<PAGE> 1
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED MARCH 31, 1999
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
[MORNINGSTAR RATINGS LOGO]
SEEKING CAPITAL APPRECIATION THROUGH THE
USE OF AGGRESSIVE INVESTMENT TECHNIQUES
KEMPER
AGGRESSIVE GROWTH FUND
"... As we face the challenges of the current market,
we're seeking stocks that offer an appropriate balance of liquidity
and reasonably valued growth. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
8
INDUSTRY SECTORS
9
LARGEST HOLDINGS
10
PORTFOLIO OF INVESTMENTS
13
FINANCIAL STATEMENTS
15
NOTES TO FINANCIAL STATEMENTS
18
FINANCIAL HIGHLIGHTS
20
SHAREHOLDERS' MEETING
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER AGGRESSIVE GROWTH
FUND TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 1999
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 26.96
CLASS B 26.41
CLASS C 26.48
LIPPER CAPITAL APPRECIATION CATEGORY AVERAGE* 28.71
- --------------------------------------------------------------------------------
</TABLE>
RETURNS AND RANKINGS ARE HISTORICAL AND DO NOT GUARANTEE FUTURE PERFORMANCE.
INVESTMENT RETURNS AND PRINCIPAL VALUES WILL FLUCTUATE SO THAT SHARES,WHEN
REDEEMED,MAY BE WORTH 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.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
3/31/99 9/30/98
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER AGGRESSIVE GROWTH
FUND CLASS A $13.94 $10.98
- --------------------------------------------------------------------------------
KEMPER AGGRESSIVE GROWTH
FUND CLASS B $13.69 $10.83
- --------------------------------------------------------------------------------
KEMPER AGGRESSIVE GROWTH
FUND CLASS C $13.71 $10.84
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
KEMPER AGGRESSIVE GROWTH FUND
LIPPER RANKINGS AS OF 3/31/99*
- --------------------------------------------------------------------------------
COMPARED TO ALL OTHER FUNDS IN THE LIPPER CAPITAL APPRECIATION FUNDS CATEGORY
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1-YEAR #166 of #172 of #173 of
251 funds 251 funds 251 funds
- --------------------------------------------------------------------------------
</TABLE>
THERE ARE SPECIAL RISK CONSIDERATIONS ASSOCIATED WITH THE FUND, INCLUDING
OPERATION AS A NON-DIVERSIFIED FUND, WHICH ALLOWS MORE ASSETS TO BE INVESTED IN
FEWER ISSUERS AND THE FLEXIBILITY TO CONCENTRATE IN VARIOUS INVESTMENT SECTORS,
AS WELL AS THE ABILITY TO INVEST SIGNIFICANT ASSETS IN SMALLER COMPANIES, WHICH
PRESENT GREATER RISK THAN LARGER, MORE ESTABLISHED COMPANIES. THERE IS NO
ASSURANCE THAT THE FUND'S MANAGEMENT STYLE WILL BE SUCCESSFUL OR THAT THE FUND
WILL ACHIEVE ITS OBJECTIVE.
TERMS TO KNOW
YOUR FUND'S STYLE
- --------------------------------------------------------------------------------
MORNINGSTAR EQUITY STYLE BOX
- --------------------------------------------------------------------------------
[MORNINGSTAR EQUITY STYLE BOX]
Source: Morningstar, Inc. Chicago, IL. (312)696-6000. The Equity Style Box
placement is based on two variables: a fund's market capitalization relative to
the movements of the market, and a fund's valuation, which is calculated by
comparing the stocks in the fund's portfolio with the most recent of the three
market-cap groups.
THE STYLE BOX REPRESENTS A SNAPSHOT OF THE FUND'S PORTFOLIO ON A SINGLE DAY.
PLEASE NOTE THAT STYLE BOXES DO NOT REPRESENT AN EXACT ASSESSMENT OF RISK AND DO
NOT REPRESENT FUTURE PERFORMANCE. THE FUND'S PORTFOLIO CHANGES FROM DAY-TO-DAY.
A LONGER-TERM VIEW IS REPRESENTED BY THE FUND'S MORNINGSTAR CATEGORY, WHICH IS
BASED ON ITS ACTUAL INVESTMENT STYLE AS MEASURED BY ITS UNDERLYING PORTFOLIO
HOLDINGS OVER THE PAST THREE YEARS. MORNINGSTAR HAS PLACED KEMPER AGGRESSIVE
GROWTH FUND IN THE SMALL-CAP GROWTH CATEGORY. PLEASE CONSULT THE PROSPECTUS FOR
A DESCRIPTION OF INVESTMENT POLICIES.
BOTTOM-UP STOCK SELECTION Individual stock selection drives the bottom-up
process. The overall sector allocation results from the individual stock
decisions. In contrast, a top-down approach begins with a determination of how
much should be invested in each market sector. Stocks are then selected to meet
the pre-determined sector allocations.
CONSUMER NONDURABLES Stocks from a variety of industries, including food,
restaurants, retail, services and entertainment. Consumer nondurable companies
produce goods or services that are consumed or replaced within a relatively
short period of time.
LIQUIDITY Describes how easy it is to move in and out of a stock. Due to higher
recognition levels and greater quantity of shares, large-cap stocks are
typically more liquid than small-cap stocks. Reduced liquidity offers both
greater risk and return potential: Investors who wish to sell a less-liquid
stock may find it difficult to find a buyer, but may also be able to dictate a
higher price if the stock is in demand.
MARKET CAP (capitalization) Market capitalization refers to the total value of a
company's outstanding stock.
<PAGE> 3
ECONOMIC OVERVIEW
[SILVIA PHOTO]
DR. JOHN E. SILVIA IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.
HIS PRIMARY RESPONSIBILITIES INCLUDE ANALYSIS, MODELING AND FORECASTING OF
ECONOMIC DEVELOPMENTS AND FEDERAL RESERVE ACTIVITY THAT AFFECT FINANCIAL
MARKETS, ESPECIALLY INTEREST RATE TRENDS. THIS EFFORT INCLUDES CLOSE
COLLABORATION WITH BOTH INCOME AND EQUITY MUTUAL FUND MANAGERS AND PENSION FUND
MANAGERS.
SILVIA HOLDS A BACHELOR'S DEGREE AND PH.D. IN ECONOMICS FROM NORTHEASTERN
UNIVERSITY IN BOSTON AND A MASTER'S DEGREE IN ECONOMICS FROM BROWN UNIVERSITY IN
PROVIDENCE, R.I. PRIOR TO HIS CAREER AT SCUDDER KEMPER INVESTMENTS, HE WAS WITH
THE HARRIS BANK AND ALSO TAUGHT AT INDIANA UNIVERSITY.
SCUDDER KEMPER INVESTMENTS, THE INVESTMENT MANAGER FOR KEMPER FUNDS, IS ONE OF
THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS IN THE
WORLD, MANAGING MORE THAN $280 BILLION IN ASSETS FOR INSTITUTIONAL AND CORPORATE
CLIENTS, RETIREMENT AND PENSION PLANS, INSURANCE COMPANIES, MUTUAL FUND
INVESTORS AND INDIVIDUALS. SCUDDER KEMPER INVESTMENTS OFFERS A FULL RANGE OF
INVESTMENT COUNSEL AND ASSET MANAGEMENT CAPABILITIES BASED ON A COMBINATION OF
PROPRIETARY RESEARCH AND DISCIPLINED, LONG-TERM INVESTMENT STRATEGIES.
DEAR KEMPER FUNDS SHAREHOLDER:
Throughout April, investor enthusiasm drove the market to its second milestone
in a year -- the Dow Jones Industrial Average rose to 11,000 just a month after
it broke 10,000 for the first time. But those gains don't tell the whole story
- -- investors in the first four months of the year have endured significant
volatility. What drove the climb to 11,000 and what, at the same time, has led
to investor anxiety?
Driving the market, in part, was consumer confidence. In the first quarter of
1999, consumer spending surged 6.7 percent -- the largest rise in 11 years. The
market's rise seems to have buoyed consumer confidence, which rose for the sixth
consecutive month in April. And, the resilience of the economy has bolstered
more optimistic expectations for the next six months.
Inspiring consumer confidence also were the lowest levels of inflation in a
generation. As measured by the consumer price index (CPI), inflation has been
between 1 1/2 and 2 percent, compared to approximately 4 percent in the
beginning of the 1990s and 10-12 percent in the beginning of the 1980s. Still,
inflation worries have been seeping into the market. The growing conviction that
Asian and Latin American economies are recovering is raising commodity prices,
particularly oil. The price of West Texas Intermediate oil surged from less than
$12 in February to almost $19 in early May. That alone almost guarantees a rise
in the "headline" inflation rate this year, which is the rate of inflation as
measured by the entire CPI. But it's important to note that the Federal Reserve
Board looks primarily at the core inflation rate, which is the CPI minus food
and energy -- and the core inflation rate looks as if it will remain low at
about 2 percent this year.
Also contributing to consumer confidence, short-term and long-term interest
rates remained low over the first quarter, and can be expected to remain so.
Today's Fed policy is reactive, not proactive, which means that the Fed tends to
respond to inflation only when it picks up. Consequently, we expect no changes
in short-term interest rates during May and June, and there's only a small
chance that the Fed will raise interest rates in the second half of the year.
Moreover, the federal budget surplus continues to benefit from good revenue
gains (which are based on good income gains, especially from households), good
capital gains and continued restraint in federal spending. The surplus this year
is expected to approach $100 billion.
Such a positive environment is exactly what poses risk for investors, and is
key to understanding recent volatility in the market. A stronger economy has the
potential to feed inflation fears and drive up interest rates. Events on April
30 illustrated the domino effect of investors reacting to positive economic
news, which they consider troubling at this point, more than eight years into
the economic expansion. The steady stream of positive economy's news prompted a
sell-off in the markets based on fears that the strong pace of economic growth
will eventually lead to higher inflation. The benchmark 30-year Treasury bond
fell nearly 2 points (close to $20 for a bond with a $1,000 face amount) as the
yield shot up to 5.657 percent. It was the biggest one-day plunge in bonds in
two months. Bonds, in turn, pulled stocks lower.
Where can we expect to go from here? The fundamentals by which we judge the
health of the economy suggested continued growth as we moved into the second
quarter of 1999. For example, the gross domestic product (GDP), the value of all
goods and services produced in the U.S., rose at an annual rate of 4.5 percent
in the first quarter, following a tremendous fourth-quarter surge of 6 percent.
This is very much in line with what we've grown accustomed to over the past year
- -- over the four quarters of 1998, the U.S. economy expanded by 4.3 percent.
Some people aren't surprised at all by strong GDP growth that once would have
alarmed them. That's partially because we've grown accustomed to a strong
economy in the past three or four years. But it's also because we've been able
to absorb growth without driving up inflation. That's important for investors.
If prices were rising as the economy was growing, the Fed would most likely
raise short-term interest rates, which would change the financial market
outlook. But again, that isn't happening right now.
However, we do see some vulnerability. Trade is a weak spot in the economy
right now. Exports of U.S. goods and services dropped in the first quarter while
imports soared. This reflects the fact that the U.S. is one of the few countries
financially fit enough to buy goods produced elsewhere in the world. But for as
long as less vibrant international economies are unable to buy U.S. goods, the
profitability of U.S. companies trying to export will be challenged.
When you think about it, vulnerability in regard to the international economy
is nothing new. Globally, the outlook is slightly more positive than it was a
few months ago. For example, the European markets are slowing down, which will
most likely lead to the central bank lowering interest rates in order to boost
domestic spending. In many countries in Europe, there are no fixed-rate
mortgages, only adjustable-rate mortgages. When interest rates go down,
mortgages are reduced and homeowners
3
<PAGE> 4
ECONOMIC OVERVIEW
- --------------------------------------------------------------------------------
ECONOMIC GUIDEPOSTS
- --------------------------------------------------------------------------------
ECONOMIC ACTIVITY IS A KEY INFLUENCE ON INVESTMENT PERFORMANCE AND SHAREHOLDER
DECISION-MAKING. PERIODS OF RECESSION OR BOOM, INFLATION OR DEFLATION, CREDIT
EXPANSION OR CREDIT CRUNCH HAVE A SIGNIFICANT IMPACT ON MUTUAL FUND PERFORMANCE.
THE FOLLOWING ARE SOME SIGNIFICANT ECONOMIC GUIDEPOSTS AND THEIR INVESTMENT
RATIONALE THAT MAY HELP YOUR INVESTMENT DECISION-MAKING. THE 10-YEAR TREASURY
RATE AND THE PRIME RATE ARE PREVAILING INTEREST RATES. THE OTHER DATA REPORT
YEAR-TO-YEAR PERCENTAGE CHANGES.
[BAR GRAPH]
(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 PERCENT. THE LOW, MODERATE INFLATION OF THE
LAST FEW YEARS HAS MEANT HIGH REAL RETURNS.
(4) CHANGES IN THE EXCHANGE VALUE OF THE DOLLAR IMPACT U.S. EXPORTERS AND THE
VALUE OF U.S. FIRMS' FOREIGN PROFITS.
(5) THESE INFLUENCE CORPORATE PROFITS AND EQUITY PERFORMANCE.
(6) AN INFLUENCE ON FAMILY INCOME AND RETAIL SALES.
*DATA AS OF MARCH 31, 1999.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
spend money elsewhere. This has a huge impact on consumer spending, and will
help European equities in the long term. Additionally, the situation in Japan
remains unchanged. And, problems in the emerging markets haven't had the
negative impact many people expected -- both the Mexican and Brazilian stock
markets have actually risen in the past two months.
But don't forget that international crises have the potential to affect the
U.S. markets drastically. An increase in military spending on Kosovo by the 11
European Monetary Union (EMU) countries could force them to spend less in other
areas, which could have economic implications, including higher interest rates.
That's because many European countries have small economies and little leeway in
their budgets. Consequently, those countries finance unplanned military
expenditures by selling government bonds -- which, in Europe's small bond
market, typically raises interest rates.
The international situation alone, however, is by no means an indicator of a
U.S. slowdown -- and without any such indications, complacency may be our
greatest concern. It's easy to look at the current economic situation and behave
as if no risk exists. But when you see the market soaring and are tempted to
jump in, note that the bull market grew to records on the strength of just a few
dozen stocks, while most other stock prices were flat or actually declined.
In summary, there are concerns that the current economy is unsustainable and
we soon could see an abrupt end. In many cases, however, people are looking for
a slowdown because they are fearful growth will drive up inflation -- these are
particularly older investors who are accustomed to inflation accompanying
growth. But we currently just don't see the pressure toward inflation at all, so
there's no reason to want a slowdown. The best approach now, as in any market,
is to diversify and invest for the long term.
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
/s/ JOHN E. SILVIA
John E. Silvia
THE INFORMATION CONTAINED IN THIS PIECE HAS BEEN TAKEN FROM SOURCES BELIEVED TO
BE RELIABLE, BUT THE ACCURACY OF THE INFORMATION IS NOT GUARANTEED. THE OPINIONS
AND FORECASTS EXPRESSED ARE THOSE OF DR. JOHN SILVIA AS OF MAY 5, 1999, AND MAY
NOT ACTUALLY COME TO PASS. THIS INFORMATION IS SUBJECT TO CHANGE. NO PART OF
THIS MATERIAL IS INTENDED AS AN INVESTMENT RECOMMENDATION.
TO OBTAIN A KEMPER FUNDS PROSPECTUS, DOWNLOAD ONE FROM WWW.KEMPER.COM, TALK TO
YOUR FINANCIAL REPRESENTATIVE OR CALL SHAREHOLDER SERVICES AT (800) 621-1048.
THE PROSPECTUS CONTAINS MORE COMPLETE INFORMATION, INCLUDING MANAGEMENT FEES AND
EXPENSES. PLEASE READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
4
<PAGE> 5
PERFORMANCE UPDATE
THROUGHOUT THE SEMIANNUAL PERIOD, KURT STALZER SERVED AS LEAD PORTFOLIO MANAGER
OF KEMPER AGGRESSIVE GROWTH FUND. STALZER IS A MANAGING DIRECTOR OF SCUDDER
KEMPER INVESTMENTS, INC. AND HAS MORE THAN 15 YEARS OF INVESTMENT INDUSTRY
EXPERIENCE.
EFFECTIVE MID-MAY, SEWALL HODGES ASSUMES THE ROLE OF LEAD PORTFOLIO MANAGER.
HODGES BRINGS MORE THAN 20 YEARS OF INVESTMENT INDUSTRY EXPERIENCE TO THE FUND.
KURT STALZER REMAINS A MEMBER OF THE PORTFOLIO MANAGEMENT TEAM.
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.
BELOW, KURT STALZER, LEAD PORTFOLIO MANAGER DURING THE SEMIANNUAL PERIOD,
DISCUSSES HOW KEMPER AGGRESSIVE GROWTH FUND PERFORMED IN A CHALLENGING MARKET
CLIMATE AND HOW HE POSITIONED THE FUND.
Q KEMPER AGGRESSIVE GROWTH FUND RETURNED 26.96 PERCENT (CLASS A SHARES,
UNADJUSTED FOR ANY SALES CHARGES) FOR THE SIX MONTH PERIOD ENDING MARCH 31,
1999. PLEASE PUT THE FUND'S PERFORMANCE INTO A LARGER CONTEXT.
A We're satisfied with Kemper Aggressive Growth Fund's semiannual gain. In
absolute terms, the fund's return is quite high. Keep in mind that over the past
50 years, stocks earned an average of just 14 percent a year. Also, the fund
outperformed its benchmark, the Russell 3000 Index, up 25.55 percent for the
six-month period.
Our enthusiasm is tempered by the fund's relative performance. Compared
to its peers, the fund's gains land near the middle of the pack. The fund
modestly trailed the Lipper Capital Appreciation Funds category average of 28.71
percent.
Over the long term, we set our sights on outperforming both the fund's
peer group average as well as its benchmark. However, the short-term market
climate has presented challenges to our long-term disciplined investment
strategy.
Q BEFORE YOU DISCUSS THE FUND IN GREATER DETAIL, COULD YOU PROVIDE A BROAD
OVERVIEW OF THE STOCK MARKET DURING THE SEMIANNUAL PERIOD?
A The stock market continued to display considerable short-term volatility.
When the fund's fiscal year began in October 1998, the global economy was
experiencing considerable turmoil. Just weeks previously, the Russian debt
default sent global markets spiralling downward. Both large-cap and small-cap
stocks suffered.
While the markets rebounded from the August sell-off, large-cap growth
stocks rebounded with considerably more momentum. Investors believed that
mega-cap growth companies could better withstand global volatility than small
caps could. In this uncertain climate, the market placed a premium on liquidity.
(See Terms To Know.) Investors sold off small caps, ignoring underlying
fundamentals. A narrow group of stocks moved upward while the vast majority
suffered.
The tide changed toward the end of 1998, however. Excitement about the
Internet propelled technology stocks, including many aggressive growth stocks.
As a result of these and other factors, small-caps surged, enjoying particularly
outstanding performance in December.
Most small-caps slowed their pace again in 1999, hindered by renewed
liquidity concerns and earnings disappointments. Technology stocks and mega-cap
growth names continued to drive the market's performance.
Q PLEASE DESCRIBE YOUR INVESTMENT DISCIPLINE.
A As part of our aggressive-growth focus, we have the freedom to invest in
companies of any size. We're willing to concentrate investments in market
sectors with the strongest prospects for growth. We pair the flexibility of our
charter with uncompromising stock-selection criteria. We think that this
combination offers an
5
<PAGE> 6
PERFORMANCE UPDATE
excellent method for pursing long-term capital appreciation.
We require strong fundamentals, clean balance sheets, and above-average
earnings growth. Before we invest, we must have confidence that a stock offers
sustainable earnings-growth potential for a period of at least two years. We
search for companies in niche markets, those that dominate their competitors,
and those that offer innovative products and services.
Exemplary fundamentals are just a part of what we seek, however. For us,
a good company also needs to be a good stock. In other words, before we'll
invest, we require a stock to be attractively priced relative to
earnings-per-share growth, industry peers and the market.
Our sell discipline is equally strict: We eliminate stocks if their
prices reach our pre-established targets or when it appears that earnings growth
may slow or fundamentals may deteriorate.
Lastly, we're bottom-up stock pickers. (See Terms To Know). We focus
first and foremost on seeking the best aggressive growth stocks. We don't
construct the portfolio to match any pre-set structure. The allocations in each
market-cap group and sector result from numerous individual stock-selection
decisions.
Q HOW DID THE MARKET'S PREFERENCE FOR LARGE-CAPS' LIQUIDITY AND PERCEIVED
STABILITY IMPACT PERFORMANCE?
A Well, despite our latitude to invest in companies of any size, our focus
on maximum long-term earnings growth has led us to favor small- and mid-cap
stocks over their larger counterparts. Currently, the fund holds roughly half of
its assets in small-cap stocks, a third in mid-cap issues, and the remainder in
large-cap companies. This commitment to smaller caps did impede the fund's
relative short-term performance.
Keep in mind that Kemper Aggressive Growth Fund is designed to pursue
maximum long-term capital appreciation. In exchange for greater return
potential, there's also additional risk. Despite the short-term market climate,
we believe that the best small-cap stocks can continue to post strong earnings
growth, while also offering more attractive valuations. At this time, therefore,
small-cap investing remains consistent with our investment objectives.
We emphasize, however, that we do not take the market's liquidity
concerns lightly. As we've noted, we need to find good stocks, not just good
companies. So, we carefully consider a stock's liquidity when making buy and
sell decisions. We steer away from stocks if there are indications that
liquidity issues could outweigh earnings-growth potential. For instance, at this
point, we're extremely cautious of micro-cap companies.
As we face the challenges of the current market, we're seeking stocks
that offer an appropriate balance of liquidity and reasonably valued growth.
These criteria make mid caps an area of growing interest.
Q GIVE US AN EXAMPLE OF YOUR STOCK-SELECTION PROCESS IN ACTION.
A Providian Financial typifies our selection criteria. Providian's
operations encompass a variety of financial services, most notably, credit-card
issuance. Our analysis indicates that a quality, specialty-financial company
such as Providian offers excellent potential for sustainable, above-average
earnings growth. Providian scores top marks for its clean balance sheet and
accelerating fundamentals. Given its earnings-growth potential, we believe that
this mid cap is very reasonably priced, while also offering us a nice level of
liquidity. So far, our conviction in this stock has been well rewarded.
Q YOU'VE NOTED THAT TECHNOLOGY STOCKS HAVE BEEN STRONG PERFORMERS. HAS
KEMPER AGGRESSIVE GROWTH FUND PARTICIPATED IN THIS RALLY?
A Yes, although our valuation focus limited the fund's participation
relative to some of its aggressive-growth peers. We did steer clear of untested,
pure-Internet stocks, such as search engines and firewall providers. As we've
noted, our investment discipline demands strong underlying company fundamentals,
demonstrated earnings-growth potential and reasonable stock prices. Quite
simply, many of the market's Internet favorites -- the ".com" group -- fall
short on one or more counts. Over the long term, however, we believe that our
strict discipline is more appropriate.
Nonetheless, the fund did benefit from a large technology stake. Based on
their strong growth potential and attractive valuations, we've built positions
in component-oriented stocks, including Novellus Systems. This mid-cap company
offers an excellent balance sheet, superior products and talented management.
Novellus has established itself as a dominant leader within a niche corner of
semiconductor manufacturing: The firm makes equipment used to deposit chemical
and vapor films on circuits. The stock fulfilled our earnings-growth
expectations, and contributed excellent performance.
6
<PAGE> 7
PERFORMANCE UPDATE
Q COULD YOU GIVE US SOME EXAMPLES OF YOUR SELL DISCIPLINE?
A Certainly. After earning good gains from Concord Communications, we sold
it toward the end of the semiannual period. Concord Communications offers
exposure to networking, a particularly appealing area of technology. Concord
Communications designs network-management software. In order to be competitive
in the Internet age, companies are increasing the demands that they place on
their networks. Concord Communications' offers companies innovative software
solutions for managing their network traffic and increasing network efficiency.
At the start of the semiannual period, this software firm was one of the fund's
largest holdings, but as its price reached our target, we reduced and then
eliminated our position. These decisions require discipline, but in the case of
our sale of Concord Communications, discipline paid off. The sale translated
into a nice gain for shareholders.
There were also instances when we sold stocks as the result of
disappointing earnings and declining fundamentals. Ventana Medical Systems is
one notable instance. At the beginning of the semiannual period, this small cap
was a large position in the fund. Ventana, a developer and manufacturer of
cancer-detecting tests, originally seemed to offer strong potential growth and
sound fundamentals. However, we became concerned about deteriorating earnings
growth. Steepening operating expenses, among other factors, caused us to remove
the stock from the portfolio. Although we believe Ventana offers excellent
products, our investment discipline demands equally good execution of business
plans.
Cotelligent Group was another holding that did not work out as well as we
had anticipated. The stock's price decline highlights the inhospitable climate
for small-cap, relatively illiquid issues. Cotelligent, a computer consulting
and programming firm, didn't post disappointing earnings, nor did it fail to
execute its business strategy. Instead, the stock suffered as a result of
investor emotion. Initially, expectations for the stock were over-inflated. And,
as is often the case, sentiment changes quickly. When the stock began to slide,
it slid quickly. We decided that Cotelligent's low level of liquidity wasn't
appropriate for the fund. In hindsight, we wish we had made this decision
sooner.
Q HOW ARE YOU POSITIONING THE PORTFOLIO GOING FORWARD? IN WHAT SECTORS HAVE
YOU BEEN FINDING PARTICULARLY ATTRACTIVE OPPORTUNITIES?
A In addition to technology stocks, our investment discipline has led us to
many attractive consumer-nondurable stocks. (See Terms To Know.) A
low-inflation, high-employment climate has fostered high consumer confidence,
which in turn has benefited quality retailers, such as Dayton Hudson. Service
stocks also enjoy a high level of representation in the portfolio. Our analysis
indicates that quality service companies such as Concord EFS should continue to
have good potential for sustainable, predictable earnings. We're also interested
in broadcasters, such as Univision (a provider of Spanish-language television),
Heftel Broadcasting (Spanish-language radio) and CBS.
Medical supply and device companies remain an important theme within the
portfolio. Demographic trends support stable and growing demand for their
products, which bodes well for consistent, above-average earnings growth.
Recently, reimbursement concerns from Washington caused many health care stocks
to suffer. We believe that for many device and supply companies the negative
sentiment is unfounded. Consistent with this longer-term view, we've maintained
and purchased positions in companies such as Hanger Orthopedic and Medquist. We
also hold Medtronic, a large-cap developer and manufacturer of pacemakers, heart
valves and other medical devices. The medical supplies and device industry is
going through a period of consolidation, and Medtronic has demonstrated an
ability to be a driving force.
Q GIVEN THE CHALLENGES OF THE RECENT MARKET, WHAT'S YOUR OUTLOOK FOR STOCK
INVESTING?
A Although we expect short-term volatility to remain a dominant force in
the market, our long-term outlook is optimistic. We encourage shareholders to
remember that when it comes to stocks, short-term ups and downs are par for the
course. In fact, we believe that short-term market volatility can open the door
to long-term growth opportunities. We are dedicated to pursuing these
opportunities on behalf of the fund's shareholders, through a disciplined,
valuation-conscious investment strategy.
7
<PAGE> 8
INDUSTRY SECTORS
A SIX-MONTH COMPARISON
DATA SHOWS THE PERCENTAGE OF THE COMMON STOCKS IN THE PORTFOLIO THAT EACH SECTOR
REPRESENTED ON MARCH 31, 1999, AND ON SEPTEMBER 30,1998.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER AGGRESSIVE GROWTH KEMPER AGGRESSIVE GROWTH
FUND ON 3/31/99 FUND ON 9/30/98
<S> <C> <C>
Consumer non-durables 33.50 30.60
Technology 26.30 18.20
Health care 14.90 27.60
Telecommunications 11.80 10.00
Capital goods 4.40 4.80
Finance 3.60 4.40
Utilities 3.40 0.00
Consumer durables 2.10 1.50
Transportation 0.00 1.30
Energy 0.00 1.60
</TABLE>
A COMPARISON WITH THE RUSSELL 3000 INDEX*
DATA SHOWS THE PERCENTAGE OF THE COMMON STOCKS IN THE PORTFOLIO THAT EACH SECTOR
OF KEMPER AGGRESSIVE GROWTH FUND REPRESENTED ON MARCH 31, 1999, COMPARED TO THE
INDUSTRY SECTORS THAT MAKE UP THE FUND'S BENCHMARK, THE RUSSELL 3000 INDEX.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER AGGRESSSIVE GROWTH
FUND ON 3/31/99 RUSSELL 3000 INDEX ON 3/31/99
<S> <C> <C>
Consumer non-durables 33.50 19.90
Technology 26.30 20.40
Health care 14.90 12.20
Telecommunications 11.80 0.00
Capital goods 4.40 7.60
Finance 3.60 18.00
Utilities 3.40 10.30
Consumer durables 2.10 2.10
Basic industries 0.00 3.20
Transportation 0.00 1.10
Energy 0.00 5.20
</TABLE>
* The Russell 3000 Index is an unmanaged index comprised of 3000 of the largest
capitalized U.S. domiciled companies whose common stocks trade in the U.S.
This portfolio of securities represents approximately 98 percent of the
investable U.S. equity market.
8
<PAGE> 9
LARGEST HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS*
Representing 22.2 percent of the fund's common stock holdings on March 31, 1999
<TABLE>
<CAPTION>
HOLDINGS PERCENT
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------
1. MCI WORLDCOM Provides intrastate, interstate 2.9%
and international long-distance
voice and data services.
- --------------------------------------------------------------------------------------
2. BIOGEN Engaged in the development of 2.6%
genetically engineered
pharmaceuticals.
- --------------------------------------------------------------------------------------
3. DYCOM INDUSTRIES Provides fiber optic and copper 2.2%
transmission, installation,
telephone engineering and
electrical services to telecom-
munications and electric utility
companies.
- --------------------------------------------------------------------------------------
4. PROVIDIAN FINANCIAL Financial services provider with 2.2%
operations in credit card
issuance, home loans, revolving
credit lines and fee-based
financial services.
- --------------------------------------------------------------------------------------
5. LEXMARK INTERNATIONAL Global developer, manufacturer and 2.2%
supplier of computer printers and
printer-products.
- --------------------------------------------------------------------------------------
6. CINAR Develops, produces and distributes 2.1%
family oriented programming and
educational services.
- --------------------------------------------------------------------------------------
7. JABIL CIRCUIT Contract manufacturer of electric 2.0%
circuit board assemblies.
- --------------------------------------------------------------------------------------
8. DAYTON HUDSON Operates retail stores throughout 2.0%
the United States. Subsidiaries
include Dayton's, Hudson's,
Marshall Field's, Target, and
Mervyn's.
- --------------------------------------------------------------------------------------
9. LINEAR TECHNOLOGY Designs, manufactures and markets 2.0%
integrated circuits for a variety
of products, including
telecommunications equipment,
computers, satellites and
automotive systems.
- --------------------------------------------------------------------------------------
10. UNIVISION COMMUNICATIONS A leading provider of 2.0%
Spanish-language broadcasting.
Additional operations include
television production.
- --------------------------------------------------------------------------------------
</TABLE>
*Portfolio holdings and composition are subject to change.
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
KEMPER AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS AT MARCH 31, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CAPITAL GOODS--3.9%
Applied Power, Inc. 15,100 $ 411
(a) Casella Waste Systems, Inc. 38,800 875
(a) Jabil Circuit 28,000 1,134
----------------------------------------------------------------------------
2,420
- ----------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--24.3%
(a) AnnTaylor Stores Corp. 20,300 897
(a) CSK Auto Corp. 25,000 749
(a) Cinar Corp. 50,800 1,169
(a) Consolidated Graphics, Inc. 8,700 502
(a) Education Management Corp. 20,600 633
(a) Foodmaker 23,700 604
Harley-Davidson, Inc. 15,300 880
(a) Tommy Hilfiger Corp. 7,700 530
(a) ITT Educational Services, Inc. 14,200 533
(a) Kohl's Corp. 8,000 567
(a) Linens 'n Things, Inc. 17,300 785
(a) Market Facts 24,700 544
(a) Men's Wearhouse 33,300 962
(a) Office Depot 28,600 1,053
(a) O'Reilly Automotive 19,400 868
Pittway Corp. 29,600 784
(a) Select Appointments Hldgs. ADR 34,100 910
(a) Station Casinos, Inc. 44,800 571
(a) Sylvan Learning Systems, Inc. 18,700 512
(a) Zale Corp. 24,900 851
----------------------------------------------------------------------------
14,904
- ----------------------------------------------------------------------------------------------------------------------
CONSUMER DURABLES--1.9%
(a) Gilat Satellite Networks Ltd. 11,200 672
(a) Tower Automotive, Inc. 25,600 477
----------------------------------------------------------------------------
1,149
- ----------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--6.1%
(a) Concord EFS 17,000 469
Dayton Hudson Corp. 17,000 1,133
(a) Dollar Tree Stores, Inc. 18,500 572
Ecolab, Inc. 17,400 618
Regis Corp. 36,600 974
----------------------------------------------------------------------------
3,766
- ----------------------------------------------------------------------------------------------------------------------
FINANCE--3.2%
Protective Life Corp. 20,000 758
Providian Financial Corp. 11,250 1,238
----------------------------------------------------------------------------
1,996
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HEALTH CARE--13.5%
(a) AmeriSource Health Corp 28,000 $ 957
(a) Biogen, Inc. 12,500 1,429
(a) Hanger Orthopedic Group, Inc. 39,400 532
(a) Medicis Pharmaceutical Corp. 20,000 600
(a) Medquist, Inc. 17,100 513
Medtronic, Inc. 8,257 592
(a) Osteotech 23,500 808
(a) ResMed, Inc. 21,600 610
(a) Serologicals Corp. 45,850 622
(a) VISX, Inc. 9,000 968
(a) Xomed Surgical Products, Inc. 16,650 654
----------------------------------------------------------------------------
8,285
- ----------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--23.9%
(a) Applied Micro Circuits Corp. 12,500 534
(a) Cisco Systems 8,150 893
(a) Comverse Technology Inc. 11,500 978
(a) Intuit 8,400 855
(a) KLA Tencor Corp. 15,200 738
(a) Lexmark International Inc. 11,000 1,229
Linear Technology Corp. 22,000 1,128
(a) Mercury Computer Systems, Inc. 40,000 720
(a) Mercury Interactive Corp. 24,200 862
(a) Microsoft Corp. 10,600 950
(a) Novell 39,900 1,005
(a) Novellus Systems 18,300 1,009
(a) SDL, Inc. 7,000 635
(a) Solectron Corp. 14,400 699
(a) SunGard Data Systems 20,700 828
(a) Sykes Enterprises, Inc. 27,400 885
(a) Veritas Software 6,800 549
(a) Ziff-Davis, Inc. 4,600 166
----------------------------------------------------------------------------
14,663
- ----------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--10.8%
(a) CBS Corp. 23,600 966
(a) CSG Systems International, Inc. 15,900 627
(a) Heftel Broadcasting Corp. "A" 13,900 603
(a) MCI WorldCom, Inc. 18,500 1,638
(a) Outdoor Systems, Inc. 26,100 783
(a) Pinnacle Holdings, Inc. 58,100 879
(a) Univision Communication, Inc. 21,900 1,095
----------------------------------------------------------------------------
6,591
- ----------------------------------------------------------------------------------------------------------------------
UTILITIES--3.1%
(a) Dycom Industries, Inc. 28,650 1,246
(a) Metzler Group, Inc. 21,100 622
----------------------------------------------------------------------------
1,908
----------------------------------------------------------------------------
TOTAL COMMON STOCKS--90.7%
(Cost: $44,510) 55,682
----------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(B)REPURCHASE AGREEMENT--.3%
State Street Bank and Trust Co., dated
3/31/99, 4.00%, due 4/1/99
(Cost: $207) $ 207 $ 207
----------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
MONEY MARKET
INSTRUMENTS--9.0%
Yield-4.80% to 5.03%
Due-April 1999
Ford Motor Credit Co. 1,500 1,499
Merrill Lynch & Co. 1,000 999
Other 3,000 2,995
----------------------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--9.0%
(Cost: $5,493) 5,493
----------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $50,210) $61,382
----------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities. The collateral is monitored daily by the fund
so that its market value exceeds the carrying value of the repurchase
agreement.
Based on the cost of investments of $50,210,000 for federal income tax purposes
at March 31, 1999, the gross unrealized appreciation was $12,427,000, the gross
unrealized depreciation was $1,255,000 and the net unrealized appreciation on
investments was $11,172,000.
See accompanying Notes to Financial Statements.
12
<PAGE> 13
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1999 (unaudited)
(IN THOUSANDS)
<TABLE>
<S> <C>
- -----------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------
Investments, at value
(Cost: $50,210) $61,382
- -----------------------------------------------------------------------
Receivable for:
Investments sold 1,396
- -----------------------------------------------------------------------
Fund shares sold 19
- -----------------------------------------------------------------------
Reimbursement from Adviser 34
- -----------------------------------------------------------------------
Dividends 3
- -----------------------------------------------------------------------
TOTAL ASSETS 62,834
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- -----------------------------------------------------------------------
Payable for:
Investments purchased 4,356
- -----------------------------------------------------------------------
Fund shares redeemed 24
- -----------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 41
- -----------------------------------------------------------------------
Trustees' fees 1
- -----------------------------------------------------------------------
Total liabilities 4,422
- -----------------------------------------------------------------------
NET ASSETS $58,412
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -----------------------------------------------------------------------
Paid-in capital $49,942
- -----------------------------------------------------------------------
Accumulated net realized loss on investments (2,702)
- -----------------------------------------------------------------------
Net unrealized appreciation on investments 11,172
- -----------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $58,412
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
THE PRICING OF SHARES
- -----------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share ($31,575 /
2,264 shares outstanding) $13.94
- -----------------------------------------------------------------------
Maximum offering price per share (net asset value, plus
6.10% of net asset value or 5.75% of offering price) $14.79
- -----------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge) per share ($21,890 /
1,599 shares outstanding) $13.69
- -----------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge) per share ($4,947 / 361
shares outstanding) $13.71
- -----------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
13
<PAGE> 14
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Six months ended March 31, 1999 (unaudited)
(IN THOUSANDS)
<TABLE>
<S> <C>
- -----------------------------------------------------------------------
INVESTMENT INCOME
- -----------------------------------------------------------------------
Interest $ 93
- -----------------------------------------------------------------------
Dividends 31
- -----------------------------------------------------------------------
Total investment income 124
- -----------------------------------------------------------------------
Expenses:
Management fee 79
- -----------------------------------------------------------------------
Distribution services fee 84
- -----------------------------------------------------------------------
Administrative services fee 63
- -----------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 219
- -----------------------------------------------------------------------
Professional fees 7
- -----------------------------------------------------------------------
Shareholder reports 12
- -----------------------------------------------------------------------
Trustees' fees and other 11
- -----------------------------------------------------------------------
Total expenses before expense waiver 475
- -----------------------------------------------------------------------
Less expenses waived by investment manager 97
- -----------------------------------------------------------------------
Total expenses after expense waiver 378
- -----------------------------------------------------------------------
NET INVESTMENT LOSS (254)
- -----------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on sales of investments 835
- -----------------------------------------------------------------------
Change in net unrealized appreciation on investments 10,763
- -----------------------------------------------------------------------
Net gain on investments 11,598
- -----------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $11,344
- -----------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1999 SEPTEMBER 30,
(UNAUDITED) 1998
- ------------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment loss $ (254) (207)
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) 835 (3,498)
- ------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation 10,763 (1,141)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 11,344 (4,846)
- ------------------------------------------------------------------------------------------------------
Distribution from net realized gain on investments -- (722)
- ------------------------------------------------------------------------------------------------------
Net increase from capital share transactions 9,736 31,291
- ------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 21,080 25,723
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------
Beginning of period 37,332 11,609
- ------------------------------------------------------------------------------------------------------
END OF PERIOD $58,412 37,332
- ------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1
DESCRIPTION OF THE
FUND Kemper Aggressive Growth Fund is an open-end
management investment company organized as a
business trust under the laws of Massachusetts. The
fund currently offers four classes of shares. Class
A shares are sold to investors subject to an
initial sales charge. Class B shares are sold
without an initial sales charge but are subject to
higher ongoing expenses than Class A shares and a
contingent deferred sales charge payable upon
certain redemptions. Class B shares automatically
convert to Class A shares six years after issuance.
Class C shares are sold without an initial sales
charge but are subject to higher ongoing expenses
than Class A shares and a contingent deferred sales
charge payable upon certain redemptions within one
year of purchase. Class C shares do not convert
into another class. Class I shares (none sold
through March 31, 1999) are offered 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 SECURITY VALUATION. Investments are stated at
value. Portfolio securities which are traded on
U.S. or foreign stock exchanges are valued at the
most recent sale price reported on the exchange on
which the security is traded most extensively. If
no sale occurred, the security is then valued at
the calculated mean between the most recent bid and
asked quotations. If there are no such bid and
asked quotations, the most recent bid quotation is
used. Securities quoted on the Nasdaq Stock Market
(Nasdaq), for which there have been sales, are
valued at the most recent sale price reported. If
there are no such sales, the value is the most
recent bid quotation. Securities which are not
quoted on the Nasdaq but are traded in another
over-the-counter market are valued at the most
recent sale price on such market. If no sale
occurred, the security is then valued at the
calculated mean between the most recent bid and
asked quotations. If there are no such bid and
asked quotations, the most recent bid quotation
shall be used. Money market instruments purchased
with an original maturity of sixty days or less are
valued at amortized cost. All other securities are
valued at their fair market value as determined in
good faith by the Valuation Committee of the Board
of Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on the
trade date. Dividend income is recorded on the ex-
dividend date, and interest income is recorded on
the accrual basis and includes discount
amortization on money market instruments. Realized
gains and losses from investment transactions are
reported on an identified cost basis.
FUND SHARE VALUATION. Fund shares are sold and
redeemed on a continuous basis at net asset value
(plus an initial sales charge on most sales of
Class A shares). Proceeds payable on redemption of
Class B and Class C shares will be reduced by the
amount of any applicable contingent 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 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.
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
FEDERAL INCOME TAXES. The fund's policy is to
comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to
regulated investment companies, and to distribute
all of its taxable income to its shareholders.
Accordingly, the fund paid no federal income taxes
and no federal income tax provision was required.
From November 1, 1997 through September 30, 1998,
the fund incurred approximately $3,544,000 of net
realized capital losses. As permitted by tax
regulations, the fund intends to elect to defer
these losses and treat them as arising in the
fiscal year ended September 30, 1999.
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.
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The fund has a management
agreement with Scudder Kemper Investments, Inc.
(Scudder Kemper) and pays a monthly investment
management fee of 1/12 of the base annual rate of
.65% of average daily net assets which is then
adjusted upward or downward by a maximum of .20%
based upon the fund's performance as compared to
the performance of the Standard & Poor's 500 Stock
Index (thus the fee on an annual basis can range
from .45% to .85% of average daily net assets).
During the six months ended March 31, 1999, the
fund incurred management fees as follows:
<TABLE>
<S> <C>
Base fee $149,000
Performance adjustment (70,000)
--------
Total fees $ 79,000
========
</TABLE>
Scudder Kemper has agreed to waive certain
operating expenses of the fund. Under this
agreement, Scudder Kemper waived and absorbed
operating expenses of $97,000 for the six months
ended March 31, 1999.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
The fund has an underwriting and distribution
services agreement with Kemper Distributors, Inc.
(KDI). Underwriting commissions retained by KDI in
connection with the distribution of Class A shares
for the six months ended March 31, 1999 are
$15,000.
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 separate Rule 12b-1 plans for
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 and CDSC received by KDI for
the six months ended March 31, 1999 are $91,000
after a distribution services fee waiver by Scudder
Kemper.
ADMINISTRATIVE SERVICES AGREEMENT. The fund has an
administrative services agreement with KDI. For
providing information and administrative services
to shareholders, the fund pays KDI a fee at an
annual rate of up to .25% of
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
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. The fund incurred no administrative
services fees for the six months ended March 31,
1999, after an expense absorption by Scudder
Kemper.
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 $211,000
for the six months ended March 31, 1999.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the fund are also officers or directors of
Scudder Kemper. During the six months ended March
31, 1999 the fund made no payments to its officers
and incurred trustees fees of $4,000 to independent
trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the six months ended March 31, 1999, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $50,626
Proceeds from sales 40,106
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the fund (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1999 SEPTEMBER 30, 1998
-------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 687 $8,518 1,734 $21,823
------------------------------------------------------------------------------
Class B 547 6,657 1,096 13,857
------------------------------------------------------------------------------
Class C 166 2,086 239 3,009
------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 162 2,183 35 399
------------------------------------------------------------------------------
Class B 100 1,320 22 251
------------------------------------------------------------------------------
Class C 11 154 5 59
------------------------------------------------------------------------------
SHARES REDEEMED
Class A (527) (6,895) (373) (4,746)
------------------------------------------------------------------------------
Class B (275) (3,429) (172) (2,248)
------------------------------------------------------------------------------
Class C (67) (858) (88) (1,113)
------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 26 340 21 279
------------------------------------------------------------------------------
Class B (27) (340) (22) (279)
------------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL
SHARE TRANSACTIONS $9,736 $31,291
------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 18
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------------------------------
CLASS A
----------------------------------------------------------------
SIX MONTHS YEAR DECEMBER 31, 1996
ENDED ENDED TO
MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.98 12.60 9.50
- ----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.07) (.02) (.02)
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 3.03 (1.05) 3.12
- ----------------------------------------------------------------------------------------------------------
Total from investment operations 2.96 (1.07) 3.10
- ----------------------------------------------------------------------------------------------------------
Less distribution from net realized gain -- .55 --
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.94 10.98 12.60
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 26.96% (8.67) 32.63
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ----------------------------------------------------------------------------------------------------------
Expenses 1.10% 1.25 1.49
- ----------------------------------------------------------------------------------------------------------
Net investment loss (.61)% (.42) (.35)
- ----------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ----------------------------------------------------------------------------------------------------------
Expenses 1.35% 1.46 --
- ----------------------------------------------------------------------------------------------------------
Net investment loss (.86)% (.63) --
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------
CLASS B
----------------------------------------------------------------
SIX MONTHS YEAR DECEMBER 31, 1996
ENDED ENDED TO
MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $10.83 12.52 9.50
- ----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.12) (.04) (.08)
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 2.98 (1.10) 3.10
- ----------------------------------------------------------------------------------------------------------
Total from investment operations 2.86 (1.14) 3.02
- ----------------------------------------------------------------------------------------------------------
Less distribution from net realized gain -- .55 --
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.69 10.83 12.52
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 26.41% (9.30) 31.79
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ----------------------------------------------------------------------------------------------------------
Expenses 1.97% 2.12 2.41
- ----------------------------------------------------------------------------------------------------------
Net investment loss (1.48)% (1.29) (1.27)
- ----------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ----------------------------------------------------------------------------------------------------------
Expenses 2.49% 2.81 --
- ----------------------------------------------------------------------------------------------------------
Net investment loss (2.00)% (1.98) --
- ----------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 19
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-------------------------------------------------
CLASS C
-------------------------------------------------
SIX MONTHS YEAR DECEMBER 31, 1996
ENDED ENDED TO
MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.84 12.53 9.50
- --------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.12) (.04) (.07)
- --------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 2.99 (1.10) 3.10
- --------------------------------------------------------------------------------------------
Total from investment operations 2.87 (1.14) 3.03
- --------------------------------------------------------------------------------------------
Less distribution from net realized gain -- .55 --
- --------------------------------------------------------------------------------------------
Net asset value, end of period $13.71 10.84 12.53
- --------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 26.48% (9.29) 31.89
- --------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------------------
Expenses 2.03% 2.10 2.19
- --------------------------------------------------------------------------------------------
Net investment loss (1.54)% (1.27) (1.05)
- --------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------------------
Expenses 2.77% 2.76 --
- --------------------------------------------------------------------------------------------
Net investment loss (2.28)% (1.93) --
- --------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- --------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS YEAR DECEMBER 31, 1996
ENDED ENDED TO
MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
Net assets at end of period (in
thousands) $58,412 37,332 11,609
- --------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 173% 190 364
- --------------------------------------------------------------------------------------------
</TABLE>
NOTES: Total return does not reflect the effect of any sales charges. Per share
data for the period ended March 31, 1999 was determined based on average shares
outstanding. Data for the period ended March 31, 1999 is unaudited. Scudder
Kemper agreed to temporarily waive and absorb certain operating expenses of the
fund during the periods ended March 31, 1999 and September 30, 1998. The Other
Ratios to Average Net Assets are computed without this waiver.
19
<PAGE> 20
SHAREHOLDERS' MEETING
SPECIAL SHAREHOLDERS' MEETING
On December 17, 1998, a special shareholders' meeting was held and adjourned to
January 15,1999. Kemper Aggressive Growth Fund shareholders were asked to vote
on two separate issues: approval of the new Investment Management Agreement
between the fund and Scudder Kemper Investments, Inc., and to modify or
eliminate certain policies and to eliminate the shareholder approval
requirements as to certain other matters. The following are the results.
1) Approval of the new Investment Management Agreement between the fund and
Scudder Kemper Investments, Inc. This item was approved.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
1,847,287 29,533 49,996
</TABLE>
2) To modify or eliminate certain policies and to eliminate the shareholder
approval requirements as to certain other matters. These items were approved.
Investment objectives
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
1,577,051 97,970 175,809
</TABLE>
Investment policies
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
1,576,966 98,386 175,477
</TABLE>
Diversification
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
1,578,017 97,336 175,477
</TABLE>
Borrowing
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
1,577,575 97,983 175,271
</TABLE>
Senior securities
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
1,578,782 96,571 175,477
</TABLE>
Concentration
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
1,578,279 97,074 175,477
</TABLE>
Underwriting of securities
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
1,578,563 96,789 175,477
</TABLE>
Investment in real estate
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
1,578,782 96,571 175,477
</TABLE>
Purchase of commodities
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
1,578,587 96,766 175,477
</TABLE>
Lending
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
1,578,534 96,818 175,477
</TABLE>
Margin purchases and short sales
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
1,575,786 99,566 175,477
</TABLE>
Pledging of assets
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
1,573,645 101,708 175,477
</TABLE>
Purchases of securities
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
1,575,672 99,680 175,477
</TABLE>
20
<PAGE> 21
NOTES
21
<PAGE> 22
NOTES
22
<PAGE> 23
NOTES
23
<PAGE> 24
TRUSTEES&OFFICERS
TRUSTEES OFFICERS
DANIEL PIERCE MARK S. CASADY LINDA J. WONDRACK
Chairman and Trustee President Vice President
LEWIS A. BURNHAM PHILIP J. COLLORA MAUREEN E. KANE
Trustee Vice President and Assistant Secretary
Secretary
DONALD L. DUNAWAY CAROLINE PEARSON
Trustee JOHN R. HEBBLE Assistant Secretary
Treasurer
ROBERT B. HOFFMAN ELIZABETH C. WERTH
Trustee ANN M. MCCREARY Assistant Secretary
Vice President
DONALD R. JONES BRENDA LYONS
Trustee KATHRYN L. QUIRK Assistant Treasurer
Vice President
THOMAS W. LITTAUER
Trustee and Vice President CORNELIA SMALL
Vice President
SHIRLEY D. PETERSON
Trustee KURT R. STALZER
Vice President
WILLIAM P. SOMMERS
Trustee
- -------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- ------------------------------------------------------------------------------
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 419557
Kansas City, MO 64141
- -------------------------------------------------------------------------------
CUSTODIAN AND STATE STREET BANK AND TRUST COMPANY
TRANSFER AGENT 225 Franklin Street
Boston, MA 02109
INVESTORS FIDUCIARY TRUST COMPANY
801 Pennsylvania Avenue
Kansas City, MO 64105
- -------------------------------------------------------------------------------
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606
www.kemper.com
KEMPER FUNDS LOGO
Long-term investing in a short-term world(SM)
Printed on recycled paper in the U.S.A.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Equity Funds/Growth Style prospectus.
KAGGF - 3 (5/24/99) 1074000
