<PAGE> 1
KEMPER
VALUE+GROWTH FUND
SEMIANNUAL REPORT TO SHAREHOLDERS FOR THE PERIOD ENDED MAY 31, 1997
Seeking growth of capital through professional management of a
portfolio of growth and value stocks.
" . . . We've looked for individual
stocks that offer multinational exposure but are
selling at what we believe are
attractive values. . . ."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
Economic Overview
5
Performance Update
8
Industry Sectors
9
Largest 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, 1997
(UNADJUSTED FOR ANY SALES CHARGE):
[BAR GRAPH]
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 8.27%
CLASS B 7.85%
CLASS C 7.68%
LIPPER GROWTH & INCOME FUNDS
CATEGORY AVERAGE* 10.12%
</TABLE>
- -------------------------------------------------------------------------------
Returns and rankings 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.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
NET ASSET VALUE
- -------------------------------------------------------------------------------
AS OF AS OF
5/31/97 11/30/96
- -------------------------------------------------------------------------------
<S> <C> <C>
KEMPER VALUE+GROWTH FUND
CLASS A $13.10 $12.95
- -------------------------------------------------------------------------------
KEMPER VALUE+GROWTH FUND
CLASS B $12.92 $12.83
- -------------------------------------------------------------------------------
KEMPER VALUE+GROWTH FUND
CLASS C $12.91 $12.84
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
KEMPER VALUE+GROWTH FUND
LIPPER RANKINGS*
- -------------------------------------------------------------------------------
COMPARED TO ALL OTHER FUNDS IN THE LIPPER GROWTH AND INCOME FUNDS CATEGORY
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
1-YEAR #305 OF #362 OF #369 OF
551 FUNDS 551 FUNDS 551 FUNDS
- -------------------------------------------------------------------------------
</TABLE>
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DIVIDEND REVIEW
- -------------------------------------------------------------------------------
During the period, the Kemper Value+Growth Fund made the following
distributions:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM
CAPITAL GAIN $0.73 $0.73 $0.73
- -------------------------------------------------------------------------------
LONG-TERM
CAPITAL GAIN $0.10 $0.10 $0.10
- -------------------------------------------------------------------------------
</TABLE>
*Lipper Analytical Services, Inc. returns and rankings are based upon changes in
net asset value with all dividends reinvested and do not include the effect of
sales charges and, if they had, results may have been less favorable.
TERMS TO KNOW
KEMPER FUND'S STYLE
MORNINGSTAR EQUITY STYLE BOX
STYLE Source: Morningstar, Inc., Chicago, IL (312)
VALUE BLEND GROWTH SIZE 696-6000. (Morningstar Style Box is based on a
portfolio date as of May 31, 1997.) The Equity
/ / /X / / / LARGE Style Box placement is based on a fund's
price-to-earnings and price-to-book ratio
relative to the S&P 500, as well as the size
of the companies in which it invests, or
/ / / / / / MEDIUM median market capitalization.
Please note that style boxes do not represent
an exact assessment of risk and do not
/ / / / / / SMALL represent future performance. Please consult
the prospectus for a description of investment
policies.
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 and whose growth is expected to
continue or accelerate.
INDEX An unmanaged group of securities 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.
VALUE STOCK The stock of a company that is out of favor with investors because
the market does not expect it to experience earnings growth or an improving
price.
<PAGE> 3
ECONOMIC OVERVIEW
[TIMBERS PHOTO]
STEPHEN B. TIMBERS IS PRESIDENT, CHIEF INVESTMENT AND EXECUTIVE OFFICER OF
ZURICH KEMPER INVESTMENTS, INC. (ZKI). ZKI AND ITS AFFILIATES MANAGE
APPROXIMATELY $80 BILLION IN ASSETS, INCLUDING $45 BILLION IN RETAIL MUTUAL
FUNDS. TIMBERS IS A GRADUATE OF YALE UNIVERSITY AND HOLDS AN M.B.A. FROM HARVARD
UNIVERSITY.
DEAR SHAREHOLDER,
The consistently good news on the domestic economy and the recent agreement
between the White House and Republican leaders in Congress to balance the
federal budget has provided the basis for strong stock and bond markets. This
progress on balancing the budget, an initiative that the bond market was
anticipating resolution of more than one year ago, has very positive long term
implications for financial markets.
The next several weeks will find Congress and the Clinton administration
negotiating toward a final agreement. Unlike previous failed proposals that
sought to balance the budget principally by increasing income taxes, the current
plan -- which starts from the base of a relatively small deficit -- proposes to
slow the growth of federal spending. As such, its prospects are promising.
Natural skeptics are waiting to see specific legislation to see if the
agreement has teeth. While we are optimistic, we need to temper our enthusiasm.
Much of the good news associated with a balanced budget has been discounted in
the higher prices in the stock and bond markets.
Of particular interest to equity investors is the agreement to reduce the
maximum tax rate on capital gains. Although details of the reduction are yet to
be known, the prospect of more favorable tax treatment on gains will have the
short-term effect of supporting stocks -- investors can be expected to postpone
selling until they can qualify for the lower tax rate. With equity sales
essentially "frozen" until the effective date is known, the stock market should
have a considerable underpinning. Once an effective date is determined, we would
expect the pent-up selling to occur. However, then we shall enjoy the long-term
positive effect of the lower tax rate on gains.
Talk of a balanced budget has shifted the spotlight away from the Federal
Reserve Board's upward pressure on interest rates. Having declined to raise
rates in May, the Fed may still act again at a later date. However, this action
may be the last for a while because the economy seems to be slowing down in the
second quarter, after the rapid 5.6 percent annualized growth in the first
quarter of the year. A slower economy would reduce the threat of inflation and
reduce the need for further rate hikes by the Fed.
In fact, a review of the standard measures of the economy shows little to
be concerned about and much to be encouraged by. As has been the pattern for
more than five years, a few strong quarters followed by a few weak quarters have
produced an overall 2 to 3 percent rate of growth in gross domestic product
(GDP). Job creation and the unemployment rate are consistent with a moderately
expanding economy. Corporate profits continue to grow at an expected 4 to 5
percent rate in 1997. The Consumer Price Index continues to track at a 2.5 to
3.0 percent rate.
Leadership in the stock market has been quite narrow and concentrated in
the first half of 1997 in large, multinational companies with familiar consumer
brand names. The recent rally after the announcement of a balanced budget
agreement suggests that valuations of smaller capitalization stocks are
compelling and the market is broadening.
A natural response to increased volatility in the U.S. equity market is to
look abroad. In fact, the valuations of many international markets are more
attractive than the U.S. However, the weak German and Japanese economies make it
difficult to identify many exciting near-term opportunities without careful
research.
3
<PAGE> 4
ECONOMIC OVERVIEW
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ECONOMIC GUIDEPOSTS
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Economic activity is a key influence on investment performance and shareholder
decision-making. Periods of recession or boom, inflation or deflation, credit
expansion or credit crunch have a significant impact on mutual fund
performance.
The following are some significant economic guideposts and their
investment rationale that may help your investment decision-making. The
10-year Treasury rate and the prime rate are prevailing interest rates. The
other data report year-to-year percentage changes.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (6/30/97) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1) 6.49 6.58 6.87 6.28
PRIME RATE(2) 8.5 8.25 8.25 8.8
INFLATION RATE(3) 2.3 3.04 2.95 2.76
THE U.S. DOLLAR(4) 5.52 4.59 8.35 -7.04
CAPITAL GOODS ORDERS(5)* 8.17 2.23 2.44 8.24
INDUSTRIAL PRODUCTION(5) 3.84 4.84 3.38 2.36
EMPLOYMENT GROWTH(6) 2.12 2.41 2.18 2.46
</TABLE>
(1) Falling interest rates in recent years have been a big plus for financial
assets.
(2) The interest rate that commercial lenders charge their best borrowers.
(3) Inflation reduces an investor's real return. In the last five years,
inflation has been as high as 6%. The low, moderate inflation of the last
few years has meant high real returns.
(4) Changes in the exchange value of the dollar impact U.S. exporters and the
value of U.S. firms' foreign profits.
(5) These influence corporate profits and equity performance.
(6) An influence on family income and retail sales.
* Data as of May 31, 1997.
SOURCE: ECONOMICS DEPARTMENT, ZURICH KEMPER INVESTMENTS, INC.
Our recommendation to shareholders is to stay the course and to fight the
temptation to try to time when and where you should be invested without help.
Financial assets react much quicker today to events. Volatility has returned to
the market and with it heightened uncertainty. Now is the time to rely on your
financial representative for the expertise and the long-term investing
discipline that he or she can provide.
With this commentary as an economic backdrop, we encourage you to read the
following detailed report of your fund, including an interview with your fund's
portfolio management. Thank you for your continued support. We appreciate the
opportunity to serve your investment needs.
Sincerely,
/s/ Stephen B. Timbers
STEPHEN B. TIMBERS
PRESIDENT, CHIEF INVESTMENT AND EXECUTIVE OFFICER
Zurich Kemper Investments, Inc.
July 11, 1997
4
<PAGE> 5
PERFORMANCE UPDATE
[BUKOWSKI PHOTO]
DANIEL J. BUKOWSKI IS A SENIOR VICE PRESIDENT AND DIRECTOR OF QUANTITATIVE
RESEARCH FOR ZURICH KEMPER INVESTMENTS, INC. (ZKI). BUKOWSKI ALSO CO-MANAGES
KEMPER VALUE+GROWTH FUND. 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.
[KNAPP PHOTO]
WILLIAM KNAPP JOINED ZKI IN 1992 AS A QUANTITATIVE ANALYST. KNAPP IS NOW A
CO-MANAGER OF KEMPER VALUE+GROWTH FUND. HE RECEIVED HIS B.S. AND GRADUATED MAGNA
CUM LAUDE AT DRAKE UNIVERSITY AND RECEIVED HIS M.S. AT THE UNIVERSITY OF
WISCONSIN-MADISON. HE ALSO EARNED HIS PH.D. AT THE UNIVERSITY OF
WISCONSIN-MADISON WITH AN EMPHASIS IN INDUSTRIAL ORGANIZATION AND FINANCE.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE
MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
OVER THE LAST SIX MONTHS, THE FUND MODESTLY UNDERPERFORMED ITS GROWTH AND
INCOME FUND PEER GROUP IN A MARKET LED BY LARGE, HIGH-PRICED GROWTH STOCKS.
Q COULD YOU PROVIDE A RECAP OF THE FUND'S PERFORMANCE OVER THE LAST SIX
MONTHS?
A Certainly. For the six-month period ended May 31, 1997, the fund's total
return was 8.27% for Class A shares unadjusted for sales charge. For comparison,
the average growth and income fund was up 10.12%, as measured by the Lipper
growth and income funds category average. The market in general gained 12.05% as
measured by the Russell 1000 Index. Over the period, the largest companies
tended to be the best performers, a fact reflected in the Russell 1000 Index's
returns. Because the Index is market-cap weighted -- meaning that the
performance of larger companies counts more than that of smaller companies -- it
outgained most growth and income funds, including ours.
Q WHY HAVE BIG COMPANY GROWTH STOCKS TENDED TO OUTPERFORM?
A There have been a couple of reasons. First, earnings of blue chip
companies have remained strong, and in fact have often surprised on the upside.
Second, and more importantly, the moderate rise in interest rates over the last
several months has prompted investors to wonder whether the stock market rally
can sustain its torrid pace. During times of uncertainty, the stocks of large
companies tend to outperform small company stocks because they are considered
more reliable performers should the economy slow or earnings growth diminish.
Q THE FUND'S RETURN SLIGHTLY LAGGED ITS PEER GROUP FOR THE PERIOD. DID
SOMETHING SPECIFIC IMPEDE ITS PERFORMANCE?
A We haven't been able to outpace our peer group during the first part of the
year primarily because our style of investing -- "growth at the right price" --
has been out of favor. An apt description of the current trend might be "growth
at ANY price."
Investors have been focusing on a very concentrated group of stocks: large,
multinational companies with strong brands such as Coke, Procter & Gamble, and
McDonald's. And people seem willing to pay any amount to own these stocks. This
demand stems largely from investors looking to capitalize on the improving
economic environment overseas. To gain exposure to foreign markets, they're
choosing a few big, established, domestic companies with which they're
comfortable. The result has been powerful price gains on a few selected stocks.
To us, this trend is reminiscent of the so-called "Nifty 50" stocks of the
early 70s. Those were also big, consumer-product companies with strong brand
names that people thought would just keep growing unabated. Like today's favored
companies, "Nifty 50" stocks sold at exorbitant multiples. Of course, in the
ensuing bear market of 1973-74, the
5
<PAGE> 6
PERFORMANCE UPDATE
highest flying stocks suffered the steepest declines.
For our part, we believe these stocks are just too expensive and we see far
more downside than upside to them at this point. But investors have continued to
bid them up regardless. It's been somewhat frustrating for us, because we can
own solid stocks with good valuations and still trail the broad market averages.
Q DO YOU THINK THIS "GROWTH AT ANY PRICE" TREND WILL CONTINUE FOR VERY LONG?
A Actually, the advance has started to broaden of late. Smaller company
stocks have started to come around, and technology stocks led the market in May.
Historically, the market has tended to recognize value, so we plan to stay
disciplined and stick to our guns. The worst thing we could do is to change our
approach and buy "Nifty 50"-type stocks at the top and then get whipsawed.
Q WHAT STRATEGIES HAVE YOU USED TO MANAGE THE FUND IN THIS MARKET?
A Our strategy has always been one of "bottom-up" stock picking rather than
trying to predict broad market moves. So we looked for individual stocks that
offered multinational exposure but were selling at what we believed were
attractive values.
On the value side of the portfolio such stocks include tobacco firms, which
have been volatile but have done well recently on news of a compromise agreement
with federal health officials. Our position in financial companies -- banks,
insurance companies and brokerages -- has continued to perform well, in
particular regional banks which have been in the midst of acquisitions and
mergers. The value portion of the portfolio is also slightly overweighted in
basic industries like chemicals, paper, steel, and commodities excluding oil.
That reflects our expectation for solid economic growth.
On the growth side of the portfolio, we remain heavily committed to technology
stocks. Although they had a very difficult first quarter in 1997, many of them
boast growth rates three or four times that of the market as a whole. So we've
stuck with them and, for the most part, we were rewarded for our patience when
they rebounded in May.
We bought a few hard-disk drive manufacturers. There is still a lot of
strength in personal computers, and while the growth rates of disk-drive
manufacturers have abated somewhat as they've matured and competition has become
stronger, their growth rates are still attractive based on the fundamentals.
Q ANY STRATEGIES THAT DIDN'T WORK OUT AS WELL AS YOU'D HOPED?
A We would have liked to have committed more to the big consumer non-durable
companies, but they've just been too expensive for our taste. We misjudged the
market's appetite for them, but trying to capture what the market likes isn't
our game. We believe in growth at the right price, and prices on the select
stocks that have driven the Dow and the Standard & Poor's 500 Stock Index (S&P
500) to all-time highs suggest to us that there is currently more risk than
return potential in those companies.
Q HOW IS THE PORTFOLIO SPLIT BETWEEN VALUE AND GROWTH?
A We are maintaining about a 60% position in growth. The economy overall
continues to grow at a moderate pace and interest rates are fairly stable.
Growth stocks tend to perform better in such an environment, because they don't
necessarily need a vibrant economy to sustain earnings growth. In fact, during
the last two years people have been saying that earnings for growth companies
have to level off, but the date it's supposed to happen keeps getting pushed
out. Until we see signs of an accelerating economy or a threat of significantly
higher interest rates, we'll likely maintain our bias towards growth stocks.
6
<PAGE> 7
PERFORMANCE UPDATE
Q WHAT'S YOUR OUTLOOK FOR THE NEXT SEVERAL MONTHS?
A Overall, the outlook for stocks in general appears good. The most important
factors remain positive: solid but not raging economic growth, subdued
inflation, and a relatively benign global climate for interest rates.
This combination of factors has led to dynamic growth for a select group of
companies. But at some point, we believe people are going to look for more
upside potential for their investment dollar. Once that happens, we may see more
volatility in the market averages, but improved performance from the
better-valued stocks that we seek to emphasize. Regardless, we'll continue to
apply our "growth at the right price" philosophy, and maintain broad
diversification to help reduce downside risk.
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, 1997, and November 30, 1996.
[SIX-MONTH COMPARISON BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER VALUE+GROWTH FUND KEMPER VALUE+GROWTH FUND
ON 5/31/97 ON 11/30/96
<S> <C> <C>
TECHNOLOGY 23.2% 18.3%
CONSUMBER NON-DURABLES 21.8% 27.0%
FINANCE 19.5% 20.4%
HEALTH CARE 13.7% 11.1%
CAPITAL GOODS 6.4% 5.2%
BASIC INDUSTRIES 6.0% 3.1%
ENERGY 5.3% 5.8%
CONSUMER DURABLES 2.1% 4.0%
UTILITIES 2.0% 3.9%
TRANSPORTATION 0.0% 1.2%
</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, 1997, compared to the
industry sectors that make up the fund's benchmark, the Russell 1000 Index.
[RUSSELL COMPARISON BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER VALUE+GROWTH FUND RUSSELL 1000 INDEX
ON 5/31/97 ON 05/31/97
<S> <C> <C>
TECHNOLOGY 23.2% 14.4%
CONSUMBER NON-DURABLES 21.8% 21.4%
FINANCE 19.5% 17.1%
HEALTH CARE 13.7% 11.1%
CAPITAL GOODS 6.4% 9.3%
BASIC INDUSTRIES 6.0% 5.2%
ENERGY 5.3% 8.0%
CONSUMER DURABLES 2.1% 2.7%
UTILITIES 2.0% 9.3%
TRANSPORTATION 0.0% 1.5%
</TABLE>
* The Russell 1000 Index is an unmanaged index comprised of 1000 of the largest
capitalized U.S. companies whose common stocks 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 Stock Index.
8
<PAGE> 9
LARGEST HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS*
Representing 22.4% of the fund's total net assets on May 31, 1997
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
HOLDINGS PERCENT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. PHILIP MORRIS Largest cigarette maker in the U.S., and through its 3.8%
Miller Brewing subsidiary, also the country's
second-largest brewer. This company is also a major
branded food producer through its Kraft Foods
subsidiary.
- -------------------------------------------------------------------------------------------------------
2. GENERAL ELECTRIC A broadly diversified company with major businesses 2.7%
in power generators, appliances, lighting, plastics,
medical systems, aircraft engines, financial services
and broadcasting.
- -------------------------------------------------------------------------------------------------------
3. INTEL Engaged in the design, development, manufacture and 2.6%
sale of advanced microcomputer components, such as
integrated circuits and other related products.
- -------------------------------------------------------------------------------------------------------
4. FEDERAL NATIONAL MORTGAGE Often referred to as "Fannie Mae," this is a private 2.5%
ASSOCIATION corporation federally chartered to provide financial
products and services that increase the availability
and affordability of housing to low, moderate and
middle-income Americans.
- -------------------------------------------------------------------------------------------------------
5. UST Manufactures and sells moist snuff, wine and other 2.4%
products.
- -------------------------------------------------------------------------------------------------------
6. COMPAQ Designs, develops, manufactures and markets personal 2.2%
COMPUTER computers for business and professional users.
- -------------------------------------------------------------------------------------------------------
7. CISCO SYSTEMS The largest, most comprehensive supplier of routing 2.1%
software and related systems that direct the flow of
data between local area networks, this company is a
play on the explosive growth of the Internet.
- -------------------------------------------------------------------------------------------------------
8. NATIONSBANK Provides financial services such as checking and 1.5%
savings accounts, loans, investment management,
brokerage, trading, corporate finance and insurance
services.
- -------------------------------------------------------------------------------------------------------
9. AMGEN A global biotechnology company that discovers, 1.3%
develops, manufactures and markets human therapeutics
based on advanced cellular and molecular biology.
- -------------------------------------------------------------------------------------------------------
10. FEDERAL HOME LOAN MORTGAGE Often referred to as "Freddie Mac," this corporation 1.3%
CORP. provides for the transfer of capital between mortgage
lenders and mortgage security investors, enabling
mortgage lenders to provide a continuous flow of
funds to borrowers.
- -------------------------------------------------------------------------------------------------------
</TABLE>
* The fund's holdings are subject to change.
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
KEMPER VALUE+GROWTH FUND
PORTFOLIO OF INVESTMENTS AT MAY 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BASIC INDUSTRIES--5.7% AMP, Inc. 14,800 $ 609
Champion International Corp. 5,400 267
Dow Chemical Co. 6,000 500
Eastman Chemical Co. 6,000 357
Georgia-Pacific Corp. 4,800 424
Louisiana-Pacific Corp. 16,500 322
Nucor Corp. 6,000 354
Sonoco Products Co. 13,000 379
Union Camp Corp. 7,000 368
---------------------------------------------------------------------------
3,580
- ---------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--6.2% Emerson Electric Co. 6,400 346
General Electric Co. 27,400 1,654
B.F. Goodrich Co. 9,500 408
Raytheon Co. 9,300 444
(a)United Waste Systems 6,900 265
(a)U.S. Filter Corp. 12,200 384
(a)USA Waste Services 10,000 362
---------------------------------------------------------------------------
3,863
- ---------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--12.3% (a)AutoZone 15,000 351
(a)Boston Chicken 18,400 331
Brunswick Corp. 18,600 567
Carnival Corp. 18,800 714
(a)Consolidated Stores Corp. 12,400 474
Deluxe Corp. 7,300 237
Walt Disney Co. 7,800 639
(a)Harrah's Entertainment 10,000 186
Heilig-Meyers 31,000 511
(a)Tommy Hilfiger Corp. 17,300 770
Home Depot 10,000 630
May Department Stores Co. 5,000 236
NIKE 13,200 752
J.C. Penney Co. 7,300 376
Philips N.V., ADR 4,900 274
Sears, Roebuck & Co. 8,000 393
V.F. Corp. 3,000 234
---------------------------------------------------------------------------
7,675
- ---------------------------------------------------------------------------------------------------------------------
CONSUMER DURABLES--2.1% Ford Motor Co. 15,200 570
(a)Lear Corp. 5,300 203
Leggett & Platt Inc. 7,000 264
Magna International Inc., "A" 4,500 242
---------------------------------------------------------------------------
1,279
- ----------------------------------------------------------------------------- ---------------------------------------
CONSUMER STAPLES--8.7% American Greetings Corp. 19,300 661
Newell Co. 9,000 344
Philip Morris Cos. 53,900 2,372
RJR Nabisco Holdings Corp. 8,000 259
UST, Inc. 52,700 1,502
Unilever N.V., ADR 1,500 291
---------------------------------------------------------------------------
5,429
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ENERGY--5.2% AMOCO Corp. 8,300 $ 742
Atlantic Richfield Co. 4,500 655
Chevron Corp. 7,000 490
Columbia Gas System 4,400 283
Exxon Corp. 10,000 592
Kerr-McGee Corp. 4,000 259
Royal Dutch Petroleum 1,000 195
----------------------------------------------------------------------------
3,216
- ---------------------------------------------------------------------------------------------------------------------
FINANCE--18.8% ADVANTA Corp. 3,000 83
H.F. Ahmanson & Co. 6,600 269
American General Corp. 6,500 288
American International Group, Inc. 3,500 474
Banc One Corp. 8,200 355
BankAmerica Corp. 2,600 304
Bankers Trust New York Corp. 3,000 254
Barnett Banks 4,600 242
Bear Stearns Cos. 13,000 422
Chase Manhattan Corp. 3,000 283
A.G. Edwards & Sons 6,000 223
Federal Home Loan Mortgage Corp. 25,000 825
Federal National Mortgage Association 35,700 1,557
First Chicago NBD Corp. 6,000 355
First Union Corp. 2,100 180
Fleet Financial Group, Inc. 2,300 140
General Re Corp. 3,000 526
ITT Hartford Group 2,500 195
Jefferson-Pilot Corp. 9,900 630
KeyCorp 3,400 185
MGIC Investment Corp. 8,400 748
Meditrust 12,000 443
Merrill Lynch & Co. 3,700 392
NationsBank 15,510 913
Norwest Corp. 4,000 214
Post Properties 8,500 338
Republic NY Corp. 2,000 200
Signet Banking Corp. 6,300 207
Torchmark Corp. 3,500 230
Wells Fargo & Co. 1,000 264
----------------------------------------------------------------------------
11,739
- ---------------------------------------------------------------------------------------------------------------------
HEALTH CARE--13.2% Abbott Laboratories 6,400 403
American Home Products Corp. 10,000 762
Amgen Inc. 12,400 829
Astra AB, ADR 40,000 655
C.R. Bard 15,500 496
Becton Dickinson & Co. 4,000 197
(a)Biogen 22,700 753
Bristol-Myers Squibb Co. 5,900 433
Glaxo Wellcome, ADR 9,000 362
(a)HealthCare COMPARE Corp. 11,300 558
Mallinckrodt Group 8,000 299
Medtronic, Inc. 9,600 710
Merck & Co. 7,700 692
Novartis, ADR 9,700 662
United Healthcare Corp. 7,000 396
----------------------------------------------------------------------------
8,207
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TECHNOLOGY--22.4% (a)Applied Materials, Inc. 10,000 $ 652
(a)Ascend Communications, Inc. 5,500 307
(a)Atmel Corp. 21,000 604
(a)Cabletron Systems 8,000 352
(a)Ceridian Corp. 12,000 441
(a)Cisco Systems 19,600 1,328
(a)Compaq Computer Corp. 12,700 1,375
Computer Associates International 6,000 328
(a)Gateway 2000 5,800 385
Hewlett-Packard Co. 9,900 510
Intel Corp. 10,600 1,606
International Business Machines Corp. 5,000 432
(a)Microchip Technology 18,000 639
(a)Novellus Systems 8,100 663
(a)Parametric Technology Corp. 11,400 512
Pitney Bowes 7,000 492
(a)Quantum Corp. 12,200 474
(a)Seagate Technology 4,500 183
(a)Sun Microsystems 14,900 481
(a)3Com Corp. 14,500 703
(a)U.S. Robotics 6,000 504
(a)Western Digital Corp. 8,900 482
Xerox Corp. 7,000 474
----------------------------------------------------------------------------
13,927
- ---------------------------------------------------------------------------------------------------------------------
UTILITIES--1.9% AT&T 9,000 332
GTE Corp. 12,000 530
Southern Co. 16,500 351
----------------------------------------------------------------------------
1,213
----------------------------------------------------------------------------
TOTAL COMMON STOCKS--96.5%
(Cost: $51,666) 60,128
----------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET Yield--5.14% to 5.49%
INSTRUMENTS--3.9% Due--June and August 1997
(Cost: $2,445) $2,450 2,445
----------------------------------------------------------------------------
TOTAL INVESTMENTS--100.4%
(Cost: $54,111) 62,573
----------------------------------------------------------------------------
LIABILITIES, LESS CASH AND OTHER ASSETS--(.4)% (270)
----------------------------------------------------------------------------
NET ASSETS--100% $62,303
----------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- -------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $54,111,000 for federal income tax purposes
at May 31, 1997, the gross unrealized appreciation was $9,188,000, the gross
unrealized depreciation was $726,000 and the net unrealized appreciation on
investments was $8,462,000.
See accompanying Notes to Financial Statements.
12
<PAGE> 13
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- -----------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------
Investments, at value
(Cost: $54,111) $62,573
- -----------------------------------------------------------------------
Cash 237
- -----------------------------------------------------------------------
Receivable for:
Fund shares sold 92
- -----------------------------------------------------------------------
Dividends 97
- -----------------------------------------------------------------------
TOTAL ASSETS 62,999
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- -----------------------------------------------------------------------
Payable for:
Investments purchased 533
- -----------------------------------------------------------------------
Management fee 36
- -----------------------------------------------------------------------
Distribution services fee 16
- -----------------------------------------------------------------------
Administrative services fee 12
- -----------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 37
- -----------------------------------------------------------------------
Trustees' fees and other 62
- -----------------------------------------------------------------------
Total liabilities 696
- -----------------------------------------------------------------------
NET ASSETS $62,303
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -----------------------------------------------------------------------
Paid-in capital $53,535
- -----------------------------------------------------------------------
Undistributed net realized gain on investments 193
- -----------------------------------------------------------------------
Net unrealized appreciation on investments 8,462
- -----------------------------------------------------------------------
Undistributed net investment income 113
- -----------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $62,303
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
THE PRICING OF SHARES
- -----------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share ($32,591 /
2,489 shares outstanding) $13.10
- -----------------------------------------------------------------------
Maximum offering price per share (net asset value, plus
6.10% of net asset value or 5.75% of offering price) $13.90
- -----------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge) per share ($28,100 /
2,174 shares outstanding) $12.92
- -----------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge) per share ($1,612 / 125
shares outstanding) $12.91
- -----------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
13
<PAGE> 14
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------
INVESTMENT INCOME
- -----------------------------------------------------------------------------------------------
Dividends $ 409
- -----------------------------------------------------------------------------------------------
Interest 63
- -----------------------------------------------------------------------------------------------
Total investment income 472
- -----------------------------------------------------------------------------------------------
Expenses:
Management fee 178
- -----------------------------------------------------------------------------------------------
Distribution services fee 92
- -----------------------------------------------------------------------------------------------
Administrative services fee 55
- -----------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 147
- -----------------------------------------------------------------------------------------------
Reports to shareholders 11
- -----------------------------------------------------------------------------------------------
Trustees' fees and other 17
- -----------------------------------------------------------------------------------------------
Total expenses before expense waiver 500
- -----------------------------------------------------------------------------------------------
Less expenses waived by investment manager 15
- -----------------------------------------------------------------------------------------------
Total expenses after expense waiver 485
- -----------------------------------------------------------------------------------------------
NET INVESTMENT LOSS (13)
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- -----------------------------------------------------------------------------------------------
Net realized gain on sales of investments 343
- -----------------------------------------------------------------------------------------------
Net realized loss from futures transactions (85)
- -----------------------------------------------------------------------------------------------
Net realized gain 258
- -----------------------------------------------------------------------------------------------
Change in net unrealized appreciation on investments 4,237
- -----------------------------------------------------------------------------------------------
Net gain on investments 4,495
- -----------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,482
- -----------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED
MAY 31, NOVEMBER 30,
1997 1996
- -----------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income (loss) $ (13) 8
- -----------------------------------------------------------------------------------------------
Net realized gain 258 2,488
- -----------------------------------------------------------------------------------------------
Change in net unrealized appreciation 4,237 4,101
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 4,482 6,597
- -----------------------------------------------------------------------------------------------
Net equalization credits 46 61
- -----------------------------------------------------------------------------------------------
Distribution from net realized gain (2,553) --
- -----------------------------------------------------------------------------------------------
Net increase from capital share transactions 21,236 26,583
- -----------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 23,211 33,241
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------
Beginning of period 39,092 5,851
- -----------------------------------------------------------------------------------------------
END OF PERIOD (including undistributed
net investment income of
$113 and $80, respectively) $62,303 39,092
- -----------------------------------------------------------------------------------------------
</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 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, 1997) are offered to a limited group of
investors, are not subject to initial or contingent
deferred sales charges and have lower ongoing
expenses than other classes. Differences in class
expenses will result in the payment of different
per share income dividends by class. All shares of
the Fund have equal rights with respect to voting,
dividends and assets, subject to class specific
preferences.
- --------------------------------------------------------------------------------
2 SIGNIFICANT
ACCOUNTING POLICIES INVESTMENT VALUATION. Investments are stated at
value. Portfolio securities that are traded on a
domestic securities exchange or securities listed
on the NASDAQ National Market are valued at the
last sale price on the exchange or market where
primarily traded or listed or, if there is no
recent sale, at the last current bid quotation.
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
Class A shares). Proceeds payable on redemption of
Class B and Class C
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
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, 1997.
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) 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 $178,000 for the six
months ended May 31, 1997. Dreman Value Advisors,
Inc. (DVA), a wholly owned subsidiary of ZKI, is
the sub-adviser for the value portion of the Fund.
Zurich Investment Management Limited (ZIML), an
affiliate of ZKI, serves as sub-adviser with
respect to foreign securities investments in the
Fund. DVA and ZIML are paid by ZKI for their
services.
ZKI has agreed to temporarily waive certain
operating expenses of the Fund. Under this
arrangement, ZKI waived expenses of $15,000 for the
six months ended May 31, 1997.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
The Fund has an underwriting and distribution
services agreement with Zurich Kemper Distributors,
Inc. (ZKDI) (formerly known as Kemper Distributors,
Inc.). Underwriting commissions paid in connection
with the distribution of Class A shares are as
follows:
<TABLE>
<CAPTION>
COMMISSIONS COMMISSIONS ALLOWED BY
RETAINED BY ZKDI ZKDI TO FIRMS
---------------- -----------------------
<S> <C> <C>
Six months ended May 31, 1997 $22,000 145,000
</TABLE>
For services under the distribution services
agreement, the Fund pays ZKDI a fee of .75% of
average daily net assets of the Class B and Class C
shares. Pursuant to the agreement, ZKDI enters into
related selling group agreements with various firms
at various rates for sales of Class B and Class C
shares. In addition, ZKDI receives any contingent
deferred sales
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
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>
DISTRIBUTION FEES
(AFTER EXPENSE WAIVER) COMMISSIONS AND
AND CDSC RECEIVED DISTRIBUTION FEES
BY ZKDI PAID BY ZKDI TO FIRMS
----------------------- ----------------------
<S> <C> <C>
Six months ended May 31, 1997 $90,000 243,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with ZKDI. For
providing information and administrative services
to shareholders, the Fund pays ZKDI a fee at an
annual rate of up to .25% of average daily net
assets. ZKDI in turn has various agreements with
financial services firms that provide these
services and pays these firms based on assets of
Fund accounts the firms service. Administrative
services fees (ASF) paid are as follows:
<TABLE>
<CAPTION>
ASF PAID BY ASF PAID BY ZKDI
THE FUND TO ZKDI TO FIRMS
----------------------- -----------------
<S> <C> <C>
Six months ended May 31, 1997 $55,000 62,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
Zurich Kemper Service Company (ZKSvC) (formerly
known as Kemper Service Company) is the shareholder
service agent of the Fund. Under the agreement,
ZKSvC received shareholder services fees of
$100,000 for the six months ended May 31, 1997.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of ZKI.
During the six months ended May 31, 1997, the Fund
made no payments to its officers and incurred
trustees' fees of $5,000 to independent trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the six months ended May 31, 1997, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $43,041
Proceeds from sales 21,476
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 YEAR ENDED
MAY 31, 1997 NOVEMBER 30, 1996
-------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------
SHARES SOLD
Class A 1,005 $12,206 1,525 $16,513
------------------------------------------------------------------------------
Class B 889 10,817 1,264 13,722
------------------------------------------------------------------------------
Class C 91 1,102 115 1,244
------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 109 1,289 -- --
------------------------------------------------------------------------------
Class B 95 1,107 -- --
------------------------------------------------------------------------------
Class C 6 65 -- --
------------------------------------------------------------------------------
SHARES REDEEMED
Class A (226) (2,764) (230) (2,482)
------------------------------------------------------------------------------
Class B (160) (1,941) (148) (1,617)
------------------------------------------------------------------------------
Class C (53) (645) (78) (797)
------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 23 289 14 160
------------------------------------------------------------------------------
Class B (23) (289) (14) (160)
------------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $21,236 $26,583
------------------------------------------------------------------------------
</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, 1997,
the market value of assets pledged by the Fund to
cover margin requirements for open futures
positions was $99,000 for the following financial
futures contracts owned by the Fund.
<TABLE>
<CAPTION>
CONTRACT EXPIRATION GAIN AT
TYPE AMOUNT POSITION MONTH 5/31/97
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
S&P 500 Index $2,061,000 Long June '97 $66,000
----------------------------------------------------------------------------
S&P 500 Index 429,000 Long Sep. '97 --
----------------------------------------------------------------------------
</TABLE>
18
<PAGE> 19
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------
CLASS A SHARES
---------------------------------------
SIX MONTHS OCTOBER 16
ENDED YEAR ENDED TO
MAY 31, NOVEMBER 30, NOVEMBER 30,
1997 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $12.95 10.02 9.50
- -----------------------------------------------------------------------------------
Income from investment operations:
Net investment income .02 .05 .02
- -----------------------------------------------------------------------------------
Net realized and unrealized gain .96 2.88 .50
- -----------------------------------------------------------------------------------
Total from investment operations .98 2.93 .52
- -----------------------------------------------------------------------------------
Less distribution from net realized gain .83 -- --
- -----------------------------------------------------------------------------------
Net asset value, end of period $13.10 12.95 10.02
- -----------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 8.27% 29.24 5.47
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED) (A)
Expenses 1.56% 1.47 1.35
- -----------------------------------------------------------------------------------
Net investment income .34% .43 2.25
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------
CLASS B SHARES
---------------------------------------
SIX MONTHS OCTOBER 16
ENDED YEAR ENDED TO
MAY 31, NOVEMBER 30, NOVEMBER 30,
1997 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $12.83 10.02 9.50
- -----------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.03) (.04) .02
- -----------------------------------------------------------------------------------
Net realized and unrealized gain .95 2.85 .50
- -----------------------------------------------------------------------------------
Total from investment operations .92 2.81 .52
- -----------------------------------------------------------------------------------
Less distribution from net realized gain .83 -- --
- -----------------------------------------------------------------------------------
Net asset value, end of period $12.92 12.83 10.02
- -----------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 7.85% 28.04 5.47
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED) (A)
Expenses 2.39% 2.27 2.10
- -----------------------------------------------------------------------------------
Net investment income (loss) (.49)% (.37) 1.50
- -----------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------
CLASS C SHARES
---------------------------------------
SIX MONTHS OCTOBER 16
ENDED YEAR ENDED TO
MAY 31, NOVEMBER 30, NOVEMBER 30,
1997 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $12.84 10.01 9.50
- -----------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.02) (.04) .01
- -----------------------------------------------------------------------------------
Net realized and unrealized gain .92 2.87 .50
- -----------------------------------------------------------------------------------
Total from investment operations .90 2.83 .51
- -----------------------------------------------------------------------------------
Less distribution from net realized gain .83 -- --
- -----------------------------------------------------------------------------------
Net asset value, end of period $12.91 12.84 10.01
- -----------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 7.68% 28.27 5.37
- -----------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED) (A)
Expenses 2.35% 2.22 2.07
- -----------------------------------------------------------------------------------
Net investment income (loss) (.45)% (.32) 1.53
- -----------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- -----------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS OCTOBER 16
ENDED YEAR ENDED TO
MAY 31, NOVEMBER 30, NOVEMBER 30,
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net assets at end of period (in thousands) $62,303 39,092 5,851
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 87% 82 --
- -----------------------------------------------------------------------------------------------------------------
Average commission rates paid per share on stock transactions for the six months ended May 31, 1997 and the year
ended November 30, 1996 were $.0560 and $.0571, respectively.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES: Total return does not reflect the effect of any sales charges.
(a) ZKI agreed to temporarily waive certain operating expenses of the Fund.
Absent this waiver, the ratios of expenses to average net assets would have
increased and the ratios of net investment income to average net assets
would have decreased by the following amounts: for the period ended May 31,
1997, 0.05% for Class B and 0.01% for Class C; for the period ended November
30, 1996, 0.12% for Class A, 0.17% for Class B and 0.13% for Class C.
20
<PAGE> 21
NOTES
21
<PAGE> 22
NOTES
22
<PAGE> 23
NOTES
23
<PAGE> 24
TRUSTEES AND OFFICERS
TRUSTEES OFFICERS
STEPHEN B. TIMBERS DANIEL J. BUKOWSKI
President and Trustee Vice President
DAVID W. BELIN WILLIAM M. KNAPP
Trustee Vice President
LEWIS A. BURNHAM CHARLES R. MANZONI, JR.
Trustee Vice President
DONALD L. DUNAWAY JOHN E. NEAL
Trustee Vice President
ROBERT B. HOFFMAN STEVEN H. REYNOLDS
Trustee Vice President
DONALD R. JONES PHILIP J. COLLORA
Trustee Vice President
and Secretary
DOMINIQUE P. MORAX
Trustee JEROME L. DUFFY
Treasurer
SHIRLEY D. PETERSON
Trustee ELIZABETH C. WERTH
Assistant Secretary
WILLIAM P. SOMMERS
Trustee
- --------------------------------------------------------------------------------
LEGAL COUNSEL
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICE AGENT
ZURICH KEMPER SERVICE COMPANY
P.O. Box 419557
Kansas City, MO 64141
- --------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT
INVESTORS FIDUCIARY TRUST COMPANY
127 West 10th Street
Kansas City, MO 64105
- --------------------------------------------------------------------------------
INVESTMENT MANAGERS
ZURICH KEMPER INVESTMENTS, INC.
Dreman Value Advisors, Inc.
PRINCIPAL UNDERWRITER
ZURICH KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606
www.kemper.com
[RECYCLED LOGO]
Printed on recycled paper.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Equity Fund prospectus.
KVGF - 3 (7/97) 1034770
Printed in the U.S.A. [KEMPER FUNDS LOGO]
