<PAGE> 1
Kemper Technology Fund
SEMIANNUAL REPORT TO SHAREHOLDERS
FOR THE PERIOD ENDED APRIL 30, 1996
Seeking growth of capital
"...some very weak periods alternated with some moderate rallies."
<PAGE> 2
Table of
Contents
2
Terms to Know
3
General
Economic Overview
5
Performance Update
7
Focus on Biotech
8
Industry Sectors
9
Individual Holdings
10
Portfolio of Investments
13
Financial Statements
17
Notes to
Financial Statements
21
Financial Highlights
At A Glance
Kemper Technology Fund Total Returns for the six-month period ended April 30,
1996 (unadjusted for any sales charge)
<TABLE>
<CAPTION>
LIPPER
SCIENCE &
TECHNOLOGY
FUNDS CATEGORY
CLASS A CLASS B CLASS C AVERAGE*
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
7.50% 6.93% 7.05% 7.56%
</TABLE>
Returns and rankings are historical and do not represent future results. Returns
and net asset value fluctuate. Shares are redeemable at current net asset value,
which may be more or less than original cost.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
NET ASSET VALUE
- -------------------------------------------------------------------------------
AS OF AS OF
4/30/96 10/31/95
- -------------------------------------------------------------------------------
<S> <C> <C>
KEMPER TECHNOLOGY FUND
CLASS A $13.12 $14.63
KEMPER TECHNOLOGY FUND
CLASS B $12.79 $14.39
KEMPER TECHNOLOGY FUND
CLASS C $12.87 $14.45
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
KEMPER TECHNOLOGY FUND LIPPER RANKINGS*
- -------------------------------------------------------------------------------
COMPARED WITH ALL OTHER FUNDS IN THE LIPPER SCIENCE & TECHNOLOGY FUNDS CATEGORY
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
1-YEAR #12 OF 36 #15 OF 36 #14 OF 36
FUNDS FUNDS FUNDS
5-YEAR #13 OF 15
FUNDS N/A N/A
10-YEAR #8 OF 13
FUNDS N/A N/A
- -------------------------------------------------------------------------------
</TABLE>
*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.
- -------------------------------------------------------------------------------
DIVIDEND REVIEW
- -------------------------------------------------------------------------------
DURING THE PERIOD, KEMPER TECHNOLOGY FUND PAID THE FOLLOWING DIVIDENDS:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM
CAPITAL GAIN: $0.70 $0.70 $0.70
LONG-TERM
CAPITAL GAIN: $1.43 $1.43 $1.43
- -------------------------------------------------------------------------------
</TABLE>
Terms To Know
BETA A mathematical measure of the historical sensitivity of rates of return on
a portfolio or a given stock compared with rates of return on the market as a
whole. A high beta (over 1.0) indicates moderate or high price volatility. A
beta of 1.5 reflects a 1.5% change in the return on an asset for every 1% change
in the return on the market. As of April 30, 1996, Kemper Technology Fund had a
beta of 1.25.
BIOTECHNOLOGY The branch of technology involved with living organisms.
INTERNET A cooperative message-forwarding system linking computer networks all
over the world. Users of the Internet can exchange electronic mail, participate
in electronic discussion forums, send files from any computer to another,
retrieve information and, with the appropriate password, even use each other's
computers. The Internet grew out of the ARPAnet, a U.S. Defense Department
experimental network.
NETWORK A set of computers connected together. A local-area network (LAN)
connects a set of computers located nearby (in the same room or building),
allowing them to share files and devices such as printers. A wide-area network
(WAN) is a set of widely separated computers connected together. The worldwide
airline reservation system is a wide-area network. The Internet is a series of
interconnected wide-area networks.
SECTOR A specific industry group.
SEMICONDUCTOR A material that is neither a good conductor of electricity, nor a
good insulator, and whose conduction properties can therefore be manipulated
easily. Semiconductor devices are the essential parts that make it possible to
build small, inexpensive electronic machines.
WORLD WIDE WEB A loosely organized set of computer sites that publish
information that anyone can read via the Internet. Each screenful of information
includes menu choices and highlighted words through which users can call up
further information either from the same computer or by linking to another
computer anywhere in the world.
<PAGE> 3
GENERAL ECONOMIC OVERVIEW
[TIMBERS PHOTO]
STEPHEN B. TIMBERS IS PRESIDENT, CHIEF EXECUTIVE AND CHIEF INVESTMENT OFFICER
OF ZURICH KEMPER INVESTMENTS, INC. (ZKI). 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 five 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 has followed a spectacular 1995 with strength so far
this year.
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 significantly 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 June, the U.S. economy entered its 63rd 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 spend 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>
<CAPTION>
Jobs Created Jobs Lost
<S> <C> <C>
12/31/91 (300,000) 40,000
12/31/92 120,000 (30,000)
12/31/93 300,000 70,000
12/31/94 180,000 70,000
12/31/95 (80,000) (40,000)
3/31/96 490,000 (10,000)
</TABLE>
SOURCE: BUREAU OF LABOR STATISTICS
3
<PAGE> 4
GENERAL ECONOMIC OVERVIEW
- ------------------------------------------------------------------------------
ECONOMIC GUIDEPOSTS
- ------------------------------------------------------------------------------
Economic activity is a key influence on investment performance and shareholder
decision-making. Periods of recession or boom, inflation or deflation, credit
expansion or credit crunch have a significant impact on mutual fund
performance.
The following are some significant economic guideposts and their investment
rationale that may help your investment decision-making. The 10-year Treasury
rate and the prime rate are prevailing interest rates. The other data report
year-to-year percentage changes.
[BAR GRAPH]
<TABLE>
<CAPTION>
Now
(4/30/96) 6 months ago 1 year ago 2 years ago
<S> <C> <C> <C> <C>
10-year Treasury rate(1) 6.51 5.93 6.63 7.18
Prime rate(2) 8.25 8.75 9.00 6.99
Inflation rate(3) 2.90 2.60 3.12 2.29
The U.S. dollar(4) 8.94 -1.57 -10.02 2.34
Capital goods orders(5) 7.94 10.38 17.84 19.99
Industrial production(6) 2.56 1.71 3.31 6.22
Employment growth(7) 1.47 1.55 2.30 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 its significant gain year to
date.
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
STEPHEN B. TIMBERS
PRESIDENT, CHIEF INVESTMENT AND EXECUTIVE OFFICER
ZURICH KEMPER INVESTMENTS, INC.
June 5, 1996
4
<PAGE> 5
Performance Update
[KORTH PHOTO]
FRANK KORTH IS SENIOR VICE PRESIDENT OF ZURICH KEMPER INVESTMENTS, INC., AND
PORTFOLIO MANAGER OF KEMPER TECHNOLOGY FUND. MR. KORTH RECEIVED HIS B.A. DEGREE
FROM MANKATO STATE UNIVERSITY OF MINNESOTA IN MATHEMATICS AND HIS MASTERS OF
BUSINESS IN FINANCE FROM BERNARD M. BARUCH COLLEGE.
[GOERS PHOTO]
RICHARD GOERS IS SENIOR VICE PRESIDENT AND CHIEF TECHNOLOGY STRATEGIST OF ZURICH
KEMPER INVESTMENTS, INC. (ZKI). MR. GOERS BEGAN HIS CAREER WITH ZKI IN 1968. HE
RECEIVED HIS B.S. DEGREE IN BUSINESS ADMINISTRATION FROM IOWA STATE UNIVERSITY
AND WENT ON TO RECEIVE HIS MBA AT NORTHWESTERN UNIVERSITY.
The views expressed in this report reflect those of the portfolio managers only
through the end of the period of the report, as stated on the cover. The
managers' views are subject to change at any time, based on market and other
conditions.
Q HOW WOULD YOU CHARACTERIZE THE MARKET FOR TECHNOLOGY STOCKS DURING THE
SIX-MONTH PERIOD ENDED APRIL 30?
A FRANK KORTH: In most sectors, performance was choppy. During November
and early December we saw a broad-based sell-off that was particularly
difficult for semiconductor stocks. Then, through the first four months of
1996, some very weak periods alternated with some moderate rallies.
Dick Goers: One of the primary factors behind this turbulence was a
slowdown in personal computer sales and demand for semiconductors. Production
capacity increased, customer inventories rose and orders fell. Major players
like Compaq, Texas Instruments, Micron Technology and Motorola were faced with
a situation where prices had to be cut to stimulate sales.
From our perspective, this was basically an inventory correction.
Consumer demand growth has slowed from levels seen in early 1995 but is still
healthy. It takes a while for companies to determine what their REAL customer
demand is and then adjust production and inventories accordingly. We're still
seeing some of those adjustments taking place, although at this point, it
appears that the worst is probably behind us for this cycle. While it's been a
frustrating situation to get through, it's good news going forward.
FK: To an extent, I think investor psychology played a role as well.
Uncertainty over a balanced budget agreement, the government shut-down and some
questionable economic figures contributed to a pretty negative environment for
consumer confidence. As a result, spending didn't accelerate during the holidays
as hoped. In the final quarter of 1995 and the first quarter of 1996, when some
companies warned that their earnings would probably come in somewhere below
estimates, investors reacted very strongly by taking profits on their technology
positions and moving on. But when earnings reports were actually released, the
results weren't as dismal as many anticipated, and we saw some decent rallies.
The important thing for investors to understand is that this kind
of volatility is really not surprising; in fact, for technology stocks it's to
be expected. When the market is stressed -- and it certainly has been in recent
months -- high beta stocks (those that tend to be more volatile than the overall
market) will generally experience more stress than the overall market. Of course
this can cause some anxiety for the short-term investor. But for the long-term
investor, the fundamentals for domestic technology stocks remain quite
compelling.
Q DID THIS ENVIRONMENT PROMPT ANY SIGNIFICANT CHANGES IN STRATEGY?
A FK: We continued to emphasize diversification among industries and
among individual companies -- one of the features that distinguishes us from
other technology funds in the market. However, we did do some shifting during
the period. The biggest change
5
<PAGE> 6
Performance Update
was a reduction in our exposure to personal computer stocks. For the most part,
this was done by trimming positions that had enjoyed attractive gains in 1995
and reached our established price targets. We deployed a lot of those assets
into data communications and networking stocks. The long-term growth trend for
this area, which represents our largest sector commitment as of April 30, is
still very strong. We added to selected positions in the areas of systems,
software and services -- namely in connection with online and Internet-related
stocks. And we reduced our positions in larger pharmaceutical companies in favor
of smaller, more aggressive investments in biotechnology. (See page 8 for a
breakdown of the fund's sector allocations compared with six months ago, and
compared with its benchmark, the Hambrecht and Quist Technology Index.)
Q WHAT MAKES THESE PARTICULAR AREAS ATTRACTIVE?
A FK: In networking, we're seeing strong demand for increased
"band-width." This is the capability for devices like personal computers and
computer networks to communicate at high speeds. Kemper Technology Fund owns
Cisco Systems, 3Com Corporation and Bay Networks -- three major suppliers of the
hardware and software that increase band-width. The fund also owns U.S.
Robotics, which makes high-speed dial-up modems that allow individual consumers
and remote offices to access their main corporate network or online services,
and Ascend Communications, a company that provides the equipment companies use
to access the Internet. This sector is in the midst of a long-term growth trend
and our positions are in companies that should be leaders in making that growth
happen.
We also like companies involved with database management and servers.
More and more information is being stored on "servers" -- a fancy name for
small- to medium-sized computers that literally serve up data to the user from
an onsite or offsite database. The fund owns Hewlett-Packard, Microsoft, which
has become increasingly important in supplying hardware and/or operating systems
for servers, and Seagate Technology, the largest supplier of disc drives -- the
devices that store data on personal computers and servers. Increasing uses for
computers, such as the Internet, have fueled an insatiable desire for more and
more storage capacity.
DG: As for online services and the Internet, these are areas that have
expanded much faster than we'd originally anticipated. And at this point it
seems clear that the potential for growth going forward is staggering. America
On-Line, which expects to reach the 6 million subscriber mark early this summer,
is one of the most successful companies in this field. Kemper Technology Fund
owns that company as well as Compuserve. While both companies have slipped a bit
in recent weeks, we're still confident their long-term prospects are intact.
On the Internet, activity continues to increase by leaps and bounds. In
fact, Kemper Funds recently introduced its own site on the worldwide web --
http://www.kemper.com -- which has enjoyed a great deal of traffic in its first
few months. In this area we own major players like Cisco Systems, which provides
about 95% of the backbone for the worldwide web, and Sun Microsystems. We also
own Spyglass and Netscape Communications, important suppliers of "browser"
software and tools that enable users to navigate the World Wide Web. We're
avoiding most of the "access providers" that have proliferated over the past
year. Despite a lot of hype in the media and some wild run-ups after their
initial offerings, we just don't see the fundamentals that would recommend them
as long-term investments. Of course, in a relatively young industry such as
this, there's no way of knowing for certain which companies will prosper over
the long-term. But we're comfortable with our current holdings based on their
current positioning in the market.
Q WHAT ABOUT BIOTECHNOLOGY? THIS AREA WAS HOT SEVERAL YEARS AGO BUT THEN
FELL DRAMATICALLY. WHAT MAKES IT ATTRACTIVE NOW?
A FK: Three things. First, the field has matured. The research of the
late 1980s and early 1990s has come to fruition and a number of promising new
drug therapies are entering Phase III testing. The drugs that failed Phase I and
Phase II testing have been swept out and now we're hearing about the products
that work. Second, we're seeing more accelerated action on the
6
<PAGE> 7
Performance Update
part of the Food and Drug Administration with regard to approvals for new drug
therapies in treating cancer, HIV and a number of chronic, incurable diseases.
So we've seen a proliferation of new drugs being approved, which we expect to
continue for the next several years. Finally, in the past, the pharmaceutical
powerhouses tended to focus on proprietary products -- those that were developed
within their own organizations. Lately, however, many of these companies have
come to realize that much of their new business is going to come from biotech
solutions to medical problems. As a result, we've seen an increasing number of
alliances between the large drug companies and smaller biotechnology firms. At
this time, we see numerous examples of new drugs that have the potential to
become billion-dollar products. (See the sidebar below).
Q DICK, YOUR TITLE RECENTLY CHANGED FROM PORTFOLIO CO-MANAGER OF KEMPER
TECHNOLOGY FUND TO CHIEF TECHNOLOGY STRATEGIST OF THE INVESTMENT MANAGER FOR ALL
THE KEMPER EQUITY FUNDS. WHAT DOES THIS CHANGE MEAN FOR KEMPER TECHNOLOGY FUND?
A DG: For Kemper Technology Fund, it shouldn't create much of a change,
other than more efficient management and an easier decision-making process for
Frank. In view of the fact that technology has become a primary driver for the
U.S. economy, our Chief Investment Officer for Equities, Steve Reynolds,
determined that it was time to place an additional emphasis on our research of
technology companies for the benefit of all the Kemper equity funds. I'm working
very closely with our research team to identify new products, markets and
opportunities that might have a place in our fund portfolios. We'll supply all
the equity portfolio managers, including Frank, with our research and
recommendations. Then they can determine what investments will fit their
particular strategies.
Q WHAT IS YOUR OUTLOOK FOR THE REST OF 1996?
A FK: We're well positioned for continued competitive performance. Our
diversification should serve us well, and there are still some solid growth
opportunities out there. In this stock pickers' market our strong research
capabilities should help give us an edge.
Focus on Biotech
BIOTECHNOLOGY HOLDS PROMISE FOR SOLUTIONS TO A HOST OF MEDICAL PROBLEMS.
"Recent advances in the area of equipment and knowledge about the human
genome have opened the floodgates for a new generation of medical therapies,"
says Frank Korth, portfolio manager of Kemper Technology Fund. "And the list of
conditions that might be treatable with new innovations in the field of
biotechnology is growing rapidly."
Indeed, several of the biotechnology companies that Kemper Technology
Fund invests in have the potential to be on the cutting edge of new life-saving
treatments. In addition to more well-known names like Amgen, Biogen and Genzyme,
several smaller companies may be on their way to becoming household names. For
example, Cephalon's drug myotrophin may prove an effective treatment for Lou
Gehrig's disease. Meanwhile, Centecor is making important strides in the areas
of cancer, cardiovascular diseases and autoimmune and infectious diseases.
One of Kemper Technology Fund's more exciting biotech investments is
Martek Biosciences Corp. of Columbia, Maryland. This company has successfully
synthesized a fatty acid known as DHA (short for docosahexaenoic acid) from a
form of algae. DHA, a building block of brain tissue, is produced by mothers and
passed on to children during the third trimester of pregnancy and later in
breast milk. Researchers believe that this nutrient may be essential for proper
development of the brain and eyes. The FDA is currently evaluating whether DHA
should be added to the list of required nutrients to be included in infant
formula.
"Discoveries of this nature hold promise not only for growth and
profit, but for improved quality of life for thousands of people around the
world," says Korth.
7
<PAGE> 8
Industry Sectors
A SIX-MONTH COMPARISON
DATA SHOW THE PERCENTAGE OF THE FUND THAT EACH SECTOR REPRESENTED ON APRIL 30,
1996, AND ON OCTOBER 31, 1995.
[BAR CHART]
<TABLE>
<CAPTION>
Kemper Technology Fund Kemper Technology Fund
as of 4/30/96 as of 10/31/95
---------------------- ----------------------
<S> <C> <C>
Communications 24.0% 19.6%
Life sciences 23.1% 14.6%
Systems, software
& services 21.5% 16.6%
Electronic parts 18.3% 29.8%
Personal computing 7.5% 14.5%
Cash & equivalent 3.0% 0.8%
Industrial
technology/misc. 2.6% 4.1%
</TABLE>
A COMPARISON WITH THE HAMBRECHT & QUIST INDEX
DATA SHOW THE PERCENTAGE OF THE FUND THAT EACH SECTOR REPRESENTED ON APRIL 30,
1996, COMPARED WITH THE INDUSTRY SECTORS THAT MAKE UP THE HAMBRECHT & QUIST
(H&Q) TECHNOLOGY INDEX. IN CONTRAST WITH BROADER INDEXES SUCH AS THE RUSSELL
1000 GROWTH INDEX OR THE S&P 500 STOCK INDEX, THE H&Q IS COMPRISED ONLY OF
TECHNOLOGY STOCKS AND, AS SUCH, IS USED BY MANAGEMENT OF KEMPER TECHNOLOGY FUND
AS AN INTERNAL PERFORMANCE BENCHMARK.
[BAR CHART]
<TABLE>
<CAPTION>
Kemper Technology Fund H & Q Technology Index
as of 4/30/96 as of 4/30/96
---------------------- ----------------------
<S> <C> <C>
Communications 24.0% 22.6%
Life sciences 23.1% 17.3%
Systems, software
& services 21.5% 33.5%
Electronic parts 18.3% 18.2%
Personal computing 7.5% 7.8%
Cash & equivalent 3.0% 0.0%
Industrial
technology/misc. 2.6% 0.6%
</TABLE>
8
<PAGE> 9
Individual Holdings
THE FUND'S 10 LARGEST HOLDINGS
Representing 27.4% of the fund's total net assets on April 30, 1996
Holdings Percent
- --------------------------------------------------------------------------------
1. CISCO Largest, most comprehensive supplier of routing software 4.4%
SYSTEMS and related systems that direct the flow of data between
local area networks. A play on the explosive growth of
the Internet.
2. HEWLETT-
PACKARD One of the largest suppliers of enterprise computer 3.5%
systems. Huge success in low-cost printers for use with
personal computers is being followed up with rapid
growth in its own PC business.
3. U.S. Designs, markets and supports high performance data 3.3%
ROBOTICS communications products and systems targeted to business
and professional users. Product line includes dial-up
modems, network management systems and data
communications software.
4. 3COM Pioneer of the data networking industry; offers broad 2.6%
CORPORATION range of global networking solutions such as routers,
hubs, LAN switches and adapters.
5. SUN
MICROSYSTEMS Provides high performance workstations. 2.6%
6. SEAGATE Provides data storage, management and access products 2.5%
TECHNOLOGY for computer and data communication systems. Leads the
disc drive storage industry with over 150 rigid disc
drive models.
7. ASCEND Develops, manufactures, markets and sells a wide range 2.3%
COMMUNICATIONS of high speed digital wide area network access products
that enable customers to build videoconference networks;
remote LAN access networks that provide remote offices,
tele-commuters and mobile computer users to access
corporate backbone networks; and voice, video and data
integrated access networks.
8. PARAMETRIC Develops, markets and supplies family of fully 2.1%
TECHNOLOGY integrated soft-ware products for the automation of the
design-through-manufacture process.
9. THERMO Provides products and services that address 2.1%
ELECTRON environmental, energy, health and safety issues;
develops, manufactures and markets environmental and
analytical instruments, biomedical products equipment
and heart assist devices and mammography systems.
10. FORE A leader in the design, development, manufacture and 2.0%
SYSTEMS sale of high performance networking products based on
asynchronous transfer mode (ATM) technology.
9
<PAGE> 10
Portfolio of Investments
KEMPER TECHNOLOGY FUND
PORTFOLIO OF INVESTMENTS AT APRIL 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS
ELECTRONIC
COMPONENTS - 7.3%
(b) C. P. Clare Corporation 100,000 $ 2,112
Hewlett-Packard Co. 350,000 37,056
(b) International Rectifier Corp. 175,000 3,937
Murata Manufacturing 47,000 1,822
NEC Corporation 163,000 2,069
(b) Oak Technology 200,000 3,575
(b) PRI Automation 75,000 2,119
(b) Sanmina Corp. 420,000 14,910
(b) Sheldahl, Inc. 125,000 2,797
(b) Solectron Corp. 150,000 6,675
==========================================================================
77,072
--------------------------------------------------------------------------
SEMICONDUCTOR
PRODUCTION
EQUIPMENT - 11.0%
(b) Adaptec, Inc. 160,000 9,200
(b) Altera Corp. 315,000 16,616
(b) Analog Devices 200,000 5,150
(b) Applied Magnetics Corp. 100,000 2,062
(b) Applied Materials, Inc. 100,000 4,000
(b) Atmel Corporation 350,000 14,000
Intel Corp. 150,000 10,162
(b) KLA Instruments 100,000 2,887
(b) LSI Logic Corp. 100,000 3,600
Linear Technology Corp. 150,000 5,156
(b) MEMC Electronic Materials 150,000 7,481
(b) Microchip Technology 376,500 9,601
(b) Novellus Systems 100,000 5,425
(b) Sierra Semiconductor 50,000 819
(b) Silicon Valley Group 111,200 2,975
Texas Instruments 250,000 14,125
(b) TranSwitch Corp. 27,153 373
(b) Ultratech Stepper, Inc. 50,000 1,306
VLSI Technology, Inc., convertible, 8.25%, 2005 2,500 2,350
==========================================================================
117,288
--------------------------------------------------------------------------
PERSONAL
COMPUTING - 7.5%
(b) C-Cube Microsystems 185,000 9,157
(b) Dell Computer Corp. 210,524 9,658
(b) Gateway 2000 125,000 4,359
(b) McAfee Associates 75,000 4,594
(b) Microsoft Corp. 150,000 17,006
(b) Seagate Technology 450,000 26,100
(b) S3 Incorporated 150,000 2,119
(b) StorMedia Incorporated 120,000 5,100
(b) Trident Microsystems 100,000 1,750
==========================================================================
79,843
--------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
Portfolio of Investments
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMUNICATIONS - 24.0%
(b) Adtran 200,000 $ 10,600
(b) America On-Line Inc. 160,000 10,240
(b) Ascend Communications, Inc. 400,000 24,600
(b) Bay Networks 200,000 6,300
(b) Cascade Communications 150,000 15,037
(b) Compuserve Corp. 109,800 3,129
LM Ericsson Telephone Co., "B" 69,870 1,413
(b) FORE Systems, Inc. 275,000 21,725
(b) Globalstar Telecommunications,
convertible preferred 250,000 11,750
Loral Corp. 30,000 431
(b) Lucent Technology Corp. 60,400 2,122
(b) Netscape Communications Corp. 225,000 13,725
(b) Newbridge Networks Corp. 150,000 9,656
(b) Paging Network, Inc. 100,000 2,350
(b) PairGain Technologies, Inc. 125,000 11,937
Shaw Communications Inc. 240,600 1,766
(b) Sierra On-Line 150,000 5,887
(a)(b) Socket Communications, Inc. 134,756 366
(b) Spyglass 150,000 4,369
(b) StrataCom 300,000 15,600
Telefonica Nacional de Espana S.A. 59,530 1,059
(b) Tellabs Operations 250,000 13,813
(b) 3Com Corporation 600,000 27,675
(b) U.S. Robotics 225,000 35,212
(b) U.S. Satellite Broadcasting 135,000 4,624
==========================================================================
255,386
--------------------------------------------------------------------------
SYSTEMS, SOFTWARE
AND SERVICES - 21.5%
(b) BMC Software 210,000 12,784
(b) Baan Company N.V. 20,865 1,260
(b) Cadence Design Systems 325,000 16,981
(b) Checkfree Corp. 100,000 1,925
(b) Cisco Systems 900,000 46,687
Computer Associates International 175,000 12,841
(b) Computer Sciences Corporation 100,000 7,400
(b) Electronic Arts 50,000 1,337
(b) Expert Software 190,000 2,470
First Data Corporation 125,942 9,572
(b) GT Interactive Software 300,000 5,887
General Motors - Electronic Data Systems 200,000 11,275
(b) Geoworks 100,000 3,750
Getronics N.V. 29,303 2,032
(b) Informix Corp. 300,000 7,912
(b) META Group 75,000 2,231
(b) Oracle Corp. 425,000 14,344
(b) Parametric Technology Corp. 550,000 22,137
(b) PeopleSoft 100,000 6,300
SAP AG 12,130 1,570
(b) 7th Level 200,000 1,725
(b) Softkey International 75,000 2,100
(b) Sun Microsystems 500,000 27,125
Telxon Corp. 125,000 2,875
(b) WM-data AB 16,400 823
Wind River Systems, Inc. 90,000 3,510
==========================================================================
228,853
--------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
Portfolio of Investments
<TABLE>
<CAPTION>
(Dollars in thousands)
- -----------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LIFE SCIENCES - 23.1%
(b) Agouron Pharmaceuticals, Inc. 50,000 $ 2,025
(b) Amgen, Inc. 200,000 11,500
(b) Angeion Corporation 450,000 4,781
(b) Arris Pharmaceutical Corp. 100,000 1,550
(b) Biochem International 250,000 11,375
(b) Biogen 135,000 8,893
(b) Boston Scientific Corp. 150,000 6,469
British Biotech PLC 23,000 1,010
(b) Centocor, Inc. 285,000 11,400
(b) Cephalon, Inc. 500,000 14,375
(b) Chiron Corp. 30,000 2,891
Ciba Geigy AG, ADR 85,500 4,895
(b) GelTex Pharmaceuticals 10,000 235
(b) Genzyme Corp. 175,500 9,872
(b) Gilead Sciences 125,000 3,813
Glaxo Wellcome 125,235 1,515
Guidant Corporation 185,663 10,420
(b) IDEXX Laboratories 130,000 5,785
(b) Isis Pharmaceuticals 275,692 3,515
(b) Lifecore Biomedical 350,000 6,388
(b) Ligand Pharmaceutical Inc. 250,000 3,656
(b) Liposome Co. 150,000 3,675
(b) Magainin Pharmaceuticals 150,000 1,763
(b) Martek Biosciences Corp. 125,000 4,328
(b) Matrix Pharmaceuticals, Inc. 175,000 4,550
Medtronic, Inc. 350,000 18,594
(b) Neoprobe Corporation 125,000 2,141
(b) North American Vaccine 200,000 4,125
Perkin-Elmer Corp. 100,000 5,488
Pfizer Inc. 225,000 15,497
(b) Pharmacopeia Inc. 100,000 2,688
(b) Pharmos Corporation 411,349 1,041
(b) Sano Corp. 200,000 3,375
(b) Sugen, Inc. 75,000 1,078
(b) Thermedics, Inc. 130,000 3,933
Thermo Electron Corp. 355,000 21,885
(b) Thermo Instrument Systems 100,500 3,316
(b) ThermoLase Corporation 135,000 4,472
(b) Total Renal Care Holdings 135,000 5,164
(a)(b) Trex Medical Corp. 60,000 615
U.S. Surgical Corp. 160,000 5,920
(b) Vertex Pharmaceuticals 100,000 2,925
(b) VidaMed, Inc. 200,000 2,175
==========================================================================
245,111
- -----------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 13
Portfolio of Investments
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INDUSTRIAL TECHNOLOGY
AND MISCELLANEOUS -
2.6%
(a)(b) Advanced Technology Ventures II,
17.9% limited partnership interest -- $ 1,386
Ashland Coal 35,000 814
CAE Inc. 205,700 1,789
(b) Cognex Corp. 50,000 1,337
(a)(b) Crosspoint Venture Partners 1993,
3.1% limited partnership interest -- 4,763
Elsag Bailey Process Automation,
convertible preferred 30,000 1,298
(a)(b) GEO Capital III, L.P.,
5.0% limited partnership interest -- 1,864
(a)(b) GEO Capital IV, L.P.,
2.9% limited partnership interest -- 300
Kyocera Corp. 27,000 2,031
Mabuchi Motor Co., Ltd. 16,000 984
Matsushita Electric Industrial Co., Ltd. 116,000 2,049
Olympus Optical Co., Ltd. 94,000 1,014
(b) Sterling Commerce, Inc. 100,000 3,500
(a)(b) Survivalink Corporation 150,000 450
(b) ThermoQuest Corp. 38,500 635
(b) Thermo Sentron 100,000 1,575
(b) ThermoSpectra 100,000 1,725
==========================================================================
27,514
--------------------------------------------------------------------------
TOTAL COMMON STOCKS--97.0%
(Cost: $709,200) 1,031,067
==========================================================================
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET
INSTRUMENTS - 3.3%
Yield--5.33% to 5.43%
Due--May 1996
(Cost: $35,272) $35,300 35,272
==========================================================================
TOTAL INVESTMENTS--100.3%
(Cost: $744,472) 1,066,339
==========================================================================
LIABILITIES, LESS CASH AND
OTHER ASSETS--(.3)% (3,364)
==========================================================================
NET ASSETS--100% $1,062,975
==========================================================================
</TABLE>
See accompanying Notes to Portfolio of Investments.
13
<PAGE> 14
Portfolio of Investments
- --------------------------------------------------------------------------------
Notes To Portfolio Of Investments
- --------------------------------------------------------------------------------
(a) The following securities may require registration under the Securities Act
of 1933 or an exemption therefrom in order to effect sale in the ordinary course
of business; they were valued at cost on the dates of acquisition. No market
quotations were available for unrestricted securities of the same class on the
dates of acquisition or on April 30, 1996, with the exception of Socket
Communications, Inc., which was valued at 70% of current market value. These
securities are valued at fair value as determined in good faith by the Board of
Trustees of the Fund. At April 30, 1996, the value of the Fund's restricted
securities was $9,744,000, which represented .92% of net assets.
<TABLE>
<CAPTION>
DATE OF NUMBER
SECURITY DESCRIPTION ACQUISITION OF SHARES COST
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
17.9% limited
Advanced Technology Ventures II December 1994 partnership interest $ 1,837,800
April 1993
to 3.1% limited
Crosspoint Venture Partners 1993 October 1995 partnership interest 1,800,000
December 1993
to 5.0% limited
GEO Capital III, L.P. September 1995 partnership interest 1,752,002
2.9% limited
GEO Capital IV, L.P. April 1996 partnership interest 300,000
May 1994
to
Socket Communications, Inc. December 1994 134,756 shs. 4.62 per share
Survivalink Corporation December 1995 150,000 3.00 per share
Trex Medical Corp. November 1995 60,000 10.25 per share
</TABLE>
(b) Non-income producing security.
Based on the cost of investments of $744,472,000 for federal income tax purposes
at April 30, 1996, the gross unrealized appreciation was $334,092,000, the gross
unrealized depreciation was $12,225,000 and the net unrealized appreciation on
investments was $321,867,000.
See accompanying Notes to Financial Statements.
14
<PAGE> 15
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------
Investments, at value
(Cost: $744,472) $1,066,339
Cash 255
Receivable for:
Fund shares sold 583
Investments sold 7,971
Dividends and interest 67
TOTAL ASSETS 1,075,215
=======================================================================================================
- -------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- -------------------------------------------------------------------------------------------------------
Payable for:
Fund shares redeemed 289
Investments purchased 11,029
Management fee 465
Distribution services fee 35
Administrative services fee 127
Custodian and transfer agent fees and related expenses 202
Other 93
Total liabilities 12,240
NET ASSETS $1,062,975
=======================================================================================================
- -------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -------------------------------------------------------------------------------------------------------
Paid-in capital $ 636,864
Undistributed net realized gain on investments 104,244
Net unrealized appreciation on investments 321,867
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $1,062,975
=======================================================================================================
- -------------------------------------------------------------------------------------------------------
THE PRICING OF SHARES
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($981,987,400 / 74,865,700 shares outstanding) $13.12
- -------------------------------------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $13.92
- -------------------------------------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($57,864,600 / 4,524,100 shares outstanding) $12.79
- ------------------------------------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($2,859,200 / 222,200 shares outstanding) $12.87
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES
Net asset value and redemption price per share
($20,263,800 / 1,541,500 shares outstanding) $13.15
- -------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
15
<PAGE> 16
Financial Statements
STATEMENT OF OPERATIONS
Six months ended April 30, 1996
(in thousands)
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- -------------------------------------------------------------------------------------------------------
Dividends $ 841
Interest 243
Total investment income 1,084
Expenses:
Management fee 2,706
Distribution services fee 185
Administrative services fee 749
Custodian and transfer agent fees and related expenses 731
Professional fees 29
Reports to shareholders 82
Trustees' fees and other 19
Total expenses 4,501
NET INVESTMENT LOSS (3,417)
=======================================================================================================
- -------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- -------------------------------------------------------------------------------------------------------
Net realized gain on sales of investments 126,407
Change in net unrealized appreciation on investments (53,670)
Net gain on investments 72,737
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 69,320
=======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------------
(in thousands)
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- ---------------------------------------------------------------------------------------------------------
Net investment loss $ (3,417) (2,018)
Net realized gain 126,407 127,806
Change in net unrealized appreciation (53,670) 196,817
Net increase in net assets resulting from operations 69,320 322,605
Net equalization credits (charges) (278) 114
Distribution from net realized gain (148,700) (92,581)
Net increase from capital share transactions 124,678 74,163
TOTAL INCREASE IN NET ASSETS 45,020 304,301
=========================================================================================================
- ---------------------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------------------
Beginning of period 1,017,955 713,654
END OF PERIOD (including undistributed net investment income
of $3,649 in 1995) $1,062,975 1,017,955
=========================================================================================================
</TABLE>
16
<PAGE> 17
Notes to Financial Statements
1 DESCRIPTION OF THE FUND
Kemper Technology 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
upon 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
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
17
<PAGE> 18
Notes to Financial Statements
Class A shares). Proceeds payable on redemption of
Class B and Class C shares will be reduced by the
amount of any applicable contingent deferred sales
charge. On each day the New York Stock Exchange is
open for trading, the net asset value per share is
determined as of the earlier of 3:00 p.m. Chicago
time or the close of the Exchange. The net asset
value per share is determined separately for each
class by dividing the Fund's net assets
attributable to that class by the number of shares
of the class outstanding.
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 April 30, 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 WITH
AFFILIATES MANAGEMENT AGREEMENT. The Fund has a management
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 gradually to .42% of average
daily net assets in excess of $12.5 billion. The
Fund incurred a management fee of $2,706,000 for
the six months ended April 30, 1996.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
The Fund has an underwriting and distribution
services agreement with Kemper Distributors, Inc.
(KDI). Underwriting commissions paid in connection
with the distribution of Class A shares are as
follows:
<TABLE>
<CAPTION>
COMMISSIONS
ALLOWED BY KDI
COMMISSIONS -----------------------------
RETAINED BY KDI TO ALL FIRMS TO AFFILIATES
--------------- ------------ -------------
<S> <C> <C> <C>
Six months ended
April 30, 1996 $ 114,000 488,000 26,000
</TABLE>
For services under the distribution services
agreement, the Fund pays KDI a fee of .75% of
average daily net assets of the Class B and Class C
shares. Pursuant to the agreement, KDI enters into
related selling group agreements with various firms
at various rates for sales of Class B and Class C
shares. In addition, KDI receives any contingent
deferred sales charges (CDSC) from redemptions of
Class B and Class C shares. Distribution fees and
commissions paid in connection with the sale of
Class B
18
<PAGE> 19
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>
COMMISSIONS AND
DISTRIBUTION FEES
DISTRIBUTION FEES PAID BY KDI
AND CDSC -------------------------------
RECEIVED BY KDI TO ALL FIRMS TO AFFILIATES
----------------- ------------- --------------
<S> <C> <C> <C>
Six months ended
April 30, 1996 $ 221,000 530,000 17,000
</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
April 30, 1996 $749,000 775,000 10,000
</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 $499,000
for the six months ended April 30, 1996.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of ZKI.
During the six months ended April 30, 1996, the
Fund made no payments to its officers and incurred
trustees' fees of $16,000 to independent trustees.
4 INVESTMENT
TRANSACTIONS For the six months ended April 30, 1996, investment
transactions (excluding short-term instruments) are
as follows (dollars in thousands):
Purchases $660,274
Proceeds from sales 711,797
19
<PAGE> 20
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
APRIL 30, 1996 OCTOBER 31, 1995
------------------------ --------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
----------------------------------------------------------------------------------
Class A 3,977 $ 56,243 8,774 $ 104,886
Class B 2,444 31,193 4,556 54,618
Class C 136 1,725 123 1,490
Class I 608 7,827 1,586 20,709
----------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
----------------------------------------------------------------------------------
Class A 10,244 102,674 7,693 73,098
Class B 649 6,353 114 1,080
Class C 25 243 3 33
Class I 244 2,440 -- --
----------------------------------------------------------------------------------
SHARES REDEEMED
----------------------------------------------------------------------------------
Class A (4,862) (60,379) (12,664) (149,299)
Class B (1,362) (16,344) (2,221) (26,954)
Class C (48) (598) (28) (335)
Class I (524) (6,699) (372) (5,163)
----------------------------------------------------------------------------------
CONVERSION OF SHARES
----------------------------------------------------------------------------------
Class A 57 698 46 574
Class B (58) (698) (47) (574)
==================================================================================
NET INCREASE
FROM CAPITAL SHARE
TRANSACTIONS $124,678 $ 74,163
==================================================================================
</TABLE>
20
<PAGE> 21
Financial Highlights
<TABLE>
<CAPTION>
---------------------------------------------------
CLASS A
---------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------
Net asset value, beginning of period $14.63 11.50 10.68 9.95 12.42
Income from investment operations:
Net investment income (loss) (.05) (.03) -- (.01) .01
Net realized and unrealized gain .67 4.66 1.49 2.03 .04
Total from investment operations .62 4.63 1.49 2.02 .05
Less dividends
Distribution from net investment income -- -- -- -- .03
Distribution from net realized gain 2.13 1.50 .67 1.29 2.49
Total dividends 2.13 1.50 .67 1.29 2.52
Net asset value, end of period $13.12 14.63 11.50 10.68 9.95
===============================================================================================
TOTAL RETURN (NOT ANNUALIZED) 7.50% 47.30 14.95 21.76 .32
- -----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
===============================================================================================
Expenses .88% .88 .89 .81 .82
Net investment income (loss) (.66)% (.23) .05 (.06) .07
<CAPTION>
--------------------------------------------
CLASS B
--------------------------------------------
SIX MONTHS YEAR MAY 31,
ENDED ENDED 1994 TO
APRIL 30, OCTOBER 31, OCTOBER 31,
1996 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------
Net asset value, beginning of period $14.39 11.45 9.99
Income from investment operations:
Net investment loss (.09) (.15) (.05)
Net realized and unrealized gain .62 4.59 1.51
Total from investment operations .53 4.44 1.46
Less distribution from net realized gain 2.13 1.50 --
Net asset value, end of period $12.79 14.39 11.45
=========================================================================================
TOTAL RETURN (NOT ANNUALIZED) 6.93% 45.65 14.61
- -----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------
Expenses 1.85% 1.82 1.99
Net investment loss (1.63)% (1.17) (1.08)
- -----------------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 22
Financial Highlights
<TABLE>
<CAPTION>
--------------------------------------- ---------------------------
CLASS C CLASS I
--------------------------------------- ---------------------------
SIX MONTHS MAY 31, SIX MONTHS JULY 3,
ENDED YEAR ENDED 1994 TO ENDED 1995 TO
APRIL 30, OCTOBER 31, OCTOBER 31, APRIL 30, OCTOBER 31,
1996 1995 1994 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $14.45 11.45 9.99 14.64 12.72
Income from investment operations:
Net investment loss (.09) (.15) (.05) (.03) (.02)
Net realized and unrealized gain .64 4.65 1.51 .67 1.94
Total from investment operations .55 4.50 1.46 .64 1.92
Less distribution from net realized gain 2.13 1.50 -- 2.13 --
Net asset value, end of period $12.87 14.45 11.45 13.15 14.64
=======================================================================================================================
TOTAL RETURN (NOT ANNUALIZED) 7.05% 46.23 14.61 7.65 15.09
- -----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------------------------------------
Expenses 1.81% 1.76 1.83 .70 .65
Net investment loss (1.59)% (1.11) (.92) (.48) (.33)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- --------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets at end of period (in thousands) $1,062,975 1,017,955 713,654 612,604 559,279
Portfolio turnover rate (annualized) 130% 105 81 95 95
Average commission rate paid per share on stock transactions for the six months ended April 30, 1996 was
$.0542.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES: Total return does not reflect the effect of any sales charges. Per share
data for the six months ended April 30, 1996 and year ended October 31, 1995 was
determined based on average shares outstanding.
22
<PAGE> 23
NOTES
23
<PAGE> 24
TRUSTEES AND OFFICERS
TRUSTEES OFFICERS
STEPHEN B. TIMBERS FRANK D. KORTH
President and Trustee Vice President
DAVID W. BELIN JOHN E. NEAL
Trustee Vice President
LEWIS A. BURNHAM JOHN E. PETERS
Trustee Vice President
DONALD L. DUNAWAY STEVEN H. REYNOLDS
Trustee Vice President
ROBERT B. HOFFMAN PHILIP J. COLLORA
Trustee Vice President
and Secretary
DONALD R. JONES
Trustee JEROME L. DUFFY
Treasurer
DOMINIQUE P. MORAX
Trustee ELIZABETH C. WERTH
Assistant Secretary
SHIRLEY D. PETERSON
Trustee
WILLIAM P. SOMMERS
Trustee
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LEGAL COUNSEL
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
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SHAREHOLDER SERVICE AGENT
KEMPER SERVICE COMPANY
P.O. Box 419557
Kansas City, MO 64141
1-800-621-1048
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CUSTODIAN AND TRANSFER AGENT
INVESTORS FIDUCIARY TRUST COMPANY
127 West 10th Street
Kansas City, MO 64105
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INVESTMENT MANAGER
ZURICH KEMPER INVESTMENTS, INC.
PRINCIPAL UNDERWRITER
KEMPER DISTRIBUTORS, INC.
120 South LaSalle Street Chicago, IL 60603
http://www.kemper.com
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unless preceded or accompanied by a
Kemper Technology Funds prospectus. 1016880
KTEC - 3 (6/96) Printed in the U.S.A.
