<PAGE> 1
KEMPER
ASIAN GROWTH FUND
ANNUAL REPORT TO SHAREHOLDERS FOR THE PERIOD ENDED NOVEMBER 30, 1996
SEEKS TO PROVIDE LONG-TERM CAPITAL GROWTH
" . . . The fund is in its early stages and one of the priorities
is to lay the foundation for future performance by building up a
diverse portfolio of Asian companies."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
2
At A Glance
2
Terms to Know
3
Economic Overview
5
Performance Update
8
Largest Holdings
9
Portfolio of
Investments
12
Report of
Independent Auditors
13
Financial Statements
15
Notes to
Financial Statements
19
Financial Highlights
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER ASIAN GROWTH FUND
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE ONE-MONTH ENDED NOVEMBER 30, 1996
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 6.24%
CLASS B 6.14%
CLASS C 6.14%
LIPPER PACIFIC EX JAPAN
FUNDS CATEGORY AVERAGE* 5.23%
- --------------------------------------------------------------------------------
</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.
*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.
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AS OF AS OF
11/30/96 10/21/96
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER ASIAN GROWTH FUND
CLASS A $10.04 $9.50
- --------------------------------------------------------------------------------
KEMPER ASIAN GROWTH FUND
CLASS B $10.03 $9.50
- --------------------------------------------------------------------------------
KEMPER ASIAN GROWTH FUND
CLASS C $10.03 $9.50
- --------------------------------------------------------------------------------
</TABLE>
You should note there are special risk considerations associated with an
investment in the fund, including fluctuating exchange rates, government
regulations, differences in liquidity and regional concentration. As with any
mutual fund, returns and net asset value will vary.
TERMS TO KNOW
BETA A mathematical measure of the sensitivity of rates of return on a portfolio
or a given stock compared with rates of return on the market as a whole. A high
beta (over 1.0) indicates moderate or high price volatility. A beta of 1.5
forecasts a 1.5% change in the return on an asset for every 1% change in the
return on the market.
CONGLOMERATE A corporation composed of companies in a variety of businesses.
EMERGING MARKETS A developing or emerging country in the initial stages of its
industrial cycle. Developing or "emerging" markets involve exposure to economic
structures and political systems that are generally less diverse, mature and
stable than in the United States.
GROWTH STOCK The stock of a company whose earnings growth has consistently
exceeded the growth rate of the overall market and whose growth is expected to
continue or accelerate.
HANG SENG INDEX A capitalization weighted price only index that tracks the
performance of shares listed on the Hong Kong Stock Exchange. The number of
stocks is limited to 33 companies which covers approximately 62% of the market
capitalization stocks traded on this exchange.
INFRASTRUCTURE A nation's basic system of transportation, communication, and
other aspects of its physical plant. For developing countries, building an
effective infrastructure is a first step in economic development.
SECTOR A specific industry group.
2
<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 $79 BILLION IN ASSETS, INCLUDING $44 BILLION IN RETAIL
MUTUAL FUNDS. TIMBERS IS A GRADUATE OF YALE UNIVERSITY AND HOLDS AN M.B.A. FROM
HARVARD UNIVERSITY.
DEAR SHAREHOLDER:
As we begin a new year, it's remarkable how eventful 1996 was and yet,
economically, we are essentially where we were one year ago.
The fundamentals of the economy are remarkably similar. Long-term interest
rates are approximately 6.5% compared to the 6.5% to 7% range they were in
during the first half of 1996. We believe the economy is growing at a rate of
approximately 2.5%. Inflation continues to be well under control, at about 3.0%.
One significant difference between today and one year ago is that prices of
the stocks are on average up 20%. While price movements were more volatile in
1996 than in the past few years, the patient investor was amply rewarded. The
prime element sending the stock market higher was strong positive cash flows.
This liquidity in an environment of modestly increasing corporate profits and
relatively stable interest rates pushed stocks higher for most of the year.
This higher stock market has caused many market observers to worry. While
we cannot ignore what has happened, we find no reason to be bearish over the
long term. The environment is benign to favorable for financial assets. Given
steady interest rates, moderate economic growth and continued moderate corporate
earnings growth, there are few excesses in the system. In fact, real interest
rates are probably too high considering our outlook for inflation, and we may
see them decline over time.
Naturally, we cannot rule out the possibility of a market correction. But,
in our belief, the downside would appear to be limited to 5% to 8%, which is the
size of a typical correction based on historical data. As we have said in
previous outlooks, three elements tend to move the market:
- EARNINGS. We forecast corporate earnings to range between 0% and 5% on
average for the Standard & Poor's 500* in 1997 -- not as high as in
recent years but positive nonetheless.
- INTEREST RATES. Rates should remain stable, and short-term interest rates
may even decline.
- LIQUIDITY. Investors, through mutual funds, 401(k)s and qualified
contribution plans in particular, will continue to create strong demand
for securities.
In order to move the market more than would be expected in a typical
decline, one or more of these elements will have to turn negative in 1997, and,
while future market conditions cannot be predicted with certainty, we fail to
see what would materially change our outlook. Our outlook going forward is that
1997 should be a lot like 1996.
While the economy continued along a relatively consistent path, the United
States took some politically significant steps in 1996. First, of course,
President Bill Clinton and a Republican Congress were re-elected by the voters.
In the first few days after the general election, especially, investors
demonstrated their support for such a balance in our leadership. But of much
greater long-term significance is the expressed commitment by both parties to
balance the federal budget and address certain entitlement programs. The first
year after an election can be a fertile time to accomplish major initiatives,
and we are hopeful that progress can be made.
The future of the Social Security system, which many experts believe will
run out of money about 20 years from now, will be a subject in which you can
expect Zurich Kemper Investments, Inc. to play a leadership role. The possible
solutions for "fixing Social Security" are finite: raise Social Security taxes,
reduce benefits, raise the retirement age, change inflation assumptions or
pursue a higher rate of return on assets contributed by workers. We believe that
a bipartisan solution will be worked out, which will include giving individuals
the option of investing a portion of their Social Security contributions in an
account earmarked for them. This change is needed to return credibility to the
system, which many Americans have lost faith in.
What to do with Social Security is a debate that spans generations and
promises to occupy much attention in the coming years. As we hope to help
advance constructive debate, we'll be advocating partial privatization for this
federal program while maintaining a safety net for many low-wage earners and
providing a seamless transition for seniors near or in retirement.
3
<PAGE> 4
ECONOMIC OVERVIEW
- ------------------------------------------------------------------------------
ECONOMIC GUIDEPOSTS
- ------------------------------------------------------------------------------
Economic activity is a key influence on investment performance and shareholder
decision-making. Periods of recession or boom, inflation or deflation, credit
expansion or credit crunch have a significant impact on mutual fund
performance.
The following are some significant economic guideposts and their
investment rationale that may help your investment decision-making. The 10-year
Treasury rate and the prime rate are prevailing interest rates. The other data
report year-to-year percentage changes.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (12/31/96) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1) 6.30 6.87 5.65 7.78
PRIME RATE (2) 8.25 8.25 8.50 8.50
INFLATION RATE(3)* 3.19 2.75 2.60 2.61
THE U.S. DOLLAR (4) 4.36 8.55 -0.57 -5.29
CAPITAL GOODS ORDERS (5)* 2.69 1.85 13.09 3.68
INDUSTRIAL PRODUCTION (5)* 4.40 4.12 1.08 6.43
EMPLOYMENT GROWTH (6) 2.17 2.19 1.57 3.52
</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,
inflations 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 November 30, 1996.
SOURCE: ECONOMICS DEPARTMENT, ZURICH KEMPER INVESTMENTS, INC.
With this letter 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.
January 9, 1997
*THE STANDARD & POOR'S 500 STOCK INDEX IS AN UNMANAGED INDEX GENERALLY
REPRESENTATIVE OF THE U.S. STOCK MARKET.
4
<PAGE> 5
PERFORMANCE UPDATE
[MASON PHOTO]
ANDREW MASON JOINED ZURICH INVESTMENT MANAGEMENT LIMITED 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.
ON OCTOBER 21, 1996, ZURICH KEMPER INVESTMENTS, INC. INTRODUCED KEMPER ASIAN
GROWTH FUND TO GIVE INVESTORS ACCESS TO ASIAN MARKETS THROUGH A FUND INVESTING
PRIMARILY IN EQUITY SECURITIES OF ASIAN COMPANIES. SINCE THE FUND'S FISCAL YEAR
ENDED NOVEMBER 30, 1996, THIS ANNUAL REPORT COVERS ONLY SIX WEEKS OF ACTIVITY.
DURING THIS PERIOD, PORTFOLIO MANAGER ANDREW MASON BEGAN BUILDING THE FUND'S
PORTFOLIO BY TAKING ADVANTAGE OF THE DIVERSE INVESTMENT OPPORTUNITIES AVAILABLE
IN THIS EVOLVING REGION.
Q ANDREW, HOW DID KEMPER ASIAN GROWTH FUND PERFORM DURING ITS FIRST SIX WEEKS
AND HOW HAVE YOU POSITIONED THE PORTFOLIO IN THE DIFFERENT ASIAN MARKETS?
A We have made a good start; the fund was up 6.24% (Class A shares,
unadjusted for sales charge) for the month of November, outperforming the Morgan
Stanley Capital International (MSCI) Asia Combined Far East Free Ex-Japan Index
(excludes Japan)* return of 5.73%. We outperformed the Lipper Pacific Ex-Japan
Funds category average of 5.23% for the month. Compared to the MSCI Asia
Combined Far East Free Ex-Japan Index, we were overweighted in Hong Kong and
Malaysia; close to market weighted in Indonesia, Singapore and Thailand; and
very underweighted in Taiwan. The fund had no exposure to Korea. One of the
fund's initial priorities is to lay the foundation for future performance by
building up a diverse portfolio of Asian companies. As new money comes in we are
adding more stocks to the portfolio and tapping into the opportunities that
exist in Asia.
*The Morgan Stanley Capital International Asia Combined Far East Free Ex-Japan
Index is generally representative of Asian free markets.
Q WHAT SORT OF ECONOMIC ACTIVITY ARE YOU SEEING THROUGHOUT ASIA?
A For the region as a whole we see strong inflows of foreign direct
investment, rising standards of living, high levels of savings and investment,
increased intra-regional trade and strong infrastructure spending. All of these
trends underpin continuing strong growth in Asia. A young, rapidly growing
population and a desire to increase wealth characterize the region. The diverse
range of economic resources is evident, as countries with low per capita incomes
try to catch up to Hong Kong and Singapore which have levels of income similar
to that of the U.S.
- - In Hong Kong, economic growth is picking up and consumer and business
sentiment is strengthening. Property is also booming, residential prices are
approaching the peaks reached in 1994 and investment in commercial property is
also picking up. The Hang Seng Index** hit a record high of 13,531 on November
27, 1996 reflecting a high level of overall confidence in the market.
- - Malaysia seems to have overcome the indigestion caused by
5
<PAGE> 6
PERFORMANCE UPDATE
growing too fast and investing too much in infrastructure. Its trade position
has improved dramatically this year and interest rates are starting to fall
which is good news for the stock market.
- - Singapore is experiencing an economic slow down which may continue into 1997.
Our investments in this market are focused on growth companies with regional
exposure.
- - Thailand has been under extreme pressure in 1996 because of large trade
deficits, high interest rates and a collapse of government. We bought some
high quality companies recently which should perform well in the long term,
but it is difficult to tell when the market will turn around.
- - In Indonesia, valuations are attractive and we have identified several
companies that we believe will provide good growth opportunities in banking,
telecommunications and consumer products.
- - In the Philippines the market performed strong in the first half of 1996 and
some consolidation was expected. We have limited our exposure in this market
until some of the consolidation has taken place, but we anticipate building up
to a larger position.
**The Hang Seng Index is a capitalization weighted price only index that tracks
the performance of shares listed on the Hong Kong Stock Exchange. The number of
stocks is limited to 33 companies which covers approximately 62% of the market
capitalization stocks traded on this exchange.
Q WHAT ARE YOUR VIEWS ON THE HANDOVER OF HONG KONG TO CHINA IN 1997?
A The best indication of sentiment is to look at what the people of Hong Kong
are actually doing. Individuals are committing themselves to mortgages at close
to peak property prices in the residential market. Businesses, which have the
option of investing anywhere in the world, are undertaking massive investment
projects in Hong Kong. This is a real sign of confidence in Hong Kong.
Confidence in China is also very high. It is the largest recipient of foreign
direct investment in the world. In terms of the fund's exposure to the Chinese
stock market, our exposure is through Red Chip stocks -- stocks of Chinese
companies listed in Hong Kong rather than on the local exchanges.
Q WHAT SECTORS OR INDUSTRIES DID YOU FOCUS ON?
A Our three main themes are infrastructure, property and conglomerates. In
Hong Kong for example, our holdings include Hysan, a property investment
company, and Cheung Kong, a property development company. In Malaysia,
Diversified Resources is one of our conglomerate holdings. Infrastructure
investments range from telecommunication services like Advanced Info Services in
Thailand, to Sungei Way in Malaysia (a building materials and construction
company that also has toll road concessions). We are not confined to these
themes and have invested in regional growth stocks such as Datacraft Asia in
Singapore (a networking and telecommunications company with clients ranging from
multinational to regional telecommunication companies).
Q WHAT IS YOUR STRATEGY FOR HELPING REDUCE THE RISK ASSOCIATED WITH INVESTING
IN DEVELOPING OR EMERGING MARKETS?
A Market betas are high in Asia and the return potential can also be high.
However, in a market like Thailand, for example, which has seen a severe
downturn in 1996, there is nowhere to hide when the market falls. During such
times I believe the fund and the investor can benefit from the fund holding onto
the investment on a medium-term basis. Stock specific risk can, however, be
reduced by spreading investments throughout a universe of high quality
companies.
Our main strategy for helping reduce risk is diversification across markets
and industries. The fund is currently invested in nearly forty companies in
seven countries. As net assets grow, the number of companies held will probably
double, adding further diversification. Currency risk is limited to a degree as
most countries in the region either have an explicit or an implicit link to the
U.S. dollar.
6
<PAGE> 7
PERFORMANCE UPDATE
Q WHAT IS YOUR OUTLOOK FOR ASIAN MARKETS?
A Historically Asia has been a fantastic investment. The major markets of
Asia have tended to outperform the U.S. market for several reasons. The region
has experienced phenomenal economic growth, in excess of 7 percent Real Gross
Domestic Product annually, in many countries over the past decade.
Strong growth should continue, spurred by the energy and enterprise of Asian
business leaders and sustained by the incredible diversity of Asian markets and
companies operating within them. It is possible to invest in anything from a
timber company in East Malaysia to a computer chip manufacturer in Singapore.
The range of opportunities is immense. There is also a steady flow of attractive
new companies into the market. Undoubtedly, one of the main engines of growth
will be the industrialization of China and the opening up of the huge Chinese
market which appears set to accelerate following a period of austerity. While
future market conditions can not be predicted, these factors should help ensure
that Asia remains an attractive region in which to invest.
7
<PAGE> 8
LARGEST HOLDINGS
THE FUND'S 5 LARGEST HOLDINGS*
Representing 22.9% of the fund's common stock holdings on November 30, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
HOLDINGS PERCENTAGE
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
1. HSBC HOLDINGS PLC 5.3%
- -------------------------------------------------------------------------------------------------
2. HYSAN DEVELOPMENT CO., LTD. 4.8%
- -------------------------------------------------------------------------------------------------
3. DIVERSIFIED RESOURCES BHD 4.4%
- -------------------------------------------------------------------------------------------------
4. HENDERSON LAND 4.4%
- -------------------------------------------------------------------------------------------------
5. CITIC PACIFIC LTD. 4.0%
- -------------------------------------------------------------------------------------------------
</TABLE>
* Holdings and portfolio composition subject to change.
8
<PAGE> 9
PORTFOLIO OF INVESTMENTS
KEMPER ASIAN GROWTH FUND
Portfolio of Investments at November 30, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HONG KONG--29.3% CITIC Pacific Ltd.
CONGLOMERATE 12,000 $ 63,000
Chen Hsong Holdings Ltd.
MANUFACTURER OF PLASTIC MOLDING MACHINES 46,000 26,000
Cheung Kong Holdings Ltd.
PROPERTY DEVELOPMENT 7,000 62,000
Cosco Pacific
TRADING, SHIPPING AND FREIGHT 26,000 25,000
HSBC Holdings PLC
BANKING 4,000 83,000
Henderson Land
PROPERTY DEVELOPMENT 7,000 70,000
Hutchison Whampoa Ltd.
CONGLOMERATE 7,000 54,000
Hysan Development Co., Ltd.
PROPERTY INVESTMENT 20,000 76,000
(a)Kerry Properties Ltd.
PROPERTY INVESTMENT AND DEVELOPMENT 16,000 47,000
(a)New World Infrastructure Ltd.
INFRASTRUCTURE DEVELOPMENT 14,000 42,000
Regal Hotel International Holdings
HOTEL OPERATOR 74,000 24,000
----------------------------------------------------------------------------
572,000
- ---------------------------------------------------------------------------------------------------------------------
INDONESIA--5.2% Bank Internasional Indonesia
BANKING 28,000 26,000
Gudang Garam, PT
CIGARETTE MANUFACTURER 11,000 47,000
Telekomunikasi Indonesia
TELECOMMUNICATIONS 17,000 28,000
----------------------------------------------------------------------------
101,000
- ---------------------------------------------------------------------------------------------------------------------
MALAYSIA--20.5% Arab Malaysian Corporation Bhd
CONGLOMERATE 10,000 51,000
Diversified Resources Bhd
CONGLOMERATE 18,000 70,000
Genting Bhd
GAMING 3,000 21,000
Hume Industries Bhd
CONSTRUCTION MATERIAL MANUFACTURER 6,000 39,000
Kedah Cement Bhd
CEMENT MANUFACTURER 12,000 23,000
Magnum Corporation Bhd
ENTERTAINMENT AND GAMING 24,000 48,000
O.Y.L. Industries Bhd
AIR CONDITIONER MANUFACTURER 3,000 31,000
Sime Darby Berhad Bhd
CONGLOMERATE 6,000 22,000
Sungei Way Holdings Bhd
BUILDING MATERIALS COMPANY 8,000 47,000
U M W Holdings Bhd
AUTOMOBILE AND HEAVY EQUIPMENT SALES 10,000 48,000
----------------------------------------------------------------------------
400,000
</TABLE>
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PHILIPPINES--3.1% Ayala Corp.
CONGLOMERATE 15,000 $ 17,000
(a)Filipino Telephone Corp.
MOBILE PHONE SERVICES 19,000 17,000
SM Prime Holdings Inc.
REAL ESTATE INVESTMENT 110,000 26,000
----------------------------------------------------------------------------
60,000
- ---------------------------------------------------------------------------------------------------------------------
SINGAPORE--12.0% City Developments Ltd.
REAL ESTATE DEVELOPMENT 3,000 27,000
Cycle & Carriage Ltd.
AUTOMOBILE SALES AND DISTRIBUTION 3,000 34,000
DBS Land Ltd.
PROPERTY INVESTMENT 9,000 32,000
Datacraft Asia Ltd.
NETWORKING AND TELECOMMUNICATIONS 20,000 28,000
Development Bank of Singapore Ltd.
BANKING 2,000 26,000
(a)Hong Kong Land Holdings Ltd.
PROPERTY INVESTMENT 8,000 23,000
Informatics Holdings Ltd.
INFORMATION TECHNOLOGY TRAINING AND EDUCATION 76,000 33,000
Keppel Corp Ltd.
CONGLOMERATE 4,000 31,000
----------------------------------------------------------------------------
234,000
- ---------------------------------------------------------------------------------------------------------------------
TAIWAN--2.6% (a)ROC Taiwan Fund
INVESTMENT HOLDINGS 5,000 51,000
- ---------------------------------------------------------------------------------------------------------------------
THAILAND--8.3% Advanced Info Service Ltd.
TELECOMMUNICATION SERVICES 2,200 26,000
Ban Pu Public Company Ltd.
COAL MINE OPERATOR 1,000 20,000
(a)Grammy Entertainment PCL
RADIO AND TELEVISION PRODUCER 1,100 13,000
Siam Cement Co. Ltd.
BUILDING MATERIALS PRODUCER 1,100 38,000
Siam Makro Co. Ltd.
WHOLESALER 7,000 30,000
Thai Farmers Bank PCL
BANKING 2,500 21,000
Tipco Asphalt Company PCL
ASPHALT PRODUCER AND DISTRIBUTOR 2,000 13,000
----------------------------------------------------------------------------
161,000
----------------------------------------------------------------------------
TOTAL COMMON STOCKS--81.0%
(Cost: $1,521,000) 1,579,000
----------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET Yield--5.21% to 5.22%
INSTRUMENTS--20.4% Due--December 1996
Federal Home Loan Mortgage Corp. $300,000 $ 299,000
Federal National Mortgage Association 100,000 99,000
----------------------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--20.4%
(Cost: $398,000) 398,000
----------------------------------------------------------------------------
TOTAL INVESTMENTS--101.4%
(Cost: $1,919,000) 1,977,000
----------------------------------------------------------------------------
LIABILITIES, LESS CASH AND OTHER ASSETS--(1.4)% (28,000)
----------------------------------------------------------------------------
NET ASSETS--100% $1,949,000
----------------------------------------------------------------------------
</TABLE>
At November 30, 1996, the Fund's portfolio of investments had the following
industry diversification:
<TABLE>
<CAPTION>
VALUE %
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Real Estate $ 363,000 18.6
- -------------------------------------------------------------------------------------------
Diversified Holding Companies 226,000 11.6
- -------------------------------------------------------------------------------------------
Construction and Building Materials 160,000 8.2
- -------------------------------------------------------------------------------------------
Banks 156,000 8.0
- -------------------------------------------------------------------------------------------
Utilities 113,000 5.8
- -------------------------------------------------------------------------------------------
Finance 102,000 5.2
- -------------------------------------------------------------------------------------------
Services 85,000 4.4
- -------------------------------------------------------------------------------------------
Automobiles 82,000 4.2
- -------------------------------------------------------------------------------------------
Leisure 69,000 3.5
- -------------------------------------------------------------------------------------------
Machinery 57,000 2.9
- -------------------------------------------------------------------------------------------
Tobacco Manufacturing 47,000 2.4
- -------------------------------------------------------------------------------------------
Heavy Engineering 31,000 1.6
- -------------------------------------------------------------------------------------------
Wholesaling 30,000 1.6
- -------------------------------------------------------------------------------------------
Transportation 25,000 1.3
- -------------------------------------------------------------------------------------------
Energy 20,000 1.0
- -------------------------------------------------------------------------------------------
Media 13,000 0.7
- -------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 1,579,000 81.0
- -------------------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS AND OTHER NET ASSETS 370,000 19.0
- -------------------------------------------------------------------------------------------
NET ASSETS $1,949,000 100.0
- -------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $1,919,000 for federal income tax purposes
at November 30, 1996, the gross unrealized appreciation was $76,000, the gross
unrealized depreciation was $18,000 and the net unrealized appreciation on
investments was $58,000.
See accompanying Notes to Financial Statements.
11
<PAGE> 12
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER ASIAN GROWTH FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper Asian Growth Fund as of
November 30, 1996, and the related statements of operations and changes in net
assets and the financial highlights for the period from October 21, 1996
(commencement of operations) to November 30, 1996. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
November 30, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Kemper
Asian Growth Fund at November 30, 1996, the results of its operations, the
changes in its net assets and the financial highlights for the period from
October 21, 1996 to November 30, 1996, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
January 17, 1997
12
<PAGE> 13
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------
<S> <C>
Investments, at value
(Cost: $1,919,000) $1,977,000
- --------------------------------------------------------------------------
Cash 153,000
- --------------------------------------------------------------------------
Receivable for:
Investments sold 44,000
- --------------------------------------------------------------------------
Fund shares sold 94,000
- --------------------------------------------------------------------------
TOTAL ASSETS 2,268,000
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- --------------------------------------------------------------------------
Payable for:
Investments purchased 317,000
- --------------------------------------------------------------------------
Management fee 1,000
- --------------------------------------------------------------------------
Other 1,000
- --------------------------------------------------------------------------
Total liabilities 319,000
- --------------------------------------------------------------------------
NET ASSETS $1,949,000
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- --------------------------------------------------------------------------
Paid-in capital $1,891,000
- --------------------------------------------------------------------------
Net unrealized appreciation on investments and assets and
liabilities in foreign currencies 58,000
- --------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $1,949,000
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
THE PRICING OF SHARES
- --------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($827,000 / 82,400 shares outstanding) $10.04
- --------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $10.65
- --------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($941,200 / 93,800 shares outstanding) $10.03
- --------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($180,800 / 18,000 shares outstanding) $10.03
- --------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
13
<PAGE> 14
FINANCIAL STATEMENTS
For the period from October 21, 1996 (commencement of operations) to
November 30, 1996
STATEMENT OF OPERATIONS
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME
- -----------------------------------------------------------------------------------------------------------------------
Dividends and interest income $ 2,000
- -----------------------------------------------------------------------------------------------------------------------
Expenses:
Management fee 1,000
- -----------------------------------------------------------------------------------------------------------------------
Other 1,000
- -----------------------------------------------------------------------------------------------------------------------
Total expenses 2,000
- -----------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME --
- -----------------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation on investments and assets and liabilities in foreign currencies 58,000
- -----------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 58,000
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
OPERATIONS AND CAPITAL SHARE ACTIVITY
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Change in net unrealized appreciation $ 58,000
- -----------------------------------------------------------------------------------------------------------------------
Net increase from capital share transactions 1,391,000
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 1,449,000
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------
Beginning of period 500,000
- -----------------------------------------------------------------------------------------------------------------------
END OF PERIOD $1,949,000
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 15
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 currently
offers four classes of shares. Class A shares are
sold to investors subject to an initial sales
charge. Class B shares are sold without an initial
sales charge but are subject to higher ongoing
expenses than Class A shares and a contingent
deferred sales charge payable upon certain
redemptions. Class B shares automatically convert
to Class A shares six years after issuance. Class C
shares are sold without an initial sales charge but
are subject to higher ongoing expenses than Class A
shares and a contingent deferred sales charge
payable upon certain redemptions within one year of
purchase. Class C shares do not convert into
another class. Class I shares (none sold through
November 30, 1996) 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 available, the rates of exchange are
determined in good faith by the
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
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 and therefore no
federal income tax provision is required.
DIVIDENDS TO SHAREHOLDERS. The Fund declares and
pays dividends of net investment income and net
realized capital gains annually, which are recorded
on the ex-dividend date. Dividends are determined
in accordance with income tax principles which may
treat certain transactions differently from
generally accepted accounting principles. 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.
- --------------------------------------------------------------------------------
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%
16
<PAGE> 17
until the earlier of October 21, 1997 or the date
when the Fund's net assets reach $100 million. The
Fund incurred a management fee of $1,000 for the
period ended November 30, 1996.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
The Fund has an underwriting and distribution
services agreement with Kemper Distributors, Inc.
(KDI). Underwriting commissions paid in connection
with the distribution of Class A shares are as
follows:
<TABLE>
<CAPTION>
COMMISSIONS
COMMISSIONS ALLOWED BY KDI
RETAINED BY KDI TO FIRMS
--------------- --------------
<S> <C> <C>
Period ended November 30, 1996 $1,000 3,000
</TABLE>
For services under the distribution services
agreement, the Fund pays KDI a fee of .75% of
average daily net assets of the Class B and Class C
shares. Pursuant to the agreement, KDI enters into
related selling group agreements with various firms
at various rates for sales of Class B and Class C
shares. In addition, KDI receives any contingent
deferred sales charges 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 are as follows:
<TABLE>
<CAPTION>
COMMISSIONS AND
DISTRIBUTION FEES
PAID BY KDI TO FIRMS
---------------------
<S> <C>
Period ended November 30, 1996 $2,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with KDI. For
providing information and administrative services
to shareholders, the Fund pays KDI a fee at an
annual rate of up to .25% of average daily net
assets. KDI in turn has various agreements with
financial services firms that provide these
services and pays these firms based on assets of
Fund accounts the firms service.
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
Kemper Service Company is the shareholder service
agent of the Fund.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of ZKI.
During the period ended November 30, 1996, the Fund
made no payments to its officers or trustees.
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the period ended November 30, 1996, investment
transactions (excluding short-term instruments) are
as follows:
Purchases $1,578,000
Proceeds from sales 57,000
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund:
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
NOVEMBER 30, 1996
---------------------------
SHARES AMOUNT
<S> <C> <C>
----------------------------------------------------------------------------------
SHARES SOLD
----------------------------------------------------------------------------------
Class A 64,000 $ 631,000
----------------------------------------------------------------------------------
Class B 77,000 760,000
----------------------------------------------------------------------------------
NET INCREASE
FROM CAPITAL SHARE
TRANSACTIONS $1,391,000
----------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 19
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FROM OCTOBER 21, 1996 (COMMENCEMENT OF OPERATIONS) TO NOVEMBER 30, 1996
- ------------------------------------------------------------------------ ---------- ----------
PER SHARE OPERATING PERFORMANCE CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------ ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 9.50 9.50 9.50
- ------------------------------------------------------------------------ ---------- ----------
Net unrealized gain .54 .53 .53
- ------------------------------------------------------------------------ ---------- ----------
Net asset value, end of period $10.04 10.03 10.03
- ------------------------------------------------------------------------ ---------- ----------
TOTAL RETURN (NOT ANNUALIZED) 5.68% 5.58 5.58
- ------------------------------------------------------------------------ ---------- ----------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------ ---------- ----------
Expense 1.46% 2.34 2.34
- ------------------------------------------------------------------------ ---------- ----------
Net investment income (loss) .74% (.14) (.14)
- ------------------------------------------------------------------------ ---------- ----------
- --------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- --------------------------------------------------------------------------------------------------------------
Net assets at end of period $1,949,000
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 74%
- --------------------------------------------------------------------------------------------------------------
Average commission rate paid per share on stock transactions for the period ended November 30, 1996 was
$.0154. 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.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Total return does not reflect the effect of any sales charges.
19
<PAGE> 20
TRUSTEES AND 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
Trustee JEROME L. DUFFY
Treasurer
DONALD R. JONES
Trustee ELIZABETH C. WERTH
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 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
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
- --------------------------------------------------------------------------------
INVESTMENT MANAGER ZURICH KEMPER INVESTMENTS, INC.
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606
http://www.kemper.com
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This report is not to be distributed
unless preceded or accompanied by a
Kemper Europe Fund prospectus.
KAGF - 2 (1/97) 1027640
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