<PAGE> 1
KEMPER
TECHNOLOGY FUND
SEMIANNUAL REPORT TO SHAREHOLDERS FOR THE SIX MONTHS ENDED APRIL 30, 1997
SEEKING GROWTH OF CAPITAL.
" . . . New products and the laws of
supply and demand have a greater effect on the
performance of technology stocks than do economic
conditions. The last six
months have been a good example ."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
Economic Overview
5
Performance Update
8
Industry Sectors
9
Largest Holdings
10
Portfolio of
Investments
14
Financial Statements
16
Notes to
Financial Statements
20
Financial Highlights
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER TECHNOLOGY FUND
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 1997
(UNADJUSTED FOR ANY SALES CHARGE)
- --------------------------------------------------------------------------------
[BAR GRAPH]
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A -0.73%
CLASS B -1.28%
CLASS C -1.17%
LIPPER SCIENCE & TECHNOLOGY
FUNDS CATEGORY AVERAGE* 1.19%
- --------------------------------------------------------------------------------
</TABLE>
Returns are historical and do not represent future performance. Returns and net
asset value fluctuate. Shares are redeemable at current net asset value, which
may be more or less than original cost.
* Lipper Analytical Services, Inc. returns and rankings are based upon
changes in net asset value with all dividends reinvested and do not
include the effect of sales charges and, if they had, results may have been
less favorable.
Investment by the fund in emerging technology companies presents greater risk
than investment in more established companies.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
4/30/97 10/31/96
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER TECHNOLOGY FUND CLASS A $11.13 $13.16
- --------------------------------------------------------------------------------
KEMPER TECHNOLOGY FUND CLASS B $10.68 $12.77
- --------------------------------------------------------------------------------
KEMPER TECHNOLOGY FUND CLASS C $10.77 $12.85
- --------------------------------------------------------------------------------
</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 #22 OF #25 OF #24 OF
44 FUNDS 42 FUNDS 42 FUNDS
- --------------------------------------------------------------------------------
5-YEAR #12 OF N/A N/A
16 FUNDS
- --------------------------------------------------------------------------------
10-YEAR #11 OF N/A N/A
12 FUNDS
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
During the period, Kemper Technology Fund made the following distributions per
share:
<TABLE>
<CAPTION>
CLASS CLASS CLASS
A B C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM CAPITAL GAIN $2.11 $2.11 $2.11
- --------------------------------------------------------------------------------
</TABLE>
TERMS TO KNOW
YOUR FUND'S STYLE
- --------------------------------------------------------------------------------
MORNINGSTAR EQUITY FUNDS STYLE BOX
- --------------------------------------------------------------------------------
STYLE
VALUE BLEND GROWTH
SIZE
/ / / / /X/ LARGE
/ / / / / / MEDIUM
/ / / / / / SMALL
Source: Morningstar, Inc., Chicago, IL (312) 696-6000. (Morningstar Style Box
is based on a portfolio date as of April 30, 1997.) The Equity Style Box
placement is based on a fund's price-to-earnings and price-to-book ratio
relative to the S&P 500, as well as the size of the companies in which it
invests, or median market capitalization.
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.
<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 $80 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 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. 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. Having declined to raise
rates in May, the Fed may still act again at a later date. However, 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. A slower economy 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 valuations of smaller capitalization stocks are
compelling and the market is broadening.
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 6.50 percent
3
<PAGE> 4
ECONOMIC OVERVIEW
and no 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 without help.
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.
- --------------------------------------------------------------------------------
ECONOMIC GUIDEPOSTS
- --------------------------------------------------------------------------------
Economic activity is a key influence on investment performance and shareholder
decision-making. Periods of recessions 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 (5/31/97) 6 MONTHS AGO 1 YEAR AGO 2 YEAR AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1) 6.71 6.3 6.91 6.17
PRIME RATE(2) 8.5 8.25 8.25 9
INFLATION RATE(3) 2.3 3.31 2.75 3.04
THE U.S. DOLLAR(4) 6.55 4.36 9.15 -9.31
CAPITAL GOODS ORDERS(5)* 8.28 2.42 3.93 17.47
INDUSTRIAL PRODUCTION(5) 4.28 4.36 3.34 2.88
EMPLOYMENT GROWTH(6) 2.13 2.15 2.09 2.7
</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 April 30, 1997.
SOURCE: ECONOMICS DEPARTMENT, ZURICH KEMPER INVESTMENTS, INC.
With this commentary as an economic backdrop, we encourage you to read the
following detailed report of your fund, including an interview with your fund's
portfolio management. Thank you for your continued support. We appreciate the
opportunity to serve your investment needs.
Sincerely,
/s/ Stephen B. Timbers
STEPHEN B. TIMBERS
PRESIDENT, CHIEF INVESTMENT AND EXECUTIVE OFFICER
Zurich Kemper Investments, Inc.
June 9, 1997
4
<PAGE> 5
PERFORMANCE UPDATE
[KORTH PHOTO]
FRANK KORTH IS SENIOR VICE PRESIDENT OF ZURICH KEMPER INVESTMENTS, INC. (ZKI)
AND VICE PRESIDENT AND PORTFOLIO MANAGER OF KEMPER TECHNOLOGY FUND. 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.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
WHILE THE OVERALL STOCK MARKET MOVED HIGHER DURING THE LAST SIX MONTHS,
TECHNOLOGY STOCKS STRUGGLED THROUGH A "STEALTH" CORRECTION, WITH INDIVIDUAL
INDUSTRIES DECLINING IN TURN. THE END RESULT: FLAT PERFORMANCE FOR THE FUND AND
FOR TECH STOCKS AS A WHOLE.
Q FRANK, HOW HAVE TECHNOLOGY STOCKS PERFORMED VERSUS THE OVERALL MARKET
DURING THE LAST SIX MONTHS?
A Although the broad market averages gained ground, technology stocks have
had a much tougher time of it. For example, the Standard & Poor's 500 Stock
Index and the Dow Jones Industrial Average gained 14.71% and 17.42%,
respectively. In comparison, the average technology fund managed only a 1.19%
gain for the period. Kemper Technology Fund's Class A shares total return was
- -0.73%, unadjusted for sales charge.*
There are many reasons behind the lagging performance of technology stocks
during the period, the primary one being fear of rising interest rates. The
stocks of technology companies are often more sensitive to rising rates than
those of other companies, since they tend to be smaller firms that borrow to
help finance new ventures and products. When interest rates rise, borrowing
becomes more expensive, which may potentially cut into profits. So as interest
rates edged up through the last six months, investors have become concerned that
earnings for technology companies might not be up to expectations.
In addition, the natural product cycles of technology companies have come into
play. New products and the laws of supply and demand often have a greater effect
on the performance of technology stocks than do economic considerations. The
last six months have been a good example. During 1996, the economy was growing
well, yet semiconductor manufacturers were hit hard due to competitive pricing
and a glut of chips on the market. Those companies now seem to be coming around.
And finally, the cyclical nature of tech stocks makes the market a magnet for
timers and momentum players -- that is, investors who look to jump into a sector
when it's heating up, and who bail out at the first sign of trouble. Any little
thing -- interest rate tremors, a two-cent shortfall in earnings, or an outlook
from management that wasn't as rosy as analysts expected -- sent stock prices
plummeting as momentum investors headed for the exits.
* SOURCE: LIPPER ANALYTICAL SERVICES. THE S&P 500 AND THE DOW JONES INDUSTRIAL
AVERAGE ARE UNMANAGED INDICES GENERALLY CONSIDERED REPRESENTATIVE OF THE U.S.
STOCK MARKET. TECHNOLOGY STOCKS ARE REPRESENTED BY THE LIPPER SCIENCE AND
TECHNOLOGY FUND CATEGORY AVERAGE.
Q IS THIS TYPE OF ROLLER-COASTER RIDE UNUSUAL IN THE TECHNOLOGY MARKET?
A Not historically. Over the last ten years, there have been several declines
similar in magnitude, as the accompanying chart illustrates. It's important
5
<PAGE> 6
PERFORMANCE UPDATE
[BAR GRAPH]
<TABLE>
<CAPTION>
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
<S> <C> <C> <C> <C>
88 0.64 8.39 -25.52 5.04
89 9.22 -7.62 0.47 3.57
90 8.01 9.83 -0.14 4.78
91 11.35 -26.05 16.17 27.89
92 -7.63 11.86 12.73 0.72
93 -7.43 4.49 18.35 2.29
94 8.74 10.27 1.28 2.33
95 -6.39 15.48 6.09 6.71
96 20.21 15.94 -5.69 0.45
97 7.29 6.08 5.12 -8.6
</TABLE>
PERFORMANCE OF TECHNOLOGY SECTOR VERSUS OTHER SECTORS AND THE MARKET
<TABLE>
<CAPTION>
TOTAL RETURN AVERAGE ANNUAL TOTAL RETURN
YTD AS OF 4/97 FOR FIVE YEARS ENDED 4/97
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY -5.30% 21.54%
- -----------------------------------------------------------------------------------------------------------
S&P 500 8.81 17.08
- -----------------------------------------------------------------------------------------------------------
GROWTH AND INCOME 4.72 14.59
- -----------------------------------------------------------------------------------------------------------
SMALL CAP -7.55 13.90
- -----------------------------------------------------------------------------------------------------------
GROWTH 2.45 13.87
- -----------------------------------------------------------------------------------------------------------
CAPITAL APPRECIATION -2.06 12.86
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Source: Lipper Analytical Services. Sector performance represented by the Lipper
fund category average. This information is historical and does not represent
future performance.
for investors to remember that the technology sector is a volatile place, and
always has been. A company's main product line can be made obsolete virtually
overnight. Conversely, a new product can help a company's earnings explode.
However, over the longer term this volatility has been mostly on the UPSIDE
... While the tech sector was one of the worst performing sectors over the first
four months of 1997, it has been by far the best performer over the last five
years.
Q WHAT STRATEGIES DID YOU USE TO HELP COMBAT THE SECTOR'S GYRATIONS?
A One thing we DIDN'T do was try to time the market's ups and downs and jump
in and out of cash. Overall, our philosophy is to stay fully invested or close
to it. That's partly because our shareholders expect us to be invested in stocks
rather than trying to time the market, but mostly because one never knows when a
group of stocks might rebound.
That said, we concentrated on staying diversified while overweighting the
areas of the market that looked most attractive. Primarily, we looked to buy the
stocks of larger companies and reduce our weighting in small company stocks.
During times of uncertainty, the stocks of large companies tend to perform
better, since they typically enjoy stronger cash flows, deeper pockets, and more
established product lines. As it turned out, larger companies did tend to
6
<PAGE> 7
PERFORMANCE UPDATE
perform better over the last six months.
We also paid close attention to the price moves of solid companies. The one
good thing about a correction is that it gives you the opportunity to buy the
stocks of strong companies that have sold off as short-term investors exit the
market. As a result, we were able to upgrade the quality of the portfolio
without paying exorbitant multiples. Often, prices for the companies we bought
were at or near one-year lows.
No one knows better than us how hard it can be to watch stock prices move up
in other sectors while the technology sector struggles. But it's just these
types of conditions that enable us to add value for our shareholders in the long
run.
Q WHERE DID YOU CONCENTRATE YOUR PURCHASES?
A As I mentioned earlier, semiconductors had just come through a period of
dramatic weakness, and prices on many companies were quite attractive. Rather
than purchase the stocks of semiconductor manufacturers, however, we tended to
buy the stocks of companies that make the EQUIPMENT that makes semiconductors.
That way, we didn't have to try to determine which semiconductor maker was going
to build which plant and when -- the orders for equipment would come regardless.
Purchases we made during the period included DuPont Photomasks and Integrated
Process Equipment Corp.
In addition, we increased the portfolio's weighting in networking. These
stocks declined in the first quarter when they reported earnings that were
modestly under expectations. However, most of these companies still boast growth
rates roughly four times that of the overall market, so we believe they offer
good value even though their earnings growth has tailed off somewhat. Newbridge
Networks and Lucent Technology, two companies which announced new products with
good potential to boost profits, were among our networking purchases. Cisco
Systems remains one of our largest holdings.
To finance our purchases, we lightened up a bit on our exposure to disk-drive
makers and PC manufacturers. However, we still maintain a presence in the PC
area, particularly through Dell Computer Corp., the world's largest direct
marketer of PCs.
Q ALTHOUGH THE FIRST TWO WEEKS OF MAY WERE OUTSIDE THE REPORTING PERIOD FOR
THIS DOCUMENT, IT'S IMPORTANT TO NOTE THAT THE MARKET RALLIED STRONGLY, AND
TECHNOLOGY STOCKS IN PARTICULAR POSTED POWERFUL GAINS. COULD THIS BE THE START
OF A PROLONGED RALLY IN TECH STOCKS?
A That might be pushing it a bit. What it does show is how fast these stocks
can rebound in a short period of time. And it shows exactly why we prefer to
take our lumps and stay invested consistently rather than try to time the
market's cycles.
Investors must always keep in mind that technology stocks should be a
long-term proposition. But if you believe, as I do, that technology will play a
major role in the development of health care, communications, finance,
information management and entertainment, then a growth-oriented investor may be
wise to have part of his or her portfolio in technology stocks.
7
<PAGE> 8
INDUSTRY SECTORS
A SIX-MONTH COMPARISON
Data show the percentage of the common stocks in the portfolio that each sector
represented on April 30, 1997, and on October 31, 1996.
[SIX-MONTH COMPARISON BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER TECHNOLOGY FUND KEMPER TECNOLOGY FUND
AS OF 4/30/97 AS OF 10/31/96
<S> <C> <C>
ELECTRONIC COMPONENTS 25.9% 12.9%
COMMUNICATIONS 21.4% 25.7%
SYSTEMS, SOFTWARE & SERVICES 15.1% 20.9%
PERSONAL COMPUTING 14.9% 14.2%
LIFE SCIENCE 12.1% 21.8%
INDUSTRIAL TECHNOLOGY/MISC. 10.6% 4.5%
</TABLE>
A COMPARISON WITH THE HAMBRECHT & QUIST INDEX
Data show the percentage of the common stocks in the portfolio that each sector
of the Kemper Technology Fund represented on April 30, 1997, 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.
[HAMBRECHT & QUIST COMPARISON BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER TECHNOLOGY FUND H&Q TECHNOLOGY INDEX
AS OF 4/30/97 AS OF 4/30/97
<S> <C> <C>
ELECTRONIC COMPONENTS 25.9% 21.8%
COMMUNICATIONS 21.4% 20.8%
SYSTEMS, SOFTWARE & SERVICES 15.1% 35.5%
PERSONAL COMPUTING 14.9% 18.0%
LIFE SCIENCES 12.1% 0.0%
INDUSTRIAL TECHNOLOGY/MISC. 10.6% 3.9%
</TABLE>
8
<PAGE> 9
LARGEST HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS*
Representing 29.6% of the fund's total net assets on April 30, 1997
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
HOLDINGS PERCENT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. INTEL Engaged in the design, development, manufacture and 5.7%
sale of advanced microcomputer components, such as
integrated circuits and other related products.
- -------------------------------------------------------------------------------------------------------
2. DELL COMPUTER The world's largest direct marketer of PCs and a major 3.4%
manufacturer of them as well. Their focus on direct
distribution leads to low costs and the ability to
react quickly to changing market conditions.
Management has been strengthened in recent years.
- -------------------------------------------------------------------------------------------------------
3. TEXAS INSTRUMENTS A high technology company with sales or manufacturing 3.0%
operations in over 30 countries. TI products and
services include semiconductors, defense electronics
systems, software productivity tools, computer and
peripheral products and consumer products.
- -------------------------------------------------------------------------------------------------------
4. CISCO SYSTEMS The largest, most comprehensive supplier of routing 3.0%
software and related systems that direct the flow of
data between local area networks, this company is a
play on the explosive growth of the Internet.
- -------------------------------------------------------------------------------------------------------
5. ASCEND COMMUNICATIONS Develops, manufactures, markets and sells a wide range 2.7%
of high speed digital wide area network access
products that enable customers to build
video-conference 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.
- -------------------------------------------------------------------------------------------------------
6. APPLIED MATERIALS The world's largest supplier of wafer fabrication 2.7%
systems and services to the global semiconductor
industry.
- -------------------------------------------------------------------------------------------------------
7. MICROCHIP TECHNOLOGY A semiconductor manufacturer specializing in 2.4%
production of low-cost field programmable
microcontrollers and related specialty memory devices
for a variety of industries.
- -------------------------------------------------------------------------------------------------------
8. TELLABS, INC. Designs, assembles, markets and services 2.3%
telephone-related signaling and transmission systems
and other products used for telecommunication services
for public and private voice/data communication
networks.
- -------------------------------------------------------------------------------------------------------
9. MOTOROLA Manufactures electronic communications equipment and 2.2%
components.
- -------------------------------------------------------------------------------------------------------
10. MICROSOFT CORP. Develops, markets and supports a variety of 2.2%
microcomputer software, operating systems, languages
and application programs, related books and peripheral
devices.
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Portfolio composition and holdings are subject to change.
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
KEMPER TECHNOLOGY FUND
PORTFOLIO OF INVESTMENTS AT APRIL 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ELECTRONIC COMPONENTS--24.6% (b)Adaptec, Inc. 250,000 $ 9,250
(b)Altera Corp. 325,000 16,108
(b)Analog Devices 650,666 17,405
(b)Cypress Semiconductor Corp. 100,000 1,387
(b)ESS Technology, Inc. 300,000 4,125
Intel Corp. 385,000 58,953
(b)LSI Logic Corp. 300,000 11,475
Linear Technology Corp. 330,000 16,583
(b)Maxim Integrated Products 150,000 7,931
(b)Microchip Technology 800,000 25,000
Micron Technology, Inc. 500,000 17,625
(b)National Semiconductor Corp. 300,000 7,500
(b)Novellus Systems 250,000 14,437
(b)SGS-Thomson Microelectronics 150,000 11,756
Texas Instruments 350,000 31,238
(b)TranSwitch Corp. 125,511 549
(b)Vitesse Semiconductor Corp. 100,000 3,150
---------------------------------------------------------------------
254,472
- -----------------------------------------------------------------------------------------------------------------
PERSONAL COMPUTING--14.1% Canon Inc. 45,000 1,067
(b)Compaq Computer Corp. 100,000 8,538
(b)Dell Computer Corp. 421,048 35,236
(b)Gateway 2000 200,000 10,975
(b)Komag, Inc. 85,000 2,401
(b)Logitech International S.A. 100,000 1,838
(b)Micron Electronics 250,000 5,094
(b)Microsoft Corp. 185,000 22,478
(b)Quantum Corp. 400,000 16,675
(b)Read-Rite Corp. 250,000 6,469
(b)Seagate Technology 300,000 13,763
(b)Western Digital Corp. 350,000 21,569
---------------------------------------------------------------------
146,103
- -----------------------------------------------------------------------------------------------------------------
COMMUNICATIONS--20.4% (b)ADC Telecommunications, Inc. 300,000 7,838
(b)Andrew Corp. 300,000 7,425
(b)Ascend Communications, Inc. 600,000 27,450
(b)Cascade Communications 400,000 12,600
(b)Cisco Systems 600,000 31,050
L.M. Ericsson Telephone Co.
American Depositary Receipts 225,000 7,566
Common "B" shares 69,870 2,209
(b)FORE Systems, Inc. 150,000 2,287
Globalstar Telecommunications,
convertible preferred 250,000 13,000
Harris Corp. 150,000 12,825
Lucent Technology Corp. 100,000 5,912
(b)MRV Communications 125,000 2,578
Motorola 400,000 22,900
(b)Netcom On-Line Communications Services 8,427 87
(b)Newbridge Networks Corp. 150,000 4,762
(b)PairGain Technologies, Inc. 275,000 7,150
(b)QUALCOMM, Inc., convertible preferred 204,000 8,976
(a)(b)Socket Communications, Inc. 134,756 75
(b)Tellabs, Inc. 600,000 23,925
(b)Worldcom 400,000 9,600
(b)Xylan Corp. 43,679 650
---------------------------------------------------------------------
210,865
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SYSTEMS, SOFTWARE
AND SERVICES--14.3% Adobe Systems 300,000 $ 11,738
(b)BMC Software 100,000 4,325
(b)Baan Company N.V. 41,730 2,187
(b)Cadence Design Systems 350,000 11,200
(b)Data General Corp. 350,000 6,563
(b)Forte Software Inc. 175,000 1,657
(b)Gartner Group 300,000 7,875
Getronics 19,500 591
HBO & Co. 275,000 14,712
Hewlett-Packard Co. 150,000 7,875
(b)Logic Works 27,638 145
(b)McAfee Associates 125,000 6,969
(b)Oracle Corp. 175,000 6,956
(b)Parametric Technology Corp. 265,000 11,991
(b)PeopleSoft Inc. 375,000 15,562
(b)Pure Atria Corp. 250,000 2,437
(b)Rational Software 250,000 3,453
SAP AG 12,130 2,209
(b)Scopus Technology 185,000 4,949
(b)Sykes Enterprises, Inc. 300,000 8,550
(b)Versant Object Technology 170,000 829
(b)VIASOFT 150,000 6,375
(b)Xilinx, Inc. 185,000 9,065
---------------------------------------------------------------------
148,213
- -----------------------------------------------------------------------------------------------------------------
LIFE SCIENCES--11.5%
(b)Angeion Corp. 425,000 1,700
(b)Biochem Pharma, Inc. 700,000 12,589
(b)Biogen 485,000 15,520
(b)British Biotech PLC 258,750 1,014
(b)Centocor, Inc. 450,000 12,656
Elsai Co., Ltd 87,000 1,508
Glaxo Wellcome 125,235 2,465
Guidant Corp. 155,000 10,579
(b)Incyte Pharmaceuticals, Inc. 100,000 4,250
(b)Lifecore Biomedical 170,000 2,125
(b)Martek Biosciences Corp. 250,000 3,656
(a)(b)Med Venture Associates II, L.P.,
6.1% limited partnership interest -- 732
(b)Pharmos Corp. 411,349 501
(b)Physician Computer Network 300,000 1,594
(a)(b)Survivalink Corp. with warrants expiring
2001 260,000 945
(b)Thermedics, Inc. 10,000 99
Thermo Electron Corp. 600,000 20,700
(a)(b)Trex Medical 60,000 615
U.S. Surgical Corp. 325,000 11,131
(b)VidaMed, Inc. 300,000 2,063
Warner-Lambert Co. 125,000 12,250
---------------------------------------------------------------------
118,692
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INDUSTRIAL TECHNOLOGY AND
MISCELLANEOUS--10.1%
(b)Alyn Corp. 11,400 $ 101
(a)(b)Advanced Technology Ventures II, L.P.,
17.9% limited partnership interest -- 415
(b)Applied Materials, Inc. 500,000 27,438
Ashland Coal 35,000 932
(a)(b)Asset Management Associates 1996, L.P.,
2.5% limited partnership interest -- 496
(b)Commodore Separation Technologies, Inc.,
convertible preferred with warrants expiring
2002 50,000 525
(a)(b)Crosspoint Venture Partners 1993, L.P.,
3.1% limited partnership interest -- 2,622
(b)Cymer Laser, Inc. 150,000 6,169
(b)DuPont Photomasks, Inc. 220,000 10,533
(a)(b)GEO Capital III, L.P.,
5.0% limited partnership interest -- 1,583
(a)(b)GEO Capital IV, L.P.,
2.9% limited partnership interest -- 696
(b)Integrated Process Equipment Corp. 250,000 3,406
Matsushita Electric Industrial Co., Ltd. 116,000 1,855
(a)Metrika Systems 133,333 1,000
Murata Manufacturing 47,000 1,733
Ricoh Company, Ltd. 51,000 607
(b)Sanmina Corp. 300,000 15,000
(a)(b)Sevin Rosen Fund V, L.P.,
2.8% limited partnership interest -- 1,220
(b)Solectron Corp. 50,000 2,869
Sony Corp. 11,000 801
(b)Sterling Commerce, Inc. 300,000 7,763
(b)Tencor Instruments 185,000 8,209
(b)Teradyne 250,000 8,187
---------------------------------------------------------------------
104,160
---------------------------------------------------------------------
TOTAL COMMON STOCKS--95.0%
(Cost: $848,802) 982,505
---------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------
MONEY MARKET
INSTRUMENTS--4.5% Yield--5.55% to 5.76%
Due--May 1997
(Cost: $46,008) $46,100 46,006
--------------------------------------------------------------------
TOTAL INVESTMENTS--99.5%
(Cost: $894,810) 1,028,511
--------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES--.5% 5,044
--------------------------------------------------------------------
NET ASSETS--100% $1,033,555
--------------------------------------------------------------------
</TABLE>
12
<PAGE> 13
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, 1997, with the exception
of Socket Communications, Inc., which was valued at 85% 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, 1997, the value of the
Fund's restricted securities was $10,400,000, which represented 1.01% 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, L.P. December 1994 partnership interest $1,687,908
----------------------------------------------------------------------------------------------------------------------
June 1996
to 2.5% limited
Asset Management Associates 1996, L.P. April 1997 partnership interest 500,000
----------------------------------------------------------------------------------------------------------------------
October 1994
to 3.1% limited
Crosspoint Venture Partners 1993, L.P. July 1996 partnership interest 1,488,231
----------------------------------------------------------------------------------------------------------------------
October 1994
to 5.0% limited
GEO Capital III L.P. December 1996 partnership interest 1,878,377
----------------------------------------------------------------------------------------------------------------------
April 1996
to 2.9% limited
GEO Capital IV, L.P. January 1997 partnership interest 750,000
----------------------------------------------------------------------------------------------------------------------
May 1996
to 6.1% limited
Med Venture Associates II, L.P. April 1997 partnership interest 900,000
----------------------------------------------------------------------------------------------------------------------
Metrika Systems December 1996 133,333 shs. 999,998
----------------------------------------------------------------------------------------------------------------------
April 1996
to 2.8% limited
Sevin Rosen Fund V, L.P. October 1996 partnership interest 821,934
----------------------------------------------------------------------------------------------------------------------
May 1994
to
Socket Communications, Inc. December 1994 134,756 shs. 4.62 per share
----------------------------------------------------------------------------------------------------------------------
December 1995
to
Survivalink Corp. with warrants expiring 2001 October 1996 260,000 3.63 per share
----------------------------------------------------------------------------------------------------------------------
Trex Medical November 1995 60,000 10.25 per share
----------------------------------------------------------------------------------------------------------------------
</TABLE>
(b) Non-income producing security.
Based on the cost of investments of $894,810,000 for federal income tax
purposes at April 30, 1997, the gross unrealized appreciation was
$200,194,000, the gross unrealized depreciation was $66,493,000 and the net
unrealized appreciation on investments was $133,701,000.
See accompanying Notes to Financial Statements.
13
<PAGE> 14
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- --------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------
Investments, at value
(Cost: $894,810) $1,028,511
- --------------------------------------------------------------------------
Receivable for:
Investments sold 6,960
- --------------------------------------------------------------------------
Fund shares sold 296
- --------------------------------------------------------------------------
Dividends 178
- --------------------------------------------------------------------------
TOTAL ASSETS 1,035,945
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- --------------------------------------------------------------------------
Cash overdraft 817
- --------------------------------------------------------------------------
Payable for:
Investments purchased 562
- --------------------------------------------------------------------------
Fund shares redeemed 100
- --------------------------------------------------------------------------
Management fee 465
- --------------------------------------------------------------------------
Distribution services fee 53
- --------------------------------------------------------------------------
Administrative services fee 132
- --------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 165
- --------------------------------------------------------------------------
Trustees' fees 96
- --------------------------------------------------------------------------
Total liabilities 2,390
- --------------------------------------------------------------------------
NET ASSETS $1,033,555
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- --------------------------------------------------------------------------
Paid-in capital $ 778,635
- --------------------------------------------------------------------------
Undistributed net realized gain on investments 121,219
- --------------------------------------------------------------------------
Net unrealized appreciation on investments 133,701
- --------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $1,033,555
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
THE PRICING OF SHARES
- --------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($925,599 / 83,191 shares outstanding) $11.13
- --------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $11.81
- --------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($83,178 / 7,787 shares outstanding) $10.68
- --------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($5,600 / 520 shares outstanding) $10.77
- --------------------------------------------------------------------------
CLASS I SHARES
Net asset value and redemption price per share
($19,178 / 1,717 shares outstanding) $11.17
- --------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
14
<PAGE> 15
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
INVESTMENT INCOME
- ------------------------------------------------------------------------
Dividends $ 1,091
- ------------------------------------------------------------------------
Interest 861
- ------------------------------------------------------------------------
Total investment income 1,952
- ------------------------------------------------------------------------
Expenses:
Management fee 3,050
- ------------------------------------------------------------------------
Distribution services fee 315
- ------------------------------------------------------------------------
Administrative services fee 850
- ------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 841
- ------------------------------------------------------------------------
Professional fees 45
- ------------------------------------------------------------------------
Reports to shareholders 87
- ------------------------------------------------------------------------
Trustees' fees and other 24
- ------------------------------------------------------------------------
Total expenses 5,212
- ------------------------------------------------------------------------
NET INVESTMENT LOSS (3,260)
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------------------------
Net realized gain on sales of investments 145,253
- ------------------------------------------------------------------------
Change in net unrealized appreciation on investments (149,052)
- ------------------------------------------------------------------------
Net loss on investments (3,799)
- ------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (7,059)
- ------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
1997 1996
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
Net investment loss $ (3,260) (6,765)
- -------------------------------------------------------------------------------------------------
Net realized gain 145,253 171,891
- -------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (149,052) (92,784)
- -------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (7,059) 72,342
- -------------------------------------------------------------------------------------------------
Net equalization credits -- 38
- -------------------------------------------------------------------------------------------------
Distribution from net realized gain (170,334) (148,702)
- -------------------------------------------------------------------------------------------------
Net increase from capital share transactions 148,135 121,180
- -------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (29,258) 44,858
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------
Beginning of period 1,062,813 1,017,955
- -------------------------------------------------------------------------------------------------
END OF PERIOD $1,033,555 1,062,813
- -------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 16
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 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
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
shares will be reduced by the amount of any
applicable contingent deferred sales charge. On
each day the New York Stock Exchange is open for
trading, the net asset value per share is
determined as of the earlier of 3:00 p.m. Chicago
time or the close of the Exchange. The net asset
value per share is determined separately for each
class by dividing the Fund's net assets
attributable to that class by the number of shares
of the class outstanding.
FEDERAL INCOME TAXES. The Fund has complied with
the special provisions of the Internal Revenue Code
available to investment companies during the six
months ended April 30, 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 $3,050,000 for the six
months ended April 30, 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
RETAINED BY COMMISSIONS ALLOWED
ZKDI BY ZKDI TO FIRMS
---------------- -------------------
<S> <C> <C>
Six months ended
April 30, 1997 $107,000 354,000
</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
17
<PAGE> 18
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
RECEIVED BY PAID BY ZKDI
ZKDI TO FIRMS
----------------- -----------------
<S> <C> <C>
Six months ended
April 30, 1997 $385,000 609,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with ZKDI. For
providing information and administrative services
to Class A, Class B and Class C shareholders, the
Fund pays ZKDI a fee at an annual rate of up to
.25% of average daily net assets of each class.
ZKDI in turn has various agreements with financial
services firms that provide these services and pays
these firms based on assets of Fund accounts the
firms service. Administrative services fees (ASF)
paid are as follows:
<TABLE>
<CAPTION>
ASF PAID BY
THE FUND TO ASF PAID BY
ZKDI ZKDI TO FIRMS
------------------ ---------------
<S> <C> <C>
Six months ended
April 30, 1997 $850,000 893,000
</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
$545,000 for the six months ended April 30, 1997.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of ZKI.
During the six months ended April 30, 1997, the
Fund made no payments to its officers and incurred
trustees' fees of $15,000 to independent trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT TRANSACTIONS For the six months ended April 30, 1997, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $1,055,760
Proceeds from sales 1,099,886
18
<PAGE> 19
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, 1997 OCTOBER 31, 1996
-------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------
SHARES SOLD
----------------------------------------------------------------------------
Class A 4,673 $ 55,653 6,779 $ 84,646
----------------------------------------------------------------------------
Class B 2,598 30,236 4,430 55,798
----------------------------------------------------------------------------
Class C 287 3,341 403 5,168
----------------------------------------------------------------------------
Class I 826 9,871 947 11,854
----------------------------------------------------------------------------
----------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
----------------------------------------------------------------------------
Class A 10,358 125,743 10,245 109,842
----------------------------------------------------------------------------
Class B 975 11,403 650 6,818
----------------------------------------------------------------------------
Class C 57 672 25 262
----------------------------------------------------------------------------
Class I 218 2,652 244 2,616
----------------------------------------------------------------------------
----------------------------------------------------------------------------
SHARES REDEEMED
----------------------------------------------------------------------------
Class A (5,693) (67,897) (8,858) (111,018)
----------------------------------------------------------------------------
Class B (1,155) (13,557) (2,317) (28,675)
----------------------------------------------------------------------------
Class C (145) (1,723) (216) (2,686)
----------------------------------------------------------------------------
Class I (678) (8,259) (1,054) (13,445)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CONVERSION OF SHARES
----------------------------------------------------------------------------
Class A 86 1,043 151 1,900
----------------------------------------------------------------------------
Class B (89) (1,043) (156) (1,900)
----------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $148,135 $121,180
----------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
------------------------------------------------
CLASS A
------------------------------------------------
SIX MONTHS YEAR ENDED OCTOBER 31,
ENDED -------------------------------
APRIL 30, 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------
Net asset value, beginning of period $13.16 14.63 11.50 10.68 9.95
- -------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.03) (.08) (.03) -- (.01)
- -------------------------------------------------------------------------------------------
Net realized and unrealized gain .11 .74 4.66 1.49 2.03
- -------------------------------------------------------------------------------------------
Total from investment operations .08 .66 4.63 1.49 2.02
- -------------------------------------------------------------------------------------------
Less distribution from net realized gain 2.11 2.13 1.50 .67 1.29
- -------------------------------------------------------------------------------------------
Net asset value, end of period $11.13 13.16 14.63 11.50 10.68
- -------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) (.73)% 7.83 47.30 14.95 21.76
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses .87% .89 .88 .89 .81
- -------------------------------------------------------------------------------------------
Net investment income (loss) (.50)% (.62) (.23) .05 (.06)
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
YEAR ENDED
SIX MONTHS OCTOBER 31, MAY 31 TO
ENDED ------------- OCTOBER 31,
APRIL 30, 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------
Net asset value, beginning of period $12.77 14.39 11.45 9.99
- ---------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.09) (.19) (.15) (.05)
- ---------------------------------------------------------------------------------------
Net realized and unrealized gain .11 .70 4.59 1.51
- ---------------------------------------------------------------------------------------
Total from investment operations .02 .51 4.44 1.46
- ---------------------------------------------------------------------------------------
Less distribution from net realized gain 2.11 2.13 1.50 --
- ---------------------------------------------------------------------------------------
Net asset value, end of period $10.68 12.77 14.39 11.45
- ---------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) (1.28)% 6.76 45.65 14.61
- ---------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ---------------------------------------------------------------------------------------
Expenses 1.85% 1.87 1.82 1.99
- ---------------------------------------------------------------------------------------
Net investment loss (1.48)% (1.60) (1.17) (1.08)
- ---------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 21
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------------- -------------------------------------
CLASS C CLASS I
--------------------------------------- -------------------------------------
SIX MONTHS YEAR ENDED SIX MONTHS
ENDED OCTOBER 31, MAY 31 TO ENDED YEAR ENDED JULY 3 TO
APRIL 30, ------------- OCTOBER 31, APRIL 30, OCTOBER 31, OCTOBER 31,
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 $12.85 14.45 11.45 9.99 13.20 14.64 12.72
- -------------------------------------------------------------------------------- ------------------------------------
Income from investment operations:
Net investment loss (.08) (.18) (.15) (.05) (.03) (.07) (.02)
- -------------------------------------------------------------------------------- ------------------------------------
Net realized and unrealized gain .11 .71 4.65 1.51 .11 .76 1.94
- -------------------------------------------------------------------------------- ------------------------------------
Total from investment operations .03 .53 4.50 1.46 .08 .69 1.92
- -------------------------------------------------------------------------------- ------------------------------------
Less distribution from net realized
gain 2.11 2.13 1.50 -- 2.11 2.13 --
- -------------------------------------------------------------------------------- ------------------------------------
Net asset value, end of period $10.77 12.85 14.45 11.45 11.17 13.20 14.64
- ----------------------------------------------------------------------------- ------------------------------------
TOTAL RETURN (NOT ANNUALIZED) (1.17)% 6.88 46.23 14.61 (.72) 8.06 15.09
- -------------------------------------------------------------------------------- ------------------------------------
- -------------------------------------------------------------------------------- ------------------------------------
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED)
- -------------------------------------------------------------------------------- ------------------------------------
Expenses 1.76% 1.82 1.76 1.83 .76 .76 .65
- -------------------------------------------------------------------------------- ------------------------------------
Net investment loss (1.39)% (1.55) (1.11) (.92) (.39) (.49) (.33)
- -------------------------------------------------------------------------------- ------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ---------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED OCTOBER 31,
ENDED ---------------------------------------------
APRIL 30, 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets at end of period (in
thousands) $1,033,555 1,062,813 1,017,955 713,654 612,604
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 201% 121 105 81 95
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Average commission rates paid per share on stock transactions for the six months
ended April 30, 1997 and the year ended October 31, 1996 were $.0580 and $.0558,
respectively.
NOTES: Total return does not reflect the effect of any sales charges. Per share
data for 1995 through 1997 were determined based on average shares outstanding.
21
<PAGE> 22
NOTES
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 CHARLES R. MANZONI, JR.
Trustee Vice President
LEWIS A. BURNHAM JOHN E. NEAL
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
- --------------------------------------------------------------------------------
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.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Technology Funds prospectus.
KTEC - 3 (6/97) 1033420
Printed in the U.S.A. [KEMPER FUNDS LOGO]
