<PAGE> 1
KEMPER GROWTH FUND
SEMIANNUAL REPORT TO SHAREHOLDERS
FOR THE PERIOD ENDED MARCH 31, 1996
Seeking growth of capital through diversification of investment securities
having potential for capital appreciation
"..This environment emphasized the importance of strong
research and discipline
on both the buy and sell sides..."
<PAGE> 2
Table of
Contents
2
Terms to Know
3
General
Economic Overview
5
Performance Update
7
Industry Sectors
8
Individual Holdings
9
Portfolio of
Investments
12
Financial Statements
14
Notes to
Financial Statements
18
Financial Highlights
At a Glance
- -------------------------------------------------------------------------------
KEMPER GROWTH FUND
TOTAL RETURNS
- -------------------------------------------------------------------------------
FOR THE SIX-MONTHS ENDED MARCH 31, 1996 (UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
Class A 9.34%
- -------------------------------------------------------------------------------
Class B 8.75%
- -------------------------------------------------------------------------------
Class C 8.88%
- -------------------------------------------------------------------------------
Lipper Growth
Funds Category
Average* 7.92%
- -------------------------------------------------------------------------------
</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.
*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.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
NET ASSET VALUE
- -------------------------------------------------------------------------------
AS OF AS OF
3/31/96 9/30/95
- -------------------------------------------------------------------------------
<S> <C> <C>
KEMPER GROWTH FUND CLASS A $15.73 $16.07
- -------------------------------------------------------------------------------
KEMPER GROWTH FUND CLASS B $15.44 $15.85
- -------------------------------------------------------------------------------
KEMPER GROWTH FUND CLASS C $15.48 $15.87
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
KEMPER GROWTH FUND
LIPPER RANKINGS*
- -------------------------------------------------------------------------------
Compared to all other funds in the Lipper Growth Funds Category
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
1-YEAR #292 OF #349 OF #340 OF
584 FUNDS 584 FUNDS 584 FUNDS
- -------------------------------------------------------------------------------
5-YEAR #186 OF N/A N/A
241 FUNDS
- -------------------------------------------------------------------------------
10-YEAR #44 OF N/A N/A
156 FUNDS
- -------------------------------------------------------------------------------
15-YEAR #44 OF N/A N/A
109 FUNDS
- -------------------------------------------------------------------------------
20-YEAR #33 OF N/A N/A
101 FUNDS
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
DIVIDEND REVIEW
- -------------------------------------------------------------------------------
During the period, Kemper Growth Fund paid the following dividends:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME DIVIDEND: $0.035 -- --
- -------------------------------------------------------------------------------
SHORT TERM CAPITAL
GAIN: $0.42 $0.42 $0.42
- -------------------------------------------------------------------------------
LONG TERM CAPITAL
GAIN: $1.26 $1.26 $1.26
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
TERMS TO KNOW
- -------------------------------------------------------------------------------
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.
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
GENERAL ECONOMIC OVERVIEW
[TIMBERS PHOTO]
Stephen B. Timbers is president, chief executive and chief investment officer
of Zurich Kemper Investments, (ZKI) Inc. ZKI and its affiliates manage
approximately $79 billion in assets, including $45 billion in retail mutual
funds. Timbers is a graduate of Yale University and holds an M.B.A. from
Harvard University.
DEAR SHAREHOLDER:
The first four months of 1996 have provided a few surprises. As the year began,
most of us expected sluggish economic and corporate growth -- which the Federal
Reserve Board would address by reducing short-term interest rates. Yet, what we
experienced was stronger-than-anticipated economic growth, better corporate
earnings and rising interest rates. Although such surprises unsettled the bond
market, the stock market followed a spectacular 1995 with a strong first quarter
in 1996. In the three-month period ended March 31, 1996, the Standard & Poor's
500 Stock Index* gained 5.37 percent.
Where is the economy headed now? Its direction is even less predictable as we
draw nearer to the November elections. Half of the country's leading economists
are forecasting 3 percent growth while an equal number are looking for no better
than 1 percent growth. At Kemper Funds, we suspect that the economy is growing
at a subpar rate of 2 percent. Although commodity prices may suggest otherwise,
we think inflation is holding at less than 3 percent. We see no reason to expect
the Fed to reduce rates to stimulate growth but neither is it likely to raise
rates to control growth. In an environment of stable or gently rising rates, we
would expect corporate earnings to grow at a rate of about 7 to 8 percent --
that's somewhat higher than we believed likely at the start of the year.
Our forecast calls for a generally comfortable environment for investors. But
both the economy and the general direction of the markets are due for a
reversal. In April, the U.S. economy entered its 61st month of consecutive
growth. This is the longest expansion without a single quarter of negative
output growth since George Washington was president. Today's bull market started
in October 1990, which makes it one of the longest running bull markets in
history. By virtue of its length alone, the stock market is vulnerable to a
correction.
As expected, volatility has returned to the market this year. For example: The
stock market's performance on March 8, the date that a surprisingly strong
employment report was released, betrayed some level of investor skittishness.
But while the Standard & Poor's lost 3.1 percent that day, it quickly regained
the ground and moved higher.
CONSUMERS AND JOB SECURITY
The restructuring of corporate America, which is generally credited for its
improved profitability, has been an important influence on the consumer.
Economic growth is heavily dependent upon consumer spending which, in turn, is
a function of inflation, pay raises and fear of job loss. While the first two
have not been a recent concern, fear of losing one's job has dampened consumer
confidence.
Such anxiety in the workplace was the subject of a recent study by the
Council of Economic Advisors. According to that report, more than two-thirds of
the new jobs created in the United States in 1994 and 1995 paid better than the
average job. The report found that the rate at which jobs were eliminated has
risen slightly despite strong economic growth of recent years -- however, it
reported that the length of time most workers spent unemployed has declined.
The graph below tracks Bureau of Labor Statistics data that show the recent
relationship between number of jobs created versus the number of jobs lost.
[LINE GRAPH]
<TABLE>
<S> <C> <C>
12/31/90 -0.06 -0.02
12/31/91 -0.3 0.04
12/31/92 0.12 -0.03
12/31/93 0.3 0.07
12/31/94 0.18 0.07
12/31/95 -0.08 -0.04
3/31/96 0.49 -0.01
</TABLE>
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 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 (3/31/96) 6 Months ago 1 year ago 2 years ago
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 6.27 6.04 7.06 6.97
Prime rate(2) 8.25 8.75 9.00 6.45
Inflation rate(3) 2.84 2.81 3.05 2.36
The U.S. dollar(4) 4.53 -1.05 -11.46 2.70
Capital goods orders(5) 6.24 8.53 9.44 20.01
Industrial production(6) 1.32 1.92 3.89 5.17
Employment growth(7) 1.44 1.80 2.60 2.93
</TABLE>
1 Falling interest rates in recent years have been a big plus for financial
assets.
2 The interest rate that commercial lenders charge their best borrowers.
3 Inflation reduces an investor's real return. In the last five years, inflation
has been as high as 6%. The low, moderate inflation of the last few years has
meant high real returns.
4 Changes in the exchange value of the dollar impact U.S. exporters and the
value of U.S. firms' foreign profits.
5 These influence corporate profits and equity performance.
6 An influence on corporate profits and equity performance.
7 An influence on family income and retail sales.
SOURCE: ECONOMICS DEPARTMENT, ZURICH KEMPER INVESTMENTS, INC.
Such ebb and flow is to be expected in investing, especially at this point in
the cycle. Attempting to "prepare" for a correction is futile, we believe. Those
whose caution caused them to excuse themselves from the market early this year,
for example, would have forgone the quarter's significant gain.
Several opportunities exist today for the careful investor. First, having
settled down some from a raucous 1995, the technology sector continues to enjoy
the product and market demand that make it the dominant sector of the 1990s.
Second, equity investors willing to look overseas may find opportunities in
countries whose economies today are at a point where the U.S. economy was in
1995. Our forecast assumes that strength in foreign markets could boost those
countries' currencies, which would weaken the value of the dollar.
We expect the fixed-income markets to continue to be sensitive to interest
rate and inflation news. However, for as long as economic growth is positive and
earnings are growing, we believe the high-yield market is one market segment
that has significant potential.
Finally, we look for political activity to have less and less bearing on the
markets' performance. Although they may continue to debate tax reform, federal
budget deficit reduction and health care reform, the incumbent legislators are
running out of time to take action before the November elections. If there is
any suspense by November, it is likely to be in whether the Republicans can
retain control of Congress. Their success would make a balanced budget and tax
reform likely agenda topics for 1997.
With that 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
PRESIDENT, CHIEF INVESTMENT AND EXECUTIVE OFFICER
ZURICH KEMPER INVESTMENTS, INC.
April 29, 1996
*THE STANDARD & POOR'S 500 STOCK INDEX IS AN UNMANAGED INDEX GENERALLY
REPRESENTATIVE OF THE U.S. STOCK MARKET.
4
<PAGE> 5
PERFORMANCE UPDATE
[REYNOLDS PHOTO]
STEVEN H. REYNOLDS, EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER FOR
EQUITY INVESTMENTS OF ZURICH KEMPER INVESTMENTS, INC. (ZKI), AND THE EQUITY
INVESTMENT COMMITTEE ARE CURRENTLY MANAGING THE KEMPER GROWTH FUND. REYNOLDS
JOINS ZKI 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.
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.
STEVE REYNOLDS, CHIEF INVESTMENT OFFICER OF EQUITIES AND ACTING PORTFOLIO
MANAGER OF KEMPER GROWTH FUND, DISCUSSES HOW THE FUND WAS POSITIONED FOR A
CHANGING MARKET ENVIRONMENT.
Q. HOW WOULD YOU CHARACTERIZE THE MARKET OVER THE LAST SIX MONTHS?
A. Rotational and increasingly volatile. Following the market's strong
performance through the first three quarters of 1995, investors began to
recognize that valuations had become extended for a great many issues. Fearing
a slowdown in earnings growth and a general correction in the market, investors
began moving from sector to sector looking for undervalued companies and
opportunities for additional growth. A sector would be favored for a few weeks,
then be left in the cold. This translated into volatility -- strong price
moves both up and down -- for a number of stocks and sectors. This environment
emphasized the importance of strong research and discipline on both the buy and
sell sides.
Q. WHAT KIND OF ADJUSTMENTS DID YOU MAKE TO THE PORTFOLIO?
A. We were very active as themarket shifted -- adding to selected positions
on weakness and selling others after strong runups or when they'd reached our
established price targets. The challenge was to recognize where the new
opportunities were, and our research and valuation models were effective in
doing that.
Late last year we anticipated a modest acceleration in the economy
through the first half of 1996. With that in mind, we broadened the portfolio
to include exposure to more economically-sensitive issues like retail
(Federated Department Stores, Wal-Mart Stores, Viking Office Products), oil
(Enron Oil & Gas Co., Union Texas Petroleum Holdings), housing-related stocks
(Armstrong World Industries, Shaw Industries, Georgia-Pacific, Home Depot) and
selected industrial cyclical issues (Praxair, Air Products & Chemicals, York
International Corp.). These are sectors one would expect to outperform in a
period of strong economic growth. And, over the past few months, they've
contributed some solid gains.
Early in the fourth quarter, we'd reduced our technology exposure --
particularly among some of the larger cap stocks -- based on the high
valuations we were seeing in most subsectors. However, despite our reductions,
the correction that occurred among technology stocks in late '95 still hurt us
a bit. More recently, however, we've added to some selected technology
positions as valuations became more attractive. Although we'll probably see
more uncertainty with regard to this sector in the coming months, some of these
companies offer excellent long-term growth potential.
<PAGE> 6
PERFORMANCE UPDATE
Similar activity occurred with our health care and consumer non-durable
positions. After enjoying some meaningful outperformance, we trimmed a number of
those stocks during the fourth quarter of 1995. However, as the market chased
cyclical growth plays during early 1996, these companies were left behind. As a
result, we've been able to add to or re-establish positions in quality companies
at very attractive prices. In health care, we own a fairly broad range of stocks
including several pharmaceutical companies (Sandoz Ltd., Pfizer Inc.), medical
device manufacturers (Medtronic Inc.) and a few health care providers (United
Healthcare, U.S. Healthcare). Among consumer non-durables, we like classic
growth stocks like Kimberly-Clark, Johnson & Johnson and Procter & Gamble Co.
Q. IN TERMS OF SECTOR ALLOCATION, WHAT WERE THE BIGGEST CHANGES OVER THE
PAST SIX MONTHS?
A. The most notable change has been an increase in our exposure to
economically-sensitive stocks -- particularly basic industries and energy. In
both sectors, we're overweighted relative to our benchmark, the Russell
1000 Growth Index. Conversely, we've reduced exposure to technology, as well as
financials. Nevertheless, our health care and financial positions are still
overweighted relative to the index. (See page 7 for a comparison of the fund's
sector allocations as of March 31, 1996 and September 30, 1995, and with the
Russell 1000 Growth Index.)
Q. YOU MAINTAINED A RATHER HIGH POSITION IN CASH AND SHORT-TERM INSTRUMENTS
THROUGH MOST OF THE REPORTING PERIOD. DID THIS REFLECT A BEARISH OUTLOOK ON
YOUR PART? HOW DID IT AFFECT FUND PERFORMANCE?
A. The high cash position was in response to a fully-valued market rather
than a bearish economic outlook. We reached a point in late 1995 where we just
weren't seeing any compelling opportunities to invest in. We've gradually
brought the fund's cash position down from as high as 20% in October and
November to about 10% as of March 31. Looking back, that high a cash position
probably held us back a bit.
Q. DOES THE FUND OWN ANY FOREIGN STOCKS?
A. In March we added a small "basket" of international stocks. In light of
slower growth in the domestic market, we believe the international markets
offer potential for good relative performance going forward. The international
component, which accounts for about 7% of the fund's equity portfolio as of
March 31, is comprised of large, liquid stocks -- similar to the type of
domestic companies we invest in, with an emphasis on industry and geographic
diversification. And, like our domestic investments, the international
holdings include several health care companies (Roche Holding AG [Switzerland],
Astra AB [Sweden]), some consumer-related stocks (Carrefour S.A. [France],
Heineken N.V. [Netherlands]) and selected technology (LM Ericsson Telephone
Co., [Sweden]) and financial (Nomura Securities [Japan], Bank of Ireland)
stocks.
Q. WHAT'S YOUR OUTLOOK FOR THE REST OF 1996?
A. We see an upward bias for the market as a whole, although any gains will
probably be achieved with additional sector rotation and a much greater level
of volatility than we saw last year. So shareholders can expect more rotation
of the portfolio based on where our research suggests the new opportunities
will be. Overall, we see good potential for growth stocks, which aren't as
dependent on prevailing economic conditions to maintain and expand earnings.
6
<PAGE> 7
INDUSTRY SECTORS
A SIX-MONTH COMPARISON
Data show the percentage of the common stocks in the portfolio that each sector
represented on March 31, 1996, and on September 30, 1995.
[Year to Year Bar Graph]
<TABLE>
<CAPTION>
March 31, 1996 September 30, 1995
-------------- ------------------
<S> <C> <C>
BASIC INDUSTRIES 9.0% 6.6%
CAPITAL GOODS 9.9% 10.1%
TECHNOLOGY 11.7% 20.9%
CONSUMER DURABLES 2.2% 0.0%
CONSUMER NON-DURABLES 24.0% 31.8%
HEALTH CARE 21.0% 16.5%
FINANCE 8.7% 10.6%
TRANSPORTATION 1.2% 1.0%
ENERGY 4.6% 2.5%
UTILITIES 7.7% 0.0%
</TABLE>
- - Kemper Growth Fund on 3/31/96
- - Kemper Growth Fund on 9/30/95
A COMPARISON WITH THE RUSSELL 1000 GROWTH INDEX*
Data show the percentage of the common stocks in the portfolio that each sector
of the Kemper Growth Fund represented on March 31, 1996, compared to the
industry sectors that make up the fund's benchmark, the Russell 1000 Growth
Index.
[Russell Comparison Bar Graph]
<TABLE>
<CAPTION>
Kemper Growth Fund Russell 1000 Growth Index
March 31, 1996 March 31, 1996
-------------- ------------------
<S> <C> <C>
BASIC INDUSTRIES 9.0% 4.7%
CAPITAL GOODS 9.9% 10.6%
TECHNOLOGY 11.7% 18.1%
CONSUMER DURABLES 2.2% 0.9%
CONSUMER NON-DURABLES 24.0% 34.1%
HEALTH CARE 21.0% 17.3%
FINANCE 8.7% 6.4%
TRANSPORTATION 1.2% 0.6%
ENERGY 4.6% 2.3%
UTILITIES 7.7% 5.0%
</TABLE>
- - Kemper Growth Fund on 3/31/96
- - Russell 1000 Growth Index on 3/31/96
* 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.
7
<PAGE> 8
INDIVIDUAL HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS
REPRESENTING 20.6% OF THE FUND'S TOTAL NET ASSETS ON MARCH 31, 1996
<TABLE>
<CAPTION>
HOLDINGS PERCENT
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. AT&T Provides products, services and systems for the movement 2.5%
and management of information. AT&T markets selected
AT&T products, systems and services in the United States
and abroad.
- -------------------------------------------------------------------------------------
2. MEDTRONIC, Developer, manufacturer and marketer of therapeutic 2.2%
INC. medical devices designed to improve cardiovascular and
neurological health.
- -------------------------------------------------------------------------------------
3. JOHNSON & Largest and most comprehensive manufacturer of health 2.2%
JOHNSON care products serving the consumer, pharmaceutical and
professional markets.
- -------------------------------------------------------------------------------------
4. FEDERATED Operates department stores and sells women's, men's and 2.1%
DEPARTMENT children's apparel, cosmetics, home furnishings and
STORES other consumer goods through stores such as Macy's,
Abraham & Strauss, Bloomingdale's, Rich's and Lazarus.
- -------------------------------------------------------------------------------------
5. ENRON CORP. Transports and markets natural gas throughout the United 2.0%
States via 44,000 miles of pipelines. The company also
sells and produces cogenerated steam and electricity.
- -------------------------------------------------------------------------------------
6. SANDOZ LTD. A global research-based pharmaceutical and nutrition 2.0%
group. The company's additional activities include
seeds, crop protection and construction technologies.
- -------------------------------------------------------------------------------------
7. COX A fully-integrated diversified media and broadband 2.0%
COMMUNICATIONS communications company. The company has operations and
INC. investments in the areas of United States cable
television systems, international cable television
systems, programming and telecommunications and
technology.
- -------------------------------------------------------------------------------------
8. TELE- Operates cable television systems through its Tele- 1.9%
COMMUNICATIONS Communications TCI and Tele-Communications Liberty Media
INC. units.
- -------------------------------------------------------------------------------------
9. MONSANTO Manufactures and sells agricultural and chemical 1.9%
CO. products, manmade fibers and textile intermediates,
industrial chemicals, polymer products, resin products
and rubber chemicals and instruments, prescription drugs
and artificial sweeteners.
- -------------------------------------------------------------------------------------
10. AIRTOUCH Provides wireless telecommunication service to customers 1.8%
COMMUNICATIONS worldwide. The company operates paging systems, cellular
phone systems, owns an interest in a long-distance
telephone company in Japan and a mobile telephone
service.
- -------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 9
PORTFOLIO OF INVESTMENTS
KEMPER GROWTH FUND
PORTFOLIO OF INVESTMENTS MARCH 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CHEMICALS--8.1% Air Products & Chemicals 550,000 $ 30,044
(a)FMC Corp. 580,000 43,573
B.F. Goodrich Co. 573,100 45,561
Monsanto Co. 319,700 49,074
PPG Industries 477,400 23,333
Praxair, Inc. 475,000 18,941
--------------------------------------------------------------------------
210,526
- -----------------------------------------------------------------------------------------------------------
COMMUNICATIONS (a)Cox Communications Inc. 2,415,000 52,828
AND MEDIA--7.1% (a)Liberty Media Group, "A" 1,300,000 34,288
Reed International PLC 194,461 3,288
Tele-Communications, Inc. 2,670,000 49,562
(a)Viacom, "B" 1,098,093 46,257
--------------------------------------------------------------------------
186,223
- -----------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE (a)BMC Software 181,200 9,921
AND SYSTEMS--5.0% First Data Corporation 365,245 25,750
General Motors Corporation - Electronic
Data Systems 339,200 19,334
Hewlett-Packard, Co. 229,900 21,611
(a)Microsoft Corp. 258,600 26,668
(a)Parametric Technology Corp. 337,400 13,201
(a)Sun Microsystems 300,000 13,125
--------------------------------------------------------------------------
129,610
- -----------------------------------------------------------------------------------------------------------
CONSUMER DURABLES--2.0% Armstrong World Industries 571,700 35,517
Shaw Industries 1,700,000 18,700
--------------------------------------------------------------------------
54,217
- -----------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS AND Heineken N.V. 16,823 3,629
SERVICES--4.8% Kimberly-Clark Corp. 389,000 28,981
Manpower, Inc. 780,000 24,180
Philip Morris Companies 487,900 42,813
Procter & Gamble Co. 270,100 22,891
Swire Pacific Limited, "A" 349,500 3,073
--------------------------------------------------------------------------
125,567
- -----------------------------------------------------------------------------------------------------------
DRUGS AND Astra AB 73,316 3,395
HEALTHCARE--18.8% Baxter International 600,000 27,150
Columbia/HCA Healthcare Corp. 640,000 36,960
Glaxo Wellcome
common stock 216,803 2,717
ADR 1,300,000 32,663
Guidant Corporation 474,224 25,667
(a)IDEXX Laboratories 411,700 17,291
Johnson & Johnson 611,200 56,383
Medtronic, Inc. 981,000 58,492
Perkin-Elmer Corp. 100,000 5,413
Pfizer Inc. 418,000 28,006
Roche Holding AG 415 3,444
Sandoz Ltd. 913,100 53,302
(a)R.P. Scherer Corp. 534,000 23,429
SmithKline Beecham PLC 900,000 46,350
United Healthcare Corp. 548,500 33,733
U.S. Healthcare 800,000 36,700
--------------------------------------------------------------------------
491,095
- -----------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
(Dollars in thousands) NUMBER OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ENERGY AND
RELATED SERVICES--4.1%
Enron Corp. 1,452,400 $ 53,557
Enron Oil & Gas Co. 480,700 12,678
Union Texas Petroleum Holdings 2,100,000 41,475
--------------------------------------------------------------------------
107,710
- -----------------------------------------------------------------------------------------------------------
ENTERTAINMENT
AND GAMING--1.5%
Walt Disney Company 430,700 27,511
Carnival Corp. 460,000 12,650
--------------------------------------------------------------------------
40,161
- -----------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES
AND REAL ESTATE--7.8%
Australia and New Zealand Banking Group Limited 608,210 2,912
Bank of Ireland 450,572 2,963
Boatmen's Bancshares 875,600 34,367
CITIC Pacific Ltd. 784,000 3,042
Cheung Kong (Holdings) Limited 428,000 3,016
Dean Witter Discover 337,800 19,339
Development Bank of Singapore 218,000 2,680
General Re Corp. 192,500 28,057
(a)Internationale Nederlanden Groep 47,166 3,425
Krung Thai Bank Public Co. Ltd. 593,100 2,797
MBIA Inc. 514,700 38,603
MGIC Investment Corp. 765,700 41,731
NationsBank 225,400 18,060
Nomura Securities Co. Ltd. 142,000 3,125
--------------------------------------------------------------------------
204,117
- -----------------------------------------------------------------------------------------------------------
MANUFACTURING--8.9%
Alco Standard Corporation 542,600 28,283
Boeing Co. 299,800 25,970
Emerson Electric Co. 202,000 16,312
Fluor Corp. 431,700 29,464
Georgia-Pacific Corp. 600,000 41,625
Matsushita Electric Industrial Co., Ltd. 189,000 3,079
Mitsubishi Heavy Industries 378,000 3,270
Murata Manufacturing 93,500 3,222
Sumitomo Metal Industries 1,011,000 3,171
Toray Industries 475,000 3,078
Xerox Corporation 290,000 36,395
York International Corp. 796,700 39,038
--------------------------------------------------------------------------
232,907
- -----------------------------------------------------------------------------------------------------------
RETAILING AND
DISTRIBUTION--8.1%
Burton Group PLC 1,562,310 3,441
Carrefour S.A. 5,023 3,679
(a)Federated Department Stores 1,737,900 56,047
Home Depot 673,600 32,249
Lowe's Companies Inc. 600,000 21,450
(a)Office Depot 781,700 15,341
(a)Viking Office Products 141,200 7,854
Wal-Mart Stores 1,630,600 37,708
Warnaco Group 1,388,200 33,490
--------------------------------------------------------------------------
211,259
- -----------------------------------------------------------------------------------------------------------
SEMICONDUCTORS
AND NETWORKING--5.5%
(a)Applied Materials, Inc. 496,000 17,298
(a)Atmel Corporation 298,800 7,620
(a)Cisco Systems 802,400 37,211
Intel Corp. 237,300 13,496
Linear Technology Corp. 613,500 25,614
(a)Microchip Technology 334,300 9,193
(a)3Com Corporation 812,600 32,402
--------------------------------------------------------------------------
142,834
- -----------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
(Dollars in thousands) NUMBER OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TELECOMMUNICATIONS--6.9%
(a)AirTouch Communications 1,490,000 $ 46,376
AT&T 1,069,600 65,513
(a)DSC Communications Corp. 390,900 10,554
LM Ericsson Telephone Co., "B" 153,089 3,367
SBC Communications, Inc. 309,000 16,261
(a)WorldCom, Inc. 821,300 37,780
--------------------------------------------------------------------------
179,851
- ------------------------------------------------------------------------------------------------------------
TRANSPORTATION--1.1%
(a)Canadian National Railway Company 177,305 3,058
Nippon Express 326,300 3,208
(a)Wisconsin Central Transportation Corporation 328,600 21,852
--------------------------------------------------------------------------
28,118
--------------------------------------------------------------------------
TOTAL COMMON STOCKS--89.7%
(Cost: $1,981,488) 2,344,195
--------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET
INSTRUMENTS--9.8%
Yield-5.25% to 5.63%
Due-April and May 1996
Columbia/HCA Healthcare Corp. $ 18,900 18,793
Finova Capital Corporation 31,000 30,897
GTE Corporation 20,800 20,740
Mid-Atlantic Fuel Company 27,000 26,945
Renaissance Energy Co. 21,700 21,687
STRAIT Capital Corporation 19,000 18,986
Other 119,100 118,806
--------------------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--9.8%
(Cost: $256,853) 256,854
--------------------------------------------------------------------------
TOTAL INVESTMENTS--99.5%
(Cost: $2,238,341) 2,601,049
--------------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES--.5% 12,600
--------------------------------------------------------------------------
NET ASSETS--100% $2,613,649
--------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
Based on the cost of investments of $2,238,341,000 for federal income tax
purposes at March 31, 1996, the aggregate gross unrealized appreciation was
$399,953,000, the aggregate gross unrealized depreciation was $37,247,000 and
the net unrealized appreciation on investments was $362,706,000.
See accompanying Notes to Financial Statements.
11
<PAGE> 12
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
- -------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------
Investment, at value
(Cost: $2,238,341) $2,601,049
- -------------------------------------------------------------------------
Cash 246
- -------------------------------------------------------------------------
Receivable for:
Fund shares sold 387
- -------------------------------------------------------------------------
Investments sold 74,963
- -------------------------------------------------------------------------
Dividends and interest 3,908
- -------------------------------------------------------------------------
TOTAL ASSETS 2,680,553
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- -------------------------------------------------------------------------
Payable for:
Fund shares redeemed 1,053
- -------------------------------------------------------------------------
Investments purchased 62,687
- -------------------------------------------------------------------------
Management fee 1,177
- -------------------------------------------------------------------------
Distribution services fee 521
- -------------------------------------------------------------------------
Administrative services fee 494
- -------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 876
- -------------------------------------------------------------------------
Other 96
- -------------------------------------------------------------------------
Total liabilities 66,904
- -------------------------------------------------------------------------
NET ASSETS $2,613,649
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -------------------------------------------------------------------------
Paid-in capital $1,967,668
- -------------------------------------------------------------------------
Undistributed net realized gain on investments 265,585
- -------------------------------------------------------------------------
Net unrealized appreciation on investments 363,193
- -------------------------------------------------------------------------
Undistributed net investment income 17,203
- -------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $2,613,649
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
THE PRICING OF SHARES
- -------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($1,744,062 / 110,866 shares outstanding) $15.73
- -------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of net asset value or
5.75% of offering price) $16.69
- -------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($824,968 / 53,419 shares outstanding) $15.44
- -------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price per share
($7,683 / 496 shares outstanding) $15.48
- -------------------------------------------------------------------------
CLASS I SHARES
Net asset value and redemption price per share
($36,936 / 2,347 shares outstanding) $15.74
- -------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
12
<PAGE> 13
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Six months ended March 31, 1996
(in thousands)
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME
- ---------------------------------------------------------------------------------------------------------------
Dividends $ 12,326
- ---------------------------------------------------------------------------------------------------------------
Interest 12,411
- ---------------------------------------------------------------------------------------------------------------
Total investment income 24,737
- ---------------------------------------------------------------------------------------------------------------
Expenses:
Management fee 6,889
- ---------------------------------------------------------------------------------------------------------------
Distribution services fee 3,022
- ---------------------------------------------------------------------------------------------------------------
Administrative services fee 2,919
- ---------------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 4,556
- ---------------------------------------------------------------------------------------------------------------
Professional fees 35
- ---------------------------------------------------------------------------------------------------------------
Reports to shareholders 207
- ---------------------------------------------------------------------------------------------------------------
Trustees' fees and other 25
- ---------------------------------------------------------------------------------------------------------------
Total expenses 17,653
- ---------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 7,084
- ---------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on sales of investments 400,589
- ---------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation on investments (184,059)
- ---------------------------------------------------------------------------------------------------------------
Net gain on investments 216,530
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $223,614
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, SEPTEMBER 30,
1996 1995
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- ------------------------------------------------------------------------------------------------------------------
Net investment income $ 7,084 2,743
- ------------------------------------------------------------------------------------------------------------------
Net realized gain 400,589 132,687
- ------------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (184,059) 392,371
- ------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 223,614 527,801
- ------------------------------------------------------------------------------------------------------------------
Net equalization credits (charges) 507 (4,328)
- ------------------------------------------------------------------------------------------------------------------
Distribution from net investment income (10,737) --
- ------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain on investments (258,903) (30,829)
- ------------------------------------------------------------------------------------------------------------------
Total dividends to shareholders (269,640) (30,829)
- ------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital share transactions 155,867 (245,320)
- ------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 110,348 247,324
- ------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
Beginning of period 2,503,301 2,255,977
- ------------------------------------------------------------------------------------------------------------------
END OF PERIOD (including undistributed net investment income of
$17,203 in 1996 and $20,349 in 1995) $2,613,649 2,503,301
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 sales charge but
are subject to higher ongoing expenses than Class A
shares and, for shares sold on or after April 1,
1996, a contingent deferred sales charge payable on
certain redemptions within one year of purchase.
Class C shares 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. Differences in
class expenses will result in the payment of
different per share income dividends by class. 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 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
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
shares will be reduced by the amount of any
applicable contingent deferred sales charge. On
each day the New York Stock Exchange is open for
trading, the net asset value per share is
determined as of the earlier of 3:00 p.m. Chicago
time or the close of the Exchange. The net asset
value per share is determined separately for each
class by dividing the Fund's net assets
attributable to that class by the number of shares
of the class outstanding.
FEDERAL INCOME TAXES. The Fund has complied with
the special provisions of the Internal Revenue Code
available to investment companies during the six
months ended March 31, 1996.
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 MANAGEMENT AGREEMENT. The Fund has a management
WITH AFFILIATES agreement with Zurich Kemper Investments, Inc.
(ZKI) (formerly known as Kemper Financial Services,
Inc.) and pays a management fee at an annual rate
of .58% of the first $250 million of average daily
net assets declining to .42% of average daily net
assets in excess of $12.5 billion. The Fund
incurred a management fee of $6,889,000 for the six
months ended March 31, 1996.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
The Fund has an underwriting and distribution
services agreement with Kemper Distributors, Inc.
(KDI). Underwriting commissions paid in connection
with the distribution of Class A shares are as
follows:
<TABLE>
<CAPTION>
COMMISSIONS
ALLOWED BY KDI
COMMISSIONS ------------------------------
RETAINED BY KDI TO ALL FIRMS TO AFFILIATES
--------------- ------------ -------------
<S> <C> <C> <C>
Six months ended March 31,
1996 $ 157,000 1,041,000 39,000
</TABLE>
For services under the distribution services
agreement, the Fund pays KDI a fee of .75% of
average daily net assets of Class B and Class C
shares. Pursuant to the agreement, KDI enters into
related selling group agreements with various firms
at various rates for sales of Class B and Class C
shares. In addition, KDI receives any contingent
deferred sales charges (CDSC) from redemptions of
Class B and Class C shares. Distribution fees and
commissions paid in connection with the sale of
Class B and
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
Class C shares, and the CDSC received in connection
with the redemption of Class B shares are as
follows:
<TABLE>
<CAPTION>
COMMISSIONS AND DISTRIBUTION
DISTRIBUTION FEES FEES PAID BY KDI
AND CDSC ------------------------------
RECEIVED BY KDI TO ALL FIRMS TO AFFILIATES
----------------- ------------ -------------
<S> <C> <C> <C>
Six months ended March 31,
1996 $ 3,850,000 1,831,000 47,000
</TABLE>
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 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 KDI
ASF PAID BY THE ------------------------------
FUND TO KDI TO ALL FIRMS TO AFFILIATES
--------------- ------------ -------------
<S> <C> <C> <C>
Six months ended March 31,
1996 $ 2,919,000 2,920,000 82,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
Kemper Service Company (KSvC) is the shareholder
service agent of the Fund. Under the agreement,
KSvC received shareholder services fees of
$3,811,000 for the six months ended March 31, 1996.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of ZKI.
During the six months ended March 31, 1996, the
Fund made no payments to its officers and incurred
trustees' fees of $24,000 to independent trustees.
- --------------------------------------------------------------------------------
4
INVESTMENT
TRANSACTIONS For the six months ended March 31, 1996, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
<TABLE>
<S> <C>
Purchases $1,469,507
Proceeds from sales 1,603,263
</TABLE>
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5 CAPITAL SHARE The following table summarizes the activity in
TRANSACTIONS capital shares of the Fund (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1996 SEPTEMBER 30, 1995
----------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C>
SHARES SOLD
Class A 6,475 $ 102,564 17,146 $ 228,060
----------------------------------------------------------------------------
Class B 5,405 87,155 12,710 174,061
----------------------------------------------------------------------------
Class C 164 2,587 287 3,950
----------------------------------------------------------------------------
Class I 549 8,721 2,166 32,293
----------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 11,443 167,755 1,651 20,744
----------------------------------------------------------------------------
Class B 5,505 79,439 736 9,188
----------------------------------------------------------------------------
Class C 43 617 2 29
----------------------------------------------------------------------------
Class I 233 3,413 -- --
----------------------------------------------------------------------------
SHARES REDEEMED
Class A (12,614) (194,603) (37,809) (507,033)
----------------------------------------------------------------------------
Class B (6,036) (94,099) (14,880) (203,270)
----------------------------------------------------------------------------
Class C (36) (564) (66) (944)
----------------------------------------------------------------------------
Class I (445) (7,118) (156) (2,398)
----------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 686 10,799 2,001 27,345
----------------------------------------------------------------------------
Class B (697) (10,799) (2,018) (27,345)
----------------------------------------------------------------------------
NET INCREASE (DECREASE)
FROM CAPITAL SHARE
TRANSACTIONS $ 155,867 $(245,320)
----------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
6
FORWARD FOREIGN
CURRENCY CONTRACTS In order to protect itself against a decline in the
value of particular foreign currencies against the
U.S. Dollar, the Fund has entered into forward
contracts to deliver foreign currency in exchange
for U.S. Dollars as described below. The Fund bears
the market risk that arises from changes in foreign
exchange rates, and accordingly, the net unrealized
gain on these contracts is reflected in the
accompanying financial statements. The Fund also
bears the credit risk if the counterparty fails to
perform under the contract. At March 31, 1996, the
Fund has the following forward foreign currency
contracts outstanding with settlement dates in May,
1996 (in thousands):
<TABLE>
<CAPTION>
CONTRACT UNREALIZED
FOREIGN CURRENCY AMOUNT IN GAIN
TO BE DELIVERED U.S. DOLLARS AT 3/31/96
<C> <S> <C> <C>
--------------------------------------------------------------
2,410 British Pounds $ 3,718 $ 43
--------------------------------------------------------------
3,810 Dutch Guilders 2,345 32
--------------------------------------------------------------
13,100 French Francs 2,614 7
--------------------------------------------------------------
1,603,776 Japanese Yen 15,501 386
--------------------------------------------------------------
2,870 Swiss Francs 2,439 17
--------------------------------------------------------------
Net unrealized gain $485
--------------------------------------------------------------
</TABLE>
17
<PAGE> 18
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------------------
CLASS A
---------------------------------------------------
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------
Net asset value, beginning of period $16.07 12.93 15.33 13.09 13.14
- -----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .02 .05 .01 .01 .03
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.36 3.27 (1.41) 2.29 .71
- -----------------------------------------------------------------------------------------------
Total from investment operations 1.38 3.32 (1.40) 2.30 .74
- -----------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .04 -- -- .03 .05
- -----------------------------------------------------------------------------------------------
Distribution from net realized gain 1.68 .18 1.00 .03 .74
- -----------------------------------------------------------------------------------------------
Total dividends 1.72 .18 1.00 .06 .79
- -----------------------------------------------------------------------------------------------
Net asset value, end of period $15.73 16.07 12.93 15.33 13.09
- -----------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 9.34% 26.07 (9.39) 17.60 5.55
- -----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------------
Expenses 1.07% 1.17 1.09 1.00 1.03
- -----------------------------------------------------------------------------------------------
Net investment income .87% .43 .24 .06 .32
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------
CLASS B
------------------------------------------
SIX MONTHS
ENDED YEAR ENDED MAY 31, 1994
MARCH 31, SEPT. 30, TO SEPT. 30,
1996 1995 1994
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $15.85 12.88 13.10
- -------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.06) (.08) (.03)
- -------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.33 3.23 (.19)
- -------------------------------------------------------------------------------------------
Total from investment operations 1.27 3.15 (.22)
- -------------------------------------------------------------------------------------------
Less distribution from net realized gain 1.68 .18 --
- -------------------------------------------------------------------------------------------
Net asset value, end of period $15.44 15.85 12.88
- -------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 8.75% 24.83 (1.68)
- -------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------------
Expenses 2.11% 2.17 2.11
- -------------------------------------------------------------------------------------------
Net investment loss (.17)% (.57) (.76)
- -------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 19
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
CLASS C CLASS I
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED MAY 31, 1994 ENDED JULY 3, 1995
MARCH 31, SEPT. 30, TO SEPT. 30, MARCH 31, TO SEPT. 30,
1996 1995 1994 1996 1995
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $15.87 12.88 13.09 16.09 14.80
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.05) (.07) (.02) .06 .03
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.34 3.24 (.19) 1.35 1.26
- ----------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.29 3.17 (.21) 1.41 1.29
- ----------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- -- -- .08 --
- ----------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain 1.68 .18 -- 1.68 --
- ----------------------------------------------------------------------------------------------------------------------
Total dividends 1.68 .18 -- 1.76 --
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.48 15.87 12.88 15.74 16.09
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 8.88% 24.99 (1.60) 9.60 8.72
- ----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ----------------------------------------------------------------------------------------------------------------------
Expenses 1.91% 2.03 2.09 .63 .59
- ----------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .03% (.43) (.67) 1.31 .92
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ----------------------------------------------------------------------------------------------------------
Net assets at end of period (in
thousands) $2,613,649 2,503,301 2,255,977 1,826,961 1,419,292
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 129% 67 115 139 83
- ----------------------------------------------------------------------------------------------------------
Average commission rate paid per share on
stock transactions $.0541 -- -- -- --
- ----------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Total return does not reflect the effect of any sales charges.
19
<PAGE> 20
TRUSTEES OFFICERS
STEPHEN B. TIMBERS JOHN E. NEAL
President and Trustee Vice President
DAVID W. BELIN JOHN E. PETERS
Trustee Vice President
LEWIS A. BURNHAM STEVEN H. REYNOLDS
Trustee Vice President
DONALD L. DUNAWAY PHILIP J. COLLORA
Trustee Vice President
and Secretary
ROBERT B. HOFFMAN CHARLES F. CUSTER
Trustee Vice President and
Assistant Secretary
DONALD R. JONES JEROME L. DUFFY
Trustee Treasurer
DOMINIQUE P. MORAX ELIZABETH C. WERTH
Trustee Assistant Secretary
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
- --------------------------------------------------------------------------------
INVESTMENT MANAGER
ZURICH KEMPER INVESTMENTS, INC.
PRINCIPAL UNDERWRITER
KEMPER DISTRIBUTORS, INC.
120 S. LaSalle Street Chicago, IL 60603
http://www.kemper.com
K
(LOGO)Printed on recycled paper in the U.S.A.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Equity Fund prospectus.
KGF - 3 (5/96) LOGO
1014590
Printed in the U.S.A.
