<PAGE> 1
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED MARCH 31, 2000
[MORNINGSTAR RATINGS LOGO]
Seeking capital appreciation through the
use of aggressive investment techniques
KEMPER AGGRESSIVE
GROWTH FUND
"... The fund's performance was due to its significant exposure to technology
stocks. Late in the period, we fared well because of our relatively high cash
reserve which was the result of defensive moves we made mid way through the
period. When the market imploded in March, our cash position helped ease the
impact. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
8
INDUSTRY SECTORS
9
INDIVIDUAL HOLDINGS
10
PORTFOLIO OF INVESTMENTS
14
FINANCIAL STATEMENTS
17
FINANCIAL HIGHLIGHTS
19
NOTES TO FINANCIAL STATEMENTS
AT A GLANCE
AT A GLANCE
KEMPER AGGRESSIVE GROWTH FUND TOTAL RETURNS
FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2000 (UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER AGGRESSIVE GROWTH KEMPER AGGRESSIVE GROWTH
KEMPER AGGRESSIVE GROWTH FUND CLASS A FUND CLASS B FUND CLASS C
- ------------------------------------- ------------------------ ------------------------
<S> <C> <C>
58.3 57.44 57.37
</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.
NET ASSET VALUE
<TABLE>
<CAPTION>
AS OF AS OF
3/31/00 9/30/99
.........................................................
<S> <C> <C> <C> <C>
KEMPER AGGRESSIVE GROWTH FUND
CLASS A $24.41 $15.42
.........................................................
KEMPER AGGRESSIVE GROWTH FUND
CLASS B $23.72 $15.72
.........................................................
KEMPER AGGRESSIVE GROWTH FUND
CLASS C $23.70 $15.06
.........................................................
</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
<TABLE>
<S> <C>
[MORNINGSTAR EQUITY STYLE Source: Morningstar, Inc. Chicago, IL. (312)
BOX] 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.
</TABLE>
BALANCE SHEET A condensed financial statement showing what a company owns, what
it owes and the ownership interest in the company of its stockholders, at a
certain time.
CYCLICAL STOCK A stock that carries a higher degree of economic sensitivity. In
accelerating economies, cyclical stocks tend to rise quickly; in decelerating
economies, they tend to decline quickly. Cyclical stocks include those of
companies in the industrial machinery, paper and forestry, automobile and
construction sectors.
MARKET CAPITALIZATION A measure of the size of a publicly traded company, as
determined by multiplying the current share price by the number of shares
outstanding.
<PAGE> 3
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 $290 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.
ECONOMIC OVERVIEW
DEAR KEMPER FUNDS SHAREHOLDER,
As spring moves along towards summer, there isn't much to complain about. For
all the yammering about the "new" economy, the old economy is doing pretty well.
Consumers may hanker for a new GPS handset or a Palm Pilot, but they lust after
a suburban mansion with a garage big enough to hold their luxury car and SUV --
and state and local governments are laying old-fashioned asphalt almost as fast
as businesses are building the information superhighway. Satisfying both old and
new desires got the economy off to a fast start in the new century -- GDP growth
rose at an annual rate of more than 5 percent in the first quarter. Even with a
modest slowdown possible in the second half, growth for the year 2000 is likely
to be close to 5 percent.
So everyone is happy, right? Well, almost everyone. Consumers seldom have felt
so confident; businesspeople seldom have behaved so expansively. But there's
still one grump: Federal Reserve Board Chairman Alan Greenspan, who's become
increasingly worried that rapid growth will bring on inflation.
Despite Greenspan's attempt to slow spending by raising interest rates,
consumers are still splurging, and they show no signs of stopping. We know this
because shoppers are buying the big-ticket items they usually purchase early in
a cycle -- items such as personal computers, mobile phones, jewelry, fancy
kitchen appliances, exercise equipment and big boats.
Why are consumers still buying despite Greenspan's attempts to slow their
splurging? There are three answers: deflation, wealth and easy credit.
Falling prices have made big-ticket items almost irresistible. Since 1997,
prices of kitchen appliances have fallen 4.5 percent, TVs and VCRs 16 percent
and sporting equipment 6.5 percent. Even auto showrooms no longer produce
sticker shock, and drivers have responded with gusto, buying a record 16.9
million cars and light trucks in 1999. 2000 is likely to be the first year in
which automotive sales top 17 million.
Some of that spending has been made possible by stock market gains: Wall
Street has handed out windfalls to almost anyone holding equities in the past
few years. But consumers who don't own stocks are also spending, thanks to a
decade of debt. Young, poor or new to America? In the 1990s, it didn't matter;
lenders still loved you. While high-income families have been borrowing less,
those lower on the income scale have been borrowing more.
But it's not just consumers that Greenspan is concerned about; businesses are
splurging as well. During 1999, businesses increased spending on computers and
peripherals by 35 percent and spending on communications equipment by 25 percent
(both after adjusting for price declines). Far from slowing down this year, we
expect investment in these two categories to accelerate -- to 40 percent growth
for computers and 30 percent growth for communications equipment.
And just like consumers, businesses are borrowing to buy. You may think that
with booming sales, entrepreneurs are cash-rich. But while 1999 saw economy-wide
earnings jump 10 percent and profits of Standard and Poor's (S&P) 500 companies
leap nearly 14 percent, internal cash covered less than 84 percent of capital
spending. With the exception of 1998, that's the lowest on record. Last year
alone, corporate debt shot up by more than 11 percent to $560 billion. New
economy companies are no exception; they have more debt than most people
realize, issuing more than half of all convertible bonds.
All this debt could cause problems. Although we've increased our 2001
inflation outlook to nearly 3 percent -- an entire percentage point higher than
our prediction three months ago -- we're not particularly worried about
inflation. It's the heavy borrowing we're concerned about. Debt continues to
exceed income growth, and when Greenspan succeeds in slowing the economy with
higher interest rates (which he will succeed in doing), all of the debt American
consumers and businesses are taking on could be tricky to handle. Private
financial obligations must be paid with personal income and corporate profits.
When the economy slows, personal income stagnates and corporate profits often
fall -- which makes it harder to pay off those debts. Consumers and businesses
may have to sell their assets to pay off the debt, and they may risk going into
default.
That being the case, a gradual economic slowdown may be in everyone's best
interest. But "gradual" is the key. Both the old and new economy have a lot
riding on the Fed's ability to rein in growth softly and smoothly, because
abrupt slowdowns encourage consumers and businesses to sell assets -- and
perhaps risk bankruptcy -- to pay off debt, as described above.
3
<PAGE> 4
ECONOMIC OVERVIEW
ECONOMIC GUIDEPOSTS
ECONOMIC ACTIVITY IS A KEY INFLUENCE ON INVESTMENT PERFORMANCE AND
SHAREHOLDER DECISION-MAKING. PERIODS OF RECESSION OR BOOM, INFLATION OR
DEFLATION, CREDIT EXPANSION OR CREDIT CRUNCH HAVE A SIGNIFICANT IMPACT ON
MUTUAL FUND PERFORMANCE.
THE FOLLOWING ARE SOME SIGNIFICANT ECONOMIC GUIDEPOSTS AND THEIR
INVESTMENT RATIONALE THAT MAY HELP YOUR INVESTMENT DECISION-MAKING. THE
10-YEAR TREASURY RATE AND THE PRIME RATE ARE PREVAILING INTEREST RATES.
THE OTHER DATA REPORT YEAR-TO-YEAR PERCENTAGE CHANGES.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (3/31/00) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 6.00 6.10 5.20 5.60
Prime rate (2) 9.00 8.25 7.75 8.50
Inflation rate (3)* 3.70 2.60 1.80 1.40
The U.S. dollar (4) 1.10 -0.90 -0.50 4.10
Capital goods orders (5)* 10.10 4.70 5.50 11.50
Industrial production (5)* 5.10 3.50 3.10 5.30
Employment growth (6) 2.30 2.20 2.30 2.60
</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 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 2/29/00.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
A gradual slowdown seems to be what the Fed is seeking, but for all of
Greenspan's semi-tough talk, some indicators suggest that monetary policy has
actually been lax. Broad money and credit creation have vastly exceeded economic
activity since 1995, and no central bank can allow that to continue indefinitely
without creating inflation. If we begin to see higher core inflation, the Fed
will have to deal with all that money it's created in a less gradualist
manner -- and that could get tricky. Financial turmoil accompanied each of the
Fed's last two efforts to slow the economy down. In 1994, there was a bond
market meltdown that resulted in a Mexican debt crisis. After a more timid Fed
tightening in 1997, crises in Asia were followed by problems with Russian debt,
Brazilian debt and a large American hedge fund. We don't think this is a
coincidence: The global debt market is so vast and interconnected that it's
highly vulnerable to a rise in the cost of its basic raw material -- short-term
funds.
Let's hope, then, that the Fed can slow the economy without upsetting the
financial applecart, because that could affect everyone. After all, the old
economy and the new economy are wedded in many ways. Much of the money that
flows to IPOs is available because mature industries have borrowed to carry out
mergers and share buybacks. Old economy companies are the biggest customers of
new economy products. And e-commerce sites are all about moving traditional
goods over old-fashioned highways. Despite a lot of talk about old and new,
we're all in this economy together.
Sincerely,
Scudder Kemper Investments Economics Group
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 THE ECONOMIC ADVISORS OF SCUDDER KEMPER
INVESTMENTS, INC. AS OF MAY 8, 2000, 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
[HODGES PHOTO]
SEWALL HODGES IS A SENIOR VICE PRESIDENT WITH SCUDDER KEMPER INVESTMENTS, INC.
HODGES BRINGS MORE THAN 20 YEARS OF INVESTMENT INDUSTRY EXPERIENCE TO THE FUND
AND SERVES AS THE LEADER OF THE COMPANY'S SMALL-CAP INVESTING TEAM. PORTFOLIO
MANAGER JESUS CABRERA JOINS HODGES IN MANAGING THE FUND. CABRERA HAS MORE THAN
10 YEARS OF INVESTMENT EXPERIENCE. THE TEAM IS SUPPORTED BY SCUDDER KEMPER
INVESTMENTS, INC.'S LARGE STAFF OF ANALYSTS, RESEARCHERS, TRADERS AND INVESTMENT
SPECIALISTS.
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, LEAD PORTFOLIO MANAGER SEWALL HODGES
DISCUSSES HOW KEMPER AGGRESSIVE GROWTH FUND
PERFORMED IN A CHALLENGING MARKET CLIMATE, HIS
INVESTMENT STRATEGY AND WHERE HE'S FINDING
ATTRACTIVELY VALUED GROWTH STOCKS.
Q HOW DID THE FUND PERFORM DURING THE SEMIANNUAL PERIOD?
A Fund performance was exceptional, despite sustained stock market
volatility. The fund gained 58.30 percent (Class A shares, unadjusted for any
sales changes) for the six months ended March 31, 2000. It soundly beat its
benchmark, the Standard & Poor's 500 stock index, which rose just 17.50 percent
for the period.
The fund's performance was due to its significant exposure to technology
stocks. Late in the period, we fared well because of our relatively high cash
reserve which was the result of defensive moves we made mid way through the
period. When the market imploded in March, our cash position helped ease the
impact.
Admittedly, however, our enthusiasm is tempered by the fund's performance as
compared with its peers. 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. Our bias toward these stocks
hindered the fund's relative short-term performance. While the fund performed
admirably against some of our most capable and aggressive competitors, overall
it trailed the small- and mid-cap peer group growth averages as measured by
Morningstar, Inc., which were 62.88 percent and 66.43 percent, respectively.
Our goal over the long term is to outperform both the fund's benchmark and its
peer-group averages. The market recently has presented challenges that were
difficult to overcome during the semiannual period. We remain committed to our
long-term investment strategy and believe wholeheartedly that a disciplined
"all-cap" approach will provide superior returns over time.
Q CAN YOU SUMMARIZE YOUR INVESTMENT DISCIPLINE?
A Our goal is to pursue long-term capital appreciation. As I mentioned, we
have the freedom to invest in companies of any size. And we're willing to
concentrate investments in market sectors with the strongest prospects for
growth. Our primary focus, however, is on bottom-up research into individual
stocks. At no time are we willing to compromise our criteria. Therefore,
portfolio allocations into market-cap segments and sectors result from our
individual stock selections.
We look for companies with strong fundamentals, clean balance sheets and
above-average earnings growth that we believe can be sustained for a period of
at least two years. We tend to favor niche players, companies that are leaders
in their industries or innovators on the cutting edge of emerging technologies.
Exemplary fundamentals are just part of what we seek. We won't invest in a
good company unless it's a good stock as well. In other words, we look for
stocks that are attractively priced relative to their earnings-per-share growth,
industry peers and the market in general.
5
<PAGE> 6
PERFORMANCE UPDATE
Conversely, we'll eliminate stocks when it appears that company fundamentals
are deteriorating or earnings growth is slowing. We also will sell stocks when
their prices reach our preestablished targets.
Q COULD YOU PROVIDE AN OVERVIEW OF THE MARKET CLIMATE AND THE CHALLENGES YOU
FACED IN MANAGING THE FUND?
A Throughout the six-month period, we continued to see dramatic, even
historic levels of market volatility. Despite the fluctuations, most market
indices ultimately climbed to new highs.
The period began in October with weak small-cap stock performance. Led by
high-flying technology stocks, the sector rebounded decisively in November and
December. After some profit taking in January, the market surged ahead once
again, and performance continued apace through most of the first quarter.
Historically wide valuations between so-called old-economy and new-economy
stocks, and fears of a continued rising-interest-rate environment caused a sharp
decline in much of the small-cap universe to end the period. Though it's
impossible to say for sure, the broad sell-off in technology stocks and the
strong performance of consumer staples and other mega-cap stocks in March
suggests that some investors are realizing the wisdom of time-tested valuation
methods and that larger-cap old-economy stocks may be returning to favor.
This type of market volatility usually works against small-cap stocks. In
addition, small-cap stocks tend to fall out of favor in rising-interest-rate
environments, such as we've seen. Investors worry that small companies will have
difficulty getting access to capital to finance growth. Concerns about liquidity
and perceived stability tend to drive investors into mid- and large-cap stocks.
Q HOW ARE YOU BALANCING LIQUIDITY CONCERNS WITH YOUR BIAS TOWARD SMALL- AND
MID-CAP STOCKS?
A Given the outlook for continued volatility and rising rates, we expect to
see the effects of ongoing liquidity concerns on small caps over the short term.
We believe that over the long term, however, small cap stocks will continue to
post strong earnings growth, while offering more attractive valuations. In terms
of purchases in the near future, we will steer clear of stocks whose
earnings-growth potential we believe will be hampered by liquidity problems. For
that reason, we remain extremely cautious of micro-cap stocks. We will continue
to look for stocks that offer a balance of liquidity and reasonably valued
growth. Based on these criteria, mid-cap stocks continue to be a growing area of
interest.
Q WHAT WORKED ESPECIALLY WELL FOR THE FUND?
A We sought to reduce our exposure to sectors that tend to underperform in
rising-interest-rate environments. As a rule, however, we do not allow
short-term macroeconomic fluctuations to drive our investment decisions.
Therefore, while some fund managers may eliminate sector positions entirely, we
examine each company's fundamental ability to sustain momentum. Bottom-up
analysis revealed slowing earnings growth in several financial and consumer
staples stocks. Reducing exposure to these groups really helped performance.
On the other hand, we added to positions in semiconductors, telecommunications
and software, creating an overweight in technology as compared with the
benchmark. Notably, Time Warner Telecommunication Services, now the fund's top
holding, did extraordinarily well. The stock, though currently off of its high,
has gained substantially since we bought it.
Other top holdings also did well, especially within the technology sector:
- Applied Micro Circuits, which manufactures specialized semiconductors
designed for wireless telecommunications, is exhibiting remarkable earnings
growth. Companies such as Nortel and Lucent Technologies look to Applied
Micro Circuits for fiber-optic solutions to help them increase speed and
bandwidth. It's a great example of the niche player we look for. Its
products meet needs that microprocessors can't.
- Vitesse Semiconductor, a producer of component technologies for a variety of
industries, currently has as close to a monopoly as we've seen since
Microsoft. Atmel Technology, a manufacturer of memory chips, saw a rapid and
dramatic increase in demand for its products.
For each of these companies, sales are robust, and because consumers are
always seeking better and faster ways to transmit and manage data, demand is
expected to surge.
Q WHAT DID NOT PERFORM AS YOU EXPECTED?
A We were disappointed by one of the fund's long-standing and largest
holdings: Concord EFS. The company handles electronic processing, providing
transaction management services and equipment
6
<PAGE> 7
PERFORMANCE UPDATE
for check and credit card authorization, among other things. Over the past 15
years, it has been among the most successful technology stocks. Its returns have
outpaced even Microsoft's at times, although it has been far more volatile.
On speculation that the elimination of fees for the use of automatic teller
machines would hurt revenues, the company's stock price was reduced nearly by
half. The stock has since recovered, although it is still markedly off its high.
That it held on to recovered ground during the collapse of the tech sector is a
testament to the strength of the stock's fundamentals. We expect it to make a
full recovery and to continue to grow earnings.
Q GIVEN THE CHALLENGES OF THE RECENT MARKET, WHAT IS YOUR OUTLOOK FOR EQUITY
INVESTING? HOW WILL YOU SEEK TO POSITION THE FUND?
A It's important to remember that no one can predict with certainty how the
markets or any sector will perform. However, we believe that slower economic
growth is likely and that investors will have to pay a premium for companies
with rapidly growing revenues.
We are looking to deploy some of the fund's cash reserves and will seek
opportunities in sectors that appear to have the best prospects for earnings
growth.
Currently, approximately half of the portfolio is in technology stocks. We
intend to stay heavily invested in tech, especially in semiconductor and
components stocks that show expanded growth potential based on our earnings and
revenue models. The recent rout in tech stocks has created a lot of buying
opportunities. We will continue to look for companies with the strongest
fundamentals and to take advantage of price weaknesses to snap up those that we
want over the long term but have been unable to buy due to high prices.
Consumer cyclicals and financials now account for only small portions of the
portfolio, creating little sensitivity to interest-rate fluctuations. Should it
look as if rates are beginning to come down, we may seek to increase exposure to
these sectors once again, based on the strength of individual names. But we do
not anticipate a reduction of interest rates in the near future.
Nor do we anticipate smooth sailing for investors. We expect volatility to
continue on some level, although it appears that the markets have begun to
stabilize somewhat. The major March downdraft was, in a sense, a "reality check"
for less experienced investors. But drops, even substantial ones, are part of
the ordinary investment process. Those who are prone to panic selling may seek
safer harbors now.
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, 2000, AND ON SEPTEMBER 30, 1999.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER AGGRESSIVE GROWTH KEMPER AGGRESSIVE GROWTH
FUND ON 3/31/00 FUND ON 9/30/99
------------------------ ------------------------
<S> <C> <C>
TECHNOLOGY 57.80 34.30
CONSUMER NON-DURABLES 13.50 30.80
COMMUNICATION SERVICES 12.00 12.20
HEALTH CARE 8.20 9.50
CAPITAL GOODS 6.90 9.80
ENERGY 1.60 0.80
FINANCE 0.00 2.60
UTILITIES 0.00 0.00
TRANSPORTATION 0.00 0.00
</TABLE>
A COMPARISON WITH THE S&P 500 INDEX*
DATA SHOWS THE PERCENTAGE OF THE COMMON STOCKS IN THE PORTFOLIO THAT EACH SECTOR
OF KEMPER AGGRESSIVE GROWTH FUND REPRESENTED ON MARCH 31, 2000, COMPARED TO THE
INDUSTRY SECTORS THAT MAKE UP THE FUND'S BENCHMARK, THE S&P 500 INDEX.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER AGGRESSIVE GROWTH
FUND ON 3/31/00 S&P 500 INDEX ON 3/31/00
------------------------ ------------------------
<S> <C> <C>
TECHNOLOGY 57.8 33.7
CONSUMER NON-DURABLES 13.5 18.6
COMMUNICATION SERVICES 12.0 7.5
HEALTH CARE 8.2 9.3
CAPITAL GOODS 6.9 7.9
ENERGY 1.6 5.4
FINANCE 0.0 12.1
BASIC INDUSTRIES 0.0 2.6
UTILITIES 0.0 2.5
TRANSPORTATION 0.0 0.6
</TABLE>
* The Standard & Poor's 500 stock index is an unmanaged index generally
representative of the U.S. stock market.
8
<PAGE> 9
INDIVIDUAL HOLDINGS
KEMPER AGGRESSIVE GROWTH FUND'S 10 LARGEST HOLDINGS*
Representing 21.2 percent of the fund's portfolio on March 31, 2000
<TABLE>
<CAPTION>
HOLDING DESCRIPTION PERCENT
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
1. TIME WARNER TELECOM Time Warner offers dedicated phone 2.8%
lines and access, switched phone
services, data and video
transmission, and Internet services,
including dedicated access.
- ---------------------------------------------------------------------------------------
2. APPLIED MICRO CIRCUITS Applied Micro Circuits Corporation 2.7%
(AMCC) makes high-performance,
high-bandwidth integrated circuits
used to control the high-speed flow
of transmissions through fiber-
optic telephone networks worldwide.
- ---------------------------------------------------------------------------------------
3. VITESSE SEMICONDUCTOR Produces component technologies for 2.2%
a variety of industries, including
computers, telecommunications,
defense and aerospace.
- ---------------------------------------------------------------------------------------
4. MICROSOFT Microsoft is the world's #1 software 2.2%
company. Products include the
Windows operating systems. It also
runs on-line services and e-commerce
portal MSN.
- ---------------------------------------------------------------------------------------
5. MERCURY INTERACTIVE Creates products to automate the 2.1%
testing and quality assurance of
client-server software.
- ---------------------------------------------------------------------------------------
6. SDL SDL mainly sells semiconductor laser 2.0%
pump modules to companies that
operate fiber-optic, cable
television, and satellite
communication networks.
- ---------------------------------------------------------------------------------------
7. ATMEL Atmel produces a variety of 2.0%
semiconductors. Atmel's chips are
used in devices such as digital
displays in auto dashboards, pagers,
digital recorders, computers,
telephones and smart cards.
- ---------------------------------------------------------------------------------------
8. MERCURY COMPUTER SYSTEMS Mercury Computer Systems, Inc., is 1.8%
producer of high-performance stream
computing systems. These embedded
computer systems transform streams
of data into visual information in
real time for analysis and
interpretation.
- ---------------------------------------------------------------------------------------
9. CONCORD EFS Provides transaction management 1.8%
services and equipment. Services
include check and credit card
authorization.
- ---------------------------------------------------------------------------------------
10. ANDRX Andrx develops timed-release generic 1.7%
versions of brand-name drugs.
- ---------------------------------------------------------------------------------------
</TABLE>
*The fund's holdings are subject to change.
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
KEMPER AGGRESSIVE GROWTH FUND
Portfolio of Investments at March 31, 2000 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM NOTES--16.0% AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
REPURCHASE AGREEMENTS--.4%
State Street Bank and Trust Company, dated
3/31/2000, 6.05%, to be repurchased at
$805,406 on 4/3/2000. (Cost $805,000) (a) $ 805,000 $ 805,000
----------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER--15.6%
Countrywide Home Loans, 6.05%, 4/24/2000 4,000,000 3,983,867
E.I. du Pont de Nemours & Co., 6.01%,
4/26/2000 6,000,000 5,975,000
IBM Credit Corp., 5.81%, 04/06/2000 8,000,000 7,993,544
Pitney Bowes Credit Corp., 6.00%, 4/10/2000 5,500,000 5,491,750
UBS Finance Inc., 6.28%, 04/03/2000 10,000,000 9,996,511
----------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost 33,440,672) 33,440,672
----------------------------------------------------------------------------
<CAPTION>
NUMBER OF
COMMON STOCKS--84.0% SHARES
<S> <C> <C> <C> <C> <C>
CONSUMER DISCRETIONARY--2.5%
DEPARTMENT & CHAIN STORES--1.3%
Kohl's Corp.* 28,200 2,890,500
----------------------------------------------------------------------------
RECREATIONAL PRODUCTS--.7%
Harley-Davidson, Inc. 15,300 1,214,437
The 3DO Company* 18,000 174,375
----------------------------------------------------------------------------
1,388,812
RESTAURANTS--.5%
CEC Entertainment, Inc.* 41,100 1,114,837
----------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--.2%
FOOD & BEVERAGE--.2%
Hain Food Group, Inc.* 18,000 509,625
----------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
HEALTH--6.9%
BIOTECHNOLOGY--3.0%
Enzon, Inc.* 60,600 2,283,862
Invitrogen Corp.* 11,400 661,913
Isis Pharmaceuticals, Inc.* 28,600 402,188
Maxygen, Inc.* 2,500 162,969
QLT PhotoTherapeutics, Inc.* 12,000 654,109
Sequenom, Inc.* 1,200 47,250
Waters Corp.* 22,600 2,152,650
----------------------------------------------------------------------------
6,364,941
MEDICAL SUPPLY & SPECIALTY--3.8%
Andrx Corp.* 31,900 3,684,450
Medtronic, Inc.* 60,805 3,127,657
ResMed, Inc.* 19,900 1,420,363
----------------------------------------------------------------------------
8,232,470
PHARMACEUTICALS--.1%
Intermune Pharmaceuticals Inc.* 7,000 139,563
----------------------------------------------------------------------------
</TABLE>
10 The accompanying notes are an integral part of the financial statements.
<PAGE> 11
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
<S> <C> <C> <C> <C> <C>
COMMUNICATIONS--7.1%
TELEPHONE/COMMUNICATIONS--7.1%
Adelphia Business Solutions, Inc.* 43,900 $ 2,705,337
Allegiance Telecom, Inc.* 9,300 749,812
AudioCodes Ltd.* 2,300 230,863
BroadWing, Inc.* 71,200 2,647,750
Cypress Communications, Inc.* 1,700 41,650
Efficient Networks, Inc.* 4,300 669,725
Pinnacle Holdings, Inc.* 37,700 2,082,925
Time Warner Telecom, Inc. "A"* 75,400 5,994,300
----------------------------------------------------------------------------
15,122,362
- -------------------------------------------------------------------------------------------------------------------------
MEDIA--3.0%
BROADCASTING & ENTERTAINMENT--3.0%
CBS Corp.* 23,600 1,336,350
Citadel Communications Corp.* 53,000 2,235,937
Cumulus Media, Inc. "A"* 34,300 493,062
Univision Communication, Inc.* 21,100 2,384,300
----------------------------------------------------------------------------
6,449,649
- -------------------------------------------------------------------------------------------------------------------------
SERVICE INDUSTRIES--8.6%
EDP SERVICES--4.5%
CSG Systems International, Inc.* 54,300 2,650,519
Fiserv Inc.* 63,100 2,346,531
OTG Software, Inc.* 3,600 145,125
PSINet, Inc.* 57,100 1,942,292
Sapient Corp.* 31,500 2,642,063
----------------------------------------------------------------------------
9,726,530
MISCELLANEOUS COMMERCIAL
SERVICES--3.2%
CMGI , Inc.* 15,000 1,699,687
Concord EFS, Inc.* 170,150 3,902,816
Internap Network Services Corp.* 27,500 1,265,000
----------------------------------------------------------------------------
6,867,503
MISCELLANEOUS CONSUMER SERVICES--.9%
eBay, Inc.* 10,300 1,812,800
----------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
DURABLES--2.3%
TELECOMMUNICATIONS EQUIPMENT--2.3%
Antec Corp.* 35,600 1,595,325
Spectrasite Holdings, Inc.* 78,900 2,233,856
Tellabs, Inc.* 16,300 1,026,645
----------------------------------------------------------------------------
4,855,826
- -------------------------------------------------------------------------------------------------------------------------
MANUFACTURING--3.5%
CONTAINERS & PAPER--.2%
Aptargroup, Inc. 13,300 354,944
----------------------------------------------------------------------------
ELECTRICAL PRODUCTS--1.6%
Anadigics, Inc.* 33,450 2,207,700
Nanometrics, Inc.* 25,900 1,262,625
----------------------------------------------------------------------------
3,470,325
INDUSTRIAL SPECIALTY--.7%
Corning, Inc. 8,100 1,571,400
----------------------------------------------------------------------------
OFFICE EQUIPMENT/SUPPLIES--1.0%
Lexmark International Group, Inc. "A"* 20,400 2,157,300
----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
<S> <C> <C> <C> <C> <C>
TECHNOLOGY--48.6%
COMPUTER SOFTWARE--15.7%
Advanced Digital Information Corp.* 48,200 $ 1,650,850
Check Point Software Technologies Ltd.* 15,400 2,634,363
Comverse Technologies, Inc.* 17,250 3,260,250
Davox Corp.* 55,000 1,471,250
Evolving Software, Inc.* 58,200 552,900
FirstWorld Communications Inc. "B"* 5,000 101,875
HNC Software, Inc.* 18,700 1,347,569
ITXC Corp.* 11,200 527,100
Information Architects Corp.* 61,700 1,072,038
Interleaf, Inc.* 19,400 911,800
Intuit, Inc.* 51,400 2,794,875
J.D. Edwards & Co.* 82,000 2,670,125
MatrixOne, Inc.* 1,500 59,906
MetaCreations Corp.* 38,600 820,250
Microsoft Corp.* 43,700 4,643,125
Parametric Technology Corp.* 66,400 1,398,550
PeopleSoft, Inc.* 107,500 2,150,000
SAP AG (Sponsored ADR)* 39,400 2,354,150
Verity, Inc.* 56,400 2,298,300
VocalTec, Ltd.* 24,100 701,913
Webmethods, Inc.* 1,200 289,650
----------------------------------------------------------------------------
33,710,839
DIVERSE ELECTRONIC PRODUCTS--2.8%
Dell Computer Corp.* 40,300 2,173,681
Natural Microsystems Corp.* 16,600 1,423,450
Solectron Corp.* 62,000 2,483,875
----------------------------------------------------------------------------
6,081,006
EDP PERIPHERALS--3.2%
Mercury Interactive Corp.* 56,800 4,501,400
Symbol Technologies, Inc. 29,600 2,436,450
----------------------------------------------------------------------------
6,937,850
ELECTRONIC COMPONENTS--7.1%
Applied Micro Circuits Corp.* 38,000 5,702,375
Cisco Systems, Inc.* 32,600 2,520,387
Jabil Circuit* 55,600 2,404,700
Three-Five Systems, Inc.* 37,600 2,256,000
Vishay Intertechnology, Inc.* 41,900 2,330,688
----------------------------------------------------------------------------
15,214,150
OFFICE/PLANT AUTOMATION--2.3%
3Com Corp.* 18,000 1,001,250
Mercury Computer Systems, Inc.* 80,000 3,910,000
----------------------------------------------------------------------------
4,911,250
PRECISION INSTRUMENTS--3.2%
Credence Systems Corp.* 19,400 2,427,425
Harmonic Inc.* 15,800 1,315,350
Photon Dynamics, Inc.* 43,500 3,001,500
----------------------------------------------------------------------------
6,744,275
</TABLE>
12 The accompanying notes are an integral part of the financial statements.
<PAGE> 13
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
<S> <C> <C> <C> <C> <C>
SEMICONDUCTORS--14.3%
Atmel Corp.* 78,000 $ 4,026,750
California Micro Devices Corp.* 31,000 850,562
Intel Corp. 27,100 3,575,506
Intersil Holding Corp.* 43,000 2,222,563
Linear Technology Corp.* 43,400 2,387,000
Pericom Semiconductor Corp.* 21,200 756,575
QLogic Corp.* 18,200 2,466,100
SDL, Inc.* 20,000 4,257,500
Sanmina Corp.* 34,400 2,324,150
Silicon Storage Technology, Inc.* 39,800 2,940,225
Vitesse Semiconductor Corp.* 49,300 4,745,125
----------------------------------------------------------------------------
30,552,056
- -------------------------------------------------------------------------------------------------------------------------
ENERGY--1.3%
OIL & GAS PRODUCTION--1.3%
Anadarko Petroleum Corp. 20,500 793,094
Nabors Industries, Inc.* 53,100 2,060,944
----------------------------------------------------------------------------
2,854,038
TOTAL COMMON STOCK
(Cost $126,505,023) 180,034,851
----------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost $160,750,695) $214,280,523
----------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
* Non-income producing security.
(a) Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities.
The cost for federal income tax purposes was $160,750,695. At March 1, 2000, net
unrealized appreciation for all securities based on tax cost was $53,529,828.
This consisted of aggregate gross unrealized appreciation for all securities in
which there was an excess of value over tax cost of $62,762,821 and aggregate
gross unrealized depreciation for all securities in which there was an excess of
tax cost over value of $9,232,993.
The accompanying notes are an integral part of the financial statements. 13
<PAGE> 14
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
as of March 31, 2000 (unaudited)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value, (cost $160,750,695) $214,280,523
- ----------------------------------------------------------------------------
Cash 30,602
- ----------------------------------------------------------------------------
Receivable for investments sold 723,126
- ----------------------------------------------------------------------------
Dividends receivable 444
- ----------------------------------------------------------------------------
Interest receivable 135
- ----------------------------------------------------------------------------
Receivable for Fund shares sold 2,670,267
- ----------------------------------------------------------------------------
Due from Adviser 260,714
- ----------------------------------------------------------------------------
Other assets 43,882
- ----------------------------------------------------------------------------
TOTAL ASSETS 218,009,693
- ----------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased 1,286,147
- ----------------------------------------------------------------------------
Payable for Fund shares redeemed 57,421
- ----------------------------------------------------------------------------
Accrued management fee 66,660
- ----------------------------------------------------------------------------
Other accrued expenses 808,106
- ----------------------------------------------------------------------------
Total liabilities 2,218,334
- ----------------------------------------------------------------------------
NET ASSETS, AT VALUE $215,791,359
- ----------------------------------------------------------------------------
NET ASSETS
Net assets consist of:
Undistributed net investment income (loss) $ (649,472)
- ----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
securities 53,529,828
- ----------------------------------------------------------------------------
Accumulated net realized gain (loss) 14,632,729
- ----------------------------------------------------------------------------
Paid-in capital 148,278,274
- ----------------------------------------------------------------------------
NET ASSETS, AT VALUE $215,791,359
- ----------------------------------------------------------------------------
NET ASSET VALUE AND OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($109,752,416 / 4,496,724 shares outstanding of beneficial
interest, $.01 par value, unlimited number of shares
authorized) $ 24.41
- ----------------------------------------------------------------------------
Maximum offering price per share (100/94.25 of $24.41) $ 25.90
- ----------------------------------------------------------------------------
CLASS B SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share ($83,077,491 /
3,503,142 shares outstanding of beneficial interest, $.01
par value, unlimited number of shares authorized) $ 23.72
- ----------------------------------------------------------------------------
CLASS C SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share ($22,961,452 /
968,796 shares outstanding of beneficial interest, $.01
par value, unlimited number of shares authorized) $ 23.70
- ----------------------------------------------------------------------------
</TABLE>
14 The accompanying notes are an integral part of the financial statements.
<PAGE> 15
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Six months ended March 31, 2000 (unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 42,532
- ---------------------------------------------------------------------------
Interest 564,418
- ---------------------------------------------------------------------------
Total income 606,950
- ---------------------------------------------------------------------------
Expenses:
Management fee 326,364
- ---------------------------------------------------------------------------
Services to shareholders 592,881
- ---------------------------------------------------------------------------
Custodian fees 2,805
- ---------------------------------------------------------------------------
Distribution services fees 235,656
- ---------------------------------------------------------------------------
Administrative service fees 157,364
- ---------------------------------------------------------------------------
Auditing 1,100
- ---------------------------------------------------------------------------
Legal 553
- ---------------------------------------------------------------------------
Reports to shareholders 1,976
- ---------------------------------------------------------------------------
Registration fees 19,653
- ---------------------------------------------------------------------------
Trustee fees 5,000
- ---------------------------------------------------------------------------
Total expenses before expense reductions 1,343,352
- ---------------------------------------------------------------------------
Expense reductions (86,929)
- ---------------------------------------------------------------------------
Total expenses, after expense reductions 1,256,423
- ---------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (649,473)
- ---------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments 16,514,688
- ---------------------------------------------------------------------------
Foreign currency related transactions 3,754
- ---------------------------------------------------------------------------
16,518,442
- ---------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
on investments 36,316,915
- ---------------------------------------------------------------------------
Net gain (loss) on investment transactions 52,835,357
- ---------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $52,185,884
- ---------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 15
<PAGE> 16
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
MARCH 31, 2000 SEPTEMBER 30,
(UNAUDITED) 1999
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $ (649,473) (723,340)
- -----------------------------------------------------------------------------------------------------------
Net realized gain (loss) 16,518,442 1,651,629
- -----------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
transactions 36,316,915 16,803,913
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 52,185,884 17,732,202
- -----------------------------------------------------------------------------------------------------------
Fund share transactions:
Proceeds from shares sold 140,404,476 45,738,816
- -----------------------------------------------------------------------------------------------------------
Cost of shares redeemed (51,149,268) (26,452,668)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions 89,255,208 19,286,148
- -----------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 141,441,092 37,018,350
- -----------------------------------------------------------------------------------------------------------
Net assets at beginning of period 74,350,267 37,331,917
- -----------------------------------------------------------------------------------------------------------
Net assets at end of period (including undistributed net
investment income (loss) of ($649,473) and $0, respectively) $215,791,359 74,350,267
- -----------------------------------------------------------------------------------------------------------
</TABLE>
16 The accompanying notes are an integral part of the financial statements.
<PAGE> 17
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
CLASS A
SIX MONTHS DECEMBER 31,
ENDED 1996 TO
MARCH 31, YEAR ENDED YEAR ENDED SEPTEMBER
2000 SEPTEMBER 30, SEPTEMBER 30, 30,
(UNAUDITED) 1999 1998 1997
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 15.42 10.98 12.60 9.50
- -------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.05)(c) (0.11)(c) (0.02)(c) (0.02)
- -------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment
transactions 9.04 4.55 (1.05) 3.12
- -------------------------------------------------------------------------------------------------------------------
Total from investment operations 8.99 4.44 (1.07) 3.10
- -------------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
Net realized gains on investment transactions -- -- (0.55) --
- -------------------------------------------------------------------------------------------------------------------
Total distributions -- -- (0.55) --
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 24.41 15.42 10.98 12.60
- -------------------------------------------------------------------------------------------------------------------
TOTAL RETURN % (A)(B) 58.30** 40.44 (8.67) 32.63**
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 109,752 39,623 21,040 6,289
- -------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.51* 1.59 1.46 1.49*
- -------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.42* 1.30 1.25 1.49*
- -------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.05)* (0.81) (0.42) (0.35)*
- -------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 140* 125 190 364*
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
SIX MONTHS DECEMBER 31,
ENDED 1996 TO
MARCH 31, YEAR ENDED YEAR ENDED SEPTEMBER
2000 SEPTEMBER 30, SEPTEMBER 30, 30,
(UNAUDITED) 1999 1998 1997
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 15.06 10.83 12.52 9.50
- -------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.16)(c) (0.24)(c) (0.04)(c) (0.08)
- -------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment
transactions 8.81 4.47 (1.10) 3.10
- -------------------------------------------------------------------------------------------------------------------
Total from investment operations 8.65 4.23 (1.14) 3.02
- -------------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
Net realized gains on investment transactions -- -- (0.55) --
- -------------------------------------------------------------------------------------------------------------------
Total distributions -- -- (0.55) --
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 23.71 15.06 10.83 12.52
- -------------------------------------------------------------------------------------------------------------------
TOTAL RETURN % (A)(B) 57.44** 39.06 (9.30) 31.79**
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 83,077 27,688 13,575 4,132
- -------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 2.69* 2.77 2.81 2.41*
- -------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 2.47* 2.17 2.12 2.41*
- -------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.15)* (1.68) (1.29) (1.27)*
- -------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 140* 125 190 364*
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 18
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C
SIX MONTHS
ENDED DECEMBER 31,
MARCH 31, YEAR ENDED YEAR ENDED 1996 TO
2000 SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) 1999 1998 1997
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 15.06 10.84 12.53 9.50
- -----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.13)(c) (0.25)(c) (0.04)(c) (0.07)
- -----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions 8.77 4.47 (1.10) 3.10
- -----------------------------------------------------------------------------------------------------------------
Total from investment operations 8.64 4.22 (1.14) 3.03
- -----------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- -- -- --
- -----------------------------------------------------------------------------------------------------------------
Net realized gains on investment transactions -- -- (0.55) --
- -----------------------------------------------------------------------------------------------------------------
Total distributions -- -- (0.55) --
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 23.70 15.06 10.84 12.53
- -----------------------------------------------------------------------------------------------------------------
TOTAL RETURN %(A)(B) 57.37** 38.93 (9.29) 31.89**
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 22,961 7,039 2,717 1,188
- -----------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 2.55* 2.96 2.76 2.19*
- -----------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 2.54* 2.30 2.10 2.19*
- -----------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.16)* (1.81) (1.27) (1.05)*
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 140* 125 190 364*
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not annualized.
(a) Total return does not reflect the effect of sales charges.
(b) Total return would have been lower had certain expenses not been reduced.
(c) Based on monthly average shares outstanding during the period.
18
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 SIGNIFICANT
ACCOUNTING POLICIES Kemper Aggressive Growth Fund (the "Fund") is
registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open end
non-diversified management investment company
organized as a Massachusetts business trust.
The Fund offers multiple classes of shares. Class A
shares are offered to investors subject to an
initial sales charge. Class B shares are offered
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 offered 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, 2000) 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.
Investment income, realized and unrealized gains
and losses, and certain fund-level expenses and
expense reductions, if any, are borne pro rata on
the basis of relative net assets by the holders of
all classes of shares except that each class bears
certain expenses unique to that class such as
distribution services, shareholder services,
administrative services and certain other class
specific expenses. Differences in class expenses
may result in payment of different per share
dividends by class. All shares of the Fund have
equal rights with respect to voting subject to
class specific arrangements.
The Fund's financial statements are prepared in
accordance with generally accepted accounting
principles which require the use of management
estimates. The policies described below are
followed consistently by the Fund in the
preparation of its financial statements.
SECURITY VALUATION. Investments are stated at value
determined as of the close of regular trading on
the New York Stock Exchange. 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 Nasdaq but are traded in another
over-the-counter market are valued at the most
recent sale price, or if no sale occurred, at the
calculated mean between the most recent bid and
asked quotations on such market. 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 value as
determined in good faith by the Valuation Committee
of the Board of Trustees.
REPURCHASE AGREEMENTS. The Fund may enter into
repurchase agreements with certain banks and
broker/dealers whereby the Fund, through its
custodian or
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
sub-custodian bank, receives delivery of the
underlying securities, the amount of which at the
time of purchase and each subsequent business day
is required to be maintained at such a level that
the market value is equal to at least the principal
amount of the repurchase price plus accrued
interest.
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.
At September 30, 1999, the Fund had a net tax basis
capital loss carryforward of approximately
$1,893,000 which may be applied against any
realized net taxable capital gains of each
succeeding year until fully utilized or until
September 30, 2007, the expiration date.
DISTRIBUTION OF INCOME AND GAINS. Distributions of
net investment income, if any, are made annually.
Net realized gains from investment transactions, in
excess of available capital loss carryforwards,
would be taxable to the Fund if not distributed,
and, therefore, will be distributed to shareholders
at least annually.
The timing and characterization of certain income
and capital gains distributions are determined
annually in accordance with federal tax regulations
which may differ from generally accepted accounting
principles. As a result, net investment income
(loss) and net realized gain (loss) on investment
transactions for a reporting period may differ
significantly from distributions during such
period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital
accounts without impacting the net asset value of
the Fund.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date. Interest income is recorded on
the accrual basis. Dividend income is recorded on
the ex-dividend date. Realized gains and losses
from investment transactions are recorded on an
identified cost basis. All discounts are accreted
for both tax and financial reporting purposes.
EXPENSES. Expenses arising in connection with a
specific Fund are allocated to that Fund. Other
Trust expenses are allocated between the Funds in
proportion to their relative net assets.
- --------------------------------------------------------------------------------
2 PURCHASE & SALES OF
SECURITIES For the six months ended March 31, 2000, investment
transactions (excluding short-term instruments) are
as follows:
Purchases $137,478,755
Proceeds from sales 78,222,207
- --------------------------------------------------------------------------------
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 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).
20
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
For the six months ended March 31, 2000 the Fund
incurred a management fee as follows:
<TABLE>
<S> <C>
Base fee $ 456,990
Performance adjustment (130,626)
---------
Total fees $ 326,364
=========
</TABLE>
Scudder Kemper has agreed to waive certain
operating expense of the Fund. Under this
agreement, Scudder Kemper waived and absorbed
operating expenses of $80,950 for the six months
ended March 31, 2000.
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, 2000 are $37,570.
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
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 charge
("CDSC") from redemptions of Class B and Class C
shares. Distribution fees and CDSC received by KDI
for the six months ended March 31, 2000 are
$276,557, of which $124,667 was unpaid at March 31,
2000.
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with KDI. For
providing information and administrative services
to Class A, Class B and Class C shareholders, the
Fund pays KDI a fee at an annual rate of up to .25%
of average daily net assets of each class. KDI in
turn has various agreements with financial services
firms that provide these services and pays these
firms based on assets of Fund accounts the firms
service. Administrative services fees were paid by
KDI for the six months ended March 31, 2000 were
$76,414 after an expense waiver of $80,950, of
which $48,609 was unpaid at March 31, 2000. In
addition $51 was paid by KDI to affiliates.
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 $322,226
for the six months ended March 31, 2000, of which
$322,226 was unpaid at March 31, 2000.
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, 2000, the Fund made no payments to its officers
and incurred trustees' fees of $5,000 to
independent trustees.
21
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2000 SEPTEMBER 30, 1999
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 3,744,201 $ 82,800,501 1,654,500 $ 23,822,260
----------------------------------------------------------------------------------------
Class B 2,029,343 43,595,980 1,250,339 16,813,433
----------------------------------------------------------------------------------------
Class C 660,906 14,007,995 374,361 5,103,123
----------------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDEND:
Class A -- -- -- --
----------------------------------------------------------------------------------------
Class B -- -- -- --
----------------------------------------------------------------------------------------
Class C -- -- -- --
----------------------------------------------------------------------------------------
SHARES REDEEMED
Class A (1,837,542) (40,791,148) (1,046,748) (14,489,362)
----------------------------------------------------------------------------------------
Class B (344,144) (7,044,432) (620,400) 9,794,000
----------------------------------------------------------------------------------------
Class C (159,422) (3,313,688) (157,839) (2,169,306)
----------------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 19,967 $ 469,251 48,000 627,000
----------------------------------------------------------------------------------------
Class B (20,529) (469,251) (48,000) (627,000)
----------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
FROM CAPITAL SHARES
TRANSACTIONS $ 89,255,208 $ 19,286,148
----------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
5 EXPENSE OFF-SET
ARRANGEMENTS The Fund has entered into arrangements with its
custodian and transfer agent whereby credits
realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's
expenses. During the period, the Fund's custodian
and transfer agent fees were reduced by $2,146 and
$3,833, respectively, under these arrangements.
- --------------------------------------------------------------------------------
6 LINE OF CREDIT The Fund and several Kemper Funds (the
"Participants") share in a $750 million revolving
credit facility for temporary or emergency
purposes, including the meeting of redemptions
requests that otherwise might require the untimely
disposition of securities. The Participants are
charged an annual commitment fee which is allocated
pro rata among each of the Participants. Interest
is calculated based on the market rates at the time
of the borrowing. The Fund may borrow up to a
maximum of 33 percent of its net assets under this
agreement.
22
<PAGE> 23
NOTES
23
<PAGE> 24
TRUSTEES&OFFICERS
<TABLE>
<S> <C> <C>
TRUSTEES OFFICERS
JOHN W. BALLANTINE MARK S. CASADY CAROLINE PEARSON
Chairman and Trustee President Assistant Secretary
LEWIS A. BURNHAM PHILIP J. COLLORA BRENDA LYONS
Trustee Vice President Assistant Treasurer
and Secretary
LINDA C. COUGHLIN
Trustee JOHN R. HEBBLE
Treasurer
DONALD L. DUNAWAY
Trustee ANN M. MCCREARY
Vice President
ROBERT B. HOFFMAN
Trustee KATHRYN L. QUIRK
Vice President
DONALD R. JONES
Trustee LINDA J. WONDRACK
Vice President
THOMAS W. LITTAUER
Trustee and Vice President MAUREEN E. KANE
Assistant Secretary
SHIRLEY D. PETERSON
Trustee
WILLIAM P. SOMMERS
Trustee
</TABLE>
<TABLE>
<S> <C>
.............................................................................................
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
.............................................................................................
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 219557
Kansas City, MO 64121
.............................................................................................
CUSTODIAN STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, MA 02109
.............................................................................................
TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
801 Pennsylvania Avenue
Kansas City, MO 64105
.............................................................................................
INDEPENDENT AUDITORS ERNST & YOUNG
233 South Wacker Drive
Chicago, IL 60606
.............................................................................................
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza
Chicago, IL 60606
www.kemper.com
</TABLE>
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Long-term investing in a short-term world(SM)
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