<PAGE> 1
KEMPER
VALUE+GROWTH FUND
SEMIANNUAL REPORT TO SHAREHOLDERS
FOR THE PERIOD ENDED MAY 31, 1996
SEEKING GROWTH OF CAPITAL THROUGH PROFESSIONAL MANAGEMENT
OF A PORTFOLIO OF GROWTH AND VALUE STOCKS.
"...the real boost came in our
stock-picking capability -- identifying
valuation oppor-
tunities and staying disciplined
with regard to our growth
and value philosophies."
<PAGE> 2
Table of
Contents
2
Terms to Know
3
General
Economic Overview
5
Management Team
6
Performance Update
8
Industry Sectors
9
Individual Holdings
10
Portfolio of Investments
13
Financial Statements
15
Notes to
Financial Statements
19
Financial Highlights
At A Glance
- --------------------------------------------------------------------------------
KEMPER VALUE+GROWTH FUND
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED MAY 31, 1996
(UNADJUSTED FOR ANY SALES CHARGE)
[LINE GRAPH]
<TABLE>
<S> <C>
CLASS A 13.77%
CLASS B 13.17%
CLASS C 13.39%
LIPPER GROWTH & INCOME FUNDS CATEGORY AVERAGE* 11.06%
</TABLE>
Returns 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 are based upon changes in net asset
value with all dividends reinvested and do not include the effect of sales
charges and, if they had, results may have been less favorable.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
5/31/96 11/30/95
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER VALUE+GROWTH FUND
CLASS A $11.40 $10.02
- --------------------------------------------------------------------------------
KEMPER VALUE+GROWTH FUND
CLASS B $11.34 $10.02
- --------------------------------------------------------------------------------
KEMPER VALUE+GROWTH FUND
CLASS C $11.35 $10.01
- --------------------------------------------------------------------------------
</TABLE>
Terms To Know
FUNDAMENTAL RESEARCH This research includes analysis of the balance sheets and
income statements of companies used to forecast their future stock price
movements. Fundamental analysis considers past records of assets, earnings,
sales, products, management and markets in helping predict future trends in
these indicators and of a company's success or failure. By appraising a firm's
prospects, this analysis may be used to help assess whether a particular stock
or group of stocks is undervalued or overvalued at its current market price.
GROWTH STOCK The stock of a company whose earnings growth has consistently
exceeded the growth rate of the overall market average and whose growth is
expected to continue or accelerate.
INDEX An unmanaged group of stocks that is considered representative of the
stock or bond markets. An index does not take into account any fees or expenses
related to the individual securities that it tracks. However, for performance
comparisons, the index is adjusted to reflect reinvestment of dividends of the
securities in the index.
SECTOR a specific industry group.
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.
<PAGE> 3
GENERAL ECONOMIC OVERVIEW
[TIMBERS PHOTO]
STEPHEN B. TIMBERS IS PRESIDENT, CHIEF EXECUTIVE AND CHIEF INVESTMENT OFFICER OF
ZURICH KEMPER INVESTMENTS, INC. (ZKI). ZKI AND ITS AFFILIATES MANAGE
APPROXIMATELY $78 BILLION IN ASSETS, INCLUDING $45 BILLION
IN RETAIL MUTUAL FUNDS. TIMBERS IS A GRADUATE OF YALE UNIVERSITY AND HOLDS AN
M.B.A. FROM HARVARD UNIVERSITY.
DEAR SHAREHOLDER,
The first six months of 1996 have provided a few surprises. As the year began,
most of us expected sluggish economic and corporate growth -- which the Federal
Reserve Board would address by reducing short-term interest rates. Yet, what we
experienced was stronger-than-anticipated economic growth, better corporate
earnings and rising interest rates. Although such surprises unsettled the bond
market, the stock market has followed a spectacular 1995 with strength so far
this year.
Where is the economy headed now? Its direction is even less predictable as we
draw nearer to the November elections. Half of the country's leading economists
are forecasting 3 percent growth while an equal number are looking for no better
than 1 percent growth. At Kemper Funds, we suspect that the economy is growing
at a subpar rate of 2 percent. Although commodity prices may suggest otherwise,
we think inflation is holding at less than 3 percent. We see no reason to expect
the Fed to reduce rates to stimulate growth but neither is it likely to raise
rates significantly to control growth. In an environment of stable or gently
rising rates, we would expect corporate earnings to grow at a rate of about 7 to
8 percent -- that's somewhat higher than we believed likely at the start of the
year.
Our forecast calls for a generally comfortable environment for investors. But
both the economy and the general direction of the markets are due for a
reversal. In July, the U.S. economy entered its 64th month of consecutive
growth. This is the longest expansion without a single quarter of negative
output growth since George Washington was president. Today's bull market started
in October 1990, which makes it one of the longest running bull markets in
history. By virtue of its length alone, the stock market is vulnerable to a
correction.
As expected, volatility has returned to the market this year. For example: The
stock market's performance on March 8, the date that a surprisingly strong
employment report was released, betrayed some level of investor skittishness.
But while the Standard & Poor's lost 3.1 percent that day, it quickly regained
the ground and moved higher.
CONSUMERS AND JOB SECURITY
The restructuring of corporate America, which is generally credited for its
improved profitability, has been an important influence on the consumer.
Economic growth is heavily dependent upon consumer spending which, in turn, is
a function of inflation, pay raises and fear of job loss. While the first two
have not been a recent concern, fear of losing one's job has dampened consumer
confidence.
Such anxiety in the workplace was the subject of a recent study by the
Council of Economic Advisors. According to that report, more than two-thirds
of the new jobs created in the United States in 1994 and 1995 paid better than
the average job. The report found that the rate at which jobs were eliminated
has risen slightly despite strong economic growth of recent years -- however, it
reported that the length of time most workers spent unemployed has declined.
The graph below tracks Bureau of Labor Statistics data that show the
recent relationship between number of jobs created versus the number of jobs
lost.
[LINE GRAPH]
<TABLE>
<CAPTION>
Jobs Created Jobs Lost
<S> <C> <C>
12/31/91 (300,000) 40,000
12/31/92 120,000 (30,000)
12/31/93 300,000 70,000
12/31/94 180,000 70,000
12/31/95 (80,000) (40,000)
3/31/96 490,000 (10,000)
</TABLE>
SOURCE: BUREAU OF LABOR STATISTICS
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.
<TABLE>
<CAPTION>
Now (5/31/96) 6 months ago 1 year ago 2 years ago
<S> <C> <C> <C> <C>
10-year Treasury rate(1) 6.74 5.71 6.17 7.10
Prime rate(2) 8.25 8.63 9.00 7.25
Inflation rate(3) 2.96 2.60 3.04 2.56
The U.S. dollar(4) 8.51 -2.58 -9.31 0.51
Capital
goods orders(5) 2.93 11.03 12.98 25.11
Industrial production(6) 3.26 1.08 2.80 6.61
Employment growth(7) 2.00 1.92 2.71 3.12
</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, infla-
tion 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.
Source: Economics Department, Zurich Kemper Investments, Inc.
Such ebb and flow is to be expected in investing, especially at this point in
the cycle. Attempting to "prepare" for a correction is futile, we believe. Those
whose caution caused them to excuse themselves from the market early this year,
for example, would have forgone its significant gain year to date.
Several opportunities exist today for the careful investor. First, having
settled down some from a raucous 1995, the technology sector continues to enjoy
the product and market demand that make it the dominant sector of the 1990s.
Second, equity investors willing to look overseas may find opportunities in
countries whose economies today are at a point where the U.S. economy was in
1995. Our forecast assumes that strength in foreign markets could boost those
countries' currencies, which would weaken the value of the dollar.
We expect the fixed-income markets to continue to be sensitive to interest
rate and inflation news. However, for as long as economic growth is positive and
earnings are growing, we believe the high-yield market is one market segment
that has significant potential.
Finally, we look for political activity to have less and less bearing on the
markets' performance. Although they may continue to debate tax reform,
federal budget deficit reduction and health care reform, the incumbent
legislators are running out of time to take action before the November
elections. If there is any suspense by November, it is likely to be in whether
the Republicans can retain control of Congress. Their success would make a
balanced budget and tax reform likely agenda topics for 1997.
With that as an economic backdrop, we encourage you to read the following
detailed report of your fund, including an interview with your fund's portfolio
management. Thank you for your continued support. We appreciate the opportunity
to serve your investment needs.
Sincerely,
/s/ Stephen B. Timbers
STEPHEN B. TIMBERS
PRESIDENT, CHIEF INVESTMENT AND EXECUTIVE OFFICER
ZURICH KEMPER INVESTMENTS, INC.
July 2, 1996
4
<PAGE> 5
MANAGEMENT TEAM
[BUKOWSKI PHOTO]
DANIEL J. BUKOWSKI, SENIOR VICE PRESIDENT AND DIRECTOR OF QUANTITATIVE RESEARCH
FOR ZURICH KEMPER INVESTMENTS, INC. (ZKI), ADMINISTERS THE QUANTITATIVE MODEL
UPON WHICH THE FUND'S ASSET ALLOCATION DECISIONS ARE BASED. HE HAS MORE THAN 10
YEARS OF EXPERIENCE IN THE CAPITAL MARKETS AND HOLDS A BACHELOR'S DEGREE AND AN
M.B.A. FROM THE UNIVERSITY OF CHICAGO.
[DREMAN PHOTO]
DAVID N. DREMAN, CHAIRMAN 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 ZURICH KEMPER INVESTMENTS, INC. (ZKI), MANAGES THE GROWTH
PORTION OF KEMPER VALUE+GROWTH FUND. REYNOLDS JOINED ZKI 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.
5
<PAGE> 6
PERFORMANCE UPDATE
STRONG RETURNS FOR KEMPER VALUE+GROWTH FUND DURING THE SIX MONTHS ENDED MAY 31,
1996 REFLECT THE POSITIVE PERFORMANCE OF THE MARKET AS A WHOLE DURING THE
PERIOD. BELOW, PORTFOLIO MANAGERS STEVE REYNOLDS, DAVID DREMAN AND DAN BUKOWSKI
DISCUSS HOW THEIR EFFORTS CONTRIBUTED TO A 13.77% TOTAL RETURN FOR CLASS A
SHARES FOR THE PERIOD.
Q. DAN, THE FUND HAS OUTPERFORMED OF ITS BENCHMARK -- THE RUSSELL 1000
INDEX -- DURING THE SIX-MONTH REPORTING PERIOD. WHAT WAS BEHIND THIS STRONG
PERFORMANCE?
A. D.B.: Early in the period we increased the fund's bias toward growth
stocks from 55% to about 60%. This certainly helped, since growth stocks
generally outperformed value stocks through most of the period. But I think the
real boost came in our stock-picking capability -- identifying valuation
opportunities and staying disciplined with regard to our growth and value
philosophies.
Q. WERE THERE ANY STRATEGIES THAT HELD THE FUND BACK, ANYTHING YOU MIGHT HAVE
DONE DIFFERENTLY?
A. D.B.: Given the fund's solid gains for the period, it's hard to single out
any factors that really "hurt" performance. For the most part, our strategies
served us well. Of course, there were a few missed opportunities. For example,
beverage stocks like Coca Cola and Pepsi did quite well during the period, but
the fund didn't own them.
We were interested in establishing a broader exposure to consumer
stocks and had added a few names like Circus Circus and Brinkers, but from our
perspective, the major beverage companies were just too expensive. We
anticipated adding to this area on temporary weakness, as selected stocks
experienced a pull-back. Instead, the sector continued to rally and we never
saw the buying opportunity we'd hoped for. Now the stocks we hoped to buy are
even more expensive. Even though we missed out on that leg of the run-up, I
have no doubt that we were right in staying true to our "growth at the right
price" discipline.
Q. STEVE, WHAT WAS YOUR STRATEGY FOR THE GROWTH PORTION OF THE PORTFOLIO
DURING THE PAST SIX MONTHS?
A. S.R.: Throughout the period, the market was rotational, often favoring
different sectors from one week to the next. In this environment, we were
pretty active in terms of trading -- trimming positions that had experienced
strong gains and buying stocks that had been beaten down. Early in the period,
we added economically-sensitive issues like retail, energy and housing-related
stocks -- positions that stood to gain in a period of strong economic growth.
After several strong months, we trimmed those positions in favor of more
defensive growth stocks like pharmaceuticals and a few financials. We also
added to our technology positions when a series of sell-offs in late 1995 and
early 1996 presented some attractive valuation opportunities. Despite some
volatility, those positions have generally done well for us.
Q. DAVID, WHAT ABOUT THE VALUE SIDE OF THE PORTFOLIO?
A. D.D.: Financial stocks were strong performers on the value side. In this
sector we own the Federal Home Loan Mortgage Corp. ("Freddie Mac") and the
Federal National Mortgage Association ("Fannie Mae"). We particularly like
regional banks, which are trading at very attractive multiples relative to the
market. Our retail positions -- many of which were established a while back --
enjoyed a nice bounce after a prolonged slump.
During the period we added some selected technology names as well. The
market recognized that this sector had become significantly overvalued and
investors just bailed out. This created some very nice opportunities from a
contrarian point of view -- fundamentally sound companies that fell out of
favor due to the whims of market psychology. I should point out, however, that
we've diligently
avoided the
6
<PAGE> 7
PERFORMANCE UPDATE
"concept" stocks, such as those connected with the Internet.
Q. ARE THERE STOCKS OWNED ON BOTH THE VALUE AND GROWTH SIDES OF THE PORTFOLIO?
A. D.B.: Although the growth and value styles are generally complementary, and
there are some fundamentally different criteria used in their stock selection
process, there will sometimes be cases where a certain stock or sector appeals
to both disciplines.
Philip Morris is one example. Its stock price took a beating in response to
some negative media coverage about potential legal action. That created an
attractive opportunity for the value side -- an undervalued company that has
strong fundamentals and pays an attractive dividend, providing a cushion for
total return in the event of a market downturn. On the growth side, the company
continues to offer steady earnings growth that, over the long-term, has
consistently outpaced the market as a whole.
As Steve and David mentioned, both were drawn to technology stocks after
the sell-off that occurred early in 1996. So there were a few overlaps in that
area (Intel, Compaq) as well as the health care (U.S. Healthcare) and financial
(Federal National Mortgage Association) sectors.
Q. DOESN'T THIS KIND OF OVERLAP HAVE A NEGATIVE EFFECT ON THE FUND'S
DIVERSIFICATION?
A. D.B.: No. As long as we remain disciplined in terms of the two styles and
keep the weightings in line with their respective benchmarks, there shouldn't
be a problem with maintaining a well-diversified portfolio. For example, if we
fell into a situation where growth stocks were very much out of favor and Steve
chose to lean heavily toward value, we might have a problem. In that situation,
I'd sit down with David and Steve and work out some alternatives that would
satisfy their respective needs and still maintain a satisfactory level of
diversity.
Q. YOU MENTIONED PHILIP MORRIS AS A STOCK FAVORED BY BOTH SIDES OF THE
PORTFOLIO. SOME SHAREHOLDERS HAVE EXPRESSED CONCERN IN RECENT MONTHS ABOUT
THEIR FUND OWNING TOBACCO STOCKS. HOW DO YOU RESPOND TO THOSE WHO MAY BE
TROUBLED BY THESE INVESTMENTS?
A. S.R.: Investors should know that this fund -- like the rest of the Kemper
Funds -- is not managed or marketed as being "socially conscious." Our
investment decisions for the fund are based on fundamental research and the
potential for future growth. Our fiduciary responsibility is to manage the fund
in accordance with its investment objectives, policies and limitations.
D.D.: There ARE funds on the market that invest according to certain social
criteria. If an investor feels very strongly about this issue, they should
discuss their concerns with a financial representative who can help them choose
a fund that meets their specific criteria.
Q. WITH THE ECONOMY APPARENTLY GOING STRONG AND INTEREST RATES MOVING UP, DO
YOU PLAN TO TILT THE PORTFOLIO TOWARD VALUE STOCKS?
A. D.B.: The strong economy and higher rates DO urge a more cautious tone
with regard to our current overweighting in growth stocks. In addition,
valuations on the growth side aren't as compelling as they were at the
beginning of the year, and a 60% weighting in either direction is a fairly high
tilt for the portfolio. With those points in mind, we may well reduce the
overweighting to some extent as we go forward. However, the cyclical strength
that we see in the economy hasn't been reflected in corporate profits as
measured by the Standard and Poor's 500 Stock Index (S&P). From our standpoint,
sub-par earnings growth in the S&P argues for a continued overweighting in
growth versus value, which I expect we'll maintain for the near-term.
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 MAY 31, 1996, AND NOVEMBER 30, 1995.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER KEMPER
VALUE+GROWTH VALUE+GROWTH
FUND ON 5/31/96 FUND ON 11/30/95
<S> <C> <C>
Technology 25.0% 17.0%
Consumer nondurables 24.0% 24.7%
Finance 21.7% 19.7%
Health care 13.3% 5.5%
Capital goods 5.2% 17.9%
Utilities 3.9% 0.0%
Energy 3.6% 9.8%
Consumer durables 2.2% 0.0%
Basic Industries 1.1% 5.4%
</TABLE>
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 MAY 31, 1996, COMPARED TO THE
INDUSTRY SECTORS THAT MAKE UP THE FUND'S BENCHMARK, THE RUSSELL 1000 INDEX.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER RUSSELL
VALUE+GROWTH 1000 INDEX
FUND ON 5/31/96 5/31/96
<S> <C> <C>
Technology 25.0% 12.2%
Consumer nondurables 24.0% 22.1%
Finance 21.7% 15.6%
Health care 13.3% 10.1%
Capital goods 5.2% 9.6%
Utilities 3.9% 12.1%
Energy 3.6% 7.8%
Consumer durables 2.2% 3.2%
Basic Industries 1.1% 5.7%
Transportation 0.0% 1.6%
</TABLE>
* THE RUSSELL 1000 INDEX IS AN UNMANAGED INDEX COMPRISED OF 1000 OF THE LARGEST
CAPITALIZED U.S. COMPANIES WHOSE COMMON STOCK TRADE IN THE U.S. ON THE NEW YORK
STOCK EXCHANGE, AMERICAN STOCK EXCHANGE AND NASDAQ. THIS LARGE CAP MARKET
ORIENTED INDEX IS HIGHLY CORRELATED WITH THE S&P 500 INDEX.
8
<PAGE> 9
INDIVIDUAL HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS*
REPRESENTING 23.7% OF THE FUND'S TOTAL NET ASSETS ON MAY 31, 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
HOLDINGS PERCENT
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
1. INTEL CORP. Designs, develops, manufactures and sells advanced 3.8%
microcomputer components such as integrated circuits and
other related products.
- ----------------------------------------------------------------------------------------------
2. PHILIP MORRIS The largest cigarette maker in the U.S. Through its 3.1%
Miller Brewing subsidiary, it is also the country's
COMPANIES second-largest brewer. This company is also a major
branded food producer through its Kraft and General
Foods subsidiaries.
- ----------------------------------------------------------------------------------------------
3. FEDERAL NATIONAL Provides financial products and services that increase 2.9%
MORTGAGE ASSOCIATION the availability and affordability of housing for low,
moderate and middle-income Americans.
- ----------------------------------------------------------------------------------------------
4. COMPAQ COMPUTER Designs, develops, manufactures and markets personal 2.4%
CORP. computers for business and professional users.
- ----------------------------------------------------------------------------------------------
5. GENERAL ELECTRIC CO. Operates in major businesses including power generators, 2.3%
appliances, lighting, plastics, medical systems,
aircraft engines, financial services and broadcasting.
- ----------------------------------------------------------------------------------------------
6. UST, INC. Manufactures and sells moist snuff, wine and other 2.0%
products.
- ----------------------------------------------------------------------------------------------
7. TEXAS INSTRUMENTS A high technology company with sales or manufacturing 2.0%
operations in over 30 countries. TI products and
services include semiconductors, defense electronics
systems, software productivity tools, computer and
peripheral products and consumer products.
- ----------------------------------------------------------------------------------------------
8. MERRILL LYNCH Through its subsidiaries, Merrill Lynch engages in 2.0%
investments, insurance, real estate and other related
financial activities.
- ----------------------------------------------------------------------------------------------
9. MERCK & CO. A leading research-driven pharmaceutical products and 1.6%
services company. Merck discovers, develops,
manufactures and markets a broad range of innovative
products to improve human and animal health.
- ----------------------------------------------------------------------------------------------
10. 3COM Founded in 1979, 3Com pioneered the data networking 1.6%
industry. Today, 3Com offers a broad range of global
data networking solutions including routers, hubs, LAN
switches and adapters.
- ----------------------------------------------------------------------------------------------
</TABLE>
*THE FUND'S COMPOSITION AND HOLDINGS ARE SUBJECT TO CHANGE.
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
KEMPER VALUE+GROWTH FUND
Portfolio of Investments May 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BASIC INDUSTRIES--.9% (a)FMC Corp. 3,000 $ 202
- --------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--4.6% Emerson Electric Co. 3,000 257
General Electric Co. 6,000 496
Xerox Corporation 1,500 236
-----------------------------------------------------------------------------
989
- --------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--7.8% (a)Burlington Coat Factory 2,500 27
Liz Claiborne 1,800 67
Dayton Hudson Corp. 900 92
Dillard Department Stores 1,800 72
(a)Fruit of The Loom 3,600 97
Home Depot 2,000 102
Manpower, Inc. 6,000 231
Mattel, Inc. 10,000 273
May Department Stores Co. 200 9
Newell Co. 7,000 210
Payless Shoesource 32 1
Philips N.V., ADR 3,700 130
TJX Companies, Inc. 3,300 116
(a)Toys R Us 2,200 64
V.F. Corp. 1,400 85
Wal-Mart Stores 3,600 93
-----------------------------------------------------------------------------
1,669
- --------------------------------------------------------------------------------------------------------------------
CONSUMER DURABLES--1.9% Ford Motor Co. 2,900 106
Magna International Inc., "A" 4,200 203
Singer Company N.V. 5,000 103
-----------------------------------------------------------------------------
412
- --------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--13.5% American Greetings Corp. 5,000 136
Carnival Corp. 9,000 268
(a)Cox Communications Inc. 10,000 225
Walt Disney Company 4,000 243
Hanson PLC, ADR 1,300 19
(a)Liberty Media Group, "A" 4,000 120
Philip Morris Companies 6,700 666
Procter & Gamble Co. 3,200 281
Tele-Communications, Inc. 10,000 189
UST, Inc. 13,000 429
(a)Viacom International
"A" shares 1,100 45
"B" shares 2,300 98
Wendy's International 10,000 180
-----------------------------------------------------------------------------
2,899
- --------------------------------------------------------------------------------------------------------------------
ENERGY--3.2% AMOCO Corp. 700 51
Atlantic Richfield Co. 400 48
Columbia Gas System 6,800 332
Enron Corp. 4,000 160
Louisiana-Pacific Corp. 3,500 86
-----------------------------------------------------------------------------
677
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCE--19.2% H.F. Ahmanson & Co. 1,300 $ 33
American General Corp. 1,700 60
American International Group, Inc. 2,500 236
Banc One Corporation 2,700 100
BankAmerica Corp. 1,900 143
Bankers Trust New York Corp. 1,500 113
Barnett Banks 1,500 94
Boatmen's Bancshares 4,000 162
Capital One Financial Corp. 300 9
Federal Home Loan Mortgage Corp. 3,500 289
Federal National Mortgage Association 20,000 617
First Chicago NBD Corp. 3,400 148
First Union Corp. 3,100 189
First USA 1,000 58
Fleet Financial Group, Inc. 1,800 79
General Re Corp. 1,000 146
Great Western Financial Corp. 1,800 41
KeyCorp 2,100 81
MBIA Inc. 2,000 152
MGIC Investment Corp. 1,000 59
Merrill Lynch & Co. 6,500 421
J.P. Morgan & Company 1,100 96
NationsBank 4,000 325
Norwest Corp. 100 3
PNC Bank, N.A. 6,200 188
Providian Corp. 1,000 44
Signet Banking Corp. 500 13
Travelers Group 4,800 199
Wells Fargo & Co. 100 24
-----------------------------------------------------------------------------
4,122
- --------------------------------------------------------------------------------------------------------------------
HEALTH CARE--11.8% Abbott Laboratories 6,000 259
Astra AB, ADR 5,500 250
Baxter International 400 18
Becton Dickinson & Co. 400 34
Columbia/HCA Healthcare Corp. 300 16
Glaxo Wellcome, ADR 10,900 285
(a)Humana, Inc. 3,100 68
Johnson & Johnson 2,300 224
Eli Lilly & Co. 1,300 83
Mallinckrodt Group 5,000 188
Merck & Co., Inc. 5,500 355
(a)Mid Atlantic Medical Services, Inc. 7,000 134
Pharmacia-Upjohn Inc. 1,400 57
(a)Sandoz, Ltd. 3,600 186
(a)Tenet Healthcare Corporation 2,700 58
U.S. Healthcare 1,800 98
(a)Value Health 8,000 218
-----------------------------------------------------------------------------
2,531
- --------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--22.1% (a)Applied Materials, Inc. 2,000 75
(a)Atmel Corporation 4,000 142
(a)Cisco Systems 6,000 328
(a)Compaq Computer Corp. 10,600 515
(a)EMC Corp. 12,500 277
Intel Corp. 10,900 823
International Business Machines Corp. 2,000 214
(a)LSI Logic Corp. 10,000 311
Linear Technology Corp. 5,000 173
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(a)Microchip Technology 4,000 $ 103
(a)Novell Inc. 4,000 57
(a)Novellus Systems 6,000 294
(a)Parametric Technology Corp. 6,000 274
(a)Seagate Technology 2,500 147
(a)Silicon Graphics Inc. 9,000 248
Texas Instruments 7,500 422
(a)3Com Corporation 7,000 345
-----------------------------------------------------------------------------
4,748
- --------------------------------------------------------------------------------------------------------------------
UTILITIES--3.5%
AT&T 5,000 312
(a)AirTouch Communications 6,500 207
(a)Paging Network, Inc. 10,000 225
-----------------------------------------------------------------------------
744
-----------------------------------------------------------------------------
TOTAL COMMON STOCKS--88.5%
(Cost: $17,756) 18,993
-----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET
INSTRUMENTS--8.8%
Yield--4.88% to 5.29%
Due--June and July 1996
Federal Farm Credit Banks $ 1,100 1,093
Other 800 797
-----------------------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--8.8%
(Cost: $1,890) 1,890
-----------------------------------------------------------------------------
TOTAL INVESTMENTS--97.3%
(Cost: $19,646) 20,883
-----------------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES--2.7% 581
-----------------------------------------------------------------------------
NET ASSETS--100% $21,464
-----------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- -------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $19,646,000 for federal income tax purposes
at May 31, 1996, the gross unrealized appreciation was $1,495,000, the gross
unrealized depreciation was $258,000 and the net unrealized appreciation on
investments was $1,237,000.
See accompanying Notes to Financial Statements.
12
<PAGE> 13
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------
Investments, at value
(Cost: $19,646) $20,883
- -------------------------------------------------------------------------------------------------------
Cash 228
- -------------------------------------------------------------------------------------------------------
Receivable for:
Fund shares sold 47
- -------------------------------------------------------------------------------------------------------
Investments sold 471
- -------------------------------------------------------------------------------------------------------
Dividends 29
- -------------------------------------------------------------------------------------------------------
TOTAL ASSETS 21,658
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- -------------------------------------------------------------------------------------------------------
Payable for:
Investments purchased 150
- -------------------------------------------------------------------------------------------------------
Management fee 10
- -------------------------------------------------------------------------------------------------------
Distribution services fee 6
- -------------------------------------------------------------------------------------------------------
Administrative services fee 4
- -------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 15
- -------------------------------------------------------------------------------------------------------
Other 9
- -------------------------------------------------------------------------------------------------------
Total liabilities 194
- -------------------------------------------------------------------------------------------------------
NET ASSETS $21,464
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -------------------------------------------------------------------------------------------------------
Paid-in capital $19,158
- -------------------------------------------------------------------------------------------------------
Undistributed net realized gain on investments 1,033
- -------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 1,237
- -------------------------------------------------------------------------------------------------------
Undistributed net investment income 36
- -------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $21,464
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
THE PRICING OF SHARES
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($11,078,600 divided by 972,200 shares outstanding) $11.40
- -------------------------------------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $12.10
- -------------------------------------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($9,884,900 divided by 871,600 shares outstanding) $11.34
- -------------------------------------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($500,000 divided 44,100 shares outstanding) $11.35
- -------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
13
<PAGE> 14
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Six months ended May 31, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- -------------------------------------------------------------------------------------------------------
Dividends $ 111
- -------------------------------------------------------------------------------------------------------
Interest 29
- -------------------------------------------------------------------------------------------------------
Total investment income 140
- -------------------------------------------------------------------------------------------------------
Expenses:
Management fee 55
- -------------------------------------------------------------------------------------------------------
Distribution services fee 28
- -------------------------------------------------------------------------------------------------------
Administrative services fee 17
- -------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 31
- -------------------------------------------------------------------------------------------------------
Professional fees 14
- -------------------------------------------------------------------------------------------------------
Reports to shareholders 5
- -------------------------------------------------------------------------------------------------------
Other 2
- -------------------------------------------------------------------------------------------------------
Total expenses before expense waiver 152
- -------------------------------------------------------------------------------------------------------
Less expenses waived by investment manager 9
- -------------------------------------------------------------------------------------------------------
Total expenses after expense waiver 143
- -------------------------------------------------------------------------------------------------------
NET INVESTMENT LOSS (3)
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
- -------------------------------------------------------------------------------------------------------
Net realized gain on sales of investments 1,008
- -------------------------------------------------------------------------------------------------------
Net realized gain from futures transactions 25
- -------------------------------------------------------------------------------------------------------
Net realized gain 1,033
- -------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation on investments 1,113
- -------------------------------------------------------------------------------------------------------
Net gain on investments 2,146
- -------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,143
- -------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS OCTOBER 16, 1995
ENDED TO
MAY 31, NOVEMBER 30,
1996 1995
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
OPERATIONS AND CAPITAL SHARE ACTIVITY
- ---------------------------------------------------------------------------------------------------------
Net investment income (loss) $ (3) 5
- ---------------------------------------------------------------------------------------------------------
Net realized gain 1,033 --
- ---------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation 1,113 124
- ---------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,143 129
- ---------------------------------------------------------------------------------------------------------
Net equalization credits 28 6
- ---------------------------------------------------------------------------------------------------------
Net increase from capital share transactions 13,442 5,616
- ---------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 15,613 5,751
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------------------
Beginning of period 5,851 100
- ---------------------------------------------------------------------------------------------------------
END OF PERIOD (including undistributed net investment
income of $36,000 and $11,000, respectively) $ 21,464 5,851
- ---------------------------------------------------------------------------------------------------------
</TABLE>
14
<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 sales charge but
are subject to higher ongoing expenses than Class A
shares and, for shares sold on or after April 1,
1996, a contingent deferred sales charge payable
upon certain redemptions within one year of
purchase. Class C shares do not convert into
another class. Class I shares (none sold through
May 31, 1996) are offered to a limited group of
investors, are not subject to initial or contingent
deferred sales charges and have lower ongoing
expenses than other classes. Differences in class
expenses will result in the payment of different
per share income dividends by class. Each share
represents an identical interest in the investments
of the Fund and has the same rights.
- --------------------------------------------------------------------------------
2 SIGNIFICANT ACCOUNTING
POLICIES INVESTMENT VALUATION. Investments are stated at
value. Portfolio securities that are traded on a
domestic securities exchange or securities listed
on the NASDAQ National Market are valued at the
last sale price on the exchange or market where
primarily traded or listed or, if there is no
recent sale, at the last current bid quotation.
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 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
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
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.
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 May 31, 1996.
DIVIDENDS TO SHAREHOLDERS. The Fund declares and
pays dividends of net investment income and net
realized capital gains annually, which are recorded
on the ex-dividend date. Dividends are determined
in accordance with income tax principles which may
treat certain transactions differently from
generally accepted accounting principles.
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 Zurich Kemper Investments, Inc.
(ZKI) (formerly known as Kemper Financial Services,
Inc.) 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 $55,000 for the six
months ended May 31, 1996. Dreman Value Advisors,
Inc., a wholly owned subsidiary of ZKI, is the
sub-adviser for the value portion of the Fund.
ZKI 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%. Under this arrangement,
ZKI waived expenses of $9,000 for the six months
ended May 31, 1996.
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>
Six months ended May 31, 1996 $19,000 128,000 11,000
</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
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
Class C shares. In addition, KDI receives any
contingent deferred sales charges (CDSC) from
redemptions of Class B and Class C shares.
Distribution fees and commissions paid in
connection with the sale of Class B and Class C
shares and the CDSC received in connection with the
redemption of such shares are as follows:
<TABLE>
<CAPTION>
COMMISSIONS AND
DISTRIBUTION DISTRIBUTION FEES
FEES PAID BY KDI
AND CDSC ------------------------------
RECEIVED BY KDI TO ALL FIRMS TO AFFILIATES
---------------- ------------- -------------
<S> <C> <C> <C>
Six months ended May 31, 1996 $ 30,000 177,000 14,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with KDI. For
providing information and administrative services
to shareholders, the Fund pays KDI a fee at an
annual rate of up to .25% of average daily net
assets. KDI in turn has various agreements with
financial services firms that provide these
services and pays these firms based on assets of
Fund accounts the firms service. Administrative
services fees (ASF) paid are as follows:
<TABLE>
<CAPTION>
ASF PAID BY KDI
ASF PAID BY -----------------------------
THE FUND TO KDI TO ALL FIRMS TO AFFILIATES
---------------- ------------ -------------
<S> <C> <C> <C>
Six months ended May 31, 1996 $ 17,000 24,000 2,000
</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. Under the agreement,
KSvC received shareholder services fees of $19,000
for the six months ended May 31, 1996.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of ZKI.
During the six months ended May 31, 1996, the Fund
made no payments to its officers or trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the six months ended May 31, 1996, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $19,937
Proceeds from sales 8,471
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED OCTOBER 16, 1995 TO
MAY 31, 1996 NOVEMBER 30, 1995
-------------------- -------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------
SHARES SOLD
----------------------------------------------------------------------------
Class A 809 $ 8,278 266 $2,609
----------------------------------------------------------------------------
Class B 675 6,988 267 2,619
----------------------------------------------------------------------------
Class C 62 649 40 393
----------------------------------------------------------------------------
SHARES REDEEMED
----------------------------------------------------------------------------
Class A (106) (1,073) (1) (5)
----------------------------------------------------------------------------
Class B (74) (786) -- --
----------------------------------------------------------------------------
Class C (62) (614) -- --
----------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $13,442 $5,616
----------------------------------------------------------------------------
</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 changes. At May 31, 1996,
the market value of assets pledged by the Fund to
cover margin requirements for open futures
positions was $100,000 for the following financial
futures contracts owned by the Fund.
<TABLE>
<CAPTION>
GAIN
CONTRACT EXPIRATION (LOSS) AT
TYPE AMOUNT POSITION MONTH 5/31/96
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
S&P 500 Index $1,671,000 Long June 96 $ 31,000
------------------------------------------------------------------------------
S&P 500/BARRA Growth Index 667,600 Long Sept. 96 (6,000)
------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 19
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------- ------------------------ -------------------------
CLASS A CLASS B CLASS C
----------------------- ------------------------ -------------------------
SIX MONTHS OCTOBER 16, SIX MONTHS OCTOBER 16, SIX MONTHS OCTOBER 16,
ENDED 1995 TO ENDED 1995 TO ENDED 1995 TO
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1996 1995 1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $10.02 9.50 10.02 9.50 10.01 9.50
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .02 .02 (.02) .02 (.02) .01
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 1.36 .50 1.34 .50 1.36 .50
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.38 .52 1.32 .52 1.34 .51
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.40 10.02 11.34 10.02 11.35 10.01
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 13.77% 5.47 13.17 5.47 13.39 5.37
- ------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------------------------------------------
Expenses absorbed by the Fund 1.46% 1.35 2.27 2.10 2.25 2.07
- ------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .35% 2.25 (.46) 1.50 (.44) 1.53
- ------------------------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------------------------------------------
Expenses 1.58% -- 2.39 -- 2.37 --
- ------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .23% -- (.58) -- (.56) --
- ------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS OCTOBER 16,
ENDED 1995 TO
MAY 31, NOVEMBER 30,
1996 1995
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $21,464 5,851
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 120% --
- ------------------------------------------------------------------------------------------------------------------------
Average commission rate paid per share on stock transactions for the six months ended May 31, 1996 was $.0567.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Total return does not reflect the effect of any sales charges. The
investment manager agreed to temporarily waive its management fee and absorb
certain operating expenses of the Fund. The Other Ratios to Average Net Assets
are computed without this expense waiver or absorption.
19
<PAGE> 20
TRUSTEES AND OFFICERS
TRUSTEES OFFICERS
STEPHEN B. TIMBERS DANIEL J. BUKOWSKI PHILIP J. COLLORA
President and Trustee Vice President Vice President and
Secretary
DAVID W. BELIN DAVID N. DREMAN
Trustee Vice President JEROME L. DUFFY
Treasurer
LEWIS A. BURNHAM JOHN E. NEAL
Trustee Vice President ELIZABETH C. WERTH
Assistant Secretary
DONALD L. DUNAWAY JOHN E. PETERS
Trustee Vice President
ROBERT B. HOFFMAN STEVEN H. REYNOLDS
Trustee Vice President
DONALD R. JONES
Trustee
DOMINIQUE P. MORAX
Trustee
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
- --------------------------------------------------------------------------------
INVESTMENT MANAGERS ZURICH KEMPER INVESTMENTS, INC.
DREMAN VALUE ADVISORS, INC.
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
120 South LaSalle Street Chicago, IL 60603
http://www.kemper.com
(RECYCLE LOGO)
Printed on recycled paper.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Equity Fund prospectus.
KVGF - 3 (7/96) KEMPER LOGO
1018330
Printed in the U.S.A.
