<PAGE> 1
KEMPER
CONTRARIAN FUND
SEMIANNUAL REPORT TO SHAREHOLDERS FOR THE PERIOD ENDED JUNE 30, 1997
Seeks long-term capital appreciation with current income as its secondary
objective
" . . . the fact that the average stock
has lagged the market suggests that good values are
still available for patient investors. . . ."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
Economic Overview
5
Performance Update
7
Terms to Know
8
Industry Sectors
9
Largest Holdings
10
Portfolio of Investments
13
Financial Statements
15
Notes to Financial Statements
18
Financial Highlights
ABOUT YOUR FUND
- --------------------------------------------------------------------------------
FUND CHANGES NAME
On July 23, 1997, the name of your fund changed from
Kemper-Dreman Contrarian Fund to Kemper Contrarian Fund. This name change does
not affect your investment. Your fund will continue to be managed by the same
management team.
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER CONTRARIAN FUND
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1997
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 17.09%
CLASS B 16.44%
CLASS C 16.29%
LIPPER GROWTH &
INCOME FUNDS
CATEGORY AVERAGE* 15.52%
- --------------------------------------------------------------------------------
</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. If they had, results may have been less favorable.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
6/30/97 12/31/96
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER CONTRARIAN FUND CLASS A $19.62 $16.93
- --------------------------------------------------------------------------------
KEMPER CONTRARIAN FUND CLASS B $19.60 $16.92
- --------------------------------------------------------------------------------
KEMPER CONTRARIAN FUND CLASS C $19.56 $16.90
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
KEMPER CONTRARIAN FUND
LIPPER RANKINGS*
- --------------------------------------------------------------------------------
COMPARED TO ALL OTHER FUNDS IN THE LIPPER GROWTH & INCOME FUNDS CATEGORY
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
1-YEAR #139 OF #199 OF #217 OF
547 FUNDS 547 FUNDS 547 FUNDS
- --------------------------------------------------------------------------------
3-YEAR #129 OF N/A N/A
344 FUNDS
- --------------------------------------------------------------------------------
5-YEAR #77 OF N/A N/A
216 FUNDS
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
DURING THE PERIOD, KEMPER CONTRARIAN FUND MADE THE FOLLOWING DISTRIBUTIONS PER
SHARE:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME DIVIDEND $0.12 $0.0229 $0.0129
- --------------------------------------------------------------------------------
SHORT-TERM CAPITAL
GAIN $0.05 $0.05 $0.05
- --------------------------------------------------------------------------------
LONG-TERM CAPITAL
GAIN $0.03 $0.03 $0.03
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
ECONOMIC OVERVIEW
[TIMBERS PHOTO]
STEPHEN B. TIMBERS IS PRESIDENT, CHIEF INVESTMENT AND EXECUTIVE OFFICER OF
ZURICH KEMPER INVESTMENTS, INC. (ZKI). ZKI AND ITS AFFILIATES MANAGE
APPROXIMATELY $80 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,
A self-regulating economy, a balanced budget agreement and a positive stock
market all have contributed to another excellent year for investors. Given the
extended length of today's bull market (which celebrated its 15th anniversary on
August 12), it is prudent to wonder whether the end is near. Our position is
that while there is a certain precariousness to today's environment, which we
will elaborate on below, we see little to suggest that there will be more than
occasional market corrections.
Bipartisan agreement to balance the federal budget by the year 2002 represents
significant progress that should benefit investors over the long term. By
reducing the burden of capital gains and eliminating certain tax loopholes, the
Taxpayer Relief Act of 1997 and the Balanced Budget Act of 1997 have the
potential to meaningfully affect behavior. Now that the ceiling has been raised
on capital gains from the sale of a home, empty nesters will be more inclined to
move out of homes and into smaller condominiums. Added investment and savings
options should help boost the country's sagging savings rate. From a social
perspective, government's action to widen the difference between the taxation
rate on capital gains and on income reflects a conscious effort to encourage
capital investment. The more people and businesses can do for themselves, the
less likely they are to rely on the government, which should help restrain
federal spending.
The maximum tax on long-term capital gains is now 20 percent versus a maximum
of approximately 40 percent on ordinary income earned by Americans in the
highest income tax brackets. This dramatic difference could have some influence
on the management of mutual funds in the future. Although few investment
decisions are based on their tax consequences, the legislation supports a "buy
and hold" approach to investing, by which a mutual fund generates investment
returns through gains on investments held 18 months or longer. Such gains are
taxed at the reduced capital gains rate. On the margin, portfolio managers
should focus on long-term investing -- the strategy that we have always
supported.
In addition, mutual funds will gain investment flexibility with the new law's
repeal of what has been called the "short/short rule." Previously, investment
companies had been subject to a 30 percent limitation on total income arising
from the sale of securities held less than three months -- or face severe tax
consequences. The lifting of this limitation provides newer funds, in
particular, with much needed maneuvering ability.
You can expect to hear more from Kemper about the implications of the new
legislation, and specifically about the tax reporting changes, over the next
several weeks and months. Overall, we believe that this legislation is something
the country can be proud of. It represents years of a commitment on the part of
the federal government to hold spending in check and refrain from creating new
programs. Expanding corporate revenues and profits in an extended period of low
inflation also contributed to making this investor-friendly environment
possible.
As we look toward the end of the year, we see little to trouble us. The
economy appears to be in excellent condition. Continuing the alternatingly
fast/slow pace that we have experienced for several months, the fast-growing
first quarter was followed by a slower second quarter. Such self-regulation has
minimized any need for the Federal Reserve Board to raise interest rates again.
We don't rule out the possibility of another hike in the fourth quarter,
however.
Inflation is very low. In spite of unemployment being the lowest we have seen
in decades, wage pressures are still manageable. For example, the United Parcel
Service strike and the earlier steel and airlines work actions represent the
most union activity we have seen in 10 years. Encouraged by the low unemployment
(and therefore high demand for workers), the unions are becoming bolder but in
the end seem ready to resolve disputes sensibly. As a consequence, wage
increases remain moderate.
3
<PAGE> 4
ECONOMIC OVERVIEW
- -------------------------------------------------------------------------------
ECONOMIC GUIDPOSTS
- -------------------------------------------------------------------------------
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 (07/31/97) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1) 6.22 6.42 6.64 6.49
PRIME RATE(2) 8.5 8.25 8.25 8.75
INFLATION RATE(3) 2.23 3.03 2.88 2.62
THE U.S. DOLLAR(4) 7.32 7.67 4.26 -4.11
CAPITAL GOODS ORDERS(5)* 7.11 3.61 16.26 1.75
INDUSTRIAL PRODUCTION(5)* 3.84 4.84 3.38 2.36
EMPLOYMENT GROWTH(6) 2.24 2.2 2.14 2.42
</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.
* Data as of June 30, 1997.
Our primary concern is the very high valuations of the stock market. All
things considered, it is difficult to see where we can go from here. With prices
at such heady levels, the market can be expected to react negatively to even
minor earnings disappointments, as we have seen in August. Kemper's response to
this market is to remain fully invested and to reduce exposure by diversifying
across a wider group of investment opportunities. Research, the first step in
stock selection, is key in this kind of a market.
Bond markets are obviously cheered by recent events, and prospects for income
investors continue to be positive. Interest rates are stable and credit quality
has not been an issue. A dwindling supply of municipal bonds has enabled
municipal investments to outperform U.S. Treasuries.
In such a fully valued domestic market, it can make sense to look to
international markets for their growth potential. The strength of the dollar
thus far this year has diminished returns but international opportunities look
bright.
With this commentary 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 14, 1997
4
<PAGE> 5
PERFORMANCE UPDATE
TOM SASSI IS THE CHIEF INVESTMENT OFFICER, MANAGING DIRECTOR AND DIRECTOR OF
RESEARCH FOR ZURICH KEMPER VALUE ADVISORS, INC. (ZKVA) AND PORTFOLIO CO-MANAGER
OF KEMPER CONTRARIAN FUND. SASSI RECEIVED A BACHELOR'S OF BUSINESS
ADMINISTRATION IN MANAGEMENT AND ECONOMICS AND AN M.B.A IN FINANCE FROM HOFSTRA
UNIVERSITY. HE HAS OVER 25 YEARS EXPERIENCE IN INVESTMENT ANALYSIS AND
MANAGEMENT. IN PREVIOUS POSITIONS, SASSI HAS SERVED AS PORTFOLIO MANAGER AND
CHIEF INVESTMENT OFFICER.
JONATHAN KAY IS THE PORTFOLIO CO-MANAGER OF KEMPER CONTRARIAN FUND. KAY RECEIVED
A BACHELOR'S DEGREE IN ECONOMICS FROM THE UNIVERSITY OF BUFFALO AND AN MBA IN
FINANCE FROM BERNARD M. BARUCH COLLEGE. HE IS A CHARTERED FINANCIAL ANALYST AND
MEMBER OF A NUMBER OF PROFESSIONAL ORGANIZATIONS.
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 A YEAR CHARACTERIZED BY VOLATILITY IN THE MARKET, KEMPER CONTRARIAN FUND
MAINTAINED ITS FOCUS ON LAGGARD STOCKS AND OUTPERFORMED THE AVERAGE FUND IN ITS
PEER GROUP (SEE PAGE 2 FOR RANKING INFORMATION).
Q OVER THE PAST SIX MONTHS, THE MARKET HAS SEEN INCREASED VOLATILITY. HOW
WOULD YOU CHARACTERIZE IT?
A The market produced excellent returns during the first six months of 1997.
Fundamentally, stock prices have been buoyed by strong growth, relatively low
inflation, benign interest rates and higher corporate profits. However, the
year-to-date returns of the market do not tell the entire story. We did see more
volatility than investors have experienced in the last few years. There were
several instances when the market dramatically increased and then fell sharply.
In addition to the volatility the market is experiencing a "Nifty Fifty" effect,
with the largest capitalization stocks driving the returns of the entire index
and the rest of the market lagging behind. Not all stocks are experiencing gains
in excess of 20% as the return of the Standard & Poor's 500 Stock Index (S&P
500) would lead you to believe.
Q WHAT IMPACT HAS THE "NIFTY FIFTY" HAD ON THE PORTFOLIO?
A The "Nifty Fifty" is the main reason Kemper Contrarian Fund - and most
equity mutual funds - have lagged the market for the first six months of the
year. Most of the "Nifty Fifty" stocks have high price-to-earnings ratios
(P/Es). Because we are value investors, we don't own them and therefore haven't
participated in their performance. On the other hand, the fact that the average
stock has lagged the market, suggests that good values are still available for
patient investors. As value investors, we continue to focus our research efforts
on laggard stocks and groups currently down in price due to short-term
fundamental or other problems perceived by the market.
Q SINCE DECEMBER 31, 1996, THERE HAVE BEEN NO SUBSTANTIAL CHANGES WITHIN THE
SECTORS HELD IN THE FUND. WHAT CHANGES HAVE BEEN MADE TO THE PORTFOLIO IN THE
LAST SIX MONTHS?
A We have maintained our positions in financial and energy stocks, as those
sectors continue to offer good value and strong return potential. One of the
areas that has seen the biggest change is the basic industry sector. In that
area, we bought depressed stocks that were down in price from 1995 due to short-
term earnings problems, cyclical events in the industry involving an inventory
liquidation and weak pricing. We purchased steel stock Nucor; paper stocks
Georgia Pacific and Champion International; aluminum stocks ALCOA and Reynolds
Metals. We bought chemical companies, Dow Chemicals and Eastman
5
<PAGE> 6
PERFORMANCE UPDATE
Chemicals, when they lagged the market and showed a good entry point. These are
all cyclical stocks that have been out-of-favor but we believe are fundamentally
solid with excellent long-term growth prospects. Significant and profitable
sales include Dupont, First Chicago NBD, BancOne, Allstate, Fruit of the Loom
and Westinghouse.
Q ENERGY AND FINANCIAL STOCKS HAVE BEEN A DOMINANT THEME WITHIN THE FUND.
HOW DID THEY PERFORM OVER THE LAST SIX MONTHS AND DO YOU FORESEE ANY EVENTS THAT
MIGHT CHANGE YOUR OPINION?
A The energy group is moderately under market in terms of its performance.
But their performance has not echoed the market. At the beginning of the year,
they were well ahead of the market and stayed ahead through the correction in
April, but have trailed the market since then. They have performed well in an
environment where there is no concern for inflation and the price of oil has
dropped. These circumstances set low expectations for these stocks and, all
things considered, they have performed well. We believe that oil prices will go
back up and energy stocks should continue to perform well. We have maintained a
large commitment to the sector because they offer attractive valuations, good
dividend yields and rising volumes of production.
Financial stocks continue to show strong performance and the potential for
additional growth. Despite the tremendous run they have had in the last few
years, financial stocks still have low P/Es relative to the rest of the market
and are fundamentally sound. In fact, two of our strongest performing stocks
this year have been financial services stocks; Merrill Lynch and Sallie Mae. We
continue to keep a positive outlook for the financial services sector.
Q THE FUND'S TECHNOLOGY HOLDINGS HAVE NOT CHANGED SIGNIFICANTLY OVER THE
PAST SIX MONTHS. HOW HAS THE FUND BEEN POSITIONED IN TECHNOLOGY STOCKS?
A The technology sector is performing similar to the market - a handful of
large companies are supporting the strength of the sector, and the rest of the
stocks are underperforming. Technology stocks have been very popular and are
receiving considerable attention from Wall Street analysts. Their P/Es are high
which does not mesh with our low P/E philosophy. We prefer what we consider
"soft technology stocks." These are not well-known companies like Microsoft,
Intel or Compaq but are a little out of the mainstream, and in our opinion,
offer far better value. What we have in technology is a handful of stocks such
as Nokia, which was down and out a year ago and is bouncing back based on strong
earnings. Seagate Technology is another example; we like Seagate because it is
down in price, has a low P/E and is dominant within its industry.
Q HAVING JUST STARTED MANAGING THE KEMPER CONTRARIAN FUND IN JUNE, DO YOU
FORESEE ANY FUNDAMENTAL CHANGES WITHIN THE PORTFOLIO OVER THE NEXT SIX MONTHS?
A This fund is positioned exactly as we like it. The stocks we own have
dividend yields greater than the market, P/E's lower than the market and
earnings growing faster than the market. From a qualitative standpoint the
companies, based on balance sheet characteristics, are stronger than the market.
The only change we anticipate is, over the next three months, the portfolio will
probably evolve toward having fewer holdings. As we trim positions, we will be
very price sensitive and will wait for the right opportunity to sell stocks. The
portfolio will typically hold 50 to 70 stocks diversified among sectors and
industries.
Q THE STOCKS THAT ARE DRIVING THE MARKET ARE ISSUES THAT, TYPICALLY, THE
FUND WON'T INVEST IN - YET KEMPER CONTRARIAN FUND HAS OUTPERFORMED THE AVERAGE
FUND IN ITS PEER GROUP FOR THE SIX MONTHS ENDED JUNE 30, 1997. HOW DO YOU
EXPLAIN THIS?
A The primary reason for the fund outperforming its peers is stock
selection. We had very few stocks that surprised us on the downside and quite a
few that contributed on the upside. The top-performing stocks in the portfolio
are spread across sectors and not concentrated in just one area. The fund
benefited from strong
6
<PAGE> 7
PERFORMANCE UPDATE
performance in financial stocks such as Student Loan Marketing Association and
Merrill Lynch. Other strong performers were Philips Electronics, Xerox, Bristol
Myers Squibb and Caterpillar. As with any portfolio, we did have some
disappointments but no serious price declines among our holdings.
Q HOW DO YOU EXPECT TO POSITION THE FUND GOING FORWARD?
A We are quite comfortable with the current position of the fund. We believe
Kemper Contrarian Fund is positioned to do well under most scenarios. We own
very few, if any, of those stocks that would be considered part of the "Nifty
Fifty." If the rest of the market begins to outperform that group of stocks, we
should do well relative to our competition because we will have bought many of
these stocks at lower levels. Also, should the "Nifty Fifty" stocks begin to
fall, their decline should not have a large affect on us since our holdings do
not typically fall into that category. We believe that the portfolio will
benefit from the value philosophy if the market begins to decline and ought to
benefit if the market continues to surprise on the upside and broadens out.
TERMS TO KNOW
YOUR FUND'S STYLE
- ------------------------------------------------------------------------------
MORNINGSTAR EQUITY STYLE BOX
- ------------------------------------------------------------------------------
Style Source: Morningstar, Inc., Chicago, IL
Value Blend Growth (312) 696-6000. (Morningstar Style Box
/X/ / / / / Large Size is based on a portfolio date as of June
30, 1997.) The Equity Funds Style Box
/ / / / / / Medium placement is based on a fund's
price-to-earnings and price-to-book
/ / / / / / Small ratios relative to the S&P 500, as well
as the size of the companies in which it
invests, or median market
capitalization.
Please note that style boxes do not
represent an exact assessment of risk
and do not represent future performance.
Please consult the prospectus for a
description of investment policies.
"NIFTY FIFTY" 50 stocks most favored by institutions. The membership of this
group is constantly changing although companies that continue to produce
consistent earnings growth over a long period of time tend to remain
institutional favorites. The stocks in the "Nifty Fifty" tend to have higher
than average price-to-earnings ratios.
VALUE INVESTING An investment strategy that seeks to identify strongly financed,
growing companies whose stocks sell at low multiples of earnings. This strategy
is also described as contrarian because such stocks are typically temporarily
out of favor.
7
<PAGE> 8
INDUSTRY SECTORS
A SIX-MONTH COMPARISON
Data show the percentage of the common stocks in the portfolio that each sector
represented on June 30, 1997, and on December 31, 1996.
[SIX MONTH COMPARISON BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER CONTRARIAN FUND KEMPER CONTRARIAN FUND
ON 6/30/97 ON 12/31/96
<S> <C> <C>
FINANCE 25.8% 27.7%
CONSUMER NONDURABLES 19.7% 15.0%
ENERGY 14.8% 18.4%
BASIC INDUSTRIES 11.7% 9.2%
CAPITAL GOODS 10.5% 10.4%
TECHNOLOGY 7.4% 9.6%
HEALTH CARE 5.2% 3.8%
UTITLITIES 2.5% 2.1%
TRANSPORTATION 2.4% 1.4%
CONSUMER DURABLES 0.0% 2.4%
</TABLE>
A COMPARISON WITH THE STANDARD & POOR'S 500 STOCK INDEX*
Data show the percentage of the common stocks in the portfolio that each sector
of the Kemper Contrarian Fund represented on June 30, 1997, compared to the
industry sectors that make up the fund's benchmark, the Standard & Poor's 500
Stock Index.
[STANDARD & POORS COMPARISON BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER CONTRARIAN FUND STANDARD & POOR'S 500 STOCK INDEX
ON 6/30/97 ON 6/30/97
<S> <C> <C>
FINANCE 25.8% 15.1%
CONSUMER NONDURABLES 19.7% 22.4%
ENERGY 14.8% 9.6%
BASIC INDUSTRIES 11.7% 5.4%
CAPITAL GOODS 10.5% 9.9%
TECHNOLOGY 7.4% 13.7%
HEALTH CARE 5.2% 11.6%
UTILITIES 2.5% 8.3%
TRANSPORTATION 2.4% 1.4%
CONSUMER DURABLES 0.0% 2.6%
</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.
8
<PAGE> 9
LARGEST HOLDINGS
THE FUND'S 10 LARGEST COMMON STOCK HOLDINGS*
REPRESENTING 18.3% OF THE FUND'S TOTAL NET ASSETS ON JUNE 30, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
HOLDINGS PERCENT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. NIKE Produces athletic footware and apparel. 2.2%
- ------------------------------------------------------------------------------------------------------
2. CITICORP Engaged in commercial and retail banking, investment 2.1%
services and investment management.
- ------------------------------------------------------------------------------------------------------
3. EXXON CORP. Explores for and produces crude oil and natural gas; 2.1%
also manufactures petroleum products as well as
exploring and mining for coal.
- ------------------------------------------------------------------------------------------------------
4. STUDENT LOAN MARKETING A major financial intermediary to the nation's 2.0%
ASSOCIATION education credit market. It is the leading source of
funds and account servicing for insured student and
parent loans and a prominent provider of financing
for post-secondary institutions' plant and
equipment.
- ------------------------------------------------------------------------------------------------------
5. PEPSICO World's second-largest soft drink company; 1.9%
manufactures and markets snack foods; operator and
franchiser of KFC, Pizza Hut and Taco Bell chains.
- ------------------------------------------------------------------------------------------------------
6. FEDERAL EXPRESS CORP. Provides overnight delivery services. 1.7%
- ------------------------------------------------------------------------------------------------------
7. GENERAL ELECTRIC CO. Operates in major businesses including power 1.6%
generators, appliances, lighting, plastics, medical
systems, aircraft engines, financial services and
broadcasting.
- ------------------------------------------------------------------------------------------------------
8. AMOCO CORP. Engaged in the exploration, development and 1.6%
production of crude oil and natural gas, and in the
refining and marketing of petroleum products and
petrochemicals.
- ------------------------------------------------------------------------------------------------------
9. ILLINOIS TOOL WORKS Engaged in the production of fasteners, tools and 1.6%
plastics.
- ------------------------------------------------------------------------------------------------------
10. FEDERAL HOME LOAN MORTGAGE Often referred to as "Freddie Mac", this corporation 1.5%
CORP. provides for the transfer of capital between
mortgage lenders and mortgage security investors,
enabling mortgage lenders to provide a continuous
flow of funds to borrowers.
- ------------------------------------------------------------------------------------------------------
</TABLE>
*The fund's holdings are subject to change.
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
KEMPER CONTRARIAN FUND
PORTFOLIO OF INVESTMENTS AT JUNE 30, 1997 (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BASIC INDUSTRIES--9.8% Aluminum Co. of America 17,000 $ 1,281
(a)Bethlehem Steel Corp. 37,500 391
Carpenter Technology Corp. 15,000 686
Champion International Corp. 23,000 1,271
Dow Chemical Co. 18,000 1,568
Eastman Chemical Co. 30,000 1,905
Georgia-Pacific Corp. 15,000 1,281
Nucor Corp. 24,000 1,356
Phelps Dodge Corp. 4,000 341
Reynolds Metals Co. 16,000 1,140
Sonoco Products Co. 39,000 1,187
Union Camp Corp. 22,000 1,100
----------------------------------------------------------------------------
13,507
- ---------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--8.9% AMP Incorporated 21,000 877
Caterpillar 13,000 1,396
Deere & Co. 19,000 1,043
Eaton Corp. 13,500 1,179
General Electric Co. 34,000 2,223
Honeywell 16,000 1,214
Illinois Tool Works 44,000 2,197
Pitney Bowes Inc. 25,000 1,738
Westinghouse Electric Corp. 15,000 347
----------------------------------------------------------------------------
12,214
- ---------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--7.3% Ford Motor Co. 31,000 1,170
Mattel, Inc. 39,000 1,321
NIKE 52,000 3,036
J.C. Penney Co. 6,000 313
Sears Roebuck & Co. 4,000 215
Toyota Motor Corp., ADR 12,000 711
V.F. Corp. 16,400 1,396
Xerox Corp. 24,000 1,893
----------------------------------------------------------------------------
10,055
- ---------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--9.3% Fortune Brands, Inc. 18,000 672
(a)Gallaher Group PLC 18,000 332
McDonald's Corp. 43,000 2,077
Nestle S.A., ADR 24,000 1,587
PepsiCo 70,500 2,648
Philip Morris Cos. 39,000 1,731
RJR Nabisco Holdings Corp. 55,000 1,815
Unilever N.V., ADR 9,000 1,962
----------------------------------------------------------------------------
12,824
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ENERGY--12.4% AMOCO Corp. 25,500 $ 2,217
Atlantic Richfield Co. 21,500 1,516
British Petroleum, ADS 26,000 1,947
Burlington Resources 30,000 1,324
Chevron Corp. 16,000 1,183
Exxon Corp. 46,000 2,829
Mobil Corp. 28,000 1,957
Royal Dutch Petroleum Co. 36,000 1,958
Shell Transport & Trading Company, ADR 7,000 880
YPF Sociedad Anonima, ADR 45,000 1,384
----------------------------------------------------------------------------
17,195
- ---------------------------------------------------------------------------------------------------------------------
FINANCE--21.7% H.F. Ahmanson & Co. 24,000 1,032
American General Corp. 10,000 477
American International Group, Inc. 14,000 2,091
Bankers Trust New York Corp. 22,000 1,914
Chase Manhattan Corp. 21,000 2,038
Citicorp 24,500 2,954
Conseco, Inc. 16,000 592
Federal Home Loan Mortgage Corp. 62,000 2,131
Federal National Mortgage Association 47,000 2,050
First Union Corp. 10,000 925
Fleet Financial Group, Inc. 10,000 632
General Re Corp. 4,000 728
Meditrust 27,000 1,077
Merrill Lynch & Co., Inc. 11,000 656
J.P. Morgan & Co. 17,000 1,774
NationsBank 18,000 1,161
PNC Bank Corp., N.A. 10,000 416
Salomon, Inc. 6,000 334
Student Loan Marketing Association 22,000 2,794
SunTrust Banks, Inc. 15,000 826
Travelers/Aetna Property & Casualty 30,000 1,196
Wells Fargo & Co. 7,900 2,129
----------------------------------------------------------------------------
29,927
- ---------------------------------------------------------------------------------------------------------------------
HEALTH CARE--4.3% C.R. Bard 46,000 1,670
Bristol-Myers Squibb Co. 18,500 1,498
Glaxo Wellcome PLC, ADR 48,000 2,007
Pharmacia & Upjohn, Inc. 23,000 799
----------------------------------------------------------------------------
5,974
- ---------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--6.3% (a)General Instrument Corp. 70,000 1,750
Hewlett-Packard Co. 24,300 1,361
Nokia Corp., ADR 19,000 1,401
Philips Electronics N.V. 15,000 1,078
Raytheon Co. 31,000 1,581
(a)Read-Rite Corp. 7,000 146
(a)Seagate Technology 37,500 1,320
----------------------------------------------------------------------------
8,637
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TRANSPORTATION--2.0% (a)Federal Express Corp. 41,500 $ 2,397
Ryder System Inc. 10,000 330
-----------------------------------------------------------------------------
2,727
- ----------------------------------------------------------------------------------------------------------------------
UTILITIES--2.1% BellSouth Corp. 7,500 348
Florida Progress Corp. 8,000 250
GTE Corp. 28,000 1,228
The Southern Co. 46,700 1,022
----------------------------------------------------------------------------
2,848
----------------------------------------------------------------------------
TOTAL COMMON STOCKS--84.1%
(Cost: $98,480) 115,908
- ----------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------
(B)MONEY MARKET
INSTRUMENTS--15.5% Yield--5.13% to 5.71%
Due--July through September 1997
Dynamic Funding Corp. $ 5,200 5,163
Goldman Sachs Group, L.P. 3,800 3,772
FINOVA Capital Corp. 4,000 3,991
Sanwa Business Credit Corp. 3,200 3,193
Other 5,300 5,289
----------------------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--15.5%
(Cost: $21,408) 21,408
----------------------------------------------------------------------------
TOTAL INVESTMENTS--99.6%
(Cost: $119,888) 137,316
----------------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES--.4% 526
----------------------------------------------------------------------------
NET ASSETS--100% $137,842
----------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) The Fund has entered into exchange traded S&P 500 Index futures contracts in
order to take advantage of anticipated market conditions and effectively
invest in equities approximately $17,000,000 of money market instruments. As
a result, approximately 96% of the Fund's net assets are effectively
invested in equities. (See Note 6 of the Notes to Financial Statements.)
Based on the cost of investments of $119,888,000 for federal income tax purposes
at June 30, 1997, the gross unrealized appreciation was $18,020,000, the gross
unrealized depreciation was $592,000 and the net unrealized appreciation on
investments was $17,428,000.
See accompanying Notes to Financial Statements.
12
<PAGE> 13
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------
Investments, at value
(Cost: $119,888) $137,316
- ------------------------------------------------------------------------
Receivable for:
Fund shares sold 723
- ------------------------------------------------------------------------
Dividends 222
- ------------------------------------------------------------------------
TOTAL ASSETS 138,261
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ------------------------------------------------------------------------
Cash overdraft 21
- ------------------------------------------------------------------------
Payable for:
Investments purchased 130
- ------------------------------------------------------------------------
Fund shares redeemed 14
- ------------------------------------------------------------------------
Management fee 83
- ------------------------------------------------------------------------
Distribution services fee 35
- ------------------------------------------------------------------------
Administrative services fee 19
- ------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 117
- ------------------------------------------------------------------------
Total liabilities 419
- ------------------------------------------------------------------------
NET ASSETS $137,842
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- ------------------------------------------------------------------------
Paid-in capital $113,992
- ------------------------------------------------------------------------
Undistributed net realized gain on investments 6,231
- ------------------------------------------------------------------------
Net unrealized appreciation on investments 17,428
- ------------------------------------------------------------------------
Undistributed net investment income 191
- ------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $137,842
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
THE PRICING OF SHARES
- ------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($79,835 / 4,069 shares outstanding) $19.62
- ------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $20.82
- ------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($53,606 / 2,734 shares outstanding) $19.60
- ------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge) per share
($4,401 / 225 shares outstanding) $19.56
- ------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
13
<PAGE> 14
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------
NET INVESTMENT INCOME
- ----------------------------------------------------------------------------
Dividends $ 1,095
- ----------------------------------------------------------------------------
Interest 426
- ----------------------------------------------------------------------------
Total investment income 1,521
- ----------------------------------------------------------------------------
Expenses:
Management fee 389
- ----------------------------------------------------------------------------
Distribution services fee 162
- ----------------------------------------------------------------------------
Administrative services fee 104
- ----------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 240
- ----------------------------------------------------------------------------
Professional fees 5
- ----------------------------------------------------------------------------
Reports to shareholders 8
- ----------------------------------------------------------------------------
Registration fees 15
- ----------------------------------------------------------------------------
Directors' fees and other 5
- ----------------------------------------------------------------------------
Total expenses 928
- ----------------------------------------------------------------------------
NET INVESTMENT INCOME 593
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
- ----------------------------------------------------------------------------
Net realized gain on sales of investments 4,863
- ----------------------------------------------------------------------------
Net realized gain from futures transactions 1,616
- ----------------------------------------------------------------------------
Net realized gain 6,479
- ----------------------------------------------------------------------------
Change in net unrealized appreciation on investments 9,288
- ----------------------------------------------------------------------------
Net gain on investments 15,767
- ----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $16,360
- ----------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED
1997 DECEMBER 31,
(UNAUDITED) 1996
<S> <C> <C>
- --------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- --------------------------------------------------------------------------------------------------
Net investment income $ 593 661
- --------------------------------------------------------------------------------------------------
Net realized gain 6,479 5,913
- --------------------------------------------------------------------------------------------------
Change in net unrealized appreciation 9,288 1,429
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 16,360 8,003
- --------------------------------------------------------------------------------------------------
Distribution from net investment income (487) (588)
- --------------------------------------------------------------------------------------------------
Distribution from net realized gain (533) (5,627)
- --------------------------------------------------------------------------------------------------
Total dividends to shareholders (1,020) (6,215)
- --------------------------------------------------------------------------------------------------
Net increase from capital share transactions 44,910 50,322
- --------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 60,250 52,110
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------------------------------
Beginning of period 77,592 25,482
- -------------------------------------------------------------------------------------------------
END OF PERIOD (including undistributed net investment
income of $191 and $85, respectively) $137,842 77,592
- -------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE
FUND Kemper Contrarian Fund (the Fund) (formerly known
as Kemper-Dreman Contrarian Fund) is a separate
series of Kemper Value Fund, Inc. (KVF) (formerly
known as Kemper-Dreman Fund, Inc.), an open-end
management investment company organized as a
corporation in the state of Maryland. KVF is
authorized to issue 3 billion 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 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, 1997) 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. All
shares of the Fund have equal rights with respect
to voting, dividends and assets, subject to class
specific preferences.
- --------------------------------------------------------------------------------
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 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.
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
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, 1997.
DIVIDENDS TO SHAREHOLDERS. The Fund declares and
pays dividends of net investment income quarterly
and net realized capital gains at least 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. KVF has a management
agreement with Zurich Kemper Value Advisors, Inc.
(ZKVA) (formerly known as Dreman Value Advisors,
Inc.), 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
$389,000 for the six months ended June 30, 1997.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
KVF has an underwriting and distribution services
agreement with Zurich Kemper Distributors, Inc.
(ZKDI) (formerly known as Kemper Distributors,
Inc.), an affiliate of ZKVA. Underwriting
commissions paid in connection with the
distribution of Class A shares are as follows:
<TABLE>
<CAPTION>
COMMISSIONS
COMMISSIONS ALLOWED BY ZKDI
RETAINED BY ZKDI TO FIRMS
---------------- ---------------
<S> <C> <C>
Six months ended June 30, 1997 $43,000 313,000
</TABLE>
For services under the distribution services
agreement, the Fund pays ZKDI a fee of .75% of
average daily net assets of the Class B and Class C
shares. Pursuant to the agreement, ZKDI enters into
related selling group agreements with various firms
at various rates for sales of Class B and Class C
shares. In addition, ZKDI 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
AND CDSC FEES PAID BY
RECEIVED BY ZKDI ZKDI TO FIRMS
----------------- -------------
<S> <C> <C>
Six months ended June 30, 1997 $187,000 503,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. KVF has an
administrative services agreement with ZKDI. For
providing information and administrative services
to shareholders, the Fund pays ZKDI a fee at an
annual rate of up to .25% of average daily net
assets. ZKDI 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 ASF PAID BY ZKDI
THE FUND TO ZKDI TO FIRMS
----------------- -----------------
<S> <C> <C>
Six months ended June 30, 1997 $104,000 123,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with KVF's transfer agent,
Zurich Kemper Service Company (ZKSvC) (formerly
known as Kemper Service Company), an affiliate of
ZKVA, is the
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
shareholder service agent of the Fund. Under the
agreement, ZKSvC received shareholder services fees
of $178,000 for the six months ended June 30, 1997.
OFFICERS AND DIRECTORS. Certain officers or
directors of the Fund are also officers or
directors of ZKVA. During the six months ended June
30, 1997, the Fund made no payments to its officers
and incurred directors' fees of $4,000 to
independent directors.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the six months ended June 30, 1997, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $71,273
Proceeds from sales 38,705
- --------------------------------------------------------------------------------
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, 1997 DECEMBER 31, 1996
-------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 1,475 $27,180 1,915 $32,066
-------------------------------------------------------------------------
Class B 1,201 21,844 1,445 24,191
-------------------------------------------------------------------------
Class C 127 2,330 156 2,614
-------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 35 694 224 3,746
-------------------------------------------------------------------------
Class B 14 263 126 2,105
-------------------------------------------------------------------------
Class C 1 14 10 166
-------------------------------------------------------------------------
SHARES REDEEMED
Class A (234) (4,264) (571) (9,564)
-------------------------------------------------------------------------
Class B (147) (2,670) (243) (4,108)
-------------------------------------------------------------------------
Class C (26) (481) (53) (894)
-------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 22 419 11 180
-------------------------------------------------------------------------
Class B (22) (419) (11) (180)
-------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $44,910 $50,322
-------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
6 FINANCIAL FUTURES
CONTRACTS The Fund has entered into exchange traded financial
futures contracts in order to take advantage of
anticipated market conditions and, as such, bears
the risk that arises from owning these contracts.
At the time the Fund enters into a futures
contract, it is required to make a margin deposit
with its custodian. Subsequently, gain or loss is
recognized and payments are made on a daily basis
between the Fund and the broker as the market value
of the futures contract fluctuates. At June 30,
1997, the market value of assets pledged by the
Fund to cover margin requirements for open futures
positions was $1,000,000 for the following futures
contracts owned by the Fund.
<TABLE>
<CAPTION>
CONTRACT EXPIRATION GAIN AT
TYPE AMOUNT POSITION MONTH 6/30/97
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
S&P 500 Index $17,360,000 Long Sept. '97 $292,000
</TABLE>
17
<PAGE> 18
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
------------------------------------------
CLASS A
------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -----------------------------
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------------------------
Net asset value, beginning of period $16.93 16.20 12.18 13.62 13.50
- --------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .12 .23 .26 .28 .22
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 2.77 2.07 5.05 (.28) .96
- --------------------------------------------------------------------------------------------------
Total from investment operations 2.89 2.30 5.31 -- 1.18
- --------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .12 .22 .24 .28 .22
- --------------------------------------------------------------------------------------------------
Distribution from net realized gain .08 1.35 1.05 1.16 .84
- --------------------------------------------------------------------------------------------------
Total dividends .20 1.57 1.29 1.44 1.06
- --------------------------------------------------------------------------------------------------
Net asset value, end of period $19.62 16.93 16.20 12.18 13.62
- --------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 17.09% 14.42 44.57 (.03) 9.10
- --------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AFTER EXPENSE ABSORPTION (ANNUALIZED)
- --------------------------------------------------------------------------------------------------
Expenses 1.36% 1.23 1.25 1.25 1.25
- --------------------------------------------------------------------------------------------------
Net investment income 1.56% 1.56 1.85 1.89 1.64
- --------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS BEFORE EXPENSE ABSORPTION (ANNUALIZED)
- --------------------------------------------------------------------------------------------------
Expenses 1.36% 1.25 1.66 1.42 1.54
- --------------------------------------------------------------------------------------------------
Net investment income 1.56% 1.54 1.44 1.71 1.34
- --------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 19
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------- -----------------------------------
CLASS B CLASS C
--------------------------------- -----------------------------------
SIX MONTHS YEAR SEPT. 11 SIX MONTHS YEAR SEPT. 11
ENDED ENDED TO ENDED ENDED TO
JUNE 30, DEC. 31, DEC. 31, JUNE 30, DEC. 31, DEC. 31,
1997 1996 1995 1997 1996 1995
- ------------------------------------------------------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------- -----------------------------------
Net asset value, beginning of period $16.92 16.20 15.26 16.90 16.20 15.26
- ------------------------------------------------------------------------------- -----------------------------------
Income from investment operations:
Net investment income .04 .11 .07 .01 .11 .08
- ------------------------------------------------------------------------------- -----------------------------------
Net realized and unrealized gain 2.74 2.07 1.85 2.74 2.05 1.85
- ------------------------------------------------------------------------------- -----------------------------------
Total from investment operations 2.78 2.18 1.92 2.75 2.16 1.93
- ------------------------------------------------------------------------------- -----------------------------------
Less dividends:
Distribution from net investment income .02 .11 .07 .01 .11 .08
- ------------------------------------------------------------------------------- -----------------------------------
Distribution from net realized gain .08 1.35 .91 .08 1.35 .91
- ------------------------------------------------------------------------------- -----------------------------------
Total dividends .10 1.46 .98 .09 1.46 .99
- ------------------------------------------------------------------------------- -----------------------------------
Net asset value, end of period $19.60 16.92 16.20 19.56 16.90 16.20
- ------------------------------------------------------------------------------- -----------------------------------
TOTAL RETURN (NOT ANNUALIZED) 16.44% 13.61 12.83 16.29 13.51 12.85
- ------------------------------------------------------------------------------- -----------------------------------
RATIOS TO AVERAGE NET ASSETS AFTER EXPENSE ABSORPTION (ANNUALIZED)
- ------------------------------------------------------------------------------- -----------------------------------
Expenses 2.32% 2.11 2.00 2.79 2.12 1.95
- ------------------------------------------------------------------------------- -----------------------------------
Net investment income .60% .68 .88 .13 .67 .93
- ------------------------------------------------------------------------------- -----------------------------------
RATIOS TO AVERAGE NET ASSETS BEFORE EXPENSE ABSORPTION (ANNUALIZED)
- ------------------------------------------------------------------------------- -----------------------------------
Expenses 2.32% 2.34 2.36 2.79 2.80 2.31
- ------------------------------------------------------------------------------- -----------------------------------
Net investment income (loss) .60% .45 .52 .13 (.01) .57
- ------------------------------------------------------------------------------- -----------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- --------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets at end of period (in thousands) $137,842 77,592 25,482 12,983 17,157
- --------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 77% 95 30 16 16
- --------------------------------------------------------------------------------------------------------
</TABLE>
Average commission rates paid per share on stock transactions for the six
months ended June 30, 1997 and the year ended December 31, 1996 were $.0547
and $.0490, respectively.
NOTE: Data for the six months ended June 30, 1997 is unaudited. Total return
does not reflect the effect of any sales charges.
19
<PAGE> 20
DIRECTORS AND OFFICERS
DIRECTORS OFFICERS
STEPHEN B. TIMBERS THOMAS H. FORESTER
President and Director Vice President
JONATHAN KAY
JAMES E. AKINS Vice President
Director
CHARLES R. MANZONI, JR.
ARTHUR R. GOTTSCHALK Vice President
Director
JOHN E. NEAL
FREDERICK T. KELSEY Vice President
Director
JAMES R. NEEL
FRED B. RENWICK Vice President
Director
THOMAS F. SASSI
JOHN B. TINGLEFF Vice President
Director
STEVEN T. STOKES
JOHN G. WEITHERS Vice President
Director
PHILIP J. COLLORA
Vice President
and 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 ZURICH 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 ZURICH KEMPER VALUE ADVISORS, INC.
280 Park Avenue
New York, NY 10017
PRINCIPAL UNDERWRITER ZURICH KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606
www.kemper.com
[RECYCLED LOGO]
Printed on recycled paper in the U.S.A.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Value Fund, Inc. Prospectus.
KCF - 3 (8/97) 1036400
Printed in the U.S.A. [KEMPER FUNDS LOGO]
