<PAGE> 1
KEMPER-DREMAN
SMALL CAP VALUE FUND
SEMIANNUAL REPORT TO SHAREHOLDERS
FOR THE PERIOD ENDED JUNE 30, 1996
Seeking long-term capital appreciation
"in a volatile market, value stocks tend to outperform on the
downside."
[KEMPER LOGO]
<PAGE> 2
TABLE OF CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
7
INDUSTRY SECTORS
8
LARGEST HOLDINGS
9
PORTFOLIO OF
INVESTMENTS
11
FINANCIAL STATEMENTS
13
NOTES TO
FINANCIAL STATEMENTS
17
FINANCIAL HIGHLIGHTS
AT A GLANCE
KEMPER-DREMAN SMALL CAP
VALUE FUND TOTAL RETURNS
For the six-month period ended June 30, 1996 (unadjusted for any sales charge)
<TABLE>
- ---------------------------------
<S> <C>
CLASS A 19.52%
- ---------------------------------
CLASS B 19.08%
- ---------------------------------
CLASS C 19.13%
- ---------------------------------
LIPPER SMALL COMPANY
GROWTH FUNDS
CATEGORY AVERAGE* 15.12%
- ---------------------------------
</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.
NET ASSET VALUE
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of As of
6/30/96 12/31/95
- -------------------------------------------------------------------------------
<S> <C> <C>
KEMPER-DREMAN SMALL CAP VALUE
FUND CLASS A $17.27 $14.50
- -------------------------------------------------------------------------------
KEMPER-DREMAN SMALL CAP VALUE
FUND CLASS B $17.18 $14.48
- -------------------------------------------------------------------------------
KEMPER-DREMAN SMALL CAP VALUE
FUND CLASS C $17.19 $14.48
- -------------------------------------------------------------------------------
</TABLE>
KEMPER-DREMAN SMALL CAP
VALUE FUND LIPPER RANKINGS*
Compared to all other funds in the Lipper Small Company Growth Funds Category
<TABLE>
<CAPTION>
CLASS A
- --------------------------------------------------------------------------------
<S> <C>
1-YEAR #122 OF 340 FUNDS
- --------------------------------------------------------------------------------
3-YEAR #44 OF 178 FUNDS
- --------------------------------------------------------------------------------
</TABLE>
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM
CAPITAL GAIN $0.0625 $0.0625 $0.0625
- --------------------------------------------------------------------------------
</TABLE>
Investments by the fund in small companies presents greater risk than investment
in larger, more established companies.
TERMS TO KNOW
CONTRARIAN An investor who decides which securities to buy and sell by going
against the crowd. Contrarians operate on the premise that when stocks are
popular they are overbought and when they are unpopular they are oversold.
Dreman's contrarian philosophy stresses buying only stocks which it believes
present good value when they are out of favor.
INDEX An unmanaged group of stocks that is considered representative of the
stock or bond markets. An index does not take into account any fees or expenses
related to the individual securities that it tracks. However, for performance
comparisons, the index is adjusted to reflect reinvestment of dividends
of the securities in the index.
MARKET CAPITALIZATION Capitalization is a measure of the size of a publicly
traded company, as determined by multiplying the current price by the number
of shares outstanding. The market capitalization of a company has bearing on
its perceived earnings potential and risk. Small capitalization companies (less
than $1 billion) may present the potential for greater growth than larger, more
established companies. On the other hand, the stock of small cap companies may
be expected to be more volatile and therefore greater risk to capital.
PRICE/EARNINGS MULTIPLE A company's stock price divided by its earnings for the
past four quarters, also referred to as its P/E.
GROWTH STOCK The stock of a company whose earnings growth has consistently
exceeded the growth rate of the overall market and whose growth is expected to
continue or accelerate.
VALUE STOCK The stock of a company that is out of favor with investors because
the market underestimates its value or overlooks its potential. Stocks can
become undervalued as a result of overreaction by investors to unfavorable news
about a company, industry or the stock market in general. Or they can become
undervalued as a result of a market decline, poor economic conditions, tax-loss
selling or actual or anticipated unfavorable developments affecting the company.
VOLATILITY Characteristic of a security, commodity or market to rise or fall
sharply in price within a short period of time. A stock may be volatile because
the outlook for the company is particularly uncertain or because of various
other reasons.
2
<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
[STOKES PHOTO]
Steven Stokes is the portfolio co-manager of Kemper-Dreman Small Cap Value
Fund. Stokes received his bachelor of science degree in finance in 1985 from
State University of New York at New Paltz. A Chartered Financial Analyst, he is
a member of the Association of Investment Management and Research, Financial
Analyst Federation and NYSSA.
[BERTELSEN PHOTO]
Christian Bertelsen is chief investment officer for Dreman Value Advisors, Inc,
(DVA) the investment advisor to the Kemper-Dreman Funds. He is portfolio
co-manager of Kemper-Dreman Small Cap Value 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 managers 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 AN INCREASINGLY VOLATILE MARKET, KEMPER-DREMAN SMALL CAP VALUE FUND
POSTED STRONG DOUBLE-DIGIT GAINS THROUGH THE FIRST HALF OF 1996. BELOW,
PORTFOLIO CO-MANAGERS STEVE STOKES AND CHRIS BERTELSEN EXPLAIN THAT STOCK
PICKING AND A COMMITMENT TO THE VALUE STYLE OF INVESTING ARE THE KEYS TO THEIR
SUCCESS.
Q HOW DID SMALL CAP STOCKS FARE DURING THE FIRST HALF OF 1996?
A C.B.: Using our benchmark, the Russell 2000 Index,* as a proxy, small caps
were up 10.4% during the six months ended June 30. During the same
period, the Standard and Poor's 500 Stock Index, which is broadly
representative of the large cap market, was up 10.1%. So generally
speaking, small caps marginally outperformed their larger counterparts.
However, with a return of 19.52% for Class A Shares (unadjusted for any
sales charge), Kemper-Dreman Small Cap Value Fund significantly
outperformed both of those indexes. *The Russell 2000 Index is an
unmanaged index generally representative of the market for small domestic
stocks.
Q DOES THE FUND'S STRONG PERFORMANCE REFLECT A BETTER ENVIRONMENT FOR VALUE
STOCKS VERSUS GROWTH STOCKS?
A S.S.: The first six months of this year was a volatile period for all
segments of the stock market, value stocks as well as growth stocks.
And in a volatile market, value stocks do tend to outperform on the
downside. They may take a hit, but not to the extent of the growth stocks.
But I think the real key to our success has been stock picking. We owned
stocks that meaningfully outperformed on the upside.
C.B.: There's no question that the stocks that were appreciating on
momentum--most notably those in the technology sector--really took a
beating. As more and more investors jumped on the bandwagon, valuations
were pushed much higher than the fundamentals could support. Inevitably,
the stock prices will correct to more reasonable valuations. In the case
of technology, as soon as earnings reports began to fall short of
expectations, the market punished them pretty severely. Our exposure to
technology was limited, so that certainly helped the fund as well. These
kinds of stocks are just the opposite of what we look for as value
managers. We look for stocks with strong fundamentals that are
substantially undervalued in the market even though their growth and
earnings are solid.
Q WHAT SECTORS DO YOU FAVOR FOR KEMPER-DREMAN SMALL CAP VALUE FUND?
A S.S.: In terms of sectors, the portfolio tends to be pretty eclectic. Our
process is more "bottom-up," focusing on individual companies and their
particular stories rather than broad plays based on sectors or industries.
That's not to say that the fund isn't diversified. It's just that sectors
aren't a primary focus, unless one is seriously out of
5
<PAGE> 6
PERFORMANCE UPDATE
favor. In that case we'd certainly be looking for opportunities.
Financial stocks have done well for us. These stocks tend to trade at
relatively low price to earnings ("P/E") ratios and offer some yield as well. We
like regional banks, thrifts and consumer financial stocks. Our gaming
positions--most notably Bally Entertainment and Casino Data Systems--have been
strong performers. And we've also done well with certain energy stocks. In this
area we like natural gas suppliers like Tesoro and KCS Energy. More recently
we've been looking at selected exploration and production companies in this area
as well.
We've got about a 5% weighting in retail stocks. In this area we own Cato
Corp., a women's apparel company, and J. Baker, which is primarily known for
shoes. We also like Haggar, a well-known brand of casual wear. While these
stocks haven't been particularly strong of late, we're comfortable with their
individual stories and their prospects so we expect to continue holding them.
C.B.: Sometimes, as a value manager, you buy stocks early and have to
wait a while for the market to recognize their value.
Q WHAT KIND OF STOCKS HAVE YOU BEEN BUYING IN RECENT MONTHS? WHAT HAVE YOU
BEEN SELLING?
A S.S.: Some of the newer names include A.K. Steel, a very efficient rolled
steel company that we think represents a great value; Cullen-Frost
Bankers, a well-established Texas bank; and Fleetwood Enterprises, a
company that manufactures mobile homes and recreational vehicles. After
the significant correction among technology stocks, we found a few
opportunities in that area as well.
On the sell side, we exercise strict discipline, normally selling when a
stock's P/E rises above that of the market. This prevents overstaying, or
watching a stock move sharply only to see a nose-dive. During the past several
months we've been trimming some of the big winners like Sofamor-Danek, a company
that makes spinal implant devices, Casino Data Systems and Sturm Ruger, a
company that manufactures firearms as well as titanium heads for Calloway golf
clubs. These are cases where the market recognized the stock's value and the P/E
began to approach market levels.
Q ARE THERE ANY STOCKS THAT YOU SPECIFICALLY AVOID?
A S.S.: Initial public offerings have gotten a lot of attention in the past
year for the astronomical gains many of them experienced. It wasn't
uncommon to see prices on these stocks skyrocket as soon as they came to
market, only to plummet soon after. As contrarian investors, you will not
see us embracing that mania type of psychology.
C.B.: It's also not our style to speculate on financially stressed
stocks or potential bankruptcies. We have more success owning profitable
companies than trying to discover speculative turnarounds. Our goal is to
cull low P/E stocks of strongly-financed, growing companies that are
suffering temporary setbacks, from a larger universe of those that are in
a long-term downtrend.
Q SINCE YOU'VE JUST RECENTLY TAKEN THE HELM WITH THIS FUND, CAN SHAREHOLDERS
EXPECT ANY SIGNIFICANT CHANGES IN THE WAY IT'S MANAGED?
A C.B.: Not really. The value-style discipline takes precedence over the
manager. We remain committed to the same philosophy and investment
process that has produced the fund's strong returns in the past.
Q WHAT'S YOUR OUTLOOK FOR THE REST OF 1996?
A S.S.: I think we'll continue to see volatility as the market wrestles with
the level of economic growth we're going to experience--namely, whether
growth remains modest or will it be rapid enough to spark higher
inflation. Our portfolio objectives are set for the long-term. Short-term
gyrations shouldn't adversely affect the fund's long-term performance.
6
<PAGE> 7
INDUSTRY SECTORS
A SIX-MONTH COMPARISON
Data show the percentage of common stocks by industry sector in Kemper-Dreman
Small Cap Value Fund's portfolio on June 30, 1996, and on December 31, 1995.
<TABLE>
<CAPTION>
KEMPER-DREMAN SMALL CAP KEMPER-DREMAN SMALL
VALUE FUND ON CAP VALUE FUND ON
6/30/96 12/31/95
- -------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE 27.8% 32.6%
CAPITAL GOODS 21.5% 23.7%
CONSUMER NONDURABLES 18.4% 25.1%
TECHNOLOGY 8.6% 2.7%
ENERGY 7.1% 10.4%
TRANSPORTATION 5.8% 2.5%
UTILITIES 4.2% 0.0%
OTHER 2.9% 0.0%
BASIC INDUSTRIES 2.4% 3.0%
HEALTH CARE 1.3% 0.0%
</TABLE>
A COMPARISON WITH THE RUSSELL 2000 INDEX*
Data show the percentage of common stocks by industry sector in Kemper-Dreman
Small Cap Value Fund's portfolio on June 30, 1996, compared to the industry
sectors that make up the fund's benchmark, the Russell 2000 Index.
<TABLE>
<CAPTION>
KEMPER-DREMAN SMALL RUSSELL 2000
CAP VALUE FUND ON INDEX AS OF
6/30/96 6/30/95
- -------------------------------------------------------------------------------
<S> <C> <C>
FINANCE 27.8% 21.5%
CAPITAL GOODS 21.5% 9.7%
CONSUMER NONDURABLES 18.4% 20.5%
TECHNOLOGY 8.6% 15.8%
ENERGY 7.1% 5.0%
TRANSPORTATION 5.8% 2.0%
UTILITIES 4.2% 4.1%
OTHER 2.9% 0.1%
BASIC INDUSTRIES 2.4% 6.7%
HEALTH CARE 1.3% 11.2%
CONSUMER DURABLES 0.0% 3.4%
</TABLE>
*The Russell 2000 Index is an unmanaged capitalization weighted price only index
which is comprised of 2000 of the smallest stocks (on the basis of
capitalization) in the Russell 3000 Index.
7
<PAGE> 8
LARGEST HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS*
Representing 32.3% of the fund's total net assets on June 30, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
HOLDINGS PERCENT
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
1 BALLY ENTERTAINMENT Through its subsidiaries, Bally owns and operates 4.9%
casino hotels in Atlantic City, New Jersey, and Las
Vegas, Nevada; operates a gambling house in Tunica,
Mississippi; and is currently building a riverboat
casino in New Orleans, Louisiana. Through Bally's
Health and Tennis, this company also owns and
operates about 350 fitness centers in the U.S. and
Canada.
- ---------------------------------------------------------------------------------------------------
2 KCS ENERGY Engaged in the exploration, transport, production and 4.3%
marketing of natural gas, oil and gas.
- ---------------------------------------------------------------------------------------------------
3 BLOUNT Manufactures outdoor products, forestry harvest and 3.9%
sporting equipment; products include saw chains,
sprockets, timber harvest and log loading equipment,
industrial tractors and sporting ammunition.
- ---------------------------------------------------------------------------------------------------
4 ATLANTIC TELE-NETWORK A holding company whose principal subsidiaries 3.5%
include Virgin Islands Telephone Co. and Guyana
Telephone and Telegraph Co.
- ---------------------------------------------------------------------------------------------------
5 PHH CORPORATION A business services company specializing in vehicle 3.0%
fleet and fuel management services, corporate
relocation, corporate real estate management services
and mortgage banking services.
- ---------------------------------------------------------------------------------------------------
6 IMPERIAL CREDIT INDUSTRIES A specialty lender with a thrift and loan subsidiary. 3.0%
- ---------------------------------------------------------------------------------------------------
7 MUELLER INDUSTRIES Manufactures and distributes flow control copper tube 2.7%
and fittings, commercially used brass rod and other
products made of copper, brass, bronze, plastic and
aluminum.
- ---------------------------------------------------------------------------------------------------
8 FLEETWOOD ENTERPRISES Produces and sells manufactured housing and 2.6%
recreational vehicles.
- ---------------------------------------------------------------------------------------------------
9 DEL WEBB Engaged in the design, development and marketing of 2.3%
master planned active adult communities in Arizona,
California, Nevada, South Carolina and Texas. It also
has conventional home building operations in Phoenix,
Tucson, Las Vegas and Southern California.
- ---------------------------------------------------------------------------------------------------
10 MERCER INTERNATIONAL Seeks assets or companies capable of providing cash 2.1%
flow or that can be used to secure long-term
borrowing; operates in the financial services and
environmental industries; provides industrial
remediation services and pulp and paper recycling
in eastern Germany.
- ---------------------------------------------------------------------------------------------------
</TABLE>
*The fund's holdings are subject to change.
8
<PAGE> 9
PORTFOLIO OF INVESTMENTS
KEMPER-DREMAN SMALL CAP VALUE FUND
Portfolio of Investments at June 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF SHARES VALUE
<S> <C> <C> <C>
AUTOS AND Airborne Freight Corporation 96,000 $ 2,496
TRANSPORTATION--4.9%
Fleetwood Enterprises 110,500 3,426
Simpson Industries 44,100 408
-----------------------------------------------------------------------------
6,330
- ----------------------------------------------------------------------------------------------------------------------
BANKS AND THRIFTS--12.3% Compass Bancshares 69,500 2,276
Cullen Frost Bankers 49,200 1,365
First Commerce Corp. 58,500 2,069
First Financial Corp. 53,000 1,192
Liberty Bancorp 39,700 1,409
Long Island Bancorp 71,500 2,185
North Side Savings Bank 47,000 1,633
Roosevelt Financial Group 105,500 2,031
T.R. Financial Corporation 67,300 1,851
-----------------------------------------------------------------------------
16,011
- ----------------------------------------------------------------------------------------------------------------------
CONSUMER J. Baker Inc. 188,500 1,414
DISCRETIONARY--15.4% Bally Entertainment Corp. 231,700 6,372
Cato Corp. 191,000 1,146
Fedders Corporation 116,800 832
Haggar Apparel Co. 100,500 1,357
Heilig - Meyers 65,000 1,560
(a)Insurance Auto Auctions 210,500 2,105
(a)Jean Philippe Fragrances 244,500 2,109
(a)Sports & Recreation 293,000 2,674
Sturm Ruger & Co. 11,700 544
-----------------------------------------------------------------------------
20,113
- ----------------------------------------------------------------------------------------------------------------------
ENERGY--6.0% Giant Industries 146,500 2,124
KCS Energy 193,900 5,575
(a)Seitel, Inc. 4,500 123
-----------------------------------------------------------------------------
7,822
- ----------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES--11.1% First Financial Caribbean Corp. 101,000 2,071
Guaranty National Insurance 85,000 1,530
Imperial Credit Industries 127,860 3,868
Integon Corp. 108,000 2,174
Lawyers Title Insurance Corp. 50,500 909
PHH Corporation 69,000 3,933
-----------------------------------------------------------------------------
14,485
- ----------------------------------------------------------------------------------------------------------------------
HEALTH CARE--1.1% (a)Sofamor-Danek Group 51,000 1,415
- ----------------------------------------------------------------------------------------------------------------------
INTEGRATED OILS--2.0% (a)Tesoro Petroleum Corp. 230,000 2,645
- ----------------------------------------------------------------------------------------------------------------------
MATERIALS PROCESSING--10.0% AK Steel Holding Corp. 56,500 2,210
AMCOL International 102,000 1,543
Del Webb Corp. 150,000 3,000
(a)Mueller Industries, Inc. 84,000 3,485
Quanex Corp. 48,000 1,134
Rexene Corp. 169,000 1,669
-----------------------------------------------------------------------------
13,041
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(Dollars in thousands)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NUMBER OF SHARES VALUE
PRODUCER DURABLES--8.1% (a)Asyst Technologies 71,000 $ 1,331
Blount, Inc. 163,050 5,136
(a)Electroglas 121,200 1,727
Stewart & Stevenson Services 105,000 2,389
--------------------------------------------------------------------------
10,583
- -----------------------------------------------------------------------------------------------------------------
TECHNOLOGY--7.2% (a)Burr Brown Corp. 57,000 1,012
(a)Casino Data Systems 50,700 767
(a)Diamond Multimedia Systems, Inc. 58,000 551
(a)EXAR Corporation 146,500 1,905
(a)In Focus Systems Incorporated 10,000 243
(a)Proxima Corp. 102,000 1,237
(a)Read-Rite Corp. 117,500 1,660
(a)Tech-Sym Corporation 15,200 452
(a)Western Digital Corp. 59,800 1,562
--------------------------------------------------------------------------
9,389
- -----------------------------------------------------------------------------------------------------------------
UTILITIES--3.5% (a)Atlantic Tele-Network 189,800 4,555
- -----------------------------------------------------------------------------------------------------------------
OTHER--2.5% Arbatax International 95,000 445
(a)Mercer International, Inc. 207,000 2,795
--------------------------------------------------------------------------
3,240
--------------------------------------------------------------------------
TOTAL COMMON STOCKS--84.1%
(Cost: $105,080) 109,629
--------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
MONEY MARKET Yield--5.44% to 5.56%
INSTRUMENTS--14.6% Due--July and August 1996
Baxter International Inc. $ 3,800 3,780
ConAgra, Inc. 5,300 5,288
Finova Capital Corporation 6,000 5,951
Other 4,000 3,991
-----------------------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--14.6%
(Cost: $19,012) 19,010
-----------------------------------------------------------------------------
TOTAL INVESTMENTS--98.7%
(Cost: $124,092) 128,639
-----------------------------------------------------------------------------
CASH AND OTHER ASSETS,
LESS LIABILITIES--1.3% 1,681
-----------------------------------------------------------------------------
NET ASSETS--100% $130,320
-----------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
Based on the cost of investments of $124,092,000 for federal income tax purposes
at June 30, 1996, the gross unrealized appreciation was $11,857,000, the gross
unrealized depreciation was $7,310,000 and the net unrealized appreciation on
investments was $4,547,000.
10
<PAGE> 11
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996
(in thousands)
ASSETS
<TABLE>
<S> <C>
Investments, at value
(Cost: $124,092) $128,639
- -------------------------------------------------------------------------------------------------------
Cash 962
- -------------------------------------------------------------------------------------------------------
Receivable for:
Investments sold 71
- -------------------------------------------------------------------------------------------------------
Fund shares sold 1,977
- -------------------------------------------------------------------------------------------------------
Dividends 87
- -------------------------------------------------------------------------------------------------------
TOTAL ASSETS 131,736
- -------------------------------------------------------------------------------------------------------
</TABLE>
LIABILITIES AND NET ASSETS
<TABLE>
<S> <C>
Payable for:
Investments purchased 1,141
- -------------------------------------------------------------------------------------------------------
Fund shares redeemed 37
- -------------------------------------------------------------------------------------------------------
Management fee 78
- -------------------------------------------------------------------------------------------------------
Distribution services fee 30
- -------------------------------------------------------------------------------------------------------
Administrative services fee 19
- -------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 27
- -------------------------------------------------------------------------------------------------------
Other 84
- -------------------------------------------------------------------------------------------------------
Total liabilities 1,416
- -------------------------------------------------------------------------------------------------------
NET ASSETS $130,320
- -------------------------------------------------------------------------------------------------------
</TABLE>
ANALYSIS OF NET ASSETS
<TABLE>
<S> <C>
Paid-in capital $120,968
- -------------------------------------------------------------------------------------------------------
Undistributed net realized gain on investments 4,288
- -------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 4,547
- -------------------------------------------------------------------------------------------------------
Undistributed net investment income 517
- -------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $130,320
- -------------------------------------------------------------------------------------------------------
</TABLE>
THE PRICING OF SHARES
<TABLE>
<S> <C>
CLASS A SHARES
Net asset value and redemption price per share
($70,114,000 divided by 4,059,900 shares outstanding) $17.27
- -------------------------------------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $18.32
- -------------------------------------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($45,681,000 divided by 2,659,400 shares outstanding) $17.18
- -------------------------------------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($6,734,000 divided by 391,700 shares outstanding) $17.19
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES
Net asset value and redemption price per share
($7,791,000 divided by 448,800 shares outstanding) $17.36
- -------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
11
<PAGE> 12
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Six months ended June 30, 1996
(in thousands)
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME
<TABLE>
<S> <C>
Dividends $ 838
- -------------------------------------------------------------------------------------------------------
Interest 211
- -------------------------------------------------------------------------------------------------------
Total investment income 1,049
- -------------------------------------------------------------------------------------------------------
Expenses:
Management fee 271
- -------------------------------------------------------------------------------------------------------
Distribution services fee 101
- -------------------------------------------------------------------------------------------------------
Administrative services fee 64
- -------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 137
- -------------------------------------------------------------------------------------------------------
Professional fees 14
- -------------------------------------------------------------------------------------------------------
Reports to shareholders 15
- -------------------------------------------------------------------------------------------------------
Registration fees 12
- -------------------------------------------------------------------------------------------------------
Directors' fees 8
- -------------------------------------------------------------------------------------------------------
Total expenses before expense waiver 622
- -------------------------------------------------------------------------------------------------------
Less expenses waived by investment manager 90
- -------------------------------------------------------------------------------------------------------
Total expenses after expense waiver 532
- -------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 517
- -------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
<TABLE>
<S> <C>
Net realized gain on sales of investments 4,420
- -------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation on investments 3,017
- -------------------------------------------------------------------------------------------------------
Net gain on investments 7,437
- -------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $7,954
- -------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1996 1995
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
Net investment income (loss) $ 517 (40)
- ---------------------------------------------------------------------------------------------------------
Net realized gain 4,420 1,914
- ---------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation 3,017 2,016
- ---------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 7,954 3,890
- ---------------------------------------------------------------------------------------------------------
Distribution from net realized gain (439) (1,603)
- ---------------------------------------------------------------------------------------------------------
Net increase from capital share transactions 91,199 22,388
- ---------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 98,714 24,675
- ---------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NET ASSETS
<TABLE>
<S> <C> <C>
Beginning of period 31,606 6,931
- ---------------------------------------------------------------------------------------------------------
END OF PERIOD (including undistributed net investment
income of $517,000 in 1996) $130,320 31,606
- ---------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 13
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. 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, 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 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
13
<PAGE> 14
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 generally
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. KDF has a management
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
$271,000 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%, Class C, 1.95% and Class I, .47%. Under this
arrangement, DVA waived expenses of $90,000 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 $79,000 586,000 42,000
</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 $ 113,000 752,000 52,000
</TABLE>
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
ADMINISTRATIVE SERVICES AGREEMENT. KDF has 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>
Six months ended June 30, 1996 $ 64,000 104,000 5,000
</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 $147,000 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):
Purchases $94,778
Proceeds from sales 21,468
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 3,404 $57,783 1,364 $19,337
------------------------------------------------------------------------------
Class B 2,663 44,646 544 7,969
------------------------------------------------------------------------------
Class C 349 5,862 91 1,360
------------------------------------------------------------------------------
Class I 728 11,922 141 2,045
------------------------------------------------------------------------------
------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 10 195 77 1,060
------------------------------------------------------------------------------
Class B 7 131 23 333
------------------------------------------------------------------------------
Class C 1 18 3 44
------------------------------------------------------------------------------
Class I 2 30 6 92
------------------------------------------------------------------------------
------------------------------------------------------------------------------
SHARES REDEEMED
Class A (781) (12,763) (653) (9,016)
------------------------------------------------------------------------------
Class B (568) (9,411) (10) (155)
------------------------------------------------------------------------------
Class C (26) (416) (26) (400)
------------------------------------------------------------------------------
Class I (409) (6,798) (19) (281)
------------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $91,199 $22,388
------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31, MAY 22, 1992
1996 1995 1994 1993 TO DEC. 31, 1992
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $14.50 10.85 11.23 11.52 10.00
- ---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .09 (.02) -- .06 .03
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 2.74 4.64 .02 .23 1.95
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.83 4.62 .02 .29 1.98
- ---------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- -- -- .06 .03
- ---------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .06 .97 .40 .52 .43
- ---------------------------------------------------------------------------------------------------------------------------
Total dividends .06 .97 .40 .58 .46
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.27 14.50 10.85 11.23 11.52
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 19.52% 43.29 .15 2.54 32.51
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------------------------
Expenses absorbed by the Fund 1.22% 1.25 1.25 1.25 1.25
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 1.65% (.16) (.03) .53 .81
- ---------------------------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------------------------
Expenses 1.47% 1.83 1.82 2.09 4.29
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 1.40% (.74) (.61) (.32) (2.24)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 18
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS B CLASS C CLASS I
----------------------- ----------------------- ---------------------
SIX MONTHS SEPT. 11, SIX MONTHS SEPT. 11, SIX MONTHS NOV. 1,
ENDED 1995 TO ENDED 1995 TO ENDED 1995 TO
JUNE 30, DEC. 31, JUNE 30, DEC. 31, JUNE 30, DEC. 31,
1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $14.48 15.75 14.48 15.75 14.52 14.25
- ---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .05 (.02) .06 (.02) .15 --
- ---------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 2.71 (.41) 2.71 (.41) 2.75 1.11
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.76 (.43) 2.77 (.43) 2.90 1.11
- ---------------------------------------------------------------------------------------------------------------------
Less distribution from net realized gain .06 .84 .06 .84 .06 .84
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.18 14.48 17.19 14.48 17.36 14.52
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 19.06% (2.52) 19.13 (2.51) 19.98 8.03
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------------------
Expenses absorbed by the Fund 1.98% 2.00 1.93 1.95 .47 .47
- ---------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .89% (.99) .94 (.94) 2.40 .28
- ---------------------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------------------
Expenses 2.23% 2.39 2.18 2.35 .72 .90
- ---------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .64% (1.38) .69 (1.34) 2.15 (.15)
- ---------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
<CAPTION>
SIX MONTHS MAY 22,
ENDED 1992 TO
JUNE 30, YEAR ENDED DECEMBER 31, DEC. 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $130,320 31,606 6,931 4,875 2,385
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 61% 86 140 79 37
- ------------------------------------------------------------------------------------------------------
Average commission rate paid per share on stock transactions for the six months ended June 30, 1996
was $.0367.
- ------------------------------------------------------------------------------------------------------
</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.
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
(LOGO)
Printed on recycled paper.
This report is not to be distributed
unless preceded or accompanied by a
Kemper-Dreman Fund, Inc. prospectus.
[KEMPER FUNDS LOGO]
KDSCF - 3 (8/96) 1019570
Printed in the U.S.A.
