<PAGE> 1
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED NOVEMBER 30, 1998
[MORNINGSTAR RATINGS LOGO]
Seeks growth of capital
KEMPER
VALUE+GROWTH FUND
"... We believe that the current economic environment
merits a cautious approach to investing ... At this
juncture, we believe that a more market-appropriate
stance is an allocation of 50 percent growth stocks and
50 percent value stocks. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
Economic Overview
5
Performance Update
10
Industry Sectors
11
Largest Holdings
12
Portfolio of Investments
18
Report of Independent Auditors
19
Financial Statements
21
Notes to Financial Statements
25
Financial Highlights
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER VALUE+GROWTH FUND
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED NOVEMBER 30, 1998 (UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 12.06
CLASS B 11.06
CLASS C 11.06
LIPPER GROWTH & INCOME FUNDS CATEGORY AVERAGE* 12.35
- --------------------------------------------------------------------------------
</TABLE>
Returns and rankings are historical and do not guarantee future results.
Investment returns and principal values will fluctuate so that shares, when
redeemed, may be worth 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.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
11/30/98 11/30/97
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER VALUE+GROWTH FUND
CLASS A $15.82 $14.62
- --------------------------------------------------------------------------------
KEMPER VALUE+GROWTH FUND
CLASS B $15.40 $14.37
- --------------------------------------------------------------------------------
KEMPER VALUE+GROWTH FUND
CLASS C $15.40 $14.37
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
KEMPER VALUE+GROWTH FUND
RANKINGS AS OF 11/30/98
- --------------------------------------------------------------------------------
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 #402 of 744 funds #443 of 744 funds #443 of 744 funds
- --------------------------------------------------------------------------------
3-YEAR #218 of 459 funds #279 of 459 funds #275 of 459 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 $0.35 $0.35 $0.35
- --------------------------------------------------------------------------------
LONG-TERM CAPITAL GAIN $0.15 $0.15 $0.15
- --------------------------------------------------------------------------------
</TABLE>
TERMS TO KNOW
YOUR FUND'S STYLE
- --------------------------------------------------------------------------------
MORNINGSTAR EQUITY STYLE BOX
- --------------------------------------------------------------------------------
[MORNINGSTAR EQUITY STYLE BOX]
Source: Data provided by Morningstar, Inc. Chicago, IL. (312) 696-6000. The
Morningstar Style Box is based on a software release date of 11/30/98. The
Equity Style Box placement is based on two variables: a fund's market
capitalization relative to the movements of the market and a fund's valuation,
which is calculated by comparing the stocks in the fund's portfolio with the
most relevant of the three market-cap groups.
Please note that style boxes do not represent an exact assessment of risk
and do not represent future performance. The fund's portfolio changes from
day-to-day. A longer-term view is represented by the fund's Morningstar
category, which is based on its actual investment style as measured by its
underlying portfolio holdings over the past three years. Morningstar has placed
Kemper Value+Growth Fund in the large blend category. Please consult the
prospectus for a description of investment policies.
FUNDAMENTAL INVESTING In addition to rigorous analysis of quantitative data,
such as stock price trends and balance sheet information, fundamental investing
also includes an emphasis on less number-driven factors, such as meetings with
company management and product comparisons.
GROWTH STOCK Growth stocks are shares in companies that are expected to
experience rapid growth resulting from strong sales, talented management and
dominant market position. Because these stocks are typically in demand, they
tend to carry relatively high price tags and can also be volatile, based on
changing perceptions of the companies' growth.
PRICE-TO-EARNINGS (P/E) RATIO A company's stock price divided by its earnings
per share for the past four quarters, also referred to as its multiple.
VALUE STOCK Value stocks are considered to be "bargain stocks" because they are
perceived as undervalued and attractively priced relative to a measure of their
true worth, such as earnings potential, book value, cash flow or dividend yield.
Securities may be undervalued as a result of overreaction by investors to
unfavorable news about a company, industry or the stock market in general, or as
a result of a market decline, poor economic conditions, or actual or anticipated
unfavorable developments impacting the company.
<PAGE> 3
ECONOMIC OVERVIEW
[SILVIA PHOTO]
DR. JOHN E. SILVIA IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.
HIS PRIMARY RESPONSIBILITIES INCLUDE ANALYSIS, MODELING AND FORECASTING OF
ECONOMIC DEVELOPMENTS AND FEDERAL RESERVE ACTIVITY THAT AFFECT FINANCIAL
MARKETS, ESPECIALLY INTEREST RATE TRENDS. THIS EFFORT INCLUDES CLOSE
COLLABORATION WITH BOTH INCOME AND EQUITY MUTUAL FUND MANAGERS AND PENSION FUND
MANAGERS.
SILVIA HOLDS A BACHELOR'S DEGREE AND PH.D. IN ECONOMICS FROM NORTHEASTERN
UNIVERSITY IN BOSTON AND A MASTER'S DEGREE IN ECONOMICS FROM BROWN UNIVERSITY IN
PROVIDENCE, R.I. PRIOR TO HIS CAREER AT SCUDDER KEMPER, HE WAS WITH THE HARRIS
BANK AND ALSO TAUGHT AT INDIANA UNIVERSITY.
SCUDDER KEMPER INVESTMENTS, INC. IS THE INVESTMENT MANAGER FOR KEMPER FUNDS. IT
IS ONE OF THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS
WORLDWIDE, MANAGING MORE THAN $245 BILLION IN ASSETS GLOBALLY FOR MUTUAL FUND
INVESTORS, RETIREMENT AND PENSION PLANS, INSTITUTIONAL AND CORPORATE CLIENTS,
INSURANCE COMPANIES, AND PRIVATE, FAMILY AND INDIVIDUAL ACCOUNTS.
DEAR SHAREHOLDERS,
If you're like most investors, you may be wondering if you should allow yourself
to breathe a sigh of relief as 1999 begins. After several months of generally
declining stock prices and extreme volatility, the U.S. stock market seems to
have rediscovered its resiliency. In the fourth quarter, the Standard & Poor's
500, an unmanaged index generally representative of the U.S. stock market,
bounced back into the 1200-point range, up approximately 20 percent from its
third-quarter low of 957. The blue chip Dow Jones Industrial Average enjoyed a
comparable rise. Investor confidence suddenly overtook the investor uncertainty
that had plagued the markets at summer's end. While financial volatility appears
to be continuing, the mood for investors definitely has improved.
To what can we attribute the change? Simply this -- the cumulative effect of
some good news, not the least of which was a long-awaited series of interest
rate reductions by the Federal Reserve Board. In September, the Fed reduced the
federal funds rate a modest quarter of a percentage point, however, this first
cut disappointed some investors who were expecting a more dramatic gesture. Two
weeks later, the Fed came back with an additional quarter of a percentage point
reduction. This was an unexpected cut that seemed to have a positive effect on
Wall Street. In November, a third rate cut of a quarter of a percentage point
also boosted investor confidence. Investors were further surprised by
better-than-expected corporate earnings reports early in the fourth quarter.
Finally, economic data regarding retail sales, employment and home sales
suggested continued economic growth and very little prospect of recession.
In many ways, 1998's market activity provides a study in how investor
perceptions can upstage economic realities. Certainly, the tumultuous lessons of
Russia and Southeast Asia renewed investors' awareness of risk in 1998, which
was an important wake-up call. At all times, investors must understand and
consider risk. But over the course of 1998, U.S. economic fundamentals have
essentially remained strong. In fact, inflation has remained low for the entire
year. Economic growth has been solid. Our consumer confidence remained fairly
high, although not quite as high as in 1997. The nation's budget surplus for
1998 came in at $60 billion, with another budget surplus expected for fiscal
1999.
Growth in the nation's gross domestic product (GDP), which represents the
total value of all goods and services produced within the U.S. economy, has
remained remarkably steady. GDP is expected to have grown at an annualized rate
of 3 percent for the second half of 1998 and is anticipated to hover around 2
percent to 2.5 percent for the first half of 1999. The consumer price index
(CPI) remains in a range of 1.5 percent to 2 percent.
While employment growth has slowed a bit, the slowdown in wage gains may
provide the Fed with an incentive to reduce interest rates even further. U.S.
corporate profits have generally been flat, so we may see a decrease in capital
spending. Banks appear to be only a little less willing to lend, so the threat
of a general credit crunch is minimal.
Investors may take comfort in the fact that the U.S. markets and economy have
withstood the test of 1998's tumultuous third quarter. Similarly, while certain
countries, such as Malaysia, Indonesia, Brazil and Russia, are still suffering
from economic crises, others, including the Philippines, South Korea, Thailand
and China, appear to have survived. As long as the Fed and the Group of Seven
leading industrial nations (G7) are committed to avoiding recession on national
and global levels respectively, investors have a good chance of experiencing a
more stable economic environment.
At home, there has been somewhat of a slowdown in manufacturing, as reduced
U.S. exports reflect foreign economic turmoil. But the global impact of the
Asian crisis still has not hit the U.S. as hard as was expected. Indeed, Asian
turmoil has not affected U.S. trade as much as it has lowered import prices and
helped reduce global interest rates.
In Europe, the much anticipated Economic and Monetary Union (EMU) is on the
move, with a focus on more flexibility and growth potential for the region.
European equities may be the beneficiaries of increased spending, as governments
seek to foster growth and reduce unemployment.
3
<PAGE> 4
ECONOMIC OVERVIEW
- --------------------------------------------------------------------------------
ECONOMIC GUIDEPOSTS
- --------------------------------------------------------------------------------
ECONOMIC ACTIVITY IS A KEY INFLUENCE ON INVESTMENT PERFORMANCE AND SHAREHOLDER
DECISION-MAKING. PERIODS OF RECESSION OR BOOM, INFLATION OR DEFLATION, CREDIT
EXPANSION OR CREDIT CRUNCH HAVE A SIGNIFICANT IMPACT ON MUTUAL FUND PERFORMANCE.
THE FOLLOWING ARE SOME SIGNIFICANT ECONOMIC GUIDEPOSTS AND THEIR
INVESTMENT RATIONALE THAT MAY HELP YOUR INVESTMENT DECISION-MAKING. THE 10-YEAR
TREASURY RATE AND THE PRIME RATE ARE PREVAILING INTEREST RATES. THE OTHER DATA
REPORT YEAR-TO-YEAR PERCENTAGE CHANGES.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (12/31/98) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-year Treasury rate(1) 4.65 5.50 5.81 6.30
Prime rate(2) 7.75 8.50 8.50 8.25
Inflation rate(3)* 1.55 1.75 1.89 3.18
The U.S. dollar(4) -2.45 9.54 10.26 4.36
Capital goods orders(5)* 7.82 9.52 8.53 4.82
Industrial production(5)* 1.47 5.10 6.56 5.32
Employment growth(6)* 2.28 2.65 2.70 2.33
</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) An influence on family income and retail sales.
* Data as of November 30, 1998.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
If you're a long-term investor in today's short-term world, go ahead and
breathe that sigh of relief -- but be on your toes in 1999. It's going to be an
interesting year as the EMU emerges, the race for the next presidency heats up
and the year 2000 approaches. And, remember: Investors don't like uncertainty,
be it economic or political. More trauma in the White House, continuing disputes
with Iraq or any other hints of crisis could prompt a downward spike in our
markets in the short run. In the long run, the keys to investment performance
remain moderate growth, low inflation and limited taxation and regulation.
Thank you for choosing to invest with Kemper Funds. We appreciate the
opportunity to serve your investment needs.
Sincerely,
/s/ John E. Silvia
JOHN E. SILVIA
The information contained in this piece has been taken from sources believed to
be reliable, but the accuracy of the information is not guaranteed. The opinions
and forecasts expressed are those of Dr. John E. Silvia as of January 4, 1999,
and may not actually come to pass. This information is subject to change. No
part of this material is intended as an investment recommendation.
4
<PAGE> 5
PERFORMANCE UPDATE
[FORTUNA PHOTO]
LEAD PORTFOLIO MANAGER PHILIP FORTUNA IS A MANAGING DIRECTOR OF SCUDDER KEMPER
INVESTMENTS, INC. HE JOINED THE ORGANIZATION IN 1986 AS AN INSTITUTIONAL
PORTFOLIO MANAGER. FORTUNA RECEIVED A BACHELOR'S DEGREE IN ECONOMICS FROM
CARNEGIE MELLON UNIVERSITY AND MASTER'S OF BUSINESS ADMINISTRATION FROM THE
UNIVERSITY OF CHICAGO.
FORTUNA IS SUPPORTED BY PORTFOLIO MANAGERS SHAHRAM TAJBAKHSH AND ROBERT
TYMOCZKO, BOTH MEMBERS OF SCUDDER KEMPER INVESTMENTS' QUANTITATIVE GROUP.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE
MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
IN SEPTEMBER, KEMPER VALUE+GROWTH FUND ADOPTED A QUANTITATIVE INVESTMENT
STRATEGY. IN ADDITION TO DISCUSSING THE FACTORS THAT DROVE THE MARKET AND THE
FUND'S PERFORMANCE DURING THE PAST FISCAL YEAR, THE PORTFOLIO MANAGEMENT TEAM
DESCRIBES THEIR DISCIPLINED, RESEARCH-INTENSIVE, RISK-CONSCIOUS APPROACH.
Q THE NEWS HAS BEEN FULL OF STORIES OF STOCK MARKET VOLATILITY. HOW DID THE
FUND PERFORM DURING THIS TURBULENT TIME?
A For the one-year period ending November 30, 1998, Kemper Value+Growth Fund
earned 12.06 percent (Class A shares, unadjusted for any sales charges). The
fund's returns placed it closely in line with the Lipper Growth and Income
category average of 12.35 percent.
Though it kept up with its peers, the fund lagged its benchmark, the
Russell 1000 index, which gained 21.84 percent. We recognize that shareholders
can be disheartened when the fund trails its index by a wide margin. However,
it's important to remember that the market climate during the past year has been
unusually volatile and narrow, and we encourage shareholders to keep a long-term
outlook.
Q BEFORE WE DISCUSS THE FUND AT GREATER LENGTH, COULD YOU EXPAND UPON YOUR
DISCUSSION OF THIS VOLATILITY AND THE NARROWNESS OF THE MARKET?
A Certainly. This year, the stock market has been dogged by uncertainty.
This climate has led investors to embark on a flight to perceived quality, which
in turn has created an unusual two-tier market. Let's analyze these factors:
A CLIMATE OF UNCERTAINTY In October 1997, concerns about Southeast Asian
economic instability ricocheted through the U.S. stock market, causing a steep
one-day sell-off, commonly referred to as "Gray Monday." Earnings
disappointments emerged throughout the year, at times triggering shock waves
throughout entire industries. In August 1998, Russia defaulted on its debt,
triggering a global market meltdown. As we close the fiscal year, economic
uncertainty still riddles the globe. Despite global economic bailout plans,
Russia, Southeast Asia, Latin America and Japan remain focal points of investor
anxiety. Here at home, impeachment issues also cast a shadow.
THE FLIGHT TO PERCEIVED QUALITY Against this backdrop of uncertainty and
earnings shortfalls, an emotional and paradoxical market has emerged. Many
commonly cited measures of market performance, such as the Dow Jones Industrial
Average and the Standard & Poor's 500 index, have climbed to new heights.
However, it is important to note that investors have not bestowed equal favor on
all types of stocks. From the weeks following Gray Monday through the close of
the fiscal year, Wall Street generally steered clear of any stocks that had real
or perceived exposure to international turmoil. Instead, investors flocked to a
relatively small number of stocks that offered the appearance of stability.
These stocks were almost exclusively mega-cap, domestic, growth-oriented
companies. Demand for this elite camp has taken on a frenetic quality --
investors have pushed stock prices of this group to levels that far surpass
their earnings growth.
5
<PAGE> 6
PERFORMANCE UPDATE
A TWO-TIER MARKET This investment pattern has resulted in a narrow,
two-tier market: Only a narrow band of large-cap, growth-oriented stocks occupy
the first-tier. Most stocks have not enjoyed similar good fortune, and have been
cast by emotional investors into the second tier.
We can see how wide the disparity between the two tiers is by taking a
closer look at the performance of the S&P 500 index. The S&P 500 is often cited
by the media as a measure of the overall stock market, but during the past year,
the index obscures the real story of the market. The S&P 500 is
capitalization-weighted, so the stocks with the largest market capitalizations
drive performance. Through November, the year-to-date cap-weighted return of the
index is 21.9 percent. However, if the returns of each of the stocks in the
index were weighted equally, then the return of the index would drop more than
twelve percentage points to 9.7 percent.
Q THE FUND'S MANAGEMENT TEAM HAS SOME NEW MEMBERS. COULD YOU INTRODUCE THE
MANAGEMENT TEAM?
A Philip Fortuna, director of Scudder Kemper Investments' Quantitative
Group, continues as lead portfolio manager. Portfolio Managers Shahram Tajbakhsh
and Robert Tymoczko, also from the firm's Quantitative Group, joined the
portfolio management team in August. This core group works with a large group of
researchers, analysts and programmers throughout the organization.
Q IN SEPTEMBER, THE INVESTMENT TEAM INCREASED THE ROLE OF QUANTITATIVE
TECHNIQUES IN THE MANAGEMENT OF THE FUND. COULD YOU EXPLAIN WHAT A
QUANTITATIVELY DRIVEN STRATEGY ENTAILS, AND THE PRINCIPLES THAT GOVERN SCUDDER
KEMPER INVESTMENTS' APPROACH TO QUANTITATIVE INVESTING?
A At Scudder Kemper Investments, our quantitative investment approach is
extremely rigorous and disciplined. We use advanced technologies to create
sophisticated computer-driven models. These models organize an extraordinary
quantity and diverse range of information, from historical earnings rates and
stock prices to Wall Street analysts' earnings estimates and bear market
indicators. The quantitative models allow us to thoroughly track far more stocks
than if we solely used a fundamental (see Terms to Know on page 2) investment
discipline. Armed with this comprehensive data, we use the models to precisely
combine stocks into a finely tuned portfolio that we feel will best pursue a
specific risk and reward profile.
We feel that one of the most significant benefits of our quantitative
approach is the discipline it brings to the investment process. We are committed
to a rational, numbers-driven approach, and we don't flinch from it. In markets
such as this one, many investors tend to get whipped around by Wall Street's
emotion and lose sight of their long-term focus. Because we rely on quantitative
techniques, we don't let sentiment cloud our judgment.
Often, people mistakenly think of quantitative investing as "black box
investing," devoid of hands-on portfolio management. However, we at Scudder
Kemper Investments believe that quantitative investing represents some of the
best elements of teamwork: The models leverage years of programming, testing and
development by researchers, analysts and portfolio managers throughout our
organization. The models are never "done." We continuously test and add to them.
Q NOW THAT YOU'VE PROVIDED A BROAD OVERVIEW OF QUANTITATIVE INVESTING, COULD
YOU EXPLAIN HOW THE TEAM USES QUANTITATIVE TECHNIQUES TO MANAGE KEMPER
VALUE+GROWTH FUND?
A Certainly. The fund's universe consists of 1,500 stocks issued by the
largest, publicly traded, domestic companies. A large universe provides us with
increased probability of finding appealing choices. Quantitative modeling allows
us to surmount some of the challenges of rigorously tracking 1,500 stocks.
We use style-specific models. Rather than having lots of stocks that fall
in the middle of a growth-value continuum, we want to have two distinct groups:
growth stocks with clear momentum traits, and value stocks with classic
valuation characteristics. We've programmed each model to hone in on the most
pertinent parameters of its style. For instance, the growth stock model focuses
more heavily on momentum-driven factors, such as historic and projected earnings
growth, while the value-stock model places a higher premium on valuation
statistics, including low price-to-earnings ratios and high dividend yields.
Q HOW DOES THIS APPROACH DIFFER FROM HOW THE FUND WAS MANAGED PREVIOUSLY?
A The fund's objective is unchanged. Kemper Value+Growth Fund continues to
seek long-term capital growth by investing primarily in large-company stocks
issued by U.S. companies.
6
<PAGE> 7
PERFORMANCE UPDATE
The fund's secondary objective is a reduced level of risk over a full market
cycle, compared to pure value-stock or growth-stock funds.
Quantitative factors, such as historic earnings, growth rates,
price-earning ratios, stock prices and cash flows, have always played an
important role in selecting stocks. Now, we've tried to take our analysis of
stocks to the next level, using our proprietary models to systematize and
enhance our stock- selection process.
Q HOW DOES THE FUND'S STRATEGY SEEK TO MANAGE DOWNSIDE VOLATILITY?
A Managing downside volatility is an important concern. After all, the
theory behind Kemper Value+Growth Fund is to try to smooth out the bumps that
plague the growth-only and value-only world.
Ideally, our approach seeks to be more like the tortoise than the hare.
We're not trying to shoot the lights out with a handful of over-the-top stocks.
Instead, our philosophy as portfolio managers is to seek a more moderate
risk/return profile. Over the long-term, our analysis suggests that this route
presents compelling opportunities.
To pursue a more-moderate risk profile, we allocate assets between growth
and value stocks. These two styles tend to react to market conditions in
different ways. Having both growth and value stocks in a single fund may help to
reduce potential volatility. When one style falls out of favor, the other style
may be more successful.
Also, we diversify assets across a large group of stocks. Currently, the
portfolio includes more than 270 stocks, up from about 130 stocks at the
beginning of the fiscal year. Thoroughly monitoring 270 stocks without
quantitative technology would be a tough feat, so we feel that this is a
significant way in which our resources have the capability to add value.
Q HOW HAVE YOU ALLOCATED ASSETS AMONG GROWTH AND VALUE STOCKS THROUGHOUT THE
YEAR? WHAT CONSIDERATIONS SHAPED YOUR DECISION?
A When the fund began the fiscal year in December 1997, its target
allocation was 60 percent of assets in growth stocks, and 40 percent in value
stocks. The growth allocation was increased, based on analysis of macroeconomic
factors, such as inflationary patterns, interest rates and market trends. At the
semiannual mark in May 1998, 65 percent of assets were invested in growth
stocks. This shift served investors as growth outperformed value during this
period.
Toward the conclusion of the fiscal year, we determined that the market
conditions supported increasing the fund's value-stock exposure. Given
historical norms, the current valuations of growth stocks seem unreasonably and
unsustainably high. Our quantitative analysis uncovers far fewer attractively
priced growth-stock opportunities.
Also, we believe that the current economic environment merits a cautious
approach to investing. We cannot rule out the possibility that the markets may
decline dramatically during the next year. Many large multinational corporations
have announced earnings warnings, and we expect that this trend will continue
through the fourth quarter of 1998. Global uncertainty remains unresolved on
many fronts, and the past year has reminded us how strongly international
economic crises can ripple through domestic markets. Historically, in declining
markets, value stocks tend to fare better than growth stocks. At this juncture,
we believe that a more market-appropriate stance is an allocation of 50 percent
growth and 50 percent value stocks.
Q IS THE FUND'S ALLOCATION BETWEEN GROWTH AND VALUE STOCKS DETERMINED USING
QUANTITATIVE TECHNIQUES?
A Presently, the overall asset allocation relies on both qualitative and
quantitative techniques. We certainly consider the information generated through
our models, but we also factor in our judgement of economic and market
conditions. As we move into the next fiscal year, we are developing quantitative
models to focus on style allocation.
Q COULD YOU HIGHLIGHT SOME ELEMENTS THAT WORKED OUT WELL FOR THE FUND?
A The fund reaped good returns from several of its largest holdings. Sun
Microsystems and Cisco Systems bolstered performance, as did cruise operator
Carnival. Our conviction in Philip Morris also paid off. At the semiannual point
in May 1998, the stock was languishing, but as the legislative outlook for the
tobacco industry improved, Philip Morris bounced back nicely. The fund also
benefited from its stakes in Federal Home Loan Mortgage Corporation and Federal
National Mortgage Association, two attractively valued, fundamentally strong,
financial services companies with no international exposure.
7
<PAGE> 8
PERFORMANCE UPDATE
Q WHAT DIDN'T WORK OUT AS WELL AS EXPECTED?
A The fund was hurt by its exposure to energy stocks, including Rowan
Companies, Royal Dutch Petroleum, and Atlantic Richfield. The price of oil has
remained extremely depressed, due to concerns about decreased Asian demand. The
Asian flu also knocked the wind out of some the fund's technology stocks, most
notably, component-oriented technology such as National Semiconductor.
Overall, the narrowness of the market hurt the fund on a relative basis.
Stratospheric prices placed many of the market's short-term winners out of the
fund's criteria. Also, during the final months of the fiscal year, our more
defensive 50/50 allocation between growth and value was not supported by the
market's growth bias. Nonetheless, while we'd prefer the fund to not be left out
of gains, we feel that longer-term market conditions warrant a more cautious
allocation.
Q WHERE ARE YOU FINDING ATTRACTIVE OPPORTUNITIES?
A To preface, we'd like to note that the fund's quantitative models don't
include sector targets. If the models find more attractive stocks in a certain
sector, we'll have a greater portion of assets in that sector. Within this
framework, we'd be glad to elaborate on themes that have emerged out of the
stock-selection process.
Technology stocks remain an important component within the portfolio.
Presently, we are favoring large, quality companies such as Sun Microsystems and
Cisco Systems, rather than technology firms involved in the component and
semiconductor industries. We continue to find attractive opportunities among
stocks within the consumer nondurable sector. Consumer nondurable stocks often
offer more downside risk protection during falling markets.
The fund's allocation in health care has remained stable. Many stocks in
the health-care sector offer long-term potential, given global aging and
population trends. Exposure to financial services stocks has increased during
the year. After the Russian debt crisis, the market pummeled the sector. Prices
dropped and many compelling values emerged.
Q YOU MENTION THAT YOU'VE ADDED MANY NEW STOCKS TO THE FUND. HAVE YOU SOLD
MANY HOLDINGS? IF SO, DO THE FUND'S QUANTITATIVE MODELS ADDRESS TAX
CONSIDERATIONS?
A Yes, during the fiscal year, we have been quite active in purchasing and
selling securities. Because managing capital gains exposure is an important
concern, the models focus on maximizing after-tax, not pre-tax return. As we run
our trading programs, the models harvest capital gains against losses, to
maximize tax efficiency wherever appropriate.
Q THE PAST FISCAL YEAR HAS BEEN A CHALLENGING ONE FOR STOCK INVESTORS. DO
YOU EXPECT THIS TO CONTINUE?
A We certainly expect that market conditions will remain volatile. While we
have seen corrections, the market has bounced back quickly. We are concerned
that these rebounds may be driven more by emotion and wishful thinking than by a
change in fundamental values. Also, we believe investors should be prepared for
a domestic growth slowdown, and continued global economic uncertainty.
That said, we still believe that the stock market offers opportunities for
the long-term investor. We believe that the disciplined and rigorous approach of
the fund has the potential to uncover attractive stocks, even during turbulent
markets. We look forward to leveraging Scudder Kemper Investments' quantitative
resources on behalf of the shareholders of Kemper Value+Growth Fund.
8
<PAGE> 9
PERFORMANCE UPDATE
AVERAGE ANNUAL TOTAL RETURNS*
FOR PERIODS ENDED NOVEMBER 30, 1998 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
LIFE
1-YEAR 3-YEAR OF CLASS
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEMPER VALUE+GROWTH FUND CLASS A 5.63% 18.15% 19.37% (since 10/16/95)
.............................................................................................
KEMPER VALUE+GROWTH FUND CLASS B 8.06 19.01 20.23 (since 10/16/95)
.............................................................................................
KEMPER VALUE+GROWTH FUND CLASS C 11.06 19.52 20.66 (since 10/16/95)
.............................................................................................
</TABLE>
[LINE GRAPH]
- -------------------------------------------------------------------------------
KEMPER VALUE+GROWTH FUND CLASS A
- -------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Class A shares from 10/16/95 to
11/30/98
<TABLE>
<CAPTION>
KEMPER VALUE+GROWTH STANDARD & POOR'S 500
FUND CLASS A1 RUSSELL 1000 INDEX+ STOCK INDEX++
------------------- ------------------- ---------------------
<S> <C> <C> <C>
10/16/95 10000.00 10000.00 10000.00
10030.00 10605.00 10602.00
10595.00 11189.00 11171.00
11111.00 11645.00 11672.00
11657.00 12024.00 12033.00
12/31/96 12593.00 12983.00 13035.00
12412.00 13134.00 13385.00
14313.00 15398.00 15720.00
15980.00 16741.00 16897.00
12/31/97 15680.00 17245.00 17383.00
17627.00 19549.00 19806.00
17682.00 20039.00 20460.00
15449.00 17972.00 18428.00
11/30/98 17396.00 20592.00 21132.00
</TABLE>
[LINE GRAPH]
- -------------------------------------------------------------------------------
KEMPER VALUE+GROWTH FUND CLASS B
- -------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Class B shares from 10/16/95 to
11/30/98
<TABLE>
<CAPTION>
KEMPER VALUE+GROWTH STANDARD & POOR'S 500
FUND CLASS B1 RUSSELL 1000 INDEX+ STOCK INDEX++
------------------- ------------------- ---------------------
<S> <C> <C> <C>
10/16/95 10000.00 10000.00 10000.00
10631.60 10605.00 10602.00
11210.50 11189.00 11171.00
11726.30 11645.00 11672.00
12273.70 12024.00 12033.00
12/31/96 13235.30 12983.00 13035.00
13021.10 13134.00 13385.00
14994.00 15398.00 15720.00
16696.30 16741.00 16897.00
12/31/97 16344.20 17245.00 17383.00
18341.90 19549.00 19806.00
18353.60 20039.00 20460.00
16005.40 17972.00 18428.00
11/30/98 17792.00 20592.00 21132.00
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER VALUE+GROWTH FUND CLASS C
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Class C shares from 10/16/95 to
11/30/98
<TABLE>
<CAPTION>
KEMPER VALUE+GROWTH STANDARD & POOR'S 500
FUND CLASS C1 RUSSELL 1000 INDEX+ STOCK INDEX++
------------------- ------------------- ---------------------
<S> <C> <C> <C>
10/16/95 10000.00 10000.00 10000.00
10632.00 10605.00 10602.00
11221.00 11189.00 11171.00
11737.00 11645.00 11672.00
12263.00 12024.00 12033.00
12/31/96 13247.00 12983.00 13035.00
13010.00 13134.00 13385.00
14983.00 15398.00 15720.00
16685.00 16741.00 16897.00
12/31/97 16356.00 17245.00 17383.00
18319.00 19549.00 19806.00
18330.00 20039.00 20460.00
15982.00 17972.00 18428.00
11/30/98 17991.00 20592.00 21132.00
</TABLE>
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURNS AND
PRINCIPAL VALUES WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH
MORE OR LESS THAN ORIGINAL COST.
*Average annual total return and total return measure net investment income and
capital gain or loss from portfolio investments over the periods specified,
assuming reinvestment of all dividends and, where indicated, adjustment for the
maximum sales charge. The maximum sales charge for Class A shares is 5.75%. For
Class B shares the maximum contingent deferred sales charge (CDSC) is 4%. Class
C shares have no sales charge adjustment, but redemptions within one year of
purchase may be subject to a contingent deferred sales charge of 1%. Share
classes invest in the same underlying portfolio. Average annual total return
reflects annualized change while total return reflects aggregate change. 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.
Investors cannot actually make investments in this index.
++The Standard & Poor's 500 Stock Index is an unmanaged index generally
representative of the U.S. stock market. Source is TowersData. Investors
cannot actually make investments in this index.
9
<PAGE> 10
INDUSTRY SECTORS
A YEAR-TO-YEAR COMPARISON
Data shows the percentage of the common stocks in the portfolio that each sector
represented on November 30, 1998, and November 30, 1997.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER VALUE+GROWTH FUND AS OF KEMPER VALUE+GROWTH FUND AS OF
11/30/98 11/30/97
<S> <C> <C>
Finance 22.80 20.60
Consumer nondurables 22.10 23.90
Technology 19.90 18.10
Health care 11.00 14.80
Capital goods 8.10 6.80
Basic industries 5.10 6.10
Consumer durables 4.80 1.40
Energy 2.80 4.70
Transportation 2.40 0.50
Utilities 1.00 3.10
</TABLE>
A COMPARISON WITH THE RUSSELL 1000 INDEX+
Data shows the percentage of the common stocks in the portfolio that each sector
of the Kemper Value+Growth Fund represented on November 30, 1998, compared to
the industry sectors that make up the fund's benchmark, the Russell 1000 Index.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER VALUE+GROWTH FUND AS OF RUSSELL 1000 INDEX AS OF
11/30/98 11/30/98
<S> <C> <C>
Finance 22.80 17.80
Consumer nondurables 22.10 20.90
Technology 19.90 17.20
Health care 11.00 12.60
Capital goods 8.10 7.70
Basic industries 5.10 3.50
Consumer durables 4.80 2.10
Energy 2.80 6.30
Transportation 2.40 1.10
Utilities 1.00 10.80
</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.
10
<PAGE> 11
LARGEST HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS*
Representing 13.5 percent of the fund's total net assets on November 30, 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
HOLDINGS PERCENT
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. FEDERAL NATIONAL MORTGAGE Often referred to as "Fannie 1.8%
ASSOCIATION Mae," this is a private
corporation federally chartered
to provide financial products and
services that increase the
availability and affordability of
housing to low, moderate and
middle-income Americans.
- ------------------------------------------------------------------------------------
2. FEDERAL HOME LOAN MORTGAGE Often referred to as "Freddie 1.7%
CORP. Mac", this corporation 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.
- ------------------------------------------------------------------------------------
3. CISCO SYSTEMS Largest, most comprehensive 1.6%
supplier of routing software and
related systems that direct the
flow of data between local area
networks.
- ------------------------------------------------------------------------------------
4. ALLIANT TECHSYSTEMS Developer and producer of 1.6%
munitions, aerospace systems and
marine systems for the United
States government and its allies.
- ------------------------------------------------------------------------------------
5. SUN MICROSYSTEMS A provider of high performance 1.4%
workstations, servers, and
networking software for the
engineering, scientific,
commercial and technical
industries.
- ------------------------------------------------------------------------------------
6. COMPUTER SCIENCES A major developer and systems 1.3%
integrator of computers and
communication. The company is
also engaged in services
including information-technology
consulting.
- ------------------------------------------------------------------------------------
7. GREAT ATLANTIC & PACIFIC TEA Sells food and general 1.1%
merchandise throughout a network
of stores in the United States
and Canada. The company's
supermarket operations include
A&P, Farmer Jack, Food Emporium
and Super Fresh.
- ------------------------------------------------------------------------------------
8. CARNIVAL Engaged in the operation of 1.0%
cruise lines; also has resort and
casino complex, hotels,
transportation and tour
businesses.
- ------------------------------------------------------------------------------------
9. ALZA Engaged in the development of 1.0%
pharmaceutical products using
advanced drug delivery techniques
to add medical and economic value
to drug suppliers.
- ------------------------------------------------------------------------------------
10. MODINE MANUFACTURING Engaged in heat-transfer 1.0%
technology, serving industrial,
commercial, building and
vehicular markets.
- ------------------------------------------------------------------------------------
</TABLE>
*The fund's holdings are subject to change.
11
<PAGE> 12
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
KEMPER VALUE+GROWTH FUND
Portfolio of Investments at November 30, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Number
of
Common stocks shares Value
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BASIC INDUSTRIES--4.9%
ABM Industries, Inc. 13,500 $ 450
AK Steel Holding Corp. 9,500 182
AMP, Inc. 18,928 916
(a) Bethlehem Steel Corp. 37,000 305
Dexter Corp. 7,500 240
Dow Chemical Co. 1,400 136
H.B. Fuller Co. 17,600 766
Inland Steel Industries 8,500 156
M.A. Hanna Co. 65,500 921
Millennium Chemicals, Inc. 6,200 148
(a) Mueller Industries, Inc. 15,300 349
Olin Corp. 17,700 541
OM Group, Inc. 8,700 315
(a) Scotts, Inc. 4,700 170
Timber Group 20,900 481
Trinity Industries, Inc. 13,900 538
U.S. Steel Group 17,300 423
----------------------------------------------------------------------
7,037
- -----------------------------------------------------------------------------------------------------
CAPITAL GOODS--7.8%
(a) Alliant Techsystems, Inc. 29,800 2,270
B.F. Goodrich Co. 3,900 148
Borg-Warner Automotive, Inc. 9,600 479
Carlisle Companies, Inc. 9,900 439
Case Corp. 19,400 470
Cordant Technologies, Inc. 6,200 249
Cummins Engine, Inc. 16,700 620
Emerson Electric Co. 5,400 351
General Electric Co. 11,300 1,023
(a) Jacobs Engineering Group 6,800 256
Kaydon Corp. 5,200 184
Kennametal, Inc. 22,900 488
LaFarge Corp. 10,100 374
Lone Star Industries, Inc. 4,600 348
Manitowoc Co., Inc. 9,400 374
NACCO Industries, Inc. 6,300 548
(a) Orbital Sciences Corp. 4,600 176
Pentair, Inc. 3,300 124
Pitney Bowes, Inc. 12,000 672
Precision Castparts Corp. 3,000 133
(a) Sunstrand Corp. 10,900 589
Timken Co. 19,900 383
Tyco International, Ltd. 3,900 257
Waste Management, Inc. 7,217 309
----------------------------------------------------------------------
11,264
- -----------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--16.1%
(a) American Eagle Outfitters 11,900 711
Burlington Coat Factory 33,500 486
Carnival Corp. 43,000 1,483
CKE Restaurants, Inc. 15,400 376
(a) CMG Information Services 12,400 961
Cracker Barrel Old Country Store 10,000 232
(a) DeVry, Inc. 11,400 301
Dillard Department Stores 30,300 1,042
Family Dollar Stores, Inc. 14,700 295
(a) Federated Department Stores, Inc. 7,800 325
Fingerhut Companies, Inc. 23,500 261
(a) Furniture Brands International 5,600 142
GAP, Inc. 3,800 280
Gaylord Entertainment Co. 21,500 630
(a) Goody's Family Clothing, Inc. 20,400 229
Great Atlantic & Pacific Tea Co. 58,800 1,606
</TABLE>
12
<PAGE> 13
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Number
of
shares Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Harman International Industries 19,600 $ 837
Home Depot 22,000 1,094
Hughes Supply, Inc. 18,700 519
(a) Interim Services, Inc. 6,600 137
(a) Just For Feet 10,200 231
Kelly Services, Inc. 12,900 375
(a) Kohl's Corp. 8,300 408
Liz Claiborne, Inc. 6,200 210
Lowes Companies 4,300 182
May Department Stores Co. 4,800 289
(a) Neiman Marcus 6,300 169
NIKE, Inc. 4,000 160
(a) O'Reilly Automotive 8,500 386
(a) Premier Parks, Inc. 27,300 740
Regis Corp. 18,300 613
(a) Saks Holdings, Inc. 12,500 344
(a) ShopKo Stores 14,100 455
Sotheby's Holdings 17,500 490
Springs Industries, Inc. 22,600 880
Standard Registar 14,800 436
(a) Staples 4,100 143
TJX Companies, Inc. 8,000 205
(a) Tommy Hilfiger Corp. 21,800 1,319
(a) Toys R Us 15,400 304
V.F. Corp. 6,000 294
Wal-Mart Stores, Inc. 12,000 904
Wallace Computer Services 12,500 280
Walt Disney Co. 4,700 151
(a) Westpoint Stevens, Inc. 4,500 135
(a) Whole Foods Market 8,700 405
Xerox Corp. 4,000 430
(a) Zale Corp. 14,600 418
---------------------------------------------------------------------
23,303
- ----------------------------------------------------------------------------------------------------
CONSUMER DURABLES--4.6%
Arvin Industries, Inc. 18,000 756
Bandag, Inc. 20,500 725
Ford Motor Co. 15,200 840
(a) Gentex Corp. 11,100 204
(a) Knoll, Inc. 9,600 259
Magna International, Inc., 'A' 4,500 300
Modine Manufacturing 39,700 1,449
(a) Mohawk Industries 22,800 851
(a) Navistar International Corp. 8,100 210
Paccar, Inc. 9,500 432
Snap-On Tools, Inc. 4,000 136
Superior Industries International 17,100 445
---------------------------------------------------------------------
6,607
- ----------------------------------------------------------------------------------------------------
CONSUMER STAPLES--5.1%
American Greetings Corp. 29,000 1,227
(a) Block Drug Co. 6,283 236
Dole Food Co. 22,700 718
Kellwood Co. 22,900 618
McDonald's Corp. 5,000 350
Newell Co. 21,900 969
Philip Morris Cos. 17,400 973
Tootsie Roll Industries 3,600 137
Unilever, N.V., ADR 6,000 464
Universal Corp. 15,000 528
UST, Inc. 33,800 1,175
---------------------------------------------------------------------
7,395
</TABLE>
13
<PAGE> 14
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Number
of
shares Value
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ENERGY--2.6%
AMOCO Corp. 18,500 $ 1,090
Columbia Gas System 6,600 375
Exxon Corp. 3,600 270
Helmerich & Paye, Inc. 6,600 114
Hussmann International, Inc. 7,500 124
K.N. Energy, Inc. 2,900 127
Oneok, Inc. 16,100 560
(a) Sunoco, Inc. 14,500 491
Texaco, Inc. 3,600 207
Valero Energy Corp. 23,200 487
---------------------------------------------------------------------
3,845
- ----------------------------------------------------------------------------------------------------
FINANCE--21.8%
A.G. Edwards, Inc. 5,500 203
Allmerica Financial Corp. 7,900 436
Ambac Financial Group, Inc. 12,700 775
American General Corp. 6,500 458
American National Insurance Co. 7,500 628
(a) Amerin Corp. 9,700 239
Amerus Life Holdings, Inc. 7,200 159
Associates First Capital Corp. 3,945 307
Banc One Corp. 4,620 237
Bank United Corp. 14,300 627
BankAmerica Corp. 9,331 608
Bear Stearns Cos. 13,000 546
BRE Properties, Inc. 20,000 482
C.I.T. Group Holdings 6,800 191
Capital One Finance 3,600 396
Chase Manhattan Corp. 4,000 254
Chubb Corp. 3,800 266
CMAC Investment Corp. 12,900 622
Commerce Group, Inc. 12,000 411
Conseco, Inc. 4,100 136
(a) Delphi Financial Group 17,748 829
Doral Financial Corp. 46,600 833
Downey Financial Corp. 13,500 351
Enhance Financial Services Group, Inc. 14,400 423
Everest Reinsurance Holdings, Inc. 4,000 150
FBL Financial Group, Inc. 14,700 360
Federal Home Loan Mortgage Corp. 40,000 2,420
Federal National Mortgage Association 35,900 2,612
Fidelity National Financial, Inc. 10,800 354
Financial Security Assurance 8,100 444
First American Financial Corp. 7,100 217
First Union Corp. 8,200 498
Fleet Financial Group, Inc. 4,600 192
Fremont General Corp. 8,400 423
General Re Corp. 2,000 467
Golden West Financial Corp. 1,500 142
ITT Hartford Group 12,000 662
Jefferson-Pilot Corp. 19,500 1,331
KeyCorp 6,800 209
LandAmerica Financial Group 21,100 1,294
Liberty Corp. 14,400 698
Liberty Financial Companies 15,500 450
(a) Markel Corp. 5,200 868
MBIA, Inc. 2,900 188
(a) Medical Assurance, Inc. 4,500 136
Mercury General Corp. 5,700 239
Merrill Lynch & Co. 7,400 555
MGIC Investment Corp. 3,300 145
NAC Reinsurance Corp. 12,600 602
Ohio Casualty Corp. 10,100 409
Orion Capital Corp. 17,200 621
Post Properties 10,500 402
</TABLE>
14
<PAGE> 15
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Number
of
shares Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Presidential Life Corp. 7,500 $ 135
Providian Financial Corp. 3,700 340
Safeco Corp. 8,100 348
SEI Investments Co. 6,500 600
Selective Insurance Group, Inc. 15,900 300
St. Paul Cos., Inc. 7,200 254
TIG Holdings, Inc. 15,800 222
Torchmark Corp. 7,000 266
Transamerica Corp. 1,300 138
Transatlantic Holdings, Inc. 4,100 312
Waddell & Reed Financial
Class "A" 825 20
Class "B" 3,551 83
Washington Mutual, Inc. 15,844 614
Wells Fargo & Co. 13,600 490
---------------------------------------------------------------------
31,627
- ----------------------------------------------------------------------------------------------------
HEALTH CARE--10.5%
Abbott Laboratories 13,600 653
(a) ALZA Corp. 28,300 1,479
American Home Products Corp. 4,300 229
Astra AB, ADR 13,200 244
Baxter International 7,000 445
(a) Becton Dickinson & Co. 3,400 144
(a) Biogen 3,400 258
Bristol-Myers Squibb Co. 2,000 245
C.R. Bard 13,500 618
Cardinal Health, Inc. 16,387 1,125
Crescendo Pharmaceuticals Corp. 1,800 24
Dentsply International, Inc. 10,500 282
Eli Lilly & Co. 12,000 1,076
(a) Forest Laboratories 4,000 186
ICN Pharmaceuticals, Inc. 6,200 157
(a) ICOS Corp. 10,400 226
Johnson & Johnson 4,600 374
McKesson Corp. 7,400 527
(a) Medimmune, Inc. 8,000 535
Merck & Co. 8,700 1,347
Mylan Laboratories, Inc. 6,600 219
Pfizer Inc. 5,400 603
(a) Quintiles Transnational, Inc. 12,800 638
Schering-Plough Corp. 13,000 1,383
(a) Sepracor, Inc. 6,600 548
(a) Sierra Health Services 20,100 460
(a) Visx, Inc. 11,000 802
Warner-Lambert Co. 2,500 189
(a) Watson Pharmaceuticals 3,500 189
---------------------------------------------------------------------
15,205
- ----------------------------------------------------------------------------------------------------
TECHNOLOGY--19.1%
Affiliated Computer Services 3,500 134
(a) America Online, Inc. 8,000 700
(a) Applied Materials, Inc. 12,800 496
(a) Ascend Communications, Inc. 11,400 641
(a) Bisys, Inc. 24,100 1,160
(a) BMC Software 10,100 516
(a) Centennial Cellular Corp. 12,100 484
(a) Cisco Systems 31,400 2,367
(a) Citrix Systems 13,400 1,112
Compaq Computer Corp. 26,400 858
(a) Computer Sciences Corp. 32,200 1,839
(a) Compuware Corp. 9,000 560
(a) Concord EFS, Inc. 15,000 477
Dallas Seminconductor 15,200 574
(a) Dell Computer Corp. 3,300 201
(a) EMC Corp. 2,100 152
</TABLE>
15
<PAGE> 16
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Number
of
shares Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(a) Gateway 2000, Inc. 8,500 $ 477
Intel Corp. 1,800 194
(a) Intuit 6,600 382
Jack Henry & Associates, Inc. 11,300 568
(a) Keane, Inc. 20,600 592
Learning Co. 15,200 442
(a) Legato System 15,000 717
(a) Lexmark International 5,000 382
Linear Technology Corp. 2,000 140
(a) Mediquist, Inc. 14,100 428
(a) Mercury Interactive Corp. 15,900 729
(a) Microsoft Corp. 2,200 268
National Computer Systems, Inc. 8,200 270
Paychex, Inc. 4,200 209
(a) PMC - Sierra, Inc. 3,800 205
(a) PSINet, Inc. 37,000 694
(a) Qlogic Corp. 4,200 431
Quantum Corp. 7,000 155
Raytheon Co. 16,500 914
Reynolds & Reynolds Co. 25,000 528
(a) Safeguard Scientifics, Inc. 4,600 130
Scientific-Atlanta 9,900 192
(a) Smart Modular Technologies, Inc. 14,100 294
(a) Sun Microsystems 26,300 1,948
Symbol Technologies, Inc. 10,400 507
(a) Tech Data Corp. 31,500 1,268
Teradyne, Inc. 5,000 160
Thomas & Betts Corp. 5,900 256
Total System Service, Inc. 6,400 139
(a) Unova, Inc. 12,900 218
(a) VERITAS Software Corp. 11,500 687
(a) Vishay Intertechnology 25,700 365
(a) Xilinx, Inc. 2,600 132
(a) Xircom, Inc. 11,800 356
---------------------------------------------------------------------
27,648
- ----------------------------------------------------------------------------------------------------
TRANSPORTATION--2.3%
Airborne Freight Corp. 6,500 173
(a) Alaska Air Group, Inc. 12,400 464
Alexander and Baldwin, Inc. 6,600 152
AMR Corp. 6,100 402
ASA Holdings, Inc. 5,600 190
Comair Holdings, Inc. 6,300 193
CSX Corp. 11,600 484
Delta Air Lines, Inc. 15,000 805
Werner Enterprise, Inc. 30,200 496
---------------------------------------------------------------------
3,359
- ----------------------------------------------------------------------------------------------------
UTILITIES--.9%
AirTouch Communications 10,000 572
GTE Corp. 4,000 248
(a) MCI WorldCom, Inc. 9,000 531
---------------------------------------------------------------------
1,351
---------------------------------------------------------------------
TOTAL COMMON STOCKS--95.7%
(Cost: $116,142) 138,641
---------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Money market Principal
instruments--3.8% amount Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Yield--5.09% to 5.30%
Due--December 1998
(Cost: $5,496) $5,500 $ 5,497
---------------------------------------------------------------------
TOTAL INVESTMENTS--99.5%
(Cost: $121,638) 144,138
---------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES--.5% 653
---------------------------------------------------------------------
NET ASSETS--100% $144,791
---------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $121,638,000 for federal income tax purposes
at November 30, 1998, the gross unrealized appreciation was $24,128,000, the
gross unrealized depreciation was $1,628,000 and the net unrealized appreciation
on investments was $22,500,000.
See accompanying Notes to Financial Statements.
17
<PAGE> 18
- --------------------------------------------------------------------------------
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, 1998, 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 disclo-
sures in the financial statements. Our procedures included confirmation of
investments owned as of November 30, 1998, 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, 1998, 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 19, 1999
18
<PAGE> 19
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
<S> <C>
Investments, at value
(Cost: $121,638) $144,138
- --------------------------------------------------------------------------------
Cash 1,902
- --------------------------------------------------------------------------------
Receivable for:
Fund shares sold 223
- --------------------------------------------------------------------------------
Dividends 201
- --------------------------------------------------------------------------------
TOTAL ASSETS 146,464
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- --------------------------------------------------------------------------------
Payable for:
Fund shares redeemed 1,209
- --------------------------------------------------------------------------------
Investments purchased 171
- --------------------------------------------------------------------------------
Management fee 85
- --------------------------------------------------------------------------------
Distribution services fee 28
- --------------------------------------------------------------------------------
Administrative services fee 34
- --------------------------------------------------------------------------------
Custodian and transfer agent fees and
related expenses 125
- --------------------------------------------------------------------------------
Trustees' fees and other 21
- --------------------------------------------------------------------------------
Total liabilities 1,673
- --------------------------------------------------------------------------------
NET ASSETS $144,791
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- --------------------------------------------------------------------------------
Paid-in capital $120,212
- --------------------------------------------------------------------------------
Undistributed net realized gain on
investments 2,079
- --------------------------------------------------------------------------------
Net unrealized appreciation on
investments 22,500
- --------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING $144,791
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
THE PRICING OF SHARES
- --------------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price
per share
($76,705 DIVIDED BY 4,849 shares
outstanding) $15.82
- --------------------------------------------------------------------------------
Maximum offering price per share (net asset value, plus 6.10% of net asset
value or 5.75% of offering
price) $16.79
- --------------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price (subject to contingent deferred sales
charge) per share ($62,287 DIVIDED BY 4,044 shares outstanding) $15.40
- --------------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price (subject to contingent deferred sales
charge) per share ($5,799 DIVIDED BY 377 shares outstanding) $15.40
- --------------------------------------------------------------------------------
See accompanying Notes to Financial Statements.
19
<PAGE> 20
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Year ended November 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
<S> <C>
Dividends $ 1,825
- --------------------------------------------------------------------------------
Interest 244
- --------------------------------------------------------------------------------
Total investment income 2,069
- --------------------------------------------------------------------------------
Expenses:
Management fee 906
- --------------------------------------------------------------------------------
Distribution services fee 354
- --------------------------------------------------------------------------------
Administrative services fee 292
- --------------------------------------------------------------------------------
Custodian and transfer agent fees and
related expenses 629
- --------------------------------------------------------------------------------
Professional fees 18
- --------------------------------------------------------------------------------
Reports to shareholders 48
- --------------------------------------------------------------------------------
Registration fees 15
- --------------------------------------------------------------------------------
Trustees' fees and other 20
- --------------------------------------------------------------------------------
Total expenses 2,282
- --------------------------------------------------------------------------------
NET INVESTMENT LOSS (213)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
- --------------------------------------------------------------------------------
Net realized gain on sales of
investments 2,481
- --------------------------------------------------------------------------------
Net realized loss from futures
transactions (366)
- --------------------------------------------------------------------------------
Net realized gain 2,115
- --------------------------------------------------------------------------------
Change in net unrealized appreciation
on investments 10,221
- --------------------------------------------------------------------------------
Net gain on investments 12,336
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $12,123
- --------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
------------------
1998 1997
- --------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- --------------------------------------------------------------------------------
<S> <C> <C>
Net investment loss $ (213) (42)
- --------------------------------------------------------------------------------
Net realized gain 2,115 3,499
- --------------------------------------------------------------------------------
Change in net unrealized appreciation 10,221 8,054
- --------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 12,123 11,511
- --------------------------------------------------------------------------------
Net equalization charges -- (30)
- --------------------------------------------------------------------------------
Distribution from net realized gain (3,455) (2,553)
- --------------------------------------------------------------------------------
Net increase from capital share
transactions 38,382 49,721
- --------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 47,050 58,649
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------------
Beginning of year 97,741 39,092
- --------------------------------------------------------------------------------
END OF YEAR $144,791 97,741
- --------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
20
<PAGE> 21
- --------------------------------------------------------------------------------
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, 1998) 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 which are traded on
U.S. or foreign stock exchanges are valued at the
most recent sale price reported on the exchange on
which the security is traded most extensively. If
no sale occurred, the security is then valued at
the calculated mean between the most recent bid and
asked quotations. If there are no such bid and
asked quotations, the most recent bid quotation is
used. Securities quoted on the Nasdaq Stock Market
(Nasdaq), for which there have been sales, are
valued at the most recent sale price reported. If
there are no such sales, the value is the most
recent bid quotation. Securities which are not
quoted on Nasdaq but are traded in another
over-the-counter market are valued at the most
recent sale price on such market. If no sale
occurred, the security is then valued at the
calculated mean between the most recent bid and
asked quotations. If there are no such bid and
asked quotations, the most recent bid quotation
shall be used. Futures contracts are valued at the
most recent settlement price. All other securities
are valued at their fair market value as determined
in good faith by the Valuation Committee of the
Board of Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on the
trade date. 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 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.
21
<PAGE> 22
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
FEDERAL INCOME TAXES. The fund's policy is to
comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to
regulated investment companies, and to distribute
all of its taxable income to its shareholders.
Accordingly, the fund paid no federal income taxes
and no federal income tax provision was 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. Prior to December 1, 1997,
the fund used equalization accounting to keep a
continuing shareholder's per share interest in
undistributed net investment income unaffected by
shareholder activity. This was accomplished by
allocating a portion of the proceeds from sales and
the cost of redemptions of fund shares to
undistributed net investment income. As of December
1, 1997, the fund discontinued using equalization.
This change has no effect on the fund's net assets,
net asset value per share or distributions to
shareholders. Discontinuing the use of equalization
accounting will result in simpler financial
statements. The cumulative effect of the
discontinuance of equalization accounting was to
decrease undistributed net investment income and
increase paid-in-capital previously reported
through November 30, 1997 by $37,000.
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES
MANAGEMENT AGREEMENT. The fund has a management
agreement with Scudder Kemper Investments, Inc.
(Scudder Kemper) and pays a monthly investment
management fee of 1/12 of the 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 $906,000 for the year
ended November 30, 1998.
ZURICH/B.A.T MERGER. On September 7, 1998, Zurich
Insurance Company (Zurich), majority owner of
Scudder Kemper, entered into an agreement with
B.A.T Industries p.l.c. (B.A.T) pursuant to which
the financial services businesses of B.A.T were
combined with Zurich's businesses to form a new
global insurance and financial services company
known as Zurich Financial Services. Upon
consummation of the transaction, the fund's
investment management agreement with Scudder Kemper
was deemed to have been assigned and, therefore,
terminated. The Board of Trustees of the fund has
approved a new investment management agreement with
Scudder Kemper, which is substantially identical to
the former investment agreement, except for the
dates of execution and termination. Shareholders
approved the new investment management agreement
through a proxy solicitation that concluded in
mid-December.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
The fund has an underwriting and distribution
services agreement with Kemper Distributors, Inc.
(KDI). Underwriting commissions paid in connection
with the distribution of Class A shares are as
follows:
COMMISSIONS COMMISSIONS
RETAINED ALLOWED
BY KDI BY KDI TO FIRMS
----------- ---------------
Year ended November 30, 1998 $ 61,000 462,000
22
<PAGE> 23
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
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 separate Rule 12b-1 plans for
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 fees, CDSC and commissions
related to Class B and Class C shares are as
follows:
DISTRIBUTION FEES COMMISSIONS AND
AND CDSC DISTRIBUTION FEES PAID
RECEIVED BY KDI BY KDI TO FIRMS
----------------- ----------------------
Year ended November 30, 1998 $ 443,000 735,000
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:
ASF PAID BY ASF PAID
THE FUND TO KDI BY KDI TO FIRMS
--------------- ---------------
Year ended November 30, 1998 $ 292,000 299,000
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the fund's transfer agent,
Kemper Service Company (KSvC) is the shareholder
service agent of the fund. Under the agreement,
KSvC received shareholder services fees of $501,000
for the year ended November 30, 1998.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the fund are also officers or directors of
Scudder Kemper. During the year ended November 30,
1998, the fund made no payments to its officers and
incurred trustees' fees of $11,000 to independent
trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS
For the year ended November 30, 1998, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $140,650
Proceeds from sales 111,125
23
<PAGE> 24
- --------------------------------------------------------------------------------
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,
1998 1997
---------------- ----------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------
SHARES SOLD
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 2,280 $35,097 2,303 $31,312
- ---------------------------------------------------------------------------
Class B 1,752 26,217 1,959 26,054
- ---------------------------------------------------------------------------
Class C 262 3,913 179 2,342
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
- ---------------------------------------------------------------------------
Class A 126 1,770 109 1,290
- ---------------------------------------------------------------------------
Class B 105 1,448 94 1,108
- ---------------------------------------------------------------------------
Class C 7 101 6 65
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
SHARES REDEEMED
- ---------------------------------------------------------------------------
Class A (1,317) (20,082) (504) (6,722)
- ---------------------------------------------------------------------------
Class B (593) (8,765) (367) (4,802)
- ---------------------------------------------------------------------------
Class C (86) (1,317) (72) (926)
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
CONVERSION OF SHARES
- ---------------------------------------------------------------------------
Class A 200 3,036 74 1,032
- ---------------------------------------------------------------------------
Class B (204) (3,036) (75) (1,032)
- ---------------------------------------------------------------------------
NET INCREASE
FROM CAPITAL
SHARE TRANSACTIONS $38,382 $49,721
- ---------------------------------------------------------------------------
</TABLE>
24
<PAGE> 25
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-------------------------------------
CLASS A
-------------------------------------
YEAR ENDED NOVEMBER OCTOBER 16
30, TO
---------------------- NOVEMBER 30,
1998 1997 1996 1995
- -------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $14.62 12.95 10.02 9.50
- -------------------------------------------------------------------------------
Income from investment operations:
Net investment income .01 .02 .05 .02
- -------------------------------------------------------------------------------
Net realized and unrealized gain 1.69 2.48 2.88 .50
- -------------------------------------------------------------------------------
Total from investment operations 1.70 2.50 2.93 .52
- -------------------------------------------------------------------------------
Less distribution from net realized
gain .50 .83 -- --
- -------------------------------------------------------------------------------
Net asset value, end of period $15.82 14.62 12.95 10.02
- -------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 12.06% 20.83 29.24 5.47
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)(A)
- -------------------------------------------------------------------------------
Expenses 1.42% 1.41 1.47 1.35
- -------------------------------------------------------------------------------
Net investment income .22% .35 .43 2.25
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------
CLASS B
-------------------------------------
OCTOBER 16
YEAR ENDED NOVEMBER 30, TO
---------------------- NOVEMBER 30,
1998 1997 1996 1995
- -------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $14.37 12.83 10.02 9.50
- -------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.07) (.07) (.04) .02
- -------------------------------------------------------------------------------
Net realized and unrealized gain 1.60 2.44 2.85 .50
- -------------------------------------------------------------------------------
Total from investment operations 1.53 2.37 2.81 .52
- -------------------------------------------------------------------------------
Less distribution from net realized
gain .50 .83 -- --
- -------------------------------------------------------------------------------
Net asset value, end of period $15.40 14.37 12.83 10.02
- -------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 11.06% 19.96 28.04 5.47
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED) (A)
- -------------------------------------------------------------------------------
Expenses 2.27% 2.27 2.27 2.10
- -------------------------------------------------------------------------------
Net investment income (loss) (.63)% (.51) (.37) 1.50
- -------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 26
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-------------------------------------
CLASS C
-------------------------------------
YEAR ENDED NOVEMBER OCTOBER 16
30, TO
---------------------- NOVEMBER 30,
1998 1997 1996 1995
- -------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $14.37 12.84 10.01 9.50
- -------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.04) (.05) (.04) .01
- -------------------------------------------------------------------------------
Net realized and unrealized gain 1.57 2.41 2.87 .50
- -------------------------------------------------------------------------------
Total from investment operations 1.53 2.36 2.83 .51
- -------------------------------------------------------------------------------
Less distribution from net realized
gain .50 .83 -- --
- -------------------------------------------------------------------------------
Net asset value, end of period $15.40 14.37 12.84 10.01
- -------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 11.06% 19.86 28.27 5.37
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)(A)
- -------------------------------------------------------------------------------
Expenses 2.16% 2.15 2.22 2.07
- -------------------------------------------------------------------------------
Net investment income (loss) (.52)% (.39) (.32) 1.53
- -------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OCTOBER 16
YEAR ENDED NOVEMBER 30, TO
-------------------------- NOVEMBER 30,
1998 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net assets at end of period (in
thousands) $144,791 97,741 39,092 5,851
- --------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 92% 56 82 --
- --------------------------------------------------------------------------------
</TABLE>
NOTES: Total return does not reflect the effect of any sales charges.
(a) Scudder Kemper Investments, Inc. agreed to temporarily waive certain
operating expenses of the fund during the fiscal years ended November 30,
1997 and 1996. 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
year ended November 30, 1997, 0.05% for Class B and 0.01% for Class C; for
the year ended November 30, 1996, 0.12% for Class A, 0.17% for Class B and
0.13% for Class C.
- --------------------------------------------------------------------------------
TAX INFORMATION
- --------------------------------------------------------------------------------
The fund paid a distribution of $.15 per share from net long-term capital gains
during the year ended November 30, 1998, of which 60% represents 20% rate gains.
Pursuant to Section 852 of the Internal Revenue Code, the fund designates
$2,127,000 as capital gain dividends for the year ended November 30, 1998, of
which 100% represents 20% rate gains.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your Kemper Fund account, please call 1-800-621-1048.
26
<PAGE> 27
NOTES
27
<PAGE> 28
TRUSTEES AND OFFICERS
TRUSTEES OFFICERS
DANIEL PIERCE MARK CASADY LINDA J. WONDRACK
Chairman and Trustee President Vice President
LEWIS A. BURNHAM PHILIP J. COLLORA MAUREEN E. KANE
Trustee Vice President and Assistant Secretary
Secretary
DONALD L. DUNAWAY CAROLINE PEARSON
Trustee JOHN R. HEBBLE Assistant Secretary
Treasurer
ROBERT B. HOFFMAN ELIZABETH C. WERTH
Trustee PHILIP FORTUNA Assistant Secretary
Vice President
DONALD R. JONES BRENDA LYONS
Trustee ANN M. MCCREARY Assistant Treasurer
Vice President
THOMAS W. LITTAUER
Trustee and Vice President KATHRYN L. QUIRK
Vice President
SHIRLEY D. PETERSON
Trustee CORNELIA SMALL
Vice President
WILLIAM P. SOMMERS
Trustee
- --------------------------------------------------------------------------------
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 Avenue
Kansas City, MO 64105
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
- --------------------------------------------------------------------------------
PRINCIPAL KEMPER DISTRIBUTORS, INC.
UNDERWRITER 222 South Riverside Plaza Chicago, IL 60606
www.kemper.com
KEMPER FUNDS LOGO
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
Printed on recycled paper in the U.S.A.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Equity Funds/Growth Style prospectus.
KVGF-2 (1/27/99) 1064380
