<PAGE> 1
KEMPER
GROWTH FUND
SEMIANNUAL REPORT TO SHAREHOLDERS FOR THE PERIOD ENDED MARCH 31, 1997
Seeking growth of capital through diversification of investment securities
having potential for capital appreciation
" . . . By staying with the current
strategy -- a more diversified portfolio constructed
of larger growth company stocks -- the fund is
positioned to better take advantage of the volatility
I foresee in the market . . ."
[KEMPER FUNDS LOGO]
<PAGE> 2
KEMPER GROWTH FUND
TOTAL RETURNS
For the six-month period ended March 31, 1997
(unadjusted for any sales charge)
LOGO
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.
NET ASSET VALUE
<TABLE>
<CAPTION>
AS OF AS OF
3/31/97 9/30/96
- --------------------------------------------------
<S> <C> <C>
KEMPER GROWTH FUND CLASS A $12.11 $17.21
- --------------------------------------------------
KEMPER GROWTH FUND CLASS B $11.67 $16.82
- --------------------------------------------------
KEMPER GROWTH FUND CLASS C $11.72 $16.87
- --------------------------------------------------
</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 #655 OF #667 OF #665 OF
738 FUNDS 738 FUNDS 738 FUNDS
- -------------------------------------------------------------
5-YEAR #256 OF N/A N/A
271 FUNDS
- -------------------------------------------------------------
10-YEAR #99 OF N/A N/A
172 FUNDS
- -------------------------------------------------------------
15-YEAR #51 OF N/A N/A
113 FUNDS
- -------------------------------------------------------------
20-YEAR #40 OF N/A N/A
103 FUNDS
- -------------------------------------------------------------
</TABLE>
DIVIDEND REVIEW
During the period, Kemper Growth Fund made the following per share
distributions:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ----------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM
CAPITAL GAIN: $1.38 $1.38 $1.38
- ----------------------------------------------------
LONG-TERM
CAPITAL GAIN: $2.97 $2.97 $2.97
- ----------------------------------------------------
</TABLE>
KEMPER FUNDS' STYLE
MORNINGSTAR EQUITY STYLE BOX
EQUITY STYLE BOX
To determine investment style, the sum of a fund's
price-to-earnings ratio must be: for value less than
1.75; for blend between 1.75 and 2.25; and for
growth greater than 2.25. Domestic funds are
measured relative to the Standard & Poor's 500.
International funds are measured relative to the
Morgan Stanley Capital International Europe,
Australasia, Far East Index.
Please note that style boxes do not represent an
exact assessment of risk and do not represent future
performance. Please consult the prospectus for a
description of investment policies.
CONTENTS
TERMS TO KNOW AT A GLANCE
3
Economic Overview
5
Performance Update
7
Industry Sectors
8
Largest Holdings
9
Portfolio of
Investments
12
Financial Statements
14
Notes to
Financial Statements
18
Financial Highlights
<PAGE> 3
ECONOMIC OVERVIEW
[TIMBERS PHOTO]
STEPHEN B. TIMBERS IS PRESIDENT, CHIEF INVESTMENT AND EXECUTIVE OFFICER OF
ZURICH KEMPER INVESTMENTS, INC. (ZKI). ZKI AND ITS AFFILIATES MANAGE
APPROXIMATELY $79 BILLION IN ASSETS, INCLUDING $42 BILLION IN RETAIL MUTUAL
FUNDS. TIMBERS IS A GRADUATE OF YALE UNIVERSITY AND HOLDS AN M.B.A. FROM HARVARD
UNIVERSITY.
DEAR SHAREHOLDER,
The agreement between the White House and Republican leaders in Congress to
balance the federal budget has effectively ended the market correction that
began in the first quarter. Such sudden progress on balancing the budget, an
initiative that the bond market was anticipating resolution on more than one
year ago, is positive news.
The next several weeks will find Congress and the Clinton administration
negotiating toward a final agreement. Unlike previous failed proposals that
sought to balance the budget principally by increasing income taxes, the current
plan -- which starts from the base of a relatively small deficit -- proposes to
slow the growth of federal spending. As such, its prospects are promising.
Natural skeptics are waiting to see specific legislation to see if the
agreement has teeth. While we are optimistic, we need to temper our enthusiasm.
Much of the good news associated with a balanced budget was quickly discounted
in the higher prices in the stock and bond markets.
Of particular interest to equity investors is the agreement to reduce the
maximum tax rate on capital gains. Although details of the reduction are yet to
be known, the prospect of more favorable tax treatment on gains will have the
short-term effect of supporting stocks -- investors can be expected to postpone
selling until they can qualify for the lower tax rate. With equity sales
essentially "frozen" until the effective date is known, the stock market should
have a considerable underpinning. Once an effective date is determined, we would
expect the pent-up selling to occur once that date is reached. However, then we
shall enjoy the long-term positive effect of the lower tax rate on gains.
Talk of a balanced budget has shifted the spotlight away from the Federal
Reserve Board's upward pressure on interest rates. Nevertheless, we look for the
Fed to raise rates in May. This action may be the last for a while because the
economy seems to be slowing down in the second quarter, after the rapid 5.6
percent growth in the first quarter of the year. An economic slowdown would
reduce the threat of inflation and reduce the need for further rate hikes by the
Fed.
In fact, a review of the standard measures of the economy shows little to
be concerned about. As has been the pattern for more than five years, a few
strong quarters followed by a few weak quarters have produced an overall 2
percent to 3 percent rate of growth in gross domestic product (GDP). Job
creation and the unemployment rate are consistent with a moderately expanding
economy. Corporate profits continue to grow at an expected 4 to 5 percent rate
in 1997. The Consumer Price Index continues to track at a 2.5 percent to 3.0
percent rate.
Just as we see a limited downside to today's rising interest rate
environment, so is there a limited upside in the near future. The effect of
higher rates will have to work itself through the economy. Higher rates have
significant implications for corporate profitability, debt issuance, credit
extension and international trade. Post-correction cash flows into the
financial markets will be a subject of great scrutiny. One of the factors
driving the stock market to its recent all-time high was the unprecedented high
level of investment through mutual funds, 401(k)s and qualified contribution
plans. It is realistic to expect that, on the margin, some of that cash will
find a home in short-term, liquid investments while the stock market sorts
itself out.
Leadership in the stock market has been quite narrow and concentrated for
the past six months in large, multinational companies with familiar consumer
brand names. The recent rally after the announcement of a balanced budget
agreement suggests that once monetary policy is also more certain, leadership
may broaden to include small capitalization stocks.
Higher interest rates are, of course, anathema to the fixed-income market.
However, bond investors in the last few weeks have been cheered by the balanced
budget proposal and by expectations that interest rates would not go much
higher. We expect the bond market to trade in a very narrow range -- with long-
term interest rates no lower than 6.75 percent and no
3
<PAGE> 4
ECONOMIC OVERVIEW
- --------------------------------------------------------------------------------
ECONOMIC GUIDEPOSTS
- --------------------------------------------------------------------------------
Economic activity is a key influence on investment performance and shareholder
decision-making. Periods of recession or boom, inflation or deflation, credit
expansion or credit crunch have a significant impact on mutual fund performance.
The following are some significant economic guideposts and their
investment rationale that may help your investment decision-making. The
10-year Treasury rate and the prime rate are prevailing interest rates. The
other data report year-to-year percentage changes.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (4/30/97) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1)* 6.69 6.53 6.51 7.06
PRIME RATE(2)* 8.3 8.25 8.25 9
INFLATION RATE(3)* 2.79 2.99 2.83 3.05
THE U.S. DOLLAR(4) 9.32 3.46 8.51 -10.02
CAPITAL GOODS ORDERS(5)* 6.34 7.46 7.42 9.96
INDUSTRIAL PRODUCTION(5)* 5.62 3.27 2.57 3.73
EMPLOYMENT GROWTH(6) 2.23 2.2 2.07 2.79
</TABLE>
(1) Falling interest rates in recent years have been a big plus for financial
assets.
(2) The interest rate that commercial lenders charge their best borrowers.
(3) Inflation reduces an investor's real return. In the last five years,
inflation has been as high as 6%. The low, moderate inflation of the last
few years has meant high real returns.
(4) Changes in the exchange value of the dollar impact U.S. exporters and the
value of U.S. firms' foreign profits.
(5) These influence corporate profits and equity performance.
(6) An influence on family income and retail sales.
* Data as of March 31, 1997.
SOURCE: ECONOMICS DEPARTMENT, ZURICH KEMPER INVESTMENTS, INC.
higher than 7.25 percent. One positive effect of the stock market correction was
the widening of spreads available on high yield bonds. As a consequence, high
yield bonds today are more reasonably priced.
A natural response to increased volatility in the U.S. equity market is to
look abroad. In fact, the valuations of many international markets are more
attractive than the U.S. However, the weak German and Japanese economies make it
difficult to identify many exciting near-term opportunities without careful
research.
Our recommendation to shareholders is to stay the course and to fight the
temptation to try to time when and where you should be invested. Financial
assets react much quicker today to events. Volatility has returned to the market
and with it heightened uncertainty. Now is the time to rely on your financial
representative for the expertise and the long-term investing discipline that he
or she can provide.
With this commentary as an economic backdrop, we encourage you to read the
following detailed report of your fund, including an interview with your fund's
portfolio management. Thank you for your continued support. We appreciate the
opportunity to serve your investment needs.
Sincerely,
/s/ Stephen B. Timbers
STEPHEN B. TIMBERS
PRESIDENT, CHIEF INVESTMENT AND EXECUTIVE OFFICER
Zurich Kemper Investments, Inc.
May 8, 1997
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) IS CURRENTLY
MANAGING KEMPER GROWTH FUND. REYNOLDS JOINED ZKI WITH NEARLY 30 YEARS OF
INVESTMENT MANAGEMENT EXPERIENCE. HE HOLDS A B.A. IN ECONOMICS FROM JOHNS
HOPKINS UNIVERSITY AND AN M.B.A. IN FINANCE FROM THE UNIVERSITY OF VIRGINIA.
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 ON MARKET AND OTHER CONDITIONS.
STEVE REYNOLDS BEGAN MANAGING KEMPER GROWTH FUND IN JANUARY AND HAS BEEN
RESTRUCTURING THE FUND TO HOLD MORE LARGE COMPANY NAMES AND CREATE A MORE
DIVERSIFIED PORTFOLIO. IN THE INTERVIEW BELOW HE DISCUSSES THE CHANGES HE HAS
MADE AND HIS STRATEGY GOING FORWARD.
Q KEMPER GROWTH FUND LAGGED THE STANDARD AND POOR'S 500 STOCK INDEX (S & P
500) FOR THE SIX-MONTH PERIOD ENDING MARCH 31, 1997. WHAT ACCOUNTS FOR THIS
SHORTFALL?
A A portion of the fund was held in mid-capitalization stocks which, as a
whole, lagged the market since June of last year. Two factors were involved in
the decision to hold more mid-capitalization stocks: first, the valuations on
many of the larger company stocks were high and the earnings could not have been
purchased at reasonable prices; second, the economic and political environment
indicated that the market could become more comfortable with these mid-cap
issues. Mid-cap stocks usually perform well in periods of strong economic growth
similar to the fourth quarter of 1996 and the first quarter of 1997, but the
market was driven by liquidity concerns, making large company stocks rally while
mid-cap issues did not participate. Our underweighting in pharmaceuticals also
held us back. We were underweighted in pharmaceuticals because valuations were
full in spite of good fundamentals. The fund held a defensive cash position
during much of the fourth quarter rally. This position was in anticipation of a
stronger economy, rising interest rates and the possibility of a market
correction.
Q SINCE YOU BEGAN MANAGING THE FUND IN JANUARY, WHAT CHANGES HAVE YOU
MADE TO THE PORTFOLIO?
A Aside from actively managing the fund, I made two structural changes to
the portfolio. First, I diversified the portfolio across more industries. By
being in more industries we don't need to worry about missing out if one part
of the market begins to take off and conversely, having our holdings spread
out will help decrease the down-side risk if one sector of the market is
getting hurt. Second, the majority of the mid-sized companies have been
eliminated from the portfolio and the fund is focusing on large company growth
issues. Mid-capitalization stocks have not significantly contributed to
performance so we reallocated those assets to larger companies. The shift to
larger more established companies helped during the market sell-off in March.
Some of our larger technology stocks held up well and added positive relative
performance. The fund's holdings in retail stocks also performed strongly.
5
<PAGE> 6
PERFORMANCE UPDATE
Q YOU MENTIONED THE STRUCTURAL CHANGES, BUT HOW HAS THE PORTFOLIO EVOLVED
OVER THE PAST SIX MONTHS FROM A DAY-TO-DAY MANAGEMENT STANDPOINT?
A We have changed the mix of industries represented in the portfolio.
Based on strong sales and earnings projections, we have been overweighted in
retail stocks for much of the past six months. Many of these issues were
purchased earlier in 1996; they performed well and we began to take profits
at the end of March.
Recently, we have taken advantage of weakness in the market to find
good buys in many of the technology and pharmaceutical stocks. Even with the
drug sector being one of the market leaders for the past year, pharmaceuticals
continue to have solid fundamentals. And, the market correction brought
valuations to reasonable levels. We've also added to banks and other financial
stocks because of the improving fundamentals and low price-earnings multiples.
We have been able to buy good companies, with solid fundamentals, selling at
attractive valuations.
Q HOW WOULD YOU CHARACTERIZE THE MARKET OVER THE LAST SIX MONTHS?
A During the fourth quarter of 1996 the market was very strong. The
strength continued through the middle of the first quarter of 1997, and the
market reached new highs. Stocks, for the most part, have been liquidity driven
with strength concentrating in a relatively narrow segment, creating a
two-tiered market. A small number of large, highly liquid stocks posted strong
gains while the rest of the stocks remained relatively flat. At the end of
March, we witnessed increased volatility and significant setbacks within
certain areas of the market. The Federal Reserve Board (the Fed) increased
interest rates which caused a decline in many financial stocks. Technology
stocks, which had continued to soar during January and February, were
sold-off quickly in March.
Q WHAT OPPORTUNITIES DID THAT CREATE IN THE MARKET?
A At the end of March, we increased the fund's weighting in technology
stocks. Basically, technology stock valuations were extremely high early in the
year and not many met our purchase criteria. The sell-off at the end of March
created buying opportunities in quality companies that, a few weeks earlier,
were not attractively priced. Software and networking stocks experienced the
steepest declines; based on that we have begun to buy more stocks in those
industries. Some of the technology names we purchased were Cisco Systems,
PeopleSoft, Sun Microsystems and Hewlett-Packard. Financial stocks also
presented some opportunity. The market perceives an interest rate change as a
negative to a financial company, but much of their revenue is derived from fees
which are not sensitive to interest rates and as a result profits are not hurt
by moderately rising rates.
Q THE MARKET HAS EXPERIENCED VOLATILITY THAT HASN'T BEEN SEEN FOR A
WHILE. IS THIS THE TYPE OF MARKET WE CAN EXPECT GOING FORWARD? HOW ARE YOU
POSITIONING THE FUND?
A I think the market will continue on an upward trend but there will be
more volatility than we have become accustomed to in recent years. The market
should act very similar to the end of March; we expect to see sharp corrections
within different sectors but not a large decline in the entire market. This
should allow us to buy companies with good growth prospects at reasonable
prices. In this instance the volatility won't be a bad thing because as sectors
strengthen we can rotate out and when they fall we can move back in and take
advantage of the cheaper stock prices. By staying with the current strategy--a
more diversified portfolio constructed of larger growth company stocks--the
fund is positioned to better take advantage of the volatility I foresee in the
market.
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, 1997, and on September 30, 1996.
[COMPARISON BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER GROWTH FUND KEMPER GROWTH FUND
ON 3/31/97 ON 9/30/96
<S> <C> <C>
TECHNOLOGY 27.0% 20.5%
CONSUMER NON-DURABLES 25.3% 32.1%
HEALTH CARE 15.0% 14.7%
FINANCE 11.7% 10.6%
CAPITAL GOODS 7.5% 5.4%
UTILITIES/TELECOMMUNICATION'S 5.9% 4.8%
ENERGY 4.0% 2.6%
BASIC INDUSTRIES 1.8% 3.0%
TRANSPORTATION 1.3% 2.5%
CONSUMER DURABLE'S 0.5% 3.8%
</TABLE>
A COMPARISON WITH THE RUSSELL 1000 GROWTH INDEX*
Data show the percentage of the common stocks in the portfolio that each sector
of Kemper Growth Fund represented on March 31, 1997, 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
ON 3/31/97 ON 3/31/97
<S> <C> <C>
TECHNOLOGY 27.0% 21.9%
CONSUMER NON-DURABLES 25.3% 34.4%
HEALTH CARE 15.0% 18.5%
FINANCE 11.7% 4.8%
CAPITAL GOODS 7.5% 10.3%
UTILITIES/TELECOMMUNICATIONS 5.9% 3.2%
ENERGY 4.0% 2.5%
BASIC INDUSTRIES 1.8% 3.4%
TRANSPORTATION 1.3% 0.4%
CONSUMER DURABLES 0.5% 0.6%
</TABLE>
* 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
LARGEST HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS*
REPRESENTING 22.6% OF THE FUND'S TOTAL NET ASSETS ON MARCH 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
HOLDINGS PERCENT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Intel Engaged in the design, development, manufacture and 3.5%
sale of advanced microcomputer components, such as
integrated circuits and other related products.
2 Philip Morris The largest cigarette maker in the U.S. Through its 2.4%
Miller Brewing subsidiary, it is also the country's
second largest brewer. This company is also a major
branded food producer through its Kraft and General
Foods subsidiaries.
3 Cisco Systems Engaged in development, manufacture, market and 2.3%
support of high performance multi-protocol
internetworking systems for computer integrated
networks.
4 Amgen A global biotechnology company that discovers, 2.3%
develops, manufactures and markets human therapeutics
based on advanced cellular and molecular biology.
5 Cadence Develops, markets and supports computer aided design 2.3%
Design Systems software products and services that automate, enhance
and accelerate the design and verification of
integrated circuits and electronic systems.
6 Medtronic Developer, manufacturer and marketer of medical 2.1%
devices designed to improve cardiovascular and
neurological health.
7 VIacom international Engaged in the business of television program feature 2.0%
film distribution for television exhibition in
domestic and international markets and television
production and advertising service operations through
its entertainment group.
8 Liberty Operates cable television systems, throughout the U.S. 2.0%
Media Group and internationally. They also test and develop new
services using optical fiber including multichannel
pay-per-view, high-capacity telecomputing and
micro-cellular telephone services.
9 FirsT USA Specializes in the credit card business. The company 1.9%
is among the largest providers of the Visa and
MasterCard services in the nation.
10 Lowes A retailer of home center products, consumer durables 1.8%
Companies and contractor building supplies. It is one of
America's largest retailers, serving the do it
yourself home improvement, home decor and home
construction market.
</TABLE>
*Portfolio composition and holdings are subject to change.
8
<PAGE> 9
PORTFOLIO OF INVESTMENTS
KEMPER GROWTH FUND
PORTFOLIO OF INVESTMENTS AT MARCH 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BASIC INDUSTRIES--1.7% Cementos Mexicanos, S.A. de C.V. "B," ADR 343,100 $ 1,423
Praxair, Inc. 400,000 17,950
Randstad Holding NV 9,300 798
Rentokil Group PLC 186,000 1,281
Sony Corp. 14,100 985
Toray Industries 188,000 1,092
(a)Tubos De Acero de Mexico, S.A., ADR 123,500 2,115
(a)UCAR International 371,500 14,721
--------------------------------------------------------------------------
40,365
- -------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--7.2% Boeing Co. 254,800 25,130
Emerson Electric Co. 550,000 24,750
General Electric Co. 265,000 26,301
B.F. Goodrich Co. 761,200 27,879
Honda Motor Co., Ltd. 49,000 1,460
Technip S.A. 11,462 1,230
(a)U.S. Filter Corp. 691,000 21,335
Westinghouse Electric Corp. 1,329,800 23,604
York International Corp. 550,000 23,031
--------------------------------------------------------------------------
174,720
- -------------------------------------------------------------------------------------------------------------------
COMPUTER SYSTEMS
AND SOFTWARE--12.4% (a)Cadence Design Syste 1,607,100 55,244
(a)Ceridian Corporation 1,000,000 35,875
(a)Compaq Computer Corp. 215,000 16,474
(a)Gartner Group, "A" 1,200,000 25,950
HBO & Company 200,000 9,500
Hewlett-Packard Co. 460,000 24,495
(a)Microsoft Corp. 110,800 10,159
Murata Manufacturing 32,500 1,165
(a)Parametric Technology Corp. 747,400 33,726
(a)PeopleSoft Inc. 520,200 20,808
(a)Silicon Graphics 850,000 16,575
(a)Sterling Commerce 844,600 24,493
(a)Sun Microsystems 880,000 25,410
-------------------------------------------- --------------------------------
299,874
- ---------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--19.3% (a)AutoZone Inc. 1,410,000 31,725
(a)Boston Market 1,000,000 30,500
Carnival Corp., "A" 770,400 28,505
(a)Consolidated Stores Corp. 529,500 18,665
Walt Disney Company 35,000 2,555
(a)Federated Department Stores 687,900 22,615
(a)Tommy Hilfiger Corporation 700,000 36,575
Home Depot 698,600 37,375
(a)Just For Feet, Inc. 641,000 11,057
(a)Liberty Media Group, "A" 2,467,500 49,196
(a)Lone Star Steakhouse & Saloon 1,155,300 26,427
Lowes Companies, Inc. 1,160,000 43,355
Newell Co. 777,700 26,053
Sears, Roebuck & Co. 500,000 25,125
(a)Viacom International, "B" 1,505,000 49,853
Wal-Mart Stores 1,000,000 27,875
----------------------------------------------------------------------------
467,456
</TABLE>
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSUMER DURABLES--.5% Magna International Inc., "A" 220,000 $ 10,917
Matsushita Electric Industrial Co., Ltd. 84,000 1,309
----------------------------------------------------------------------------
12,226
- ---------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--5.0% Gillette Co. 83,000 6,028
(a)Kroger Co. 333,200 16,910
PepsiCo 1,180,000 38,498
Philip Morris Companies 510,000 58,204
Reed International PLC 77,461 1,425
----------------------------------------------------------------------------
121,065
- ---------------------------------------------------------------------------------------------------------------------
ENERGY--3.8% Amerada Hess Corp. 460,000 24,380
Baker Hughes, Inc. 400,000 15,350
British Petroleum 105,188 1,220
Enron Corp. 73,400 2,789
Halliburton Co. 375,000 25,406
Tosco Corporation 845,000 24,083
----------------------------------------------------------------------------
93,228
- ---------------------------------------------------------------------------------------------------------------------
FINANCE--11.3% Allstate Corp. 200,000 11,875
American Express Company 400,000 23,950
American General Corp. 700,000 28,525
Bank of Ireland 185,478 1,862
CITIC Pacific Ltd. 223,000 1,105
Chase Manhattan Corp. 295,000 27,619
Cheung Kong Holdings Ltd. 127,000 1,119
Development Bank of Singapore 86,000 1,000
Federal National Mortgage Association 690,000 24,926
First USA 1,065,000 45,129
Great Western Financial Corp. 700,700 28,291
ING Barings Ltd. 48,366 1,905
ITT Hartford Group 370,800 26,744
KeyCorp 500,000 24,375
MGIC Investment Corp. 327,700 23,185
Swire Pacific Limited, "A" 110,000 866
----------------------------------------------------------------------------
272,476
- ---------------------------------------------------------------------------------------------------------------------
HEALTH CARE--14.4% (a)Amgen Inc. 1,000,000 55,875
(a)Biogen 700,000 26,163
(a)Boston Scientific Corp. 400,000 24,700
(a)British Bio-Technology Group 294,000 1,207
Cardinal Health 379,600 20,641
(a)Centocor, Inc. 153,000 4,667
(a)Fresenius Medical Care, AG 16,660 1,343
Guidant Corporation 146,700 9,022
Johnson & Johnson 475,000 25,116
Eli Lilly & Co. 160,000 13,160
Medtronic, Inc. 805,000 50,111
Merck & Co. 330,000 27,803
Omnicare Inc. 1,000,600 23,514
(a)Oxford Health Plans, Inc. 255,000 14,949
Perkin-Elmer Corp. 375,000 24,141
Roche Holding AG 165 1,425
(a)Total Renal Care Holdings 100,000 3,038
United Healthcare Corp. 448,500 21,360
----------------------------------------------------------------------------
348,235
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SEMICONDUCTORS AND
NETWORKING--13.5% (a)Analog Devices 1,176,666 $ 26,475
(a)Applied Materials, Inc. 555,800 25,775
(a)Cabletron Systems 375,300 10,978
(a)Cisco Systems 1,167,400 56,181
Intel Corp. 608,600 84,671
(a)Microchip Technology 977,600 29,328
(a)National Semiconductor Corp . 911,000 25,053
(a)Teradyne 478,900 13,828
Texas Instruments 360,000 26,955
(a)3Com Corporation 822,900 26,950
----------------------------------------------------------------------------
326,194
- ---------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--4.6% (a)Ascend Communications, Inc. 660,000 26,895
L.M. Ericsson Telephone Co., "B" 40,559 1,432
(a)Glenayre Technologies, Inc. 575,000 5,678
Lucent Technologies Inc. 200,000 10,550
Nokia Corporation, ADR 530,000 30,873
(a)Tellabs, Inc. 1,015,000 36,667
----------------------------------------------------------------------------
112,095
- ---------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--1.3% Burlington Northern Sante Fe Corporation 385,000 28,490
Canadian National Railway Company 70,305 2,487
----------------------------------------------------------------------------
30,977
- ---------------------------------------------------------------------------------------------------------------------
UTILITIES--1.0% Iberdrola, S.A. 111,000 1,221
(a)Paging Network, Inc. 2,368,000 19,240
Telefonica del Peru S.A., ADS 150,000 3,338
----------------------------------------------------------------------------
23,799
----------------------------------------------------------------------------
TOTAL COMMON STOCKS--96.0%
(Cost: $2,370,140) 2,322,710
----------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET Yield--5.38% to 5.58%
INSTRUMENTS--2.0% Due--April 1997
(Cost: $46,811) $46,915 46,807
----------------------------------------------------------------------------
TOTAL INVESTMENTS--98.0%
(Cost: $2,416,951) 2,369,517
----------------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES--2.0% 49,233
----------------------------------------------------------------------------
NET ASSETS--100% $2,418,750
----------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- -------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $2,416,951,000 for federal income tax
purposes at March 31, 1997, the gross unrealized appreciation was $132,989,000,
the gross unrealized depreciation was $180,423,000 and the net unrealized
depreciation on investments was $47,434,000.
See accompanying Notes to Financial Statements.
11
<PAGE> 12
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- --------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------
Investments, at value
(Cost: $2,416,951) $2,369,517
- --------------------------------------------------------------------------
Cash 9,901
- --------------------------------------------------------------------------
Receivable for:
Investments sold 104,040
- --------------------------------------------------------------------------
Fund shares sold 336
- --------------------------------------------------------------------------
Dividends 2,484
- --------------------------------------------------------------------------
TOTAL ASSETS 2,486,278
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- --------------------------------------------------------------------------
Payable for:
Investments purchased 62,910
- --------------------------------------------------------------------------
Fund shares redeemed 1,221
- --------------------------------------------------------------------------
Management fee 1,179
- --------------------------------------------------------------------------
Distribution services fee 529
- --------------------------------------------------------------------------
Administrative services fee 470
- --------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 1,107
- --------------------------------------------------------------------------
Trustees' fees 112
- --------------------------------------------------------------------------
Total liabilities 67,528
- --------------------------------------------------------------------------
NET ASSETS $2,418,750
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- --------------------------------------------------------------------------
Paid-in capital $2,378,414
- --------------------------------------------------------------------------
Undistributed net realized gain on investments 59,838
- --------------------------------------------------------------------------
Net unrealized depreciation on investments (47,336)
- --------------------------------------------------------------------------
Undistributed net investment income 27,834
- --------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $2,418,750
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
THE PRICING OF SHARES
- --------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($1,609,981 / 132,979 shares outstanding) $12.11
- --------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of net asset value or
5.75% of offering price) $12.85
- --------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($769,841 / 65,972 shares outstanding) $11.67
- --------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($13,062 / 1,115 shares outstanding) $11.72
- --------------------------------------------------------------------------
CLASS I SHARES
Net asset value and redemption price per share
($25,866 / 2,125 shares outstanding) $12.17
- --------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
12
<PAGE> 13
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ---------------------------------------------------------------------------------------------------
Interest $ 8,874
- ---------------------------------------------------------------------------------------------------
Dividends 6,978
- ---------------------------------------------------------------------------------------------------
Total investment income 15,852
- ---------------------------------------------------------------------------------------------------
Expenses:
Management fee 7,275
- ---------------------------------------------------------------------------------------------------
Distribution services fee 3,285
- ---------------------------------------------------------------------------------------------------
Administrative services fee 3,011
- ---------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 5,037
- ---------------------------------------------------------------------------------------------------
Professional fees 47
- ---------------------------------------------------------------------------------------------------
Reports to shareholders 357
- ---------------------------------------------------------------------------------------------------
Trustees' fees and other 58
- ---------------------------------------------------------------------------------------------------
Total expenses 19,070
- ---------------------------------------------------------------------------------------------------
NET INVESTMENT LOSS (3,218)
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ---------------------------------------------------------------------------------------------------
Net realized gain on sales of investments 137,854
- --------------------------------------------------------------------------------------------------
Change in net unrealized depreciation on investments (295,049)
- ---------------------------------------------------------------------------------------------------
Net loss on investments (157,195)
- ---------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(160,413)
- ---------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
MARCH 31, SEPTEMBER 30,
1997 1996
- ---------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income (loss) $ (3,218) 8,893
- ---------------------------------------------------------------------------------------------------
Net realized gain 137,854 748,123
- ---------------------------------------------------------------------------------------------------
Change in net unrealized depreciation (295,049) (299,539)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (160,413) 457,477
- ---------------------------------------------------------------------------------------------------
Net equalization credits 5,735 5,974
- ---------------------------------------------------------------------------------------------------
Distribution from net investment income -- (10,741)
- ---------------------------------------------------------------------------------------------------
Distribution from net realized gain (690,293) (258,903)
- ---------------------------------------------------------------------------------------------------
Total dividends to shareholders (690,293) (269,644)
- ---------------------------------------------------------------------------------------------------
Net increase from capital share transactions 525,418 41,195
- ---------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (319,553) 235,002
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------------
Beginning of period 2,738,303 2,503,301
- ---------------------------------------------------------------------------------------------------
END OF PERIOD (including undistributed net investment
income of $27,834 and $25,317, respectively) $2,418,750 2,738,303
- ---------------------------------------------------------------------------------------------------
</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 a contingent deferred sales charge
payable upon certain redemptions within one year of
purchase. Class C shares do not convert into
another class. Class I shares 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. All
shares of the Fund have equal rights with respect
to voting, dividends and assets, subject to class
specific preferences.
- --------------------------------------------------------------------------------
2 SIGNIFICANT
ACCOUNTING POLICIES INVESTMENT VALUATION. Investments are stated at
value. Portfolio securities that are traded on a
domestic securities exchange or securities listed
on the NASDAQ National Market are valued at the
last sale price on the exchange or market where
primarily traded or listed or, if there is no
recent sale, at the last current bid quotation.
Portfolio securities that are primarily traded on
foreign securities exchanges are generally valued
at the preceding closing values of such securities
on their respective exchanges where primarily
traded. Securities not so traded or listed are
valued at the last current bid quotation if market
quotations are available. Fixed income securities
are valued by using market quotations, or
independent pricing services that use prices
provided by market makers or estimates of market
values obtained from yield data relating to
instruments or securities with similar
characteristics. Equity options are valued at the
last sale price unless the bid price is higher or
the asked price is lower, in which event such bid
or asked price is used. Financial futures and
options thereon are valued at the settlement price
established each day by the board of trade or
exchange on which they are traded. Forward foreign
currency contracts are valued at the forward rates
prevailing on the day of valuation. Other
securities and assets are valued at fair value as
determined in good faith by the Board of Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on the
trade date (date the order to buy or sell is
executed). Dividend income is recorded on the
ex-dividend date, and interest income is recorded
on the accrual basis and includes discount
amortization on money market instruments. Realized
gains and losses from investment transactions are
reported on an identified cost basis.
FUND SHARE VALUATION. Fund shares are sold and
redeemed on a continuous basis at net asset value
(plus an initial sales charge on most sales of
Class A shares). Proceeds payable on redemption of
Class B and Class C shares will be reduced by the
amount of any applicable contingent
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
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, 1997.
DIVIDENDS TO SHAREHOLDERS. The Fund declares and
pays dividends of net investment income and net
realized capital gains annually, which are recorded
on the ex-dividend date. Dividends are determined
in accordance with income tax principles which may
treat certain transactions differently from
generally accepted accounting principles.
EQUALIZATION ACCOUNTING. A portion of proceeds from
sales and cost of redemptions of Fund shares is
credited or charged to undistributed net investment
income so that income per share available for
distribution is not affected by sales or
redemptions of shares.
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The Fund has a management
agreement with Zurich Kemper Investments, Inc.
(ZKI) and pays a management fee at 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 $7,275,000 for the six
months ended March 31, 1997. Zurich Investment
Management Limited, an affiliate of ZKI, serves as
sub-adviser with respect to foreign securities
investments in the Fund, and is paid by ZKI for its
services.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
The Fund has an underwriting and distribution
services agreement with Zurich Kemper Distributors,
Inc. (ZKDI) (formerly known as Kemper Distributors,
Inc.). Underwriting commissions paid in connection
with the distribution of Class A shares are as
follows:
<TABLE>
<CAPTION>
COMMISSIONS
ALLOWED BY ZKDI
COMMISSIONS ----------------------------
RETAINED BY ZKDI TO ALL FIRMS TO AFFILIATES
---------------- ------------ -------------
<S> <C> <C> <C>
Six months ended
March 31, 1997 $165,000 821,000 6,000
</TABLE>
For services under the distribution services
agreement, the Fund pays ZKDI a fee of .75% of
average daily net assets of the Class B and Class C
shares. Pursuant to the agreement, ZKDI enters into
related selling group agreements with various firms
at various rates for sales of Class B and Class C
shares. In addition, ZKDI receives any contingent
deferred sales charges (CDSC) from redemptions of
Class B and Class C shares. Distribution fees and
commissions paid in connection with the sale of
Class B
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
and Class C shares, and the CDSC received in
connection with the redemption of such shares are
as follows:
<TABLE>
<CAPTION>
DISTRIBUTION FEES COMMISSIONS AND
AND CDSC DISTRIBUTION FEES PAID
RECEIVED BY ZKDI BY ZKDI TO FIRMS
----------------- ----------------------
<S> <C> <C>
Six months ended
March 31, 1997 $3,859,000 1,830,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with ZKDI. For
providing information and administrative services
to Class A, Class B and Class C shareholders, the
Fund pays ZKDI a fee at an annual rate of up to
.25% of average daily net assets of each class.
ZKDI in turn has various agreements with financial
services firms that provide these services and pays
these firms based on assets of Fund accounts the
firms service. Administrative services fees (ASF)
paid are as follows:
<TABLE>
<CAPTION>
ASF PAID BY ZKDI
ASF PAID BY THE -----------------------------
FUND TO ZKDI TO ALL FIRMS TO AFFILIATES
--------------- ------------- -------------
<S> <C> <C> <C>
Six months ended
March 31, 1997 $3,011,000 2,987,000 21,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
Zurich Kemper Service Company (ZKSvC) (formerly
known as Kemper Service Company) is the shareholder
service agent of the Fund. Under the agreement,
ZKSvC received shareholder services fees of
$3,878,000 for the six months ended March 31, 1997.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of ZKI.
During the six months ended March 31, 1997, the
Fund made no payments to its officers and incurred
trustees' fees of $21,000 to independent trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the six months ended March 31, 1997, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $3,082,16
Proceeds from sales 2,904,46
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1997 SEPTEMBER 30, 1996
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 7,176 $ 92,288 13,560 $ 210,554
---------------------------------------------------------------------------------
Class B 5,437 82,530 12,475 197,160
---------------------------------------------------------------------------------
Class C 305 4,391 435 6,880
---------------------------------------------------------------------------------
Class I 383 5,322 758 11,932
---------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 33,257 432,365 11,446 167,815
---------------------------------------------------------------------------------
Class B 17,437 219,213 5,507 79,478
---------------------------------------------------------------------------------
Class C 258 3,257 43 618
---------------------------------------------------------------------------------
Class I 634 8,270 233 3,413
---------------------------------------------------------------------------------
SHARES REDEEMED
Class A (14,301) (200,090) (25,770) (400,961)
---------------------------------------------------------------------------------
Class B (7,534) (106,851) (13,792) (218,715)
---------------------------------------------------------------------------------
Class C (122) (1,689) (129) (2,048)
---------------------------------------------------------------------------------
Class I (957) (13,588) (936) (14,931)
---------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 1,287 18,202 1,448 21,712
---------------------------------------------------------------------------------
Class B (1,329) (18,202) (1,471) (21,712)
---------------------------------------------------------------------------------
NET INCREASE
FROM CAPITAL SHARE
TRANSACTIONS $ 525,418 $ 41,195
---------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
6 FORWARD FOREIGN
CURRENCY CONTRACTS In order to help 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,
1997, the Fund had the following forward foreign
currency contracts outstanding with settlement
dates in April, 1997:
<TABLE>
<CAPTION>
FOREIGN CURRENCY CONTRACT AMOUNT
TO BE DELIVERED IN U.S. DOLLARS UNREALIZED GAIN
-------------------------------------------------------------------
<S> <C> <C> <C>
1,280,000 French Francs $ 228,000 $ 3,000
-------------------------------------------------------------------
518,000 German Marks 311,000 5,000
-------------------------------------------------------------------
338,000,000 Japanese Yen 2,737,000 85,000
-------------------------------------------------------------------
489,000 Swiss Francs 340,000 5,000
-------------------------------------------------------------------
NET UNREALIZED GAIN $98,000
-------------------------------------------------------------------
</TABLE>
17
<PAGE> 18
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------------
CLASS A
----------------------------------------------
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------
Net asset value, beginning of period $17.21 16.07 12.93 15.33 13.09
- -----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income -- .12 .05 .01 .01
- -----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.75) 2.74 3.27 (1.41) 2.29
- -----------------------------------------------------------------------------------------
Total from investment operations (.75) 2.86 3.32 (1.40) 2.30
- -----------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- .04 -- -- .03
- -----------------------------------------------------------------------------------------
Distribution from net realized gain 4.35 1.68 .18 1.00 .03
- -----------------------------------------------------------------------------------------
Total dividends 4.35 1.72 .18 1.00 .06
- -----------------------------------------------------------------------------------------
Net asset value, end of period $12.11 17.21 16.07 12.93 15.33
- -----------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) (6.09)% 19.62 26.07 (9.39) 17.60
- -----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------
Expenses 1.08% 1.07 1.17 1.09 1.00
- -----------------------------------------------------------------------------------------
Net investment income .09% .65 .43 .24 .06
- -----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------
CLASS B
----------------------------------------------
SIX MONTHS YEAR ENDED MAY 31 TO
ENDED SEPTEMBER 30, SEPT. 30,
MARCH 31, 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------
Net asset value, beginning of period $16.82 15.85 12.88 13.10
- -----------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.07) (.09) (.08) (.03)
- -----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.73) 2.74 3.23 (.19)
- -----------------------------------------------------------------------------------------
Total from investment operations (.80) 2.65 3.15 (.22)
- -----------------------------------------------------------------------------------------
Less distribution from net realized gain 4.35 1.68 .18 --
- -----------------------------------------------------------------------------------------
Net asset value, end of period $11.67 16.82 15.85 12.88
- -----------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) (6.61)% 18.47 24.83 (1.68)
- -----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------
Expenses 2.12% 2.05 2.17 2.11
- -----------------------------------------------------------------------------------------
Net investment loss (.95)% (.33) (.57) (.76)
- -----------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 19
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------- -----------------------------------
CLASS C CLASS I
----------------------------------------- -----------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED MAY 31 TO ENDED YEAR ENDED JULY 3 TO
MARCH 31, SEPTEMBER 30, SEPT. 30, MARCH 31, SEPT. 30, SEPT. 30,
1997 1996 1995 1994 1997 1996 1995
- ------------------------------------------------------------------------------ ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------ ------------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------ ------------------------------------
Net asset value, beginning of period $16.87 15.87 12.88 13.09 17.26 16.09 14.80
- ------------------------------------------------------------------------------ -----------------------------------
Income from investment operations:
Net investment income (loss) (.04) (.06) (.07) (.02) .04 .19 .03
- ------------------------------------------------------------------------------ -----------------------------------
Net realized and unrealized gain
(loss) (.76) 2.74 3.24 (.19) (.78) 2.74 1.26
- ------------------------------------------------------------------------------ -----------------------------------
Total from investment operations (.80) 2.68 3.17 (.21) (.74) 2.93 1.29
- ------------------------------------------------------------------------------ -----------------------------------
Less dividends:
Distribution from net investment
income -- -- -- -- -- .08 --
- ------------------------------------------------------------------------------ -----------------------------------
Distribution from net realized gain 4.35 1.68 .18 -- 4.35 1.68 --
- ------------------------------------------------------------------------------ -----------------------------------
Total dividends 4.35 1.68 .18 -- 4.35 1.76 --
- ------------------------------------------------------------------------------ -----------------------------------
Net asset value, end of period $11.72 16.87 15.87 12.8 12.17 17.26 16.09
- ------------------------------------------------------------------------------ ---------------------------------
TOTAL RETURN (NOT ANNUALIZED) (6.56)% 18.65 24.99 (1.60) (5.99) 20.19 8.72
- ----------------------------------------------------------------------------- -------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------ -----------------------------------
Expenses 2.01% 1.95 2.03 2.09 .76 .64 .59
- ------------------------------------------------------------------------------ -----------------------------------
Net investment income (loss) (.84)% (.23) (.43) (.67) .41 1.08 - .92
- ------------------------------------------------------------------------------ -----------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- -----------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets at end of period (in thousands) $2,418,75 2,738,303 2,503,301 2,255,977 1,826,961
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 235% 150 67 115 139
- -----------------------------------------------------------------------------------------------------------------------
Average commission rates paid per share on stock transactions for the six months ended March 31, 1997 and the year
ended September 30, 1996 were $.0556 and $.0560, respectively.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Total return does not reflect the effect of any sales charges.
19
<PAGE> 20
TRUSTEES & OFFICERS
TRUSTEES OFFICERS
STEPHEN B. TIMBERS CHARLES R. MANZONI, JR.
President and Trustee Vice President
DAVID W. BELIN JOHN E. NEAL
Trustee Vice President
LEWIS A. BURNHAM STEVEN H. REYNOLDS
Trustee Vice President
DONALD L. DUNAWAY PHILIP J. COLLORA
Trustee Vice President
and Secretary
ROBERT B. HOFFMAN JEROME L. DUFFY
Trustee Treasurer
DONALD R. JONES ELIZABETH C. WERTH
Trustee Assistant Secretary
DOMINIQUE P. MORAX
Trustee
SHIRLEY D. PETERSON
Trustee
WILLIAM P. SOMMERS
Trustee
- --------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICE AGENT ZURICH KEMPER SERVICE COMPANY
P.O. Box 419557
Kansas City, MO 64141
- --------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
127 West 10th Street
Kansas City, MO 64105
- --------------------------------------------------------------------------------
INVESTMENT MANAGER ZURICH KEMPER INVESTMENTS, INC.
PRINCIPAL UNDERWRITER ZURICH KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606
www.kemper.com
[RECYCLED 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 (5/97) 1031830
Printed in the U.S.A. [KEMPER FUNDS LOGO]
