<PAGE>
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED NOVEMBER 30, 1997
[LOGO]
Seeks growth of capital
KEMPER VALUE+GROWTH
FUND
"...Our experience is that solid
investment ideas can offer good
returns not just over the course
of months, but over years. ..."
[LOGO] KEMPER FUNDS
<PAGE>
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
9
INDUSTRY SECTORS
10
LARGEST HOLDINGS
11
PORTFOLIO OF INVESTMENTS
14
REPORT OF
INDEPENDENT AUDITORS
15
FINANCIAL STATEMENTS
17
NOTES TO
FINANCIAL STATEMENTS
21
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER VALUE+GROWTH FUND
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED NOVEMBER 30, 1997 (UNADJUSTED FOR ANY SALES CHARGE)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Class A 20.83%
Class B 19.96%
Class C 19.86%
Lipper Growth & Income Funds Category Average* 23.50%
</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.
*LIPPER ANALYTICAL SERVICES, INC. RETURNS AND RANKINGS ARE BASED UPON CHANGES IN
NET ASSET VALUE WITH ALL DIVIDENDS REINVESTED AND DO NOT INCLUDE THE EFFECT OF
SALES CHARGES AND, IF THEY HAD, RESULTS MAY HAVE BEEN LESS FAVORABLE.
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AS OF AS OF
11/30/97 11/30/96
<S> <C> <C>
............................................
KEMPER VALUE+GROWTH FUND
CLASS A $14.62 $ 12.95
............................................
KEMPER VALUE+GROWTH FUND
CLASS B $14.37 $ 12.83
............................................
KEMPER VALUE+GROWTH FUND
CLASS C $14.37 $ 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 #458 of #490 of #494 of
608 funds 608 funds 608 funds
.....................................................
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
DURING THE FISCAL YEAR, KEMPER VALUE+GROWTH FUND MADE THE FOLLOWING
DISTRIBUTIONS PER SHARE:
<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>
- --------------------------------------------------------------------------------
TERMS TO KNOW
YOUR FUND'S STYLE
STYLE
SIZE
VALUE BLEND GROWTH
X LARGE
MEDIUM
SMALL
- --------------------------------------------------------------------------------
MORNINGSTAR EQUITY STYLE BOX
- --------------------------------------------------------------------------------
Source: Morningstar, Inc., Chicago, IL (312) 696-6000. (Morningstar Style Box is
based on a portfolio date as of November 30, 1997.) The Equity 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 median market capitalization.
PLEASE NOTE THAT STYLE BOXES DO NOT REPRESENT AN EXACT ASSESSMENT OF RISK AND DO
NOT REPRESENT FUTURE PERFORMANCE. PLEASE CONSULT THE PROSPECTUS FOR A
DESCRIPTION OF INVESTMENT POLICIES.
CORRECTION A reverse movement, usually downward, in the price of a group of
stocks or the overall market. Corrections are to be expected over a long term.
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.
P/E RATIO The price of a stock divided by its earnings per share. The P/E
ratio, also known as the MULTIPLE, is a measure of how much an investor is
paying for a company's earning power.
<PAGE>
ECONOMIC OVERVIEW
[PHOTO]
MAUREEN F. ALLYN, A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.,
SERVES AS THE FIRM'S CHIEF ECONOMIST. ALLYN GRADUATED SUMMA CUM LAUDE FROM
OAKLAND UNIVERSITY NEAR DETROIT, WITH A BACHELOR'S DEGREE IN PSYCHOLOGY. SHE
RECEIVED HER MASTER'S IN ECONOMICS, WITH A SPECIALIZATION IN INTERNATIONAL TRADE
AND FINANCE, FROM THE NEW SCHOOL FOR SOCIAL RESEARCH IN NEW YORK.
SCUDDER KEMPER INVESTMENTS, INC. IS THE INVESTMENT ADVISOR FOR KEMPER FUNDS. IT
IS ONE OF THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS
WORLDWIDE, MANAGING MORE THAN $200 BILLION IN ASSETS GLOBALLY FOR MUTUAL FUND
INVESTORS, RETIREMENT AND PENSION PLANS, INSTITUTIONAL AND CORPORATE CLIENTS,
INSURANCE COMPANIES AND PRIVATE, FAMILY AND INDIVIDUAL ACCOUNTS. IT IS ONE OF
THE 10 LARGEST MUTUAL FUND COMPANIES IN THE UNITED STATES.
DEAR SHAREHOLDERS,
We start 1998 optimistic about the long-term prospects of the U.S. economy and
financial markets but cautious about the next several months. The Asian
financial crisis that dominated the global investment environment in the second
half of 1997 promises to continue, posing significant risks to the economy and
investors. We look for the strength of the American consumer -- currently
enjoying rising real incomes, better employment opportunities, lower mortgage
rates and easy access to credit -- and the secular strength of the trend toward
capital spending on high technology to be sufficient to override the influence
of Asia on the U.S. In short, our best case scenario calls for the U.S. to
muddle through an unsettling period.
As it has for several years, the country should continue to enjoy relatively
low interest rates and low inflation. But the new year will be different in at
least two ways, both of which can be expected to have direct bearing on
investment opportunities.
First, the economy should grow at a much slower pace. A slowdown in Asia will
depress capital goods spending and heighten import pricing pressure, putting a
damper on American corporations' pricing and profit growth at least through
1999. While the U.S. economy grew at an almost 4 percent rate in 1997, we look
for no better than 2 percent growth for the next two years -- with more than
half of the change attributable to the effect of the Asian fallout.
Disappointing corporate profits is another given for 1998. Profits had begun
to slow last year even before the height of the Asian crisis. High current
valuations, however, seem to suggest that Wall Street has yet to recognize this.
The clash between Wall Street profit expectations and actual reported earnings
is part of the risk likely to be associated with equity investing in 1998.
Volatility, such as we experienced in 1997, should continue. In fact, the
overall market volatility is not likely to reflect the turmoil that individual
equities may experience. There will be a narrowing of the number of companies
able to meet analysts' expectations and this market will be absolutely
unforgiving to those companies that fall far short.
Having stated this, however, we look for the Standard & Poor's 500 to return
about 9.5 percent, including the effect of reinvested dividends. This would be
an average return and in line with the historical long-term 10 percent return of
the stock market. On the heels of the last three 20 percent-plus return years,
an investor in 1998 may weigh the 10 percent prospect against a projected 7
percent total return on bonds and consider the difference insufficient
compensation for the inherent added risk. Adopting a more conservative posture
for the new year may be an appropriate step that you'll want to discuss with
your financial representative in the context of your long-term investing
objectives.
To achieve a 9.5 percent return in 1998, the market's already high valuations
need to move even higher. We expect this to occur for a few reasons: the market
has so far demonstrated a certain complacency about the valuation levels;
American investors don't perceive there's anywhere better to go than the U.S.
equity market; and foreigners think of the U.S. market as a safe haven. All
should help support the market.
Where, then, are the opportunities likely to be in 1998? Expect to see
disparate performance within industry sectors. For example, while the financial
services sector in 1997 tended to provide across-the-board strong performance,
in 1998 we expect the sector to include its share of winners and losers. Stock
selection will be key, too, to benefiting from the technology sector. Over the
long term, we are optimistic about technology and corporate America's continuing
commitment to it. It will be difficult to participate in a market return in 1998
without having some exposure to technology-based companies. One caution: Not all
technology companies will survive the year, which raises the risk of investing
in the sector.
3
<PAGE>
ECONOMIC OVERVIEW
ECONOMIC GUIDEPOSTS
ECONOMIC ACTIVITY IS A KEY INFLUENCE ON INVESTMENT PERFORMANCE AND SHAREHOLDER
DECISION-MAKING. PERIODS OF RECESSION OR BOOM, INFLATION, CREDIT EXPANSION OR
CREDIT CRUNCH HAVE A SIGNIFICANT IMPACT ON MUTUAL FUND PERFORMANCE.
THE FOLLOWING ARE SOME SIGNIFICANT ECONOMIC EXPANSION 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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NOW (12/31/97) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 5.81 6.22 6.58 5.65
Prime rate (2) 8.50 8.50 8.25 8.50
Inflation rate (3) 1.70 2.23 3.04 2.72
The U.S. dollar (4) 10.43 7.32 4.59 -0.57
Capital goods orders (5)* 11.61 8.58 2.23 9.56
Industrial production (5)* 5.59 3.91 4.70 2.34
Employment growth (6) 2.66 2.30 2.41 1.57
</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 PERCENT. 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) AS INFLUENCE ON FAMILY INCOME AND RETAIL SALES.
* DATA AS OF NOVEMBER 30, 1997.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
Conventional wisdom might argue in favor of remaining in the U.S. with your
investment dollars in 1998 and, more specifically, invested in small
capitalization companies with domestic lines of business. We'd challenge such
thinking as slower growth, slower inflation and even deflation and pricing
pressures change the U.S. economic climate. The only real antidote is growth,
and from now on growth is more likely to be found outside the United States.
Today to participate in the growth from global business you'd need to be exposed
to large capitalization companies.
International investing is a promising proposition in 1998, the Asian fallout
notwithstanding. In established markets, there are attractive opportunities to
be found in Europe and in Japan. Several Japanese companies have real cash flows
and even relatively attractive valuations. In addition, the effect of the Asian
problems has not been to discourage all investment into emerging markets; rather
investors have tended to divert investment dollars and business to other
increasingly attractive emerging markets in eastern Europe, the Middle East,
Africa and Latin America.
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/ MAUREEN ALLYN
MAUREEN ALLYN
CHIEF ECONOMIST, Scudder Kemper Investments, Inc.
January 9, 1998
4
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE
[PHOTO]
DANIEL J. BUKOWSKI IS A SENIOR VICE PRESIDENT OF WHAT IS NOW SCUDDER KEMPER
INVESTMENTS, INC. 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.
[PHOTO]
WILLIAM KNAPP JOINED SCUDDER KEMPER INVESTMENTS, INC. IN 1992 AS A QUANTITATIVE
ANALYST AND IS A CO-MANAGER OF KEMPER VALUE+GROWTH FUND. HE RECEIVED HIS B.S.
AND GRADUATED MAGNA CUM LAUDE AT DRAKE UNIVERSITY AND 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.
Q DID THE FUND'S PERFORMANCE FOR
THE YEAR MEET YOUR EXPECTATIONS?
A Yes, on an absolute basis
the fund's performance was excellent. Class A shares had a total return
(unadjusted for any sales charge) of 20.83 percent for the year. This was a
strong return in a remarkably robust market. However, the difference between our
return and the 28.10 percent return of the benchmark Russell 1000 Index requires
some explanation.
The index is skewed towards the largest companies -- primarily big brand-name
growth companies like Procter & Gamble, Pfizer, Coca-Cola, Gillette, Microsoft,
Eli Lilly and GE. These companies are frequently refered to as the "Nifty Fifty"
by the popular press. Few if any of these companies are priced low enough
relative to their earnings to fit with our "growth at a reasonable price"
approach. For example, Coca-Cola recently sold at 40 times 1997 earnings --
that's a lot to pay, and we think at that level there is more downside risk than
upside potential, even though it's a fine growth company. So we tended not to
have large positions in these types of names.
Unfortunately, the market didn't seem very concerned about value for much of
the fiscal year -- investors just continued to bid up the prices of big,
brand-name companies. There were two reasons for this. First, uncertainty about
the direction of interest rates during the first part of the year prompted
investors to favor big companies whose bottom lines tend to be less affected by
interest rate changes. Second, concern over the impact of Asia's problems during
the last two months of the year prompted a "flight to safety," and large cap,
brand-name companies benefited.
Q WERE THE HIGH PRICES OF THESE
COMPANIES THE ONLY REASON YOU DIDN'T BUY MORE?
A Price is the main reason but
not the only one. We also manage the fund with tax efficiency in mind.
Selling current holdings to buy big cap consumer stocks would have dramatically
boosted the fund's taxable capital gains exposure, but only would provide modest
upside potential. For us, that didn't make a lot of sense. Our experience is
that solid investment ideas can offer good returns not just over the course of
months, but over years. Unless there's a compelling reason to sell stocks, we'll
hang onto them. We think that's the best way to serve our shareholders.
Q WITH THE PASSAGE OF THE NEW
TAX ACT, SHAREHOLDERS MAY BE INTERESTED IN HOW YOU MANAGE THE FUND FOR TAX
EFFICIENCY. COULD YOU FURTHER DESCRIBE YOUR APPROACH?
A Certainly. We work to
provide tax efficiency in a couple of ways: (1) keeping portfolio turnover
relatively low and (2) when selling shares, paying attention to when they were
purchased and at what price, so we can offset gains with losses.
In this way, we hope to help shareholders keep more of their return rather
than giving a portion to Uncle Sam in the form of capital gains tax. It's a
strategy that doesn't show up in absolute return numbers, but it does show up in
our potential capital gains exposure (PCGE).
5
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE
Morningstar, the independent mutual fund rating service, keeps track of PCGE.
Potential capital gains as determined by Morningstar indicate how much of a
fund's assets would be subject to taxation if the fund were to be liquidated
today. They list Kemper Value+Growth Fund's PCGE as 16 percent as of November
30, 1997. That compares to an average of 27 percent for Morningstar's growth
fund category. That potentially lower tax exposure can make a big difference in
our shareholders' pocketbooks.
Q EARLIER, YOU MENTIONED A
COUPLE OF PERIODS OF MARKET UNCERTAINTY. COULD YOU PROVIDE A
"PLAY-BY-PLAY" OF MARKET CONDITIONS FOR THE YEAR AND HOW YOU RESPONDED TO THEM?
A The year began with two
quarters of strong economic growth and with a parallel run-up in interest
rates. This increase in rates was caused by fears of a major Federal Reserve
Board ("the Fed") rate action.
Interest rate increases are potentially negative for the financial services
stocks in particular, and investor apprehensiveness resulted in buying
opportunities in that sector. As a result, the financial services sector was an
out-
standing performer for the fund (up an average of 50 percent for the fiscal
year). Among new positions, we had strong price appreciation in Federal National
Mortgage Association ("Fannie Mae") and in Bear Stearns, bought on concern that
1997 would be a weaker year for the brokerage industry. We added to our position
in NationsBank, a leading "super-regional" bank, for its potential in a time of
rapid nationwide consolidation.
We found further growth at reasonable prices in the second quarter of 1997 in
technology, one of the largest sectors in our portfolio (17 percent) at November
30, 1997. The entire sector was under pressure at the end of the first quarter
due to fears of inventory overhang and intense price competition. We believed
these concerns to be largely unwarranted, and we loaded up on technology stocks.
With world PC demand continuing to expand rapidly, we see real long-term growth
potential for selected PC manufacturers.
Technology stocks, along with the rest of the market, rallied strongly during
the second and third quarters of 1997, as posi-
tive data for the U.S. economy reassured investors. Indications
of sustainable growth, low infla-
tion, and declining interest rates
created a favorable environment
for stocks, a climate which con-
tinued through October.
Believing the health care sector to be overvalued by the market, we took the
opportunity to sell some of the particularly high-flying issues such as
Medtronic. These sales slightly reduced the fund's short-term performance in
health care as measured by the market-cap weighted indexes. But we felt the fund
was better served by establishing new positions in more value-oriented issues in
the sector, which should enhance long-term fund results. An example is American
Home Products, a company possessing strong earnings power. We believe the market
had over-reacted to problems this year with diet drugs, creating an excellent
buying opportunity. Another pharma-
ceutical holding was Merck, which the market suspected could not sustain its
growth rate derived from revolutionary new drug discoveries. We were rewarded at
the end of the fiscal year when the stock moved vigorously upward in response to
an announcement from Merck's chairman that the earnings growth rate would be
maintained.
In October, the market's powerful rally was suddenly reversed by emerging
problems in Asia, which, as we mentioned earlier caused a "flight to safety."
The fund was particularly hurt by its large exposure to techno-
logy, which took the worst of the market's fear. Investors instead favored even
further the big-name, large capitalization consumer non-durable stocks. However,
we believe that tactic may in the end reverse itself as many of these companies
are multi-nationals with heavy exposure to Asia. It is our view that at these
lofty price-earnings multiples, even a "flight to safety" can be dangerous. The
fate of the so-called "Nifty Fifty" during the 1973-74 bear market is an
example. Many of those "couldn't fail" stocks lost over half their value. We
prefer to look for growth without paying exorbitant prices. The market hasn't
rewarded that approach yet, but we believe it will in the long term.
6
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE
Q HOW DOES THE FUND'S OVERALL
PRICE-TO-EARNINGS RATIO STACK UP VERSUS THE MARKET?
A Kemper Value+Growth
Fund is trading at an average of 22 times the last 12-months' earnings,
with an expected growth rate of 13 percent. This compares favorably with the
Standard & Poor's 500 Index which is at 23 times the last 12-months' earnings,
with an expected growth rate of 14 percent. So we're paying slightly less than
the average market price for stocks with above-market growth potential. And
because this is growth at the right price, the portfolio is less vulnerable in
possible corrections.
Q HOW IS THE PORTFOLIO DIVIDED
BETWEEN VALUE AND GROWTH?
A This is the only fund we
know of with managers devoted exclusively to both approaches. All growth
and income funds that we have heard about have managers who are not specialists.
But at Kemper Value+Growth Fund, we manage the growth side of the portfolio here
in Chicago, while our counterparts at Kemper Value Advisors in New York manage
the value side. We think this arrangement offers the best of both worlds, with
each set of managers sticking to their areas of expertise.
We allocate capital between the two investment approaches by means of a
quantitative model we developed, exclusive to Kemper Funds, to evaluate the
macroeconomic factors (the strength of the economy, interest rate trends, and
the relative valuations of growth and value stocks), that largely determine
which approach is likely to outperform for a sustained period. We will always
keep a sizable representation in both value and growth, so as to reduce the
fund's volatility.
Toward the end of the fiscal year, we increased the growth percentage of the
fund's portfolio from 60 percent to 65 percent. That's related to our outlook
for the economy and interest rates. Real rates (interest rates minus inflation)
are very high. In this situation, we expect to see the long bond stay below six
percent, which is very favorable for growth stocks. You can think of it this
way: Growth stocks are like long dated bonds, in that most of their earnings
occur farther in the future. Value stocks are kind of like T-bills, because they
tend to offer more immediate earnings. A decline in rates lowers the opportunity
cost of future earnings, therefore increasing the present value of growth type
stocks.
Also favorable to growth stocks is that earnings growth for the market as a
whole is expected to slow in 1998. The reasons include concerns regarding the
impact of the problems in Asia; reduced opportunities to increase industrial
productivity (since many companies have already made a lot of improvements); and
diminished tax incentives as a stimulus to industry.
Slower earnings growth tends to be good for growth stocks, as economically
sensitive types of stocks typically take the brunt of earnings declines. If
earnings slow, the market will be willing to pay a premium for what growth it
can find, making growth stocks more attractive.
7
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
FOR PERIODS ENDED NOVEMBER 30, 1997 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
1-YEAR LIFE OF CLASS
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
13.88% 22.96% (since
KEMPER VALUE+GROWTH FUND CLASS A 10/16/95)
.......................................................................................
16.96 24.36 (since
KEMPER VALUE+GROWTH FUND CLASS B 10/16/95)
.......................................................................................
19.86 25.46 (since
KEMPER VALUE+GROWTH FUND CLASS C 10/16/95)
.......................................................................................
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
KEMPER VALUE+GROWTH FUND CLASS A
KEMPER VALUE+GROWTH
FUND CLASS A(1) RUSSELL 1000 INDEX+
10/31/95 $10,000 $10,000
12/31/95 $9,961 $10,605
<S> <C> <C>
12/31/96 $12,506 $12,983
11/30/97 $15,416 $16,902
Growth of an assumed $10,000 investment in Class A shares from 10/31/95 to
11/30/97
<CAPTION>
KEMPER VALUE+GROWTH FUND CLASS A
STANDARD & POOR'S
500 STOCK INDEX++
10/31/95 $10,000
12/31/95 $10,653
<S> <C>
12/31/96 $13,093
11/30/97 $17,115
Growth of an assumed $10,000 investment in Class A shares from 10/31/95 to
11/30/97
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
KEMPER VALUE+GROWTH FUND CLASS B
KEMPER VALUE+GROWTH
FUND CLASS B(1) RUSSELL 1000 INDEX+
10/31/95 $10,000 $10,000
12/31/95 $10,554 $10,605
<S> <C> <C>
12/31/96 $13,139 $12,983
11/30/97 $15,782 $16,902
Growth of an assumed $10,000 investment in Class B shares from 10/31/95 to
11/30/97
<CAPTION>
KEMPER VALUE+GROWTH FUND CLASS B
STANDARD & POOR'S
500 STOCK INDEX++
10/31/95 $10,000
12/31/95 $10,653
<S> <C>
12/31/96 $13,093
11/30/97 $17,115
Growth of an assumed $10,000 investment in Class B shares from 10/31/95 to
11/30/97
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
KEMPER VALUE+GROWTH FUND CLASS C
KEMPER VALUE+GROWTH
FUND CLASS C(1) RUSSELL 1000 INDEX+
10/31/95 $10,000 $10,000
12/31/95 $10,554 $10,605
<S> <C> <C>
12/31/96 $13,150 $12,983
11/30/97 $16,082 $16,902
Growth of an assumed $10,000 investment in Class C shares from 10/31/95 to
11/30/97
<CAPTION>
KEMPER VALUE+GROWTH FUND CLASS C
STANDARD & POOR'S
500 STOCK INDEX++
10/31/95 $10,000
12/31/95 $10,653
<S> <C>
12/31/96 $13,093
11/30/97 $17,115
Growth of an assumed $10,000 investment in Class C shares from 10/31/95 to
11/30/97
</TABLE>
RETURNS ARE HISTORICAL AND DO NOT REPRESENT FUTURE PERFORMANCE. RETURNS AND NET
ASSET VALUE FLUCTUATE. SHARES ARE REDEEMABLE AT CURRENT NET ASSET VALUE, WHICH
MAY BE MORE OR LESS THAN ORIGINAL COST.
*AVERAGE ANNUAL TOTAL RETURN MEASURES NET INVESTMENT INCOME AND CAPITAL GAIN OR
LOSS FROM PORTFOLIO INVESTMENTS, ASSUMING REINVESTMENT OF ALL DIVIDENDS AND FOR
CLASS A SHARES ADJUSTMENT FOR THE MAXIMUM SALES CHARGE OF 5.75 PERCENT, FOR
CLASS B SHARES ADJUSTMENT FOR THE APPLICABLE CONTINGENT DEFERRED SALES CHARGE
(CDSC) AS FOLLOWS: 1 YEAR, 3 PERCENT; 5 YEAR, 1 PERCENT; SINCE INCEPTION, 0
PERCENT. FOR CLASS C SHARES THERE IS NO ADJUSTMENT FOR SALES CHARGE. THE
MAXIMUM CDSC FOR CLASS B SHARES IS 4 PERCENT. FOR CLASS C SHARES, THERE IS A 1
PERCENT CDSC ON CERTAIN REDEMPTIONS WITHIN THE FIRST YEAR OF PURCHASE. DURING
THE PERIODS NOTED, SECURITIES PRICES FLUCTUATED. FOR ADDITIONAL INFORMATION,
SEE THE PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION AND THE FINANCIAL
HIGHLIGHTS AT THE END OF THIS REPORT.
(1)PERFORMANCE INCLUDES REINVESTMENT OF DIVIDENDS AND ADJUSTMENT FOR THE
MAXIMUM SALES CHARGE FOR CLASS A SHARES AND THE CDSC IN EFFECT AT THE END OF
THE PERIOD FOR CLASS B SHARES. IN COMPARING KEMPER VALUE+GROWTH FUND TO THE
INDICES, YOU SHOULD ALSO NOTE THAT THE FUND'S PERFORMANCE REFLECTS THE
MAXIMUM SALES CHARGE, WHILE NO SUCH CHARGES ARE REFLECTED IN THE PERFORMANCE
OF THE INDICES.
+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.
++THE STANDARD & POOR'S 500 STOCK INDEX IS AN UNMANAGED INDEX GENERALLY
REPRESENTATIVE OF THE U.S. STOCK MARKET. SOURCE IS TOWERS DATA SYSTEMS.
8
<PAGE>
- --------------------------------------------------------------------------------
INDUSTRY SECTORS
A YEAR-TO-YEAR COMPARISON
Data show the percentage of the common stocks in the portfolio that each sector
represented on November 30, 1997, and on November 30, 1996.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
KEMPER VALUE+GROWTH FUND AS OF 11/30/97 KEMPER VALUE+GROWTH FUND AS OF 11/30/96
<S> <C> <C>
Consumer nondurables 22.7% 27.0%
Finance 20.6% 20.4%
Technology 17.3% 18.3%
Health care 14.8% 11.1%
Basic industries 6.8% 3.1%
Capital goods 6.1% 5.2%
Energy 6.0% 5.8%
Utilities 3.1% 3.9%
Consumer durables 2.1% 4.0%
Transportation 0.5% 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 November 30, 1997, compared to
the industry sectors that make up the fund's benchmark, the Russell 1000 Growth
Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
KEMPER VALUE+GROWTH FUND AS OF 11/30/97 RUSSELL 1000 INDEX AS OF 11/30/97
<S> <C> <C>
Consumer nondurables 22.7% 21.2%
Finance 20.6% 18.5%
Technology 17.3% 14.0%
Health care 14.8% 11.0%
Basic industries 6.8% 4.7%
Capital goods 6.1% 8.9%
Energy 6.0% 7.8%
Utilities 3.1% 9.8%
Consumer durables 2.1% 2.7%
Transportation 0.5% 1.4%
</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 INDEX.
9
<PAGE>
- --------------------------------------------------------------------------------
LARGEST HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS*
Representing 22.4 percent of the fund's total net assets on November 30, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Holdings Percent
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
1. PHILIP The largest cigarette maker in the U.S. Through 4.3%
MORRIS its Miller Brewing subsidiary, it is also the
country's second-largest brewer. This company is
also a major branded food producer through its
Kraft Foods subsidiaries.
- --------------------------------------------------------------------------------
2. GENERAL A broadly diversified company with major 2.6%
ELECTRIC businesses in power generators, appliances,
lighting, plastics, medical systems, aircraft
engines, financial services and broadcasting.
- --------------------------------------------------------------------------------
3. UST Manufactures and sells moist snuff, wine and other 2.4%
products.
- --------------------------------------------------------------------------------
4. FEDERAL Often referred to as "Fannie Mae", this is a 2.3%
NATIONAL private corporation federally chartered to provide
MORTGAGE financial products and services that increase the
ASSOCIATION availability and affordability of housing to low,
moderate and
middle-income Americans.
- --------------------------------------------------------------------------------
5. INTEL Engaged in the design, development, manufacture 2.2%
and sale of advanced microcomputer components such
as integrated circuits and other related products.
- --------------------------------------------------------------------------------
6. FEDERAL HOME Provides for the transfer of capital between 1.9%
LOAN mortgage lenders and mortgage securities
MORTGAGE investors, enabling mortgage lenders to provide a
CORPORATION continuous flow of funds to borrowers.
- --------------------------------------------------------------------------------
7. CISCO The largest, most comprehensive supplier of 1.9%
SYSTEMS routing 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 1.7%
savings accounts, loans, investment management,
brokerage, trading, corporate finance and
insurance services.
- --------------------------------------------------------------------------------
9. AMERICAN Manufactures and markets health care products. 1.6%
HOME
PRODUCTS
- --------------------------------------------------------------------------------
10. WORLDCOM Provides intrastate, interstate and international 1.5%
long distance services, along with operator,
billing and
collection services.
- --------------------------------------------------------------------------------
</TABLE>
* PORTFOLIO COMPOSITION AND HOLDINGS ARE SUBJECT TO CHANGE.
10
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
KEMPER VALUE+GROWTH FUND
Portfolio of Investments at November 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Number
of
Common stocks shares Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
BASIC INDUSTRIES--6.7%
AMP, Inc. 16,700 $ 725
Crown Cork & Seal Co. 21,000 1,025
Dow Chemical Co. 9,000 889
Eastman Chemical Co. 10,100 610
Ferro Corp. 13,000 498
Georgia-Pacific Corp. 5,400 461
Louisiana-Pacific Corp. 29,800 602
Nucor Corp. 9,000 450
Sonoco Products Co. 25,900 850
Union Camp Corp. 7,900 474
---------------------------------------------------------------------
6,584
- ----------------------------------------------------------------------------------------------------
CAPITAL GOODS--6.0%
B.F. Goodrich Co. 12,400 552
Emerson Electric Co. 11,100 610
General Electric Co. 34,900 2,574
Honeywell 7,000 458
Pitney Bowes, Inc. 6,000 504
(a) U.S. Filter Corp. 13,200 414
(a) USA Waste Services 22,617 748
---------------------------------------------------------------------
5,860
- ----------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--9.1%
(a) AutoZone 17,400 522
Carnival Corp. 23,000 1,243
(a) Consolidated Stores Corp. 16,500 802
Home Depot 5,000 280
J.C. Penney Co. 2,300 148
May Department Stores Co. 9,000 484
(a) MGM Grand 27,000 1,056
NIKE 16,300 794
Sears, Roebuck & Co. 13,500 618
(a) Tommy Hilfiger Corp. 26,800 1,052
Tricon Global Restaurants, Inc. 1,900 64
V.F. Corp. 6,800 314
Walt Disney Co. 15,700 1,491
---------------------------------------------------------------------
8,868
- ----------------------------------------------------------------------------------------------------
CONSUMER DURABLES--2.1%
Ford Motor Co. 16,200 697
Leggett & Platt Inc. 7,000 301
Magna International, Inc., "A" 6,800 429
Superior Industries International 25,000 650
---------------------------------------------------------------------
2,077
- ----------------------------------------------------------------------------------------------------
CONSUMER STAPLES--13.3%
American Greetings Corp. 28,200 1,036
Clorox Co. 5,400 419
Kimberly-Clark Corp. 11,400 594
McDonald's Corp. 28,800 1,397
Newell Co. 19,900 812
PepsiCo 20,000 737
Philip Morris Cos. 96,900 4,215
Procter & Gamble Co. 9,500 725
Unilever, N.V., ADR 6,000 348
UST, Inc. 74,400 2,297
Whitman Corp. 15,000 395
---------------------------------------------------------------------
12,975
- ----------------------------------------------------------------------------------------------------
ENERGY--5.9%
AMOCO Corp. 9,300 837
Atlantic Richfield Co. 11,300 921
Chevron Corp. 8,000 641
Columbia Gas System 4,400 320
</TABLE>
11
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Number
of
Common stocks shares Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Consolidated Natural Gas 5,000 $ 302
Enron Corp. 17,000 659
Exxon Corp. 19,900 1,214
Kerr-McGee Corp. 10,100 670
Royal Dutch Petroleum Co. 4,000 211
---------------------------------------------------------------------
5,775
- ----------------------------------------------------------------------------------------------------
FINANCE--20.3%
American General Corp. 6,500 350
American International Group, Inc. 3,500 353
Banc One Corp. 13,200 678
BankAmerica Corp. 5,900 431
Bankers Trust New York Corp. 3,000 356
Barnett Banks 6,600 464
Bear Stearns Cos. 15,000 622
BRE Properties, Inc. 20,000 575
Chase Manhattan Corp. 3,400 369
Dean Witter Discover 13,000 706
Federal Home Loan Mortgage Corp. 45,000 1,856
Federal National Mortgage Association 41,800 2,208
First Chicago NBD Corp. 6,000 469
First Union Corp. 4,700 229
Fleet Financial Group, Inc. 2,600 172
General Re Corp. 3,300 655
Golden West Financial Corp. 1,200 108
H.F. Ahmanson & Co. 10,800 643
ITT Hartford Group 3,500 293
Jefferson-Pilot Corp. 13,000 992
KeyCorp 3,400 229
Meditrust 14,419 548
Mellon Bank Corp. 10,000 567
Merrill Lynch & Co. 9,400 660
MGIC Investment Corp. 16,800 982
NationsBank 27,510 1,652
Norwest Corp. 13,600 509
PNC Bank Corp., N.A. 1,300 70
Post Properties 14,500 560
Republic NY Corp. 2,000 218
Safeco Corp. 6,500 318
Torchmark Corp. 7,000 286
Wells Fargo & Co. 2,300 707
---------------------------------------------------------------------
19,835
- ----------------------------------------------------------------------------------------------------
HEALTH CARE--14.7%
Abbott Laboratories 17,400 1,131
ALZA Corp. 46,000 1,228
American Home Products Corp. 23,200 1,621
(a) Amgen, Inc. 1,100 56
Astra AB, ADR 59,000 1,003
Baxter International 6,000 304
Becton Dickinson & Co. 15,000 773
(a) Biogen 16,700 585
Bristol-Myers Squibb Co. 9,000 843
C.R. Bard 17,400 521
Crescendo Pharmaceuticals Corp. 1,800 21
Glaxo Wellcome, ADR 9,000 411
(a) HealthCare COMPARE Corp. 17,200 897
Johnson & Johnson 10,700 673
Mallinckrodt Group 35,000 1,295
Merck & Co. 15,000 1,418
Novartis, ADR 5,000 398
United Healthcare Corp. 22,000 1,145
---------------------------------------------------------------------
14,323
- ----------------------------------------------------------------------------------------------------
TECHNOLOGY--17.0%
(a) 3Com Corp. 32,700 1,185
(a) Applied Materials, Inc. 23,000 759
</TABLE>
12
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Number
of
Common stocks shares Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(a) Ascend Communications, Inc. 16,900 $ 421
(a) Atmel Corp. 23,000 516
(a) Cisco Systems 21,100 1,820
(a) Compaq Computer Corp. 24,050 1,502
(a) Computer Sciences Corp. 16,200 1,283
Diebold 19,000 878
Intel Corp. 27,200 2,111
Linear Technology Corp. 7,000 451
(a) Microchip Technology 6,700 235
(a) Novellus Systems 13,000 489
(a) Parametric Technology Corp. 12,400 627
(a) Quantum Corp. 18,400 490
Raytheon Co. 13,500 755
Reynolds & Reynolds Co. 39,000 746
(a) Seagate Technology 21,000 476
(a) Sun Microsystems 31,400 1,130
(a) Western Digital Corp. 15,800 319
Xerox Corp. 6,000 466
---------------------------------------------------------------------
16,659
- ----------------------------------------------------------------------------------------------------
TRANSPORTATION--.5%
Canadian National Railway Co. 9,500 491
---------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
UTILITIES--3.0%
GTE Corp. 17,000 860
Southern Co. 24,200 581
(a) WorldCom, Inc. 47,700 1,526
---------------------------------------------------------------------
2,967
---------------------------------------------------------------------
TOTAL INVESTMENTS--98.6%
(Cost: $84,135) 96,414
---------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES--1.4% 1,327
---------------------------------------------------------------------
NET ASSETS--100% $97,741
---------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $84,135,000 for federal income tax purposes
at November 30, 1997, the gross unrealized appreciation was $14,180,000, the
gross unrealized depreciation was $1,901,000, and the net unrealized
appreciation on investments was $12,279,000.
See accompanying Notes to Financial Statements.
13
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER VALUE+GROWTH FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper Value+Growth Fund as of
November 30, 1997, the related statements of operations for the year then ended
and changes in net assets for each of the two years in the period then ended,
and the financial highlights for each of the fiscal periods since 1995. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
November 30, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Kemper
Value+Growth Fund at November 30, 1997, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the fiscal periods
since 1995, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
January 20, 1998
14
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- -------------------------------------------------
ASSETS
- -------------------------------------------------
Investments, at value
(Cost: $84,135) $96,414
- -------------------------------------------------
Cash 929
- -------------------------------------------------
Receivable for:
Investments sold 365
- -------------------------------------------------
Fund shares sold 342
- -------------------------------------------------
Dividends 134
- -------------------------------------------------
TOTAL ASSETS 98,184
- -------------------------------------------------
- -------------------------------------------------
LIABILITIES AND NET ASSETS
- -------------------------------------------------
Payable for:
Investments purchased 133
- -------------------------------------------------
Fund shares redeemed 121
- -------------------------------------------------
Management fee 55
- -------------------------------------------------
Distribution services fee 27
- -------------------------------------------------
Administrative services fee 17
- -------------------------------------------------
Custodian and transfer agent fees and
related expenses 59
- -------------------------------------------------
Trustees' fees and other 31
- -------------------------------------------------
Total liabilities 443
- -------------------------------------------------
NET ASSETS $97,741
- -------------------------------------------------
- -------------------------------------------------
ANALYSIS OF NET ASSETS
- -------------------------------------------------
Paid-in capital $82,020
- -------------------------------------------------
Undistributed net realized gain on
investments 3,434
- -------------------------------------------------
Net unrealized appreciation on
investments 12,279
- -------------------------------------------------
Undistributed net investment income 8
- -------------------------------------------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING $97,741
- -------------------------------------------------
- -------------------------------------------------
THE PRICING OF SHARES
- -------------------------------------------------
CLASS A SHARES
Net asset value and redemption price
per share
($52,059 DIVIDED BY 3,560 shares
outstanding) $14.62
- -------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering
price) $15.51
- -------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales
charge) per share
($42,888 DIVIDED BY 2,984 shares
outstanding) $14.37
- -------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales
charge) per share
($2,794 DIVIDED BY 194 shares
outstanding) $14.37
- -------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
15
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Year ended November 30, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- -------------------------------------------------
NET INVESTMENT INCOME
- -------------------------------------------------
Dividends $ 1,051
- -------------------------------------------------
Interest 106
- -------------------------------------------------
Total investment income 1,157
- -------------------------------------------------
Expenses:
Management fee 474
- -------------------------------------------------
Distribution services fee 240
- -------------------------------------------------
Administrative services fee 150
- -------------------------------------------------
Custodian and transfer agent fees and
related expenses 306
- -------------------------------------------------
Professional fees 11
- -------------------------------------------------
Reports to shareholders 32
- -------------------------------------------------
Registration fees 12
- -------------------------------------------------
Trustees' fees and other 14
- -------------------------------------------------
Total expenses before expense
waiver 1,239
- -------------------------------------------------
Less expenses waived by investment
manager 40
- -------------------------------------------------
Total expenses after expense waiver 1,199
- -------------------------------------------------
NET INVESTMENT LOSS (42)
- -------------------------------------------------
- -------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
- -------------------------------------------------
Net realized gain on sales of
investments 3,595
- -------------------------------------------------
Net realized loss from futures
transactions (96)
- -------------------------------------------------
Net realized gain 3,499
- -------------------------------------------------
Change in net unrealized appreciation
on investments 8,054
- -------------------------------------------------
Net gain on investments 11,553
- -------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $11,511
- -------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1997 1996
<S> <C> <C>
- -----------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- -----------------------------------------------------------
Net investment income (loss) $ (42) 8
- -----------------------------------------------------------
Net realized gain 3,499 2,488
- -----------------------------------------------------------
Change in net unrealized appreciation 8,054 4,101
- -----------------------------------------------------------
Net increase in net assets resulting
from operations 11,511 6,597
- -----------------------------------------------------------
Net equalization credits (charges) (30) 61
- -----------------------------------------------------------
Distribution from net realized gain (2,553) --
- -----------------------------------------------------------
Net increase from capital share
transactions 49,721 26,583
- -----------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 58,649 33,241
- -----------------------------------------------------------
- -----------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------
Beginning of year 39,092 5,851
- -----------------------------------------------------------
END OF YEAR (including undistributed
net investment income
of $8 and $80, respectively) $97,741 39,092
- -----------------------------------------------------------
</TABLE>
16
<PAGE>
- --------------------------------------------------------------------------------
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
November 30, 1997) are offered to a limited group
of investors, are not subject to initial or
contingent deferred sales charges and have lower
ongoing expenses than other classes. Differences in
class expenses will result in the payment of
different per share income dividends by class. All
shares of the Fund have equal rights with respect
to voting, dividends and assets, subject to class
specific preferences.
- --------------------------------------------------------------------------------
2 SIGNIFICANT
ACCOUNTING POLICIES
INVESTMENT VALUATION. Investments are stated at
value. Portfolio securities that are traded on a
domestic securities exchange or securities listed
on the NASDAQ National Market are valued at the
last sale price on the exchange or market where
primarily traded or listed or, if there is no
recent sale, at the last current bid quotation.
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 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.
17
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Chicago time or the close of the Exchange. The net
asset value per share is determined separately for
each class by dividing the Fund's net assets
attributable to that class by the number of shares
of the class outstanding.
FEDERAL INCOME TAXES. The Fund has complied with
the special provisions of the Internal Revenue Code
available to investment companies and therefore no
federal income tax provision is required.
DIVIDENDS TO SHAREHOLDERS. The Fund declares and
pays dividends of net investment income and net
realized capital gains 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
INVESTMENT MANAGER COMBINATION. Zurich Insurance
Company, the parent of Zurich Kemper Investments,
Inc. (ZKI), has acquired a majority interest in
Scudder, Stevens & Clark, Inc. (Scudder), another
major investment manager. At completion of this
transaction on December 31, 1997, Scudder changed
its name to Scudder Kemper Investments, Inc.
(Scudder Kemper) and the operations of ZKI were
combined with Scudder Kemper. In addition, the
names of the Fund's principal underwriter and
shareholder service agent were changed to Kemper
Distributors, Inc. (KDI) and Kemper Service Company
(KSvC), respectively.
MANAGEMENT AGREEMENT. The Fund has a management
agreement with Scudder Kemper 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
$474,000 for the year ended November 30, 1997.
Scudder Kemper has agreed to temporarily waive
certain operating expenses of the Fund. Under this
arrangement, Scudder Kemper waived expenses of
$40,000 for the year ended November 30, 1997.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
The Fund has an underwriting and distribution
services agreement with KDI. Underwriting
commissions paid in connection with the
distribution of Class A shares are as follows:
<TABLE>
<CAPTION>
COMMISSIONS COMMISSIONS
RETAINED ALLOWED
BY KDI BY KDI TO FIRMS
----------- ---------------
<S> <C> <C>
Year ended November 30, 1997 $ 40,000 538,000
</TABLE>
For services under the distribution services
agreement, the Fund pays KDI a fee of .75% of
average daily net assets of the Class B and Class C
shares. Pursuant to the agreement, KDI enters into
related selling group agreements with various firms
at various rates for sales of Class B and Class C
shares. In addition, KDI receives any contingent
deferred sales charges (CDSC) from redemptions of
Class B and Class C shares. Distribution
18
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
fees, CDSC and commissions related to Class B and
Class C shares are as follows:
<TABLE>
<CAPTION>
DISTRIBUTION FEES
(AFTER EXPENSE WAIVER) COMMISSIONS AND
AND CDSC DISTRIBUTION FEES PAID
RECEIVED BY KDI BY KDI TO FIRMS
---------------------- ----------------------
<S> <C> <C>
Year ended November 30, 1997 $ 232,000 676,000
</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 (AFTER EXPENSE
WAIVER) PAID BY ASF PAID
THE FUND TO KDI BY KDI TO FIRMS
------------------ ---------------
<S> <C> <C>
Year ended November 30, 1997 $ 148,000 169,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
KSvC is the shareholder service agent of the Fund.
Under the agreement, KSvC received shareholder
services fees of $236,000 for the year ended
November 30, 1997.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. During the year ended November 30,
1997, the Fund made no payments to its officers and
incurred trustees' fees of $8,000 to independent
trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS
For the year ended November 30, 1997, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
<TABLE>
<S> <C>
Purchases $87,919
Proceeds from sales 37,137
</TABLE>
19
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS
The following table summarizes the activity in
capital shares of the Fund (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1997 1996
---------------- ----------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------
SHARES SOLD
- ---------------------------------------------------------------------------
Class A 2,303 $31,312 1,525 $16,513
- ---------------------------------------------------------------------------
Class B 1,959 26,054 1,264 13,722
- ---------------------------------------------------------------------------
Class C 179 2,342 115 1,244
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
- ---------------------------------------------------------------------------
Class A 109 1,290 -- --
- ---------------------------------------------------------------------------
Class B 94 1,108 -- --
- ---------------------------------------------------------------------------
Class C 6 65 -- --
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
SHARES REDEEMED
- ---------------------------------------------------------------------------
Class A (504) (6,722) (230) (2,482)
- ---------------------------------------------------------------------------
Class B (367) (4,802) (148) (1,617)
- ---------------------------------------------------------------------------
Class C (72) (926) (78) (797)
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
CONVERSION OF SHARES
- ---------------------------------------------------------------------------
Class A 74 1,032 14 160
- ---------------------------------------------------------------------------
Class B (75) (1,032) (14) (160)
- ---------------------------------------------------------------------------
NET INCREASE FROM CAPITAL SHARE
TRANSACTIONS $49,721 $26,583
- ---------------------------------------------------------------------------
</TABLE>
20
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------- ---------------------------
CLASS A CLASS B
---------------------------- -----------------------------
YEAR ENDED OCTOBER 16 YEAR ENDED OCTOBER 16
NOVEMBER 30, TO NOVEMBER 30, TO
-------------- NOVEMBER 30, -------------- NOVEMBER 30,
1997 1996 1995 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.95 10.02 9.50 12.83 10.02 9.50
- ------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .02 .05 .02 (.07) (.04) .02
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 2.48 2.88 .50 2.44 2.85 .50
- ------------------------------------------------------------------------------------------------------
Total from investment operations 2.50 2.93 .52 2.37 2.81 .52
- ------------------------------------------------------------------------------------------------------
Less distribution from net realized
gain .83 -- -- .83 -- --
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.62 12.95 10.02 14.37 12.83 10.02
- ------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 20.83% 29.24 5.47 19.96 28.04 5.47
- ------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)(A)
- ------------------------------------------------------------------------------------------------------
Expenses 1.41% 1.47 1.35 2.27 2.27 2.10
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) .35% .43 2.25 (.51) (.37) 1.50
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------
CLASS C
-----------------------------
YEAR ENDED OCTOBER 16
NOVEMBER 30, TO
-------------- 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) (.05) (.04) .01
- -----------------------------------------------------------------------
Net realized and unrealized gain 2.41 2.87 .50
- -----------------------------------------------------------------------
Total from investment operations 2.36 2.83 .51
- -----------------------------------------------------------------------
Less distribution from net realized
gain .83 -- --
- -----------------------------------------------------------------------
Net asset value, end of period $14.37 12.84 10.01
- -----------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 19.86% 28.27 5.37
- -----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)(A)
- -----------------------------------------------------------------------
Expenses 2.15% 2.22 2.07
- -----------------------------------------------------------------------
Net investment income (loss) (.39)% (.32) 1.53
- -----------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 16
NOVEMBER 30, TO
---------------- NOVEMBER 30,
1997 1996 1995
<S> <C> <C> <C>
- -------------------------------------------------------------------------
Net assets at end of period (in
thousands) $97,741 39,092 5,851
- -------------------------------------------------------------------------
Portfolio turnover rate 56% 82 --
- -------------------------------------------------------------------------
</TABLE>
Average commission rates paid per share on stock transactions for the periods
ended November 30, 1997 and 1996 were $.0578 and $.0571, respectively.
- --------------------------------------------------------------------------------
NOTES: Total return does not reflect the effect of any sales charges.
(a) The investment manager 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 November 30, 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.
21
<PAGE>
- --------------------------------------------------------------------------------
NOTES
22
<PAGE>
- --------------------------------------------------------------------------------
NOTES
23
<PAGE>
- --------------------------------------------------------------------------------
TRUSTEES&OFFICERS
LONG-TERM INVESTING IN A SHORT-TERM WORLD-SM-
TRUSTEES
DANIEL PIERCE
Chairman and Trustee
DAVID W. BELIN
Trustee
LEWIS A. BURNHAM
Trustee
DONALD L. DUNAWAY
Trustee
ROBERT B. HOFFMAN
Trustee
DONALD R. JONES
Trustee
SHIRLEY D. PETERSON
Trustee
WILLIAM P. SOMMERS
Trustee
EDMOND D. VILLANI
Trustee
OFFICERS
MARK S. CASADY
President
PHILIP J. COLLORA
Vice President,
Secretary and Treasurer
DANIEL J. BUKOWSKI
Vice President
JERARD R. HARTMAN
Vice President
THOMAS W. LITTAUER
Vice President
ANN M. MCCREARY
Vice President
KATHRYN L. QUIRK
Vice President
STEVEN H. REYNOLDS
Vice President
LINDA J. WONDRACK
Vice President
JOHN R. HEBBLE
Assistant Treasurer
MAUREEN E. KANE
Assistant Secretary
CAROLINE PEARSON
Assistant Secretary
ELIZABETH C. WERTH
Assistant Secretary
- --------------------------------------------------------------------------------
..............................................................................
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
..............................................................................
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 419557
Kansas City, MO 64141
..............................................................................
CUSTODIAN AND INVESTORS FIDUCIARY TRUST COMPANY
TRANSFER AGENT 801 Pennsylvania
Kansas City, MO 64105
..............................................................................
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
..............................................................................
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL
60606
www.kemper.com
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This report is not to be distributed
unless preceded or accompanied by a
Kemper Equity Funds/Growth Style
prospectus.
KVGF - 2 (1/98) 1041940
