 of
the Code.
37
<PAGE> 72
IRS Letters
Serial No. D257426a
Serial No. D257427a
Dated: 3/19/91
<PAGE> 73
AMENDATORY AGREEMENT
Adoption of 401(a)(31) Model Amendment (Revenue Procedure 93-12)
Kemper Growth Fund, as Prototype Plan Sponsor ("Sponsor"), makes this
Amendatory Agreement to the Kemper Retirement Plan Prototype.
WITNESSETH
WHEREAS, it is necessary to amend the Prototype Plan basic plan
document to provide plan participants with the option of electing a direct
transfer of any eligible rollover distribution to an eligible retirement plan;
and
WHEREAS, the Prototype Plan gives the Sponsor authority, without the
approval of any adopting employer, to make amendments necessary to conform the
Prototype Plan to any requirement for qualification under the Internal Revenue
Code.
NOW THEREFORE, in consideration of the above premises, the Sponsor as
designated agent for all sponsoring organizations for purposes of making plan
amendments hereby amends the Prototype Plan to include the following amendment,
as an appendix to the basic plan document. This amendment, which is identical
to the model language in the Appendix of Revenue Procedure 93-12, applies to
any plan maintained by an employer under the Prototype Plan.
APPENDIX TO BASIC PLAN DOCUMENT
ARTICLE VI
6.02(C). THIS ARTICLE APPLIES TO DISTRIBUTIONS MADE ON OR AFTER JANUARY 1,
1993.
Notwithstanding any provision of the plan to the contrary that would
otherwise limit a distributee's election under the Article, a Distributee may
elect, at the time and in the manner prescribed by the plan administrator, to
have any portion of an eligible rollover distribution paid directly to an
eligible retirement plan specified by the distributee in a direct rollover.
6.02(D). DEFINITIONS.
(1) ELIGIBLE ROLLOVER DISTRIBUTION: An eligible rollover
distribution is any distribution of all or any portion of the balance to the
credit of the distributee, except that an eligible rollover distribution does
not include: any distribution that is on of a series of substantially equal
periodic payments (not less frequently than annually) make for the life (or
life expectancy) of the distributee or the joint lives (or joint life
expectancies) of the distributee and the distributee's designated beneficiary,
or for a specified period of ten years or more; any distribution to the extent
such distribution is required under section 401(a)(9) of the Code; and the
portion of any distribution that is not includible in gross income (determined
without regard to the exclusion for net unrealized appreciation with respect to
employer securities).
(2) ELIGIBLE RETIREMENT PLAN: An eligible retirement plan is an
individual retirement account described in section 408(a) of the Code, an
individual retirement annuity described in section 408(b) of the Code, an
annuity plan described in section 403(a) of the Code, or a qualified trust
described in section 401(a) of the Code, that accepts the distributee's
eligible rollover distribution. However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement annuity.
(3) DISTRIBUTEE: A distributee includes an employee or former
employee. In addition, the employee's or former employee's surviving spouse
and the employee's or former employee's spouse or former spouse who is the
alternate payee under a qualified domestic relations order, as defined in
section 414(p) of the Code, are distributees with regard to the interest of the
spouse or former spouse.
(4) DIRECT ROLLOVER: A direct rollover is a payment by the plan to
the eligible retirement plan specified by the distributee.
With respect to each adopting employer's plan maintained under this Prototype
Plan, this amendment is effective as of January 1, 1993.
IN WITNESS WHEREOF, the Sponsor has executed this Amendatory Agreement on the
20th day of January, 1993.
Kemper Growth Fund
By /s/ Paul Murphy
-----------------------------------------------------------
"Sponsor's" Authorized Representative
<PAGE> 74
APPENDIX ARTICLE B
RESOLVED, that Kemper Growth Fund ("Sponsor"), in its capacity as a prototype
sponsoring organization under IRS Revenue Procedure 89-9, amend the Prototype
Plan basic plan document by adopting Appendix Article B, a copy of which is
attached to this resolution. The amendment will be effective for all adopting
employers of the Prototype Plan for plan years beginning after December 31,
1993.
Adopted this seventeenth day of February, 1994.
Kemper Financial Services, Inc.
By: Paul Murphy
-------------------------------------------
*Sponsor's Authorized Representative
ARTICLE B
APPENDIX TO BASIC PLAN DOCUMENT
This Article is necessary to comply with the Omnibus Budget
Reconciliation Act of 1993 (OBRA '93) and is an integral part of the basic plan
document. Section 11.07 applies to any modification or amendment of this
Article.
In addition to other applicable limitations set forth in the plan,
and notwithstanding any other provision of the plan to the contrary, for plan
years beginning on or after January 1, 1994, the annual compensation of each
employee taken into account under the plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding
12 months, over which compensation is determined (determination period)
beginning in such calendar year. If a determination period consists of fewer
than 12 months, the OBRA '93 annual compensation limit will be multiplied by a
fraction, the numerator of which is the number of months in the determination
period, and the denominator of which is 12.
For plan years beginning on or after January 1, 1994, any reference
in this plan to the limitation under Section 401(a)(17) of the Code shall mean
the OBRA '93 annual compensation limit set forth in this provision.
If compensation for any prior determination period is taken into
account in determining an employee's benefits accruing in the current plan
year, the compensation for that prior determination period is subject to the
OBRA '93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before the first
day of the first plan year beginning on or after January 1, 1994, the OBRA '93
annual compensation limit is $150,000.
<PAGE> 75
Kemper Financial Services, Inc.
120 South LaSalle Street
Chicago, IL 60603
<PAGE> 1
EXHIBIT 99.B14.(b)
INDIVIDUAL RETIREMENT TRUST ACCOUNT FORM (UNDER SECTION 408(a) OF THE
INTERNAL REVENUE CODE)
KEEP FOR YOUR RECORDS.
FORM 5305 DO NOT FILE WITH
INDIVIDUAL RETIREMENT TRUST ACCOUNT INTERNAL REVENUE
(REV. OCTOBER 1992) SERVICE
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
<TABLE>
<S><C>
State of } SS / / Amendment
----------------------------------------------------------------------------
County of
---------------------------------------------------------------------------
Grantor's name Grantor's date of birth
--------------------------------- --------------------------------------
Grantor's address Grantor's social security number
------------------------------ ----------------------------
Trustee's name INVESTORS FIDUCIARY TRUST COMPANY
------------------------------------------------------------------------------------------------
Trustee's address or principal place of business KANSAS CITY, MISSOURI
--------------------------------------------------------------
</TABLE>
The Grantor whose name appears above is establishing an Individual Retirement
Account under section 408(a) to provide for his or her retirement and for the
support of his or her beneficiaries after death. The Trustee named above has
given the Grantor the disclosure statement required under Regulations section
1.406-6. The Grantor has assigned the trust __________ dollars ($_______) in
cash. The Grantor and the Trustee made the following agreement:
ARTICLE I
The Trustee may accept additional cash contributions on behalf of the Grantor
for a tax year of the Grantor. The total cash contributions are limited to
$2,000 for the tax year unless the contribution is a rollover described in
section 402(c) (but only after December 31, 1992), 403(a)(4), 403(b)(8),
408(d)(3), or an employer contribution to a simplified employee pension plan as
described in section 408(1). Rollover contributions before January 1, 1993,
include rollovers described in section 402(a)(5), 402(a)(7), 403(a)(4),
403(b)(8), 408(d)(3) or an employer contribution to a simplified employee
pension plan described in section 408(k).
ARTICLE II
The Grantor's interest in the balance in the trust account is nonforfeitable.
ARTICLE III
1. No part of the trust funds may be invested in life insurance contracts, nor
may the assets of the trust account be commingled with other property except in
a common trust fund or common investment fund (within the meaning of section
408(a)(5).
2. No part of the trust funds may be invested in collectibles (within the
meaning of section 408(m).
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Grantor's interest in the trust account shall be made in
accordance with the following requirements and shall otherwise comply with
section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section
1. 401(a)(9)-2, the provisions of which are herein incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Grantor under paragraph 3, or to the surviving spouse under paragraph 4,
other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the Grantor and
the surviving spouse and shall apply to all subsequent years. The life
expectancy of a nonspouse beneficiary may not be recalculated.
3. The Grantor's entire interest in the trust account must be, or begin to be,
distributed by the Grantor's required beginning date, April 1 following the
calendar year end in which the Grantor reaches age 70 1/2. By that date, the
Grantor may elect, in a manner acceptable to the trustee, to have the balance
in the trust account distributed in:
(A) A single sum payment.
(B) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the grantor.
(C) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of the
Grantor and his or her designated beneficiary.
(D) Equal or substantially equal annual payments over a specified period that
may not be longer than the Grantor's life expectancy.
(E) Equal or substantially equal payments over a specified period that may not
be longer than the joint life and last survivor expectancy of the Grantor and
his or her designated beneficiary.
4. If the Grantor dies before his or her entire interest is distributed to him
or her, the entire remaining interest will be distributed as follows:
(A) If the Grantor dies on or after distribution of his or her interest has
begun, distribution must continue to be made in accordance with paragraph 3.
(B) If the Grantor dies before distribution of his or her interest has begun,
the entire remaining interest will, at the election of the Grantor or, if the
Grantor has not so elected, at the election of the beneficiary or
beneficiaries, either
(I) Be distributed by the December 31 of the year containing the fifth
anniversary of the Grantor's death, or
(II) Be distributed in equal or substantially equal payments over the life or
life expectancy of the designated beneficiary or beneficiaries starting by
December 31 of the year following the year of the Grantor's death. If, however,
the beneficiary is the Grantor's surviving spouse, then this distribution is
not required to begin before December 31 of the year in which the Grantor would
have turned age 70 1/2.
(C) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has irrevocably
commenced, distributions are treated as having begun on the Grantor's required
beginning date, even though payments may actually have been made before that
date.
(D) If the Grantor dies before his or her entire interest has been distributed
and if the beneficiary is other than the surviving spouse, no additional cash
contributions or rollover contributions may be accepted in the account.
5. In the case of a distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each year,
divide the Grantor's entire interest in the trust as of the close of business
on December 31 of the preceding year by the life expectancy of the Grantor (or
the joint life and last survivor expectancy of the Grantor and the Grantor's
designated beneficiary, or the life expectancy of the designated beneficiary,
whichever applies). In the case of distributions under paragraph 3, determine
the initial life expectancy (or joint life and last survivor expectancy) using
the attained ages of the Grantor and designated beneficiary as of their
birthdays in the year the Grantor reaches age 70 1/2. In the case of a
distribution in accordance with paragraph 4(b)(ii), determine life expectancy
using the attained age of the designated beneficiary as of the beneficiary's
birthday in the year distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy the
minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
<PAGE> 2
INDIVIDUAL RETIREMENT TRUST ACCOUNT FORM (CONTINUED)
ARTICLE V
1. The Grantor agrees to provide the Trustee with information necessary for the
Trustee to prepare any reports required under section 408(i) and Regulations
1.408-5 and 1.408-6.
2. The Trustee agrees to submit reports to the Internal Revenue Service and the
Grantor as prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and related
regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signature appear below.
ARTICLE VIII
1. DEFINITIONS: "Designated Investment Company" shall mean any Kemper Mutual
Fund, or any other registered investment company with the same investment
advisor or principal underwriter, if certified to the Trustee as being
available for investment pursuant to this trust.
2. INVESTMENT OF ACCOUNT ASSETS: The amount of each contribution shall be
applied to the purchase of shares of a Designated Investment Company at the
price and in the manner in which such shares are then being publicly offered by
such investment company. All dividends and capital gain distributions received
on the shares of a Designated Investment Company other than Kemper Bond
Enhanced Securities Trust shall be reinvested in such shares. Any distributions
from the Kemper Bond Enhanced Securities Trust shall be invested in one of the
other Designated Investment Companies set forth in the prospectus and selected
by the Grantor, or in the absence of a selection will be invested in the Kemper
Money Market Fund-Government Securities Portfolio.
3. DISTRIBUTIONS: Notwithstanding the provisions of Article IV, if the Grantor
or a beneficiary does not choose a method of distribution in accordance with
Article IV, the Trustee is authorized, but is not required, to elect a
distribution option other than a single sum payment, to make distributions
pursuant to such election in kind, and to liquidate sufficient shares of a
Designated Investment Company to withhold federal income tax from distributions
as required by law. Further, the Trustee shall not be responsible for any
distribution or failure to distribute in the absence of written instructions
acceptable to the Trustee from the Trustee from the Grantor or beneficiary in
accordance with Article IV including, but not limited to, any tax or penalty
resulting from such distribution or failure to distribute.
4. AMENDMENT AND TERMINATION: The Grantor may, at any time, and from time to
time, terminate the Trust in whole or in part by delivering to the Trustee a
signed written copy of such termination and the Grantor delegated to the
Trustee the right to amend the Trust (including retroactive amendments) by
written notice to the Grantor mailed to his last address known to the Trustee,
and the Grantor shall be deemed to have consented to any such amendment,
provided that no amendment shall cause or permit any part of the asset of the
Trust Account to be diverted to purposes other than for the exclusive benefit
of the Grantor or beneficiaries, and no amendment shall be made except in
accordance with any applicable laws and regulations affecting this Trust.
5. RESIGNATION OR REMOVAL OF TRUSTEE: The Trustee may resign at any time upon
thirty (30) days of notice in writing to the Grantor, and may be removed by the
Grantor at any time upon thirty (30) days notice in writing to the Trustee.
Upon such resignation or removal, the Grantor shall appoint a successor
Trustee, which successor shall be a "bank" as defined in section 408(n). Upon
receipt by the Trustee of written acceptance of such appointment by the
successor Trustee, the Trustee shall transfer and pay over to such successor
the assets of the Trust Account and all records pertaining thereto. The Trustee
is authorized, however, to reserve such sum of money as it may deem advisable
for payment of all its fees, compensation, costs and expenses, or for payment
of any other liability constituting a charge on or against the assets of the
Trust Account or on or against the Trustee, which any balance of such reserve
remaining after the payment of such items to be paid over to the successor
Trustee. The successor Trustee shall hold the assets paid over to it under
terms similar to those of this Agreement that qualify under the provisions of
the Internal Revenue Code. If within thirty (30) days after the Trustee's
resignation or removal the Grantor has not appointed a successor trustee, which
has accepted with appointment, the Trustee shall appoint such successor itself.
6. TRUSTEE'S ANNUAL FEES: The Grantor shall be charged by the Trustee for its
services here-under in such amount as the Trustee shall establish from time to
time. Sufficient shares may be liquidated from the Trust Account to pay the
fee. The annual fee in effect on the date of this agreement is set forth in the
Application Guide. A different fee may be substituted at any time upon written
notice to the Grantor. A Grantor who does not consent to such new fee should
terminate this agreement pursuant to Paragraph 4 of Article IX within 30 days
of the notice to the new fee. If no such termination is made within 30 days of
the notice of the new fee, the Grantor will be deemed to have consented to the
new fee.
7. STATE LAW REQUIREMENTS: This Trust shall be construed, administered and
enforced according to the laws of the State of Missouri.
8. EXCESS CONTRIBUTIONS: If, because of an erroneous assumption as to earned
income for any other reason, a contribution which is an excess contribution is
made on behalf the Grantor for any year, adjustment of such excess contribution
shall be in accordance with the provisions of this paragraph. The full amount
of such excess contribution and net income attributable thereto shall be
distributed to the Grantor, in cash or kind upon written notice to the Trustee
from the Grantor which states the amount of such excess contribution.
9. INALIENABILITY OF BENEFITS: The benefits provided hereunder shall not be
subject to alienation, assignment, garnishment, attachment, execution or levy
of any kind, and any attempt to cause such benefits to be subjected shall not
be recognized, except to such extent as may be required by law.
10. EXCHANGE PRIVILEGE: With respect to any of the Designated Investment
Company shares, the Grantor may, upon submission of written instructions
acceptable to the Trustee, cause such shares to be exchanged for shares of any
other Designated Investment Company meeting the requirements of this Trust upon
the terms and within the limitations imposed by the then current prospectus of
such investment company.
11. DESIGNATION OF BENEFICIARY: The Grantor shall have the right, by written
notice to the Trustee, to designate or change a beneficiary to receive any
benefit to which such Grantor may be entitled in the event of the Grantor's
death prior to the complete distribution of such benefit. If no such designation
is in effect on a Grantor's death, the beneficiary shall be the Grantor's
estate.
12. RESPONSIBILITY AS TO CONTRIBUTIONS OR DISTRIBUTIONS: Neither the Trustee
nor the Designated Investment Company will under any circumstances be
responsible for the timing, purpose or propriety of any contribution or of any
distribution made hereunder, nor shall the Trustee or the Designated Investment
Company incur any liability or responsibility for any tax imposed account of
any such contribution or distribution. Without limiting the generality of the
foregoing, neither the Trustee nor the Designated Investment Company is
obligated to make any distribution absent a specific direction from the Grantor
or the designated beneficiary to do so.
[KEMPER MUTUAL FUNDS LOGO]
INVESTMENT MANAGER:
Kemper Financial Services, Inc.
PRINCIPAL UNDERWRITER:
Kemper Distributors, Inc.
120 South LaSalle Street
Chicago, Illinois 60603
Trustee Signature INVESTORS FIDUCIARY TRUST COMPANY Grantor's Signature
- --------------------------------------------------------------------------------
IRA-10B 2/95 203932
<PAGE> 3
IRA DISCLOSURE STATEMENT IMPORTANT--PLEASE RETAIN
IRAs: AN INTRODUCTION
WHAT IS AN IRA?
Your Individual Retirement Account (IRA) is a trust created for the exclusive
benefit of you and your beneficiaries. It is created by a written instrument
that meets the following requirements:
- - Contribution restrictions stated in Article I of the trust instrument.
- - Investment restrictions stated in Article III of the trust instrument.
- - Distribution of benefits requirements contained in Article IV of the trust
instrument.
- - The trustee is a bank as defined in the Internal Revenue Code.
- - You will have a non-forfeitable interest in your account.
ESTABLISHING THE PLAN
HOW DO I ESTABLISH MY KEMPER IRA?
Read this disclosure statement and retain it for your files.
Complete and sign the correct application. (2 applications are necessary if
both you and your spouse wish to establish an IRA).
MAKE CHECK PAYABLE TO THE KEMPER FUND OF YOUR CHOICE, AND MAIL COMPLETED
APPLICATION AND CONTRIBUTION TO:
INVESTORS FIDUCIARY TRUST COMPANY (IFTC)
P.O. BOX 419356
KANSAS CITY, MO 64141-6356
MAY I REVOKE MY IRA?
You have the right to revoke your account within seven days of the date on
which your application was signed. To revoke your account write to IFTC at the
address referenced above.
ELIGIBILITY
WHO CAN ADOPT AN IRA?
You may adopt an IRA if you are receiving compensation from employment,
earnings from self-employment or alimony, and have not attained age 70 1/2. You
may also adopt an IRA if you have received a qualifying rollover distribution
from another plan within the preceding 60 days or if you wish to transfer
assets from another IRA. See "Rollover/Transfer of Assets" section on the
following page.
WHAT ABOUT A NON-WORKING SPOUSE?
A spousal IRA allows an individual who qualifies for an IRA and his or her
non-working spouse to set up two IRA accounts: one for each spouse. See
"Contribution Limits" section below.
CONTRIBUTION LIMITS
HOW MUCH CAN I CONTRIBUTE EACH YEAR?
If you are receiving compensation you may contribute the lesser of $2,000 or
100% of your compensation.
For a year in which you are receiving compensation, but your spouse is not, you
can set up an IRA for your spouse and contribute the lesser of: $2,250 or 100%
of your compensation. The maximum contribution must be split between the two
accounts so that no more than $2,000 is placed in either account.
No contribution will be allowed for the year in which you attain age 70 1/2 and
thereafter.
FOR MY IRA, WHAT IS CONSIDERED COMPENSATION?
Compensation is defined as wages, salaries or professional fees, other amounts
received for personal services actually rendered (including income earned from
self-employment), and any taxable alimony received. It does not include earnings
from property such as interest, rents and dividends. If your compensation is
not includable in gross income (such as income earned from sources outside the
United States, it is not treated as compensation in determining the maximum
limitation for the deduction.
WHEN CAN A CONTRIBUTION BE MADE?
Your annual contribution may be made during the taxable year or no later than
the due date for filing your federal income tax return not including extensions.
WHAT HAPPENS IF I OVER-CONTRIBUTE TO MY IRA?
There is a 6% annual excise tax on contributions to an IRA over the annual
contributions limit. However, if you withdraw the excess contribution and
earnings thereon from the IRA before the due date for filing your federal
income tax return (including extensions) for the year of the excess
contribution, the excise tax is not imposed, the withdrawn contribution is not
taxable and the withdrawn earnings are taxable in the year the excess
contribution was made.
If the excess is not withdrawn, you may use the excess as part of next year's
contribution by reducing the next year's contribution by the amount of the
excess. You will, however, be liable for the 6% excise tax on the
over-contributed amount for each year it remains an excess contribution.
HOW DOES MY MARITAL STATUS AFFECT MY IRA?
Since a contribution is available to each eligible individual, both husband
and wife can contribute if each individually is eligible and each adopts a
separate individual retirement savings program. The contribution limitation is
computed separately for each spouse, whether or not they file a joint tax
return.
CAN MY EMPLOYER CONTRIBUTE TO MY IRA?
Yes, but these contributions are included in your gross income as compensation
and must be claimed as a deduction on your federal income tax return, just as
if you had received the money and made the contribution.
DEDUCTION LIMITS
HOW MUCH CAN I DEDUCT EACH YEAR?
If you and your spouse are not covered by a retirement plan at work, the
amount you can deduct is the same as the amount you can contribute (see
"Contribution Limit" above). If you or your spouse are covered by a retirement
plan at work, the $2,000 limit is reduced $10 for each $50 that your adjusted
gross income exceeds:
$40,000 (married filing jointly), $25,000 (single), or $0 (married filing
separately), and the $2,250 limit is reduced $10 for each $44.44 that your
adjusted gross income exceeds $40,000.
DISTRIBUTION FROM YOUR IRA
WHEN CAN I TAKE MONEY OUT OF MY IRA?
You can begin to take money out of your IRA without penalty after age 59 1/2,
but you must begin to take money out by April 1 following the year in which you
attain age 70-1/2.
WHAT IF I TAKE A DISTRIBUTION BEFORE AGE 59 1/2?
There is an additional tax equal to 10% of the taxable amount of a distribution
before age 59 1/2, unless you are disabled or take your distributions as a
series of substantially equal periodic payments over your life or life
expectancy or the joint lives or life expectancies of you and your beneficiary.
The amounts of such periodic payments may not be changed before the later of
five years or at attainment of age 59 1/2.
HOW ARE MY DISTRIBUTIONS TAXED?
The distributions are generally taxed as ordinary income in the year they are
received. Distributions are non-taxable to the extent they represent a return
of non-deductible contributions.
The non-taxable percentage of such a distribution is determined by dividing
the undistributed non-deductible contributions to all your IRAs by the total
value of all your IRAs (including SEPs and rollover IRAs).
DO I HAVE A CHOICE ON HOW TO RECEIVE MY DISTRIBUTIONS UPON RETIREMENT?
Yes, subject to the minimum distribution incidental benefit (MDIB) requirement
described below, distributions may be taken as:
- - Regular payments over the joint lives or life expectancies of you and your
designated beneficiary.
- - An annuity purchased with the money in your IRA payable over the joint lives
or life expectancies of you and your beneficiary.
- - Annuity or regular payments over any period shorter than the above.
- - A lump sum.
WHAT IS THE MINIMUM ANNUAL DISTRIBUTION?
The amount to be distributed for each year (commencing with the year in which
you attain age 70 1/2) must be at least an amount equal to the quotient
obtained by dividing the value of the IRA by your life expectancy or by the
joint and last survivor life expectancy of you and your designated beneficiary,
subject to the MDIB requirement described on the next page. The minimum
distribution for the year in which you attain age 70 1/2 may be deferred until
April 1 of the following year. Note that if you elect to defer the minimum
distribution for the year you attain age 70 1/2 to the following year, you will
be required to take 2 years' minimum distributions in that year. Life expectancy
and joint and last survivor expectancy are computed by use of the tables
contained in IRS Publication 590. For purposes of this computation, the life
expectancy of you or your spouse may be recalculated annually, while the life
expectancy of a nonspouse beneficiary may not be recalculated.
<PAGE> 4
IRA DISCLOSURE STATEMENT (CONTINUED)
WHAT IS THE MINIMUM DISTRIBUTION INCIDENTAL BENEFIT (MDIB) REQUIREMENT?
The MDIB Requirement requires that a death benefit under an IRA be incidental
to the primary purpose of the IRA which is to provide your retirement benefits.
Thus, if your designated beneficiary is more than 10 years younger, you must
assume he or she is exactly 10 years younger than you to determine your joint
and last survivor life expectancy.
WHAT IF I HAVE MORE THAN ONE IRA?
If you have more than one IRA, you may take the total amount of your minimum
distribution amounts from one IRA or you may allocate it among your IRAs.
WHAT IF I TAKE AN AMOUNT LESS THAN DESCRIBED ABOVE?
A 50% excise tax will be imposed on the difference between the minimum payout
required and the amount actually paid, unless the underdistribution was due to
reasonable cause.
WHAT ABOUT FEDERAL INCOME TAX WITHHOLDING?
The Trustee may be required to withhold 10% from any taxable distribution from
an IRA unless you elect no withholding at the time your distributions begin.
Whether or not you allow the Trustee to withhold, you may be required to make
quarterly estimated tax payments.
SPECIAL CONSIDERATIONS
CAN I USE MY IRA AS COLLATERAL FOR A LOAN?
No. If you use any portion of your IRA as security for a loan the portion so
used will be treated as distributed to you.
HAS THIS PLAN BEEN SUBMITTED TO THE IRS FOR APPROVAL?
The use of IRS Form 5305 (included in this packet) makes such submission
unnecessary.
ROLLOVER/TRANSFER OF ASSETS DO DISTRIBUTIONS FROM MY EMPLOYER'S TAX-QUALIFIED
PLAN QUALIFY FOR IRA ROLLOVER TREATMENT?
Yes, part or all of a lump-sum distribution or a series of distributions if
made during one calendar year as the result of termination of employment,
attainment of age 59 1/2, disability, death, or plan termination may be rolled
over into an IRA.
You do not have to roll over the total taxable amount of the distribution, but
whatever portion is not rolled over will be taxed as ordinary income in the
year received and will not qualify for either long-term capital gains or
special averaging. The maximum amount that can be rolled over is the total
distribution minus the dollar amount of any voluntary non-deductible
contributions you made.
Please consult your accountant regarding current IRS regulations on the tax
treatment of rollovers from tax-qualified plans.
WHEN MUST THE ROLLOVER BE COMPLETED?
The check and application must be sent to the IRA trustee within 60 days of
receipt of a qualifying distribution.
CAN I TAKE A TAX DEDUCTION FOR A ROLLOVER?
No. You are not allowed to take a tax deduction for the amount transferred
from a qualified employer's plan or retirement savings program to an IRA.
WHAT IS THE DIFFERENCE BETWEEN A ROLLOVER AND A DIRECT TRANSFER OF ASSETS?
With a rollover, you actually receive the distribution from an IRA or qualified
employer's plan. A direct transfer of assets occurs when the existing trustee or
custodian makes the check payable and sends the distribution directly to the
new trustee or custodian.
A rollover distribution from an IRA may be made to you only once a year. The
one year period begins on the date you receive the IRA distribution. There is
no minimum holding period for a direct transfer of assets from one trustee to
another.
WHAT STEPS DO I NEED TO TAKE TO PROCESS A ROLLOVER OR DIRECT TRANSFER OF
ASSETS?
You can do a rollover by notifying your current IRA trustee or custodian in
writing that you wish to take a distribution from your IRA and roll over to a
new IRA. Once the distribution is received you may either endorse the check over
to the new trustee or deposit the check received and issue a new check for the
amount received to the new trustee and send it along with an IRA Application to
the new trustee.
To accomplish a direct transfer of assets, you simply notify your existing
trustee in writing of your intentions. Then send a copy of the letter along
with an IRA application to the new trustee. Your old trustee will send your
distribution directly to the new trustee.
REPORTING REQUIREMENTS
DOES THE IRA REQUIRE A LOT OF PAPERWORK EACH YEAR?
No, unless you have to pay an excise or penalty tax or you received a
nontaxable distribution or you made a nondeductible contribution (other than a
rollover), no special income tax return is required. If an excise or penalty tax
is due you must file IRS Form 5329 with your Form 1040. If you designate an IRA
contribution as nondeductible you must attach Form 8606 to your 1040 for the
year of the nondeductible contribution and for any year you take a
non-deductible distribution (other than a rollover to another IRA).
SIMPLIFIED EMPLOYEE PENSION PLAN (SEP)
DOES THE KEMPER IRA QUALIFY FOR A SEP?
Yes, but the SEP must be established and maintained by your employer. More
information about establishing a SEP is available from Kemper upon request.
WHAT IS THE MAXIMUM DEDUCTION FOR A SEP-IRA?
The lesser of 15% of your compensation with respect to the sponsoring employer
or $30,000.
FINANCIAL DISCLOSURE
WHAT ELSE DO I NEED TO KNOW ABOUT KEMPER'S IRAs?
Information about the fund or trust you have selected is included in the
appropriate prospectus. The acquisition cost and how the value of your account
changes are described in the prospectus.
A SHARES
If $1,000 is invested in Kemper Technology Fund, Kemper Total Return Fund,
Kemper Growth Fund, Kemper Small Capitalization Equity Fund, Kemper
International Fund or Kemper Blue Chip Fund, the amount of the sales charge
will be $57.50. If $1,000 is invested in Kemper Target Equity Funds, the amount
of the sales charge will be $50. If $1,000 is invested in Kemper High Yield
Fund, Kemper Income and Capital Preservation Fund, Kemper Diversified Income
Fund, Kemper Global Income Fund, Kemper U.S. Mortgage Fund or Kemper U.S.
Government Securities Fund, the amount of the sales charge will be $45. If
$1,000 is invested in Kemper Adjustable Rate U.S. Government Fund or Kemper
Short-Intermediate Government Fund, the amount of the sales charge will be $35.
If $1,000 is invested in Kemper Money Market Fund-Government Securities
Portfolio or Kemper Money Market Fund-Money Market Portfolio, there will be no
sales charge.
B SHARES
If $1,000 is invested in Kemper Mutual Funds B shares, there is no initial
sales charge. B shares are subject to an annual distribution fee and, on
redemption, may be subject to a contingent deferred sales charge and have a
conversion priveledge to A shares after 6 years.
C SHARES
If $1,000 is invested in Kemper Mutual Funds C shares, there is no initial
sales charge. C shares are subject to an annual distribution fee and have no
conversion priveledge.
There is an annual $12 trustee fee for the Kemper Family of Funds. An
individual holding two or more accounts in Kemper Family of Funds will be
charged a maximum of $24. The fees may be paid either by separate check or will
be automatically deducted from your account by IFTC. This fee is subject to
change as provided in Article IX, Paragraph 6 of the trust instrument. These
fees are paid either by a separate check or by the liquidation of sufficient
shares or units. If not paid by a separate check, IFTC will automatically
deduct the annual trustee fee on or about May 1. If an account is opened after
May 1, IFTC will deduct the $12 annual trustee fee on or about December 1 in
the year the account is opened. (See "Application Guide" for more details.)
This fee is subject to change upon notice by IFTC to you as provided in Article
IX, Paragraph 6 of the trust instrument.
The deadline for an IRA contribution is generally April 15 of the year
following the taxable year for which the contribution will apply. IFTC and
Kemper will not be responsible for postal delays or delays resulting from
incomplete applications. Applications received by IFTC postmarked after the
deadline and improperly completed applications will be returned to the sender.
IRA-10A 7/94 [KEMPER MUTUAL FUNDS LOGO]
203921
<PAGE> 5
<TABLE>
<S> <C>
IRA APPLICATION (PLEASE PRINT) FOR ASSISTANCE IN COMPLETING THIS FORM, CALL
KEMPER SHAREHOLDER SERVICES AT 1-800-621-1048.
1. INFORMATION ABOUT YOU For internal use only
Name ___________________________________________________________________________
Address ________________________________________________________________________
City _______________________________ State _____________________ Zip ___________
Daytime Phone Number(_____)_____________________________________________
Social Security Number ________/___________/_________ Date of Birth ____/____/____
2. YOUR BENEFICIARIES (PLEASE INCLUDE SOCIAL SECURITY NUMBERS FOR ALL BENEFICIARIES)
Primary Beneficiary Name _____________________________________ Secondary Beneficiary Name ________________________________________
Address ______________________________________________________ Address ___________________________________________________________
City _____________________________ State __________ Zip ______ City _____________________________ State _______________ Zip ______
Relationship__________________________________________________ Relationship ______________________________________________________
SS#_____________/_____/__________ Date of Birth ____/____/____ SS# _______________ /______ /__________ Date of Birth ____/____/____
3. TYPE OF IRA (CHECK ONLY ONE)
/ / Individual / / Simplified Employee Plan (SEP) / / Spousal
4. TYPE OF TRANSACTION (CHECK ALL BOXES THAT APPLY)
/ / Contribution: (CIRCLE ONE) A. Individual B. Employer (ONLY APPLIES TO SEPS)
/ / Direct Transfer of Assets (PLEASE ATTACH IRA TRANSFER FORM)
/ / Rollover from: (CIRCLE ONE) A. Another Annual B. Another IRA, where the initial contribution C. A Qualified
Contribution IRA was from a qualified retirement plan Retirement Plan
/ / I have reached the age of 59 1/2 and am eligible to take a distribution without tax penalty from my IRA: (CIRCLE ONE)
A. IRA Distribution Form B. Please send my
is attached dividends in cash
5. YOUR INVESTMENT CHOICES ($250 MINIMUM PER FUND TO ESTABLISH AN IRA. $50 IF NUMBER 7 [BANK DIRECT DEPOSIT] SELECTED.)
(SEE FRONT CARD FOR FUND NAMES. NOTE NUMBER 9 BELOW REGARDING RECEIPT OF PROSPECTUS.)
/ / A Shares / / B Shares / / C Shares 199___ 199___
(PLEASE CHOOSE SHARE CLASS) (CIRCLE ONE) (CIRCLE ONE)
Indiv/Employer Indiv/Employer
Contribution Contribution Rollover Transfer
Fund Name _____________________________ $__________ $__________ $__________ __________%
Fund Name _____________________________ $__________ $__________ $__________ __________%
Fund Name _____________________________ $__________ $__________ $__________ __________%
Trustee Fee (OPTIONAL) $____________
6. TELEPHONE EXCHANGES
I authorize exchanges between Kemper Mutual Funds upon instruction from any person by telephone. / / YES / / NO
NOTE: IF NEITHER BOX IS CHECKED, THE TELEPHONE EXCHANGE PRIVILEGE WILL BE PROVIDED.
7. BANK DIRECT DEPOSIT
I authorize the Fund's agent to draw checks or initiate Automated Clearing House ("ACH") debits against the bank account on the
attached voided check in the amount of $_____ (minimum $50), beginning on the ____ day of _____ month and on the same day of each
month thereafter. If the date falls on a weekend or holiday, funds will be invested on the next business day. The investment will be
applied to the following Fund account(s). A $50 minimum per Fund applies.
Fund Name ______________________________ $_______________ (NOTE: THE BANK ACCOUNT MUST
Fund Name ______________________________ $_______________ HAVE CHECK OR DRAFT WRITING
Fund Name ______________________________ $_______________ PRIVILEGES.)
8. YOUR FINANCIAL REPRESENTATIVE
Representative _____________________________ Name of Firm ________________________________________________________
Address_____________________________________ City __________________________ State __________________ Zip ________
Rep. Daytime Phone (___)___________ Rep.#____________ Dealer #______________ Branch #______________
9. YOUR SIGNATURE BY SIGNING THIS APPLICATION ESTABLISHING AN IRA, THE UNDERSIGNED:
- - Establishes an Individual Retirement Account pursuant to the Employee Retirement Income Security Act of 1974 and in accordance
with all the terms of the Trust Agreement on Form 5305;
- - Appoints Investors Fiduciary Trust Company, or its successors, as Trustee of the account;
- - States that he or she has received, read, accepts and specifically incorporates herein the Trust Agreement on Form 5305 and
Disclosure Statement;
- - Agrees to promptly give instructions to the Trustee necessary to enable the Trustee to carry out its duties under the Trust
Agreement and;
- - Agrees that he or she has received and read the prospectus for the investment(s) selected and that this account will be
subject to the prospectus as amended from time to time.
Under penalties of perjury, I certify that the number shown on this form is my correct social security number, and that I have not
been notified by the IRS that I am subject to back-up withholding. I certify that I have the power and authority to establish this
account and select the privileges requested. Account holders can request the following telephone privilege on this application:
telephone exchange transactions. Please note that the telephone exchange privilege is automatic unless the account holder refuses
it. Neither a Fund nor its agents will be liable for any loss, expense or cost arising out of any telephone request pursuant to
this privilege, including any fraudulent or unauthorized request, and THE ACCOUNT HOLDER WILL BEAR THE RISK OF LOSS, so long as the
Fund or its agent reasonably believes, based upon reasonable verification procedures, that the telephonic instructions are genuine.
The verification procedures include recording instructions, requiring certain identifying information before acting upon
instructions, and sending written confirmations.
Your Signature _________________________________________________ Date ____________________________________________________________
IRA-10 2/95 203911
</TABLE>
<PAGE> 6
IRA APPLICATION GUIDE
1. INFORMATION ABOUT YOU
Fill this section out completely.
2. YOUR BENEFICIARIES
You can change your beneficiaries by writing a letter of instruction to
Investors Fiduciary Trust Company, c/o Kemper Service Company, P.O. Box 419415,
Kansas City, MO 64141-6415. Reference your name, fund, and fund account number.
If you have more than one beneficiary, please identify the primary and
secondary beneficiary.
3. TYPE OF IRA
INDIVIDUAL: A working individual may contribute up to $2,000 or 100% of
compensation, whichever is less.
SIMPLIFIED EMPLOYEE PLAN (SEP): Must be established and maintained by the
employer. The maximum contribution is the lesser of 15% of your compensation
or $30,000. For more information on establishing a SEP, call Kemper
Shareholder Services at 1-800-621-1048.
SPOUSAL: Two applications are necessary if both you and your spouse wish to
establish an IRA. If you're contributing for both you and your non-working
spouse, the maximum contribution is the lesser of 100% of your compensation or
$2,250. The maximum contribution must be split between the two accounts so that
no more than $2,000 is placed in either account.
4. TYPE OF TRANSACTION
DIRECT TRANSFER OF ASSETS: When changing custodians on an existing IRA, the IRA
must be released by the present custodian. To obtain information concerning the
transfer of IRA assets call Kemper Shareholder Services at 1-800-621-1048.
ROLLOVER: With a rollover, you actually receive a distribution from an IRA, or
qualified employer's plan. Once the distribution is received, you may either
endorse the check over to the new trustee or deposit the check received and,
within 60 days of receipt, issue a new check for the amount received to the new
trustee and send it along with an IRA Application to the new trustee.
You may roll over your IRA as many times as you wish. However, each time you do
roll over, the funds must remain with the new trustee for at least 12 months.
(PLEASE NOTE: CONTACT YOUR ACCOUNTANT ABOUT THE TAX CONSEQUENCES OF RECEIVING
A CASH DISTRIBUTION FROM YOUR EMPLOYER'S TAX-QUALIFIED PLAN BEFORE
FORWARDING A CHECK TO KEMPER TO OPEN AN IRA. UNDER CURRENT IRS PROVISIONS, THERE
MAY BE TAX LIABILITY ASSOCIATED WITH TAKING PHYSICAL POSSESSION OF YOUR
DISTRIBUTION, INSTEAD OF AUTOMATICALLY TRANSFERRING YOUR BALANCE INTO A KEMPER
IRA).
5. YOUR INVESTMENT CHOICES
Elect your investment choice(s) from among the Kemper Funds for which you have
received a prospectus. The minimum investment to establish an IRA is $250 per
Fund; the minimum subsequent investment is $50. The minimum initial investment
is $50 per Fund if the Bank Direct Deposit option is selected.
TRUSTEE FEE
There is an annual $12 trustee fee for the Kemper Family of Funds.
An individual holding two or more accounts in Kemper Family of Funds will be
charged a maximum of $24. The fees may be paid either by separate check or will
be automatically deducted from your account by Investors Fiduciary Trust
Company. This fee is subject to change as provided in Article IX of the
Individual Retirement Trust Account Form.
WHEN AND HOW THE $12 FEE IS AUTOMATICALLY DEDUCTED
If the $12 annual trustee fee is not paid by separate check, Investors
Fiduciary Trust Company will automatically deduct the $12 fee from your
account. Annual trustee fees are assessed on a calendar year basis.
If you opened your account prior to May 1st of the calendar year, the fee will
be deducted on May 1st. If you opened your account after May 1st of that
calendar year, the $12 fee will be deducted on December 1st. In every calendar
year after the year in which you opened your account, the fee will be deducted
on May 1st.
WHAT TO DO IF YOU ELECT TO PAY THE $12 ANNUAL FEE DIRECTLY
- - You may pay the first year fee by including $12 with your first contribution
and making the proper entry in Section 5 of the IRA Application.
- - If you elect to send in the $12 annual fee by separate check in subsequent
years, make sure to do so prior to the May 1st automatic deduction. Send a
letter referencing the exact name on your account, the fund name and the
account number. Make your check payable to Investors Fiduciary Trust Company
and mail to Investors Fiduciary Trust Company, c/o Kemper Service Company, P.O.
Box 419356, Kansas City, MO 64141-6356.
6. TELEPHONE EXCHANGES
To make exchanges, call 1-800-621-1048. Please see the prospectus for exchange
privilege limitations. The exchange privilege may be modified, suspended or
terminated by a Fund.
7. BANK DIRECT DEPOSIT
With Bank Direct Deposit, you can make automatic contributions for as little as
$50 from your checking account into your Kemper IRA. There is no service
charge, no checks to write and it's a great way to invest for the future.
8. YOUR FINANCIAL REPRESENTATIVE
You must complete this section if you have a financial representative. The
information is necessary for proper identification of the account and can be
obtained from your representative.
9. YOUR SIGNATURE
Please be sure to sign and date this section.
10. RETURN YOUR APPLICATION
IF NOT A TRANSFER...
Mail the IRA APPLICATION, a check made payable to Kemper Fund of your choice
(and the IRA DISTRIBUTION FORM if applicable) to:
INVESTORS FIDUCIARY TRUST COMPANY - C/O KEMPER SERVICE COMPANY
P.O. BOX 419356 - KANSAS CITY, MO 64141-6356
FOR TRANSFERS ONLY...
Mail the IRA Application, IRA Transfer Form (and the IRA Distribution form if
applicable) to:
INVESTORS FIDUCIARY TRUST COMPANY - C/O KEMPER SERVICE COMPANY
P.O. BOX 419222 - KANSAS CITY, MO 64141-6222
FOR MORE INFORMATION
If you need further information, please contact your financial representative
directly or call Kemper Shareholder Services at 1-800-621-1048 7:00 a.m. to
6:00 p.m. Central Time (Monday-Friday) and 9:00 a.m. to 2:00 p.m. (Saturday).
If you have tax or legal questions, contact your tax advisor or any district
office of the IRS.
[KEMPER MUTUAL FUNDS LOGO]
<PAGE> 1
EXHIBIT 99.B18
KEMPER MUTUAL FUNDS
MULTI-DISTRIBUTION SYSTEM PLAN
WHEREAS, each investment company adopting this Multi- Distribution System
Plan (each a "Fund" and collectively the "Funds") is an open-end management
investment company registered under the Investment Company Act of 1940 (the
"1940 Act");
WHEREAS, 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
<PAGE> 2
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: (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 Rule 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.
2
<PAGE> 3
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 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
3
<PAGE> 4
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
4
<PAGE> 1
EXHIBIT 99.B24
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as such person's attorney-in-fact to
sign and file on such person's behalf individually and in the capacity stated
below such registration statements, amendments, post-effective amendments,
exhibits, applications and other documents with the Securities and Exchange
Commission or any other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Kemper-Dreman Fund, Inc.
Signature Title Date
--------- ----- ----
/s/ Stephen B. Timbers Director January 17, 1996
----------------------
<PAGE> 2
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as such person's attorney-in-fact to
sign and file on such person's behalf individually and in the capacity stated
below such registration statements, amendments, post-effective amendments,
exhibits, applications and other documents with the Securities and Exchange
Commission or any other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Kemper-Dreman Fund, Inc.
Signature Title Date
--------- ----- ----
/s/ James E. Akins Director January 17, 1996
----------------------
<PAGE> 3
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as such person's attorney-in-fact to
sign and file on such person's behalf individually and in the capacity stated
below such registration statements, amendments, post-effective amendments,
exhibits, applications and other documents with the Securities and Exchange
Commission or any other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Kemper-Dreman Fund, Inc.
Signature Title Date
--------- ----- ----
/s/ Arthur R. Gottschalk Director January 17, 1996
------------------------
<PAGE> 4
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as such person's attorney-in-fact to
sign and file on such person's behalf individually and in the capacity stated
below such registration statements, amendments, post-effective amendments,
exhibits, applications and other documents with the Securities and Exchange
Commission or any other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Kemper-Dreman Fund, Inc.
Signature Title Date
--------- ----- ----
/s/ Frederick T. Kelsey Director January 17, 1996
----------------------
<PAGE> 5
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as such person's attorney-in-fact to
sign and file on such person's behalf individually and in the capacity stated
below such registration statements, amendments, post-effective amendments,
exhibits, applications and other documents with the Securities and Exchange
Commission or any other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Kemper-Dreman Fund, Inc.
Signature Title Date
--------- ----- ----
/s/ Dominique P. Morax Director March 6, 1996
----------------------
<PAGE> 6
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as such person's attorney-in-fact to
sign and file on such person's behalf individually and in the capacity stated
below such registration statements, amendments, post-effective amendments,
exhibits, applications and other documents with the Securities and Exchange
Commission or any other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Kemper-Dreman Fund, Inc.
Signature Title Date
--------- ----- ----
/s/ Fred B. Renwick Director January 17, 1996
----------------------
<PAGE> 7
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as such person's attorney-in-fact to
sign and file on such person's behalf individually and in the capacity stated
below such registration statements, amendments, post-effective amendments,
exhibits, applications and other documents with the Securities and Exchange
Commission or any other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Kemper-Dreman Fund, Inc.
Signature Title Date
--------- ----- ----
/s/ John B. Tingleff Director January 17, 1996
----------------------
<PAGE> 8
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as such person's attorney-in-fact to
sign and file on such person's behalf individually and in the capacity stated
below such registration statements, amendments, post-effective amendments,
exhibits, applications and other documents with the Securities and Exchange
Commission or any other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Kemper-Dreman Fund, Inc.
Signature Title Date
--------- ----- ----
/s/ John G. Weithers Director January 17, 1996
----------------------
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
Per share and ratio information is shown at the class level. All other
information is combined for all classes. This schedule contains summary
financial information extracted from the 1995 Annual Report to shareholders and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000825062
<NAME> KEMPER-DREMAN FUND, INC.
<SERIES>
<NUMBER> 10
<NAME> KEMPER-DREMAN CONTRARIAN FUND - COMBINED
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 18,353
<INVESTMENTS-AT-VALUE> 25,064
<RECEIVABLES> 680
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 25,744
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 262
<TOTAL-LIABILITIES> 262
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 18,760
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 11
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,711
<NET-ASSETS> 25,482
<DIVIDEND-INCOME> 482
<INTEREST-INCOME> 6
<OTHER-INCOME> 0
<EXPENSES-NET> (211)
<NET-INVESTMENT-INCOME> 277
<REALIZED-GAINS-CURRENT> 1,306
<APPREC-INCREASE-CURRENT> 4,426
<NET-CHANGE-FROM-OPS> 6,009
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (248)
<DISTRIBUTIONS-OF-GAINS> (1,475)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 12,499
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (142)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (270)
<AVERAGE-NET-ASSETS> 15,773
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
Per share and ratio information is shown at the class level. All other
information is combined for all classes. This schedule contains summary
financial information extracted from the 1995 Annual Report to shareholders and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000825062
<NAME> KEMPER-DREMAN FUND, INC.
<SERIES>
<NUMBER> 11
<NAME> KEMPER-DREMAN CONTRARIAN FUND - CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,192
<SHARES-COMMON-PRIOR> 1,066
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 19,301
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 526
<NUMBER-OF-SHARES-REDEEMED> (485)
<SHARES-REINVESTED> 85
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 12.18
<PER-SHARE-NII> .26
<PER-SHARE-GAIN-APPREC> 5.05
<PER-SHARE-DIVIDEND> (.24)
<PER-SHARE-DISTRIBUTIONS> (1.05)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.20
<EXPENSE-RATIO> .013
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
Per share and ratio information is shown at the class level. All other
information is combined for all classes. This schedule contains summary
financial information extracted from the 1995 Annual Report to shareholders and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000825062
<NAME> KEMPER-DREMAN FUND, INC.
<SERIES>
<NUMBER> 12
<NAME> KEMPER-DREMAN CONTRARIAN FUND - CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 371
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 6,020
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 362
<NUMBER-OF-SHARES-REDEEMED> (8)
<SHARES-REINVESTED> 17
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 15.26
<PER-SHARE-NII> .07
<PER-SHARE-GAIN-APPREC> 1.85
<PER-SHARE-DIVIDEND> (.07)
<PER-SHARE-DISTRIBUTIONS> (.91)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.20
<EXPENSE-RATIO> .020
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
Per share and ratio information is shown at the class level. All other
information is combined for all classes. This schedule contains summary
financial information extracted from the 1995 Annual Report to shareholders and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000825062
<NAME> KEMPER-DREMAN FUND, INC.
<SERIES>
<NUMBER> 13
<NAME> KEMPER-DREMAN CONTRARIAN FUND - CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 10
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 161
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 15.26
<PER-SHARE-NII> .08
<PER-SHARE-GAIN-APPREC> 1.85
<PER-SHARE-DIVIDEND> (.08)
<PER-SHARE-DISTRIBUTIONS> (.91)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.20
<EXPENSE-RATIO> .019
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
Per share and ratio information is shown at the class level. All other
information is combined for all classes. This schedule contains summary
financial information extracted from the 1995 Annual Report to shareholders and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000825062
<NAME> KEMPER-DREMAN FUND, INC.
<SERIES>
<NUMBER> 20
<NAME> KEMPER-DREMAN HIGH RETURN FUND - COMBINED
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 57,034
<INVESTMENTS-AT-VALUE> 76,987
<RECEIVABLES> 2,300
<ASSETS-OTHER> 20,391
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 99,678
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,482
<TOTAL-LIABILITIES> 1,482
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 78,222
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 94
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (73)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19,953
<NET-ASSETS> 98,196
<DIVIDEND-INCOME> 1,338
<INTEREST-INCOME> 43
<OTHER-INCOME> 0
<EXPENSES-NET> (651)
<NET-INVESTMENT-INCOME> 730
<REALIZED-GAINS-CURRENT> 1,939
<APPREC-INCREASE-CURRENT> 16,825
<NET-CHANGE-FROM-OPS> 19,494
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (643)
<DISTRIBUTIONS-OF-GAINS> (1,637)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 63,191
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (441)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (791)
<AVERAGE-NET-ASSETS> 49,328
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
Per share and ratio information is shown at the class level. All other
information is combined for all classes. This schedule contains summary
financial information extracted from the 1995 Annual Report to shareholders and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000825062
<NAME> KEMPER-DREMAN FUND, INC.
<SERIES>
<NUMBER> 21
<NAME> KEMPER-DREMAN HIGH RETURN FUND - CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 3,543
<SHARES-COMMON-PRIOR> 2,316
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 76,152
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,797
<NUMBER-OF-SHARES-REDEEMED> (659)
<SHARES-REINVESTED> 89
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 15.11
<PER-SHARE-NII> .26
<PER-SHARE-GAIN-APPREC> 6.76
<PER-SHARE-DIVIDEND> (.24)
<PER-SHARE-DISTRIBUTIONS> (.40)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.49
<EXPENSE-RATIO> .013
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
Per share and ratio information is shown at the class level. All other
information is combined for all classes. This schedule contains summary
financial information extracted from the 1995 Annual Report to shareholders and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000825062
<NAME> KEMPER-DREMAN FUND, INC.
<SERIES>
<NUMBER> 22
<NAME> KEMPER-DREMAN HIGH RETURN FUND - CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 777
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 16,667
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 772
<NUMBER-OF-SHARES-REDEEMED> (7)
<SHARES-REINVESTED> 12
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 19.45
<PER-SHARE-NII> .07
<PER-SHARE-GAIN-APPREC> 2.71
<PER-SHARE-DIVIDEND> (.06)
<PER-SHARE-DISTRIBUTIONS> (.40)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.47
<EXPENSE-RATIO> .020
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
Per share and ratio information is shown at the class level. All other
information is combined for all classes. This schedule contains summary
financial information extracted from the 1995 Annual Report to shareholders and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000825062
<NAME> KEMPER-DREMAN FUND, INC.
<SERIES>
<NUMBER> 23
<NAME> KEMPER-DREMAN HIGH RETURN FUND - CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 91
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,948
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 93
<NUMBER-OF-SHARES-REDEEMED> (3)
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 19.45
<PER-SHARE-NII> .09
<PER-SHARE-GAIN-APPREC> 2.41
<PER-SHARE-DIVIDEND> (.07)
<PER-SHARE-DISTRIBUTIONS> (.04)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.48
<EXPENSE-RATIO> .019
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
Per share and ratio information is shown at the class level. all other
information is combined for all classes. This schedule contains summary
financial information extracted from the 1995 annual report to shareholders and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<CIK> 0000825062
<NAME> KEMPER-DREMAN FUND, INC.
<SERIES>
<NUMBER> 24
<NAME> KEMPER-DREMAN HIGH RETURN - CLASS I
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 159
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,429
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 161
<NUMBER-OF-SHARES-REDEEMED> (5)
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 19.90
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> 2.03
<PER-SHARE-DIVIDEND> (.06)
<PER-SHARE-DISTRIBUTIONS> (.40)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.51
<EXPENSE-RATIO> .005
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
Per share and ratio information is shown at the class level. All other
information is combined for all classes. this schedule contains summary
financial information extracted from the 1995 annual report to shareholders and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000825062
<NAME> KEMPER-DREMAN FUND, INC.
<SERIES>
<NUMBER> 50
<NAME> KEMPER-DREMAN SMALL CAP VALUE FUND - COMBINED
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 27,350
<INVESTMENTS-AT-VALUE> 28,880
<RECEIVABLES> 2,829
<ASSETS-OTHER> 3,464
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 35,173
<PAYABLE-FOR-SECURITIES> 3,019
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 548
<TOTAL-LIABILITIES> 3,567
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29,769
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 307
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,530
<NET-ASSETS> 31,606
<DIVIDEND-INCOME> 123
<INTEREST-INCOME> 16
<OTHER-INCOME> 0
<EXPENSES-NET> (179)
<NET-INVESTMENT-INCOME> (40)
<REALIZED-GAINS-CURRENT> 1,914
<APPREC-INCREASE-CURRENT> 2,016
<NET-CHANGE-FROM-OPS> 3,890
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (1,603)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 24,675
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (113)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (241)
<AVERAGE-NET-ASSETS> 12,920
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
Per share and ratio information is shown at the class level. all other
information is combined for all classes. This schedule contains summary
financial information extracted from the 1995 annual report to shareholders and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000825062
<NAME> KEMPER-DREMAN FUND, INC.
<SERIES>
<NUMBER> 51
<NAME> KEMPER-DREMAN SMALL CAP VALUE FUND - CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,427
<SHARES-COMMON-PRIOR> 639
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 20,684
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,364
<NUMBER-OF-SHARES-REDEEMED> (653)
<SHARES-REINVESTED> 77
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.85
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> 4.64
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.97)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.50
<EXPENSE-RATIO> .013
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
Per share and ratio information is shown at the class level. all other
information is combined for all classes. This schedule contains summary
financial information extracted from the 1995 annual report to shareholders and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000825062
<NAME> KEMPER-DREMAN FUND, INC.
<SERIES>
<NUMBER> 52
<NAME> KEMPER-DREMAN SMALL CAP VALUE FUND - CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 557
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 8,072
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 544
<NUMBER-OF-SHARES-REDEEMED> (10)
<SHARES-REINVESTED> 23
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 15.75
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> (.41)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.84)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.48
<EXPENSE-RATIO> .020
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
Per share and ratio information is shown at the class level. all other
information is combined for all classes. This schedule contains summary
financial information extracted from the 1995 annual report to shareholders and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000825062
<NAME> KEMPER-DREMAN FUND, INC.
<SERIES>
<NUMBER> 53
<NAME> KEMPER-DREMAN SMALL CAP VALUE FUND - CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 68
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 985
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 91
<NUMBER-OF-SHARES-REDEEMED> (26)
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 15.75
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> (.41)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.84)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.48
<EXPENSE-RATIO> .020
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
Per share and ratio information is shown at the class level. all other
information is combined for all classes. This schedule contains summary
financial information extracted from the 1995 annual report to shareholders and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000825062
<NAME> KEMPER-DREMAN FUND, INC.
<SERIES>
<NUMBER> 54
<NAME> KEMPER-DREMAN SMALL CAP VALUE FUND - CLASS I
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 128
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,865
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 141
<NUMBER-OF-SHARES-REDEEMED> (19)
<SHARES-REINVESTED> 6
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 14.25
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 1.11
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.84)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.52
<EXPENSE-RATIO> .005
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE> 1
EXHIBIT 485.B
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
April 25, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Kemper-Dreman Fund, Inc.
To The Commission:
We are counsel to the above-referenced investment company (the "Fund")
and as such have participated in the preparation and review of Post-Effective
Amendment No. 16 to the Fund's registration statement being filed pursuant to
Rule 485(b) under the Securities Act of 1933. In accordance with paragraph
(b)(4) of Rule 485, we hereby represent that such amendment does not contain
disclosures which would render it ineligible to become effective pursuant to
paragraph (b) thereof.
Very truly yours,
/Vedder, Price, Kaufman & Kammholz
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
COK/dd
