<PAGE> 1
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED MAY 31, 2000
SEEKS GROWTH OF CAPITAL
KEMPER
VALUE+GROWTH FUND
"... The fund remains tilted toward growth stocks generally, which should
outperform the market as the economy slows. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
8
INDUSTRY SECTORS
9
LARGEST HOLDINGS
10
PORTFOLIO
OF INVESTMENTS
15
FINANCIAL STATEMENTS
18
FINANCIAL HIGHLIGHTS
20
NOTES TO
FINANCIAL STATEMENTS
AT A GLANCE
TERMS TO KNOW
KEMPER VALUE+GROWTH FUND TOTAL RETURNS
FOR THE SIX-MONTH PERIOD ENDED MAY 31, 2000 (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>
1.69% 1.27% 1.33%
</TABLE>
RETURNS AND RANKINGS ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS. RETURNS
AND NET ASSET VALUE FLUCTUATE. SHARES ARE REDEEMABLE AT CURRENT NET ASSET VALUE,
WHICH MAY BE MORE OR LESS THAN ORIGINAL COST.
*LIPPER ANALYTICAL SERVICES, INC. RETURNS AND RANKINGS ARE BASED UPON CHANGES IN
NET ASSET VALUE WITH ALL DIVIDENDS REINVESTED AND DO NOT INCLUDE THE EFFECT OF
SALES CHARGES; IF SALES CHARGES HAD BEEN INCLUDED, RESULTS MIGHT HAVE BEEN LESS
FAVORABLE.
NET ASSET VALUE
<TABLE>
<CAPTION>
AS OF AS OF
05/31/00 11/30/99
...........................................................
<S> <C> <C> <C> <C>
KEMPER VALUE+GROWTH FUND CLASS
A $16.50 $18.30
...........................................................
KEMPER VALUE+GROWTH FUND CLASS
B $15.80 $17.68
...........................................................
KEMPER VALUE+GROWTH FUND CLASS
C $15.81 $17.68
...........................................................
</TABLE>
DIVIDEND REVIEW
DURING THE SIX-MONTH PERIOD, KEMPER VALUE+GROWTH FUND MADE THE FOLLOWING
DISTRIBUTIONS PER SHARE:
<TABLE>
<CAPTION>
CLASS CLASS CLASS
A B C
................................................................................................
<S> <C> <C> <C> <C> <C>
LONG-TERM CAPITAL GAIN $1.62 $1.62 $1.62
................................................................................................
SHORT-TERM CAPITAL
GAIN $0.62 $0.62 $0.62
................................................................................................
</TABLE>
YOUR FUND'S STYLE
MORNINGSTAR EQUITY STYLE BOX(TM)
<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.
THE STYLE BOX REPRESENTS
A SNAPSHOT OF THE FUND'S
PORTFOLIO ON A SINGLE DAY.
IT IS NOT AN EXACT
ASSESSMENT OF RISK AND
DOES 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 INVEST-
MENT POLICIES.
</TABLE>
GROWTH STOCK A stock in a company that is expected to experience rapid growth
resulting from strong sales, talented management and dominant market position.
Because growth 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.
INITIAL PUBLIC OFFERING (IPO) The first launch of a company's publicly traded
stock. IPOs often involve a relatively small quantity of shares. When paired
with fluctuating demand, the small quantity of shares can contribute to
increased volatility.
PRICE-TO-EARNINGS RATIO (P/E) The P/E ratio indicates about how much investors
are paying for a company's earning power. The higher the P/E, the more investors
are paying and the more earnings growth they are expecting.
VALUATION A stock's price relative to an underlying measure of worth.
<PAGE> 3
ECONOMIC OVERVIEW
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.
DEAR KEMPER FUNDS SHAREHOLDER,
When an irresistible force such as the ebullient U.S. economy meets an immovable
object, such as a determined Federal Reserve Board, the old song is right:
Something's gotta give. One possibility -- the economy could slow down as the
Fed has ordered. Or, if market volatility becomes true distress, the Fed could
back off, as it has in the past. A third possibility is that neither the Fed nor
the economy will give way until it's too late, which could lead to a recession.
Recent evidence suggests, however, that the economy probably will slow down as
ordered.
Before explaining why, perhaps it's best to start with a review of how
monetary policy works. Central bankers often sound like witch doctors reading
animal entrails, so it's understandable that many people are confused about
monetary policy. But monetary policy still works in the same way it always has.
First, it changes the price and availability of money. More subtly, it alters
people's perceptions about and confidence in the future, thereby adjusting their
willingness to take risks.
It's a bit early to tell how the Fed's monetary policy is working so far. The
policymakers only started raising interest rates about a year ago, and it takes
at least that long for higher rates to impact borrowers. There are two reasons.
First, interest rates on many existing loans are fixed. And, a family who has
just selected a dream house isn't going to walk away if mortgage rates rise a
notch. Similarly, a company that has just approved an expansion program won't
stop cold because the prime rate is higher. So it's foolish to think that
America's economy has become less interest-sensitive because the economy roared
through the first several months of this year. Americans are more in hock than
ever, so higher interest rates will hurt more than ever. The May dip in housing
starts and auto sales -- especially the higher priced, gas guzzling sport
utility vehicles -- is probably the first sign that higher rates are biting.
They will bite harder in coming months. We look for both housing starts and
vehicle sales to drop about 10 percent in 2001.
Confidence is harder to measure, but there are some early flutters of
weakness. It's true that consumers remain cheerily upbeat. But corporate bond
markets, the most sensitive barometer of business confidence and a vital source
of corporate funds, have been nervous. Investors are demanding a big premium
before they'll buy lower quality bonds, which means there's less new money for
companies to spend. Corporate bond issuance through mid-June was 35 percent
below the first five and a half months of 1999.
So far, companies have been able to get around the bond market stinginess by
turning to their bankers. Banks lent businesses 8 percent more from January
through May of this year than they did during the first five months of 1999. But
some banks are beginning to worry, too. Bank examiners have been questioning the
quality of loans and the level of reserves. In response, more bankers are
tightening lending standards and raising rates. This is a textbook case of how
tighter monetary policy eventually slows an economy.
Aren't bond market and banker concerns overdone? As long as the economy keeps
growing at 3 percent or so, won't that guarantee such good profits that paying
the bills will be a cinch? Not necessarily. Profits are far more cyclical than
economic growth. Earnings actually fell during 1998, even though the economy
continued to roll. That was a global crisis, when foreign earnings fell sharply.
But take a look at the last "soft landing" during 1995. Revenue growth dipped
and pricing power fell, squeezing profits. The same thing is likely to happen
again in the coming slowdown -- and this time, tight labor markets could make it
even tougher for companies to control costs quickly. Assuming growth is between
2.5 percent and 3 percent by the end of 2001, we believe year-over-year profit
comparisons will have turned slightly negative.
A profit slowdown when new lines of credit are hard to come by will take its
toll on capital spending. We expect growth in business outlays for buildings and
equipment to slip from over 12 percent this year to around 8 percent in 2001.
That's still quite robust, and the "high-tech imperative" is the reason why.
Executives believe that they have no option but to keep up with the
technological revolution that is transforming the world. The fact that high-tech
gear keeps getting cheaper year after year and also helps save on expensive
labor makes the decision to buy it easy. Indeed, unit sales of computers and
peripherals to businesses have sustained growth rates in excess of 40 percent
since 1995. And the rush is on to lay down the infrastructure for the next
generation of wireless communications. We estimate that the sector will see unit
growth of about 50 percent this year, double the growth in 1999. It's hard even
for superstars to sustain these stratospheric
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 (5/31/00) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 6.40 6.00 5.50 5.60
Prime rate (2) 9.50 8.50 7.75 8.50
Inflation rate (3)* 3.00 2.60 2.30 1.50
The U.S. dollar (4) 4.30 -0.70 -0.90 6.40
Capital goods orders (5)* 17.00 12.30 2.50 14.50
Industrial production (5)* 6.10 3.70 2.90 5.20
Employment growth (6) 2.60 2.20 2.30 2.60
</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 4/30/00.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
compound growth rates forever, and we do expect some moderation next year.
However, high-tech orders continue to ratchet upwards, and the shortage in
semiconductors and other components has persisted long enough to cause major
players to announce huge capacity additions.
Another battle the Fed must win before it succeeds in slowing the economy is
bringing consumers to heel. Most families still feel better off than they were
last year and much richer than they were five years ago. That's a powerful
incentive to spend and enjoy. Indeed, total real consumption has been galloping
at a 5 percent rate or better since early 1998. But consumers are so important
to the economy that if they don't start spending less freely, there won't be a
slowdown. We expect the Fed to be successful and slow down shoppers in the
months ahead -- but the victory won't be an easy one. We expect at least one
more rate hike and a few more financial fireworks before consumers and the
economy hoist the white flag.
So what will the slowdown look like? During the spring, retail sales, housing
starts and job creation slowed, but strength in high tech orders and capital
equipment production probably will help keep the slowdown from becoming too
abrupt. We expect about 3.5 percent growth in the second half. That would still
produce a hearty 5 percent growth for full year 2000. During 2001, the full
impact of the Fed's recent tightening will probably rein growth in to just 3
percent.
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 JUNE 29, 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 MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
INTEREST RATE HIKES, A TECHNOLOGY CORRECTION AND INCREASED VOLATILITY
CHARACTERIZED THE KEMPER VALUE + GROWTH FUND'S SEMIANNUAL PERIOD -- DECEMBER 1,
1999, THROUGH MAY 31, 2000. LEAD PORTFOLIO MANAGER DON HALL DISCUSSES HOW THESE
MARKET EVENTS IMPACTED FUND PERFORMANCE AND PROVIDES HIS OUTLOOK FOR THE FUND IN
THE COMING MONTHS.
Q BEFORE GOING INTO DETAIL ABOUT KEMPER VALUE + GROWTH FUND, COULD YOU TELL
US ABOUT THE MARKET CLIMATE DURING THE SEMIANNUAL PERIOD?
A The economic backdrop of the last six months was unique. On one hand, we
had the Federal Reserve Board aggressively raising interest rates, an event that
typically causes corporate earnings to eventually slow or stall. But the impact
of higher rates is felt with a lag of several quarters. During this period, we
saw most companies -- in and out of the high-flying technology market --
continue to post strong earnings, keeping their fundamentals intact.
On the other hand, the extremely high valuations of technology and
Internet-related stocks began to spook the market. Investors began to lock in
technology gains by selling en masse. This caused a swift and deep correction in
the technology sector starting in mid-March, with valuations continuing to fall
throughout the remainder of the period.
Investors left the technology market for more defensive, value-oriented stocks
such as energy and financial services. As this occurred, the huge disparity in
the valuations between growth stocks -- particularly technology and Internet
issues -- and value stocks began to narrow. The extreme disparity in the market
wasn't erased -- it had taken nearly two years for the spreads to grow so
extreme -- but certainly the market broadened its favor beyond just a small
group of technology-related growth stocks.
Q HOW DID KEMPER VALUE+GROWTH FUND PERFORM IN THIS ENVIRONMENT? AND HOW WAS
THE FUND POSITIONED AMONG GROWTH AND VALUE STOCKS?
A Although the fund gained during the period, its relative performance was
hurt by the decline in technology and telecom stocks and our tilt toward growth
stocks in general. The fund gained 1.69 percent (A shares, unadjusted for any
sales charge), outperforming the Russell 1000 Value, which advanced 0.84 percent
and the Morningstar large-cap blend category, up 0.51 percent. However, the
portfolio trailed the Standard & Poor's 500 index, which gained 2.90 percent.
At the start of the period, our bias toward growth stocks contributed
significantly to performance as the technology market continued to gain
momentum. In early March, however, valuations of these stocks reached a level
that we didn't think was sustainable -- even with the strong earnings that tech
companies were posting. Although we liked the companies' long-term prospects, we
believed that their extreme valuations put them at risk. We therefore began to
reduce our technology position in favor of value-oriented names in the energy
sector. Unfortunately, we had just begun our adjustments when the technology
sector corrected. At
5
<PAGE> 6
PERFORMANCE UPDATE
the time of the correction, our technology position was still sizable, and the
sector's dramatic decline hurt fund performance. Microsoft was the single
largest drag on the fund's performance.
After the severe correction, however, the valuations of some of the stocks we
had sold looked attractive to us again. We added to our position in Intel.
Despite their volatility, tech names such as Intel, Oracle, Seagate and EMC were
among the fund's best performers over the six-month period.
Q
SO, YOU THINK THAT THE CORRECTION IN TECHNOLOGY IS NOW OVER?
A
We certainly expect more bumps in the road ahead, but we do believe that
the worst may now be behind us. Technology is our largest sector holding, and we
are still enthusiastic about it.
What we saw in March was a refocusing on valuations in which investors began
to look at earnings, business plans and other fundamental factors. We may see
more fallout in the newer Internet names, but stocks of established,
fundamentally sound technology companies - like those that the fund
owns -- should continue to grow. The fund remains tilted toward growth stocks
generally, which should outperform the market as the economy slows.
Q
WHAT TECHNOLOGY STOCKS DO YOU BELIEVE HAVE THE BEST LONG-TERM GROWTH
POTENTIAL?
A
The companies with the best potential to exploit the extraordinary growth
in this sector are those with the most secure competitive positions. Such
companies are not only participating in the growth of the sector but also
gaining share against competitors, providing a double-whammy positive. Cisco
Systems is the largest holding in the fund. Cisco occupies an enviable
competitive position in one of the largest high-growth sectors in the world,
networking infrastructure. It got this way partly through flawless execution and
partly through deft acquisitions. Intel, another major holding, is far and above
the market leader in semiconductors, especially microprocessors. Intel's massive
R&D investments should position the company well for growth.
Corning is another company that we like for some of the same reasons. Known in
the past for its manufacturing businesses, Corning has remade itself into the
leading fiber optics company and is a major beneficiary of the explosive demand
for bandwidth that is being driven by Internet expansion. This is not only
boosting sales of Corning's traditional fiber-optic cable products but also
fueling the company's new high-growth areas such as photonic components.
And despite all of its legal troubles, we still believe Microsoft has
extremely good long-term growth potential -- even if the government succeeds in
splitting its business into two companies. Our fundamental analysis of
Microsoft's business prospects shows that the company is well positioned to
expand sales and earnings in the coming months. We believe the company's new
Windows 2000 product line will win wide marketplace acceptance this year.
Microsoft is also well positioned to expand market share in computer servers.
Based on our outlook for the company, we've maintained the fund's position in
Microsoft.
Q
YOU MENTIONED EARLIER THAT YOU WERE INVESTING IN ENERGY STOCKS. WILL YOU
ELABORATE?
A
We've been building our position in the energy sector -- specifically oil
stocks, a traditionally value-oriented segment of the market. At the start of
the period, energy represented a little over 6 percent of the portfolio. As of
May 31, over 10 percent of the portfolio was invested in this sector.
Although crude oil prices have been rising for more than a year, the rising
prices haven't been fully reflected in the market value of oil stocks. That's
because the market was skeptical that the higher prices would be sustainable.
Meanwhile, earnings of large integrated oil companies such as fund holdings
Royal Dutch Shell, Phillips Petroleum and Chevron have increased
dramatically -- a direct result of the higher crude prices. Although the price
of crude has fallen somewhat, we don't think it will fall dramatically. And if
crude prices remain in their current price range -- about $25-$30 a barrel -- we
would expect that the large integrated oil companies we own would continue
posting strong performance. Of course, we'll keep our eye on supply-and-demand
issues and adjust our energy position if the pricing structure of crude oil
seems to be changing. The energy sector, like the technology sector, is enjoying
positive earnings revisions, which is a nice diversifier along the value
spectrum.
Q
WERE YOU INVESTED IN ANY OTHER VALUE-ORIENTED SECTORS OF THE MARKET?
A
Yes, about 18 percent of the portfolio is invested in the financial
services sector. This is our second largest sector weighting,
6
<PAGE> 7
PERFORMANCE UPDATE
behind technology (22 percent). The financial sector has struggled for some time
as the Federal Reserve Board has increased interest rates. In March, however,
these stocks made strong gains as investors exited the technology sector in
favor of these more defensive issues. Although this surge has helped this
sector, many financial stocks are still trading at dramatically discounted P/E
multiples. But we're not investing indiscriminately in this sector. We're
investing only in those companies that are gaining ground for reasons specific
to the individual company, not because of moves in the sector as a whole.
We focused our investment on some of the stronger companies that we believed
were less sensitive to the rising-interest-rate environment: large money-center
banks such as Bank of America and Chase Manhattan Bank as well as diversified
financial firms such as Citigroup. These companies outperformed as they
continued to benefit from a strong initial public offering market. They also
have good management and business strategies in place.
Q WILL 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 WHAT IS YOUR OUTLOOK FOR THE REST OF 2000?
A As long as the Federal Reserve Board remains vigilant with interest rates,
I don't think we'll see any huge rises in stocks. We see a slowing economy but
neither of the two scenarios that would most certainly take the market down
sharply, namely, recession or significantly higher inflation. Our disciplined
process and balance between growth and value investments is meant to exploit the
usual tension between fear and greed that is always present in the markets.
7
<PAGE> 8
INDUSTRY SECTORS
A SIX-MONTH COMPARISON
Data shows the percentage of the common stocks in the portfolio that each sector
represented on May 31, 2000, and November 30, 1999.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER VALUE+GROWTH FUND ON KEMPER VALUE+GROWTH FUND ON
5/31/00 11/30/99
--------------------------- ---------------------------
<S> <C> <C>
TECHNOLOGY 23 23.6
FINANCE 18.9 15
COMMUNICATION SERVICES 13.2 14.2
CAPITAL GOODS 12 11.7
ENERGY 10.5 6.4
CONSUMER NONDURABLES 9.5 13.9
HEALTH CARE 8.4 11.6
UTILITIES 3.6 1
TRANSPORTATION 0.7 1.3
BASIC MATERIALS 0.2 1.3
</TABLE>
A COMPARISON WITH THE S&P 500 STOCK INDEX*
Data shows the percentage of the common stocks in the portfolio that each sector
of the Kemper Value+Growth Fund represented on May 31, 2000, compared with the
industry sectors that make up the fund's benchmark, the Standard and Poor's 500
stock index.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER VALUE+GROWTH FUND ON
5/31/00 S&P 500 INDEX ON 5/31/00
--------------------------- ------------------------
<S> <C> <C>
TECHNOLOGY 23 32.3
FINANCE 18.9 12.9
COMMUNICATION SERVICES 13.2 7.3
CAPITAL GOODS 12 8.1
ENERGY 10.5 5.3
CONSUMER NONDURABLES 9.5 18.4
HEALTH CARE 8.4 10.2
UTILITIES 3.6 2.6
TRANSPORTATION 0.7 0.6
BASIC MATERIALS 0.2 2.3
</TABLE>
* THE S&P 500 STOCK INDEX IS AN UNMANAGED INDEX GENERALLY REPRESENTATIVE OF THE
U.S. STOCK MARKET.
8
<PAGE> 9
LARGEST HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS*
Representing 23.7% of the fund's total investment portfolio on May 31, 2000.
<TABLE>
<CAPTION>
HOLDINGS PERCENT
<S> <C> <C> <C>
-------------------------------------------------------------------------------------
1. CISCO SYSTEMS Large, comprehensive supplier of 3.6%
routing software and related
systems that direct the flow of
data between networks.
-------------------------------------------------------------------------------------
2. INTEL Engaged in the design, 3.1%
development, manufacture and sale
of advanced microcomputer
components.
-------------------------------------------------------------------------------------
3. MICROSOFT Develops, markets and supports a 2.9%
variety of microcomputer
software, operating systems,
language and application
programs, related books and
peripheral devices.
-------------------------------------------------------------------------------------
4. CITIGROUP A worldwide bank holding company 2.5%
that provides a broad array of
financial services.
-------------------------------------------------------------------------------------
5. ROYAL DUTCH PETROLEUM Operations include exploration 2.3%
and processing of oil and natural
gas. Other divisions are involved
in the production of base and
industrial chemicals.
-------------------------------------------------------------------------------------
6. BELL ATLANTIC Provider of information and 2.1%
telecommunications services.
Subsidiaries provide telephone
services to the mid-Atlantic
region, cellular
telecommunications, software,
network support and computer
maintenance.
-------------------------------------------------------------------------------------
7. CHASE MANHATTAN Holding company for subsidiaries 1.8%
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. EXXON MOBIL Engaged in the exploration, 1.8%
production, manufacture,
transportation and sale of crude
oil, natural gas and petroleum
products.
-------------------------------------------------------------------------------------
9. HOME DEPOT Operator of retail stores 1.8%
carrying building supplies and
home-improvement products.
-------------------------------------------------------------------------------------
10. ORACLE A leading global provider of 1.8%
database management software.
-------------------------------------------------------------------------------------
</TABLE>
*THE FUND'S HOLDINGS ARE SUBJECT TO CHANGE.
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
KEMPER VALUE + GROWTH FUND
Portfolio of Investments at May 31, 2000 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
REPURCHASE AGREEMENTS--.1% AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
State Street Bank and Trust Company, 6.37%,
to be repurchased at $177,031 on
06/01/2000
(Cost $177,000)** $ 177,000 $ 177,000
----------------------------------------------------------------------------
<CAPTION>
SHORT TERM INSTRUMENTS--3.0%
<S> <C> <C> <C> <C> <C>
FCAR Owner Trust, 6.5%, 06/02/2000 3,000,000 2,999,460
Pitney Bowes Credit, 6.48%, 06/05/2000 2,000,000 1,998,560
----------------------------------------------------------------------------
TOTAL SHORT TERM INSTRUMENTS
(Cost $4,998,020) 4,998,020
----------------------------------------------------------------------------
<CAPTION>
NUMBER OF
COMMON STOCKS--96.9% SHARES
<S> <C> <C> <C> <C> <C>
COMMUNICATIONS--9.7%
CELLULAR TELEPHONE--1.6%
Nokia Oyj(ADR) 43,600 2,267,200
Vodafone AirTouch PLC (ADR) 10,000 458,125
----------------------------------------------------------------------------
2,725,325
TELEPHONE/
COMMUNICATIONS--8.1%
AT&T Corp. 42,600 1,477,687
Bell Atlantic Corp. 65,300 3,452,738
BellSouth Corp. 25,600 1,195,200
GTE Corp. 34,000 2,150,500
Nortel Networks Corp. 18,000 977,625
SBC Communications, Inc. 30,500 1,332,469
WorldCom, Inc.* 74,150 2,789,894
----------------------------------------------------------------------------
13,376,113
-------------------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--3.5%
APPAREL & SHOES--.2%
Liz Claiborne, Inc. 6,200 243,738
----------------------------------------------------------------------------
DEPARTMENT & CHAIN
STORES--3.3%
Gap, Inc. 11,900 417,244
Home Depot, Inc. 60,150 2,936,072
Wal-Mart Stores, Inc. 38,300 2,207,038
----------------------------------------------------------------------------
5,560,354
-------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--2.4%
ALCOHOL & TOBACCO--.7%
Anheuser-Busch Companies, Inc. 6,300 488,250
Philip Morris Companies, Inc. 14,500 378,813
UST, Inc. 16,500 274,313
----------------------------------------------------------------------------
1,141,376
FOOD & BEVERAGE--1.1%
Bestfoods 10,700 690,150
Coca-Cola Co. 9,600 512,400
PepsiCo, Inc. 16,200 659,138
----------------------------------------------------------------------------
1,861,688
PACKAGE GOODS/
COSMETICS--.6%
Kimberly-Clark Corp. 16,200 980,100
----------------------------------------------------------------------------
</TABLE>
10 The accompanying notes are an integral part of the financial statements.
<PAGE> 11
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
<S> <C> <C> <C> <C> <C>
DURABLES--6.7%
AEROSPACE--2.8%
Boeing Co. 32,600 $ 1,273,437
Northrop Grumman Corp. 12,200 934,825
Rockwell International Corp. 38,100 1,562,100
United Technologies Corp. 14,282 863,168
----------------------------------------------------------------------------
4,633,530
AUTOMOBILES--2.1%
Eaton Corp. 6,000 435,375
Ford Motor Co. 53,100 2,578,669
General Motors Corp. 6,995 494,022
----------------------------------------------------------------------------
3,508,066
CONSTRUCTION/
AGRICULTURAL
EQUIPMENT--.5%
PACCAR, Inc. 19,800 829,125
----------------------------------------------------------------------------
TELECOMMUNICATIONS
EQUIPMENT--1.3%
Lucent Technologies, Inc. 25,310 1,452,161
Tellabs, Inc.* 12,600 818,213
----------------------------------------------------------------------------
2,270,374
-------------------------------------------------------------------------------------------------------------------------
ENERGY--10.2%
OIL & GAS
PRODUCTION--6.1%
Anadarko Petroleum Corp. 14,000 742,875
Exxon Mobil Corp. 36,141 3,010,997
Imperial Oil Ltd. 36,000 878,049
Royal Dutch Petroleum Co.(New York shares) 60,900 3,802,444
Texaco, Inc. 28,900 1,659,944
----------------------------------------------------------------------------
10,094,309
OIL COMPANIES--4.1%
Ashland Inc. 29,600 1,034,150
Chevron Corp. 23,300 2,153,793
Phillips Petroleum Co. 39,400 2,255,650
Repsol SA (ADR) 66,800 1,406,975
----------------------------------------------------------------------------
6,850,568
-------------------------------------------------------------------------------------------------------------------------
FINANCIAL--18.3%
BANKS--4.8%
Bank of America Corp. 46,531 2,585,378
Chase Manhattan Corp. 40,600 3,032,312
Compass Bancshares, Inc. 36,500 739,125
J.P. Morgan & Co., Inc. 4,600 592,250
PNC Bank Corp. 10,300 518,863
Wells Fargo Co. 11,600 524,900
----------------------------------------------------------------------------
7,992,828
INSURANCE--5.3%
AFLAC, Inc. 4,100 211,918
AMBAC Financial Group, Inc 16,700 841,262
American General Corp. 14,300 916,093
American International Group, Inc. 11,200 1,260,700
Cigna Corp. 7,100 630,568
Hartford Financial Service Group, Inc. 10,400 614,900
Lincoln National Corp. 22,400 868,000
MBIA, Inc. 6,400 370,000
MGIC Investment Corp. 14,900 738,481
Nationwide Financial Services, Inc. "A" 24,000 681,000
PMI Group, Inc. 5,100 258,825
Providian Financial Corp. 10,650 947,184
XL Capital Ltd. "A" 8,453 502,954
----------------------------------------------------------------------------
8,841,885
</TABLE>
The accompanying notes are an integral part of the financial statements. 11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
<S> <C> <C> <C> <C> <C>
CONSUMER FINANCE--3.8%
Associates First Capital Corp. 32,290 $ 885,957
Citigroup, Inc. 66,000 4,104,375
Household International, Inc. 22,500 1,057,500
SLM Holding Corp. 9,100 306,556
----------------------------------------------------------------------------
6,354,388
OTHER FINANCIAL
COMPANIES--4.4%
CIT Group, Inc. 19,600 358,925
Federal Home Loan Mortgage Corp. 14,800 658,600
Federal National Mortgage Association 15,200 913,900
Legg Mason, Inc. 26,500 1,169,313
Lehman Brothers Holdings, Inc. 10,800 833,625
Marsh & McLennan Companies Inc. 9,100 1,001,569
Morgan Stanley Dean Witter Co. 32,100 2,309,194
----------------------------------------------------------------------------
7,245,126
-------------------------------------------------------------------------------------------------------------------------
HEALTH--8.1%
BIOTECHNOLOGY--1.1%
Amgen Inc.* 15,600 992,550
MedImmune, Inc.* 3,400 528,275
PE Corp-PE Biosystems Group 7,400 410,700
----------------------------------------------------------------------------
1,931,525
HOSPITAL MANAGEMENT--.7%
Columbia/HCA Healthcare Corp. 19,100 515,700
UnitedHealth Group Inc. 9,500 708,344
----------------------------------------------------------------------------
1,224,044
MEDICAL SUPPLY &
SPECIALTY--.4%
Baxter International, Inc. 8,900 591,850
----------------------------------------------------------------------------
PHARMACEUTICALS--5.9%
Abbott Laboratories 25,200 1,025,325
Bristol-Myers Squibb Co. 45,600 2,510,850
Eli Lilly & Co. 12,000 913,500
Johnson & Johnson, Inc. 18,500 1,655,750
Merck & Co., Inc. 18,700 1,395,488
Pfizer, Inc. 16,200 721,913
Schering-Plough Corp. 8,900 430,538
Warner-Lambert Co. 9,700 1,184,613
----------------------------------------------------------------------------
9,837,977
-------------------------------------------------------------------------------------------------------------------------
MANUFACTURING--4.9%
CHEMICALS--.5%
E.I. du Pont de Nemours 16,000 784,000
----------------------------------------------------------------------------
DIVERSIFIED
MANUFACTURING--2.3%
General Electric Co. 46,300 2,436,538
Koninklijke (Royal) Philip Electronics N.V. 9,200 406,525
Tyco International Ltd. 22,618 1,064,460
----------------------------------------------------------------------------
3,907,523
ELECTRICAL PRODUCTS--.7%
Emerson Electric Co. 20,000 1,180,000
----------------------------------------------------------------------------
INDUSTRIAL SPECIALTY--.9%
Corning, Inc. 4,700 909,156
QUALCOMM Inc.* 8,400 557,550
----------------------------------------------------------------------------
1,466,706
MACHINERY/COMPONENT/
CONTROLS--.5%
Parker-Hannifin Corp. 18,600 775,388
----------------------------------------------------------------------------
</TABLE>
12 The accompanying notes are an integral part of the financial statements.
<PAGE> 13
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
<S> <C> <C> <C> <C> <C>
MEDIA--3.1%
ADVERTISING--.9%
Interpublic Group of Companies, Inc. 7,600 $ 326,325
True North Communications, Inc. 26,700 1,166,456
----------------------------------------------------------------------------
1,492,781
BROADCASTING &
ENTERTAINMENT--.2%
Time Warner, Inc. 5,100 402,581
----------------------------------------------------------------------------
CABLE TELEVISION--.3%
Media One Group, Inc.* 6,700 447,644
----------------------------------------------------------------------------
PRINT MEDIA--.9%
Gannett Co., Inc. 24,600 1,592,850
----------------------------------------------------------------------------
MISCELLANEOUS--.8%
TV Guide, Inc.* 51,400 1,322,747
----------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
METALS & MINERALS--.2%
STEEL & METALS
Alcoa, Inc. 5,100 298,031
----------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
SERVICE INDUSTRIES--3.3%
EDP SERVICES--1.9%
Automatic Data Processing, Inc. 8,200 450,487
Electronic Data Systems Co 24,300 1,562,794
First Data Corp. 20,600 1,154,888
----------------------------------------------------------------------------
3,168,169
INVESTMENT--1.2%
Bear Stearns Companies, Inc. 9,600 378,000
Charles Schwab Corp. 21,300 612,375
Goldman Sachs Group, Inc. 4,700 345,744
Merrill Lynch & Co., Inc. 6,200 611,475
----------------------------------------------------------------------------
1,947,594
MISCELLANEOUS CONSUMER
SERVICES--.2%
H & R Block, Inc. 12,000 370,500
----------------------------------------------------------------------------
MISCELLANEOUS--0%
Metris Companies Inc. 2 74
----------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--22.3%
COMPUTER SOFTWARE--6.5%
America Online, Inc. 13,600 720,800
Computer Associates International, Inc. 35,300 1,817,950
Microsoft Corp. 78,200 4,892,388
Oracle Corp.* 40,600 2,918,125
Rational Software Corp.* 7,000 513,188
----------------------------------------------------------------------------
10,862,451
DIVERSE ELECTRONIC
PRODUCT--2.4%
Applied Materials, Inc.* 16,000 1,336,000
Dell Computer Corp.* 18,100 780,562
General Motors Corp. "H" (New)* 2,454 241,566
Motorola Inc. 16,900 1,584,375
----------------------------------------------------------------------------
3,942,503
EDP PERIPHERALS--.9%
EMC Corp.* 13,300 1,546,956
----------------------------------------------------------------------------
ELECTRONIC COMPONENTS/
DISTRIBUTORS--3.6%
Cisco Systems, Inc.* 104,600 5,955,663
----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
<S> <C> <C> <C> <C> <C>
ELECTRONIC DATA
PROCESSING--4.1%
Apple Computer, Inc.* 4,300 $ 361,200
Hewlett-Packard Co. 7,900 948,988
International Business Machines Corp. 6,000 643,875
Seagate Technology, Inc.* 40,500 2,349,000
Sun Microsystems, Inc.* 34,100 2,612,913
----------------------------------------------------------------------------
6,915,976
SEMICONDUCTORS--4.8%
Intel Corp. 41,500 5,174,531
Maxim Integrated Products Inc.* 7,900 501,156
QLogic Corp.* 8,200 402,825
Texas Instruments, Inc. 14,600 1,054,850
Vitesse Semiconductor Corp.* 15,600 789,750
----------------------------------------------------------------------------
7,923,112
-------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--.7%
AIRLINES--.2%
Delta Air Lines, Inc. 7,700 396,068
----------------------------------------------------------------------------
RAILROADS--.5%
Canadian National Railway 30,200 822,352
----------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
UTILITIES--3.5%
ELECTRIC UTILITIES
Allegheny Energy, Inc. 26,100 807,468
DPL Inc. 43,500 1,019,531
Northeast Utilities 75,800 1,677,075
Peco Energy Co. 11,000 483,313
Southern Co. 25,900 671,781
Unicom Corp. 27,700 1,154,744
----------------------------------------------------------------------------
5,813,912
----------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $143,015,578) 161,429,870
----------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost $148,190,598)(a) $166,604,890
----------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
* Non-income producing securities
** Repurchase agreement is fully collateralized by U.S. Treasury or Government
agency securities.
(a) The cost for federal income tax purpose was $148,190,598. At May 31, 2000,
net unrealized appreciation for all securities based on tax cost was
$18,414,292. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost of
$27,817,474 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over market value of $9,403,182.
14 The accompanying notes are an integral part of the financial statements.
<PAGE> 15
FINANCIAL STATEMENTS
STATEMENT OF ASSETS & LIABILITIES
As of May 31, 2000 (unaudited)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $148,190,598) $166,604,890
----------------------------------------------------------------------------
Cash 248,056
----------------------------------------------------------------------------
Dividends receivable 254,834
----------------------------------------------------------------------------
Receivable for Fund shares sold 78,226
----------------------------------------------------------------------------
Foreign taxes recoverable 7,173
----------------------------------------------------------------------------
TOTAL ASSETS 167,193,179
----------------------------------------------------------------------------
LIABILITIES
Payable for Fund shares redeemed 354,369
----------------------------------------------------------------------------
Accrued management fee 81,904
----------------------------------------------------------------------------
Other accrued expenses and payables 216,385
----------------------------------------------------------------------------
Total liabilities 652,658
----------------------------------------------------------------------------
NET ASSETS, AT VALUE 166,540,521
----------------------------------------------------------------------------
NET ASSETS
Net assets consist of:
Undistributed net investment income (loss) (382,437)
----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investments 18,414,292
----------------------------------------------------------------------------
Accumulated net realized gain (loss) 11,108,868
----------------------------------------------------------------------------
Paid-in capital 137,399,798
----------------------------------------------------------------------------
NET ASSETS, AT VALUE $166,540,521
----------------------------------------------------------------------------
NET ASSET VALUE AND OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($83,250,472 / 5,044,445 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares
authorized) $16.50
----------------------------------------------------------------------------
Maximum offering price per share (100 / 94.25 of $16.50) $17.51
----------------------------------------------------------------------------
CLASS B SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share ($72,414,010 /
4,581,988 outstanding shares of beneficial interest, $.01
par value, unlimited number of shares authorized) $15.80
----------------------------------------------------------------------------
CLASS C SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share ($10,876,039 /
687,995 outstanding shares of beneficial interest, $.01
par value, unlimited number of shares authorized) $15.81
----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 15
<PAGE> 16
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Six months ended May 31, 2000 (unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of $10,665) $ 1,134,585
---------------------------------------------------------------------------
Interest 94,649
---------------------------------------------------------------------------
Total income 1,229,234
---------------------------------------------------------------------------
Expenses:
Management fee 626,616
---------------------------------------------------------------------------
Services to shareholders 316,909
---------------------------------------------------------------------------
Custodian fees 5,239
---------------------------------------------------------------------------
Distribution services fees 321,847
---------------------------------------------------------------------------
Administrative services fees 217,509
---------------------------------------------------------------------------
Auditing 9,774
---------------------------------------------------------------------------
Legal 4,534
---------------------------------------------------------------------------
Trustees' fees and expenses 10,132
---------------------------------------------------------------------------
Reports to shareholders 87,070
---------------------------------------------------------------------------
Registration fees 25,831
---------------------------------------------------------------------------
Other 1,419
---------------------------------------------------------------------------
Total expenses, before expense reductions 1,626,880
---------------------------------------------------------------------------
Expense reductions (15,209)
---------------------------------------------------------------------------
Total expenses, after expense reductions 1,611,671
---------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (382,437)
---------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments 11,488,216
---------------------------------------------------------------------------
Foreign currency related transactions (312)
---------------------------------------------------------------------------
11,487,904
---------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
on investments (8,121,487)
---------------------------------------------------------------------------
Net gain (loss) on investment transactions 3,366,417
---------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $ 2,983,980
---------------------------------------------------------------------------
</TABLE>
16 The accompanying notes are an integral part of the financial statements.
<PAGE> 17
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MAY 31, YEAR ENDED
2000 NOVEMBER 30,
(UNAUDITED) 1999
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $ (382,437) (857,898)
-----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions 11,487,904 22,362,122
-----------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
transactions during the period (8,121,487) 4,035,885
-----------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 2,983,980 25,540,109
-----------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net realized gains
Class A (10,953,136) (1,116,825)
-----------------------------------------------------------------------------------------------------
Class B (9,569,426) (936,567)
-----------------------------------------------------------------------------------------------------
Class C (1,289,241) (92,277)
-----------------------------------------------------------------------------------------------------
Fund share transactions:
Proceeds from shares sold 52,438,757 71,602,140
-----------------------------------------------------------------------------------------------------
Reinvestment of distributions 20,737,444 2,075,774
-----------------------------------------------------------------------------------------------------
Cost of shares redeemed (61,201,256) (68,470,396)
-----------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions 11,974,945 5,207,518
-----------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (6,852,878) 28,601,958
-----------------------------------------------------------------------------------------------------
NET ASSETS AT BEGINNING OF PERIOD 173,393,399 144,791,441
-----------------------------------------------------------------------------------------------------
NET ASSETS AT END OF PERIOD, (including undistributed net
investment loss of $382,437 for the period ended May 31,
2000) $166,540,521 173,393,399
-----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 17
<PAGE> 18
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
OF
OPERATIONS)
SIX MONTHS TO
ENDED YEAR ENDED NOVEMBER 30, NOVEMBER
MAY 31, 2000 ------------------------------------------- 30,
(UNAUDITED) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $18.30 15.82 14.62 12.95 10.02 9.50
----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) --(a) .03(a) .01 .02 .05 .02
----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investment transactions .44 2.68 1.69 2.48 2.88 .50
----------------------------------------------------------------------------------------------------------------
Total from investment operations .44 2.71 1.70 2.50 2.93 .52
----------------------------------------------------------------------------------------------------------------
Less distributions from:
Net realized gains on investment
transactions (2.24) (.23) (.50) (.83) -- --
----------------------------------------------------------------------------------------------------------------
Total distributions (2.24) (.23) (.50) (.83) -- --
----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $16.50 18.30 15.82 14.62 12.95 10.02
----------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (C) 1.69** 17.42(B) 12.06 20.83 29.24(B) 5.47**
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets at end of period ($ in
thousands) 83,250 89,662 76,705 52,059 20,432 2,695
----------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense
reductions (%) 1.46* 1.42 1.42 1.41 1.59 1.35*
----------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense
reductions (%) 1.45* 1.41 1.42 1.41 1.47 1.35*
----------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.04)* (.15) .22 .35 .43 2.25*
----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 60* 105 92 56 82 --*
----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
FOR THE
PERIOD
OCTOBER
16
(COMMENCEMENT
OF
OPERATIONS)
SIX MONTHS TO
ENDED YEAR ENDED NOVEMBER 30, NOVEMBER
MAY 31, 2000 ------------------------------------------------- 30,
(UNAUDITED) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $17.68 15.40 14.37 12.83 10.02 9.50
----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.07)(a) (.10)(a) (.07) (.07) (.04) .02
----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investment transaction .43 2.61 1.60 2.44 2.85 .50
----------------------------------------------------------------------------------------------------------------------
Total from investment operations .36 2.51 1.53 2.37 2.81 .52
----------------------------------------------------------------------------------------------------------------------
Less distributions from:
Net realized gains on investment
transactions (2.24) (.23) (.50) (.83) -- --
----------------------------------------------------------------------------------------------------------------------
Total distributions (2.24) (.23) (.50) (.83) -- --
----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.80 17.68 15.40 14.37 12.83 10.02
----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (C) 1.27** 16.58(B) 11.06(B) 19.96(B) 28.04(B) 5.47**
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets at end of period ($ in
thousands) 72,414 74,352 62,287 42,888 17,617 2,720
----------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense
reductions (%) 2.28* 2.31 2.38 2.32 2.44 2.10*
----------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense
reductions (%) 2.27* 2.19 2.27 2.27 2.27 2.10*
----------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.86)* (.93) (.63) (.51) (.37) 1.50*
----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 60* 105 92 56 82 --*
----------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 19
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C
FOR THE
PERIOD
OCTOBER 16
(COMMENCEMENT
OF
OPERATIONS)
SIX MONTHS TO
ENDED YEAR ENDED NOVEMBER 30, NOVEMBER
MAY 31, 2000 ------------------------------------------------- 30,
(UNAUDITED) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $17.68 15.40 14.37 12.84 10.01 9.50
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.07)(a) (.11)(a) (.04) (.05) (.04) .01
---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investment
transactions .44 2.62 1.57 2.41 2.87 .50
---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .37 2.51 1.53 2.36 2.83 .51
---------------------------------------------------------------------------------------------------------------------------------
Less distributions from:
Net realized gains on investment transactions (2.24) (.23) (.50) (.83) -- --
---------------------------------------------------------------------------------------------------------------------------------
Total distributions (2.24) (.23) (.50) (.83) -- --
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.81 17.68 15.40 14.37 12.84 10.01
---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (C) 1.33 **(B) 16.58(B) 11.06(B) 19.86(B) 28.27(B) 5.37**
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets at end of period ($ in thousands) 10,876 9,379 5,799 2,794 1,043 436
---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 2.41* 2.68 2.16 2.15 2.22 2.07*
---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 2.23* 2.14 2.16 2.15 2.22 2.07*
---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.82)* (.88) (.52) (.39) (.32) 1.53*
---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 60* 105 92 56 82 --*
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(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
19
<PAGE> 20
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 May 31, 2000) 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.
20
<PAGE> 21
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 six months ended May 31, 2000, investment
transactions (excluding short-term instruments) are
as follows:
Purchases $51,357,043
Proceeds from sales 63,437,308
--------------------------------------------------------------------------------
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 $626,616 for the six
months ended May 31, 2000, which is equivalent to
an annualized effective rate of .72% of the Fund's
average daily net assets.
21
<PAGE> 22
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 six months ended May 31,
2000 are $12,019.
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 six months ended May 31, 2000 are $434,532,
of which $60,573 is unpaid at May 31, 2000.
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 six months ended May 31, 2000 are
$208,268 after an expense waiver of 9,241, of which
$33,081 is unpaid at May 31, 2000.
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 $264,659
for the six months ended May 31, 2000, of which
$87,295 is unpaid at May 31, 2000.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. During the six months ended May 31,
2000, the Fund made no payments to its officers and
incurred trustees' fees of $10,132 to independent
trustees.
22
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
4
CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MAY 31, 2000 NOVEMBER 30, 1999
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 1,928,385 $ 34,414,461 2,269,267 $ 38,412,236
------------------------------------------------------------------------------------------
Class B 757,966 12,756,710 1,530,622 25,065,215
------------------------------------------------------------------------------------------
Class C 251,252 4,226,667 325,473 5,343,759
------------------------------------------------------------------------------------------
SHARES ISSUED ON REINVESTMENT OF DIVIDENDS
Class A 583,431 10,476,806 68,003 1,080,051
------------------------------------------------------------------------------------------
Class B 525,308 9,069,842 58,590 905,216
------------------------------------------------------------------------------------------
Class C 68,869 1,190,796 5,858 90,507
------------------------------------------------------------------------------------------
SHARES REDEEMED
Class A (2,430,148) (43,167,278) (2,452,773) (42,007,981)
------------------------------------------------------------------------------------------
Class B (847,506) (14,249,628) (1,258,159) (20,766,907)
------------------------------------------------------------------------------------------
Class C (162,642) (2,743,431) (177,417) (2,914,578)
------------------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 64,096 1,040,919 164,726 2,780,930
------------------------------------------------------------------------------------------
Class B (58,731) (1,040,919) (169,807) (2,780,930)
------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
FROM CAPITAL
SHARE TRANSACTIONS $ 11,974,945 $ 5,207,518
------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
5
EXPENSE OFF-SET
ARRANGEMENTS The Fund has entered into arrangements with its
custodian and transfer agent 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
and transfer agent fees were reduced by $160 and
$5,808, respectively, 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.
23
<PAGE> 24
TRUSTEES&OFFICERS
<TABLE>
<S> <C> <C>
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
</TABLE>
<TABLE>
<S> <C>
..............................................................................................
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
</TABLE>
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 - 3 (7/25/00) 1116590
