<PAGE> 1
KEMPER
AGGRESSIVE GROWTH FUND
ANNUAL REPORT TO SHAREHOLDERS FOR THE PERIOD ENDED SEPTEMBER 30, 1997
Seeking capital appreciation through the use of aggressive investment
techniques
LONG-TERM INVESTING IN A SHORT-TERM WORLD (SM)
"..Small cap stocks looked better
on both a value and a fundamental basis. That
prompted us to be more aggressive in buying them,
and it worked out well for us..."
[KEMPER FUNDS LOGO]
Long-term investing in a short-term world(SM)
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
8
INDUSTRY SECTORS
9
LARGEST HOLDINGS
10
PORTFOLIO OF INVESTMENTS
13
REPORT OF INDEPENDENT AUDITORS
14
FINANCIAL STATEMENTS
16
NOTES TO FINANCIAL STATEMENTS
19
FINANCIAL HIGHLIGHTS
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER AGGRESSIVE GROWTH
FUND TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 32.63%
CLASS B 31.79%
CLASS C 31.89%
LIPPER (CAPITAL APPRECIATION CATEGORY AVERAGE* 24.73%
- --------------------------------------------------------------------------------
</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.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
9/30/97 12/31/96
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER AGGRESSIVE GROWTH
FUND CLASS A $12.60 $9.50
- --------------------------------------------------------------------------------
KEMPER AGGRESSIVE GROWTH
FUND CLASS B $12.52 $9.50
- --------------------------------------------------------------------------------
KEMPER AGGRESSIVE GROWTH
FUND CLASS C $12.53 $9.50
- --------------------------------------------------------------------------------
</TABLE>
There are special risk considerations associated with the fund including
operation as a non-diversified fund, which allows more assets to be invested in
fewer issuers, and flexibility to concentrate in various investment sectors and
to invest significant assets in smaller companies, which present greater risk
than larger more established companies. There is no assurance that the fund's
management style will be successful or that the fund will achieve its objective.
TERMS TO KNOW
CAPITALIZATION The value of a corporation as determined by the market price
ofits issued and outstanding common stock. It is calculated by multiplying
the number of outstanding shares by the current market price of a share.
TOTAL RETURN A fund's total return figure measures both the net investment
income and any realized and unrealized appreciation or depreciation of the
underlying investments in its portfolio for the period, assuming the
reinvestment of all dividends. It represents the aggregate percentage or dollar
value change over the period.
<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 $86 BILLION IN ASSETS, INCLUDING $49 BILLION IN RETAIL MUTUAL
FUNDS. TIMBERS IS A GRADUATE OF YALE UNIVERSITY AND HOLDS AN M.B.A. FROM
HARVARD UNIVERSITY.
DEAR SHAREHOLDER:
Once again, investors experienced extreme market volatility in the month of
October. Unlike the October corrections of 1987 and 1989, this year's market
drop occurred at a time when the United States economy is remarkably healthy and
resilient. As we have noted, the U.S. economy has been moving forward for
several years with an alternating fast/slow pace that has proven successful in
removing whatever excesses build from quarter to quarter. As a consequence,
interest rates and the rate of inflation are both low and stable. Moreover, the
federal budget deficit has been reduced to such an extent that discussion has
now turned to what the government should do with a projected surplus in 1998.
Fortunately, no part of our strong economic foundation was shaken by the
market correction. If anything, the correction provided a short-lived and
relatively painless lesson about the vulnerability of a highly valued market.
When markets are high, everything -- economic news, corporate earnings and
liquidity -- must go right. When markets are high - as our equity market has
been for most of this year - they are vulnerable to relatively minor
disappointments.
As you have read, of course, the direct source of the October correction
was Southeast Asia, where the world's highest growth economies had been
stumbling since the summer. These economies had become overextended, banks ran
into trouble with bad loans and the local governments failed to take prompt
action. The result was a domino effect of competitive devaluations of
currencies, crashing markets and political chaos.
But while Southeast Asia produced the event that led to the mini-panic in
the U.S. equity market - resulting in a 7 percent loss on October 27 -- the
world quickly looked to the U.S. for solutions. When the U.S. market quickly
rebounded, other markets became less volatile. Considering U.S. economic
fundamentals and the relatively small effect that Southeast Asian problems have
on U.S. companies as a whole, rational investors had to expect our market to
bounce back. In fact, if the U.S. equity market had not been so highly valued,
we would have expected the market's reaction to the Asian problems to be quite
muted. For instance, if the Dow Jones Industrial Average had been closer to
7000 than to 8000, we would have expected that the market would have dropped
only slightly.
But as we have said before, today's markets move very fast. We experienced
in one day the kind of correction that we used to experience over a six-month
period. At this writing, the U.S. equity market remains very volatile. We expect
that condition to continue, as volatility is a factor of higher valued markets.
Despite what the last few years may have suggested, markets do not go in just
one direction.
Our recent experience supported many of the basic tenets of investing:
- Invest for the long term and don't react to the short-term noise.
Investors who got hurt in the October correction were those who had
borrowed the money they invested and were forced to sell at low prices.
Investors who were able to remain invested and did, lost only some of
their above-average gain for the year.
- Diversification helps reduce overall portfolio risk. Government
securities investors, for example, found the bond market to be a safe
haven as the bond market rallied during the stock market correction.
- Investing abroad is complex and requires expert advice. Currency
valuations, in particular, can have a significant effect on investment
returns.
Our forecast for the next several months calls for moderate economic
growth, stable interest rates and controlled inflation. While we cannot rule
out the possibility of another market event that would add to the excitement of
equity investing, we would expect the U.S. market to again demonstrate its
resiliency.
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 (10/31/97) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1) 6.03 6.71 6.2 5.93
PRIME RATE(2) 8.5 8.5 8.25 8.75
INFLATION RATE(3)* 2.15 2.5 2.99 2.74
THE U.S. DOLLAR(4) 7.62 6.55 3.46 -1.57
CAPITAL GOODS ORDERS(5)* 14.97 8.17 7.71 5.13
INDUSTRIAL PRODUCTION(5)* 5.52 4.39 3.27 2.35
EMPLOYMENT GROWTH(6)* 2.23 2.27 2.1 2.19
</TABLE>
(1) Falling interest rates in recent years have been a big plus for financial
assets.
(2) The interest rate that commerical lenders charge their best borrowers.
(3) Inflation reduces an investor's real return. In the last five years,
inflation has been as high as 6 percent. The low, moderate inflation of
the last few years has meant high real returns.
(4) Changes in the exchange value of the dollar impact U.S. exporters and the
value of U.S. firms' foreign profits.
(5) These influence corporate profits and equity performance.
(6) An influence on family income and retail sales.
* Data as of September 30, 1997.
SOURCE: ECONOMICS DEPARTMENT, ZURICH KEMPER INVESTMENTS, INC.
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 AND CHIEF INVESTMENT OFFICER
Zurich Kemper Investments, Inc.
November 13, 1997
4
<PAGE> 5
PERFORMANCE UPDATE
[STALZER PHOTO]
KURT R. STALZER JOINED ZURICH KEMPER INVESTMENTS, INC. (ZKI) IN JANUARY 1997
WITH OVER 15 YEARS OF INVESTMENT EXPERIENCE. HE IS A SENIOR VICE PRESIDENT OF
ZKI AND PORTFOLIO MANAGER OF KEMPER AGGRESSIVE GROWTH FUND. STALZER RECEIVED A
B.B.A. DEGREE FROM THE UNIVERSITY OF MICHIGAN WHERE HE EARNED A DUAL
SPECIALIZATION IN FINANCE AND ACCOUNTING. HE IS ALSO A MEMBER OF THE FINANCIAL
ANALYST FEDERATION AND THE ASSOCIATION OF INVESTMENT MANAGEMENT AND RESEARCH.
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.
KURT STALZER USED THE FUND'S FLEXIBLE CHARTER TO MOVE FROM LARGER COMPANIES
INTO SMALLER COMPANIES EARLY IN THE YEAR. AS A RESULT, THE FUND SUBSTANTIALLY
OUTPERFORMED ITS PEER GROUP DURING THE FIRST NINE MONTHS OF 1997 (UNADJUSTED
FOR ANY SALES CHARGE).
Q KURT, BEFORE YOU DISCUSS THE PERFORMANCE OF THE FUND, COULD YOU PROVIDE A
BRIEF RECAP OF THE STOCK MARKET'S PERFORMANCE DURING THE FIRST NINE MONTHS OF
1997?
A Certainly. Nearly all sectors of the U.S. stock market have performed
extremely well so far in 1997. Performance was led by energy and consumer
staples, with health care stocks lagging the overall market. Small company
stocks as measured by the Russell 2000 Index*, gained 26.60 percent. Large
capitalization stocks were up 29.63 percent as measured by the Standard & Poor's
500 Stock Index** (S&P 500). During the first quarter, small company stocks
drastically underperformed their large cap counterparts for a couple of reasons.
First, the magnitude of large cap earnings was greater than that of small cap
stocks. Second, there was a lot of uncertainty regarding the strength of the
economy. This made investors nervous about the potential of small companies to
deliver growing earnings.
However, as the year progressed and the economic outlook brightened,
small company stocks started to make up lost ground. In fact, from March 31 to
September 30, the Russell 2000 outperformed the S&P 500 33.51 percent to 26.24
percent. As those figures suggest, small cap stocks are rebounding strongly.
Q HOW DID THE FUND PERFORM IN COMPARISON?
A For the first nine months of 1997, the fund delivered a total return of
32.63 percent (Class A shares unadjusted for any sales charge). That was far
ahead of the Russell 2000's 26.60 percent gain, and the Lipper Capital
Appreciation Funds Category average of 24.73 percent.
Q THAT'S PRETTY IMPRESSIVE PERFORMANCE. TO WHAT DO YOU ATTRIBUTE IT?
A Primarily, it was a well-timed move into small company stocks. After
underperforming large company stocks for almost two years, small cap stock
valuations were very attractive, especially after having been under pressure in
the first quarter. So we were able to invest in a number of high quality,
smaller company stocks at very attractive prices. As they took off, they took
the fund with them.
Q SO IT WAS A MATTER OF TIMING?
A Not really. We weren't trying to time a trade-off in momentum between
large and small company stocks. We were just looking at where earnings and
values were best. Early on, we saw there was a discrepancy between large and
small cap stocks. Large company earnings growth had started to slow, and
* The Russell 2000 Index is a capitalization weighted price only index which
is comprised of 2000 of the smallest stocks (on the basis of capitalization)
in the Russell 3000 Index.
** The Standard & Poor's 500 Stock Index is an unmanaged index generally
representative of the U.S. stock market.
5
<PAGE> 6
PERFORMANCE UPDATE
small cap stocks looked better on both a valuation and a fundamental basis. That
prompted us to be more aggressive in buying them, and it worked out well for us.
Q WHAT KIND OF SMALL COMPANIES INTERESTED YOU?
A Actually, we looked for the same attributes in small company stocks that
we look for in all our purchases. We want companies that are attractively priced
and have the potential to deliver sustainable, predictable earnings growth over
a two- to five-year time period. In addition, we look for companies that hold
distinct advantages over their competition. They may be the low cost provider in
an industry, hold a dominant market position, have superior pricing flexibility
or occupy a special niche. Small company stocks can be extremely volatile, so
we're most interested in those firms that can perform well CONSISTENTLY.
Q WHERE DID YOU TEND TO FIND SUCH COMPANIES?
A Industries in which we overweighted the portfolio included consumer
nondurables, lodging, broadcasting, restaurants, and retail. On the surface,
these seem like a play on the economy's robust performance. But actually our
decisions were based more on attractive valuations than economics. These
companies are stable and growing much faster than the market as a whole, but
were priced attractively relative to the market.
The strong showings in lodging and restaurants surprised a lot of
people. We had overweighted these areas because of valuation reasons and, in
the case of lodging, because of increasing demand for luxury/upscale hotels. We
expect our restaurant holdings to post solid gains.
Attractive valuations also led us to invest in several broadcasters,
including Emmis Broadcasting and Jacor Communications, both radio
broadcasters. We also think Westinghouse Electric is making the right moves as
it transforms itself into a more broadcasting-based company.
We have also had an overweighting in retail over the last six months
due to the improving economy. Again, we concentrated on companies with good
valuations, such as Pier 1 Imports. We've also emphasized mall-based
stores that tend to cater to the teenage market. Teenagers are a group with
high disposable income, and a retailer that stands to benefit is Pacific
Sunwear.
Finally, transportation has also been an area of emphasis due to
attractive valuations, easy comparisons and earnings momentum stemming from the
growing economy.
Q WHAT SECTORS DID YOU UNDERWEIGHT?
A There were two notable ones: finance and health care. We tend not to
invest heavily in traditional finance companies because they are not aggressive
enough. We're looking for greater than 15 percent earnings growth, and most
traditional financial companies just don't deliver that.
We were neutrally weighted in health care. There are a lot of fast
growing companies in this sector, but not many with attractive valuations. Many
also have to contend with potential legislative issues. So when we do find a
health care company we like, we tend to take pretty large positions.
Finally, we ended the quarter underweighted in energy but we'll likely
increase that going forward. Energy-related companies have enjoyed strong
earnings momentum due to increased energy demand. It's been a long time since
oil companies have committed capital to drilling new wells and getting more out
of existing wells.
Q WERE THERE ANY CHOICES YOU MADE THAT YOU'D LIKE TO CHANGE?
A Well, hindsight is 20/20 and there are always decisions you'd like to
take back. Probably the only substantive one was our decision to go to a neutral
weighting in technology. A host of technology names got crushed in March and
April, and we boosted our weighting then. But as they came back strongly during
the following months, we began to sell into the strength of the rally.
Semiconductors continued to perform well in the third quarter, which was
surprising, so we rebuilt that position. But overall, we'd rather sell a little
early than overstay our welcome and see our gains evaporate.
Q YOU MENTIONED THAT SMALL COMPANY STOCKS WERE OUTPERFORMING LARGE COMPANY
STOCKS AS THE FISCAL YEAR DREW TO A CLOSE. DO YOU EXPECT THAT TO CONTINUE?
A Small company stocks have trailed large cap stocks for about the last two
years. So there's a lot of ground they can make up from a valuation standpoint.
Relative earnings growth has also improved for small cap stocks. In addition,
the economy seems to be enjoying robust growth with few if any signs of
inflation or higher interest rates. So I think small company stocks could
continue to perform well for the foreseeable future. That's not to say we won't
have our occasional corrections and market rotations within groups that can
cause bouts of volatility. But overall, the economic climate appears to be a
good one for small companies.
Regardless, we'll continue to concentrate on holdings that share
demonstrated earnings growth, relatively predictable earnings, and a higher
level of earnings and quality than the market at prices that are comparable to
the market. In short, we want a portfolio that's populated by stocks offering
growth at reasonable value. We believe that's a good description of how the
portfolio looks right now.
<PAGE> 7
PERFORMANCE UPDATE
- -------------------------------------------------------------------------------
TOTAL RETURNS*
- -------------------------------------------------------------------------------
FOR PERIODS ENDED SEPTEMBER 30, 1997 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
LIFE OF CLASS
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
KEMPER AGGRESSIVE GROWTH FUND CLASS A 25.00% (since 12/31/96)
- -------------------------------------------------------------------------------------------------
KEMPER AGGRESSIVE GROWTH FUND CLASS B 27.79% (since 12/31/96)
- -------------------------------------------------------------------------------------------------
KEMPER AGGRESSIVE GROWTH FUND CLASS C 30.89% (since 12/31/96)
- -------------------------------------------------------------------------------------------------
</TABLE>
KEMPER AGGRESSIVE GROWTH FUND CLASS A
[LINE GRAPH]
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Class A shares from 12/31/96 to 9/30/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12/31/96 3/31/97 6/30/97 9/30/97
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kemper Aggressive Growth Fund Class A(1) 10000 9236 11071 12500
Russell 3000 Index+ 10000 10086 11776 12875
Standard & Poor's 500 Stock Index++ 10000 10270 12059 12961
</TABLE>
KEMPER AGGRESSIVE GROWTH FUND CLASS B
[LINE GRAPH]
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Class B shares from 12/31/96 to 9/30/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12/31/96 3/31/97 6/30/97 9/30/97
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kemper Aggressive Growth Fund Class B(1) 10000 9779 11695 12779
Russell 3000 Index+ 10000 10086 11776 12875
Standard & Poor's 500 Stock Index++ 10000 10270 12059 12961
</TABLE>
KEMPER AGGRESSIVE GROWTH FUND CLASS C
[LINE GRAPH]
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Class C shares from 12/31/96 to 9/30/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12/31/96 3/31/97 6/30/97 9/30/97
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kemper Aggressive Growth Fund Class C(1) 10000 9779 11705 13090
Russell 3000 Index+ 10000 10086 11776 12875
Standard & Poor's 500 Stock Index++ 10000 10270 12059 12961
</TABLE>
Returns are historical and do not represent future performance. Returns
and net asset value fluctuate. Shares are redeemable at current net asset
value, which may be more or less than original cost.
* Total return measures net investment income and capital gain or loss from
portfolio investments, assuming reinvestment of all dividends and for Class
A shares adjustment for the maximum sales charge of 5.75 percent, for Class
B shares adjustment for the maximum contingent deferred sales charge (CDSC)
of 4 percent. For Class C shares, there is a 1 percent CDSC on certain
redemptions within the first year of purchase. During the periods noted,
securities prices fluctuated. For additional information, see the
Prospectus and Statement of Additional Information and the Financial
Highlights at the end report.
(1) Performance includes reinvestment of dividends and adjustment
for the maximum sales charge for Class A shares and the contingent
deferred sales charge in effect at the end of the period for Class B
and Class C shares. In comparing Kemper Aggressive Growth Fund to the
indices, you should also note that the fund's performance reflects the
maximum sales charge, while no such charges are reflected in the
performance of the indices.
+ The Russell 3000 Index is an unmanaged index comprised of 3000
of the largest capitalized U.S. domiciled companies whose common
stocks trade in the U.S. This portfolio of securities represents
approximately 98 percent of the investable U.S. equity market.
++ The Standard & Poor's 500 Stock Index is an unmanaged index
generally representative of the U.S. stock market. Source is Towers Data
Systems.
7
<PAGE> 8
INDUSTRY SECTORS
A SIX-MONTH COMPARISON
Data show the percentage of the common stocks in the portfolio that each sector
represented on September 30, 1997, and on March 31, 1997.
[SIX-MONTH COMPARISON BAR GRAPHS]
<TABLE>
<CAPTION>
KEMPER AGGRESSIVE GROWTH KEMPER AGGRESSIVE GROWTH
FUND ON 9/30/97 FUND ON 3/31/97
<S> <C> <C>
CONSUMER NON-DURABLES 29.4% 31.5%
TECHNOLOGY 24.9% 17.4%
HEALTH CARE 14.5% 14.8%
CAPITAL GOODS 14.0% 9.5%
FINANCE 7.4% 16.4%
TRANSPORTATION 4.6% 3.3%
ENERGY 2.1% 5.2%
BASIC INDUSTRIES 1.7% 1.9%
CONSUMER DURABLES 1.4% 0.0%
</TABLE>
A COMPARISON WITH THE RUSSELL 3000 INDEX*
Data show the percentage of the common stocks in the portfolio that each sector
of Kemper Aggressive Growth Fund represented on september 30, 1997, compared to
the industry sectors that make up the fund's benchmark, the Russell 3000 Index.
[RUSSELL COMPARISON BAR GRAPHS]
<TABLE>
<CAPTION>
KEMPER AGGRESSIVE GROWTH RUSSELL 3000 GROWTH INDEX
FUND ON 9/30/97 FUND ON 9/30/97
<S> <C> <C>
CONSUMER NON-DURABLES 29.4% 20.3%
TECHNOLOGY 24.9% 15.3%
HEALTHCARE 14.5% 10.7%
CAPITAL GOODS 14.0% 9.1%
FINANCE 7.4% 18.8%
TRANSPORTATION 4.6% 1.5%
ENERGY 2.1% 8.0%
BASIC INDUSTRIES 1.7% 5.1%
CONSUMER DURABLES 1.4% 2.8%
UTILITIES 0.0% 8.4%
</TABLE>
* THE RUSSELL 3000 INDEX IS AN UNMANAGED INDEX COMPRISED OF 3000 OF THE LARGEST
CAPITALIZED U.S. DOMICILED COMPANIES WHOSE COMMON STOCKS TRADE IN THE U.S.
THIS PORTFOLIO OF SECURITIES REPRESENTS APPROXIMATELY 98 PERCENT OF THE
INVESTABLE U.S. EQUITY MARKET.
8
<PAGE> 9
LARGEST HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS*
REPRESENTING 21.16% OF THE FUND'S TOTAL NET ASSETS ON SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
HOLDINGS PERCENT
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. SCHLOTZSKY'S Franchises a fast-service restaurant concept featuring 2.77%
deli sandwiches with sourdough buns, pizzas, soups and
chips
2. COMPUTER PRODUCTS A multinational manufacturer of standard and custom- 2.52%
designed electronic products and sub-systems for power
conversion, industrial automation and other real time
applications.
3. SOFAMOR-DANEK GROUP Manufacturer of spinal implant devices. 2.21%
4. CARIBINER INTERNATIONAL Produces meetings, events, training programs, and 2.11%
related communications services for businesses.
5. BMC INDUSTRIES The only U.S. and European manufacturer of aperture 2.08%
masks for color picture tubes used in television and
computer monitors. Also a leading producer of
polycarbonate, glass and plastic eye wear.
6. TECNOMATIX TECHNOLOGIES A world leader in the emerging Computer Aided 1.98%
Production Engineering (CAPE) software market.
7. MEN'S WEARHOUSE A national off-price specialty men's apparel retailer 1.93%
operating in excess of 300 stores in 32 states
offering brand name tailored clothing at 20-30% below
department store prices.
8. ROYAL CARIBBEAN CRUISES One of the leading providers of cruises to North 1.92%
American passengers as well as a leading provider of
cruises in the Caribbean market.
9. FOUR SEASONS HOTELS Operates 37 luxury hotels worldwide, with additional 1.87%
hotels currently under development.
10. VISIO CORP. Makes business drawing and diagramming software for 1.77%
personal computers.
</TABLE>
*PORTFOLIO COMPOSITION AND HOLDINGS ARE SUBJECT TO CHANGE.
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
KEMPER AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS AT SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CAPITAL GOODS--12.7% (a)Advanced Lighting Technologies 6,700 $ 181,000
(a)American Disposal Services 4,000 125,000
Applied Power, Inc. 2,700 170,000
BMC Industries 7,600 242,000
(a)Caribiner International, Inc. 6,000 244,000
(a)Culligan Water Technologies 2,000 92,000
Pittway Corp. 2,500 162,000
Precision Castparts Corp. 1,200 78,000
(a)Unifab International, Inc. 400 13,000
Watsco, Inc. 5,500 172,000
-------------------------------------------------------------------------
1,479,000
- ------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--21.5% (a)AccuStaff 5,500 173,000
(a)Boron, Lepore & Associates 1,400 32,000
(a)CapStar Hotels Co. 4,100 138,000
(a)EduTrek International, Inc. 400 11,000
Four Seasons Hotels, Ltd. 5,300 217,000
(a)MSC Industrial Direct 3,000 138,000
(a)Men's Wearhouse 6,000 223,000
(a)Outdoor Systems, Inc. 3,800 100,000
(a)Pacific Sunwear of California 4,400 180,000
Pier 1 Imports 10,500 188,000
Royal Caribbean Cruises, Ltd. 5,100 223,000
(a)Schlotzsky's, Inc. 17,000 322,000
(a)Star Buffet, Inc. 1,900 30,000
Stewart Enterprises, Inc. 3,800 166,000
(a)Travis Boats & Motors, Inc. 10,000 204,000
U.S. Rentals 5,600 147,000
-------------------------------------------------------------------------
2,492,000
- ------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--5.3% (a)Emmis Broadcasting Corp. 3,000 143,000
(a)JLK Direct Distribution, Inc. 5,600 168,000
(a)Jacor Communications 2,500 110,000
(a)Tefron, Ltd. 1,800 36,000
Westinghouse Electric Corp. 6,000 162,000
-------------------------------------------------------------------------
619,000
- ------------------------------------------------------------------------------------------------------------------
ENERGY--1.9% (a)Global Industries, Ltd. 3,000 120,000
(a)Precision Drilling Corp. 1,500 96,000
-------------------------------------------------------------------------
216,000
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCE--6.8% (a)ABR Information Services 4,200 $ 116,000
First Union Real Estate Investments 8,000 110,000
Frontier Insurance Group 5,000 190,000
(a)Healthcare Financial Partners 3,500 108,000
(a)LaSalle Partners 2,100 73,000
Sirrom Capital Corp. 3,600 187,000
---------------------------------------------------------------------------
784,000
- --------------------------------------------------------------------------------------------------------------------
HEALTH CARE--13.2% (a)Coast Dental Services, Inc. 3,400 101,000
(a)Dura Pharmaceuticals 4,200 183,000
McKesson Corp. 2,000 204,000
(a)National Surgery Centers 6,000 131,000
(a)Ocular Sciences, Inc. 7,900 183,000
(a)Pediatrix Medical Group 2,800 124,000
(a)Safeskin Corp. 4,000 177,000
(a)Serologicals Corp. 7,500 171,000
(a)Sofamor-Danek Group 4,500 257,000
---------------------------------------------------------------------------
1,531,000
- --------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--22.7% (a)Advantage Learning Systems, Inc. 2,200 56,000
(a)Analog Devices 5,500 184,000
(a)Atmel Corp. 4,900 179,000
(a)Bell Canada International, Inc. 1,800 34,000
(a)Best Software, Inc. 700 10,000
(a)CFM Technologies, Inc. 5,100 200,000
(a)Cisco Systems 1,500 110,000
(a)Computer Products, Inc. 9,800 292,000
HBO & Co. 5,300 200,000
(a)J.D. Edwards & Co. 500 17,000
(a)MRV Communications 5,000 182,000
Natural MicroSystems Corp. 1,700 65,000
(a)Network Appliance, Inc. 2,600 141,000
(a)Network Solutions, Inc. 400 9,000
(a)Nextlink Communications 200 5,000
(a)Pervasive Software, Inc. 14,300 164,000
(a)Tecnomatix Technologies 6,000 229,000
(a)Tellabs, Inc. 3,200 165,000
(a)Visio Corp. 4,900 205,000
(a)World Access, Inc. 5,700 185,000
---------------------------------------------------------------------------
2,632,000
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TRANSPORTATION--4.2% Expeditors International of Washington 4,300 $ 180,000
Heartland Express 4,100 113,000
(a)Knight Transportation 7,000 196,000
---------------------------------------------------------------------------
489,000
- --------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS--2.7% OM Group 4,500 180,000
(a)Tower Automotive, Inc. 3,200 144,000
---------------------------------------------------------------------------
324,000
---------------------------------------------------------------------------
TOTAL COMMON STOCKS--91.0%
(Cost: $9,016,000) 10,566,000
---------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET Yield--5.41% to 5.92%
INSTRUMENTS--5.2%
Due--October 1997
Federal Home Loan Bank $400,000 400,000
Federal National Mortgage Association 200,000 200,000
---------------------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--5.2%
(Cost: $600,000) 600,000
---------------------------------------------------------------------------
TOTAL INVESTMENTS--96.2%
(Cost: $9,616,000) 11,166,000
---------------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES--3.8% 443,000
---------------------------------------------------------------------------
NET ASSETS--100% $11,609,000
---------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- -------------------------------------------------------------------------------
(a) Non-income producing security
Based on the cost of investments of $9,616,000 for federal income tax purposes
at September 30, 1997, the gross unrealized appreciation was $1,605,000, the
gross unrealized depreciation was $55,000 and the net unrealized appreciation on
investments was $1,550,000.
See accompanying Notes to Financial Statements.
12
<PAGE> 13
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER AGGRESSIVE GROWTH FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper Aggressive Growth Fund as of
September 30, 1997, and the related statements of operations and changes in net
assets and the financial highlights for the period from December 31, 1996
(commencement of operations) to September 30, 1997. 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
September 30, 1997, 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
Aggressive Growth Fund at September 30, 1997, the results of its operations, the
changes in its net assets and the financial highlights for the period from
December 31, 1996 to September 30, 1997, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
November 18, 1997
13
<PAGE> 14
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------
ASSETS
- ---------------------------------------------------------------------------
Investments, at value
(Cost: $9,616,000) $11,166,000
- ---------------------------------------------------------------------------
Cash 14,000
- ---------------------------------------------------------------------------
Receivable for:
Investments sold 414,000
- ---------------------------------------------------------------------------
Fund shares sold 255,000
- ---------------------------------------------------------------------------
Dividends 2,000
- ---------------------------------------------------------------------------
TOTAL ASSETS 11,851,000
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ---------------------------------------------------------------------------
Payable for:
Investments purchased 215,000
- ---------------------------------------------------------------------------
Management fee 16,000
- ---------------------------------------------------------------------------
Distribution services fee 3,000
- ---------------------------------------------------------------------------
Administrative services fee 2,000
- ---------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 5,000
- ---------------------------------------------------------------------------
Other 1,000
- ---------------------------------------------------------------------------
Total liabilities 242,000
- ---------------------------------------------------------------------------
NET ASSETS $11,609,000
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- ---------------------------------------------------------------------------
Paid-in capital $ 9,330,000
- ---------------------------------------------------------------------------
Undistributed net realized gain on investments 729,000
- ---------------------------------------------------------------------------
Net unrealized appreciation on investments 1,550,000
- ---------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $11,609,000
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
THE PRICING OF SHARES
- ---------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($6,289,000 / 499,000 shares outstanding) $12.60
- ---------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $13.37
- ---------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($4,132,000 / 330,000 shares outstanding) $12.52
- ---------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($1,188,000 / 95,000 shares outstanding) $12.53
- ---------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
14
<PAGE> 15
FINANCIAL STATEMENTS
For the period from December 31, 1996 (commencement of operations) to
September 30, 1997
STATEMENT OF OPERATIONS
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------
INVESTMENT INCOME
- ---------------------------------------------------------------------------
Interest $ 48,000
- ---------------------------------------------------------------------------
Dividends 14,000
- ---------------------------------------------------------------------------
Total investment income 62,000
- ---------------------------------------------------------------------------
Expenses:
Management fee 37,000
- ---------------------------------------------------------------------------
Distribution services fee 19,000
- ---------------------------------------------------------------------------
Administrative services fee 13,000
- ---------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 23,000
- ---------------------------------------------------------------------------
Professional fees 10,000
- ---------------------------------------------------------------------------
Other 1,000
- ---------------------------------------------------------------------------
Total expenses 103,000
- ---------------------------------------------------------------------------
NET INVESTMENT LOSS (41,000)
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
- ---------------------------------------------------------------------------
Net realized gain on sales of investments 729,000
- ---------------------------------------------------------------------------
Change in net unrealized appreciation on investments 1,550,000
- ---------------------------------------------------------------------------
Net gain on investments 2,279,000
- ---------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,238,000
- ---------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
- ---------------------------------------------------------------------------
OPERATIONS AND CAPITAL SHARE ACTIVITY
- ---------------------------------------------------------------------------
<S> <C>
Net investment loss $ (41,000)
- ---------------------------------------------------------------------------
Net realized gain 729,000
- ---------------------------------------------------------------------------
Change in net unrealized appreciation 1,550,000
- ---------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,238,000
- ---------------------------------------------------------------------------
Net increase from capital share transactions 9,271,000
- ---------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 11,509,000
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------
Beginning of period 100,000
- ---------------------------------------------------------------------------
END OF PERIOD $11,609,000
- ---------------------------------------------------------------------------
</TABLE>
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE
FUND Kemper Aggressive 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 September 30, 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 or securities listed
on the NASDAQ National Market are valued at the
last sale price on the exchange or market where
primarily traded or listed or, if there is no
recent sale, 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. Securities not so traded or listed 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 are valued at the forward rates
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.
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, and interest income is recorded
on the accrual basis and includes discount
amortization on money market instruments. Realized
gains and losses from investment transactions are
reported on an identified cost basis.
FUND SHARE VALUATION. Fund shares are sold and
redeemed on a continuous basis at net asset value
(plus an initial sales charge on most sales of
Class A shares). Proceeds payable on redemption of
Class B and Class C shares will be reduced by the
amount of any applicable contingent deferred sales
charge. On each day the New York Stock Exchange is
open for trading, the net asset value per share is
determined as of the 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
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
by dividing the Fund's net assets attributable to
that class by the number of shares of the class
outstanding.
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.
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 a base annual
rate of .65% of average daily net assets which is
then adjusted upward or downward by a maximum of
.20% based upon the Fund's performance as compared
to the performance of the Standard & Poor's 500
Stock Index (thus the fee on an annual basis can
range from .45% to .85% of average daily net
assets).
During the period ended September 30, 1997, the
Fund incurred management fees as follows:
<TABLE>
<S> <C>
Base fee $36,000
Performance adjustment 1,000
-------
Total fees $37,000
=======
</TABLE>
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). Underwriting commissions paid in
connection with the distribution of Class A shares
are as follows:
<TABLE>
<CAPTION>
COMMISSIONS
COMMISSIONS ALLOWED BY ZKDI
RETAINED BY ----------------------------
ZKDI TO ALL FIRMS TO AFFILIATES
----------- ------------ -------------
<S> <C> <C> <C>
Period ended September 30, 1997 $7,000 111,000 5,000
</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
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
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
AND CDSC COMMISSIONS AND
RECEIVED BY DISTRIBUTION FEES PAID
ZKDI BY ZKDI TO FIRMS
----------------- ----------------------
<S> <C> <C>
Period ended September 30, 1997 $35,000 138,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with ZKDI. For
providing information and administrative services
to Class A, Class B and Class C shareholders, the
Fund pays ZKDI a fee at an annual rate of up to
.25% of average daily net assets of each class.
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 FUND TO ASF PAID BY
ZKDI ZKDI TO FIRMS
---------------- --------------
<S> <C> <C>
Period ended September 30, 1997 $13,000 24,000
</TABLE>
SHAREHOLDER SERVICES AGENT AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
Zurich Kemper Service Company (ZKSvC) is the
shareholder service agent of the Fund. Under the
agreement, ZKSvC received shareholder services fees
of $13,000 for the period ended September 30, 1997.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of ZKI.
During the period ended September 30, 1997, the
Fund made no payments to its officers or trustees.
- --------------------------------------------------------------------------------
4 TRANSACTIONS
INVESTMENT For the period ended September 30, 1997, investment
transactions (excluding short-term instruments) are
as follows:
Purchases $25,305,000
Proceeds from sales 17,018,000
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund:
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
SEPTEMBER 30, 1997
------------------------------
SHARES AMOUNT
----------------------------------------------------------------------------
<S> <C> <C>
SHARES SOLD
Class A 766,000 $ 7,757,000
----------------------------------------------------------------------------
Class B 379,000 3,908,000
----------------------------------------------------------------------------
Class C 144,000 1,404,000
----------------------------------------------------------------------------
----------------------------------------------------------------------------
SHARES REDEEMED
Class A (276,000) (2,723,000)
----------------------------------------------------------------------------
Class B (47,000) (508,000)
----------------------------------------------------------------------------
Class C (53,000) (567,000)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 5 60
----------------------------------------------------------------------------
Class B (5) (60)
----------------------------------------------------------------------------
NET INCREASE FROM CAPITAL
SHARE TRANSACTIONS $ 9,271,000
----------------------------------------------------------------------------
</TABLE>
18
<PAGE> 19
FINANCIAL HIGHLIGHTS
FOR THE PERIOD FROM DECEMBER 31, 1996 (COMMENCEMENT OF OPERATIONS) TO
SEPTEMBER 30, 1997
<TABLE>
<S> <C> <C> <C>
- -------------------------------------------------------------------- ------------------- -------------------
PER SHARE OPERATING PERFORMANCE CLASS A CLASS B CLASS C
- -------------------------------------------------------------------- ------------------- -------------------
Net asset value, beginning of period $ 9.50 9.50 9.50
- -------------------------------------------------------------------- ------------------- -------------------
Income from investment operations:
Net investment loss (.02) (.08) (.07)
- -------------------------------------------------------------------- ------------------- -------------------
Net realized and unrealized gain 3.12 3.10 3.10
- -------------------------------------------------------------------- ------------------- -------------------
Total from investment operations 3.10 3.02 3.03
- -------------------------------------------------------------------- ------------------- -------------------
Net asset value, end of period $12.60 12.52 12.53
- -------------------------------------------------------------------- ------------------ ------------------
TOTAL RETURN (NOT ANNUALIZED) 32.63% 31.79 31.89
- -------------------------------------------------------------------- ------------------- -------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------- ------------------- -------------------
Expenses 1.49% 2.41 2.19
- -------------------------------------------------------------------- ------------------- -------------------
Net investment loss (.35)% (1.27) (1.05)
- -------------------------------------------------------------------- ------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $11,609,000
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 364%
- ------------------------------------------------------------------------------------------------------------------------
Average commission rate paid per share on
stock transactions $.0588
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Total return does not reflect the effect of any sales charges.
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 KURT R. STALZER
Trustee Vice President
ROBERT B. HOFFMAN PHILIP J. COLLORA
Trustee Vice President
and Secretary
DONALD R. JONES JEROME L. DUFFY
Trustee Treasurer
SHIRLEY D. PETERSON ELIZABETH C. WERTH
Trustee Assistant Secretary
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
801 Pennsylvania
Kansas City, MO 64105
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
- --------------------------------------------------------------------------------
INVESTMENT MANAGER ZURICH KEMPER INVESTMENTS, INC.
PRINCIPAL UNDERWRITER ZURICH KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606-5808
www.kemper.com
[KEMPER LOGO]
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
Printed on recycled paper in the U.S.A.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Equity Funds/Growth Style prospectus.
KAGGF - 2 (11/97) 1039820
