<PAGE> 1
KEMPER GROWTH FUND
ANNUAL REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
Seeking growth of capital through diversification of investment securities
having potential for capital appreciation
"... As interest rates began to decline, improving P/E multiples and a
significant increase in earnings momentum contributed to a strong bull
market..."
<PAGE> 2
Table of Contents
3
General Economic Overview
5
Performance Update
8
Terms to Know
9
Industry Sectors
10
Largest Holdings
11
Portfolio of Investments
14
Report of Independent Auditors
15
Financial Statements
17
Notes to Financial Statements
21
Financial Highlights
At A Glance
Kemper Growth Fund Total Returns for the year ended September 30, 1995
(unadjusted for any sales charge):
Class A 26.07%
Class B 24.63%
Class C 24.99%
Lipper Growth Funds
Category Average* 25.87%
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.
*Lipper Analytical Services, Inc.returns and rankings are based upon changes in
net asset value with all dividends reinvested and do not include the effect of
sales charges and, if they had, results may have been less favorable. Returns
and rankings are historical and do not reflect future performance.
NET ASSET VALUE
<TABLE>
<CAPTION>
AS OF AS OF
9/30/95 9/30/94
<S> <C> <C>
- ---------------------------------------------------------------------------
Kemper Growth Fund Class A $16.07 $12.93
- ---------------------------------------------------------------------------
Kemper Growth Fund Class B $15.85 $12.88
- ---------------------------------------------------------------------------
Kemper Growth Fund Class C $15.87 $12.88
- ---------------------------------------------------------------------------
</TABLE>
KEMPER GROWTH FUND
LIPPER RANKINGS
COMPARED TO ALL OTHER FUNDS IN THE LIPPER GROWTH FUNDS CATEGORY*
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
- --------------------------------------------------------
1-year # 277 of # 325 of # 318 of
550 funds 550 funds 550 funds
- --------------------------------------------------------
5-year # 117 of
234 funds N/A N/A
- --------------------------------------------------------
10-year # 57 of
149 funds N/A N/A
- --------------------------------------------------------
16-year # 44 of
106 funds N/A N/A
- --------------------------------------------------------
</TABLE>
DIVIDEND REVIEW
During the fiscal year, Kemper Growth Fund paid the following dividends:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
- --------------------------------------------------------------------------
Long-Term
Capital Gain: $0.18 $0.18 $0.18
- --------------------------------------------------------------------------
</TABLE>
About Your Report
SHAREHOLDER REPORTS REVISED
Your fund's annual report is one of your best
sources for tracking the progress of your investment. This report includes
several changes that have been made in an effort to provide additional
information to you as well as explain significant changes to the fund over the
last fiscal year. In addition, the performance update includes commentary from
your fund's portfolio manager or management team on what might be expected in
the coming months.
Specifically, your report now includes:
- Terms you need to know related to your fund
- A look at your fund's sector weightings and how they have changed
- A comparison of your fund and its benchmark sector weightings
- Your fund's largest individual holdings
If you have any comments about the revised format or if you have
suggestions for additional changes, please write to:
Kemper Mutual Funds
Shareholder Communications
120 South LaSalle Street
Chicago, IL 60603
<PAGE> 3
General Economic Overview
STEPHEN B. TIMBERS IS CHIEF EXECUTIVE AND CHIEF INVESTMENT
[PHOTO OF OFFICER OF KEMPER FINANCIAL SERVICES, INC. (KFS). KFS AND ITS
STEPHEN B. AFFILIATES MANAGE APPROXIMATELY $63 BILLION IN ASSETS, INCLUDING
TIMBERS] $44 BILLION IN RETAIL MUTUAL FUNDS. TIMBERS IS A GRADUATE OF YALE
UNIVERSITY AND HOLDS AN M.B.A. FROM HARVARD UNIVERSITY.
DEAR SHAREHOLDER,
Investors enjoyed generally positive performance in both the fixed income and
stock markets in the first 10 months of 1995. At this point in the year, the
returns of most leading securities markets worldwide are significantly higher
than they were at the same time in 1994.
We have an excellent environment for financial assets. After several
quarters of robust growth, the United States economy seems to be growing at a
pace that investors find comfortable. Contrary to isolated reports that caused
some observers to become concerned, the economy is in no jeopardy of recession.
Its health was confirmed with the news that the economy grew (as measured by
real gross domestic product [GDP]) at an annual rate of 4.2% in the third
quarter. This follows much lower growth in the first two quarters, as the
economy was adjusting to the Federal Reserve Board's series of interest rate
increases. The slowdown, in fact, was acknowledged by the Fed when it eased
short-term rates by a small but symbolic 25 basis points in July. Now we know
that the economy was rebounding from July through September.
The economy's continued growth without a corresponding increase in
inflation is very encouraging. Although we are well along in the economic cycle
and at a point when prices often start hiking up, inflationary pressures have
actually been reduced somewhat.
Will the Federal Reserve Board adjust interest rates again? As of this
date -- which precedes any resolution on the federal budget issue -- we doubt
that the Fed has motivation to either ease or (which would be even less likely)
raise interest rates. Our forecast calls for lower growth ranging between 2% to
3% for the next few quarters, with the momentum likely to come from exports and
nonresidential construction.
MARKET OUTLOOK
Slow growth and low inflation is the optimal combination for investors
in the fixed income markets, and we expect them to continue to perform well.
We believe that the opportunities for common stock investors will be
increasingly concentrated in higher quality investments. After hitting new
highs and showing considerable strength for most of the year, the stock market
showed some vulnerability when it took a tumble in the summer. The market
recovered after a brief period and has gained ground since. But such a sudden,
severe mini-correction served to remind investors that the current bull market
will inevitably come to an end someday and that some sectors may even be
overextended today.
As we view the remainder of the year, companies cannot necessarily
count on the economy to provide above-average earnings support. Rather, stocks
that have proven themselves with a pattern of consistent earnings are likely to
attract investor support. Specifically, sectors that produce more consistent
earnings, such as health care, consumer nondurables, selected technology and
selected capital goods can be expected to do well. Picking the right sectors to
invest in will be the key challenge for equity investors during the next few
quarters.
International investing continues to be quite complex. After sinking to
its post-World War II low in April, the value of the U.S. dollar has gained
strength against most foreign currencies. While a stronger dollar favors the
U.S. economy because it reduces the cost of American imports and attracts
foreign capital, a strong dollar in relation to a local currency has the effect
of devaluing a foreign investment. The value of the dollar and the
attractiveness of U.S. investments to foreign investors will be key factors in
the next few months.
3
<PAGE> 4
General 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.
<TABLE>
<CAPTION>
Now (10/31/95) 6 months ago 1 year ago 2 years ago
<S> <C> <C> <C> <C>
10-year Treasury rate(1) 6.04 6.63 7.96 5.72
Prime rate(3) 8.75 9 8.15 6
Inflation rate(3)(*) 2.54 3.05 2.68 2.75
The U.S. Dollar(4) -1.05 -10.02 -5.65 1.23
Capital goods orders(5)(*) 11.72 9.44 18.9 19.12
Industrial production(6)(*) 3.03 3.84 6.08 3.50
Employment growth(7) 1.80 2.30 3.25 2.47
</TABLE>
(*) Data as of September 30, 1995
(1) Falling interest rates in recent years have been a big plus for financial
assets.
(2) The interest rate that commercial lenders charge their best
borrowers.
(3) Inflation reduces an investor's real return. In the last five years,
inflation has been as high as 6%. The low, moderate inflation of the
last few years has meant high real returns.
(4) Changes in the exchange value of the dollar impact U.S. exporters and the
value of U.S. firms' foreign profits.
(5) These influence corporate profits and equity performance.
(6) An influence on corporate profits and equity performance.
(7) An influence on family income and retail sales.
Source: Economics Department, Kemper Financial Services, Inc.
We are in the midst of a global recovery, and the same fundamentals that
have driven markets higher in the U.S. can be found in many foreign countries
currently. However, leading international economies continue to lag the U.S.
Japan and Germany, whose economies typically follow U.S. growth, are not as
robust as in past cycles. Moreover, conditions in emerging market countries
underline the importance of careful research and experience in understanding how
these markets work.
Political leadership also has some bearing on the progress of the
economy and the state of the financial markets. In the months preceding a
presidential election year, it has been common for incumbents to attempt to
stimulate growth. Given our Republican Congress and Democratic President,
however, we do not consider this as likely this time.
With the rest of the country, we are closely following political
initiatives to produce a balanced federal budget. This is a political wild
card, but we would expect both the stock and fixed income markets to react with
enthusiasm if progress can be made.
With that as an economic backdrop, we encourage you to read the
following detailed report of your fund, including a question-and-answer
interview with your fund's portfolio manager. Thank you for your continued
support. We appreciate the opportunity to serve your investment needs.
Sincerely,
Stephen B. Timbers
STEPHEN B. TIMBERS
CHIEF INVESTMENT AND EXECUTIVE OFFICER
November 6, 1995
4
<PAGE> 5
Performance Update
STEVEN H. REYNOLDS, EXECUTIVE VICE PRESIDENT AND CHIEF
[PHOTO OF INVESTMENT OFFICER FOR EQUITY INVESTMENTS OF KEMPER FINANCIAL
STEVEN H. SERVICES, INC. (KFS), AND THE EQUITY INVESTMENT COMMITTEE ARE
REYNOLDS] CURRENTLY MANAGING THE KEMPER GROWTH FUND. REYNOLDS JOINS KFS
WITH NEARLY 30 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE. HE
HOLDS AN M.B.A. IN FINANCE FROM THE UNIVERSITY OF VIRGINIA
AND A B.A. IN ECONOMICS FROM JOHNS HOPKINS UNIVERSITY.
C. BETH COTNER, PORTFOLIO MANAGER OF KEMPER GROWTH FUND, RESIGNED IN
SEPTEMBER, 1995 TO PURSUE OTHER INTERESTS. UNTIL A SUCCESSOR IS NAMED, THE
FUND IS BEING MANAGED BY KEMPER'S EQUITY INVESTMENT COMMITTEE, AND STEVEN H.
REYNOLDS, KEMPER'S CHIEF INVESTMENT OFFICER OF EQUITIES. IN THE FOLLOWING
INTERVIEW, REYNOLDS DISCUSSES THE FUND'S PERFORMANCE IN THE BULL MARKET OF 1995
AND HIS OUTLOOK FOR THE COMING YEAR.
Q. KEMPER GROWTH FUND CLOSED THE FISCAL YEAR WITH A 26.07% GAIN FOR CLASS
A SHARES ON A TOTAL RETURN BASIS -- A SIGNIFICANT CHANGE FROM THE NEGATIVE
RETURN POSTED ONE YEAR EARLIER. WHAT BROUGHT ABOUT THIS CHANGE?
A. At the beginning of the fiscal year (October 1, 1994), the Federal
Reserve Board was still raising short-term interest rates in an effort to bring
economic growth down to a more sustainable level and to head-off inflation.
Although corporate earnings were generally strong, rising rates compressed
price/earnings (P/E) multiples (the ratio of a stock's price to its earnings),
negatively affecting valuations.
Early in 1995, as interest rates began to decline, improving P/E
multiples and a significant increase in earnings momentum contributed to a
strong bull market. Supporting this rebound was a global technology-based
capital spending boom, in which U.S. companies like Intel, Microsoft and Cisco
Systems were dominant. In addition, a weak dollar relative to the Japanese yen
and German deutchmark benefited large multinational companies like Coca Cola
and Procter & Gamble, because their earnings from foreign sales increased when
translated back into U.S. dollars. Interest rate-sensitive stocks like banks,
insurers, mortgage lenders and credit card issuers (Nationsbank, MBNA, MGIC)
performed well thanks to declining, and then stable, interest rates. Consumer
staples (Campbell Soup, Scott Paper) rebounded, as did health care stocks
(Johnson & Johnson, Medtronic).
The fund was well positioned for the turnaround. We maintained a
weighting of about 18 to 21 percent in technology which, of course, has been
the market leader throughout the past year. Holdings in consumer products,
health care and financial stocks also increased in late 1994, as our analysts
identified a number of buying opportunities -- companies trading at very low
valuations relative to their projected earnings. As a result, the fund was well
exposed to the strong performance of each of these sectors over the past nine
months. In addition, many of the fund's holdings were companies with
international exposure, so we were able to benefit from the weak dollar as
well.
5
<PAGE> 6
Performance Update
Q. HOW DID THE GROWTH FUND'S INVESTMENT PORTFOLIO CHANGE IN THIS ENVIRONMENT?
A. Comparing the fund's current sector weightings with one year ago (see
page 9), you can see that we've maintained a pretty steady sector allocation --
favoring consumer products, technology and health care. Of course, some
selected changes occurred within each sector. In technology, for example,
positions in Motorola, Silicon Graphics and Oracle Systems were reduced and
eventually eliminated. A year ago these companies were among the fund's top
holdings. But after posting significant gains, we felt they were fully valued
and were concerned that their earnings momentum may have peaked. Instead, we
invested in companies such as Sun Microsystems and Compaq Computer, and
biotechnology companies like Amgen and Biogen, which were poised for additional
growth.
In health care, we were concerned about the earnings momentum of Health
Maintenance Organizations (HMOs) and eliminated our positions. This allowed us
to avoid the drubbing those stocks took in the spring. As the dollar
strengthened, positions in some of the multinational stocks like Merck and
Abbott Laboratories were trimmed to take profits and protect against declines
in the face of earnings pressures. We reduced several of our consumer stock
positions, including Coca Cola and Procter & Gamble, for the same reasons.
Q. DESPITE THE FUND'S STRONG PERFORMANCE, IT STILL LAGGED THE STANDARD &
POOR'S ("S&P") 500 INDEX AS WELL AS THE LIPPER GROWTH FUND CATEGORY FOR THE
YEAR ENDED SEPTEMBER 30. WHY?
A. It comes down to a more conservative management approach on our part.
While we certainly benefited from our technology positions, many of our
competitors have had a substantially larger stake than our fund -- as much as
30 or 40% of assets. In contrast, the Growth Fund's technology weighting was in
the high teens to low 20s. That limited our participation in the extended
technology rally. But, from a risk perspective, we didn't think it was prudent
for a diversified equity fund to maintain that large a position in one
investment sector.
Q. AS KEMPER'S NEW CHIEF INVESTMENT OFFICER FOR EQUITIES, DO YOU ANTICIPATE
ANY CHANGES TO THE MANAGEMENT OF THE FUND?
A. No significant changes. Kemper's motto for equity investing has been
"Growth at the Right Price." Going forward, we'll put more emphasis on "right."
Our goal at this point is to take better advantage of the opportunities
presented by market volatility -- using our research capabilities to identify
opportunities before the market recognizes them and being more disciplined
about selling when a stock becomes overpriced. Toward that end, our research
staff will continue to focus on companies with favorable risk/reward
characteristics, being careful not to get caught up in market euphoria.
As far as portfolio structure, we're in the process of reducing the
number of fund holdings -- from the current 100 to a more manageable total of
about 70-80 stocks. That will be accomplished in two ways. First, we'll
eliminate some extremely small positions. In a fund of this size, a 0.1% or
0.2% position, even if it gains 100%, just doesn't contribute to performance in
a meaningful way. Second, we're going to move out of some positions that have
been significant winners over the past six to nine months and appear to have
reached full valuation.
Q. WHAT IS YOUR OUTLOOK FOR GROWTH STOCKS IN THE COMING YEAR?
A. Looking toward 1996, we remain optimistic on the equity markets. From
our vantage point, it appears that companies are doing all the right things to
improve their bottom lines and boost shareholder value. In addition, the
political environment is very positive with both political parties attempting
to bring about a more sane, intelligent plan to balance the budget and manage
government spending. The global economies should continue on a positive path.
Domestically, we believe the market is fairly valued and, even after the big
market gains of 1995, we don't see a lot of valuation risk.
6
<PAGE> 7
Performance Update
Q. WHAT COULD CHANGE YOUR OUTLOOK?
A. The biggest threat to our current outlook would be some sort of political
or financial disequilibrium in the international markets -- some
unanticipated event(s) impacting the global banking system, which could lead to
currency and fund flow problems, and inflated interest rates which could
negatively impact the bond markets as well as valuations in the equity markets.
Such events could cause a setback for the domestic markets in terms of the pace
of economic growth and, possibly, the speed with which political reforms are
implemented.
We think that sort of scenario is a long-shot at this point but, as we
saw last year in Mexico, it's a possibility. Barring a crisis of this nature,
the combination of a rebounding economy, low inflation, stable interest rates,
continued profit growth and reasonable equity valuations argue for continued
progress in stock prices in 1996.
AVERAGE ANNUAL TOTAL RETURNS*
FOR PERIODS ENDED SEPTEMBER 30, 1995 (ADJUSTED FOR THE APPLICABLE SALES CHARGE)
<TABLE>
<CAPTION>
LIFE OF
1-YEAR 5-YEAR 10-YEAR CLASS
<S> <C> <C> <C> <C>
KEMPER GROWTH FUND CLASS A 18.81% 15.55% 14.50% 12.44% (SINCE 4/4/66)
KEMPER GROWTH FUND CLASS B 21.83% N/A N/A 14.39% (SINCE 5/31/94)
KEMPER GROWTH FUND CLASS C 24.99% N/A N/A 16.70% (SINCE 5/31/94)
</TABLE>
GROWTH OF AN ASSUMED $10,000 INVESTMENT IN
KEMPER GROWTH FUND CLASS A FROM 1/1/79 THROUGH 9/30/95
<TABLE>
<CAPTION>
WILSHIRE
KEMPER GROWTH RUSSELL 1000 LARGE COMPANY STANDARD & POOR'S
FUND CLASS A1 GROWTH INDEX** GROWTH INDEX 500 STOCK INDEX
<S> <C> <C> <C> <C>
1/1/79 10000 10000 10000 10000
12/31/83 21840 21421 21895 22203
12/31/87 38606 34234 36245 38734
12/31/91 96942 72895 83241 74980
9/30/95 115578 106106 119230 116679
</TABLE>
GROWTH OF AN ASSUMED $10,000 INVESTMENT IN
KEMPER GROWTH FUND CLASS B FROM 5/31/94 THROUGH 9/30/95
<TABLE>
<CAPTION>
Wilshire
Kemper Growth Russell 1000 Large Company Standard & Poor's
Fund Class B1 Growth Index** Growth Index 500 Stock Index
<S> <C> <C> <C> <C>
5/31/94 10000 10000 10000 10000
12/31/94 9764.7 10529 10492 10284
9/30/95 11966 13816 13851 13335
</TABLE>
Past performance is not predictive of 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.
* Average annual 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% and for
Class B Shares adjustment for the applicable contingent deferred sales charge
of 3%. The maximum contingent deferred sales charge is 4%. There is no sales
charge for Class C Shares. During the periods noted, securities prices
fluctuated. For additional information, see the Prospectus and Statement of
Additional Information and the Financial Highlights at the end of this report.
1 Performance includes reinvestment of dividends and adjustment for the maximum
sales charge for A Shares and the contingent deferred sales charge in effect at
the end of the period for B Shares. When reviewing the performance chart,
please note that the inception date for the Russell 1000 Growth Index is
1/1/79. As a result, we are not able to illustrate the life of fund performance
(since 4/4/66) for the Kemper Growth Fund. In comparing the Kemper Growth Fund
to the two 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. Beginning with the next annual report, we will stop
showing the Wilshire Large Company Growth Index and will only show the Russell
1000 Growth Index, a more readily available index.
** The Russell 1000 Growth Index is an unmanaged index comprised of common
stocks of larger U.S. companies with greater than average growth orientation
and represents the universe of stocks from which "earnings/growth" money
managers typically select.
+ The Wilshire Large Company Growth Index is an unmanaged index, which
generally represents the market for stocks of larger companies (selected on the
basis of sales growth, return on equity, and dividend payout). Source is
Wilshire Associates Incorporated.
++ 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
Performance Update
GROWTH OF AN ASSUMED $10,000 INVESTMENT IN
KEMPER GROWTH FUND CLASS C FROM 5/31/94 THROUGH 9/30/95
<TABLE>
<CAPTION>
Wilshire
Kemper Growth Russell 1000 Large Company Standard & Poor's
Fund Class C1 Growth Index** Growth Index+ 500 Stock Index++
<S> <C> <C> <C> <C>
5/31/94 10000 9705 9678 10000
12/31/94 9772 10529 10492 10284
9/30/95 12291 13816 13851 13335
</TABLE>
CAPITALIZATION The value of a corporation as determined by the market price of
its issued and outstanding common stock. It is calculated by multiplying the
number of outstanding shares by the current market price of a share.
P/E RATIO The price of a stock divided by its earnings per share. The P/E
ratio, also known as the multiple, is a measure of how much an investor is
paying for a company's earning power.
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.
8
<PAGE> 9
Industry Sectors
A YEAR-TO-YEAR COMPARISON
DATA SHOW THE PERCENTAGE OF THE COMMON STOCKS IN THE PORTFOLIO THAT EACH SECTOR
REPRESENTED ON SEPTEMBER 30, 1995 AND ON SEPTEMBER 30, 1994.
<TABLE>
<CAPTION>
Kemper Growth Fund Kemper Growth Fund
as of 9/30/95 as of 9/30/94
<S> <C> <C>
Basic Industries 6.6% 6.4%
Capital goods 10.1 5.0
Technology 20.9 21.6
Consumer durables 0 3.0
Consumer non-durables 31.8 30.8
Health care 16.5 15.0
Finance 10.6 11.0
Transportation 1.0 3.3
Energy 2.5 1.8
Utilities 0 1.4
Other 0 0.7
</TABLE>
A COMPARISON WITH THE RUSSELL 1000 GROWTH INDEX
DATA SHOW THE PERCENTAGES OF THE COMMON STOCKS IN THE PORTFOLIO THAT EACH
SECTOR OF THE KEMPER GROWTH FUND REPRESENTED ON SEPTEMBER 30, 1995, COMPARED TO
THE INDUSTRY SECTORS THAT MAKE UP THE FUND'S BENCHMARK, THE RUSSELL 1000 GROWTH
INDEX.
<TABLE>
<CAPTION>
Kemper Growth Fund Kemper Growth Fund
as of 9/30/95 as of 9/30/94
<S> <C> <C>
Basic Industries 6.6% 4.6%
Capital goods 10.1 9.9
Technology 20.9 21.9
Consumer durables 0 0.8
Consumer non-durables 31.8 34.3
Health care 16.5 15
Finance 10.6 6.2
Transportation 1 0.6
Energy 2.5 2.1
Utilities 0 4.5
Other 0 0.1
</TABLE>
9
<PAGE> 10
Largest Holdings
THE FUND'S 10 LARGEST HOLDINGS
REPRESENTING 19.5% OF THE FUND'S TOTAL NET ASSETS ON SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
HOLDINGS PERCENT
<S> <C> <C> <C>
1. JOHNSON & JOHNSON Largest and most comprehensive manufacturer of health care products serving 2.6%
the consumer, pharmaceutical and professional markets.
2. PHILIP MORRIS Largest cigarette company in the U.S. and the second largest brewer, through 2.2%
its Miller Brewing subsidiary. The company is also a major branded food producer,
through its Kraft and General Foods subsidiaries.
3. FIRST FINANCIAL Leader in information services, offering a vertically integrated set of data 2.1%
MANAGEMENT processing, storage and management products for the capture, manipulation and
distribution of data.
4. MEDTRONIC Developer, manufacturer and marketer of therapeutic medical devices designed to 2.1%
improve cardiovascular and neurological health.
5. SCOTT PAPER Manufactures and markets 1) personal care and cleaning products for personal care, 1.9%
environmental cleaning and health care and health care and 2) printing and
publishing products.
6. INTEL Engaged in the design, development, manufacture and sale of advanced microcomputer 1.9%
components, such as integrated circuits and other related products.
7. MGIC INVESTMENT Leading provider of private mortgage insurance coverage in the U.S. to mortgage 1.7%
CORP. bankers, savings institutions, commercial banks, mortgage brokers, credit unions
and other lenders.
8. MONSANTO Manufactures and sells agricultural and chemical products, manmade fibers and textile 1.7%
intermediates, industrial chemicals, polymer products, resin products and rubber
chemicals and instruments, prescription drugs and artificial sweeteners.
9. MBNA Parent of MBNA America Bank, N.A. ( a national bank). Second largest lender through 1.7%
bank credit cards, with $14.2 billion in managed loans to over 12 million customers.
10. PROCTER & GAMBLE Engaged in the manufacture and distribution of a wide variety of household products, 1.6%
consisting of laundry and cleaning products, diapers, personal care products and
food products.
</TABLE>
10
<PAGE> 11
Portfolio of Investments
KEMPER GROWTH FUND
PORTFOLIO OF INVESTMENTS AT SEPTEMBER 30, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Number of shares Value
<S> <C> <C> <C>
COMMON STOCKS
- ---------------------------------------------------------------------------------------------------------
CHEMICALS--5.3% Air Products & Chemicals 425,000 $ 22,153
B.F. Goodrich Co. 523,100 34,459
E.I. DuPont de Nemours & Co. 500,000 34,375
Monsanto Co. 423,000 42,617
======================================================================
133,604
- ----------------------------------------------------------------------------------------------------------
COMMUNICATIONS (a)Cox Communications Inc. 1,000,000 20,250
AND MEDIA--3.7% (a)DSC Communications Corp. 310,900 18,421
SBC Communications, Inc. 309,000 16,995
(a)Tellabs Operations 392,400 16,530
(a)WorldCom, Inc. 651,700 20,936
======================================================================
93,132
- ----------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE--6.9% (a)BMC Software 181,200 8,335
First Data Corporation 348,000 21,576
First Financial Management Corporation 550,000 53,694
General Motors Corporation, "E" 549,200 24,989
(a)Informix Corp. 600,000 19,500
(a)Microsoft Corp. 338,600 30,643
Reynolds &Reynolds Co. 400,000 13,750
======================================================================
172,487
- ----------------------------------------------------------------------------------------------------------
COMPUTER SYSTEMS--3.5% (a)Compaq Computer Corp. 371,300 17,962
Hewlett-Packard, Co. 254,900 21,252
(a)Silicon Graphics Inc. 907,400 31,192
(a)Sun Microsystems 272,300 17,155
======================================================================
87,561
- ----------------------------------------------------------------------------------------------------------
CONSTRUCTION--.6% Fluor Corp. 281,700 15,775
- ----------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS Campbell Soup Co. 125,600 6,311
AND SERVICES--14.7% Coca-Cola Co. 390,300 26,931
CPC International 270,000 17,820
(a)CUC International 369,800 12,897
(a)Franklin Quest Co. 45,500 1,115
Gillette Co. 578,800 27,565
Manpower Inc. 1,080,000 31,320
McDonald's Corporation 324,600 12,416
Newell Co. 1,075,000 26,606
PepsiCo 250,000 12,750
Philip Morris Companies 652,900 54,517
Pioneer Hi-Bred International 100,000 4,600
Procter & Gamble Co. 525,100 40,433
Sara Lee Corp. 975,000 29,006
Scott Paper Co. 1,000,000 48,500
Service Corp. International 380,000 14,868
======================================================================
367,655
</TABLE>
11
<PAGE> 12
Portfolio of Investment
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Number of shares Value
<S> <C> <C> <C>
DRUGS AND HEALTHCARE-- Abbott Laboratories 798,500 $ 34,036
14.9% (a)Amgen, Inc. 210,800 10,514
(a)Biogen 86,900 5,214
(a)Boston Scientific Corp. 270,000 11,509
Columbia/HCA Healthcare Corp. 600,000 29,175
Guidant Corp. 474,224 13,871
(a)HealthCare COMPARE Corp. 330,000 12,787
(a)Healthsource, Inc. 300,000 14,437
(a)IDEXX Laboratories 577,800 21,523
Integrated Health Services 244,100 6,896
Johnson & Johnson 879,200 65,171
Eli Lilly & Co. 218,319 19,622
Medtronic, Inc. 980,000 52,675
Merck & Co., Inc. 264,400 14,806
Pfizer Inc. 468,000 24,980
SmithKline Beecham PLC 300,000 15,188
United Healthcare Corp. 278,500 13,612
(a)U.S. Bioscience, with warrants
expiring 1988 6,237 41
(a)Value Health 245,000 6,493
---------------------------------------------------------------------
372,550
- ----------------------------------------------------------------------------------------------------------
ENERGY AND Enron Corp. 902,400 30,230
RELATED SERVICES--2.3% Mobil Corp. 140,000 13,948
Praxair, Inc. 475,000 12,706
---------------------------------------------------------------------
56,884
- ----------------------------------------------------------------------------------------------------------
ENTERTAINMENT Walt Disney Company 630,700 36,186
AND GAMING--2.9% Harrah's Entertainment 520,000 15,210
(a)Viacom International, "B" 417,593 20,775
---------------------------------------------------------------------
72,171
- ----------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES American International Group, Inc. 239,300 20,340
AND REAL ESTATE--9.6% Boatmen's Bancshares 697,500 25,807
Dean Witter Discover 487,800 27,439
First USA 332,000 18,011
General Re Corp. 142,300 21,487
MBNA Corporation 1,020,100 42,462
Mercantile Bancorp 250,000 11,188
MGIC Investment Corp. 747,500 42,794
NationsBank 461,400 31,029
---------------------------------------------------------------------
240,557
- ----------------------------------------------------------------------------------------------------------
MANUFACTURING--9.1% Allied-Signal 404,900 17,866
Armstrong World Industries 151,700 8,419
Boeing Co. 584,800 39,913
(a)Crown Cork & Seal Co. 354,400 13,733
Emerson Electric Co. 453,200 32,404
General Electric Co. 601,600 38,352
Loral Corp. 290,300 16,547
(a)Thermo Electron Corp. 400,000 18,550
TriMas Corp. 152,900 3,173
Xerox Corporation 200,000 26,875
York International Corp. 306,700 12,920
---------------------------------------------------------------------
228,752
</TABLE>
12
<PAGE> 13
Portfolio of Investments
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Number of shares Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
RETAILING AND Alco Standard Corporation 321,300 $27,230
DISTRIBUTION--7.5% (a) Federated Department Stores 1,098,300 31,164
Home Depot 573,600 22,872
(a) Office Depot 781,700 23,549
(a) OfficeMax 849,250 20,594
Tandy Corp. 200,000 12,150
(a) Viking Office Products 426,200 17,794
Wal-Mart Stores 495,600 12,328
Warnaco Group 813,200 19,517
=======================================================================
187,198
- ---------------------------------------------------------------------------------------------------------
SEMICONDUCTORS (a) Applied Materials, Inc. 248,000 25,358
AND NETWORKING--8.5% (a) Atmel Corporation 394,400 13,311
(a) Cisco Systems 491,200 33,893
Intel Corp. 772,300 46,434
Linear Technology Corp. 750,000 31,125
(a) LSI Logic Corp. 325,000 18,769
(a) Solectron Corp. 371,700 14,682
(a) 3Com Corporation 617,600 28,101
=======================================================================
211,673
- ---------------------------------------------------------------------------------------------------------
TRANSPORTATION--.9% (a) Wisconsin Central Transportation Corporation 328,600 21,934
=======================================================================
TOTAL COMMON STOCKS--90.4%
-----------------------------------------------------------------------
(Cost: $1,714,655) 2,261,933
=======================================================================
<CAPTION>
Principal amount Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
MONEY MARKET Yield-5.84% to 5.92%
INSTRUMENTS Due-October and November 1995
ConAgra, Inc. $35,400 35,197
Dynamic Funding Corporation 30,000 29,783
Ensearch Corporation 11,250 11,212
Finova Capital Corporation 15,000 14,950
GTE Corporation 3,000 2,987
GTE Finance Corporation 500 499
Renaissance Energy Co. 20,000 19,960
=======================================================================
TOTAL MONEY MARKET INSTRUMENTS--4.5%
(Cost: $114,614) 114,588
=======================================================================
TOTAL INVESTMENTS--94.9%
(Cost: $1,829,269) 2,376,521
=======================================================================
Cash and other assets, less liabilities--5.1% 126,780
=======================================================================
Net assets--100% $2,503,301
=======================================================================
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
Based on the cost of investments of $1,829,269,000 for federal income tax
purposes at September 30, 1995, the aggregate gross unrealized appreciation was
$562,972,000, the aggregate gross unrealized depreciation was $15,720,000 and
the net unrealized appreciation of investments was $547,252,000.
See accompanying Notes to Financial Statements.
13
<PAGE> 14
Report of Independent Auditors
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER GROWTH FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper Growth Fund as of September
30, 1995, and the related statements of operations for the year then ended and
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the fiscal periods since 1991. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with 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, 1995, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Kemper Growth Fund at September 30, 1995, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the fiscal periods
since 1991, in conformity with generally accepted accounting principles.
ERNST& YOUNG LLP
Chicago, Illinois
November 14, 1995
14
<PAGE> 15
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
(IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Investment, at value
(Cost: $1,829,269) $2,376,521
- ------------------------------------------------------------------------------
Cash 166
- ------------------------------------------------------------------------------
Receivable for:
Fund shares sold 1,615
- ------------------------------------------------------------------------------
Investments sold 128,841
- ------------------------------------------------------------------------------
Dividends and interest 3,237
- ------------------------------------------------------------------------------
TOTAL ASSETS 2,510,380
LIABILITIES AND NET ASSETS
Payable for:
Fund shares redeemed 3,898
- ------------------------------------------------------------------------------
Management fee 1,118
- ------------------------------------------------------------------------------
Distribution services fee 485
- ------------------------------------------------------------------------------
Administrative services fee 483
- ------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 1,007
- ------------------------------------------------------------------------------
Other 88
- ------------------------------------------------------------------------------
Total liabilities 7,079
- ------------------------------------------------------------------------------
NET ASSETS $2,503,301
- ------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
Paid-in capital $1,811,801
- ------------------------------------------------------------------------------
Undistributed net realized gain on investments 123,899
- ------------------------------------------------------------------------------
Net unrealized appreciation on investments 547,252
- ------------------------------------------------------------------------------
Undistributed net investment income 20,349
- ------------------------------------------------------------------------------
Net assets applicable to shares outstanding $2,503,301
- ------------------------------------------------------------------------------
THE PRICING OF SHARES
CLASS A SHARES
Net asset value and redemption price per share
($1,685,271 divided by 104,876 shares outstanding) $16.07
- ------------------------------------------------------------------------------
Maximum offering price per share (net asset value, plus
6.10% of net asset value or 5.75% of offering price) $17.05
- ------------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($780,522 divided by 49,242 shares outstanding) $15.85
- ------------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price per share
($5,161 divided by 325 shares outstanding) $15.87
- ------------------------------------------------------------------------------
CLASS I SHARES
Net asset value and redemption price per share
($32,347 divided by 2,010 shares outstanding) $16.09
- ------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
15
<PAGE> 16
STATEMENT OF OPERATIONS
Year ended September 30, 1995
(IN THOUSANDS)
<TABLE>
<S> <C>
NET INVESTMENT INCOME
Dividends $ 31,006
- -------------------------------------------------------------------------------
Interest 5,501
- -------------------------------------------------------------------------------
Total investment income 36,507
- -------------------------------------------------------------------------------
Expenses:
Management fee 12,349
- -------------------------------------------------------------------------------
Distribution services fee 5,273
- -------------------------------------------------------------------------------
Administrative services fee 5,362
- -------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 10,203
- -------------------------------------------------------------------------------
Professional fees 77
- -------------------------------------------------------------------------------
Reports to shareholders 400
- -------------------------------------------------------------------------------
Trustees' fees and other 100
- -------------------------------------------------------------------------------
Total expenses 33,764
- -------------------------------------------------------------------------------
Net investment income 2,743
- -------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on sales of investments 132,687
- -------------------------------------------------------------------------------
Change in net unrealized appreciation on investments 392,371
- -------------------------------------------------------------------------------
Net gain on investments 525,058
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $527,801
- -------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
Net investment income $ 2,743 2,123
- -------------------------------------------------------------------------------
Net realized gain 132,687 42,600
- -------------------------------------------------------------------------------
Change in net unrealized appreciation 392,371 (221,438)
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 527,801 (176,715)
- -------------------------------------------------------------------------------
Net equalization charges (4,328) (2,595)
- -------------------------------------------------------------------------------
Distribution from net realized gain on investments (30,829) (113,892)
- -------------------------------------------------------------------------------
Net increase (decrease) from capital share transactions (245,320) 722,218
- -------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 247,324 429,016
- -------------------------------------------------------------------------------
NET ASSETS
Beginning of year 2,255,977 1,826,961
END OF YEAR (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $20,349 IN 1995 AND $22,732 IN 1994) $2,503,301 2,255,977
- -------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
1 DESCRIPTION OF THE FUND Kemper 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 or a contingent deferred sales charge but
are subject to higher ongoing expenses than Class
A shares and do not convert into another class.
Class I shares, which are sold to a limited group
of investors, are not subject to initial or
contingent deferred sales charges and have lower
ongoing expenses than other classes. Each share
represents an identical interest in the
investments of the Fund and has the same rights.
2 SIGNIFICANT INVESTMENT VALUATION. Investments are stated at
ACCOUNTING POLICIES 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 amortization of
money market instrument premium and discount.
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 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
17
<PAGE> 18
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.
FEDERAL INCOME TAXES AND DIVIDENDS TO
SHAREHOLDERS. 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.
Differences in dividends per share are due to
different class expenses. Dividends payable to its
shareholders are recorded by the Fund on the
ex-dividend date.
Distributions 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 AFILIATES MANAGEMENT AGREEMENT. The Fund has a management
agreement with Kemper Financial Services, Inc.
(KFS) and pays a management fee at an annual rate
of .58% of the first $250 million of average daily
net assets declining gradually to .42% of average
daily net assets in excess of $12.5 billion. The
Fund incurred a management fee of $12,349,000 for
the year ended September 30, 1995.
UNDERWRITING AND DISTRIBUTION SERVICES
AGREEMENT. The Fund has an underwriting and
distribution services agreement with Kemper
Distributors, Inc. (KDI). As principal
underwriter for the Fund, KDI retained commissions
of $266,000 for the year ended September 30, 1995
for sales of Class A shares, after allowing
$2,130,000 as commissions to firms of which
$326,000 was paid to firms affiliated with KDI.
For distribution services, 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 that provide distribution services
to investors. KDI compensates these firms at
various rates for sales of Class B and Class C
shares. During the year ended September 30, 1995,
the Fund incurred a distribution services fee for
Class B and Class C shares of $5,273,000, and KDI
paid $3,318,000 for commissions and distribution
fees to firms, including $341,000 to firms
affiliated with KDI. In addition, KDI received
$2,368,000 of contingent deferred sales charges.
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has
an administrative services agreement with KDI.
For providing information and administrative
services to Class A, Class B and Class C
shareholders, the Fund pays KDI a fee at an annual
rate of up to .25% of average daily net assets of
each class. KDI in turn has various arrangements
with financial services firms that provide these
services and pays these firms based on assets of
Fund accounts the firms service. For the year
ended September 30, 1995, the Fund incurred an
administrative services fee of $5,362,000 and
18
<PAGE> 19
KDI paid $5,301,000 to firms, including
$693,000 that was paid to firms affiliated with
KDI.
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
Kemper Service Company (KSvC) is the shareholder
service agent of the Fund. For the year ended
September 30, 1995, the transfer agent remitted
shareholder services fees to KSvC of $7,474,000.
OFFICERS AND TRUSTEES. Certain officers or
trustees of the Fund are also officers or
directors of KFS. During the year ended September
30, 1995, the Fund made no payments to its
officers and incurred trustees' fees of $53,000 to
independent trustees.
4 INVESTMENT For the year ended September 30, 1995, investment
TRANSACTIONS transactions (excluding short term instruments)
are as follows (in thousands):
<TABLE>
<S> <C>
Purchases $1,446,148
Proceeds from sales 1,914,017
</TABLE>
19
<PAGE> 20
5 CAPITAL SHARE The following table summarizes the activity in capital
TRANSACTIONS shares of the Fund (in thousands):
<TABLE>
<CAPTION>
Year ended September 30,
1995 1994
-------------------- --------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 17,146 $ 228,060 20,694 $ 275,869
- -----------------------------------------------------------------------
Class B 12,710 174,061 4,577 58,469
- -----------------------------------------------------------------------
Class C 287 3,950 105 1,321
- -----------------------------------------------------------------------
Class I 2,166 32,293 -- --
- -----------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 1,651 20,744 8,047 108,304
- -----------------------------------------------------------------------
Class B 736 9,188 -- --
- -----------------------------------------------------------------------
Class C 2 29 -- --
- -----------------------------------------------------------------------
SHARES REDEEMED
Class A (37,809) (507,033) (41,886) (561,277)
- -----------------------------------------------------------------------
Class B (14,880) (203,270) (4,400) (56,293)
- -----------------------------------------------------------------------
Class C (66) (944) (2) (30)
- -----------------------------------------------------------------------
Class I (156) (2,398) -- --
- -----------------------------------------------------------------------
CONVERSION OF SHARES
Class A 2,001 27,345 968 12,303
- -----------------------------------------------------------------------
Class B (2,018) (27,345) (970) (12,303)
- -----------------------------------------------------------------------
SHARES ISSUED IN ACQUISITION(A)
Class A -- -- 14,913 195,154
- -----------------------------------------------------------------------
Class B -- -- 53,485 700,701
- -----------------------------------------------------------------------
NET INCREASE (DECREASE)
FROM CAPITAL SHARE
TRANSACTIONS $(245,320) $ 722,218
- -----------------------------------------------------------------------
</TABLE>
(a) On May 27, 1994, the Fund acquired the assets of Kemper Investment
Portfolios--Growth Portfolio in a tax-free exchange.
20
<PAGE> 21
<TABLE>
<CAPTION>
CLASS A
YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $12.93 15.33) 13.09 13.14 09.00
- -----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .05 .01 .01 .03 .06
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 3.27 (1.41) 2.29 .71 4.57
- -----------------------------------------------------------------------------------------------------------
Total from investment operations 3.32 (1.40) 2.30 .74 4.63
- -----------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- -- .03 .05 .11
- -----------------------------------------------------------------------------------------------------------
Distribution from net realized gain .18 1.00 .03 .74 .38
- -----------------------------------------------------------------------------------------------------------
Total dividends .18 1.00 .06 .79 .49
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of year $16.07 12.93 15.33 13.09 13.14
- -----------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 26.07% (9.39) 17.60% 5.55% 54.13%
ANNUALIZED RATIOS TO AVERAGE NET ASSETS
Expenses 1.17% 1.09 1.00 1.03 1.04
- -----------------------------------------------------------------------------------------------------------
Net investment income .43% .24 .06 .32 .59
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C CLASS I
MAY 31, MAY 31, JULY 3,
YEAR ENDED 1994 TO YEAR ENDED 1994 TO 1995 TO
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
1995 1994 1995 1994 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $12.88) 13.10 12.88 13.09 14.80
- ------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.08) (.03) (.07) (.02) .03
- ------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 3.23 (.19) 3.24 (.19) 1.26
- ------------------------------------------------------------------------------------------------------------
Total from investment operations 3.15 (.22) 3.17 (.21) 1.29
- ------------------------------------------------------------------------------------------------------------
Less distribution from net realized gain .18 -- .18 -- --
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.85 12.88 15.87 12.88 16.09
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 24.83% (1.68) 24.99 (1.60) 8.72
ANNUALIZED RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------------------------------------
Expenses 2.17% 2.11 2.03 2.09 .59
- ------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.57) (.76) (.43) (.67) .92
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL DATA FOR ALL CLASSES
Net assets at end of year (in thousands) $2,503,301 2,255,977 1,826,961 1,419,292 613,245
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 67% 115 139 83 143
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Total return does not reflect the effect of any sales charges.
21
<PAGE> 22
Shareholder Meeting
SPECIAL SHAREHOLDERS MEETING
On September 19, 1995 the results of the proxy solicitation were announced
at a joint special shareholders meeting. Kemper Growth Fund shareholders
were asked to vote on four separate issues: election of nine Trustees to the
Board of Trustees, ratification of Ernst & Young LLP as independent auditors,
approval of a new investment management agreement with Kemper Financial
Services, Inc. or its successor on the same terms as the current agreement
and for Class B and Class C shareholders only, approval of a new 12b-1
distribution plan with Kemper Distributors, Inc. or its successor on the same
terms as the current plan. We are pleased to report that all nominees
were elected and all other items were approved. Following are the results for
each issue:
1) Election of Trustees
For Withheld
David W. Belin 91,095,074 2,739,984
Lewis A. Burnham 91,151,375 2,683,683
Donald L. Dunaway 91,179,526 2,655,532
Robert B. Hoffman 91,226,443 2,608,615
Donald R. Jones 91,132,608 2,702,450
David B. Mathis 91,104,458 2,730,600
Shirley D. Peterson 91,076,307 2,758,751
William P. Sommers 91,179,526 2,655,532
Stephen B. Timbers 91,217,060 2,617,998
2) Ratification of the selection of Ernst & Young LLP as independent auditors
for the fund
For Against Abstain
89,046,985 1,590,150 3,197,924
3) Approval of new investment management agreement
For Against Abstain
87,012,575 2,446,752 4,375,729
4) Approval of new 12b-1 distribution plan
For Against Abstain
Class B
Shares 23,327,593 1,187,425 1,677,592
Class C
Shares 132,199 1,742 8,857
22
<PAGE> 23
N O T E S
23
<PAGE> 24
Trustees and Officers
TRUSTEES OFFICERS
STEPHEN B. TIMBERS JOHN E. PETERS
President and Trustee Vice President
DAVID W. BELIN STEVEN H. REYNOLDS
Trustee Vice President
LEWIS A. BURNHAM PHILIP J. COLLORA
Trustee Vice President and
Secretary
DONALD L. DUNAWAY
Trustee CHARLES F. CUSTER
Vice President and
ROBERT B. HOFFMAN Assistant Secretary
Trustee
JEROME L. DUFFY
DONALD R. JONES Treasurer
Trustee
ELIZABETH C. WERTH
DAVID B. MATHIS Assistant Secretary
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
1-800-621-1048
CUSTODIAN AND TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
127 West 10th Street
Kansas City, MO 64105
INDEPENDENT AUDITORS Ernst & Young LLP
233 South Wacker Drive
Chicago, IL 60606
INVESTMENT MANAGER KEMPER FINANCIAL SERVICES, INC.
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
120 S. LaSalle Street
Chicago, IL 60603
Printed on recycled paper in the U.S.A. [KEMPER LOGO]
This report is not to be distributed We're Building Tomorrows Today
unless preceded or accompanied by a 1005560
Kemper Equity Fund prospectus. Printed in the U.S.A
KGF - 2(11/95)
