<PAGE> 1
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED NOVEMBER 30, 1999
[MORNINGSTAR RATINGS LOGO]
SEEKS GROWTH OF CAPITAL
Kemper
Value+Growth Fund
"... Although growth stocks are selling at unprecedented price-to- earnings
multiples, many are also directly in the path of extraordinary growth
prospects...Meanwhile, many of the lagging value stocks...are deeply undervalued
and offer compelling upside. ..."
[KEMPER FUNDS LOGO]
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
10
INDUSTRY SECTORS
11
LARGEST HOLDINGS
12
PORTFOLIO OF INVESTMENTS
18
FINANCIAL STATEMENTS
21
FINANCIAL HIGHLIGHTS
23
NOTES TO FINANCIAL STATEMENTS
27
REPORT
OF INDEPENDENT AUDITORS
AT A GLANCE
KEMPER VALUE+GROWTH FUND
TOTAL RETURNS
FOR THE YEAR ENDED NOVEMBER 30, 1999 (UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER VALUE+GROWTH FUND CLASS KEMPER VALUE+GROWTH FUND CLASS
KEMPER VALUE+GROWTH FUND CLASS A B C
- -------------------------------- ------------------------------ ------------------------------
<S> <C> <C>
17.42% 16.58% 16.58%
</TABLE>
RETURNS AND RANKINGS ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN ORIGINAL COST.
NET ASSET VALUE
<TABLE>
<CAPTION>
AS OF AS OF
11/30/99 11/30/98
...........................................................
<S> <C> <C>
KEMPER VALUE+GROWTH FUND CLASS
A $18.30 $15.82
...........................................................
KEMPER VALUE+GROWTH FUND CLASS
B $17.68 $15.40
...........................................................
KEMPER VALUE+GROWTH FUND CLASS
C $17.68 $15.40
...........................................................
</TABLE>
DIVIDEND REVIEW
DURING THE FISCAL YEAR, THE KEMPER VALUE+GROWTH FUND MADE THE FOLLOWING
DISTRIBUTIONS PER SHARE:
<TABLE>
<CAPTION>
CLASS CLASS CLASS
A B C
.....................................................................................................
<S> <C> <C> <C>
LONG-TERM
CAPITAL GAIN $0.23 $0.23 $0.23
.....................................................................................................
</TABLE>
YOUR FUND'S STYLE
MORNINGSTAR EQUITY STYLE BOX
<TABLE>
<S> <C>
[MORNINGSTAR EQUITY STYLE Source: Morningstar, Inc. Chicago, IL. (312)
BOX] 696-6000. 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.
</TABLE>
TERMS TO KNOW
BOTTOM-UP An investment strategy wherein the final sector and other allocations
(for instance, growth versus value) are the end result of individual
stock-selection decisions. In contrast, in a top-down strategy, sector
weightings and allocations are made first, and then stocks are bought or sold to
maintain the weightings.
CAPITALIZATION-WEIGHTED INDEX A pool of stocks in which the returns of
individual companies are weighted in proportion to the size of the company. The
S&P 500 index and Russell 1000 index are both capitalization-weighted
benchmarks.
G7 The Group of Seven (G7) is an economic alliance of seven leading nations,
including the United States.
GROWTH STOCK Stock of a company expected to experience rapid growth resulting
from strong sales, talented management and dominant market position. Because
growth stocks are typically in demand, they often carry higher price tags.
Growth stocks may also be subject to greater volatility than value stocks, based
on changing perceptions of their potential.
PRICE-TO-EARNINGS RATIO (P/E RATIO) A company's stock price divided by its
annual earnings per share. The P/E ratio, also known as the multiple, is a
measure of how much an investor is paying for each unit of earnings.
VALUE STOCK A stock considered to be a bargain or "on sale" because it is
perceived as undervalued relative to a measure of its true worth, such as
earnings potential, book value, cash flow or dividend yield.
<PAGE> 3
SCUDDER KEMPER INVESTMENTS, THE INVESTMENT MANAGER FOR KEMPER FUNDS, IS ONE OF
THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS IN THE
WORLD, MANAGING MORE THAN $290 BILLION IN ASSETS FOR INSTITUTIONAL AND CORPORATE
CLIENTS, RETIREMENT AND PENSION PLANS, INSURANCE COMPANIES, MUTUAL FUND
INVESTORS AND INDIVIDUALS. SCUDDER KEMPER INVESTMENTS OFFERS A FULL RANGE OF
INVESTMENT COUNSEL AND ASSET MANAGEMENT CAPABILITIES BASED ON A COMBINATION OF
PROPRIETARY RESEARCH AND DISCIPLINED, LONG-TERM INVESTMENT STRATEGIES.
ECONOMIC OVERVIEW
DEAR KEMPER FUNDS SHAREHOLDER:
The end of the metaphorical millennium, it turns out, was not a disaster.
Instead, it was an excuse to party. And why not? As our technological revolution
gained critical mass, its vast potential came into better focus. Capital
spending on information technology didn't slow down; it accelerated. Inflation
remained dormant. The budget surplus nearly doubled, with the promise of oceans
of black ink yet to come. Even the government delivered good news: Its
statisticians toyed with the national accounts to reveal a more productive
economy. It's no wonder the prevailing sentiment could be summed up with the
quintessentially American yelp of glee: Yahoo!
Now, with the potential Y2K crisis seemingly averted, the question hanging
over the economy is whether the Federal Reserve Board will boost interest rates
to soak up extra liquidity caused by its pre-Y2K infusion of cash into the
economy. And unfortunately, all parties end. This one will, too. The questions
are when and how.
The "when" should be before the second half of the year. The Fed has already
raised interest rates three times, and is likely to raise them again on Feb. 2.
Fed officials said they left the rate at 5.5 percent in December mainly because
of "market uncertainties associated with the century-date change." But the Fed
expressed concern that "increases in demand" will foster "inflationary
imbalances" that could spark rate increases once the Y2K issue has been handled.
Although some investors have expressed fear that the Fed's sucking cash out of
banks will jolt the financial system (causing some stock indexes, as well as the
bond markets, to drop sharply in early January), the "how" is likely to be a
slow winding down, thanks to persistent low inflation.
Yes, some prices are higher: Filling up the SUV's gas tank definitely costs
more. But the rate of inflation for non-energy goods and services has actually
slowed during the past year. Although most analysts are worried that the
reprieve won't last -- assuming that higher commodity prices, a softer dollar
and the scarcity of skilled workers will show up as higher prices at the
checkout counter -- we'd turn that worry on its head. If inflation hasn't
accelerated after three years of over 4-percent gross domestic product (GDP)
growth and an unprecedented credit explosion, prices aren't likely to increase
if growth slows and lenders get stingier.
More good news stems from the technological investment boom. While executives
have pared capital budgets in traditional areas such as industrial machinery and
buildings, they've boosted outlays on computers and software. Thanks to the
sheer force of technology spending, overall business investment has grown two to
four times as fast as GDP in every year since 1993. And that expansion should
continue, with more than 20 percent growth likely in high-tech through 2000 and
even beyond. And technology hurts inflation. It saves on labor and inventory,
increases capacity, creates new competitors, cuts out middlemen, gives shoppers
comparative price information and enables global auctions.
Our outlook is for inflation to stay centered around 2 percent, and we expect
the Fed to raise the federal funds rate and the discount rate by one quarter of
a point (0.25%) each on Feb. 2. (More extreme possibilities bandied about by
bearish investors -- including a half-point rise or an emergency move before the
Fed's February meeting -- are unlikely.) We project that the result will be a
gentle slowing of growth from 4 percent in 1999 to around 3.5 percent in 2000
and just under 2.5 percent in 2001.
Despite this positive outlook, the rowdiness of Y2K preparations and
celebration should be sufficient to show us that risks exist in today's markets
and remind us that we could be in for a serious hangover.
The prospect of sparkling growth with no inflation has excited equity
investors, but there's a catch: declining corporate pricing power. If companies
don't have the ability to increase prices, profit growth will decline -- and
it's already happening. For the five years ending in June 1999, S&P 500
operating earnings averaged 9 percent, two and a half percentage points per year
slower than analysts had predicted. Profits did recover strongly in the second
half of 1999, but we suspect that they will soon sputter again. And the
economy's newfound productivity won't change the rules and allow companies to
make money even if they can't raise prices. Productivity gains do produce a
windfall, but historically customers and employees have grabbed the lion's
share. Web sites and dot.coms haven't changed this
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 (12/31/99) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
-------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 6.00 5.50 4.80 5.90
Prime rate (2) 8.50 7.75 8.00 8.50
Inflation rate (3)* 2.60 2.30 1.50 2.00
The U.S. dollar (4) -0.7 -0.9 1.20 9.40
Capital goods orders (5)* 12.60 2.50 -0.6 6.40
Industrial production (5)* 3.30 2.90 3.50 6.90
Employment growth (6) 2.10 2.10 2.30 2.70
</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 11/30/99.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
one iota. As a result, we expect profits to be virtually flat in all of 2000 and
to decline as the economy slows in 2001.
Debt is another drink that could bring on future headaches. America has been
swigging it in prodigious amounts. Companies have borrowed heavily to fund
mergers, share buybacks and new investments. Homeowners have increased their
debt with new home equity loans and bigger mortgages. Financial institutions
have issued record amounts of new paper to fund aggressive growth. There's no
hard and fast rule for determining if the debt America is taking on is too much,
but warning bells should sound when debt grows by orders of magnitude faster
than necessary to fund economic activity. That happened in 1985 and 1986, when
excess credit created a commercial real estate bubble and funded dubious
leveraged buyouts with suspect junk bonds, and it's happening again now. Both
the commercial real estate and the high yield markets took years to recover.
Today, the sheer size of the excesses could make the "morning after" even more
painful.
The end result: Given the continuing thrust of growth from the technological
revolution, an improving world economy and the Fed's experience and skill, 2000
could turn out to be a good year. But it's highly unlikely to be as good a year
as 1999.
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
Scudder Kemper Investments Economics Group
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 THE ECONOMIC ADVISORS OF SCUDDER KEMPER
INVESTMENTS, INC. AS OF JANUARY 6, 2000, AND MAY NOT ACTUALLY COME TO PASS. THIS
INFORMATION IS SUBJECT TO CHANGE. NO PART OF THIS MATERIAL IS INTENDED AS AN
INVESTMENT RECOMMENDATION.
TO OBTAIN A KEMPER FUNDS PROSPECTUS, DOWNLOAD ONE FROM WWW.KEMPER.COM, TALK TO
YOUR FINANCIAL REPRESENTATIVE OR CALL SHAREHOLDER SERVICES AT (800) 621-1048.
THE PROSPECTUS CONTAINS MORE COMPLETE INFORMATION, INCLUDING MANAGEMENT FEES AND
EXPENSES. PLEASE READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
4
<PAGE> 5
PERFORMANCE UPDATE
[HALL PHOTO]
LEAD PORTFOLIO MANAGER DONALD HALL JOINED SCUDDER KEMPER INVESTMENTS, INC. IN
1982. HE IS A CHARTERED FINANCIAL ANALYST. PORTFOLIO MANAGER WILLIAM WALLACE
CONTRIBUTES NEARLY 20 YEARS OF INVESTMENT INDUSTRY EXPERIENCE TO THE FUND. HE IS
ALSO A CHARTERED FINANCIAL ANALYST.
HALL AND WALLACE ARE SUPPORTED BY SCUDDER KEMPER INVESTMENTS' LARGE STAFF OF
ANALYSTS, RESEARCHERS, ECONOMISTS AND OTHER INVESTMENT PROFESSIONALS THROUGHOUT
THE UNITED STATES AND ABROAD.
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 THIS SECTION, LEAD PORTFOLIO MANAGER DONALD HALL DISCUSSES THE MARKET CLIMATE
DURING THE PAST FISCAL YEAR AND THE FACTORS THAT DROVE THE FUND'S PERFORMANCE.
HE ALSO PROVIDES AN OVERVIEW OF HOW THE PORTFOLIO MANAGEMENT TEAM SELECTS GROWTH
AND VALUE STOCKS.
Q HOW DID KEMPER VALUE+GROWTH FUND PERFORM DURING THE ANNUAL PERIOD?
A For the one-year period ending November 30, 1999, Kemper Value+Growth Fund
gained 17.42 percent (Class A shares, unadjusted for any sales charges). During
this same period, the average for the Morningstar large-cap blend fund category
was 18.87 percent. The Russell 1000 index gained 21.30 percent, and the Standard
& Poor's 500 (S&P 500) climbed 20.89 percent.
As we'll discuss in greater detail, we did reposition the portfolio during the
fiscal year, and we are pleased to report that the fund picked up steam as the
period progressed. The fund earned 8.54 percent (Class A shares unadjusted for
sales charge) in the second half of the period, surpassing the Russell 1000, up
7.45 percent, and the S&P 500, up 7.36 percent.
Returns of the popular indices, such as the S&P 500, were particularly
difficult to match over the last year as capitalization-weighted indices (see
Terms To Know on page 2) substantially outperformed the average U.S. stock.
Q BEFORE DISCUSSING THE FUND IN GREATER DETAIL, COULD YOU HIGHLIGHT SOME OF
THE EVENTS AND THEMES THAT SHAPED THE DOMESTIC EQUITY MARKET DURING THE ANNUAL
PERIOD?
A When the fund began its fiscal year on December 1, 1998, the markets were
rebounding briskly from the Russian debt debacle. As you may recall, in August
1998, the Russian debt default triggered a global financial meltdown, in which
stocks of all kinds corrected sharply. The crisis climate abated quickly,
though. The Federal Reserve's interest-rate cut and the G7's (see Terms To Know
on page 2) cohesive economic bailout plans were well received, and investors
returned enthusiastically to the market in the fourth quarter of 1998. Low
inflation and unemployment, and high consumer confidence also contributed to a
generally positive domestic-market climate.
Not all stocks participated in this rebound, however. Because investors
remained anxious about market volatility, they generally favored large-cap
domestic growth stocks over smaller-cap and value stocks. Technology stocks also
performed extremely well, as excitement about the Internet's meteoric growth
propelled many technology stocks to new heights.
The climate changed markedly in the spring of 1999. As concerns about
increasing interest rates and energy prices (often signals of an accelerating
economy and inflationary environment) loomed larger, investors turned away from
growth stocks. Value-oriented stocks took the lead, and smaller-cap stocks also
moved forward. Meanwhile, many technology stocks tumbled.
Within a few months, the markets changed direction again, rotating back to
large-cap growth stocks. Investors became less concerned about additional
interest-rate increases. Continued low inflation, good corporate profits and
5
<PAGE> 6
PERFORMANCE UPDATE
productivity, and high consumer confidence pointed to a continuation of slow,
steady and sustainable economic growth -- a scenario that favors growth stocks.
Q YOU TOOK THE HELM OF THE FUND DURING THE SECOND HALF OF THE FISCAL YEAR.
IS THE FUND'S OBJECTIVE
THE SAME?
A Kemper Value+Growth Fund continues to seek long-term capital growth by
investing primarily in large-company stocks issued by U.S. companies. The fund's
secondary objective is a reduced level of risk over a full market cycle,
compared with pure value-stock or growth-stock funds.
Q IS THE INVESTMENT PROCESS THE SAME, AS WELL?
A While quantitative research continues to be a cornerstone of our process,
we have increased the emphasis on fundamental research. We use a quantitative
process that flows from an intensive traditional research effort by Scudder
Kemper Investments' large staff of analysts. The goal of traditional research is
to anticipate events a step ahead of the market, while the quantitative process
is extremely helpful in organizing and synthesizing a large amount of
information. Pairing the two disciplines in this way provides us with a unique
opportunity to serve the fund's shareholders.
Q COULD YOU TELL US MORE ABOUT YOUR TEAM'S INVESTMENT PROCESS?
A Our investment process seeks to benefit from two market forces: first, the
tendency of stocks to revert to their intrinsic value; and second, the impact of
persistent growth trends that are underestimated by investors.
We begin with independently derived fundamental data, such as current
earnings, growth projections and quality ratings. Using these measures we
calculate each company's "intrinsic value." We then use a proprietary system to
rank stocks by market price-to-value ratios. (While intrinsic value is more
complicated than a simple price-to-earnings [P/E] ratio, there is a correlation
between the two measures.)
We also rank stocks by directional growth measures, such as changes in
earnings expectations. Here's why: If intrinsic value were all that we
considered in our approach, the portfolio would be heavily skewed toward low-P/E
value stocks. Directional measures provide clues for identifying open-ended
sustainable growth stocks. In these situations, the stock's P/E may be high
today, but because future earnings are underestimated, the intrinsic value is
also underestimated.
Q PLEASE DESCRIBE HOW YOUR INVESTMENT PROCESS RELATES TO THE SELECTION OF
GROWTH AND VALUE STOCKS.
A Our goal is to provide shareholders with exposure to the "best" value
stocks and the "best" growth stocks.
Value: The best value stocks are those that are selling well below our
calculated intrinsic value. Usually, this means they carry low price-to-
earnings ratios, while offering steady or improving earnings prospects. For
these undervalued stocks, the earnings-growth outlook may be unexciting.
However, because these stocks are significantly undervalued, even steady or
modest growth can provide substantial upside to the stock. Currently, Bell
Atlantic fits our profile for an attractive value stock. As such, it is
currently among the fund's top 10 holdings. While this
telecommunication-services provider may not have rapidly accelerating growth,
its competitive position, and low P/E ratio -- paired with double-digit growth
driven by data transmission, wireless services and long distance -- makes it an
exemplary value choice. Other new value additions include Royal Dutch Petroleum,
PECO Energy and Emerson Electric.
Growth: The best growth stocks are those with strong competitive positions
that are projected to enjoy above-average, long-term growth in earnings and
revenue. These stocks are also currently experiencing accelerating near-term
positive earnings revisions, and they occupy the "sweet spot" of a large and
open-ended growth opportunity. Sun Microsystems, another of our largest
holdings, demonstrates these principles. A leading hardware provider, Sun
Microsystems is a key beneficiary of the build-out of the Internet's
infrastructure and e-commerce. While Sun Microsystems' stock price may be high
relative to certain traditional measures, the company is well-positioned for
exciting accelerating growth. Other new growth additions include Nokia, Qualcomm
and TV Guide.
Q COULD YOU DISCUSS HOW THE IMPLEMENTATION OF THE NEW MANAGEMENT STRATEGY
HAS CHANGED THE OVERALL COMPLEXION OF THE FUND?
A Most notably, we increased the market capitalization of the portfolio to
be closer to those of popular large-cap indices such as the
6
<PAGE> 7
PERFORMANCE UPDATE
S&P 500 index and the Russell 1000 index. So far, this move toward larger
companies has been productive -- the fund outperformed the S&P 500 index in the
six months since June 1, 1999.
Also, we've reduced the number of stocks in the portfolio. At the start of the
fiscal year, the fund held more than 270 stocks; now it holds 161. We believe
that the current number of holdings provides a prudent level of diversification,
without overdiluting the return potential of our top-performing stocks.
Q AS THEY WERE AT THE SEMIANNUAL MARK, THE FUND'S ASSETS ARE FAIRLY EQUALLY
DIVIDED BETWEEN GROWTH AND VALUE STOCKS. COULD YOU ELABORATE ON THE FACTORS THAT
HAVE SHAPED THE GROWTH/VALUE ALLOCATION?
A In the current market climate, there is an unusual standoff between what
is generally thought of as "growth" and "value." Never before have we seen such
a separation of P/Es, with opportunities in both groups. Because of low growth,
many attractively valued stocks -- such as AMR (the parent of American Airlines)
and Ford Motor -- are selling at very depressed single-digit P/E multiples
offering substantial upside from P/E expansion. On the growth side, Cisco
Systems and America Online are trading at triple-digit multiples. While these
multiples are extraordinary, the Internet-driven growth potential is also
extraordinary. Even with all the hype, the earnings outlooks for these leading
companies have been routinely underestimated.
The key factor that is likely to influence the mix of value and growth will be
a change in the pace of overall economic activity. If the economy weakens, we
would expect the portfolio to tilt more toward growth-oriented stocks. Should
the economy accelerate, value stocks are likely to enjoy a greater improvement
in earnings expectations than growth stocks, and the portfolio would tilt toward
value.
Keep in mind, however, that we're bottom-up stock pickers (see Terms To Know
on page 2). The final allocations to growth and value -- as well as to
individual industries -- are the result of individual stock-selection decisions.
Q AS A RESULT OF THE TRANSITION, HAVE THE SHAREHOLDERS INCURRED UNUSUALLY
HIGH CAPITAL GAINS?
A Throughout the transition process, we were vigilant about the potential
impact of capital gains. In 1999, the fund paid a per-share long-term capital
gain distribution of $0.99.
Q WHAT WORKED OUT WELL FOR THE FUND?
A Technology holdings contributed significantly to performance during the
period. Many of the fund's stocks benefited tremendously from the growth of the
Internet and electronic commerce. Leading stocks were from a variety of
industries, including software (Veritas Software, Intuit, Mercury Interactive,
Microsoft), networking (Cisco Systems), computer hardware (Sun Microsystems,
Gateway) and semiconductors (Intel, Xilinx, QLogic Corp.).
Biotech stocks such as MedImmune, Biogen and Amgen also bolstered gains. These
companies offer good product niches and stronger prospects for growth compared
with many of the larger pharmaceutical companies. Growth retailers, such as
Wal-Mart and Home Depot, were also above-average performers.
Q DESPITE THE FUND'S 17.42 PERCENT GAIN (A SHARES UNADJUSTED FOR A SALES
CHARGE) DURING THE YEAR, WERE THERE FACTORS THAT IMPEDED PERFORMANCE?
A The fund's earlier market-cap tilt hindered relative performance. Although
the fund invested in large companies throughout the annual period, the fund did
not have ample exposure to the largest-cap names until the final months of the
fiscal year. Given the narrowness of the market and investors' penchant for
large-cap growth stocks, this tilt toward the mid-cap zone was disadvantageous.
However, as we noted, we have increased the fund's average market capitalization
upward, a move that has translated into improved performance.
The value side of the portfolio generally struggled. Financial-services stocks
were mixed at best. These stocks were hit particularly hard in the wake of the
August 1998 debt default. They did gain back some ground in the months that
followed, only to be beleaguered in 1999's rising-rate environment. Many
financial-services companies are attractively valued -- including Bank of
America, Morgan Stanley Dean Witter, and Travelers Property and Casualty -- and
could benefit from the recent passage of the Gramm-Leach-Bliley Act of 1999.
While exposure to cyclically oriented stocks did help performance in the
second quarter of 1999, many of these stocks lost considerable ground during the
final months of the year despite a strong economy as the markets tilted back to
the more exciting technology sector. In a complex litigation and regulatory
climate, tobacco stocks (Philip Morris, U.S. Tobacco) also dampened performance.
Exposure there has been substantially reduced.
7
<PAGE> 8
PERFORMANCE UPDATE
Q AS WE ENTER THE NEW FISCAL YEAR -- AND THE NEW MILLENNIUM -- DO YOU HAVE
ANY CLOSING THOUGHTS FOR SHAREHOLDERS?
A As we move into the next fiscal year, we are comfortable with the outlook
for the market. We see a continuation of growth in the economy, without
significantly higher inflation -- the ideal environment for investors. Yet,
because the markets are already very high relative to longer-term trends, we
would not be surprised to see a lower -- though still robust -- level of market
appreciation than in recent years.
We also believe the Kemper Value+Growth Fund is well positioned due to the
many attractive opportunities among both value-style and growth-style stocks.
Although growth stocks are selling at unprecedented price-to-earnings multiples,
many are also directly in the path of extraordinary growth prospects, especially
those participating in the build-out of the Internet and wireless
communications. Meanwhile, many of the lagging value stocks, such as financials
and transportation, are deeply undervalued and offer compelling upside
potential. In this environment, we believe the flexibility of the fund is a
significant advantage. We look forward to seeking the best growth and value
opportunities on behalf of the fund's shareholders.
8
<PAGE> 9
PERFORMANCE UPDATE
AVERAGE ANNUAL TOTAL RETURNS*
FOR PERIODS ENDED NOVEMBER 30, 1999 (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 10.63% 14.44% 18.90% (since 10/16/95)
..................................................................................................
KEMPER VALUE+GROWTH FUND CLASS B 13.58 15.32 19.39 (since 10/16/95)
..................................................................................................
KEMPER VALUE+GROWTH FUND CLASS C 16.58 15.79 19.67 (since 10/16/95)
..................................................................................................
</TABLE>
KEMPER VALUE+GROWTH FUND CLASS A
Growth of an assumed $10,000 investment in Class A
shares from 10/31/95 to 11/30/99
[LINE GRAPH]
<TABLE>
<CAPTION>
KEMPER VALUE+GROWTH STANDARD & POOR'S 500
FUND CLASS A(1) RUSSELL 1000+ COMPOSITE STOCK INDEX++
------------------- ------------- -----------------------
<S> <C> <C> <C>
10/31/95 9429 10000 10000
9961 10605 10592
11034 11646 11533
12/31/96 12506 12986 12738
14214 15403 15222
15572 17252 16688
6/30/98 17560 20048 19499
18512 21914 21139
19686 24445 23606
11/30/99 20284 24992 23888
</TABLE>
KEMPER VALUE+GROWTH FUND CLASS B
Growth of an assumed $10,000 investment in Class B
shares from 10/31/95 to 11/30/99
[LINE GRAPH]
<TABLE>
<CAPTION>
KEMPER VALUE+GROWTH STANDARD & POOR'S 500
FUND CLASS B(1) RUSSELL 1000+ COMPOSITE STOCK INDEX++
------------------- ------------- -----------------------
<S> <C> <C> <C>
10/31/95 10000 10000 10000
10554 10605 10592
11641 11646 11533
12/31/96 13139 12986 12738
14884 15403 15222
16225 17252 16688
6/30/98 18219 20048 19499
19126 21914 21139
20256 24445 23606
11/30/99 20625 24992 23888
</TABLE>
KEMPER VALUE+GROWTH FUND CLASS C
Growth of an assumed $10,000 investment in Class C
shares from 10/31/95 to 11/30/99
[LINE GRAPH]
<TABLE>
<CAPTION>
KEMPER VALUE+GROWTH STANDARD & POOR'S 500
FUND CLASS C(1) RUSSELL 1000+ COMPOSITE STOCK INDEX++
------------------- ------------- -----------------------
<S> <C> <C> <C>
10/31/95 10000 10000 10000
10554 10605 10592
11651 11646 11533
12/31/96 13150 12986 12738
14873 15403 15222
16236 17252 16688
6/30/98 18196 20048 19499
19126 21914 21139
20268 24445 23606
11/30/99 20821 24992 23888
</TABLE>
PAST PERFORMANCE IS NOT A GUARANTEE OF
FUTURE RESULTS. INVESTMENT RETURNS AND
PRINCIPAL VALUE 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 WITH 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 THAT COMPRISES 1000
OF THE LARGEST-CAPITALIZED U.S.
COMPANIES WHOSE COMMON STOCKS TRADE
IN THE UNITED STATES 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.
SOURCE IS WIESENBERGER.
++THE STANDARD & POOR'S 500 STOCK
INDEX IS AN UNMANAGED INDEX THAT
COMPRISES 500 LARGE-CAP U.S.
COMPANIES AND IS GENERALLY
REPRESENTATIVE OF THE U.S. STOCK
MARKET. SOURCE IS WIESENBERGER.
9
<PAGE> 10
INDUSTRY SECTORS
INDUSTRY SECTORS
Data shows the percentage of the common stocks in the portfolio that each sector
represented on November 30, 1999, and November 30, 1998.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER VALUE+GROWTH FUND ON KEMPER VALUE+GROWTH FUND ON
11/30/99 11/30/98
--------------------------- ---------------------------
<S> <C> <C>
Technology 23.60 19.90
Finance 15.00 22.80
Communication Services 14.20 0.00
Consumer non-durables 13.90 22.10
Capital goods 11.70 12.90
Health care 11.60 11.00
Energy 6.40 2.80
Transportation 1.30 2.40
Basic industries 1.30 5.10
Utilities 1.00 1.00
</TABLE>
A COMPARISON WITH THE S&P 500 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, 1999, compared to
the industry sectors that make up the S&P 500 index.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER VALUE+GROWTH FUND ON STANDARD & POOR'S 500 INDEX ON
11/30/99 11/30/99
--------------------------- ------------------------------
<S> <C> <C>
Technology 26.5 23.5
Finance 16.4 15.5
Communication Services 14.4 8.5
Consumer non-durables 13.9 20.9
Capital goods 12.8 8.4
Health care 7.4 10.7
Energy 6.5 5.9
Utilities 1.1 2.8
Transportation 1.0 0.8
Basic industries 0.0 3.0
</TABLE>
* THE STANDARD & POOR'S 500 INDEX IS AN UNMANAGED INDEX THAT COMPRISES 500
LARGE-CAP U.S. COMPANIES AND IS GENERALLY REPRESENTATIVE OF THE U.S. STOCK
MARKET.
10
<PAGE> 11
LARGEST HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS*
Representing 22.9 percent of the fund's total net assets on November 30, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
HOLDINGS PERCENT
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------
1. MICROSOFT Developer, marketer and supporter 4.1%
of a variety of software,
operating systems, language and
application programs.
- --------------------------------------------------------------------------------------
2. BELL ATLANTIC Provider of information and 3.3%
telecommunications services.
Subsidiaries provide telephone
services to the mid-Atlantic
region, cellular
telecommunications, software,
network support and computer
maintenance.
- --------------------------------------------------------------------------------------
3. CISCO SYSTEMS Large, comprehensive supplier of 2.4%
routing software and related
systems that direct the flow of
data between local networks.
- --------------------------------------------------------------------------------------
4. HOME DEPOT Operator of retail stores 2.1%
carrying building supplies and
home-improvement products.
- --------------------------------------------------------------------------------------
5. AMERICA ONLINE Global leader in consumer on-line 2.1%
services, including Internet
access, E-mail, software and
computer support.
- --------------------------------------------------------------------------------------
6. MCI WORLDCOM Provider of intrastate, 1.9%
interstate and international
long-distance voice and data
services
- --------------------------------------------------------------------------------------
7. CHASE MANHATTAN Holding company for subsidiaries 1.9%
that provide financial services
in the United States and abroad.
Services include consumer
financing, real-estate financing,
investment banking, discount
brokerage, security trading,
leasing, credit cards and
computer banking.
- --------------------------------------------------------------------------------------
8. ROYAL DUTCH PETROLEUM Operations include the 1.8%
exploration and processing of oil
and natural gas. Other divisions
are involved in the production of
base and industrial chemicals.
- --------------------------------------------------------------------------------------
9. SUN MICROSYSTEMS A provider of high-performance 1.7%
workstations, servers and
networking software for the
engineering, scientific,
commercial and technical
industries.
- --------------------------------------------------------------------------------------
10. BANK OF AMERICA CORP. Bank of America Corporation is 1.6%
the holding company for Bank of
America and NationsBank. The
Company provides retail banking
services, asset management,
financial products, corporate
finance, specialized finance,
capital markets, and financial
services.
- --------------------------------------------------------------------------------------
</TABLE>
*The fund's holding's are subject to change.
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
KEMPER VALUE+GROWTH FUND
Portfolio of Investments at November 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
REPURCHASE AGREEMENTS--.3% AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
State Street Bank and Co. dated 11/30/1999 at
5.63%, to be repurchased at $534 on
12/01/1999(b) (Cost $534) $ 534 $ 534
--------------------------------------------------------------------------
SHORT TERM NOTES--1.7% Federal Home Loan Discount Note,
5.41%**, 12/02/1999 2,000 2,000
Xerox Capital Corp.,
5.45%**, 12/03/1999 1,000 1,000
--------------------------------------------------------------------------
TOTAL SHORT-TERM NOTES
(Cost $3,000) 3,000
--------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
NUMBER OF
COMMON STOCKS--98.0% SHARES
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMUNICATIONS--11.4% Nokia Oy "A" (ADR) 7,400 1,022
CELLULAR TELEPHONE--.9% Vodafone Group PLC (ADR) 10,000 472
--------------------------------------------------------------------------
1,494
TELEPHONE/ AT&T Corp. 35,900 2,006
COMMUNICATIONS--10.5% Bell Atlantic Corp. 90,900 5,755
BellSouth Corp. 42,700 1,972
BroadWing Inc. 15,100 440
GTE Corp. 34,000 2,482
MCI WorldCom, Inc.* 39,800 3,291
Nortel Networks Corp. 9,000 666
SBC Communications, Inc. 31,000 1,610
--------------------------------------------------------------------------
18,222
- ------------------------------------------------------------------------------------------------------------------------
CONSUMER
DISCRETIONARY--7.3%
APPAREL & STORES--.7% Liz Claiborne Inc. 6,200 232
Tommy Hilfiger Corp.* 37,700 928
--------------------------------------------------------------------------
1,160
DEPARTMENT & Federated Department Stores, Inc.* 8,700 409
CHAIN STORES--4.8% Home Depot, Inc. 46,700 3,692
May Department Stores 18,600 625
Shopko Stores, Inc.* 14,100 320
The Gap, Inc. 33,500 1,357
TJX Companies, Inc. 8,000 210
Wal-Mart Stores, Inc. 28,800 1,660
--------------------------------------------------------------------------
8,273
HOTELS & CASINOS--.2% Carnival Corp. "A" 8,500 375
--------------------------------------------------------------------------
RECREATIONAL PRODUCTS--.3% Harley-Davidson, Inc. 7,100 433
--------------------------------------------------------------------------
RESTAURANTS--1.0% McDonald's Corp. 40,100 1,805
--------------------------------------------------------------------------
SPECIALTY RETAIL--.3% Sotheby's Holdings, Inc. "A" 17,500 546
--------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSUMER STAPLES--3.3% Anheuser-Busch Companies, Inc. 10,200 $ 762
ALCOHOL & TOBACCO--1.1% Philip Morris Companies, Inc. 14,500 382
UST, Inc. 27,600 735
--------------------------------------------------------------------------
1,879
FOOD & BEVERAGE--1.1% Albertson's Inc. 9,100 291
Bestfoods 7,900 433
Dean Foods Co. 9,000 356
PepsiCo, Inc. 16,200 560
Unilever N.V. 5,357 292
--------------------------------------------------------------------------
1,932
PACKAGE GOODS/ Kimberly-Clark Corp. 16,200 1,035
COSMETICS--1.1% Procter & Gamble Co. 8,800 950
--------------------------------------------------------------------------
1,985
- ------------------------------------------------------------------------------------------------------------------------
DURABLES--6.0% AlliedSignal Inc. 11,400 682
AEROSPACE--2.2% Boeing Co. 20,700 845
Northrop Grumman Corp. 12,200 685
Rockwell International Corp. 15,400 764
United Technologies Corp. 14,482 818
--------------------------------------------------------------------------
3,794
AUTOMOBILES--1.7% Dana Corp. 11,000 305
Ford Motor Co. 53,100 2,682
--------------------------------------------------------------------------
2,987
CONSTRUCTION/AGRICULTURAL PACCAR, Inc. 13,200 543
EQUIPMENT--.3%
--------------------------------------------------------------------------
TELECOMMUNICATIONS Lucent Technologies, Inc. 34,910 2,551
EQUIPMENT--1.8% Scientific-Atlanta, Inc. 9,900 577
--------------------------------------------------------------------------
3,128
- ------------------------------------------------------------------------------------------------------------------------
ENERGY--6.3% Burlington Resources, Inc. 9,900 333
OIL & GAS PRODUCTION--2.4% Imperial Oil Ltd. 36,000 845
Royal Dutch Petroleum Co. (New York shares) 52,600 3,051
--------------------------------------------------------------------------
4,229
OIL COMPANIES--3.9% Ashland Inc. 29,600 999
Chevron Corp. 18,700 1,656
Exxon Corp. 20,300 1,610
Mobil Corp. 12,000 1,252
Texaco, Inc. 20,800 1,268
--------------------------------------------------------------------------
6,785
- ------------------------------------------------------------------------------------------------------------------------
FINANCIAL--15.2% Bank of America Corp. 46,531 2,722
BANKS--5.0% Chase Manhattan Corp. 41,600 3,213
Compass Bancshares, Inc. 27,700 703
J.P. Morgan & Co., Inc. 4,600 605
Washington Mutual, Inc. 9,644 280
Wells Fargo & Co. 24,200 1,125
--------------------------------------------------------------------------
8,648
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
<S> <C> <C> <C>
INSURANCE--5.4% AFLAC, Inc. 4,100 $ 196
AMBAC Financial Group, Inc. 16,700 910
American International Group, Inc. 18,000 1,859
Cigna Corp. 7,000 576
MBIA, Inc. 6,400 320
MGIC Investment Corp. 7,200 407
Nationwide Financial Services, Inc. "A" 24,000 863
PMI Group, Inc. 9,100 454
Providian Financial Corp. 9,650 764
Radian Group, Inc. 18,073 883
St. Paul Companies, Inc. 26,500 800
Travelers Property Casualty Corp. "A" 28,400 945
XL Capital Ltd. "A" 8,453 431
--------------------------------------------------------------------------
9,408
CONSUMER FINANCE--2.0% Associates First Capital Corp. 32,290 1,074
Capital One Finance Corp. 10,800 502
Citigroup, Inc. 23,800 1,282
Household International, Inc. 14,300 566
--------------------------------------------------------------------------
3,424
OTHER FINANCIAL Doral Financial Corp. 27,500 328
COMPANIES--2.8% Federal Home Loan Mortgage Corp. 20,000 988
Federal National Mortgage Association 15,200 1,013
Legg Mason Inc. 11,300 398
Morgan Stanley Dean Witter & Co. 18,100 2,183
--------------------------------------------------------------------------
4,910
- ------------------------------------------------------------------------------------------------------------------------
HEALTH--10.9% Amgen Inc.* 15,600 711
BIOTECHNOLOGY--1.5% Biogen, Inc.* 6,800 497
MedImmune, Inc.* 11,500 1,382
--------------------------------------------------------------------------
2,590
HEALTH INDUSTRY Cardinal Health, Inc. 16,387 857
SERVICES--.7% MedQuist, Inc.* 14,100 402
--------------------------------------------------------------------------
1,259
HOSPITAL MANAGEMENT--.5% Columbia/HCA Healthcare Corp. 32,700 891
--------------------------------------------------------------------------
MEDICAL SUPPLY & Baxter International Inc. 8,900 601
SPECIALTY--2.3% MiniMed Inc.* 12,800 939
VISX Inc.* 31,000 2,404
--------------------------------------------------------------------------
3,944
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE> 15
PORTFOLIO OF Investments
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
<S> <C> <C> <C>
PHARMACEUTICALS--5.9% Abbott Laboratories 13,600 $ 517
Allergan, Inc. 3,800 374
Alza Corp.* 25,900 1,119
American Home Products Corp. 4,300 224
Astra AB "A" (ADR)(c) 13,200 296
Bristol-Myers Squibb Co. 21,100 1,542
Eli Lilly & Co. 12,000 861
Johnson & Johnson 20,700 2,148
Merck & Co., Inc. 10,300 809
Pfizer, Inc. 16,200 586
Schering-Plough Corp. 16,000 818
Warner-Lambert Co. 9,700 870
--------------------------------------------------------------------------
10,164
- ------------------------------------------------------------------------------------------------------------------------
MEDIA--2.7% True North Communications, Inc. 31,300 1,246
ADVERTISING--.7%
--------------------------------------------------------------------------
BROADCASTING & Time Warner, Inc. 5,100 315
ENTERTAINMENT--.2%
--------------------------------------------------------------------------
CABLE TELEVISION--.9% AT&T Corp-Liberty Media Group* 11,000 460
Comcast Corp. "A" 11,800 533
Media One Group, Inc.* 6,700 531
--------------------------------------------------------------------------
1,524
MISCELLANEOUS--.9% TV Guide, Inc.* 25,700 1,631
--------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
MANUFACTURING--5.9% Dow Chemicals Co. 5,100 597
CHEMICALS--.7% M.A. Hanna Co. 51,000 532
--------------------------------------------------------------------------
1,129
DIVERSIFIED Barnes Group, Inc. 22,700 369
MANUFACTURING--2.4% General Electric Co. 11,300 1,468
Minnesota Mining & Manufacturing Co. 8,900 851
Tyco International Ltd. 36,216 1,451
--------------------------------------------------------------------------
4,139
ELECTRICAL PRODUCTS--.7% Emerson Electric Co. 20,000 1,140
--------------------------------------------------------------------------
INDUSTRIAL SPECIALTY--1.0% Carlisle Companies Inc. 11,300 379
Corning, Inc. 7,100 665
QUALCOMM Inc.* 2,100 761
--------------------------------------------------------------------------
1,805
MACHINERY/COMPONENTS/ Federal-Mogul Corp. 8,100 181
CONTROLS--.6% Parker-Hannifin Corp. 18,600 875
--------------------------------------------------------------------------
1,056
OFFICE EQUIPMENT/ Lexmark International Group Inc. "A"* 4,900 407
SUPPLIES--.2%
--------------------------------------------------------------------------
MISCELLANEOUS--.3% PE Corp-PE Biosystems Group 6,700 547
--------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE> 16
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
<S> <C> <C> <C>
SERVICE INDUSTRIES--3.2% Electronic Data Systems Corp. 24,300 $ 1,563
EDP SERVICES--2.0% First Data Corp. 20,600 891
PSINet, Inc.* 19,700 985
--------------------------------------------------------------------------
3,439
INVESTMENT--.3% Charles Schwab Corp. 14,200 539
--------------------------------------------------------------------------
MISCELLANEOUS COMMERCIAL Galileo International, Inc. 22,300 714
SERVICES--.7% Kelly Services, Inc. "A" 20,600 540
--------------------------------------------------------------------------
1,254
MISCELLANEOUS CONSUMER H & R Block Inc. 9,100 391
SERVICES--.2%
--------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--23.5% America Online Inc.* 50,000 3,634
COMPUTER SOFTWARE--8.5% Computer Associates International, Inc. 16,000 1,040
Microsoft Corp.* 78,200 7,120
Oracle Systems Corp.* 20,300 1,377
Parametric Technology Corp.* 42,700 969
Reynolds and Reynolds Co. 30,400 589
--------------------------------------------------------------------------
14,729
DIVERSE ELECTRONIC Applied Materials, Inc.* 5,300 516
PRODUCTS--2.6% Dell Computer Corp.* 30,000 1,290
Motorola, Inc. 16,900 1,931
Solectron Corp.* 3,700 305
Teradyne, Inc.* 10,000 436
--------------------------------------------------------------------------
4,478
EDP PERIPHERALS--2.1% EMC Corp.* 28,900 2,415
Mercury Interactive Corp.* 4,600 382
Network Appliance, Inc.* 6,600 777
--------------------------------------------------------------------------
3,574
ELECTRONIC COMPONENTS/ Cisco Systems, Inc.* 46,800 4,174
DISTRIBUTORS--2.4%
--------------------------------------------------------------------------
ELECTRONIC DATA Hewlett-Packard Co. 16,900 1,603
PROCESSING--4.7% International Business Machines Corp. 13,900 1,433
Seagate Technology, Inc.* 59,300 2,194
Sun Microsystems, Inc.* 22,700 3,002
--------------------------------------------------------------------------
8,232
MILITARY ELECTRONICS--.2% Computer Sciences Corp.* 5,000 326
--------------------------------------------------------------------------
OFFICE/PLANT Novell Inc.* 22,800 446
AUTOMATION--.3%
--------------------------------------------------------------------------
SEMICONDUCTORS--2.7% Intel Corp. 35,400 2,715
QLogic Corp.* 4,100 464
Xilinx, Inc.* 17,300 1,548
--------------------------------------------------------------------------
4,727
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE> 17
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
<S> <C> <C> <C>
TRANSPORTATION--1.3% AMR Corp.* 15,000 $ 913
AIRLINES--.5%
--------------------------------------------------------------------------
RAILROADS--.8% CSX Corp. 18,800 669
Canadian National Railway Co. 25,800 763
--------------------------------------------------------------------------
1,432
- ------------------------------------------------------------------------------------------------------------------------
UTILITIES--1.0% Allegheny Energy, Inc. 26,100 757
ELECTRIC UTILITIES Peco Energy Co. 11,000 362
Unicom Corp. 19,500 623
--------------------------------------------------------------------------
1,742
--------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost $143,607) 170,143
--------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100.0%
(Cost $147,141)(a) $173,677
--------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
* Non-income producing security.
** Annualized yield at time of purchase; not a coupon rate.
(a) The cost for federal income tax purpose was $147,280. At November 30, 1999,
net unrealized appreciation for all securities based on tax cost was
$26,397. This consist of aggregate gross unrealized appreciation for all
securities in which there was an excess of market value over tax cost of
$31,987 and aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over market value of $5,590.
(b) Repurchase agreement is fully collateralized by U.S. Treasury or Government
agency Securities.
(c) Securities valued in good faith the Valuation Committee of the Board of
Trustees at fair value amounted to $296,343 (.17% of net assets). Their
values have been estimated by the Board of Trustees in the absence of
readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of these
securities at November 30, 1999 aggregated $241,780. These securities may
also have certain restrictions to resale.
The accompanying notes are an integral part of the financial statements.
17
<PAGE> 18
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
as of November 30, 1999
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------
Investments in securities, at value (cost $147,141) $173,677
- ------------------------------------------------------------------------
Cash 1
- ------------------------------------------------------------------------
Receivable for investments sold 2,831
- ------------------------------------------------------------------------
Dividends receivable 209
- ------------------------------------------------------------------------
Receivable for Fund shares sold 148
- ------------------------------------------------------------------------
Foreign taxes recoverable 3
- ------------------------------------------------------------------------
TOTAL ASSETS 176,869
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------
Payable for investments purchased 2,273
- ------------------------------------------------------------------------
Payable for Fund shares redeemed 674
- ------------------------------------------------------------------------
Accrued management fee 187
- ------------------------------------------------------------------------
Other accrued expenses and payables 342
- ------------------------------------------------------------------------
TOTAL LIABILITIES 3,476
- ------------------------------------------------------------------------
NET ASSETS, AT VALUE $173,393
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------
Net assets consist of:
- ------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on Investment
securities $ 26,536
- ------------------------------------------------------------------------
Accumulated net realized gain (loss) 21,432
- ------------------------------------------------------------------------
Paid-in capital 125,425
- ------------------------------------------------------------------------
NET ASSETS, AT VALUE $173,393
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
NET ASSET VALUE AND OFFERING PRICE
- ------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($89,662 / 4,899 outstanding shares of beneficial
interest, $.01 par value, unlimited shares authorized) $18.30
- ------------------------------------------------------------------------
Maximum offering price per share (100/94.25 of $18.30) $19.42
- ------------------------------------------------------------------------
CLASS B SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share
($74,352 / 4,205 outstanding shares of beneficial
interest, $.01 par value, unlimited shares authorized) $17.68
- ------------------------------------------------------------------------
CLASS C SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share ($9,379 / 531
outstanding shares of beneficial interest, $.01 par value,
unlimited shares authorized) $17.68
- ------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE> 19
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Year ended November 30, 1999
(IN THOUSANDS)
<TABLE>
<S> <C>
- -----------------------------------------------------------------------
INVESTMENT INCOME
- -----------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $15) $ 1,809
- -----------------------------------------------------------------------
Interest 290
- -----------------------------------------------------------------------
Total income 2,099
- -----------------------------------------------------------------------
Expenses:
Management fee 1,171
- -----------------------------------------------------------------------
Services to shareholders 711
- -----------------------------------------------------------------------
Custodian and accounting fees 17
- -----------------------------------------------------------------------
Distribution services fees 588
- -----------------------------------------------------------------------
Administrative services fees 393
- -----------------------------------------------------------------------
Auditing 43
- -----------------------------------------------------------------------
Legal 12
- -----------------------------------------------------------------------
Trustees' fees and expenses 13
- -----------------------------------------------------------------------
Reports to shareholders 101
- -----------------------------------------------------------------------
Registration fees 11
- -----------------------------------------------------------------------
Other 24
- -----------------------------------------------------------------------
Total expenses, before expense reductions 3,084
- -----------------------------------------------------------------------
Expense reductions (127)
- -----------------------------------------------------------------------
Total expenses, after expense reductions 2,957
- -----------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (858)
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
- -----------------------------------------------------------------------
Net realized gain (loss) from Investments 22,362
- -----------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
on Investments 4,036
- -----------------------------------------------------------------------
Net gain (loss) on investment transactions 26,398
- -----------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $25,540
- -----------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE> 20
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------
1999 1998
<S> <C> <C>
- --------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
- --------------------------------------------------------------------------------------------
Operations:
Net investment income (loss) $ (858) (213)
- --------------------------------------------------------------------------------------------
Net realized gain (loss) 22,362 2,115
- --------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
transactions during the period 4,036 10,221
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 25,540 12,123
- --------------------------------------------------------------------------------------------
Distributions to shareholders:
From net realized gains
Class A (1,117) (1,830)
- --------------------------------------------------------------------------------------------
Class B (936) (1,520)
- --------------------------------------------------------------------------------------------
Class C (93) (105)
- --------------------------------------------------------------------------------------------
Fund share transactions:
Proceeds from shares sold 71,602 68,263
- --------------------------------------------------------------------------------------------
Reinvestment of distributions 2,076 3,319
- --------------------------------------------------------------------------------------------
Cost of shares redeemed (68,470) (33,200)
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions 5,208 38,382
- --------------------------------------------------------------------------------------------
Increase (decrease) in net assets 28,602 47,050
- --------------------------------------------------------------------------------------------
Net assets at beginning of period 144,791 97,741
- --------------------------------------------------------------------------------------------
NET ASSETS AT END OF PERIOD $173,393 144,791
- --------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE> 21
FINANCIAL HIGHLIGHTS
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
----------------------------------------------------
CLASS A
----------------------------------------------------
FOR THE PERIOD
OCTOBER 16
(COMMENCEMENT
YEAR ENDED NOVEMBER 30, OF OPERATIONS)
---------------------------------- TO NOVEMBER 30,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------
Net asset value, beginning of period $15.82 14.62 12.95 10.02 9.50
- -----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .03(a) .01 .02 .05 .02
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investment transactions 2.68 1.69 2.48 2.88 .50
- -----------------------------------------------------------------------------------------------
Total from investment operations 2.71 1.70 2.50 2.93 .52
- -----------------------------------------------------------------------------------------------
Less distributions from:
Net realized gains on investment
transactions (.23) (.50) (.83) -- --
- -----------------------------------------------------------------------------------------------
Total distributions (.23) (.50) (.83) -- --
- -----------------------------------------------------------------------------------------------
Net asset value, end of period $18.30 15.82 14.62 12.95 10.02
- -----------------------------------------------------------------------------------------------
TOTAL RETURN (%) (C) 17.42(B) 12.06 20.83 29.24(B) 5.47**
- -----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Net assets at end of year ($ in
thousands) 89,662 76,705 52,059 20,432 2,695
- -----------------------------------------------------------------------------------------------
Ratio of expenses before expense
reductions (%) 1.42 1.42 1.41 1.59 1.35*
- -----------------------------------------------------------------------------------------------
Ratio of expenses after expense
reductions (%) 1.41 1.42 1.41 1.47 1.35*
- -----------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.15) .22 .35 .43 2.25*
- -----------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 105 92 56 82 --*
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------
CLASS B
----------------------------------------------------
FOR THE PERIOD
OCTOBER 16
(COMMENCEMENT
YEAR ENDED NOVEMBER 30, OF OPERATIONS)
---------------------------------- TO NOVEMBER 30,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------
Net asset value, beginning of period $15.40 14.37 12.83 10.02 9.50
- -----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.10)(a) (.07) (.07) (.04) .02
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investment transaction 2.61 1.60 2.44 2.85 .50
- -----------------------------------------------------------------------------------------------
Total from investment operations 2.51 1.53 2.37 2.81 .52
- -----------------------------------------------------------------------------------------------
Less distributions from:
Net realized gains on investment
transactions (.23) (.50) (.83) -- --
- -----------------------------------------------------------------------------------------------
Total distributions (.23) (.50) (.83) -- --
- -----------------------------------------------------------------------------------------------
Net asset value, end of period $17.68 15.40 14.37 12.83 10.02
- -----------------------------------------------------------------------------------------------
TOTAL RETURN (%) (C) 16.58(B) 11.06(B) 19.96(B) 28.04(B) 5.47**
- -----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Net assets at end of year ($ in
thousands) 74,352 62,287 42,888 17,617 2,720
- -----------------------------------------------------------------------------------------------
Ratio of expenses before expense
reductions (%) 2.31 2.38 2.32 2.44 2.10*
- -----------------------------------------------------------------------------------------------
Ratio of expenses after expense
reductions (%) 2.19 2.27 2.27 2.27 2.10*
- -----------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.93) (.63) (.51) (.37) 1.50*
- -----------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 105 92 56 82 --*
- -----------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 22
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
------------------------------------------------
CLASS C
------------------------------------------------
FOR THE PERIOD
OCTOBER 16
(COMMENCEMENT
YEAR ENDED NOVEMBER 30, OF OPERATIONS)
------------------------------ TO NOVEMBER 30,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------
Net asset value, beginning of period $15.40 14.37 12.84 10.01 9.50
- -------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.11)(a)(.04) (.05) (.04) .01
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investment
transactions 2.62 1.57 2.41 2.87 .50
- -------------------------------------------------------------------------------------------------
Total from investment operations 2.51 1.53 2.36 2.83 .51
- -------------------------------------------------------------------------------------------------
Less distributions from:
Net realized gains on investment transactions (.23) (.50) (.83) -- --
- -------------------------------------------------------------------------------------------------
Total distributions (.23) (.50) (.83) -- --
- -------------------------------------------------------------------------------------------------
Net asset value, end of period $17.68 15.40 14.37 12.84 10.01
- -------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (C) 16.58(B)11.06(B)19.86(B)28.27(B) 5.37**
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets at end of year ($ in thousands) 9,379 5,799 2,794 1,043 436
- -------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 2.68 2.16 2.15 2.22 2.07*
- -------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 2.14 2.16 2.15 2.22 2.07*
- -------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.88) (.52) (.39) (.32) 1.53*
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 105 92 56 82 --*
- -------------------------------------------------------------------------------------------------
</TABLE>
NOTES:
(a) Based on monthly average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been reduced.
(c) Total return does not reflect the effect of sales charges.
* Annualized
** Not annualized
22
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 SIGNIFICANT
ACCOUNTING POLICIES Kemper Value+Growth Fund (the "Fund") is registered
under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end,
diversified management investment company organized
as a Massachusetts business trust.
The Fund offers multiple classes of shares. Class A
shares are offered to investors subject to an
initial sales charge. Class B shares are offered
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 offered 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, 1999) 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.
Investment income, realized and unrealized gains
and losses, and certain fund-level expenses and
expense reductions, if any, are borne pro rata on
the basis of relative net assets by the holders of
all classes of shares except that each class bears
certain expenses unique to that class such as
distribution services, shareholder services,
administrative services and certain other class
specific expenses. Differences in class expenses
may result in payment of different per share
dividends by class. All shares of the Fund have
equal rights with respect to voting subject to
class specific arrangements.
The Fund's financial statements are prepared in
accordance with generally accepted accounting
principles which require the use of management
estimates. The policies described below are
followed consistently by the Fund in the
preparation of its financial statements.
SECURITY VALUATION. Investments are stated at value
determined as of the close of regular trading on
the New York Stock Exchange. 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, or if no sale occurred, at the
calculated mean between the most recent bid and
asked quotations on such market. If there are no
such bid and asked quotations, the most recent bid
quotation shall be used.
Portfolio debt securities purchased with an
original maturity greater than sixty days are
valued by pricing agents approved by the officers
of the Trust, whose quotations reflect
broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents
are unable to provide such quotations, the most
recent bid quotation supplied by a bona fide market
maker shall be used.
23
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS
Money market instruments purchased with an original
maturity of sixty days or less are valued at
amortized cost.
All other securities are valued at their fair value
as determined in good faith by the Valuation
Committee of the Board of Trustees.
REPURCHASE AGREEMENTS. The Fund may enter into
repurchase agreements with certain banks and
broker/dealers whereby the Fund, through its
custodian or sub-custodian bank, receives delivery
of the underlying securities, the amount of which
at the time of purchase and each subsequent
business day is required to be maintained at such a
level that the market value is equal to at least
the principal amount of the repurchase price plus
accrued interest.
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.
DISTRIBUTION OF INCOME AND GAINS. Distributions of
net investment income, if any, are made annually.
Net realized gains from investment transactions, in
excess of available capital loss carryforwards,
would be taxable to the Fund if not distributed,
and, therefore, will be distributed to shareholders
at least annually.
The timing and characterization of certain income
and capital gains distributions are determined
annually in accordance with federal tax regulations
which may differ from generally accepted accounting
principles. As a result, net investment income
(loss) and net realized gain (loss) on investment
transactions for a reporting period may differ
significantly from distributions during such
period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital
accounts without impacting the net asset value of
the Fund.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date. Interest income is recorded on
the accrual basis. Dividend income is recorded on
the ex-dividend date. Certain dividends from
foreign securities may be recorded subsequent to
the ex-dividend date as soon as the Fund is
informed of such dividends. Realized gains and
losses from investment transactions are recorded on
an identified cost basis.
- --------------------------------------------------------------------------------
2 PURCHASES AND
SALES OF SECURITIES For the year ended November 30, 1999, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $173,034
Proceeds from sales 167,459
- --------------------------------------------------------------------------------
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 $1,171,000 for the
year ended November 30, 1999, which is equivalent
to an annual effective rate of 0.72% of the Fund's
average daily net assets.
24
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS
UNDERWRITING AND DISTRIBUTION SERVICES
AGREEMENT. The Fund has an underwriting and
distribution services agreement with Kemper
Distributors, Inc. (KDI). Underwriting commissions
retained by KDI in connection with the distribution
of Class A shares for the year ended November 30,
1999 are $38,000.
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 and CDSC received by KDI
for the year ended November 30, 1999 are $764,000,
of which $48,000 is unpaid.
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 of each class. KDI in turn has various
agreements with financial services firms that
provide these services and pays these firms based
on assets of Fund accounts the firms service.
Administrative services fees paid by the Fund to
KDI for the year ended November 30, 1999 are
$393,000, of which $1,000 is unpaid.
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 $535,000
for the year ended November 30, 1999.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. During the year ended November 30,
1999, the Fund made no payments to its officers and
incurred trustees' fees of $13,000 to independent
trustees.
25
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1999 1998
--------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 2,270 $ 38,412 2,280 $ 35,097
------------------------------------------------------------------------------
Class B 1,530 25,065 1,752 26,217
------------------------------------------------------------------------------
Class C 323 5,344 262 3,913
------------------------------------------------------------------------------
SHARES ISSUED ON REINVESTMENT OF DIVIDENDS
Class A 68 1,080 126 1,770
------------------------------------------------------------------------------
Class B 59 905 105 1,448
------------------------------------------------------------------------------
Class C 8 91 7 101
------------------------------------------------------------------------------
SHARES REDEEMED
Class A (2,453) (42,007) (1,317) (20,082)
------------------------------------------------------------------------------
Class B (1,258) (20,767) (593) (8,765)
------------------------------------------------------------------------------
Class C (177) (2,915) (86) (1,317)
------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 165 2,781 200 3,036
------------------------------------------------------------------------------
Class B (170) (2,781) (204) (3,036)
------------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $ 5,208 $ 38,382
------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
5 EXPENSE OFF-SET
ARRANGEMENTS The Fund has entered into arrangements with its
custodian whereby credits realized as a result of
uninvested cash balances were used to reduce a
portion of the Fund's expenses. During the period,
the Fund's custodian fees were reduced by $3,000
under these arrangements.
- --------------------------------------------------------------------------------
6 LINE OF
CREDIT The Fund and several Kemper funds (the
"Participants") share in a $750 million revolving
credit facility for temporary or emergency
purposes, including the meeting of redemption
request that otherwise might require the untimely
disposition of securities. The Participants are
charged an annual commitment fee which is allocated
pro rata among each of the Participants. Interest
is calculated based on the market rates at the time
of the borrowing. The Fund may borrow up to a
maximum of 33 percent of its net assets under the
agreement.
26
<PAGE> 27
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS 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, 1999, 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 auditing standards generally
accepted in the United States. 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, 1999, by correspondence with the custodian. 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, 1999, the results of its operations for the
year then ended, the changes in its net assets for each of the two years ended
and the financial highlights for each of the fiscal periods since 1995 in
conformity with accounting principles generally accepted in the United States.
ERNST & YOUNG LLP
Chicago, Illinois
January 19, 2000
27
<PAGE> 28
TAX INFORMATION
- --------------------------------------------------------------------------------
TAX INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
The Fund paid distributions of $0.23 per share from net long-term capital gains
during its year ended November 30, 1999, of which 100% represents 20% rate
gains.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$17,284,000 as capital gain dividends for its year ended November 30, 1999, 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 account, please call 1-800-621-1048.
28
<PAGE> 29
NOTES
29
<PAGE> 30
NOTES
30
<PAGE> 31
NOTES
31
<PAGE> 32
TRUSTEES&OFFICERS
TRUSTEES OFFICERS
JOHN W. BALLANTINE MARK S. CASADY MAUREEN E. KANE
Trustee President Assistant Secretary
LEWIS A. BURNHAM PHILIP J. COLLORA CAROLINE PEARSON
Trustee Vice President and Assistant Secretary
Secretary
LINDA C. COUGHLIN BRENDA LYONS
Trustee DONALD E. HALL Assistant Treasurer
Vice President
DONALD L. DUNAWAY
Trustee JOHN R. HEBBLE
Treasurer
ROBERT B. HOFFMAN
Trustee ANN M. MCCREARY
Vice President
DONALD R. JONES
Trustee KATHRYN L. QUIRK
Vice President
THOMAS W. LITTAUER
Trustee and Vice President WILLIAM F. TRUSCOTT
Vice President
SHIRLEY D. PETERSON
Trustee LINDA J. WONDRACK
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 219557
Kansas City, MO 64121
...............................................................................
TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
801 Pennsylvania Avenue
Kansas City, MO 64105
...............................................................................
CUSTODIAN STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, MA 02110
...............................................................................
INDEPENDENT ERNST & YOUNG
AUDITORS 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 (1/26/00) 1099500
