<PAGE> 1
Kemper-Dreman Contrarian Fund
SEMIANNUAL REPORT TO SHAREHOLDERS FOR THE PERIOD ENDED JUNE 30,
1996
Seeks long-term capital appreciation with current income as its
secondary objective
" ... One of the challenges of being a contrarian is
recognizing the difference between being wrong and being early ..."
[KEMPER LOGO]
<PAGE> 2
3
Economic Overview
5
Performance Update
7
Industry Sectors
8
Largest Holdings
9
Portfolio of
Investments
12
Financial Statements
14
Notes to
Financial Statements
17
Financial Highlights
At A Glance
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1996 (UNADJUSTED FOR ANY SALES CHARGE)
[LIPPER BAR GRAPH]
- -------------------------------------------------------------------------------
KEMPER-DREMAN CONTRARIAN FUND
TOTAL RETURNS
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 2.03%
CLASS B 1.73%
CLASS C 1.68%
LIPPER GROWTH &
INCOME FUNDS
CATEGORY AVERAGE* 9.24%
- -------------------------------------------------------------------------------
</TABLE>
Returns and rankings are historical and do not represent future results. Returns
and net asset value fluctuate. Shares are redeemable at current net asset value,
which may be more or less than original cost.
*Lipper Analytical Services, Inc. returns and rankings are based upon changes in
net asset value with all dividends reinvested and do not include the effect of
sales charges and, if they had, results may have been less favorable.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Net Asset Value
- -------------------------------------------------------------------------------
AS OF AS OF
6/30/96 12/31/95
- -------------------------------------------------------------------------------
<S> <C> <C>
KEMPER-DREMAN CONTRARIAN FUND
CLASS A $16.41 $16.20
KEMPER-DREMAN CONTRARIAN FUND
CLASS B $16.42 $16.20
KEMPER-DREMAN CONTRARIAN FUND
CLASS C $16.41 $16.20
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
KEMPER-DREMAN CONTRARIAN FUND LIPPER RANKINGS
- -------------------------------------------------------------------------------
COMPARED TO ALL OTHER FUNDS IN THE LIPPER GROWTH & INCOME FUNDS CATEGORY*
<TABLE>
<CAPTION>
CLASS A
- -------------------------------------------------------------------------------
<S> <C>
1-YEAR #246 OF 484 FUNDS
3-YEAR #86 OF 286 FUNDS
5-YEAR #86 OF 208 FUNDS
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
DIVIDEND REVIEW
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME DIVIDEND $0.1200 $0.0606 $0.0628
- -------------------------------------------------------------------------------
</TABLE>
TERMS TO KNOW
GROWTH STOCKS Shares of companies whose earnings growth has consistently
exceeded that of the overall market average.
PRICE/EARNINGS MULTIPLE A company's stock price divided by its earnings for the
past four quarters, also referred to as its P/E.
TOTAL RETURN A fund's total return measures both the net investment income and
any realized and unrealized appreciation or depreciation of the underlying
investments in its portfolio for the period. Total return calculations assume
that dividends are reinvested. Total return represents the aggregate percentage
or dollar value change over the period.
VALUE INVESTING An investment strategy that seeks to identify strongly financed,
growing companies whose stocks sell at low multiples of earnings (P/Es). This
strategy is also described as contrarian because such stocks are typically
temporarily out of favor.
<PAGE> 3
ECONOMIC OVERVIEW
[TIMBERS PHOTO]
Stephen B. Timbers is President, Chief Executive and Chief Investment Officer of
Zurich Kemper Investments, Inc. (ZKI). ZKI and its affiliates manage
approximately $78 billion in assets, including $45 billion in retail Mutual
Funds. Timbers is a graduate of Yale University and holds an M.B.A. from
Harvard University.
DEAR SHAREHOLDER,
We have just completed a period of some discomfort for bond and stock market
traders. Concerns about rising interest rates, the possibility of higher price
inflation and Federal Reserve tightening of credit contributed to considerable
market volatility. But while the professional investors tend to fret over every
economic release, individuals who invest in mutual funds for the long term were
wise to stay the course -- at least until the direction of the economy became
clearer. Indeed, several recent economic measures are quite reassuring and argue
in favor of a continued healthy economy with low inflation.
The economy expanded at a 4.2% annual rate in the second quarter, the fastest
pace since the second quarter of 1994. This robust growth is welcome in general
but has tended to roil markets, which fear strong growth will lead to
overheating and inflationary pressures. So far, however, such fears have been
largely unwarranted. With the exception of food prices, whose increases were
weather-related, there have been no significant signs of inflationary pressures.
As it has so often recently, the economy is in the process of slowing itself
down. While the Federal Reserve Board stands by ready to attempt to moderate
- --------------------------------------------------------------------------------
ECONOMIC GUIDEPOSTS
- --------------------------------------------------------------------------------
Economic activity is a key influence on investment performance and shareholder
decision-making. Periods of recession or boom, inflation or deflation, credit
expansion or credit crunch have a significant impact on mutual fund
performance.
The following are some significant economic guideposts and their investment
rationale that may help your investment decision-making. The 10-year Treasury
rate and the prime rate are prevailing interest rates. The other data report
year-to-year percentage changes.
[BAR GRAPH]
<TABLE>
<CAPTION>
Now (6/30/96) 6 months ago 1 year ago 2 years ago
<S> <C> <C> <C> <C>
10-Year Treasury rate(1) 6.91 5.65 6.28 7.30
Prime Rate(2) 8.25 8.50 8.80 7.25
Inflation rate(3) 2.75 2.72 2.76 2.77
The U.S. dollar(4) 9.15 -0.57 -7.06 -3.24
Capital goods orders(5) 1.19 4.72 5.60 18.66
Industrial production(5) 3.54 0.56 2.65 6.25
Employment growth(6) 2.10 1.57 2.47 3.23
</TABLE>
1 Falling interest rates in recent years have been a big plus for financial
assets.
2 The interest rate that commercial lenders charge their best borrowers.
3 Inflation reduces an investor's real return. In the last five years,
inflation has been as high as 6%. The low, moderate inflation of the last few
years has meant high real returns.
4 Changes in the exchange value of the dollar impact U.S. exporters and the
value of U.S. firms' foreign profits.
5 These influence corporate profits and equity performance.
6 An influence on family income and retail sales.
Source: Economics Department, Zurich Kemper Investments, Inc.
3
<PAGE> 4
ECONOMIC OVERVIEW
economic growth with either interest rate cuts or increases, such intervention
can run the risk of going too far in one direction. It appears that our economy
today is self-regulating.
Based on these snapshots of the economy, then, we look for a relatively calmer
second half of 1996. Our forecast calls for growth to slow down in the third and
fourth quarters, to result in an advance of about 2.5% for the entire year.
Assuming that bond and stock market investors concur that there is no chance of
an overheating economy or significantly rising interest rates, the markets
should relax, as well.
What was the meaning of the market volatility that we experienced in May, June
and July? Investors were nervous about the broad economy, and some disappointing
earnings reports made them pessimistic. Yet, the markets performed the way that
history suggests they should: an overall correction in the stock market was
accentuated in technology and small capitalization stocks -- the industry
sectors whose performance tends to be the most volatile. Once the stock market
corrected, the bond market rallied. Finally, while not producing spectacular
results, international markets provided a stabilizing influence when compared to
U.S. markets.
Our market forecast eight months into the year is not much different from what
we forecasted in January. The bond market, which is climbing back from a decline
this year, may produce a 5% total return in 1996. The stock market, after the
correction is completed, may advance 5% to 10% for the year. Naturally, future
market conditions cannot be predicted with assurance.
In addition, we are projecting that long-term (30-year) interest rates will
hover in the 6.5% to 7.5% range. Short-term interest rates may drop below their
current levels. Finally, we would be surprised if the Federal Reserve Board
moved to adjust interest rates more than 25 basis points either way for the
remainder of the year.
Given the economic environment, we do not look for an upset in the upcoming
presidential election. Much more interesting will be which party wins the most
congressional seats. If the Democrats regain control of Congress, a bond market
selloff could be expected.
While U.S. markets are expected to provide modest returns, we continue to
advocate the benefits of diversification into alternate markets. Many overseas
markets are forecasted to grow at a rate well above our 2.5% growth expectation
for the U.S., and there are many equity and fixed-income opportunities abroad.
The value of the U.S. dollar, always a concern to international investors, will
probably not strengthen much against other currencies for the foreseeable
future.
With that as an economic backdrop, we encourage you to read the following
detailed report of your fund, including an interview with your fund's portfolio
management. Thank you for your continued support. We appreciate the opportunity
to serve your investment needs.
Sincerely,
/s/ Stephen B. Timbers
STEPHEN B. TIMBERS
President, Chief Investment and Executive Officer
Zurich Kemper Investments, Inc.
August 2, 1996
4
<PAGE> 5
Performance Update
[BERTELSEN PHOTO]
CHRISTIAN BERTELSEN IS CHIEF INVESTMENT OFFICER FOR DREMAN VALUE ADVISORS, INC.
(DVA), THE INVESTMENT MANAGER OF THE KEMPER- DREMAN FUNDS. BERTELSEN IS ALSO THE
PORTFOLIO MANAGER OF KEMPER-DREMAN CONTRARIAN FUND AND HOLDS AN M.B.A. IN
FINANCE AND MARKETING AND A B.A. IN HISTORY AND ECONOMICS FROM BOSTON
UNIVERSITY.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE
MANAGERS VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED
ON MARKET AND OTHER CONDITIONS.
IN RETROSPECT, KEMPER-DREMAN CONTRARIAN FUND IN 1996 WAS AN EARLY SELLER OF
DRUG STOCKS AND AN EARLY BUYER OF TECHNOLOGY AND ENERGY STOCKS. BELOW,
PORTFOLIO MANAGER CHRIS BERTELSEN EXPLAINS THE REPOSITIONING OF THE PORTFOLIO.
Q. CHRIS, THE PERFORMANCE OF KEMPER-DREMAN CONTRARIAN FUND SIGNIFICANTLY
LAGGED THE MARKET IN THE FIRST SIX MONTHS OF THE YEAR (CLASS A SHARES GAINED
2.03% VERSUS THE 10.09% ADVANCE OF THE STANDARD & POOR'S 500 STOCK INDEX.) WHAT
CAN THIS DISAPPOINTING PERFORMANCE BE ATTRIBUTED TO, ESPECIALLY GIVEN THE FUND'S
STRONG 1995?
A. I'll elaborate on this later but the broad explanation is that we made some
significant changes to the portfolio based on our expectation that the economy
was strengthening and that interest rates would go up rather than down. This was
a contrarian view. To benefit from it we established positions in companies
whose earnings ebb and flow with the economic cycle. We purchased them at
depressed prices, expecting a rebound at the same time the economy rebounded.
In fact, our forecast couldn't have been more right--the economy did pick up
steam as 1996 progressed and interest rates rose. But the market in the last six
months had a counterintuitive mindset. Rather than rushing to the cyclical
companies that stood to do well in an improving economy, investors tended to
favor growth companies whose earnings tend to grow at a stable rate, with less
dependency on the economic cycle. There seemed to be no overcoming the market's
pessimism about economic growth.
The six-month return of the fund is a result of our shifting the portfolio in
a way that was not rewarded by the market. When you're contrary and you buy
stocks that are out of favor they can return to favor, which is the objective,
or they can fall further from favor. In our case, many of the stocks we bought
at a discount fell further and the stocks with high price/earnings multiples
(see Terms To Know) that we sold went on to do even better.
Q. LET'S TALK SPECIFICALLY ABOUT THE CHANGES THAT YOU'VE MADE.
A. That's a good idea. The adjustments that we made to the portfolio may yet
prove themselves. One of the challenges of being a contrarian is recognizing the
difference between being wrong and being early.
When I started managing the fund in March, I took profits in several of the
financial and consumer franchise stocks that had been top performers in 1995.
Many of these stocks (Eli Lilly, Pharmacia and Upjohn) were either trading at a
30% premium to the average April market price/ earnings ratio of 18 or had
appreciated significantly since we purchased them. Both events, of course, can
be good for the portfolio but we also believe that it's time to sell when either
occurs since the stocks no longer qualify as "value stocks."
5
<PAGE> 6
Performance Update
I reinvested the proceeds from these sales into stocks that followed four
strategic themes:
- -Industrial stocks that stand to benefit as the shine returns to the Rust Belt
(Caterpillar, Illinois Tool Works, Foster Wheeler and Boeing).
- -Stocks that offer some inflation protection (Exxon, Mobil and Georgia Pacific).
- -Stocks that should gain from a consumer comeback (Office Depot, Payless
Shoesource).
- -"Star Wars" stocks that can take advantage of U.S. superiority in technology
developments (Seagate, Read-Rite, Hutchinson Technology).
Most shared the following traits: low Wall Street expectations, low P/Es,
strong financial condition and attractive yields.
Our changes further diversified the portfolio and more than doubled our
holdings from 43 issues at year-end 1995 to 101 on June 30, 1996.
Q. DO YOU CONTINUE TO BELIEVE IN ALL FOUR?
A. For the most part, yes. We still believe in the inflation protection and
consumer comeback stories and somewhat in the technology stocks. We're becoming
slightly impatient with the industrial recovery issues.
Q. YOU'VE EXPLAINED YOUR STRICT SELLING DISCIPLINE WHEN A STOCK IN THE
PORTFOLIO EXCEEDS YOUR EXPECTATIONS. ARE YOU JUST AS STRICT ABOUT STOCKS THAT
DON'T PERFORM AS YOU HOPED?
A. Well, it's always possible to be just wrong. But buying undervalued stocks
does require a certain amount of patience. If you've bought a good stock when
it's down, the greater likelihood is that when it surprises (with earnings news,
for example) the surprise will be positive. After holding on to a stock while it
was down, you can't sell prematurely. You have to be somewhat patient.
Q. YOUR PURSUIT OF YOUR FOUR STRATEGIC THEMES EXPLAINS SOME OF THE CHANGE
REFLECTED IN THE FUND'S SECTOR BY SECTOR BREAKDOWN (SEE PAGE 7). IT LOOKS AS IF
YOU'RE BRINGING THE FUND'S SECTOR EXPOSURE CLOSER TO THE COMPOSITION OF THE S&P
500.
A. Yes, that's probably true. Moving toward the middle reduces our strategic
risk. It doesn't pay to be contrary and wrong so we may be closer to the market
until the market assumes a direction we can be more confident of.
Q. CHRIS, YOU'VE MANAGED MONEY THROUGH ALL KINDS OF PERIODS. WAS THE FIRST SIX
MONTHS OF 1996 ONE OF THE MOST DIFFICULT FOR YOU?
A. Uncomfortable is the word I'd use. One thing I learned this year was not to
underestimate the amount of money pouring into the market. I just didn't believe
that some of the high P/E stocks we sold would continue on up. But, do you know
what? I'd do it again. I don't believe in breaking investing rules.
I think the most recent period was the fourth most uncomfortable in my
experience. The first was 1990, when I bought banks and autos and they continued
to go down. The second was 1980 when I didn't own oil and technology and the
third was 1984 when I was off in general.
Q. ALL RIGHT THEN, THAT BEGS THE QUESTION--HOW WAS YOUR 1991, 1981 AND 1985?
A. A relief. These periods, during which contrarians attempt to anticipate
market changes, serve to remind us that the world does not come to an end.
Q. AS WE PROGRESS THROUGH THE SECOND HALF OF 1996, WHAT IS YOUR OUTLOOK AND
HOW ARE YOU POSITIONING THE FUND?
A. The irony is that now I'm wondering if the economic growth we've seen is
sustainable. The biggest portfolio change underway now is to heighten the fund's
exposure to energy stocks (Atlantic Richfield, Chevron, Exxon). They're selling
at low P/Es and pay handsome dividends. We also like utility stocks, especially
companies (BellSouth is one example) that can be low-cost producers. The
financial sector, in particular, represents attractive valuations and good
dividend yields.
Whatever we do will be measured. We fell behind in a hurry but the only way we
can catch up is slowly. We're not taking any unreasonable risks. I feel very
strongly about that.
6
<PAGE> 7
Industry Sectors
A SIX-MONTH COMPARISON
DATA SHOW THE PERCENTAGE OF COMMON STOCKS BY INDUSTRY SECTOR IN KEMPER-DREMAN
CONTRARIAN FUND'S PORTFOLIO ON JUNE 30, 1996, AND ON DECEMBER 31, 1995.
[BAR CHART]
<TABLE>
<CAPTION>
KEMPER-DREMAN KEMPER-DREMAN
CONTRARIAN FUND CONTRARIAN FUND
ON 6/30/96 ON 12/31/95
<S> <C> <C>
CONSUMER NONDURABLES 18.7% 26.1%
FINANCE 18.6% 38.7%
TECHNOLOGY 18.4% 0.0%
CAPITAL GOODS 15.5% 0.0%
ENERGY 9.3% 11.4%
BASIC INDUSTRIES 8.2% 3.0%
CONSUMER DURABLES 5.1% 3.1%
HEALTH CARE 2.9% 14.9%
TRANSPORTATION 2.9% 0.0%
UTILITIES 0.4% 0.0%
OTHER 0.0% 2.8%
</TABLE>
A COMPARISON WITH THE STANDARD & POOR'S 500 STOCK INDEX*
DATA SHOW THE PERCENTAGE OF COMMON STOCKS BY INDUSTRY SECTOR IN KEMPER-DREMAN
CONTRARIAN FUND'S PORTFOLIO ON JUNE 30, 1996, COMPARED TO THE INDUSTRY SECTORS
THAT MAKE UP THE FUND'S BENCHMARK, THE STANDARD & POOR'S 500 STOCK INDEX.
[BAR CHART]
<TABLE>
<CAPTION>
KEMPER-DREMAN
CONTRARIAN FUND S & P INDEX
ON 6/30/96 ON 06/30/96
<S> <C> <C>
CONSUMER NONDURABLES 18.7% 23.2%
FINANCE 18.6% 13.4%
TECHNOLOGY 18.4% 11.0%
CAPITAL GOODS 15.5% 10.2%
ENERGY 9.3% 9.8%
BASIC INDUSTRIES 8.2% 6.0%
CONSUMER DURABLES 5.1% 3.1%
HEALTH CARE 2.9% 10.6%
TRANSPORTATION 2.9% 1.6%
UTILITIES 0.4% 11.1%
</TABLE>
* THE STANDARD & POOR'S 500 STOCK INDEX IS AN UNMANAGED INDEX GENERALLY
REPRESENTATIVE OF THE U.S. STOCK MARKET. SOURCE IS TOWERS DATA SYSTEMS.
7
<PAGE> 8
Largest Holdings
THE FUND'S 10 LARGEST HOLDINGS*
REPRESENTING 21.3% OF THE FUND'S TOTAL NET ASSETS ON JUNE 30, 1996
- ----------------------------------------------------------------------------
HOLDINGS PERCENT
- ----------------------------------------------------------------------------
1. Seagate Provides data storage, management and access products 3.3%
Technology for computer and data communication systems. Leads
the disc drive storage industry with over 150 rigid
disc drive models.
2. Boeing Manufactures commercial transportation equipment, 3.0%
Co. primarily passenger and cargo jetliners. Also
develops military aircraft and missiles and space
systems.
3. Intel Engaged in the design, development, manufacture and 2.4%
Corp. sale of advanced microcomputer components, such as
integrated circuits and other related products.
4. Student A major financial intermediary to the nation's 2.1%
Loan education credit market. It is the leading source of
Marketing funds and account servicing for insured student and
Association parent loans and a prominent provider of financing
for postsecondary institutions' plant and equipment.
5. Westinghouse Manufactures, sells and services electronic equipment 1.9%
Electric and components for the generation, utilization and
Corp. control of electricity.
6. General Operates in major businesses including power 1.9%
Electric generators, appliances, lighting, plastics, medical
Co. systems, aircraft engines, financial services and
broadcasting.
7. Mobil Produces, transports, refines and markets petroleum 1.8%
Corp. and natural gas and related products.
8. Ford Manufactures, assembles and sells cars, trucks, and 1.7%
Motor related parts and accessories, and is one of the
Co. largest providers of financial services in the U.S.
9. Unilever Develops, manufactures and markets branded consumer 1.6%
N.V. goods, primarily food, drinks, detergents and
personal products.
10. Allstate Second largest domestic property/casualty insurer. 1.6%
Corp.
*The fund's holdings are subject to change.
8
<PAGE> 9
Portfolio of Investments
KEMPER-DREMAN CONTRARIAN FUND
PORTFOLIO OF INVESTMENTS AT JUNE 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BASIC INDUSTRIES--7.7%
Aluminum Co. of America 11,000 $ 631
Carpenter Technology Corp. 9,000 288
Champion International Corporation 5,000 209
Dow Chemical Co. 3,500 266
E.I. DuPont de Nemours & Co. 6,500 514
Foster Wheeler Corp. 5,000 224
Georgia Pacific Corp. 8,500 603
Ingersoll-Rand Co. 2,500 109
Louisiana-Pacific Corp. 20,000 442
PPG Industries 5,000 244
Parker Hannifin Corp. 8,500 360
Union Carbide Corp. 9,000 358
==========================================================================
4,248
- -----------------------------------------------------------------------------------------------------------
CAPITAL GOODS--14.5%
Allied-Signal 12,000 686
Boeing Co. 19,000 1,655
Caterpillar 10,000 678
Dana Corporation 5,000 155
Deere & Co. 17,000 680
Eaton Corporation 9,000 528
General Electric Co. 12,000 1,038
Illinois Tool Works 11,000 744
United Technologies 7,000 805
Westinghouse Electric Corp. 56,000 1,050
==========================================================================
8,019
- -----------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--11.3%
American Brands, Inc. 7,500 340
Liz Claiborne 14,300 495
Dillard Department Stores 16,100 588
Family Dollar Stores 6,000 104
(a)Federal Express Corp. 11,000 902
(a)Fruit of The Loom 20,000 510
Gannett Co. 4,500 318
International Flavors & Fragrances 9,000 429
J.C. Penney Co. 6,000 315
May Department Stores Co. 9,500 416
(a)Office Depot 22,000 448
(a)Payless Shoesource 15,000 476
TJX Companies, Inc. 12,000 405
V.F. Corp. 8,200 489
==========================================================================
6,235
- -----------------------------------------------------------------------------------------------------------
CONSUMER DURABLES--4.8%
Chrysler Corporation 11,000 682
Ford Motor Co. 29,000 939
Johnson Controls Inc. 7,500 521
Pitney Bowes Inc. 10,500 501
==========================================================================
2,643
- -----------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
Portfolio of Investments
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSUMER STAPLES--6.1%
(a)Grand Casinos 10,000 $ 257
Nestle S.A., ADR 8,900 507
Philip Morris Companies 6,000 624
RJR Nabisco Holdings Corp., preferred 68,000 442
UST, Inc. 19,000 651
Unilever N.V., ADR 6,300 914
==========================================================================
3,395
- -----------------------------------------------------------------------------------------------------------
ENERGY--8.6%
AMOCO Corp. 6,000 434
Atlantic Richfield Co. 3,800 450
British Petroleum, ADR 6,000 641
Chevron Corp. 6,000 354
Columbia Gas System 4,000 208
Exxon Corp. 10,000 869
Halliburton Co. 5,500 305
Mobil Corp. 9,000 1,009
Texaco 4,000 336
YPF Sociedad Anonima "D", ADR 8,000 180
==========================================================================
4,786
- -----------------------------------------------------------------------------------------------------------
FINANCE--17.3%
Allstate Corp. 20,000 913
American Express Company 11,000 491
American General Corp. 10,000 364
American International Group, Inc. 2,000 197
BankAmerica Corp. 1,500 114
Bankers Trust New York Corp. 6,000 443
California Federal Bank 21,000 383
Chase Manhattan Corp. 9,400 664
Citicorp 6,000 496
Federal Home Loan Mortgage Corp. 4,500 385
Federal National Mortgage Association 18,000 603
First Union Corp. 9,000 548
First USA 3,000 165
Fleet Financial Group, Inc. 10,000 435
Great Western Financial Corp. 18,100 432
Hanson PLC, ADR 26,300 375
NationsBank 9,000 744
State Street Boston Corp. 5,000 255
Student Loan Marketing Association 15,500 1,147
Travelers/Aetna Property & Casualty 16,000 454
==========================================================================
9,608
- -----------------------------------------------------------------------------------------------------------
HEALTH CARE--2.7%
Abbott Laboratories 6,000 261
(a)Amgen, Inc. 6,000 324
(a)Humana, Inc. 10,000 179
(a)Tenet Healthcare Corporation 11,000 235
United Healthcare Corp. 10,000 505
==========================================================================
1,504
- -----------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
Portfolio of Investments
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TECHNOLOGY--17.1%
Automatic Data Processing 3,000 $ 116
(a)Boca Research 18,000 329
(a)Compaq Computer Corp. 17,500 862
(a)Diamond Multimedia Systems, Inc. 50,000 475
Dun & Bradstreet Corp. 4,500 281
Eastman Kodak 7,000 544
Hewlett-Packard, Co. 3,000 299
Honeywell 10,000 545
(a)Hutchinson Technology 6,000 213
Intel Corp. 18,000 1,322
Motorola Inc. 11,000 692
Nokia Corp., ADR 15,000 555
(a)Read-Rite Corp. 30,000 424
S3 Incorporated 25,000 308
(a)Seagate Technology 41,000 1,845
Texas Instruments 13,500 673
==========================================================================
9,483
- -----------------------------------------------------------------------------------------------------------
TRANSPORTATION--2.7%
Burlington Northern 9,000 728
CSX Corp. 4,000 193
Delta Airlines 7,000 581
==========================================================================
1,502
- -----------------------------------------------------------------------------------------------------------
UTILITIES--.3%
BellSouth Corporation 4,500 191
==========================================================================
TOTAL COMMON STOCKS--93.1%
(Cost: $50,277) 51,614
==========================================================================
<CAPTION>
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET
INSTRUMENTS--5.4%
Yield--5.45% to 5.50%
Due--July and August 1996
Finova Capital Corporation $ 1,900 1,884
Other 1,100 1,098
==========================================================================
TOTAL MONEY MARKET INSTRUMENTS--5.4%
(Cost: $2,982) 2,982
==========================================================================
TOTAL INVESTMENTS--98.5%
(Cost: $53,259) 54,596
==========================================================================
CASH AND OTHER ASSETS, LESS LIABILITIES--1.5% 817
==========================================================================
NET ASSETS--100% $55,413
==========================================================================
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
Based on the cost of investments of $53,259,000 for federal income tax purposes
at June 30, 1996, the gross unrealized appreciation was $3,721,000, the gross
unrealized depreciation was $2,384,000 and the net unrealized appreciation on
investments was $1,337,000.
See accompanying Notes to Financial Statements.
11
<PAGE> 12
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996
(in thousands)
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------
Investments, at value
(Cost: $53,259) $54,596
Cash 864
Receivable for:
Investments sold 439
Fund shares sold 347
Dividends 60
TOTAL ASSETS 56,306
=======================================================================================================
- -------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- -------------------------------------------------------------------------------------------------------
Payable for:
Investments purchased 744
Fund shares redeemed 14
Management fee 38
Distribution services fee 12
Administrative services fee 7
Custodian and transfer agent fees and related expenses 28
Other 50
Total liabilities 893
NET ASSETS $55,413
=======================================================================================================
- -------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -------------------------------------------------------------------------------------------------------
Paid-in capital $48,733
Undistributed net realized gain on investments 5,356
Net unrealized appreciation on investments 1,337
Accumulated net investment loss (13)
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $55,413
=======================================================================================================
- -------------------------------------------------------------------------------------------------------
THE PRICING OF SHARES
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($34,983,000 / 2,132,300 shares outstanding) $16.41
- -------------------------------------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $17.41
- -------------------------------------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($19,147,000 / 1,165,900 shares outstanding) $16.42
- -------------------------------------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge) per share
($1,283,000 / 78,200 shares outstanding) $16.41
- -------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 13
Financial Statements
STATEMENT OF OPERATIONS
Six months ended June 30, 1996
(in thousands)
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME
- --------------------------------------------------------------------------------------------------------
Dividends $ 435
Interest 121
Total investment income 556
Expenses:
Management fee 152
Distribution services fee 51
Administrative services fee 29
Custodian and transfer agent fees and related expenses 77
Professional fees 14
Reports to shareholders 15
Registration fees 7
Directors' fees and other 12
Total expenses before expense waiver 357
Less expenses waived by investment manager 51
Total expenses after expense waiver 306
NET INVESTMENT INCOME 250
========================================================================================================
- --------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- --------------------------------------------------------------------------------------------------------
Net realized gain on sales of investments 5,356
Change in net unrealized appreciation on investments (5,374)
Net loss on investments (18)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 232
========================================================================================================
- --------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
- --------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- --------------------------------------------------------------------------------------------------------
Net investment income $ 250 277
Net realized gain 5,356 1,306
Change in net unrealized appreciation (5,374) 4,426
Net increase in net assets resulting from operations 232 6,009
Distribution from net investment income (274) (248)
Distribution from net realized gain -- (1,475)
Total dividends to shareholders (274) (1,723)
Net increase from capital share transactions 29,973 8,213
TOTAL INCREASE IN NET ASSETS 29,931 12,499
======================================================================================================
- ------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------
Beginning of period 25,482 12,983
END OF PERIOD (including undistributed net investment
income of $11,000 in 1995) $ 55,413 25,482
======================================================================================================
</TABLE>
See accompanying Notes to Financial Statements.
13
<PAGE> 14
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. KDF is
authorized to issue 500,000,000 shares of $.01 par
value common stock.
The Fund currently offers four classes of shares.
Class A shares are sold to investors subject to an
initial sales charge. Class B shares are sold
without an initial sales charge but are subject to
higher ongoing expenses than Class A shares and a
contingent deferred sales charge payable upon
certain redemptions. Class B shares automatically
convert to Class A shares six years after issuance.
Class C shares are sold without an initial sales
charge but are subject to higher ongoing expenses
than Class A shares and, for shares sold on or
after April 1, 1996, a contingent deferred sales
charge payable upon certain redemptions within one
year of purchase. Class C shares do not convert
into another class. Class I shares (none sold
through June 30, 1996) 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
POLICIES INVESTMENT VALUATION. Investments are stated at
value. Portfolio securities that are traded on a
domestic securities exchange or securities listed
on the NASDAQ National Market are valued at the
last sale price on the exchange or market where
primarily traded or listed or, if there is no
recent sale, at the last current bid quotation.
Fixed income securities are valued by using market
quotations, or independent pricing services that
use prices provided by market makers or estimates
of market values obtained from yield data relating
to instruments or securities with similar
characteristics. Equity options are valued at the
last sale price unless the bid price is higher or
the asked price is lower, in which event such bid
or asked price is used. Financial futures and
options thereon are valued at the settlement price
established each day by the board of trade or
exchange on which they are traded. Other securities
and assets are valued at fair value as determined
in good faith by the Board of Directors.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on the
trade date (date the order to buy or sell is
executed). Dividend income is recorded on the
ex-dividend date, and interest income is recorded
on the accrual basis and includes discount
amortization on money market instruments. Realized
gains and losses from investment transactions are
reported on an identified cost basis.
FUND SHARE VALUATION. Fund shares are sold and
redeemed on a continuous basis at net asset value
(plus an initial sales charge on most sales of
Class A shares). Proceeds payable on redemption of
Class B and Class C shares will be reduced by the
amount of any applicable contingent deferred sales
charge. On each day the New York Stock Exchange is
open for trading, the net asset value per share is
determined as of the earlier of
14
<PAGE> 15
Notes to Financial Statements
3:00 p.m. 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 during the six
months ended June 30, 1996.
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. KDF has a management
AFFILIATES agreement with Dreman Value Advisors, Inc. (DVA), a
wholly owned subsidiary of Zurich Kemper
Investments, Inc. The Fund pays a management fee at
an annual rate of .75% of the first $250 million of
average daily net assets declining to .62% of
average daily net assets in excess of $12.5
billion. The Fund incurred a management fee of
$152,000 for the six months ended June 30, 1996.
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 $51,000 for the six months
ended June 30, 1996.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
KDF has 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>
Six months ended June 30, 1996 $33,000 263,000 28,000
</TABLE>
For services under the distribution services
agreement, the Fund pays KDI a fee of .75% of
average daily net assets of the Class B and Class C
shares. Pursuant to the agreement, KDI enters into
related selling group agreements with various firms
at various rates for sales of Class B and Class C
shares. In addition, KDI receives any contingent
deferred sales charges (CDSC) from redemptions of
Class B and Class C shares. Distribution fees 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 such 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>
Six months ended June 30, 1996 $59,000 332,000 15,000
</TABLE>
15
<PAGE> 16
Notes to Financial Statements
ADMINISTRATIVE SERVICES AGREEMENT. KDF has an
administrative services agreement with KDI. For
providing information and administrative services
to shareholders, the Fund pays KDI a fee at an
annual rate of up to .25% of average daily net
assets. KDI in turn has various agreements with
financial services firms that provide these
services and pays these firms based on assets of
Fund accounts the firms service. Administrative
services fees (ASF) paid by the Fund are as
follows:
<TABLE>
<CAPTION>
ASF PAID BY KDI
ASF PAID BY -----------------------------
THE FUND TO KDI TO ALL FIRMS TO AFFILIATES
--------------- ------------- -------------
<S> <C> <C> <C>
Six months ended June 30, 1996 $29,000 48,000 2,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with KDF's transfer agent,
Kemper Service Company (KSvC), an affiliate of DVA,
is the shareholder service agent of the Fund. Under
the agreement, KSvC received shareholder services
fees of $73,000 for the six months ended June 30,
1996.
OFFICERS AND DIRECTORS. Certain officers or
directors of the Fund are also officers or
directors of DVA. During the six months ended June
30, 1996, the Fund made no payments to its officers
and incurred directors' fees of $8,000 to
independent directors.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the six months ended June 30, 1996, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
<TABLE>
<S> <C>
Purchases $46,440
Proceeds from sales 19,873
</TABLE>
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
------------------- -------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
----------------------------------------------------------------------------
Class A 1,160 $19,263 526 $8,157
Class B 853 14,181 362 5,736
Class C 97 1,619 10 159
----------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
----------------------------------------------------------------------------
Class A 14 235 85 1,290
Class B 3 54 17 274
----------------------------------------------------------------------------
SHARES REDEEMED
----------------------------------------------------------------------------
Class A (234) (3,873) (485) (7,279)
Class B (61) (1,015) (8) (124)
Class C (29) (491) -- --
============================================================================
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $29,973 $8,213
============================================================================
</TABLE>
16
<PAGE> 17
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------------------------
CLASS A
---------------------------------------------------------
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $16.20 12.18 13.62 13.50 12.38
Income from investment operations:
Net investment income .10 .26 .28 .22 .25
Net realized and unrealized gain (loss) .23 5.05 (.28) .96 1.13
Total from investment operations .33 5.31 -- 1.18 1.38
Less dividends:
Distribution from net investment income .12 .24 .28 .22 .26
Distribution from net realized gain -- 1.05 1.16 .84 --
Total dividends .12 1.29 1.44 1.06 .26
Net asset value, end of period $16.41 16.20 12.18 13.62 13.50
============================================================================================================
TOTAL RETURN (NOT ANNUALIZED) 2.03% 44.57 (.03) 9.10 11.32
- ------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
============================================================================================================
Expenses absorbed by the Fund 1.23% 1.25 1.25 1.25 1.25
Net investment income 1.48% 1.85 1.89 1.64 2.04
- ------------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 1.48% 1.66 1.42 1.54 1.53
- ------------------------------------------------------------------------------------------------------------
Net investment income 1.23% 1.44 1.71 1.34 1.76
- ------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 18
Financial Highlights
<TABLE>
<CAPTION>
----------------------------- --------------------------------
CLASS B CLASS C
----------------------------- --------------------------------
SIX MONTHS SIX MONTHS
ENDED SEPT. 11, 1995 ENDED SEPT. 11, 1995
JUNE 30, TO JUNE 30, TO
1996 DEC. 31, 1995 1996 DEC. 31, 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $16.20 15.26 16.20 15.26
Income from investment operations:
Net investment income .05 .07 .06 .08
Net realized and unrealized gain .23 1.85 .21 1.85
Total from investment operations .28 1.92 .27 1.93
Less dividends:
Distribution from net investment income .06 .07 .06 .08
Distribution from net realized gain -- .91 -- .91
Total dividends .06 .98 .06 .99
Net asset value, end of period $16.42 16.20 16.41 16.20
===========================================================================================================
TOTAL RETURN (NOT ANNUALIZED) 1.73% 12.83 1.68% 12.85
- -----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
===========================================================================================================
Expenses absorbed by the Fund 1.99% 2.00 1.94 1.95
Net investment income .72% .88 .77 .93
- -----------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------------------------
Expenses 2.24% 2.36 2.19 2.31
Net investment income .47% .52 .52 .57
- -----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net assets at end of period (in thousands) $55,413 25,482 12,983 17,157 14,884
Portfolio turnover rate (annualized) 106% 30 16 16 28
</TABLE>
Average commission rate paid per share on stock transactions for the six
months ended June 30, 1996 was $.0500.
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.
18
<PAGE> 19
NOTES
19
<PAGE> 20
DIRECTORS & OFFICERS
DIRECTORS
STEPHEN B. TIMBERS
President and Director
JAMES E. AKINS
Director
ARTHUR R. GOTTSCHALK
Director
FREDERICK T. KELSEY
Director
DOMINIQUE P. MORAX
Director
FRED B. RENWICK
Director
JOHN B. TINGLEFF
Director
JOHN G. WEITHERS
Director
OFFICERS
CHRISTIAN C. BERTELSEN
Vice President
DAVID N. DREMAN
Vice President
JOHN E. NEAL
Vice President
JAMES R. NEEL
Vice President
PHILIP J. COLLORA
Vice President and
Secretary
CHARLES F. CUSTER
Vice President and
Assistant Secretary
JEROME L. DUFFY
Treasurer
ELIZABETH C. WERTH
Assistant Secretary
- --------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICE AGENT KEMPER SERVICE COMPANY
P.O. Box 419557
Kansas City, MO 64141
- --------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
127 West 10th Street
Kansas City, MO 64105
- --------------------------------------------------------------------------------
INVESTMENT MANAGER DREMAN VALUE ADVISORS, INC.
10 Exchange Place
20th Floor
Jersey City, NJ 07302
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
120 South LaSalle Street Chicago, IL 60603
http://www.kemper.com
[RECYCLED LOGO]
Printed on recycled paper.
This report is not to be distributed
unless preceded or accompanied by a
Kemper-Dreman Fund, Inc. prospectus.
KDCF - 3 (8/96) 1019580 [KEMPER FUNDS LOGO]
Printed in the U.S.A.
