<PAGE> 1
KEMPER
ASIAN GROWTH FUND
SEMIANNUAL REPORT TO SHAREHOLDERS FOR THE PERIOD ENDED MAY 31, 1997
Seeks to provide long-term capital growth
" . . . The Asian markets were divided
into several camps during this period; countries ...
that were benefiting from an economic upswing, and
countries ... that needed to slow bank lending and
asset price inflation."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
Economic Overview
5
Performance Update
8
Largest Holdings
9
Portfolio of
Investments
12
Financial Statements
14
Notes to
Financial Statements
18
Financial Highlights
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER ASIAN GROWTH FUND
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED MAY 31, 1997
(UNADJUSTED FOR ANY SALES CHARGE):
[BAR GRAPH]
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A -0.30%
CLASS B -0.60%
CLASS C -0.50%
LIPPER PACIFIC EX JAPAN FUNDS CATEGORY AVERAGE* 3.68%
- --------------------------------------------------------------------------------
</TABLE>
Returns are historical and do not represent 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. Investment in foreign securities
presents special risk considerations including fluctuating currency exchange
rates, government regulations and differences in liquidity.
* Lipper Analytical Services, Inc. returns are based upon changes in net asset
value with all dividends reinvested and do not include the effect of sales
charges and, if they had, results may have been less favorable.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
5/31/97 11/30/96
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER ASIAN GROWTH FUND CLASS A $10.01 $10.04
- --------------------------------------------------------------------------------
KEMPER ASIAN GROWTH FUND CLASS B $ 9.97 $10.03
- --------------------------------------------------------------------------------
KEMPER ASIAN GROWTH FUND CLASS C $ 9.98 $10.03
- --------------------------------------------------------------------------------
</TABLE>
TERMS TO KNOW
CONGLOMERATE A corporation composed of companies in a variety of businesses.
CORRECTION A reverse movement, usually downward, in the price of a group of
stocks or the overall market. Corrections are to be expected over a long term.
FEDERAL FUNDS RATE The interest rate banks charge each other for overnight loans
that are needed to meet reserve requirements. Often considered the most
sensitive indicator of the direction of interest rates.
MARKET CAPITALIZATION A measure of the size of a publicly traded company, as
determined by multiplying the current market price per share by the number of
shares outstanding. The market capitalization of a company has bearing on its
perceived earnings potential and risk. Small cap companies (less than $1
billion) may present the potential for greater growth than larger, more
established companies. On the other hand, the stock of small cap companies may
be expected to be more volatile and therefore a greater risk to capital.
RALLY A sharp, short-lived rise in values after a period of either little
movement or falling values.
SECTOR Stocks usually found in related industries. Stocks within a market sector
may be similarly affected by financial, economic, business and other
developments.
VOLATILITY Characteristic of a security, commodity or market to rise or fall
sharply in price within a short period of time. A stock may be volatile because
the outlook for the company is particularly uncertain or because of various
other reasons.
<PAGE> 3
ECONOMIC OVERVIEW
[TIMBERS PHOTO]
STEPHEN B. TIMBERS IS PRESIDENT, CHIEF INVESTMENT AND EXECUTIVE OFFICER OF
ZURICH KEMPER INVESTMENTS, INC. (ZKI). ZKI AND ITS AFFILIATES MANAGE
APPROXIMATELY $80 BILLION IN ASSETS, INCLUDING $45 BILLION IN RETAIL MUTUAL
FUNDS. TIMBERS IS A GRADUATE OF YALE UNIVERSITY AND HOLDS AN M.B.A. FROM HARVARD
UNIVERSITY.
DEAR SHAREHOLDER,
The consistently good news on the domestic economy and the recent agreement
between the White House and Republican leaders in Congress to balance the
federal budget has provided the basis for strong stock and bond markets. This
progress on balancing the budget, an initiative that the bond market was
anticipating resolution of more than one year ago, has very positive long term
implications for financial markets.
The next several weeks will find Congress and the Clinton administration
negotiating toward a final agreement. Unlike previous failed proposals that
sought to balance the budget principally by increasing income taxes, the current
plan -- which starts from the base of a relatively small deficit -- proposes to
slow the growth of federal spending. As such, its prospects are promising.
Natural skeptics are waiting to see specific legislation to see if the
agreement has teeth. While we are optimistic, we need to temper our enthusiasm.
Much of the good news associated with a balanced budget has been discounted in
the higher prices in the stock and bond markets.
Of particular interest to equity investors is the agreement to reduce the
maximum tax rate on capital gains. Although details of the reduction are yet to
be known, the prospect of more favorable tax treatment on gains will have the
short-term effect of supporting stocks -- investors can be expected to postpone
selling until they can qualify for the lower tax rate. With equity sales
essentially "frozen" until the effective date is known, the stock market should
have a considerable underpinning. Once an effective date is determined, we would
expect the pent-up selling to occur. However, then we shall enjoy the long-term
positive effect of the lower tax rate on gains.
Talk of a balanced budget has shifted the spotlight away from the Federal
Reserve Board's upward pressure on interest rates. Having declined to raise
rates in May, the Fed may still act again at a later date. However, this action
may be the last for a while because the economy seems to be slowing down in the
second quarter, after the rapid 5.6 percent annualized growth in the first
quarter of the year. A slower economy would reduce the threat of inflation and
reduce the need for further rate hikes by the Fed.
In fact, a review of the standard measures of the economy shows little to
be concerned about and much to be encouraged by. As has been the pattern for
more than five years, a few strong quarters followed by a few weak quarters have
produced an overall 2 to 3 percent rate of growth in gross domestic product
(GDP). Job creation and the unemployment rate are consistent with a moderately
expanding economy. Corporate profits continue to grow at an expected 4 to 5
percent rate in 1997. The Consumer Price Index continues to track at a 2.5 to
3.0 percent rate.
Leadership in the stock market has been quite narrow and concentrated in
the first half of 1997 in large, multinational companies with familiar consumer
brand names. The recent rally after the announcement of a balanced budget
agreement suggests that valuations of smaller capitalization stocks are
compelling and the market is broadening.
A natural response to increased volatility in the U.S. equity market is to
look abroad. In fact, the valuations of many international markets are more
attractive than the U.S. However, the weak German and Japanese economies make it
difficult to identify many exciting near-term opportunities without careful
research.
3
<PAGE> 4
ECONOMIC OVERVIEW
- -------------------------------------------------------------------------------
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 (6/30/97) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1) 6.49 6.58 6.87 6.28
PRIME RATE(2) 8.5 8.25 8.25 8.8
INFLATION RATE(3) 2.3 3.04 2.95 2.76
THE U.S. DOLLAR(4) 5.52 4.59 8.35 -7.04
CAPITAL GOODS ORDERS(5)* 8.17 2.23 2.44 8.24
INDUSTRIAL PRODUCTION(5) 3.84 4.84 3.38 2.36
EMPLOYMENT GROWTH(6) 2.12 2.41 2.18 2.46
</TABLE>
(1) Falling interest rates in recent years have been a big plus for financial
assets.
(2) The interest rate that commercial lenders charge their best borrowers.
(3) Inflation reduces an investor's real return. In the last five years,
inflation has been as high as 6%. The low, moderate inflation of the last
few years has meant high real returns.
(4) Changes in the exchange value of the dollar impact U.S. exporters and the
value of U.S. firms' foreign profits.
(5) These influence corporate profits and equity performance.
(6) An influence on family income and retail sales.
* Data as of May 31, 1997.
SOURCE: ECONOMICS DEPARTMENT, ZURICH KEMPER INVESTMENTS, INC.
Our recommendation to shareholders is to stay the course and to fight the
temptation to try to time when and where you should be invested without help.
Financial assets react much quicker today to events. Volatility has returned to
the market and with it heightened uncertainty. Now is the time to rely on your
financial representative for the expertise and the long-term investing
discipline that he or she can provide.
With this commentary as an economic backdrop, we encourage you to read the
following detailed report of your fund, including an interview with your fund's
portfolio management. Thank you for your continued support. We appreciate the
opportunity to serve your investment needs.
Sincerely,
/s/ Stephen B. Timbers
STEPHEN B. TIMBERS
PRESIDENT, CHIEF INVESTMENT AND EXECUTIVE OFFICER
Zurich Kemper Investments, Inc.
July 11, 1997
4
<PAGE> 5
PERFORMANCE UPDATE
[MASON PHOTO]
ANDREW MASON JOINED ZURICH INVESTMENT MANAGEMENT, LTD. IN 1994 AND IS THE
DIRECTOR OF ASIAN EQUITIES AND PORTFOLIO MANAGER OF KEMPER ASIAN GROWTH FUND.
MASON RECEIVED HIS BACHELOR'S DEGREE IN ECONOMICS FROM UNIVERSITY COLLEGE
SWANSEA AND UNDERTOOK POST GRADUATE RESEARCH AT UNIVERSITY COLLEGE BUCKINGHAM.
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.
IN THE SIX-MONTH PERIOD ENDED MAY 31, 1997, KEMPER ASIAN GROWTH FUND PORTFOLIO
MANAGER ANDREW MASON MADE HONG KONG A PREDOMINANT FOCUS. THIS MARKET ENJOYED
RECORD STRENGTH AS PROPERTY MARKETS SURGED AND THE POLITICAL ENVIRONMENT
SPURRED INVESTOR CONFIDENCE. MASON DISCUSSES HIS TEAM'S STRATEGY AND THE FUND'S
PERFORMANCE.
Q WHILE THE FUND'S -0.30% (CLASS A SHARES, UNADJUSTED FOR SALES CHARGE)
SIX-MONTH RETURN BEAT THE MORGAN STANLEY CAPITAL INTERNATIONAL ASIA COMBINED FAR
EAST FREE EX-JAPAN INDEX*, -2.06%, THE FUND UNDERPERFORMED ITS LIPPER CATEGORY
AVERAGE. (SEE PAGE 2 FOR LIPPER ANALYTICAL SERVICES, INC. PERFORMANCE
INFORMATION.) HOW DID YOU POSITION THE FUND DURING THE PERIOD AND HOW DID THAT
DIFFER FROM ITS LIPPER CATEGORY PEERS?
A At 43 percent, our largest exposure was in Hong Kong so the fund's
performance was very much tied to that market. Residential property prices and
the Hang Seng Index** hit record highs and the fund was positioned to benefit
from this market strength. Red Chips, companies listed in Hong Kong but backed
by Chinese entities, were a major investment theme for us within Hong Kong. Our
exposure reached as much as 18 percent at the end of May.
Singapore was our next largest exposure (18.6 percent of the fund), with
around one-third of our holdings in small capitalization regional growth stocks
like Informatics, an information technology training company.
Our weightings vary from our peers largely in two markets: Taiwan and
Korea. The application process for direct investment in these two markets has
been complex and the alternative investment options trade at very high
premiums. Taiwan has been the top performing market in the region as the
domestic liquidity driven rally continued. Our exposure was only about three
percent compared to an index weighting of 13 percent.
We had no exposure to Korea throughout the period. We have received
investment approval from local authorities and have begun to invest in
this market. Our emphasis in Korea is likely to be on high-tech and
manufacturing companies.
Another area where we may have varied relative to our peers was in the
percentage of cash we held in the fund. We had as much as 10 percent in cash at
certain points. This was partially due to new assets coming into the fund but we
also held higher levels of cash to protect value during volatile periods in the
markets. The main methods for helping to reduce risk in this region are through
diversification -- both at the company and market level -- and holding higher
levels of cash. The fund is well diversified so our decision to hold cash was
another approach we took to withstand
5
<PAGE> 6
PERFORMANCE UPDATE
some rocky periods in the markets. Under less volatile circumstances, we would
prefer to have a cash level of around five percent.
*THE MORGAN STANLEY CAPITAL INTERNATIONAL ASIA COMBINED FAR EAST FREE EX-JAPAN
INDEX IS GENERALLY REPRESENTATIVE OF ASIAN FREE MARKET PERFORMANCE, EXCLUDING
JAPAN.
**THE HANG SENG INDEX IS A CAPITALIZATION WEIGHTED, PRICE ONLY INDEX THAT TRACKS
THE PERFORMANCE OF SHARES LISTED ON THE HONG KONG STOCK EXCHANGE.
Q WHAT DID YOU SEE HAPPENING IN THE DIFFERENT COUNTRIES THAT LED TO THE
OVERALL DOWNTURN IN REGIONAL PERFORMANCE?
A The Asian markets were divided into several camps during this period;
countries such as Hong Kong and Indonesia that were benefiting from an economic
upswing, and countries like Malaysia and the Philippines that needed to slow
bank lending and asset price inflation. Thailand was an unfortunate example of
what can go wrong if excesses go unchecked.
The Hong Kong economy bottomed out in 1995 but recovered strongly through
1996 -- a rebound we expect to continue through 1998. The stock market was
strong in the fourth quarter of 1996. In the first quarter of this year,
however, the market entered a consolidation phase that was followed by a
sell-off in March and April in the wake of the increase in the Fed Funds Rate.
Confidence returned to the market in May, led by strong performance from
large-cap stocks such as HSBC, HK Telecom and property development companies.
Red Chip stocks performed very strongly in the months leading to the July 1
handover of Hong Kong to China.
In contrast, Thai markets saw aggressive sell-offs as concerns mounted
about property companies and the finance sector. The bankruptcy of Finance 1,
the largest finance company in Thailand, and the suspension of operations of 16
small finance companies verified the instability of the sector. These problems,
and the high level of foreign debt, led to a run on the Thai currency which,
after the imposition of direct exchange controls, paved the way for a
devaluation of the currency.
Concerns over bank lending were also found in Malaysia. Interest rates
remained high in this market with little chance of a reduction because of high
current lending levels. However, economic growth in Malaysia was fairly steady
at around eight percent as infrastructure and commercial development projects
kept the economy from slowing down significantly during the period.
In Singapore we saw a slowdown in gross domestic product growth. Slowed
manufacturing and non-oil exports, due primarily to a slowdown in the
electronics industry, were to blame for this downturn. Banks in Singapore,
however, are ahead of other banks in the region in controlling the rate of
lending growth and the M.A.S. (Monetary Authority of Singapore) is in a position
to ease monetary policies ahead of other central banks in the region. In the
first quarter of 1997, lending growth was 14 percent, in line with new housing
loan commitments. The Singapore market is attractively valued and should perform
well as the economy starts to pick up later this year and early in 1998.
Q WAS THERE ANY CHANGE IN THE POLITICAL ENVIRONMENT IN THE REGION?
A With multiple elections and the imminent Hong Kong handover, these markets
saw a lot of political activity. In Thailand a new coalition government was
formed in November. To date, they have not been able to overcome the economic
problems facing Thailand and it remains to be seen if this government can
survive the currency depreciation. In Singapore and Indonesia, the ruling
parties were returned to power. And in Hong Kong, C.H. Tung was appointed Chief
Executive of the Hong Kong SAR, the new government of Hong Kong following the
handover. Early indications of policy suggest this new government will focus on
maintaining the business culture of Hong Kong while trying to increase
provisions for lower cost housing to help the lower income groups in Hong Kong.
Q WHAT EFFECT DO YOU EXPECT THE HANDOVER TO HAVE ON THE HONG KONG MARKET AND
ON THE RED CHIP STOCKS?
A Investors showed a great deal of confidence in Hong Kong in the months
leading to the handover, but it is now time to take stock of the new chief
executive. C.H. Tung has indicated his desire to increase supply in the property
market but detailed proposals are likely to be outlined in October rather than
in the early days of his office.
6
<PAGE> 7
PERFORMANCE UPDATE
Red Chips have performed well and currently they account for around eight
percent of the Hong Kong stock market. Closer scrutiny of transactions with
related parties and acquisitions from China may occur which may lead to a more
orderly process, but ultimately corporate China needs cash and Red Chips are a
way to get it.
Q A FOCUS ON RED CHIPS IS, AS YOU MENTIONED, ONE OF YOUR MAJOR THEMES. WHAT
ARE SOME OF THE OTHERS YOU ARE FOLLOWING WITH THE FUND?
A The restructuring of the banking and finance sector in Greater China is
likely to be a theme in Hong Kong, taking in both Hong Kong banks and Chinese
banks as Hong Kong provides China with greater access to world capital markets.
With this restructuring in mind, our team invested in companies likely to
benefit from these changes.
Throughout the region, property is always a major theme. This is a
developing region so building is booming but sometimes it gets ahead of
itself. This can be a negative, but long-term population growth and efforts to
improve living standards should help utilize much of the excesses in
development. Within the fund, we invested in residential property developers
such as Cheung Kong and companies like New World Infrastructure which should
benefit from the region's infrastructure development focus.
Where possible, we invested in new technology companies. Datacraft Asia,
an information technology company based in Singapore, and Founder, a Hong
Kong company that has exclusive rights to the software research of Beijing
University, are two technology companies we are invested in.
Conglomerates like CITIC Pacific in Hong Kong and Sime Darby in Malaysia
were a major theme for investment. Sometimes this is the only way to access
some of the businesses we would like to invest in. This is the case of
Hutchison Whampoa which is one of the main operators of Hong Kong's busy
container port.
Despite the restrictions on bank lending in a number of markets, we
maintained a position in the finance sector. Our focus was on quality
banks like HSBC Holdings in Hong Kong and DBS in Singapore.
Q WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS?
A In Hong Kong, we are likely to see a correction, but we still think this
market looks very attractive and the themes we have focused on should enjoy
continued strength. As I mentioned, we don't expect C.H. Tung to introduce
sweeping changes in his early days but we have to wait to see what measures he
introduces for the property sector in Hong Kong as this is a key sector of the
market.
We are cautious about Malaysia going forward. The economy saw some notable
improvements in the trade deficit last year but we expect some slippage this
year. Bank Negara, the Malaysian central bank, has introduced measures to try to
slow lending rates but it is too soon to see improvements. Lending growth is
still running very high and interest rates are likely to remain high. Property
supply is also due to increase dramatically in Malaysia and there are some
large, unattractive IPOs expected which will dampen enthusiasm for the market.
Korea will be a new focus for the fund in the coming months. This market
provides access to larger cap manufacturing companies including steel and
petrochemical companies. We are likely to concentrate on high-tech manufacturing
companies in the electronics sector.
In Singapore, markets are attractively valued but there isn't a great
deal of variety. Generally, there are banks, property companies and some
consumer issues such as Singapore Press Holdings, the newspaper publisher.
There are, however, attractive smaller companies in Singapore in the service
sector and electronics sector so we will continue to focus on these types of
companies.
7
<PAGE> 8
LARGEST HOLDINGS
THE FUND'S 5 LARGEST HOLDINGS*
REPRESENTING 17.7% OF THE FUND'S COMMON STOCK HOLDINGS ON MAY 31, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
HOLDINGS PERCENT
- --------------------------------------------------------------------------------
<S> <C> <C>
1. BEIJING ENTERPRISES 4.4%
2. HSBC HOLDINGS PLC 3.5%
3. CHEUNG KONG HOLDINGS 3.5%
4. MALAYAN BANKING 3.2%
5. HENDERSON LAND DEVELOPMENT 3.1%
</TABLE>
*Portfolio holdings are subject to change.
8
<PAGE> 9
PORTFOLIO OF INVESTMENTS
KEMPER ASIAN GROWTH FUND
PORTFOLIO OF INVESTMENTS AT MAY 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HONG KONG--43.0% (a)Bejing Enterprises
CONGLOMERATE 40,000 $ 233,000
HSBC Holdings PLC
BANKING 6,105 185,000
Cheung Kong Holdings Ltd.
PROPERTY DEVELOPMENT 18,000 184,000
Henderson Land Development Co., Ltd.
PROPERTY DEVELOPMENT 17,000 166,000
CITIC Pacific Ltd.
CONGLOMERATE 28,000 160,000
Sun Hung Kai & Co., Ltd.
PROPERTY DEVELOPMENT 13,000 160,000
Swire Pacific Ltd., "A"
CONGLOMERATE 19,000 159,000
Cosco Pacific
TRADING, SHIPPING AND FREIGHT 110,000 158,000
Wharf Holdings Ltd.
CONGLOMERATE 35,000 157,000
Hysan Development Co., Ltd.
PROPERTY INVESTMENT 45,000 150,000
Hutchison Whampoa Ltd.
CONGLOMERATE 17,000 141,000
(a)New World Infrastructure Ltd.
INFRASTRUCTURE DEVELOPMENT 40,000 125,000
Shanghai Industrial Holdings Ltd.
CONGLOMERATE 20,000 112,000
Hong Kong Telecommunications Ltd.
TELECOMMUNICATIONS 45,200 100,000
Founder Hong Kong Ltd.
SOFTWARE DEVELOPMENT AND SYSTEMS INTEGRATION 144,000 98,000
Guangnan Holdings
FOOD DISTRIBUTOR 56,000 90,000
Chen Hsong Holdings Ltd.
MANUFACTURER OF PLASTIC MOLDING MACHINES 150,000 88,000
China Travel International Investment Hong Kong
TOURISM 150,000 87,000
-------------------------------------------------------------------------
2,553,000
- ------------------------------------------------------------------------------------------------------------------
SINGAPORE--18.6% Development Bank of Singapore
BANKING 13,000 163,000
Cycle & Carriage Ltd.
AUTOMOBILE SALES AND DISTRIBUTION 14,000 142,000
City Developments Ltd.
REAL ESTATE DEVELOPMENT 13,000 121,000
Singapore Press Holdings Ltd.
PUBLISHER 5,000 100,000
Lindeteves-Jacoberg Ltd.
MACHINERY INSTALLATION 60,000 99,000
DBS Land Ltd.
PROPERTY INVESTMENT 28,000 98,000
Keppel Bank
BANKING 35,000 94,000
Pentex-Schweizer Circuits Ltd.
PRINTED CIRCUIT BOARD MANUFACTURER 62,000 78,000
Datacraft Asia Ltd.
INFORMATION TECHNOLOGY SUPPLIER 25,000 76,000
</TABLE>
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Keppel Corp Ltd.
CONGLOMERATE 15,750 $ 72,000
Informatics Holdings Ltd.
INFORMATION TECHNOLOGY TRAINING AND EDUCATION 110,000 60,000
-------------------------------------------------------------------------
1,103,000
- ------------------------------------------------------------------------------------------------------------------
MALAYSIA--13.7% Malayan Banking Bhd
BANKING 16,000 169,000
Hume Industries Bhd
CONSTRUCTION MATERIAL MANUFACTURER 20,000 107,000
DCB Holdings Bhd
BANKING 33,000 106,000
Magnum Corporation Bhd
ENTERTAINMENT AND GAMING 60,000 100,000
Sungei Way Holdings Bhd
BUILDING MATERIALS COMPANY 43,600 99,000
Sime Darby Bhd
CONGLOMERATE 27,000 88,000
Genting Bhd
GAMING 13,000 68,000
Kedah Cement Bhd
CEMENT MANUFACTURER 30,000 44,000
O.Y.L. Industries Bhd
AIR CONDITIONER MANUFACTURER 5,000 34,000
-------------------------------------------------------------------------
815,000
- ------------------------------------------------------------------------------------------------------------------
INDONESIA--7.7% Bank Internasional Indonesia,
with warrants expiring January 2000
BANKING 119,995 128,000
Bimantara Citra
CONGLOMERATE 70,000 119,000
Gudang Garam, PT
CIGARETTE MANUFACTURER 27,000 117,000
Telekomunikasi Indonesia
TELECOMMUNICATIONS 55,000 93,000
-------------------------------------------------------------------------
457,000
- ------------------------------------------------------------------------------------------------------------------
PHILLIPPINES--2.7% SM Prime Holdings Inc.
REAL ESTATE INVESTMENT 125,000 36,000
Ayala Corp.
CONGLOMERATE 37,500 28,000
DMCI Holdings Inc.
CONSTRUCTION 45,000 27,000
Metropolitan Bank and Trust Co.
BANKING 1,080 24,000
C&P Homes
REAL ESTATE 60,000 23,000
Solid Group
ELECTRONICS MANUFACTURER 100,000 19,000
-------------------------------------------------------------------------
157,000
- ------------------------------------------------------------------------------------------------------------------
TAIWAN--2.4% (a)ROC Taiwan Fund
INVESTMENT HOLDINGS 13,000 143,000
-------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
THAILAND--1.4% Lanna Lignite Public Co. Ltd.
COAL MINING 3,500 $ 29,000
Tipco Asphalt Company PCL
ASPHALT PRODUCER AND DISTRIBUTOR 6,000 28,000
Siam Makro Co. Ltd.
WHOLESALER 9,000 23,000
-------------------------------------------------------------------------
80,000
-------------------------------------------------------------------------
TOTAL COMMON STOCKS--89.5%
(Cost: $5,052,000) 5,308,000
-------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET Yield--5.39% to 5.40%
INSTRUMENTS--8.4% Due--June and July 1997
Federal Home Loan Mortgage Co. $300,000 299,000
Federal National Mortgage Association 200,000 199,000
-------------------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--8.4%
(Cost: $498,000) 498,000
-------------------------------------------------------------------------
TOTAL INVESTMENTS--97.9%
(Cost: $5,550,000) 5,806,000
-------------------------------------------------------------------------
CASH AND OTHER ASSETS,
LESS LIABILITIES--2.1% 126,000
-------------------------------------------------------------------------
NET ASSETS--100% $5,932,000
-------------------------------------------------------------------------
</TABLE>
At May 31, 1997, the Fund's portfolio of investments had the following industry
diversification:
<TABLE>
<CAPTION>
VALUE %
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Diversified Holding Companies $1,269,000 21.4
- -------------------------------------------------------------------------------------------
Real Estate 938,000 15.8
- -------------------------------------------------------------------------------------------
Banks 869,000 14.6
- -------------------------------------------------------------------------------------------
Construction and Building Materials 430,000 7.2
- -------------------------------------------------------------------------------------------
Services 411,000 6.9
- -------------------------------------------------------------------------------------------
Machinery 318,000 5.4
- -------------------------------------------------------------------------------------------
Utilities 193,000 3.3
- -------------------------------------------------------------------------------------------
Leisure 168,000 2.8
- -------------------------------------------------------------------------------------------
Transportation 158,000 2.7
- -------------------------------------------------------------------------------------------
Finance 143,000 2.4
- -------------------------------------------------------------------------------------------
Automobiles 142,000 2.4
- -------------------------------------------------------------------------------------------
Tobacco Manufacturing 117,000 2.0
- -------------------------------------------------------------------------------------------
Media 100,000 1.7
- -------------------------------------------------------------------------------------------
Miscellaneous 52,000 .9
- -------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 5,308,000 89.5
- -------------------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS AND OTHER NET ASSETS 624,000 10.5
- -------------------------------------------------------------------------------------------
NET ASSETS $5,932,000 100.0
- -------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $5,550,000 for federal income tax purposes
at May 31, 1997, the gross unrealized appreciation was $518,000, the gross
unrealized depreciation was $262,000 and the net unrealized appreciation on
investments was $256,000.
See accompanying Notes to Financial Statements.
11
<PAGE> 12
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1997
<TABLE>
<S> <C>
- --------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------
Investments, at value
(Cost: $5,550,000) $5,806,000
- --------------------------------------------------------------------------
Cash 104,000
- --------------------------------------------------------------------------
Receivable for:
Dividends 31,000
- --------------------------------------------------------------------------
Fund shares sold 5,000
- --------------------------------------------------------------------------
TOTAL ASSETS 5,946,000
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- --------------------------------------------------------------------------
Payable for:
Management fee 4,000
- --------------------------------------------------------------------------
Distribution services fee 3,000
- --------------------------------------------------------------------------
Administrative services fee 3,000
- --------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 4,000
- --------------------------------------------------------------------------
Total liabilities 14,000
- --------------------------------------------------------------------------
NET ASSETS $5,932,000
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- --------------------------------------------------------------------------
Paid-in capital $5,904,000
- --------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (244,000)
- --------------------------------------------------------------------------
Net unrealized appreciation on investments 256,000
- --------------------------------------------------------------------------
Undistributed net investment income 16,000
- --------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $5,932,000
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
THE PRICING OF SHARES
- --------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($2,790,000 / 278,750 shares outstanding) $10.01
- --------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $10.62
- --------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($2,839,000 / 284,900 shares outstanding) $9.97
- --------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($303,000 / 30,350 shares outstanding) $9.98
- --------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
12
<PAGE> 13
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1997
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
NET INVESTMENT INCOME
- ------------------------------------------------------------------------
Dividends (less foreign taxes withheld) $ 49,000
- ------------------------------------------------------------------------
Interest 12,000
- ------------------------------------------------------------------------
Total investment income 61,000
- ------------------------------------------------------------------------
Expenses:
Management fee 17,000
- ------------------------------------------------------------------------
Distribution services fee 8,000
- ------------------------------------------------------------------------
Administrative services fee 5,000
- ------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 13,000
- ------------------------------------------------------------------------
Professional fees 3,000
- ------------------------------------------------------------------------
Total expenses before expense waiver 46,000
- ------------------------------------------------------------------------
Less expenses waived by investment manager 5,000
- ------------------------------------------------------------------------
Total expenses after expense waiver 41,000
- ------------------------------------------------------------------------
NET INVESTMENT INCOME 20,000
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------------------------
Net realized loss on sales of investments and foreign
currency transactions (244,000)
- ------------------------------------------------------------------------
Change in net unrealized appreciation on investments 198,000
- ------------------------------------------------------------------------
Net loss on investments (46,000)
- ------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(26,000)
- ------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED OCTOBER 21 TO
MAY 31, NOVEMBER 30,
1997 1996
- -----------------------------------------------------------------------------------------------------------
OPERATIONS AND CAPITAL SHARE ACTIVITY
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income $ 20,000 --
- -----------------------------------------------------------------------------------------------------------
Net realized loss (244,000) --
- -----------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation 198,000 58,000
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (26,000) 58,000
- -----------------------------------------------------------------------------------------------------------
Net increase from capital share transactions 4,009,000 1,391,000
- -----------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 3,983,000 1,449,000
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------------
Beginning of period 1,949,000 500,000
- ----------------------------------------------------------------------------------------------------------
END OF PERIOD (including undistributed net investment
income of $16,000 at May 31, 1997) $5,932,000 1,949,000
- ----------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE
FUND Kemper Asian Growth Fund is an open-end management
investment company organized as a business trust
under the laws of Massachusetts. The Fund commenced
operations on October 21, 1996. The Fund currently
offers four classes of shares. Class A shares are
sold to investors subject to an initial sales
charge. Class B shares are sold without an initial
sales charge but are subject to higher ongoing
expenses than Class A shares and a contingent
deferred sales charge payable upon certain
redemptions. Class B shares automatically convert
to Class A shares six years after issuance. Class C
shares are sold without an initial sales charge but
are subject to higher ongoing expenses than Class A
shares and a contingent deferred sales charge
payable upon certain redemptions within one year of
purchase. Class C shares do not convert into
another class. Class I shares (none sold through
May 31, 1997) are offered to a limited group of
investors, are not subject to initial or contingent
deferred sales charges and have lower ongoing
expenses than other classes. Differences in class
expenses will result in the payment of different
per share income dividends by class. All shares of
the Fund have equal rights with respect to voting,
dividends and assets, subject to class specific
preferences.
- --------------------------------------------------------------------------------
2 SIGNIFICANT
ACCOUNTING POLICIES INVESTMENT VALUATION. Investments are stated at
value. Portfolio securities that are traded on a
domestic securities exchange are valued at the last
sale price on that exchange or, if there is no
recent sale price available, at the last current
bid quotation. Portfolio securities that are
primarily traded on foreign securities exchanges
are generally valued at the preceding closing
values of such securities on their respective
exchanges where primarily traded. A security that
is listed or traded on more than one exchange is
valued at the quotation on the exchange determined
to be the primary market for such security by the
Board of Trustees or its delegates. All other
securities not so traded are valued at the last
current bid quotation if market quotations are
available. Fixed income securities are valued by
using market quotations, or independent pricing
services that use prices provided by market makers
or estimates of market values obtained from yield
data relating to instruments or securities with
similar characteristics. Equity options are valued
at the last sale price unless the bid price is
higher or the asked price is lower, in which event
such bid or asked price is used. Financial futures
and options thereon are valued at the settlement
price established each day by the board of trade or
exchange on which they are traded. Forward foreign
currency contracts and foreign currencies are
valued at the forward and current exchange rates,
respectively, prevailing on the day of valuation.
Other securities and assets are valued at fair
value as determined in good faith by the Board of
Trustees.
CURRENCY TRANSLATION. The books and records of the
Fund are maintained in U.S. dollars. All assets and
liabilities initially expressed in foreign currency
values are converted into U.S. dollar values at the
mean between the bid and offered quotations of such
currencies against U.S. dollars as last quoted by a
recognized dealer. If such quotations are not
readily
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
available, the rates of exchange are determined in
good faith by the Board of Trustees. Income and
expenses and purchases and sales of investments are
translated into U.S. dollars at the rates of
exchange prevailing on the respective dates of such
transactions. The Fund includes that portion of the
results of operations resulting from changes in
foreign exchange rates with net realized and
unrealized gain (loss) on investments, as
appropriate.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date (date the order to buy or sell is
executed). Dividend income is recorded on the
ex-dividend date, except that certain dividends
from foreign securities are recorded as soon as the
information is available to the Fund. Interest
income is recorded on the accrual basis and
includes discount amortization on money market
instruments. Realized gains and losses from
investment transactions are reported on an
identified cost basis.
FUND SHARE VALUATION. Fund shares are sold and
redeemed on a continuous basis at net asset value
(plus an initial sales charge on most sales of
Class A shares). Proceeds payable on redemption of
Class B and Class C shares will be reduced by the
amount of any applicable contingent deferred sales
charge. On each day the New York Stock Exchange is
open for trading, the net asset value per share is
determined as of the earlier of 3:00 p.m. Chicago
time or the close of the Exchange. The net asset
value per share is determined separately for each
class by dividing the Fund's net assets
attributable to that class by the number of shares
of the class outstanding. Because of the need to
obtain prices as of the close of trading on various
exchanges throughout the world, the calculation of
net asset value does not take place
contemporaneously with the determination of the
prices of the majority of the portfolio securities.
FEDERAL INCOME TAXES. The Fund has complied with
the special provisions of the Internal Revenue Code
available to investment companies during the six
months ended May 31, 1997. The accumulated net
realized loss on sales of investments for federal
income tax purposes at May 31, 1997, amounting to
approximately $242,000, is available to offset
future taxable gains. If not applied, the loss
carryover expires in the period ended 2005.
DIVIDENDS TO SHAREHOLDERS. The Fund declares and
pays dividends of net investment income and net
realized capital gains annually, which are recorded
on the ex-dividend date. Dividends are determined
in accordance with income tax principles which may
treat certain transactions differently from
generally accepted accounting principles. These
differences are primarily due to differing
treatments for certain transactions such as foreign
currency transactions.
EQUALIZATION ACCOUNTING. A portion of proceeds from
sales and cost of redemptions of Fund shares is
credited or charged to undistributed net investment
income so that income per share available for
distribution is not affected by sales or
redemptions of shares.
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The Fund has a management
agreement with Zurich Kemper Investments, Inc.
(ZKI) and pays a management fee at an annual rate
of .85% of the first $250 million of average daily
net assets declining to .72% of average daily net
assets in excess of $12.5 billion. However, ZKI has
agreed to a reduction of its management fee to .60%
until the earlier of October 21, 1997 or the date
when the Fund's net assets reach $100 million. For
the six months ended May 31, 1997, the Fund
incurred a management fee of $12,000 after a waiver
of $5,000 by ZKI. Zurich Investment Management
Limited, an affiliate of ZKI, serves as sub-adviser
with respect to foreign securities investments in
the Fund, and is paid by ZKI for its services.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
The Fund has an underwriting and distribution
services agreement with Zurich Kemper Distributors,
Inc. (ZKDI) (formerly known as Kemper Distributors,
Inc.). Underwriting commissions paid in connection
with the distribution of Class A shares are as
follows:
<TABLE>
<CAPTION>
COMMISSIONS COMMISSIONS
RETAINED BY ALLOWED BY ZKDI
ZKDI TO FIRMS
----------- ---------------
<S> <C> <C>
Six months ended May 31, 1997 $6,000 42,000
</TABLE>
For services under the distribution services
agreement, the Fund pays ZKDI a fee of .75% of
average daily net assets of the Class B and Class C
shares. Pursuant to the agreement, ZKDI enters into
related selling group agreements with various firms
at various rates for sales of Class B and Class C
shares. In addition, ZKDI receives any contingent
deferred sales charges (CDSC) from redemptions of
Class B and Class C shares. Distribution fees and
commissions paid in connection with the sale of
Class B and Class C shares and the CDSC received in
connection with the redemption of such shares are
as follows:
<TABLE>
<CAPTION>
DISTRIBUTION FEES COMMISSIONS AND
AND CDSC DISTRIBUTION FEES
RECEIVED BY ZKDI PAID BY ZKDI TO FIRMS
----------------- ----------------------
<S> <C> <C>
Six months ended May 31, 1997 $10,000 79,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with ZKDI. For
providing information and administrative services
to shareholders, the Fund pays ZKDI a fee at an
annual rate of up to .25% of average daily net
assets. ZKDI in turn has various agreements with
financial services firms that provide these
services and pays these firms based on assets of
Fund accounts the firms service. Administrative
services fees (ASF) paid are as follows:
<TABLE>
<CAPTION>
ASF PAID BY THE ASF PAID BY
FUND TO ZKDI ZKDI TO FIRMS
---------------- --------------
<S> <C> <C>
Six months ended May 31, 1997 $5,000 10,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
Zurich Kemper Service Company (ZKSvC) (formerly
known as Kemper Service Company) is the shareholder
service agent of the Fund. Under the agreement,
ZKSvC received shareholder services fees of $13,000
for the six months ended May 31, 1997.
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of ZKI.
During the six months ended May 31, 1997, the Fund
made no payments to its officers or trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the six months ended May 31, 1997, investment
transactions (excluding short-term instruments) are
as follows:
Purchases $5,459,000
Proceeds from sales 1,686,000
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund:
<TABLE>
<CAPTION>
SIX MONTHS ENDED OCTOBER 21 TO
MAY 31, 1997 NOVEMBER 30, 1996
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 258,000 $2,587,000 64,000 $ 631,000
-------------------------------------------------------------------------------------
Class B 259,000 2,557,000 77,000 760,000
-------------------------------------------------------------------------------------
Class C 14,000 141,000 -- --
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
SHARES REDEEMED
Class A (63,000) (622,000) -- --
-------------------------------------------------------------------------------------
Class B (66,000) (636,000) -- --
-------------------------------------------------------------------------------------
Class C (2,000) (18,000) -- --
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 2,000 13,000 -- --
-------------------------------------------------------------------------------------
Class B (2,000) (13,000) -- --
-------------------------------------------------------------------------------------
NET INCREASE
FROM CAPITAL SHARE
TRANSACTIONS $4,009,000 $1,391,000
-------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 18
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------- ----------------------- -----------------------
CLASS A CLASS B CLASS C
----------------------- ----------------------- -----------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED OCT. 21 TO ENDED OCT. 21 TO ENDED OCT. 21 TO
MAY 31, NOV. 30, MAY 31, NOV. 30, MAY 31, NOV. 30,
1997 1996 1997 1996 1997 1996
- ------------------------------------------------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------- ----------------------- -----------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------- ----------------------- -----------------------
Net asset value, beginning of period $10.04 9.50 10.03 9.50 10.03 9.50
- ------------------------------------------------------------- ----------------------- -----------------------
Income from investment operations:
Net investment income .08 -- .05 -- .06 --
- ------------------------------------------------------------- ----------------------- -----------------------
Net realized and unrealized gain
(loss) (.11) .54 (.11) .53 (.11) .53
- ------------------------------------------------------------- ----------------------- -----------------------
Total from investment operations (.03) .54 (.06) .53 (.05) .53
- ------------------------------------------------------------- ----------------------- -----------------------
Net asset value, end of period $10.01 10.04 9.97 10.03 9.98 10.03
- ------------------------------------------------------------- ----------------------- -----------------------
TOTAL RETURN (NOT ANNUALIZED) (.30)% 5.68 (.60) 5.58 (.50) 5.58
- ------------------------------------------------------------- ----------------------- -----------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------- ----------------------- -----------------------
Expenses after expense waiver 1.52% 1.46 2.42 2.34 2.38 2.34
- ------------------------------------------------------------- ----------------------- -----------------------
Net investment income (loss) 1.49% .74 .59 (.14) .63 (.14)
- ------------------------------------------------------------- ----------------------- -----------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------- ----------------------- -----------------------
Expenses 1.77% -- 2.67 -- 2.63 --
- ------------------------------------------------------------- ----------------------- -----------------------
Net investment income 1.24% -- .34 -- .38 --
- ------------------------------------------------------------- ----------------------- -----------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ----------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED OCT. 21 TO
MAY 31, NOV. 30,
1997 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net assets at end of period $5,932,000 1,949,000
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 81% 74
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Average commission rates paid per share on stock transactions for the six months
ended May 31, 1997 and the period ended November 30, 1996 were $.0102 and
$.0154, respectively. Foreign commissions usually are lower than U.S.
commissions when expressed as cents per share due to the lower per share price
of many non-U.S. securities.
- --------------------------------------------------------------------------------
NOTE: Total return does not reflect the effect of any sales charges. Per share
data for the six months ended May 31, 1997 were determined based on average
shares outstanding. ZKI agreed to temporarily waive certain operating expenses
of the Fund. The Other Ratios to Average Net Assets are computed without this
expense waiver.
18
<PAGE> 19
NOTES
19
<PAGE> 20
TRUSTEES & OFFICERS
TRUSTEES OFFICERS
STEPHEN B. TIMBERS CHARLES R. MANZONI, JR.
President and Trustee Vice President
DAVID W. BELIN JOHN E. NEAL
Trustee Vice President
LEWIS A. BURNHAM STEVEN H. REYNOLDS
Trustee Vice President
DONALD L. DUNAWAY PHILIP J. COLLORA
Trustee Vice President and
Secretary
ROBERT B. HOFFMAN JEROME L. DUFFY
Trustee Treasurer
DONALD R. JONES ELIZABETH C. WERTH
Trustee Assistant Secretary
DOMINIQUE P. MORAX
Trustee
SHIRLEY D. PETERSON
Trustee
WILLIAM P. SOMMERS
Trustee
- --------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICE AGENT ZURICH KEMPER SERVICE COMPANY
P.O. Box 419557
Kansas City, MO 64141
- --------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
127 West 10th Street
Kansas City, MO 64105
- --------------------------------------------------------------------------------
FOREIGN CUSTODIAN THE CHASE MANHATTAN BANK
Chase Metro Center
Brooklyn, NY 11245
- --------------------------------------------------------------------------------
INVESTMENT MANAGER ZURICH KEMPER INVESTMENTS, INC.
PRINCIPAL UNDERWRITER ZURICH KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606
www.kemper.com
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Printed on recycled paper in the U.S.A.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Europe Fund prospectus.
KAGF - 3 (7/97) 1034740
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