<PAGE> 1
Kemper
Value+Growth Fund
ANNUAL REPORT TO SHAREHOLDERS
FOR THE PERIOD ENDED NOVEMBER 30, 1995
Seeking growth of capital through professional management of a portfolio of
growth and value stocks.
"This year, growth and value stocks have both done well; neither has
substantially outperformed the other."
<PAGE> 2
Table of
Contents
3
General
Economic Overview
5
Performance Update
7
Terms to Know
8
Largest Holdings
9
Industry Sectors
10
Portfolio of
Investments
12
Report of
Independent Auditors
13
Financial Statements
15
Notes to
Financial Statements
18
Financial Highlights
At A Glance
Kemper Value+Growth Fund total returns for the one month ended November 30,
1995 (unadjusted for any sales charge)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
LIPPER GROWTH
FUNDS CATEGORY
CLASS A CLASS B CLASS C AVERAGE*
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
4.70% 4.70% 4.60% 3.48%
- ----------------------------------------------------------------------------
</TABLE>
Returns are historical and do not represent future performance. 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 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. Returns are
historical and do not reflect future performance.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
NET ASSET VALUE
- ----------------------------------------------------------------------------
AS OF
10/16/95
AS OF (INITIAL
11/30/95 OFFERING)
- ----------------------------------------------------------------------------
<S> <C> <C>
KEMPER VALUE+GROWTH
FUND CLASS A $10.02 $9.50
KEMPER VALUE+GROWTH
FUND CLASS B $10.02 $9.50
KEMPER VALUE+GROWTH
FUND CLASS C $10.01 $9.50
- ----------------------------------------------------------------------------
</TABLE>
- ----------------------------------------------------------------------------
Total Returns**
- ----------------------------------------------------------------------------
FOR THE PERIOD ENDED NOVEMBER 30, 1995
(ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
LIFE OF
CLASS
- ----------------------------------------------------------------------------
<S> <C> <C>
KEMPER VALUE+GROWTH
FUND CLASS A -0.60% (SINCE 10/16/95)
KEMPER VALUE+GROWTH
FUND CLASS B 1.47% (SINCE 10/16/95)
KEMPER VALUE+GROWTH
FUND CLASS C 5.37% (SINCE 10/16/95)
- ----------------------------------------------------------------------------
</TABLE>
**Total return measures net investment income and capital gain or loss from
portfolio investments, assuming reinvestment of all dividends and for Class A
Shares, adjustment for the maximum sales charge of 5.75% and for Class B
Shares, adjustment for the maximum contingent deferred sales charge of 4%.
There is no sales charge for Class C Shares. During the period noted,
securities prices fluctuated. For additional information, see the Prospectus
and Statement of Additional Information and the Financial Highlights at the end
of this report.
<PAGE> 3
General Economic Overview
[TIMBERS PHOTO]
STEPHEN B. TIMBERS IS PRESIDENT, CHIEF EXECUTIVE AND CHIEF INVESTMENT OFFICER
OF KEMPER FINANCIAL SERVICES, INC. (KFS). KFS AND ITS AFFILIATES MANAGE
APPROXIMATELY $63 BILLION IN ASSETS, INCLUDING $44 BILLION IN RETAIL MUTUAL
FUNDS. TIMBERS IS A GRADUATE OF YALE UNIVERSITY AND HOLDS AN M.B.A. FROM
HARVARD UNIVERSITY.
DEAR SHAREHOLDER,
Investors enjoyed very positive performance in both the fixed income and stock
markets in 1995. The returns of most leading securities markets worldwide were
significantly higher than they were in 1994.
We have an excellent environment for financial assets. After several quarters
of robust growth, the United States economy seems to be growing at a pace that
investors find comfortable. Contrary to isolated reports that caused some
observers to become concerned, we believe the economy is in no jeopardy of
recession. Its health was confirmed with the news that the economy grew (as
measured by real gross domestic product [GDP]) at an annual rate of 4.2 percent
in the third quarter. This follows much lower growth in the first two quarters,
as the economy was adjusting to the Federal Reserve Board's series of interest
rate increases. The slowdown, in fact, was acknowledged by the Fed when it
eased short-term rates by a small but symbolic 25 basis points in July. Now we
know that the economy was rebounding from July through September.
Growth without a corresponding increase in inflation is very encouraging.
Although we are well along in the economic cycle and at a point when prices
often start hiking up, inflationary pressures have actually been reduced
somewhat.
The Fed reduced rates again in December, this time acknowledging discussions
underway to reduce the federal budget deficit. Assuming these discussions are
productive, a third rate cut is possible later this month. Even with such
reducing by the Fed, our forecast calls for lower growth ranging between 2
percent to 3 percent for the next few quarters, with the momentum likely to
come from exports and nonresidential construction.
MARKET OUTLOOK
Slow growth and low inflation is the optimal combination for investors in the
fixed income markets, and we expect them to continue to perform well.
We believe that the opportunities for common stock investors will be
increasingly concentrated in higher quality investments. After hitting new
highs and showing considerable strength for most of the year, the stock market
has shown some vulnerability and then gone on to set records. However, it's
inevitable -- the current bull market will come to an end some day. In fact,
some sectors may be overextended today.
As we view the new year, companies cannot necessarily count on the economy to
provide above-average earnings support. Rather, stocks that have proven
themselves with a pattern of consistent earnings are likely to attract investor
support. Specifically, sectors that produce more consistent earnings, such as
health care, consumer nondurables, selected technology and selected capital
goods can be expected to do well. Picking the right sectors to invest in will
be the key challenge for equity investors during the next few quarters.
International investing continues to be quite complex. After sinking to its
post-World War II low last year, the value of the U.S. dollar has gained
strength against most foreign currencies. While a stronger dollar favors the
U.S. economy because it reduces the cost of American imports and attracts
foreign capital, a strong dollar in relation to a local currency has the effect
of devaluing a foreign investment. The value of the dollar and the
attractiveness of U.S. investments to foreign investors will be key factors in
the next few months.
3
<PAGE> 4
GENERAL ECONOMIC OVERVIEW
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 (12/31/95) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1) 5.71 6.28 7.78 5.75
PRIME RATE(2) 8.65 8.8 8.5 6
INFLATION RATE(3)* 2.6 2.97 2.6 2.74
THE U.S. DOLLAR(4)* -1.57 -9.31 -4.52 1.71
CAPITAL GOODS ORDERS(5)** 7.6 17.84 13.53 23.75
INDUSTRIAL PRODUCTION(6)* 1.88 2.8 6.43 3.76
EMPLOYMENT GROWTH(7)* 1.5 2.29 3.15 2.58
</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 corporate profits and equity performance.
7 An influence on family income and retail sales.
* Data as of November 30, 1995
** Data as of October 31, 1995
SOURCE: ECONOMICS DEPARTMENT, KEMPER FINANCIAL SERVICES, INC.
We are in the midst of a global recovery, and the same fundamentals that have
driven markets higher in the U.S. can be found in many foreign countries
currently. However, leading international economies continue to lag the U.S.
Japan and Germany, whose economies typically follow U.S. growth, are not as
robust as in past cycles. Moreover, conditions in emerging market countries
underline the importance of careful research and experience in understanding
how these markets work.
Political leadership also has some bearing on the progress of the economy and
the state of the financial markets. In the months preceding a presidential
election year, it has been common for incumbents to attempt to stimulate
growth. Given our Republican Congress and Democratic President, however, we do
not consider this as likely this time.
With the rest of the country, we are closely following political initiatives
to produce a balanced federal budget. This is a political wild card, but we
would expect both the stock and fixed-income markets to react with enthusiasm if
progress can be made.
With that as an economic backdrop, we encourage you to read the following
detailed report of your fund, including a question-and-answer interview with
your fund's portfolio managers. 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
January 9, 1996
4
<PAGE> 5
Performance Update
[BUKOWSKI PHOTO]
Daniel J. Bukowski, senior vice president and director of quantitative research
for Kemper Financial Services, Inc. (KFS), administers the quantitative model
upon which the fund's asset allocation decisions are based. He holds more than
10 years of experience in the capital markets. Bukowski holds a bachelor's
degree and an M.B.A. from the University of Chicago.
[DREMAN PHOTO]
David N. Dreman, chairman and chief investment officer of Dreman Value
Advisors, Inc., manages the value portion of Kemper Value+Growth Fund. He has
more than thirty years' experience as an investment analyst, advisor and
manager. Dreman holds a bachelor of commerce degree from the University of
Manitoba, Winnipeg, Manitoba, Canada.
[REYNOLDS PHOTO]
Steven H. Reynolds, executive vice president and chief investment officer for
equity investments of Kemper Financial Services, Inc. (KFS), manages the growth
portion of Kemper Value+Growth Fund. Reynolds joins KFS with nearly 30 years of
investment management experience. He holds an M.B.A. in finance from the
University of Virginia and a B.A. in economics from Johns Hopkins University.
The views expressed in this report reflect those of the portfolio management
team 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.
On October 16, 1995, Kemper introduced Kemper Value+Growth Fund, designed to
help reduce risk and enhance return potential by combining stocks with growth
and value characteristics in a single fund. Portfolio Co-managers Dan
Bukowski, David Dreman and Steven Reynolds discuss the fund's approach and
their outlook for 1996.
Q. WHAT PROMPTED KEMPER TO CREATE THIS TYPE OF FUND?
A. STEVEN REYNOLDS: Financial planners have recommended diversification
between growth and value stocks for their equity investors for quite some time.
While Kemper has historically been known as a growth style manager, the
acquisition of substantially all the assets of Dreman Value Management, L.P.
last August greatly enhanced our equity management capabilities. Now we can
offer strong expertise and years of experience, backed by very competitive
track records, in both styles.
Q. HOW DOES THE COMBINATION OF VALUE AND GROWTH STOCKS WORK TO REDUCE RISK AND
ENHANCE PERFORMANCE?
A. DAVID DREMAN: The performance of value and growth stocks has historically
been countercyclical, meaning that the two styles tend to run in opposite
cycles. When value stocks are in favor, growth stocks are generally not as
strong, and vice-versa. By diversifying the portfolio with both types of
stocks, investors are exposed to the potential gains of the style that's in
favor, which should help offset declines in the style that's not.
DAN BUKOWSKI: What's unique about this fund is that it utilizes two
separate and distinctly specialized investment managers. David's expertise on
the value side and Steve's on the growth side should help us achieve
consistent, competitive performance. On top of that, we'll try to add
incremental return by tilting the portfolio toward the style that we believe
will be in favor during a 12-month forecast horizon.
Q. DAN, YOU'RE RESPONSIBLE FOR DETERMINING WHAT PERCENTAGES OF THE PORTFOLIO
WILL BE INVESTED IN GROWTH AND VALUE. HOW DO YOU MAKE THAT DECISION?
5
<PAGE> 6
A. D.B.: We've developed a proprietary quantitative model to evaluate the
macroeconomic factors that largely determine which style is likely to
outperform for a sustained period.
Q. WHAT IS A "PROPRIETARY QUANTITATIVE MODEL," AND WHAT DOES IT DO?
A. D.B.: "Proprietary" refers to the fact that it's exclusive to Kemper.
Our analysts have developed a set of measurements that we'll examine as a means
of helping predict future relative performance. The "quantitative model" is
that selected data. In this case we're looking at certain broad ("macro")
economic factors like the strength of the economy, interest rate trends and the
relative valuations of growth and value stocks. By analyzing how growth and
value stocks have performed under a variety of certain economic conditions, we
can project how each should perform in the environment we anticipate.
Here's a very general example: Think of corporate earnings growth as a
commodity -- a product that is bought and sold, with prices determined by
supply and demand. In a slow economy, people are willing to pay a premium for
a growth stock because it offers consistent earnings growth -- something that
is not broadly available in the market. But in a strong economy, the opposite
is true. People WON'T be so willing to pay a premium for earnings growth,
because there are a lot of companies who have it. So growth stocks aren't as
attractive in a strong economy as they are in a slow one. Similarly, a
favorable interest rate environment (when rates are falling) has historically
been good for growth stocks, while a period of rising interest rates tends to
favor value stocks.
By analyzing these types of economic factors, we can better determine
which type of stock is more likely to outperform as we go forward.
Q. HOW SIGNIFICANT DO YOU EXPECT THE BENEFITS OF TILTING THE PORTFOLIO TO
BE?
A. D.B.: A lot of that will be dictated by the market. This year, for
example, growth and value stocks have both done well; neither has substantially
outperformed the other. But if you look at 1993, value stocks outperformed
growth stocks significantly. In an environment like that, tilting the
portfolio could add significant value. Of course, there is no guarantee that
tilting the portfolios will improve performance.
Q. HOW FREQUENTLY IS THE PORTFOLIO'S ALLOCATION MODIFIED? WHAT'S THE
CURRENT ALLOCATION?
A. D.B.: Basically, we plan to adjust the allocations whenever the
forecast changes by more than five percent. But the allocation process isn't
like turning a light switch on or off; it's more like the ebb and flow of the
tide. A lot of switching can increase the fund's volatility, which is contrary
to our intention of reducing volatility. Normally, the portfolio should be
within 10 percentage points of neutral -- 50 percent growth, 50 percent value.
We've been running the model portfolio since early 1995. Back then it
was fairly neutral -- 50 percent growth and 50 percent value. At this point we
believe the economy is going to experience a "soft landing" - a slowdown, but
no recession. So at this point we're moderately bullish toward growth stocks
with about 45 percent of the portfolio in value and 55 percent in growth.
Q. WHAT MIGHT CHANGE YOUR OUTLOOK?
A. D.B.: A sharp slowdown in the economy or a deterioration of earnings
would make us even more bullish on growth. On the other hand, if the economy
picks up steam, we'd turn more toward value.
Q. WHAT LIPPER CATEGORY DOES THIS FUND FALL INTO, AND WHAT BENCHMARKS WILL
YOU USE TO EVALUATE THE FUND'S PERFORMANCE?
A. D.B.: Kemper Value+Growth Fund is in the Lipper Growth Fund category,
which consists of about 640 funds. As for a performance benchmark, we'll
compare the fund's growth portfolio with the Russell 1000 Growth Index and the
value portfolio with the Russell 1000 Value Index. We'll compare the fund as a
whole with the Russell 1000 Index.
Q. LET'S MOVE ON TO THE ACTUAL STOCKS IN THE FUND. STEVE, THE MARKET HAS
ENJOYED SOME VERY STRONG GAINS IN 1995. WHAT'S YOUR OUTLOOK FOR GROWTH STOCKS
IN THE COMING YEAR?
6
<PAGE> 7
Performance Update
A. S.R.: Generally positive. While 1996 may not be as exciting as 1995,
we think there will definitely be some opportunities. The economic factors
that fueled this year's markets -- low interest rates and low inflation -- are
still in place. But, given the gains we've seen in 1995 and the fair
valuations of many stocks, we'll be a bit more conservative at least for the
next few months. Technology stocks, and health care and consumer nondurables as
well, have significantly outperformed. Now that they're fully priced, our
exposure will be somewhat lower than it would have been several months ago.
Right now I'm adding more economically sensitive stocks like chemicals,
industrials and retail. (See page 8 for a list of the fund's top holdings.)
Q. AREN'T THOSE KINDS OF STOCKS USUALLY CONSIDERED CYCLICAL OR VALUE
STOCKS RATHER THAN GROWTH STOCKS?
A. S.R.: They ARE cyclical in the sense that their earnings are more
vulnerable to a downturn in the economy, or their business might be more
seasonal, like some of the energy stocks. And you definitely won't see true
cyclicals like automobile manufacturers in the growth side of the portfolio.
But some of these stocks also present growth opportunities. Over time, despite
their cyclicality, they are able to achieve growth at a rate meaningfully above
the economy as a whole. Those are the companies we're looking at.
Q. DAVID, HOW ABOUT THE VALUE SIDE OF THE EQUATION? WHAT'S YOUR OUTLOOK?
A. D.D. I agree with Steve that a lot of the market appears to be fully
valued. Right now, we like companies in the financial sector -- regional
banks, financial services companies. During 1995, many of these stocks have
been up as much as the hot technology stocks -- with much less risk because of
their lower price/earning multiples. From a contrarian point of view, we're
also looking at quality retail stocks like Dayton-Hudson Corp. and apparel
manufacturers like Fruit of the Loom.
Terms To Know
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.
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.
CYCLICAL STOCK The stock of a company whose profits are heavily influenced by
cyclical changes in economic activity. As investors anticipate changes in
profits, cyclical stocks often reach their high and low levels before the
respective highs and lows in the economy. Depending on the specific company, a
cyclical stock can be considered either a growth or a value stock.
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.
Kemper's contrarian philosophy stresses buying only stocks which it believes
present good value when they are out of favor.
7
<PAGE> 8
LARGEST HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS
REPRESENTING 22.8% OF THE FUND'S TOTAL NET ASSETS ON NOVEMBER 30, 1995
- --------------------------------------------------------------------------------
HOLDINGS PERCENT
- --------------------------------------------------------------------------------
1. Union Texas Engaged in international oil and gas exploration 3.0%
Petroleum Holdings as well as the manufacturing of petrochemical
products.
2. Philip Morris The largest cigarette maker in the U.S. Through 2.7%
Companies its Miller Brewing subsidiary, it is also the
country's second-largest brewer. This company is
also a major branded food producer, through its
Kraft and General Foods subsidiaries.
3. Federal National Often referred to as "Fannie Mae", this is a 2.2%
Mortgage private corporation federally chartered to
Association provide financial products and services that
increase the availability and affordability of
housing to low, moderate and middle-income
Americans.
4. UST, Inc. Engaged in manufacturing and selling moist 2.2%
snuff, wine and other products.
5. Carnival Corp. A company with subsidiaries engaged in the 2.2%
operation of cruise lines, Carnival Corp. also
operates a resort and casino complex as well as
hotel, transportation and tour businesses.
6. PepsiCo The world's second-largest soft drink 2.2%
company, PepsiCo also manufactures and markets
snack foods and is the operator and franchiser of
the KFC, Pizza Hut and Taco Bell fast food
chains.
7. International Manufacturer of data processing equipment and 2.2%
Business Machines systems in the information processing field.
Corp.
8. Federated One of the nation's leading department store 2.1%
Department Stores retailers, Federated operates over 350 department
stores and operates over 100 specialty and
clearance stores in 35 states. Federated's stores
operate under the names Bloomingdale's, The Bon
Marche, Burdine's, Goldsmith's, Lazarus, Macy's,
Rich's and Stern's.
9. Heilig - Meyers Retailer of home furnishings and accessories. 2.1%
10. Johnson & Johnson The world's largest and most comprehensive 1.9%
manufacturer of health care products, serving the
consumer, pharmaceutical and professional markets.
8
<PAGE> 9
Industry Sectors
A COMPARISON WITH THE RUSSELL 1000 INDEX
DATA SHOW THE PERCENTAGE OF THE COMMON STOCKS IN THE PORTFOLIO THAT EACH SECTOR
OF THE KEMPER VALUE+GROWTH FUND REPRESENTED ON NOVEMBER 30, 1995, COMPARED TO
THE INDUSTRY SECTORS THAT MAKE UP THE FUND'S BENCHMARK, THE RUSSELL 1000 INDEX.
<TABLE>
<CAPTION>
VALUE+
GROWTH FUND ON INDEX ON
11/30/95 11/30/95
------------ ------------
<S> <C> <C>
Basic Industries 5.4% 6.2%
Capital goods 17.9% 9.5%
Technology 17.0% 12.4%
Consumer durables 0% 2.8%
Consumer nondurables 24.7% 23.0%
Health care 5.9% 10.1%
Finance 19.7% 15.1%
Transportation 0% 1.6%
Energy 9.8% 7.3%
Utilities 0% 12.0%
</TABLE>
9
<PAGE> 10
Portfolio of Investments
KEMPER VALUE+GROWTH FUND
Portfolio of Investments at November 30, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF SHARES VALUE
CHEMICALS--5.0%
<S> <C> <C> <C>
Air Products and Chemicals 1,500 $ 83,000
E.I. DuPont de Nemours & Co. 1,500 100,000
(a)FMC Corp. 1,500 111,000
---------------------------------------------------------------------------
294,000
- ----------------------------------------------------------------------------------------------------------
COMMUNICATIONS
AND MEDIA--3.2%
(a)AirTouch Communications 2,500 73,000
(a)Liberty Media Group, "A" 4,000 112,000
---------------------------------------------------------------------------
185,000
- ----------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE--6.3%
(a)BMC Software 2,500 106,000
Computer Associates International 1,500 98,000
(a)EMC Corp. 5,500 98,000
(a)Novell Inc. 4,000 67,000
---------------------------------------------------------------------------
369,000
- ----------------------------------------------------------------------------------------------------------
COMPUTER SYSTEMS AND
SEMICONDUCTORS--9.4%
(a)Applied Materials, Inc. 500 24,000
(a)Compaq Computer Corp. 2,000 99,000
Intel Corp. 1,000 61,000
International Business Machines Corp. 1,300 126,000
(a)Seagate Technology 1,500 79,000
(a)Silicon Graphics Inc. 2,000 73,000
Texas Instruments 1,500 87,000
---------------------------------------------------------------------------
549,000
- ----------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS
AND SERVICES--7.1%
PepsiCo 2,300 127,000
Philip Morris Companies 1,800 158,000
UST, Inc. 4,000 130,000
---------------------------------------------------------------------------
415,000
- ----------------------------------------------------------------------------------------------------------
DRUGS AND
HEALTHCARE--5.1%
Astra AB, "A" 2,500 93,000
Johnson & Johnson 1,300 113,000
U.S. Healthcare 2,000 91,000
---------------------------------------------------------------------------
297,000
- ----------------------------------------------------------------------------------------------------------
ENERGY AND RELATED
SERVICES--9.1%
Enron Corp. 2,000 75,000
Enron Oil & Gas Co. 4,000 84,000
Mobil Corp. 1,000 104,000
Schlumberger Ltd. 1,500 95,000
Union Texas Petroleum Holdings 9,000 173,000
---------------------------------------------------------------------------
531,000
- ----------------------------------------------------------------------------------------------------------
ENTERTAINMENT--4.1%
Carnival Corp. 5,000 130,000
(a)Viacom International, "B" 2,300 111,000
---------------------------------------------------------------------------
241,000
- ----------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
Portfolio of Investments
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
FINANCIAL SERVICES--18.2%
<S> <C> <C> <C>
American International Group, Inc. 800 $ 72,000
Banc One Corporation 2,700 103,000
Bank of Boston 2,000 93,000
Federal Home Loan Mortgage Corp. 700 54,000
Federal National Mortgage Association 1,200 131,000
General Re Corp. 700 105,000
KeyCorp 2,000 74,000
MBIA Inc. 1,000 77,000
Merrill Lynch & Co. 1,500 83,000
NationsBank 1,500 107,000
Northern Trust Co. 2,000 104,000
Western National Corporation 4,500 64,000
------------------------------------------------------------------------
1,067,000
- -------------------------------------------------------------------------------------------------------
MANUFACTURING--16.5%
Allied-Signal 2,000 95,000
Baker Hughes, Inc. 4,500 92,000
Boeing Co. 1,000 73,000
Emerson Electric Co. 1,000 78,000
Fluor Corp. 1,500 98,000
General Electric Co. 1,600 108,000
Goodyear Tire & Rubber Co. 2,000 85,000
Magna International, "A" 2,100 91,000
(a)Novellus Systems 1,500 93,000
Nucor Corp. 2,000 100,000
PPG Industries 1,200 54,000
------------------------------------------------------------------------
967,000
- -------------------------------------------------------------------------------------------------------
RETAILING--8.4%
Dayton Hudson Corp. 700 51,000
(a)Federated Department Stores 4,200 122,000
Heilig-Meyers 6,000 121,000
Home Depot 2,000 89,000
Wal-Mart Stores 4,500 108,000
------------------------------------------------------------------------
491,000
------------------------------------------------------------------------
TOTAL COMMON STOCKS--92.4%
(Cost: $5,282,000) 5,406,000
------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS--37.6%
PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C>
Yield--5.71%
Due--December 1995
Federal Home Loan Mortgage Corp.
(Cost: $2,199,000) $ 2,200,000 2,199,000
-------------------------------------------------------------------------
TOTAL INVESTMENTS--130.0%
(Cost: $7,481,000) 7,605,000
-------------------------------------------------------------------------
LIABILITIES, LESS CASH AND OTHER
ASSETS--(30.0)% (1,754,000)
-------------------------------------------------------------------------
NET ASSETS--100% $ 5,851,000
-------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
Based on the cost of investments of $7,481,000 for federal income tax purposes
at November 30, 1995, the aggregate gross unrealized appreciation was $145,000,
the aggregate gross unrealized depreciation was $21,000 and the net unrealized
appreciation on investments was $124,000.
See accompanying Notes to Financial Statements.
11
<PAGE> 12
Report of Independent Auditors
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER VALUE+GROWTH FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper Value+Growth Fund as of
November 30, 1995, and the related statements of operations, changes in net
assets and the financial highlights for the period from October 16, 1995
(initial public offering) to November 30, 1995. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
November 30, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Kemper
Value+Growth Fund at November 30, 1995, the results of its operations, the
changes in its net assets and the financial highlights for the period from
October 16, 1995 to November 30, 1995, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
January 12, 1996
12
<PAGE> 13
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1995
- ---------------------------------------------------
ASSETS
<TABLE>
<S> <C>
Investment, at value
(Cost: $7,481,000) $7,605,000
- -------------------------------------------------------------------------------------------------
Cash 19,000
- -------------------------------------------------------------------------------------------------
Receivable for:
Fund shares sold 1,115,000
- -------------------------------------------------------------------------------------------------
Dividends 3,000
- -------------------------------------------------------------------------------------------------
TOTAL ASSETS 8,742,000
- -------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
<TABLE>
<S> <C>
Payable for:
Investments purchased 2,887,000
- -------------------------------------------------------------------------------------------------
Management fee 1,000
- -------------------------------------------------------------------------------------------------
Distribution services fee 1,000
- -------------------------------------------------------------------------------------------------
Other 2,000
- -------------------------------------------------------------------------------------------------
Total liabilities 2,891,000
- -------------------------------------------------------------------------------------------------
NET ASSETS $5,851,000
- -------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
<TABLE>
<S> <C>
Paid-in capital $5,716,000
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 124,000
- -------------------------------------------------------------------------------------------------
Undistributed net investment income 11,000
- -------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $5,851,000
- -------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
THE PRICING OF SHARES
<TABLE>
<S> <C>
CLASS A SHARES
Net asset value and redemption price per share
($2,695,000 / 269,000 shares outstanding) $10.02
- -------------------------------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $10.63
- -------------------------------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($2,720,000 / 271,000 shares outstanding) $10.02
- -------------------------------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price per share
($436,000 / 44,000 shares outstanding) $10.01
- -------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
13
<PAGE> 14
For the period from October 16, 1995 (initial public offering) to November 30,
1995
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME
<TABLE>
<S> <C>
Dividends $ 4,000
- --------------------------------------------------------------------------------------------
Interest 5,000
- --------------------------------------------------------------------------------------------
Total investment income 9,000
- --------------------------------------------------------------------------------------------
Expenses:
Management fee 1,000
- --------------------------------------------------------------------------------------------
Distribution services fee 1,000
- --------------------------------------------------------------------------------------------
Professional fees 1,000
- --------------------------------------------------------------------------------------------
Other 1,000
- --------------------------------------------------------------------------------------------
Total expenses 4,000
- --------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 5,000
- --------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NET UNREALIZED GAIN ON INVESTMENTS
<TABLE>
<S> <C>
Change in net unrealized appreciation on investments 124,000
- --------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $129,000
- --------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
Net investment income $ 5,000
- ---------------------------------------------------------------------------------------------
Change in net unrealized appreciation 124,000
- ---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 129,000
- ---------------------------------------------------------------------------------------------
Net equalization credits 6,000
- ---------------------------------------------------------------------------------------------
Net increase from capital share transactions 5,616,000
- ---------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 5,751,000
- ---------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NET ASSETS
<TABLE>
<S> <C>
Beginning of period 100,000
- ---------------------------------------------------------------------------------------------
END OF PERIOD (including undistributed net investment income of $11,000) $5,851,000
- ---------------------------------------------------------------------------------------------
</TABLE>
14
Financial Statements
<PAGE> 15
Notes to Financial Statements
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE FUND Kemper Value+Growth Fund is an open-end management
investment company organized as a business trust
under the laws of Massachusetts. 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 or a contingent
deferred sales charge but are subject to higher
ongoing expenses than Class A shares and do not
convert into another class. Class I shares (none
sold through November 30, 1995) are offered to a
limited group of investors, are not subject to
initial or contingent deferred sales charges and
have lower ongoing expenses than other classes.
Differences in class expenses will result in the
payment of different per share income dividends by
class. Each share represents an identical interest
in the investments of the Fund and has the same
rights.
- --------------------------------------------------------------------------------
2 SIGNIFICANT ACCOUNTING
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.
Portfolio securities that are primarily traded on
foreign securities exchanges are generally valued
at the preceding closing values of such securities
on their respective exchanges where primarily
traded. Securities not so traded or listed are
valued at the last current bid quotation if market
quotations are available. 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. Forward foreign
currency contracts are valued at the forward rates
prevailing on the day of valuation. Other
securities and assets are valued at fair value as
determined in good faith by the Board of Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on the
trade date (date the order to buy or sell is
executed). Dividend income is recorded on the
ex-dividend date, and interest income is recorded
on the accrual basis and includes amortization of
money market instrument premium and discount.
Realized gains and losses from investment
transactions are reported on an identified cost
basis.
FUND SHARE VALUATION. Fund shares are sold and
redeemed on a continuous basis at net asset value
(plus an initial sales charge on most sales of
Class A shares). Proceeds payable on redemption of
Class B shares will be reduced by the amount of any
applicable contingent deferred sales charge. On
each day the New York Stock Exchange is open for
trading, the net asset value
15
<PAGE> 16
Notes to Financial Statements
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.
FEDERAL INCOME TAXES. The Fund has complied with
the special provisions of the Internal Revenue Code
available to investment companies and therefore no
federal income tax provision is required.
DIVIDENDS TO SHAREHOLDERS. The Fund declares and
pays dividends of net investment income and net
realized capital gains on an annual basis, 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.
EQUALIZATION ACCOUNTING. A portion of proceeds from
sales and cost of redemptions of Fund shares is
credited or charged to undistributed net investment
income so that income per share available for
distribution is not affected by sales or
redemptions of shares.
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The Fund has a management
agreement with Kemper Financial Services, Inc.
(KFS) and pays a management fee at an annual rate
of .72% of the first $250 million of average daily
net assets declining to .54% of average daily net
assets in excess of $12.5 billion. The Fund
incurred a management fee of $1,000 for the period
ended November 30, 1995.
KFS has agreed to temporarily reduce its management
fee and reimburse or pay certain operating expenses
to the extent necessary to limit the Fund's
operating expenses to the following percentages of
average daily net assets: Class A, 1.50%, Class B,
2.28% and Class C, 2.25%.
Dreman Value Advisors, Inc. (DVA), a wholly owned
subsidiary of KFS, is the sub-adviser for the value
portion of the Fund. KFS pays DVA a sub-advisory
fee at an annual rate of .25% of the average daily
net assets of the Fund.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
The Fund has an underwriting and distribution
services agreement with Kemper Distributors, Inc.
(KDI). 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>
Period ended November 30, 1995 -- $48,000 3,000
</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 shares. Distribution fees and
16
<PAGE> 17
Notes to Financial Statements
commissions paid in connection with the sale of
Class B and Class C shares are as follows:
<TABLE>
<CAPTION>
COMMISSIONS AND
DISTRIBUTION FEES
PAID BY KDI
DISTRIBUTION FEES ------------------------------
RECEIVED BY KDI TO ALL FIRMS TO AFFILIATES
----------------- ------------- --------------
<S> <C> <C> <C>
Period ended November 30, 1995 $ 1,000 75,000 2,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The Fund 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
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>
Period ended November 30, 1995 -- $ 5,000 --
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
Kemper Service Company (KSvC) is the shareholder
service agent of the Fund.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of KFS.
During the period ended November 30, 1995, the Fund
made no payments to its officers or trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the period ended November 30, 1995, investment
transactions (excluding short-term instruments) are
as follows:
Purchases $5,282,000
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund:
<TABLE>
<CAPTION>
OCTOBER 16, 1995 TO
NOVEMBER 30, 1995
------------------------
SHARES AMOUNT
<S> <C> <C>
-----------------------------------------------------------------------
SHARES SOLD
Class A 266,000 $2,609,000
-----------------------------------------------------------------------
Class B 267,000 2,619,000
-----------------------------------------------------------------------
Class C 40,000 393,000
-----------------------------------------------------------------------
-----------------------------------------------------------------------
SHARES REDEEMED
Class A (1,000) (5,000)
-----------------------------------------------------------------------
NET INCREASE FROM CAPITAL SHARE TRANSACTIONS $5,616,000
-----------------------------------------------------------------------
</TABLE>
17
<PAGE> 18
Financial Highlights
For the period from October 16, 1995 (initial public offering) to November 30,
1995
<TABLE>
- ----------------------------------------------------------- -------------- --------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE CLASS A CLASS B CLASS C
Net asset value, beginning of period $9.50 9.50 9.50
- ----------------------------------------------------------- -------------- --------------
Income from investment operations:
Net investment income .02 .02 .01
- ----------------------------------------------------------- -------------- --------------
Net unrealized gain .50 .50 .50
- ----------------------------------------------------------- -------------- --------------
Total from investment operations .52 .52 .51
- ----------------------------------------------------------- -------------- --------------
Net asset value, end of period $10.02 10.02 10.01
- ----------------------------------------------------------- -------------- --------------
TOTAL RETURN (NOT ANNUALIZED) 5.47% 5.47 5.37
- ----------------------------------------------------------- -------------- --------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 1.35% 2.10 2.07
- ----------------------------------------------------------- -------------- --------------
Net investment income 2.25 1.50 1.53
- ----------------------------------------------------------- -------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTAL FUND DATA FOR ALL CLASSES
<TABLE>
<S> <C>
Net assets at end of period $5,851,000
- ----------------------------------------------------------------------
Portfolio turnover rate --
- ----------------------------------------------------------------------
</TABLE>
NOTE: Total return does not reflect the effect of any sales charges.
18
<PAGE> 19
NOTES
19
<PAGE> 20
Trustees and Officers
Trustees Officers
PHILIP J. COLLORA
STEPHEN B. TIMBERS DANIEL J. BUKOWSKI Vice President and
President and Trustee Vice President Secretary
DAVID W. BELIN TRACY M. CHESTER CHARLES F. CUSTER
Trustee Vice President Vice President and
Assistant Secretary
LEWIS A. BURNHAM DAVID N. DREMAN
Trustee Vice President JEROME L. DUFFY
Treasurer
DONALD L. DUNAWAY JOHN E. NEAL
Trustee Vice President ELIZABETH C. WERTH
Assistant Secretary
ROBERT B. HOFFMAN JOHN E. PETERS
Trustee Vice President
DONALD R. JONES STEVEN H. REYNOLDS
Trustee Vice President
SHIRLEY D. PETERSON
Trustee
WILLIAM P. SOMMERS
Trustee
- --------------------------------------------------------------------
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
1-800-621-1048
- --------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
127 West 10th Street
Kansas City, MO 64105
- --------------------------------------------------------------------
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
- --------------------------------------------------------------------
INVESTMENT MANAGERS KEMPER FINANCIAL SERVICES, INC.
DREMAN VALUE ADVISORS, INC.
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
120 South LaSalle Street
Chicago, IL 60603
[KEMPER FUNDS LOGO]
[RECYCLED LOGO] 1008260
Printed on recycled paper. Printed in the U.S.A.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Equity Funds prospectus.
KVGF-2 (1/96)
