SCUDDER
INVESTMENTS (SM)
[LOGO]
--------------------------------------------------------------------------------
EQUITY/GROWTH
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Scudder Classic
Growth Fund
Fund #058
Semiannual Report
April 30, 2000
The fund seeks long-term growth of capital with reduced share price volatility
compared to other growth mutual funds.
Scudder Classic Growth Fund is properly known as Classic Growth Fund.
<PAGE>
Contents
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4 Letter from the Fund's President
6 Performance Update
8 Portfolio Summary
10 Portfolio Management Discussion
16 Glossary of Investment Terms
17 Investment Portfolio
22 Financial Statements
25 Financial Highlights
26 Notes to Financial Statements
35 Officers and Trustees
36 Investment Products and Services
38 Scudder Solutions
2
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Scudder Classic Growth Fund
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ticker symbol SCCGX fund number 058
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Date of Inception: o The Scudder Shares of the fund returned 14.61% for
9/9/96 the six-month period, beating the 7.20% return of its
unmanaged benchmark, the S&P 500, and the 10.79%
average return for the large-cap core fund category, as
calculated by Lipper Analytical Services.^1
Total Net Assets of o The fund benefited from strong stock picking,
Scudder Shares as of particularly among carefully selected
4/30/00: technology-related companies.
$173.3 million
o Volatility in the market was extreme during most of the
period as the Federal Reserve Board aggressively raised
interest rates and a small group of large growth
stocks -- primarily technology and Internet-related
stocks -- gained momentum.
^1 Lipper Analytical Services, Inc. is an independent analyst of investment
performance.
3
<PAGE>
Letter from the Fund's President
Dear Shareholders,
A series of interest-rate increases by the Federal Reserve Board and strong
performance by a small group of large-company growth stocks contributed to a
volatile market environment during the past six months. For much of the period,
the momentum of the technology sector, specifically Internet stocks, seemed
unstoppable. This momentum was accelerated by a combination of a strong economy,
moderate inflation, and improving corporate profits, all of which served to mask
concerns about the impact of rising energy and labor prices and the threat of
even more aggressive Fed tightening. In March and April, however, a tug of war
developed between technology stocks whose prices had reached very high multiples
relative to their earnings prospects and more conservative value-oriented
stocks. That struggle led to even greater market volatility.
Classic Growth Fund, which seeks to invest in quality growing companies trading
at reasonable prices, was, we believe, well positioned to perform well in this
environment. The fund's attention to risk management helped mitigate losses
during this period, while strong stock picking, particularly among carefully
selected technology companies with strong business franchises, helped
performance.
4
<PAGE>
Over the six-month period, the Scudder Shares of the fund outperformed both the
fund's benchmark, the S&P 500 Index, and the average for funds in the Lipper
large-cap core fund category. For more information on the market environment and
management's approach to stockpicking, please turn to the Portfolio Management
Discussion that begins on page 10.
Thank you for your continued interest in the Scudder Shares of the Classic
Growth Fund. If you have any questions about your investment, please call
Scudder Investor Information at 1-800-SCUDDER (1-800-728-3337) or visit our Web
site at www.scudder.com.
Sincerely,
/s/Linda C. Coughlin
Linda C. Coughlin
President,
Scudder Classic Growth Fund
5
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Performance Update
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April 30, 2000
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Growth of a $10,000 Investment
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THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Classic Growth Fund
-- Scudder Shares S&P 500 Index*
9/96** 10000 10000
10/96 10159 10276
4/97 11632 11788
10/97 13921 13577
4/98 16454 16632
10/98 15418 16563
4/99 18316 20260
10/99 20370 20817
4/00 23346 22315
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Fund Index Comparison
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Total Return
Growth of Average
Period ended 4/30/2000 $10,000 Cumulative Annual
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Classic Growth Fund -- Scudder Shares
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1 year $ 12,746 27.46% 27.46%
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Life of Class** $ 24,533 145.33% 28.00%
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S&P 500 Index*
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1 year $ 11,014 10.14% 10.14%
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Life of Class** $ 22,315 123.15% 25.11%
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* The Standard & Poor's 500 Index is a capitalization-weighted index of 500
stocks. The index is designed to measure performance of the broad domestic
economy through changes in the aggregate market value of 500 stocks
representing all major industies. Index returns assume reinvestment of
dividends and, unlike Fund returns, do not reflect any fees or expenses.
** The Fund commenced operations on September 9, 1996. Index comparisons begin
September 30, 1996.
6
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Returns and Per Share Information
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THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE ILLUSTRATING THE CLASSIC GROWTH
-- SCUDDER SHARES FUND TOTAL RETURN (%) AND S&P 500 INDEX* TOTAL RETURN (%)
BAR CHART DATA:
Yearly periods ended April 30
1997** 1998 1999 2000
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Class Total
Return (%) 22.23 41.46 11.32 27.46
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Index Total
Return (%) 17.88 41.07 21.82 10.14
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Net Asset Value ($) 14.63 20.32 21.76 26.60
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Income
Dividends ($) .04 .04 -- --
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Capital Gains
Distributions ($) -- .29 .81 1.11
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* The Standard & Poor's 500 Index is a capitalization-weighted index of 500
stocks. The index is designed to measure performance of the broad domestic
economy through changes in the aggregate market value of 500 stocks
representing all major industries. Index returns assume reinvestment of
dividends and, unlike Fund returns, do not reflect any fees or expenses.
** The Fund commenced operations on September 9, 1996. Index comparisons begin
September 30, 1996.
Effective April 16, 1998, the Fund changed its name from Scudder Classic
Growth Fund to Classic Growth Fund and an additional three classes of
shares were offered. Existing shares of Classic Growth Fund outstanding on
that date were redesignated Scudder Shares of the Fund. The total return
information provided is for the Fund's Scudder Share class. Performance is
historical, assumes reinvestment of all dividends and capital gains and is
not indicative of future results. Total return and principal value will
fluctuate, so an investor's shares, when redeemed, may be worth more or
less than when purchased. If the Adviser had not maintained expenses, the
total return for the one year and life of Class periods would have been
lower.
7
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Portfolio Summary
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April 30, 2000
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Asset Allocation
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The fund remains close
to fully invested in
domestic growth stocks.
A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA POINTS IN THE TABLE BELOW.
Equity Holdings 96%
Cash Equivalents 4%
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100%
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Sector Diversification
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(Excludes 4% Cash Equivalents) The relatively strong
fundamentals of our
technology holdings
enabled them to
outperform some of the
high-flying Internet
stocks that we did not
own.
A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA POINTS IN THE TABLE BELOW.
Technology 30%
Health 13%
Financial 9%
Communications 8%
Consumer Discretionary 8%
Manufacturing 7%
Consumer Staples 7%
Media 7%
Energy 5%
Other 6%
------------------------------------
100%
------------------------------------
8
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Ten Largest Equity Holdings
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(30% of Portfolio) The fund's top holdings
reflect our desire to
invest in companies that
we believe can provide
growth at a
reasonable price.
1. Intel Corp.
Producer of semiconductor memory circuits
2. General Electric Co.
Producer of electrical equipment
3. Cisco Systems, Inc.
Manufacturer of computer network products
4. Warner-Lambert Co.
Provider of drug, toiletry and food products
5. Microsoft Corp.
Developer of computer software
6. EMC Corp.
Provider of enterprise storage systems, software, networks
and services
7. American Express Co.
Provider of travel-related, financial advisory and
international banking services
8. Electronic Data Systems Corp.
Provider of information technology systems
9. AT&T Corp. -- Liberty Media Group
Holding company of entertainment networks
10. Schlumberger Ltd.
Provider of oil field services
For more complete details about the Fund's investment portfolio, see page 17. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
9
<PAGE>
Portfolio Management Discussion
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April 30, 2000
In the following interview, William F. Gadsden and Bruce F. Beaty, portfolio
managers of Scudder Classic Growth Fund, discuss the Fund's strategy and the
market environment during the six-month period ended April 30, 2000.
Q: How did Scudder shares of the fund perform over the period?
A: The Scudder Shares of the fund returned 14.61% for the period, beating the
7.20% return of its unmanaged benchmark, the S&P 500. In addition, the Scudder
Shares of the fund's returns placed it ahead of the 10.79% average of the Lipper
large-cap core fund category. Strong stock picking, particularly within
technology-related sectors, continued to drive the fund's relative
outperformance. We achieved this without significantly overweighting technology
stocks. Instead we maintained a portfolio that was well-diversified across
sectors, which outperformed even in the very narrow technology-driven market.
Q: Please give us an overview of the market and how it was impacted by economic
events over the last six months.
A: Volatility in the market was extreme during the period as the Federal Reserve
Board (the Fed) aggressively raised interest rates and a small group of large
growth stocks -- primarily technology and Internet-related stocks -- gained
momentum and dominated market returns from November through February. Early in
the period, it seemed as if nothing could stop the momentum of the technology
sector, specifically Internet or "dot-com" stocks. Nearly every new initial
public offering of an Internet-related stock shot through the roof and
catapulted new, untested businesses to high market capitalizations once reserved
only for tried and true companies with long-term earnings track records.
Momentum for almost any company tied to the Internet in some way grew, while
nearly every other type of stock endured lackluster returns or losses. After
falling in the first two months of 2000, the S&P 500 surged to new highs in
March on a rebound in depressed
10
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financial and cyclical stocks. A combination of strong economic momentum,
moderate inflation, and an improving corporate profits outlook helped to
alleviate prior concerns about the impact of rising energy and labor prices and
the threat of a more aggressive Fed tightening regimen.
More dramatic than the turnaround in the direction of the market was the sharp
change in market leadership. Through February, technology was the only sector to
post a positive return, while the rest of the market declined. Among the hardest
hit were financial, consumer, and manufacturing-related stocks, due to concerns
about the Fed's determination to slow the economy. At the same time, technology
stocks thrived on both fundamental as well as technical drivers. From a
fundamental standpoint, demand globally for Internet and telecommunications
infrastructure spending continued to accelerate, driving revenue growth, as well
as profit growth for established firms. Strong growth and relatively low levels
of debt have helped to make many stocks in the sector less sensitive to
fluctuations in interest rates. At the same time, technical factors -- market
sentiment and mutual fund investment flows, among other items -- drove
valuations in several parts of the sector to unwarranted levels earlier in the
year. Much of the recent volatility has been the result of short-term
fluctuations in these technical factors, rather than a longer-term change in
fundamentals for the higher-quality, established firms.
In March, however, leadership shifted as financial and cyclical sectors
responded favorably to a more benign economic outlook. A tug of war continued in
April between technology stocks and more conservative value-oriented stocks and
with that struggle came increased market volatility. The fund's diversified
approach and attention to risk management helped mitigate some of the volatility
during this period.
11
<PAGE>
Q: Are you concerned about the correction in technology stocks?
A: No, we're not. In fact, we think it may be healthy for the overall market.
Many technology stocks had grown to valuations that we believed to be
unwarranted and unsustainably high -- especially for a large group of untested
dot-com stocks. What we began to see in March was a refocusing on valuations
where investors began to look at earnings, business plans and other fundamental
factors. We may see more fallout in the newer Internet companies, but stocks of
established, fundamentally sound technology companies should continue to grow.
Q: What technology stocks does the fund hold and how did they perform?
A: We have a significant position in technology stocks -- close to that of our
S&P 500 benchmark -- but we generally hold only those companies that fit our
"growth at a reasonable price," or GARP, discipline. And although technology
valuations are high, we do own some stocks with high price-to-earnings (P/Es)
such as Cisco Systems and QUALCOMM. However, we own the market leaders and
always select these companies within the context of the overall portfolio and
how they impact its risk profile. We are fairly consistent at keeping the fund's
P/E lower than the average growth fund.
Our technology holdings certainly helped performance during this period as most
other sectors struggled. And although our tech holdings suffered in March and
April along with the rest of the technology sector, their relatively strong
fundamentals enabled them to fall less than some of the high-flying Internet
stocks that we didn't own.
Q: What is the concept behind GARP?
A: GARP is a method the fund uses to assess value. We seek high-quality,
large-cap growth companies with strong competitive positions, stable and
consistent earnings-growth prospects, excellent balance sheets, and
12
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strong management. Outstanding fundamentals and growth potential are only a part
of what we want, however. Our analysis must indicate that the stocks are
"reasonably valued," or in other words, trading at an attractive price. We sell
stocks when we see indications of deteriorating fundamentals or slowing earnings
growth. Also, in keeping with our price-conscious philosophy, we reduce
positions when we feel valuations become stretched.
Q: How have you applied the GARP process to the fund's technology investments?
A: Because technology dominated the market, it was critical for us to have a
meaningful position in technology stocks. Across the board, and certainly in the
technology sector, we stick with the proven leaders: we typically invest in the
number one or number two players in each particular market segment. For instance
we owned Oracle, Intel, Cisco Systems, EMC, and Applied Materials. These are all
top-tier companies within their specific technology subsectors, and are all
stocks that fit our process. We maintained only minor positions in some of the
more speculative technology issues. And, while our tech holdings did not escape
the downturns in March and April, they certainly fared better than many
unproven, newly public technology and Internet stocks. This helped the fund's
relative performance.
Q: Does the fund hold Microsoft? If so, how was the fund impacted by its recent
decline in value?
A: The fund holds a sizeable position in Microsoft, which we maintained during
its recent weakness. Certainly Microsoft's antitrust fight has created anxiety
for investors and short-term stock price volatility because the court battle
raises questions with no immediate answers. However, our fundamental analysis of
Microsoft's business prospects shows that the company and its technology sector
peers are well positioned to expand sales and earnings in the coming months.
13
<PAGE>
Q: What other sectors helped performance?
A: Technology was really a one-note song during most of the period, while the
returns from most other sectors lagged. Although we had successes in individual
stocks, on a sector-by-sector basis, technology was really the only sector
providing substantive gains. However, it's important to remember that we're
bottom-up stock pickers. That means we don't decide to invest a certain amount
in a particular sector and then select the stocks. Instead, the fund's overall
sector weightings are the outcome of many individual decisions.
Q: Outside of technology, what stocks helped performance?
A: Warner Lambert, a holding in the health care sector, added to the fund's
performance. The company is in negotiations to merge with Pfizer, another large
and dominant pharmaceutical company. As the proposed merger progressed, the
market bid up the price of Warner Lambert. The combined entity of Warner Lambert
and Pfizer is expected to have one of the highest growth rates in the industry
as well as one of the most attractive pipelines of new products.
Q: What about stocks that disappointed?
A: A couple of non-technology related companies disappointed us. Consumer
products stocks struggled throughout the second part of the period as profit
warnings from Procter & Gamble (P&G) and Dial Corp. highlighted the margin
pressures faced by many firms in the sector due to higher raw materials and
labor costs, while product pricing remains extremely competitive. P&G's
negotiations to potentially merge with Warner Lambert also were troubling. We
viewed this as a negative shift in their strategy, and didn't understand why
they were looking for growth outside of their existing businesses. By the end of
the period we had eliminated P&G from the portfolio. We would add the stock
again if we had
14
<PAGE>
confidence that the company's earnings were entering a period of acceleration.
Q: What's your outlook for the markets and the fund?
A: Over the past few years, it has not paid to underestimate the resilience of
the U.S. economy or the ability of the Fed to keep things on an even keel. That
said, we've kept a long-term view and avoided the temptation to sell when market
conditions deteriorate. While we feel that caution is warranted as long as the
threat of higher interest rates is an issue, we remain optimistic on the outlook
for the companies we hold in the portfolio, and believe that our disciplined
investment style will continue to position the portfolio for outperformance over
time.
15
<PAGE>
Glossary of Investment Terms
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<TABLE>
<S> <C>
Bottom-Up Investing An investment style that focuses on the use of research to
Style assess the performance of individual companies before
considering the impact of economic trends. This approach,
which is the opposite of "top-down" investing, assumes that
the most significant determinant of performance is
individual stock selection, rather than industry or country
allocation.
Consumer Non- Products bought by consumers that are expected to last less
durables than three years, such as food and drugs. Sales of
non-durables generally tend to be less sensitive to economic
fluctuations.
Cyclical Stocks Companies whose earnings are closely tied to the business
cycle. Cyclical industries include steel, cement, paper,
machinery, and autos.
Growth Stock Stock of a company that has displayed above average earnings
growth and is expected to continue to increase profits
faster than the overall market. Stocks of such companies
usually trade at higher valuations and experience more price
volatility than the market as a whole. Distinct from value
stock.
Monetary Policy The decision of a central bank to control the level of
economic activity by either supplying credit through lower
interest rates or open market purchases, or by restricting
credit through higher rates or open market sales. Looser
credit tends to stimulate the economy, while tighter credit
tends to calm inflationary forces.
Price/Earnings Ratio A widely used gauge of a stock's valuation that indicates
(P/E) (also what investors are paying for a company's earning power at
"earnings multiple") the current stock price. A P/E ratio may be based on a
company's projected earnings for the coming 12 months. A
higher "earnings multiple" indicates higher expected
earnings growth, along with greater risk of earnings
disappointment.
</TABLE>
(Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
16
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<TABLE>
<CAPTION>
Investment Portfolio as of April 30, 2000 (Unaudited)
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Principal
Amount ($) Value ($)
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Repurchase Agreements 1.4%
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<S> <C> <C>
State Street Bank and Trust Company, 5.68%,
to be repurchased at $5,455,581 on 5/1/2000**
(Cost $5,453,000) ........................................... 5,453,000 5,453,000
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U.S. Government Agency Obligations 2.5%
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Federal Home Loan Bank, 5.88%, 5/1/2000
(Cost $10,000,000) .......................................... 10,000,000 10,000,000
Shares
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Common Stocks 96.1%
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Consumer Discretionary 7.3%
Department & Chain Stores 5.7%
Home Depot, Inc. ............................................... 150,650 8,445,816
Target Corp. ................................................... 98,600 6,563,063
Wal-Mart Stores, Inc. .......................................... 141,600 7,841,100
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22,849,979
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Recreational Products 0.6%
Premier Parks, Inc.* ........................................... 105,300 2,270,531
----------
Specialty Retail 1.0%
Circuit City Stores, Inc. ...................................... 68,300 4,016,894
----------
Consumer Staples 6.5%
Alcohol & Tobacco 1.3%
Anheuser-Busch Companies, Inc. ................................. 75,600 5,334,525
----------
Food & Beverage 2.8%
Bestfoods ...................................................... 72,900 3,663,225
PepsiCo, Inc. .................................................. 208,300 7,642,006
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11,305,231
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Package Goods/Cosmetics 2.4%
Colgate-Palmolive Co. .......................................... 65,500 3,741,688
Gillette Co. ................................................... 159,200 5,890,400
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9,632,088
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</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
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Shares Value ($)
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Health 12.5%
Biotechnology 2.1%
Amgen Inc.* ........................ 12,000 672,000
Genentech, Inc.* ................... 28,000 3,276,000
MedImmune, Inc.* ................... 14,800 2,367,075
PE Corp-PE Biosystems Group ........ 35,400 2,124,000
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8,439,075
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Medical Supply & Specialty 4.0%
Baxter International, Inc. ......... 114,750 7,473,094
Becton, Dickinson & Co. ............ 120,200 3,080,125
Edwards Lifesciences Corp.* ........ 22,910 343,650
Medtronic, Inc. .................... 96,300 5,001,581
----------
15,898,450
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Pharmaceuticals 6.4%
Allergan, Inc. ..................... 75,700 4,456,832
Merck & Co., Inc. .................. 106,900 7,429,550
Warner-Lambert Co. ................. 123,100 14,010,319
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25,896,701
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Communications 6.7%
Cellular Telephone 2.6%
Nokia Oyj (ADR) .................... 94,200 5,357,625
Vodafone AirTouch PLC (ADR) ........ 108,500 5,099,500
----------
10,457,125
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Telephone/Communications 4.1%
AT&T Wireless Group* ............... 124,900 3,973,381
Bell Atlantic Corp. ................ 75,750 4,488,188
Broadwing, Inc. .................... 142,700 4,040,194
US West, Inc. ...................... 54,000 3,844,125
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16,345,888
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Financial 8.4%
Insurance 1.8%
American International Group, Inc. . 66,850 7,332,609
----------
Consumer Finance 4.5%
American Express Co. ............... 65,500 9,829,094
Citigroup, Inc. .................... 137,450 8,169,684
----------
17,998,778
----------
Other Financial Companies 2.1%
Federal National Mortgage Association 66,500 4,010,781
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
Shares Value ($)
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Marsh & McLennan Companies, Inc. .... 44,000 4,336,750
----------
8,347,531
----------
Media 6.4%
Advertising 1.7%
Interpublic Group of Companies, Inc. 79,200 3,247,200
Omnicom Group, Inc. ................. 37,900 3,451,269
----------
6,698,469
----------
Broadcasting & Entertainment 1.7%
Infinity Broadcasting Corp. "A"* .... 88,800 3,013,650
Viacom, Inc. "B"* ................... 74,300 4,040,063
----------
7,053,713
----------
Cable Television 3.0%
AT&T Corp.-- Liberty Media Group "A"* 180,000 8,988,750
Comcast Corp. "A"* .................. 73,600 2,948,600
----------
11,937,350
----------
Service Industries 4.6%
EDP Services 3.5%
Automatic Data Processing, Inc. ..... 96,200 5,176,763
Electronic Data Systems Corp. ....... 131,300 9,026,875
----------
14,203,638
----------
Miscellaneous Commercial Services 0.8%
Siebel Systems, Inc.* ............... 26,400 3,243,900
----------
Miscellaneous Consumer Services 0.3%
eBay, Inc.* ......................... 7,100 1,130,231
----------
Durables 1.7%
Aerospace
United Technologies Corp. ........... 112,600 7,002,313
----------
Manufacturing 7.8%
Diversified Manufacturing 4.0%
General Electric Co. ................ 99,000 15,567,750
Textron, Inc. ....................... 6,800 421,175
----------
15,988,925
----------
Industrial Specialty 3.8%
Corning, Inc. ....................... 41,400 8,176,500
JDS Uniphase Corp.* ................. 48,600 5,039,213
QUALCOMM Inc.* ...................... 20,500 2,222,969
----------
15,438,682
----------
The accompanying notes are an integral part of the financial statements.
19
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<TABLE>
<CAPTION>
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Shares Value ($)
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Technology 29.2%
<S> <C> <C>
Computer Software 6.8%
America Online, Inc.* .................................... 86,500 5,173,781
i2 Technologies, Inc.* ................................... 12,600 1,628,550
Microsoft Corp.* ......................................... 169,100 11,794,725
Oracle Corp.* ............................................ 110,400 8,825,100
-----------
27,422,156
-----------
Diverse Electronic Products 4.7%
Dell Computer Corp.* ..................................... 112,600 5,644,075
Motorola, Inc. ........................................... 39,400 4,691,063
Solectron Corp.* ......................................... 128,800 6,029,450
Teradyne, Inc.* .......................................... 22,800 2,508,000
-----------
18,872,588
-----------
EDP Peripherals 2.7%
EMC Corp.* ............................................... 78,400 10,892,700
-----------
Electronic Components/Distributors 3.6%
Cisco Systems, Inc.* ..................................... 209,900 14,551,973
-----------
Electronic Data Processing 4.2%
International Business Machines Corp. .................... 76,100 8,494,663
Sun Microsystems, Inc.* .................................. 90,100 8,283,569
-----------
16,778,232
-----------
Semiconductors 7.2%
Applied Materials, Inc.* ................................. 45,700 4,652,831
Intel Corp. .............................................. 139,240 17,657,373
Vitesse Semiconductor Corp.* ............................. 49,000 3,335,063
Xilinx, Inc.* ............................................ 45,600 3,340,200
-----------
28,985,467
-----------
Energy 5.0%
Oil & Gas Production 2.8%
Exxon Mobil Corp. ........................................ 93,236 7,243,272
Royal Dutch Petroleum Co. (New York shares) .............. 66,900 3,838,388
-----------
11,081,660
-----------
Oilfield Services/Equipment 2.2%
Schlumberger Ltd. ........................................ 117,300 8,980,781
-----------
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Total Common Stocks (Cost $319,898,314) 386,388,183
---------------------------------------------------------------------------------------
Total Investment Portfolio-- 100.0% (Cost $335,351,314) (a) 401,841,183
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</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
--------------------------------------------------------------------------------
* Non-income producing security.
** Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities.
(a) The cost for federal income tax purposes was $335,661,255. At April 30,
2000, net unrealized appreciation for all securities based on tax cost was
$66,179,928. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $77,059,189 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$10,879,261.
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
Statement of Assets and Liabilities as of April 30, 2000 (Unaudited)
----------------------------------------------------------------------------------------------
Assets
----------------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (cost $335,351,314) ...................... $ 401,841,183
Cash ......................................................................... 1,327
Receivable for investments sold .............................................. 4,579,365
Dividends receivable ......................................................... 184,801
Interest receivable .......................................................... 2,581
Receivable for Fund shares sold .............................................. 1,674,294
Deferred organization expenses ............................................... 10,590
Due from Adviser ............................................................. 117,600
Other assets ................................................................. 1,147
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Total assets ................................................................. 408,412,888
Liabilities
----------------------------------------------------------------------------------------------
Payable for investments purchased ............................................ 10,729,125
Payable for Fund shares redeemed ............................................. 198,248
Accrued Trustees' fees and expenses .......................................... 36,092
Other accrued expenses and payables .......................................... 653,503
-------------
Total liabilities ............................................................ 11,616,968
----------------------------------------------------------------------------------------------
Net assets, at value $ 396,795,920
----------------------------------------------------------------------------------------------
Net Assets
----------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated net investment loss .............................................. (1,181,405)
Net unrealized appreciation (depreciation) on investments .................... 66,489,869
Accumulated net realized gain (loss) ......................................... 21,212,803
Paid-in capital .............................................................. 310,274,653
----------------------------------------------------------------------------------------------
Net assets, at value $ 396,795,920
----------------------------------------------------------------------------------------------
Net Asset Value
----------------------------------------------------------------------------------------------
Scudder Shares
Net asset value, offering and redemption price per share ($173,343,630 /
6,516,132 outstanding shares of beneficial interest, $.01 par value, -------------
unlimited number of shares authorized) .................................... $ 26.60
-------------
Class A Shares
Net asset value and redemption price per share ($112,960,338 / 4,226,204
outstanding shares of beneficial interest, $.01 par value, unlimited number -------------
of shares authorized) ..................................................... $ 26.73
-------------
-------------
Maximum offering price per share (100 / 94.25 of $26.73) ..................... $ 28.36
-------------
Class B Shares
Net asset value, offering and redemption price (subject to contingent deferred
sales charge) per share ($92,389,425 / 3,521,499 outstanding shares of -------------
beneficial interest, $.01 par value, unlimited number of shares authorized) $ 26.24
-------------
Class C Shares
Net asset value, offering and redemption price (subject to contingent deferred
sales charge) per share ($18,102,527 / 691,528 outstanding shares of -------------
beneficial interest, $.01 par value, unlimited number of shares authorized) $ 26.18
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Statements of Operations for the six months ended April 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Investment Income
--------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $2,587) ........... $ 1,047,459
Interest ...................................................... 374,337
------------
Total Income .................................................. 1,421,796
------------
Expenses:
Management fee ................................................ 1,170,032
Services to shareholders ...................................... 945,107
Custodian and accounting fees ................................. 103,030
Distribution services fees .................................... 303,012
Administrative services fees .................................. 212,757
Auditing ...................................................... 19,372
Legal ......................................................... 18,006
Trustees' fees and expenses ................................... 77,442
Reports to shareholders ....................................... 90,032
Registration fees ............................................. 90,788
Amortization of organization expenses ......................... 2,390
Other ......................................................... 18,007
------------
Total expenses, before expense reductions ..................... 3,049,975
Expense reductions ............................................ (446,774)
------------
Total expenses, after expense reductions ...................... 2,603,201
--------------------------------------------------------------------------------
Net investment income (loss) (1,181,405)
--------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
--------------------------------------------------------------------------------
Net realized gain (loss) from investments ..................... 21,940,703
Net unrealized appreciation (depreciation) during the
period on investments ...................................... 18,530,618
--------------------------------------------------------------------------------
Net gain (loss) on investment transactions 40,471,321
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 39,289,916
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Statements of Changes in Net Assets
--------------------------------------------------------------------------------------
Six Months Two Months
Increase (Decrease) in Ended April 30, Ended October Year Ended
Net Assets 2000 (Unaudited) 31, 1999 August 31, 1999
--------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income (loss) ...... $ (1,181,405) $ (293,550) $ (932,342)
Net realized gain (loss) on
investment transactions ........ 21,940,703 2,343,968 9,396,870
Net unrealized appreciation
(depreciation) on investment
transactions during the period . 18,530,618 14,900,813 44,795,107
------------- ------------- ---------------
Net increase (decrease) in net
assets resulting from operations 39,289,916 16,951,231 53,259,635
------------- ------------- ---------------
Distributions to shareholders from:
Net realized gains-- Scudder Shares (6,409,116) -- (4,994,696)
Net realized gains-- Class A ...... (3,258,435) -- (734,391)
Net realized gains-- Class B ...... (2,296,884) -- (597,986)
Net realized gains-- Class C ...... (410,739) -- (91,871)
------------- ------------- ---------------
Fund share transactions:
Proceeds from shares sold ......... 217,410,373 22,858,479 167,868,674
Reinvestment of distributions ..... 12,138,255 -- 6,289,899
Cost of shares redeemed ........... (110,041,068) (13,479,531) (114,518,626)
------------- ------------- ---------------
Net increase (decrease) in net
assets from Fund share
transactions ................... 119,507,560 9,378,948 59,639,947
------------- ------------- ---------------
Increase (decrease) in net assets . 146,422,302 26,330,179 106,480,638
Net assets at beginning of period . 250,373,618 224,043,439 117,562,801
Net assets at end of period
(including accumulated net
investment loss of $1,181,405 ------------- ------------- ---------------
at April 30, 2000) ............. $ 396,795,920 $ 250,373,618 $ 224,043,439
------------- ------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each period (a) and other performance information derived from the financial
statements.
Scudder Shares (b)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Periods ended October 31, 2000(c) 1999(g) 1999(d) 1998(d) 1997(e)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $24.20 $22.55 $16.61 $17.38 $12.00
-------------------------------------------------
-----------------------------------------------------------------------------------------
Income (loss) from investment operations:
-----------------------------------------------------------------------------------------
Net investment income (loss) (.07) (.03) (.10) .01 .06
-----------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investment transactions 3.58 1.68 6.85 (.45) 5.36
-------------------------------------------------
-----------------------------------------------------------------------------------------
Total from investment operations 3.51 1.65 6.75 (.44) 5.42
-----------------------------------------------------------------------------------------
Less distributions from:
-----------------------------------------------------------------------------------------
Net investment income -- -- -- (.04) (.04)
-----------------------------------------------------------------------------------------
Net realized gains on investment
transactions (1.11) -- (.81) (.29) --
-------------------------------------------------
-----------------------------------------------------------------------------------------
Total distributions (1.11) -- (.81) (.33) (.04)
-----------------------------------------------------------------------------------------
Net asset value, end of period $26.60 $24.20 $22.55 $16.61 $17.38
-------------------------------------------------
-----------------------------------------------------------------------------------------
Total Return (%) (f) 14.61** 7.36** 41.06 (2.72) 45.20**
-----------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
-----------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 173.3 143.2 133.3 103.5 53.2
-----------------------------------------------------------------------------------------
Ratio of expenses before expense
reductions (%) 1.64(h)* 1.78* 1.84 1.61 2.25*
-----------------------------------------------------------------------------------------
Ratio of expenses after expense
reductions (%) 1.39(h)* 1.53* 1.59 1.30 1.25*
-----------------------------------------------------------------------------------------
Ratio of net investment income (loss)
(%) (.54)* (.71)* (.48) .03 .43*
-----------------------------------------------------------------------------------------
Portfolio turnover rate (%) 88* 58* 68 49 27*
-----------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) On April 16, 1998, existing shares of the Fund were designated as Scudder
Shares and are generally not available to new investors.
(c) For the six months ended April 30, 2000 (Unaudited).
(d) For the year ended August 31.
(e) For the period September 9, 1996 (commencement of operations) to August 31,
1997.
(f) Total return would have been lower had certain expenses not been reduced.
(g) Two months ended October 31, 1999. On August 10, 1999 the Board of Trustees
of the Fund changed the fiscal year end from August 31 to October 31.
(h) The ratios of operating expenses excluding costs incurred in connection
with the reorganization before and after expense reductions were 1.62% and
1.38%, respectively.
* Annualized
** Not annualized
25
<PAGE>
Notes to Financial Statements (Unaudited)
--------------------------------------------------------------------------------
A. Significant Accounting Policies
Classic Growth Fund (the "Fund") is a diversified series of Investment Trust
(the "Trust") which is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end management investment company organized
as a Massachusetts business trust.
On August 10, 1999, the Fund changed its fiscal year end for financial reporting
and federal income tax purposes to October 31 from August 31.
Effective April 16, 1998, the Fund changed its name from Scudder Classic Growth
Fund to Classic Growth Fund and an additional three classes of shares were
offered, namely Classes A, B and C. Existing shares of Classic Growth Fund
outstanding on that date were redesignated Scudder 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. Scudder Shares,
generally not available to new investors, are not subject to initial or
contingent deferred sales charges. Certain detailed financial information for
the Class A, B, and C shares is provided separately and is available upon
request.
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.
26
<PAGE>
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.
Portfolio debt securities purchased with an original maturity greater than sixty
days are valued by pricing agents approved by the officers of the Trust, whose
quotations reflect broker/dealer-supplied valuations and electronic data
processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
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
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.
Distribution of Income and Gains. Distributions of net investment income, if
any, are made annually. Net realized gains from investment transactions, in
27
<PAGE>
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.
B. Purchases and Sales of Securities
For the six months ended April 30, 2000, purchases and sales of investment
securities (excluding short-term investments) aggregated $243,170,078 and
$141,131,229, respectively.
C. Related Parties
Under the Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser") the Adviser directs the
investments of the Fund in accordance with its investment objectives, policies,
and restrictions. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the Adviser provides certain
administrative services in accordance with the Agreement. The management fee
payable under the Agreement is equal to an annual rate of 0.70% of the Fund's
average daily net assets, computed and accrued daily and payable monthly.
Effective April 16, 1998, the Adviser has agreed to waive 0.25% of its
management fee until January 31, 2001. For the six months ended April 30, 2000,
the Adviser did not impose a portion of its management fee amounting to
$415,019, and the fee imposed amounted to $755,013.
28
<PAGE>
Distribution Service Agreement. In accordance with Rule 12b-1 under the
Investment Company Act of 1940, Kemper Distributors, Inc. ("KDI"), a subsidiary
of the Adviser, receives a fee of 0.75% of average daily net assets of Classes B
and C. Pursuant to the agreement, KDI enters into related selling group
agreements with various firms at various rates for sales of Class B and C
shares. For the six months ended April 30, 2000, the Distribution Fee was as
follows:
Total Unpaid at
Distribution Fee Aggregated April 30, 2000
--------------------------------------------------------------------------------
Class B ............................... $ 254,176 $ 204,272
Class C ............................... 48,836 35,248
$ 303,012 $ 239,520
Underwriting Agreement and Contingent Deferred Sales Charge. KDI is the
principal underwriter for Classes A, B and C. Underwriting commissions paid in
connection with the distribution of Class A shares for the six months ended
April 30, 2000 aggregated $173,636, of which $139,910 was paid to other firms.
In addition, KDI receives any contingent deferred sales charge (CDSC) from Class
B share redemptions occurring within six years of purchase and Class C share
redemptions occurring within one year of purchase. There is no such charge upon
redemption of any share appreciation or reinvested dividends. Contingent
deferred sales charges are based on declining rates ranging from 4% to 1% for
Class B and 1% for Class C, of the value of the shares redeemed. For the six
months ended April 30, 2000, the CDSC for Classes B and C aggregated $69,618 and
$317, respectively.
Administrative Service Fees. KDI provides information and administrative
services to Classes A, B and C shareholders at an annual rate of up to 0.25% of
average daily net assets for each such class. KDI in turn has various agreements
with financial services firms that provide these services and pays these firms
based on assets of shareholder accounts the firms service. For the
29
<PAGE>
six months ended April 30, 2000, the Administrative Services Fee was as follows:
Total Unpaid at
Administrative Services Fee Aggregated April 30, 2000
--------------------------------------------------------------------------------
Class A .................................... $ 111,753 $ 25,441
Class B .................................... 84,726 1,459
Class C .................................... 16,278 842
$ 212,757 $ 27,742
Shareholder Services Fees. Kemper Service Company ("KSC"), an affiliate of the
Adviser, is the transfer, dividend-paying and shareholder service agent for the
Fund's Classes A, B and C Shares. For the six months ended April 30, 2000, the
amount charged to Classes A, B and C by KSC aggregated $134,120, $141,107, and
$38,856, respectively, of which $96,453 is unpaid at April 30, 2000. Scudder
Service Corporation ("SSC"), a subsidiary of the Adviser, is the transfer,
dividend-paying and shareholder service agent for the Scudder Shares. For the
six months ended April 30, 2000, the amount charged to the Scudder Shares by SSC
for shareholder services aggregated $156,294, of which $23,272 is unpaid at
April 30, 2000.
The Scudder Shares of the Fund are one of several Scudder Funds (the "Underlying
Funds") in which the Scudder Pathway Series Portfolios (the "Portfolios")
invest. In accordance with the Special Servicing Agreement entered into by the
Adviser, the Portfolios, the Underlying Funds, SSC, SFAC, STC, and Scudder
Investor Services, Inc., expenses from the operation of the Portfolios are borne
by the Underlying Funds based on each Underlying Fund's proportionate share of
assets owned by the Portfolios. No Underlying Funds will be charged expenses
that exceed the estimated savings to such Underlying Fund. These estimated
savings result from the elimination of separate shareholder accounts which
either currently are or have potential to be invested in the Underlying Funds.
For the six months ended April 30, 2000, the Special Servicing Agreement expense
charged to the Scudder Shares amounted to $335,412, of which $39,120 is unpaid
at April 30, 2000.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Scudder Shares of the Fund. For the six
months ended April 30, 2000, the amount charged to the Scudder Shares by STC
aggregated $10,077, all of which is unpaid at April 30, 2000.
30
<PAGE>
Fund Accounting Fees. Scudder Fund Accounting Corporation ("SFAC"), a subsidiary
of the Adviser, is responsible for determining the daily net asset value per
share and maintaining the portfolio and general accounting records of the Fund.
For the six months ended April 30, 2000, the amount charged to the Fund by SFAC
aggregated $69,065, of which $9,840 is unpaid at April 30, 2000.
Trustees Fees. The Trust pays each of its Trustees not affiliated with the
Adviser an annual retainer plus specified amounts for attended board and
committee meetings. For the six months ended April 30, 2000, the Trustees' fees
and expenses aggregated $20,566. In addition, a one-time fee of $56,876 was
accrued for payment to those Trustees not affiliated with the Adviser who are
not standing for re-election, under the reorganization discussed in Note G.
Inasmuch as the Adviser will also benefit from administrative efficiencies of a
consolidated Board, the Adviser has agreed to bear $28,438 of such costs.
D. Expense Off-Set Arrangements
The Fund has entered into arrangements with its custodian and transfer agents
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 $36 and $3,281, respectively, under
these arrangements.
E. Line of Credit
The Fund and several other Scudder Funds (the "Participants") share in a $1
billion revolving credit facility for temporary or emergency purposes, including
the meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated, pro rata based upon net assets, among each of the
Participants. Interest is calculated based on the market rates at the time of
borrowing. The Fund may borrow up to a maximum of 33 percent of its net assets
under the agreement.
31
<PAGE>
--------------------------------------------------------------------------------
F. Share Transactions
The following table summarizes shares of beneficial interest and dollar activity
in the Fund:
<TABLE>
<CAPTION>
Six Months Ended Two Months Ended
April 30, 2000 October 31, 1999
-------------------------------- --------------------------------
Shares Dollars Shares Dollars
Shares sold
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Scudder Shares 1,493,857 $ 39,081,048 191,253 $ 4,368,502
Class A ......... 4,015,926 105,892,291 467,676 10,792,550
Class B ......... 2,321,929 59,800,222 282,287 6,387,191
Class C ......... 489,853 12,636,812 57,839 1,310,236
8,321,565 $ 217,410,373 999,055 $ 22,858,479
Shares issued to shareholders in reinvestment of distributions
------------------------------------------------------------------------------------
Scudder Shares 246,889 $ 6,362,305 -- --
Class A ......... 123,957 3,209,231 -- --
Class B ......... 85,399 2,176,832 -- --
Class C ......... 15,301 389,887 -- --
471,546 $ 12,138,255 -- --
Shares redeemed
------------------------------------------------------------------------------------
Scudder Shares (1,140,960) $ (29,519,662) (186,095) $ (4,242,573)
Class A ......... (2,490,915) (66,118,673) (307,088) (7,090,317)
Class B ......... (447,275) (11,546,753) (83,158) (1,889,264)
Class C ......... (110,811) (2,855,980) (11,341) (257,377)
(4,189,961) $(110,041,068) (587,682) $ (13,479,531)
Net increase (decrease)
------------------------------------------------------------------------------------
Scudder Shares 599,786 $ 15,923,691 5,158 $ 125,929
Class A ......... 1,648,968 42,982,849 160,588 3,702,233
Class B ......... 1,960,053 50,430,301 199,129 4,497,927
Class C ......... 394,343 10,170,719 46,498 1,052,859
4,603,150 $ 119,507,560 411,373 $ 9,378,948
</TABLE>
32
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
August 31, 1999
---------------------------------
Shares Dollars
Shares sold
------------------------------------------------------------------------------------
<S> <C> <C>
Scudder Shares .................................. 1,767,053 $ 36,814,454
Class A ......................................... 4,181,810 89,719,684
Class B ......................................... 1,703,242 35,213,582
Class C ......................................... 290,638 6,120,954
7,942,743 $ 167,868,674
Shares issued to shareholders in reinvestment of distributions
------------------------------------------------------------------------------------
Scudder Shares .................................. 241,446 $ 4,918,255
Class A ......................................... 34,363 700,664
Class B ......................................... 28,770 583,153
Class C ......................................... 4,331 87,827
308,910 $ 6,289,899
Shares redeemed
------------------------------------------------------------------------------------
Scudder Shares .................................. (2,330,780) $ (48,909,586)
Class A ......................................... (2,232,659) (48,175,880)
Class B ......................................... (727,039) (15,294,433)
Class C ......................................... (99,616) (2,138,727)
(5,390,094) $(114,518,626)
Net increase (decrease)
------------------------------------------------------------------------------------
Scudder Shares .................................. (322,281) $ (7,176,877)
Class A ......................................... 1,983,514 42,244,468
Class B ......................................... 1,004,973 20,502,302
Class C ......................................... 195,353 4,070,054
2,861,559 $ 59,639,947
</TABLE>
33
<PAGE>
--------------------------------------------------------------------------------
G. Reorganization
In early 2000, Scudder Kemper initiated a restructuring program for most of its
Scudder no-load open-end funds in response to changing industry conditions and
investor needs. The program proposes to streamline the management and operations
of most of the no-load open-end funds Scudder Kemper advises principally through
the liquidation of several small funds, mergers of certain funds with similar
investment objectives, the creation of one Board of Directors/Trustees and the
adoption of an administrative fee covering the provision of most of the services
currently paid for by the affected funds. Costs incurred in connection with this
restructuring initiative are being borne jointly by Scudder Kemper and certain
of the affected funds.
34
<PAGE>
Officers and Trustees
--------------------------------------------------------------------------------
Linda C. Coughlin*
o President and Trustee
Henry P. Becton, Jr.
o Trustee; President and General
Manager, WGBH Educational
Foundation
Dawn-Marie Driscoll
o Trustee; President, Driscoll
Associates; Executive Fellow,
Center for Business Ethics,
Bentley College
Peter B. Freeman
o Trustee; Corporate Director and
Trustee
George M. Lovejoy, Jr.
o Trustee; President and Director,
Fifty Associates
Wesley W. Marple, Jr.
o Trustee; Professor of Business
Administration, Northeastern University,
College of Business
Administration
Kathryn L. Quirk*
o Trustee, Vice President and
Assistant Secretary
Jean C. Tempel
o Trustee; Managing Director,
First Light Capital
Bruce F. Beaty*
o Vice President
Jennifer P. Carter*
o Vice President
James M. Eysenbach*
o Vice President
William F. Gadsden*
o Vice President
Valerie F. Malter*
o Vice President
Ann M. McCreary*
o Vice President
Kathleen T. Millard*
o Vice President
John R. Hebble*
o Treasurer
John Millette*
o Vice President and Secretary
Caroline Pearson*
o Assistant Secretary
*Scudder Kemper Investments, Inc.
35
<PAGE>
Investment Products and Services
--------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
The Scudder Family of Funds+++
--------------------------------------------------------------------------------
<S> <C>
Money Market U.S. Growth
Scudder U.S. Treasury Money Fund Value
Scudder Cash Investment Trust Scudder Large Company Value Fund
Scudder Money Market Series -- Scudder Value Fund***
Prime Reserve Shares* Scudder Small Company Value Fund
Premium Shares* Scudder Micro Cap Fund
Managed Shares*
Growth
Tax Free Money Market+ Scudder Classic Growth Fund***
Scudder Tax Free Money Fund Scudder Large Company Growth Fund***
Scudder California Tax Free Money Fund** Scudder Select 1000 Growth Fund
Scudder New York Tax Free Money Fund** Scudder Development Fund
Scudder 21st Century Growth Fund
Tax Free+
Scudder Limited Term Tax Free Fund Global Equity
Scudder Medium Term Tax Free Fund Worldwide
Scudder Managed Municipal Bonds Scudder Global Fund
Scudder High Yield Tax Free Fund Scudder International Value Fund
Scudder California Tax Free Fund** Scudder International Growth and
Scudder Massachusetts Limited Term Income Fund
Tax Free Fund** Scudder International Fund++
Scudder Massachusetts Tax Free Fund** Scudder International Growth Fund
Scudder New York Tax Free Fund** Scudder Global Discovery Fund***
Scudder Ohio Tax Free Fund** Scudder Emerging Markets Growth Fund
Scudder Gold Fund
U.S. Income
Scudder Short Term Bond Fund Regional
Scudder GNMA Fund Scudder Greater Europe Growth Fund
Scudder Income Fund Scudder Pacific Opportunities Fund
Scudder Corporate Bond Fund Scudder Latin America Fund
Scudder High Yield Bond Fund The Japan Fund, Inc.
Global Income Industry Sector Funds
Scudder Global Bond Fund Choice Series
Scudder International Bond Fund Scudder Financial Services Fund
Scudder Emerging Markets Income Fund Scudder Health Care Fund
Scudder Technology Fund
Asset Allocation
Scudder Pathway Conservative Portfolio Preferred Series
Scudder Pathway Balanced Portfolio Scudder Tax Managed Growth Fund
Scudder Pathway Growth Portfolio Scudder Tax Managed Small Company Fund
U.S. Growth and Income
Scudder Balanced Fund
Scudder Dividend & Growth Fund
Scudder Growth and Income Fund***
Scudder Select 500 Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment Fund
</TABLE>
36
<PAGE>
--------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
--------------------------------------------------------------------------------
Retirement Programs and Education Accounts
--------------------------------------------------------------------------------
Retirement Programs Education Accounts
Traditional IRA Education IRA
Roth IRA UGMA/UTMA
SEP-IRA IRA for Minors
Inherited IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Closed-End Funds#
-----------------------------------------------------------------------------------------
<S> <C>
The Argentina Fund, Inc. Montgomery Street Income Securities, Inc.
The Brazil Fund, Inc. Scudder Global High Income Fund, Inc.
The Korea Fund, Inc. Scudder New Asia Fund, Inc.
</TABLE>
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money.
+++ Funds within categories are listed in order from expected least
risk to most risk. Certain Scudder funds or classes thereof may
not be available for purchase or exchange.
+ A portion of the income from the tax-free funds may be subject to
federal, state, and local taxes.
* A class of shares of the fund.
** Not available in all states.
*** Only the Scudder Shares of the fund are part of the Scudder Family
of Funds.
++ Only the International Shares of the fund are part of the Scudder
Family of Funds.
+++ +++ A no-load variable annuity contract provided by Charter National
Life Insurance Company and its affiliate, offered by Scudder
Kemper Investment's insurance agencies, 1-800-225-2470.
+++ +++ +++ A no-load variable annuity contract issued by Glenbrook Life and
Annuity Company and underwritten by Allstate Financial Services,
Inc., sold by Scudder Kemper Investment's insurance agencies,
1-800-225-2470.
# These funds, advised by Scudder Kemper Investments, Inc., are
traded on the New York Stock Exchange and, in some cases, on
various other stock exchanges.
37
<PAGE>
Scudder Solutions
--------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Convenient Automatic Investment Plan
ways to invest,
quickly and A convenient investment program in which money is
reliably electronically debited from your bank account monthly to
regularly purchase fund shares and "dollar cost average" --
buy more shares when the fund's price is lower and fewer
when it's higher, which can reduce your average purchase
price over time.*
Automatic Dividend Transfer
The most timely, reliable, and convenient way to purchase
shares -- use distributions from one Scudder fund to
purchase shares in another, automatically (accounts with
identical registrations or the same social security or tax
identification number).
QuickBuy
Lets you purchase Scudder fund shares electronically,
avoiding potential mailing delays; money for each of your
transactions is electronically debited from a previously
designated bank account.
Payroll Deduction and Direct Deposit
Have all or part of your paycheck -- even government checks
-- invested in up to four Scudder funds at one time.
* Dollar cost averaging involves continuous investment in
securities regardless of price fluctuations and does not
assure a profit or protect against loss in declining
markets. Investors should consider their ability to
continue such a plan through periods of low price
levels.
Around-the- Scudder Automated Information Line: SAIL(TM) --
clock electronic 1-800-343-2890
account
service and Personalized account information, the ability to exchange
information, or redeem shares, and information on other Scudder funds
including some and services via touchtone telephone.
transactions
Scudder's Web Site -- www.scudder.com
Personal Investment Organizer: Offering account information
and transactions, interactive worksheets, prospectuses and
applications for all Scudder funds, plus your current asset
allocation, whenever your need them. Scudder's site also
provides news about Scudder funds, retirement planning
information, and more.
38
<PAGE>
--------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Retirees and Automatic Withdrawal Plan
those who depend
on investment You designate the bank account, determine the schedule (as
proceeds for frequently as once a month) and amount of the redemptions,
living expenses and Scudder does the rest.
can enjoy these
convenient, Distributions Direct
timely, and
reliable Automatically deposits your fund distributions into the
automated bank account you designate within three business days after
withdrawal each distribution is paid.
programs
QuickSell
Provides speedy access to your money by electronically
crediting your redemption proceeds to the bank account you
previously designated.
For more Call a Scudder representative at
information about 1-800-SCUDDER
these services
Or visit our Web site at
www.scudder.com
Please address The Scudder Funds
all written PO Box 2291
correspondence Boston, Massachusetts
to 02107-2291
39
<PAGE>
About the Fund's Adviser
SCUDDER
INVESTMENTS (SM)
[LOGO]
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Financial Services Group
Scudder Kemper Investments, Inc. is one of the largest and most experienced
investment management organizations worldwide, managing more than $290 billion
in assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded over 80
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Financial Services Group. As a result, Zurich's subsidiary, Zurich
Kemper Investments, Inc., with 50 years of mutual fund and investment management
experience, was combined with Scudder. Headquartered in New York, 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. With its global investment resources and
perspective, the firm seeks opportunities in markets throughout the world to
meet the needs of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Financial Services Group. The Zurich Financial Services Group is
an internationally recognized leader in financial services, including
property/casualty and life insurance, reinsurance, and asset management.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
<PAGE>
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED APRIL 30, 2000
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
Seeks long-term growth of capital with reduced share price volatility compared
with other growth mutual funds. Kemper Classic Growth Fund is registered as
Classic Growth Fund.
KEMPER CLASSIC GROWTH FUND
"... Strong stock picking, within technology-related
sectors in particular, continued to drive the fund's
relative outperformance. We achieved this without
significantly overweighting technology stocks.
Instead we maintained a well-diversified
portfolio, which outperformed even in the
very narrow technology-driven market. ..."
[KEMPER FUNDS LOGO]
<PAGE>
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
8
INDUSTRY SECTORS
9
LARGEST HOLDINGS
10
PORTFOLIO OF INVESTMENTS
14
FINANCIAL STATEMENTS
17
FINANCIAL HIGHLIGHTS
20
NOTES TO FINANCIAL STATEMENTS
AT A GLANCE
TERMS TO KNOW
2
<PAGE>
--------------------------------------------------------------------------------
KEMPER CLASSIC GROWTH FUND
TOTAL RETURNS
--------------------------------------------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 2000
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER CLASSIC GROWTH KEMPER CLASSIC GROWTH LIPPER GROWTH FUNDS
KEMPER CLASSIC GROWTH FUND CLASS A FUND CLASS B FUND CLASS C CATEGORY AVERAGE*
---------------------------------- --------------------- --------------------- -------------------
<S> <C> <C> <C>
14.67 14.15 13.93 10.79
</TABLE>
RETURNS ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MIGHT BE
WORTH MORE OR LESS THAN ORIGINAL COST.
NET ASSET VALUE
AS OF AS OF
4/30/00 10/31/99
--------------------------------------------------------------------------------
KEMPER CLASSIC GROWTH FUND
CLASS A $26.73 $24.30
--------------------------------------------------------------------------------
KEMPER CLASSIC GROWTH FUND
CLASS B $26.24 $23.98
--------------------------------------------------------------------------------
KEMPER CLASSIC GROWTH FUND
CLASS C $26.18 $23.97
KEMPER CLASSIC GROWTH FUND
RANKINGS AS OF 4/30/00*
COMPARED WITH ALL OTHER FUNDS IN THE LIPPER GROWTH FUNDS CATEGORY
CLASS A CLASS B CLASS C
--------------------------------------------------------------------------------
1-YEAR #17 of #20 of #24 of
423 funds 423 funds 423 funds
* 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; IF SALES CHARGES HAD BEEN INCLUDED, RESULTS
MIGHT HAVE BEEN LESS FAVORABLE.
DIVIDEND REVIEW
DURING THE PERIOD ENDED APRIL 30, 2000, KEMPER CLASSIC GROWTH FUND PAID THE
FOLLOWING DIVIDENDS.
CLASS A CLASS B CLASS C
--------------------------------------------------------------------------------
LONG-TERM CAPITAL GAIN $1.11 $1.11 $1.11
--------------------------------------------------------------------------------
3
<PAGE>
YOUR FUND'S STYLE
MORNINGSTAR EQUITY STYLE BOX(TM)
[MORNINGSTAR EQUITY STYLE Source: Morningstar, Inc. Chicago, IL. (312)
BOX] 696-6000. The Morningstar 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 relevant of the three market-cap groups.
THE STYLEBOX REPRESENTS A SNAPSHOT OF THE FUND'S
PORTFOLIO ON A SINGLE DAY. IT IS NOT AN EXACT
ASSESSMENT OF RISK AND DOES 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. CATEGORY PLACEMENTS OF NEW FUNDS ARE
ESTIMATED. MORNINGSTAR HAS PLACED KEMPER CLASSIC
GROWTH FUND IN THE GROWTH FUNDS CATEGORY. PLEASE
CONSULT THE PROSPECTUS FOR A DESCRIPTION OF
INVESTMENT POLICIES.
GROWTH STOCK Growth stocks are shares in companies that are expected to
experience rapid growth resulting from strong sales, talented management and
dominant market position. Because these stocks are typically in demand, they
tend to carry relatively high price tags and can also be volatile, based on
changing perceptions of the companies' growth.
INITIAL PUBLIC OFFERING (IPO) The first launch of a company's publicly traded
stock. IPOs often involve a relatively small quantity of shares. When paired
with fluctuating demand, the small quantity of shares can contribute to
increased volatility.
NARROW MARKET A narrow market is a securities market in which most of the gains
are earned by only a small group of companies. In 1998 and most of 1999, a
narrow market existed in which only the largest growth-style stocks enjoyed
robust gains.
PRICE-TO-EARNINGS (P/E) RATIO A P/E ratio is a company's stock price divided by
its earnings for the past four quarters. The P/E ratio, also known as the
multiple, is a measure of how much an investor is paying for a company's earning
power.
4
<PAGE>
PERFORMANCE UPDATE
[GADSDEN PHOTO]
CO-LEAD PORTFOLIO MANAGER WILLIAM F. GADSDEN JOINED SCUDDER KEMPER INVESTMENTS,
INC. IN 1983 AND HAS MORE THAN 15 YEARS OF INVESTMENT INDUSTRY EXPERIENCE.
[BEATY PHOTO]
CO-LEAD PORTFOLIO MANAGER BRUCE F. BEATY JOINED THE ORGANIZATION IN 1991 AND HAS
NEARLY 20 YEARS OF INVESTMENT INDUSTRY EXPERIENCE. GADSDEN AND BEATY HAVE
MANAGED THE FUND SINCE ITS INCEPTION IN 1996. SCUDDER KEMPER INVESTMENTS' LARGE
STAFF OF ANALYSTS, RESEARCHERS, TRADERS, ECONOMISTS AND OTHER INVESTMENT
PROFESSIONALS SUPPORTS THE TEAM.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY
THROUGH THE END OF THE REPORTING PERIOD INDICATED ON THE COVER. THE MANAGERS'
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER CONDITIONS.
TECHNOLOGY, SPECIFICALLY SPECULATIVE INTERNET-RELATED COMPANIES, DOMINATED
MARKET RETURNS FOR MOST OF THE FUND'S SEMIANNUAL PERIOD -- NOVEMBER 1, 1999,
THROUGH APRIL 30, 2000. KEMPER CLASSIC GROWTH FUND CO-LEAD PORTFOLIO MANAGERS
WILLIAM GADSDEN AND BRUCE BEATY DISCUSS HOW THEY LED THE FUND TO OUTPERFORM ITS
BENCHMARK AND PEERS, WHILE STAYING AWAY FROM THE MOST SPECULATIVE TECHNOLOGY AND
INTERNET-RELATED STOCKS AND MANAGING THE PORTFOLIO'S RISK.
Q HOW DID KEMPER CLASSIC GROWTH FUND PERFORM DURING THE SEMIANNUAL PERIOD?
A We're very pleased with Kemper Classic Growth Fund's performance. The fund
handily outperformed both its benchmark and its peer group. The fund's Class A
shares (unadjusted for any sales charge) gained 14.67 percent, while its
benchmark, the Standard & Poor's 500 stock index, gained just 7.20 percent, and
the Lipper Large-Cap Core Fund Category average was 10.79 percent for the same
period.
Q TO WHAT DO YOU ATTRIBUTE KEMPER CLASSIC GROWTH FUND'S OUTPERFORMANCE?
A Strong stock picking, within technology-related sectors in particular,
continued to drive the fund's relative outperformance. We achieved this without
significantly overweighting technology stocks. Instead we maintained a
well-diversified portfolio, which outperformed even in the very narrow
technology-driven market.
Q WILL YOU PROVIDE AN OVERVIEW OF THE MARKET AND HOW IT WAS IMPACTED BY ECONOMIC
EVENTS OVER THE LAST SIX MONTHS?
A Volatility in the market was extreme during the period as the Federal Reserve
Board (the Fed) aggressively raised interest rates and a small group of large
growth stocks -- primarily technology and Internet-related stocks -- gained
momentum and dominated market returns from November through February.
Early in the period, it seemed as if nothing could stop the momentum of the
technology sector and specifically the Internet or "dot-com" stocks. Nearly
every new initial public offering of an Internet-related stock shot through the
roof and catapulted new, untested businesses to high market capitalizations once
reserved only for tried-and-true companies with long-term earnings track
records. Momentum for almost any company tied to the Internet in some way grew,
while nearly every other type of stock endured lackluster returns or losses.
After falling in the first two months of 2000, the S&P 500 surged to new highs
in March on a rebound in depressed financial and cyclical stocks. A combination
of strong economic momentum, moderate inflation and an improving corporate
profits outlook helped to alleviate prior concerns about the impact of rising
energy and labor prices and the threat of a more aggressive Fed-tightening
regimen.
More dramatic than the turnaround in the direction of the market was the sharp
change in market leadership. Through February, technology was the only bright
spot as the rest of the market struggled.
5
<PAGE>
PERFORMANCE UPDATE
Among the hardest hit were financial, consumer and manufacturing-related stocks,
due to concerns about the Fed's determination to slow the economy. Also,
technology stocks thrived on fundamental as well as technical drivers. From a
fundamental standpoint, demand globally for Internet and telecommunications
infrastructure spending continued to accelerate, driving revenue growth (and
profit growth for established firms). Strong growth and relatively low levels of
debt have helped to make many stocks in the sector less sensitive to
fluctuations in interest rates. At the same time, technical factors -- market
sentiment and mutual fund investment flows among other items -- drove valuations
in several parts of the sector to unwarranted levels earlier in the year. Much
of the recent volatility has been the result of short-term fluctuations in these
technical factors, rather than a longer-term change in fundamentals for the
higher-quality, established firms.
In March, leadership shifted as financial and cyclical sectors responded
favorably to a more benign economic outlook. A tug of war continued in April
between technology stocks and more conservative value-oriented stocks, and with
that struggle came increased market volatility. The fund's diversified approach
and attention to risk management helped mitigate some of the volatility during
this period.
Q ARE YOU CONCERNED ABOUT THE CORRECTION IN TECHNOLOGY STOCKS?
A No, we're not. In fact, we think it may be healthy for the overall market.
Many technology stocks had grown to valuations that we believed to be
unwarranted and unsustainably high -- especially for a large group of untested
dot-com stocks. What we started to see in March was a refocusing on valuations
in which investors began to look at earnings, business plans and other
fundamental factors. We may see more fallout in the newer Internet companies,
but stocks of established, fundamentally sound technology companies should
continue to grow.
Q PLEASE TELL US ABOUT THE FUND'S TECHNOLOGY STOCKS AND YOUR ATTITUDE ABOUT
THEIR HIGH VALUATIONS.
A We have a significant position in technology stocks -- close to that of our
S&P 500 benchmark -- but generally we hold only those companies that fit our
"growth-at-a-reasonable-price" discipline. And although technology valuations
are quite high, we do own some stocks with very high price-to-earnings ratios
such as Cisco Systems and QUALCOMM. However, we own the market leaders and
always select these companies within the context of the overall portfolio and
how they impact its risk profile. We are fairly consistent at keeping the fund's
P/E ratio lower than that of the average growth fund.
Our technology holdings certainly helped performance during this period as
most other sectors struggled. And although our tech holdings suffered in March
and April along with the rest of the technology sector, their relatively strong
fundamentals enabled them to fall less than some of the high-flying Internet
stocks that we didn't own.
Q WILL YOU EXPLAIN WHAT YOU MEAN BY "GROWTH AT A REASONABLE PRICE"?
A Kemper Classic Growth Fund pursues long-term growth of capital, with reduced
share-price volatility compared with other growth-stock funds. To do this, we
follow a growth-at-a-reasonable-price (GARP) investment strategy. Our investment
process targets high-quality, large-cap growth stocks. We seek established
companies with strong competitive positions, stable and consistent
earnings-growth prospects, excellent balance sheets and strong management.
Outstanding fundamentals and growth potential are only a part of what we want,
however. Our analysis must indicate that the stocks are "reasonably valued," or
in other words, trading at an attractive price.
We sell stocks when we see indications of deteriorating fundamentals or
slowing earnings growth. Also, in keeping with our price-conscious philosophy,
we reduce positions when valuations become stretched.
Q HOW DOES THIS GARP PROCESS FIT WITH THE FUND'S TECHNOLOGY INVESTMENTS?
A Technology dominated the market, so it was critical for us to have a
meaningful position in technology stocks.
Across the board, and certainly in the technology sector, we stick with the
proven leaders -- we typically invest in the number one or number two players in
each particular market segment. For instance, we owned Oracle, Intel, Cisco
Systems, EMC and Applied Materials. These are all top-tier companies within
their specific technology subsectors, and are all stocks that fit our process.
We maintained only minor positions in some of the more speculative technology
issues.
And while our tech holdings did not escape the downturns in March and April,
they certainly fared better than many unproven, newly public
6
<PAGE>
PERFORMANCE UPDATE
technology and Internet stocks. This of course helped the fund's relative
performance.
Q DOES THE FUND HOLD MICROSOFT? IF SO, HOW WAS THE FUND IMPACTED BY ITS RECENT
DECLINE IN VALUE?
A The fund holds a sizable position in Microsoft, which we maintained during its
recent weakness. Certainly Microsoft's antitrust fight has created anxiety for
investors and short-term stock price volatility, because the court battle raises
questions with no immediate answers.
However, our fundamental analysis of Microsoft's business prospects shows that
the company and its technology-sector peers are well positioned to expand sales
and earnings in the coming months. We share management's view that Microsoft is
worth more as one company than two. We also believe Microsoft will prevail on
appeal because of shortcomings in the government's case as well as a lack of
evidence that consumers have been harmed.
Q WHAT OTHER SECTORS HELPED PERFORMANCE?
A Technology was really a one-note song during the period, while the returns
from most other sectors were punk. Although we had successes in individual
stocks, on a sector-by-sector basis, technology was really the only sector
providing substantive gains.
It's also important to remember that we're bottom-up stock pickers. That means
we don't decide to invest a certain amount in a particular sector and then
select the stocks. Instead, the fund's overall sector weightings are the outcome
of many individual decisions.
Q WHICH INDIVIDUAL STOCKS OUTSIDE THE TECHNOLOGY SECTOR HELPED PERFORMANCE?
A Warner-Lambert, a holding in the health care sector, added to the fund's
performance. The company is in negotiations to merge with Pfizer, another large
and dominant pharmaceutical company. As the proposed merger progressed, the
market bid up the price of Warner-Lambert. The combined entity of Warner-
Lambert and Pfizer is expected to have one of the highest growth rates in the
industry as well as one of the most attractive pipelines of new products.
Q WHAT ABOUT STOCKS THAT DISAPPOINTED?
A A couple non-technology-related companies disappointed us. Consumer products
stocks struggled throughout the second part of the period as profit warnings
from Procter & Gamble (P&G) and Dial Corp. highlighted the margin pressures
faced by many firms in the sector due to higher raw materials and labor costs,
while product pricing remains extremely competitive.
P&G's negotiations to potentially merge with health care company
Warner-Lambert also troubled us. We viewed this as a negative shift in P&G's
strategy and didn't understand why the company was looking for growth outside of
its existing businesses. By the end of the period, we had eliminated P&G from
the portfolio. We'd add the stock again if we had confidence that the company's
earnings were entering a period of acceleration.
Q WHAT'S YOUR OUTLOOK FOR THE MARKETS AND FOR KEMPER CLASSIC GROWTH FUND IN
PARTICULAR?
A Over the past few years, it has not paid to underestimate the resilience of
the U.S. economy or the ability of the Fed to keep things on an even keel. That
said, we've kept a long-term view and avoided the temptation to sell when market
conditions deteriorate. While we feel that caution is warranted as long as the
threat of higher interest rates is an issue, we remain optimistic on the outlook
for the companies we hold in the portfolio, and we believe that our disciplined
investment style will continue to position the portfolio for outperformance over
time.
7
<PAGE>
INDUSTRY SECTORS
A SIX-MONTH COMPARISON*
Data shows the percentage of the common stocks in the portfolio that each sector
of Kemper Classic Growth Fund represented on April 30, 2000, and October 31,
1999.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER CLASSIC GROWTH FUND ON KEMPER CLASSIC GROWTH FUND ON
4/30/00 10/31/99
----------------------------- -----------------------------
<S> <C> <C>
Technology 30.0 23.2
Consumer nondurables 15.0 20.3
Communication services 15.0 14.4
Health care 13.0 15.9
Finance 9.0 10.0
Capital goods 7.0 11.2
Other 6.0 0.0
Energy 5.0 5.0
</TABLE>
* PORTFOLIO COMPOSITION IS SUBJECT TO CHANGE
A COMPARISON WITH THE STANDARD AND POOR'S 500 STOCK INDEX*
Data shows the percentage of the common stocks in the portfolio that each sector
of Kemper Classic Growth Fund represented on April 30, 2000, compared to the
industry sectors that make up the fund's benchmark, the Standard & Poor's 500
stock index.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER CLASSIC GROWTH FUND ON
4/30/00 S&P 500 INDEX ON 4/30/00
----------------------------- ------------------------
<S> <C> <C>
Technology 30 33.4
Consumer nondurables 15 18.1
Communication services 15 7.6
Health care 13 9.1
Finance 9 13
Capital goods 7 8.2
Other 6 0
Energy 5 5.4
Basic materials 0 2.3
Utilities 0 2.3
Transportation 0 0.6
</TABLE>
* STANDARD & POOR'S 500 IS AN UNMANAGED CAPITALIZATION-WEIGHTED PRICE-ONLY INDEX
COMPRISED OF THE LARGEST CAPITALIZED U.S. COMPANIES WHOSE COMMON STOCKS ARE
TRADED IN THE UNITED STATES. THIS LARGE CAPITALIZATION MARKET ORIENTED INDEX
IS HIGHLY CORRELATED WITH THE S&P 500 STOCK INDEX.
8
<PAGE>
LARGEST HOLDINGS
KEMPER CLASSIC GROWTH FUND'S 10 LARGEST HOLDINGS* Representing 30.2 percent of
the fund's portfolio on April 30, 2000.
<TABLE>
<CAPTION>
HOLDINGS PERCENT
<S> <C> <C> <C>
---------------------------------------------------------------------------------------
1. INTEL Engaged in the design, 4.4%
development, manufacturing and
sale of advanced semiconductors
and integrated circuits
---------------------------------------------------------------------------------------
2. GENERAL ELECTRIC A broadly diversified company 3.9%
with major businesses in power
generators, appliances, lighting,
plastics, medical systems,
aircraft engines, financial
services and broadcasting
---------------------------------------------------------------------------------------
3. CISCO SYSTEMS Large, comprehensive supplier of 3.6%
routing software and related
systems that direct the flow of
data between local networks.
---------------------------------------------------------------------------------------
4. WARNER-LAMBERT A diversified consumer products 3.5%
and health care company that
develops, manufactures and
markets a wide variety of
products for human hygiene and
health care
---------------------------------------------------------------------------------------
5. MICROSOFT Develops, markets and supports a 2.9%
variety of software, operating
systems, language and application
programs
---------------------------------------------------------------------------------------
6. EMC EMC is a maker of mainframe 2.7%
computer disk memory hardware and
software
---------------------------------------------------------------------------------------
7. AMERICAN EXPRESS American Express is a diversified 2.5%
financial services firm with
three units: Travel Related
Services, American Express
Financial Advisors and American
Express Bank
---------------------------------------------------------------------------------------
8. ELECTRONIC DATA SYSTEMS Electronic Data Systems (EDS) is 2.3%
the largest independent systems
consulting firm in the U.S. EDS
offers corporate outsourcing,
data center management, on-line
consulting, and reengineering for
businesses and the U.S. and
foreign governments
---------------------------------------------------------------------------------------
9. AT&T/LIBERTY MEDIA GROUP Liberty Media Group has stakes in 2.2%
about 100 cable channels,
including BET, Discovery Channel,
E!, Encore, QVC and USA Networks.
The company is a subsidiary of
AT&T but operates as a separate
and independent entity
---------------------------------------------------------------------------------------
10. SCHLUMBERGER Schlumberger is an oil field 2.2%
service company that provides
full range of service for oil and
gas operations, including seismic
surveys, drilling services,
wire-line logging, well
construction, and project
management
---------------------------------------------------------------------------------------
</TABLE>
*PORTFOLIO COMPOSITION AND HOLDINGS ARE SUBJECT TO CHANGE.
9
<PAGE>
PORTFOLIO OF INVESTMENTS
KEMPER CLASSIC GROWTH FUND
Portfolio of Investments as of April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
REPURCHASE AGREEMENTS--1.4% AMOUNT ($) VALUE ($)
<S> <C> <C> <C> <C> <C>
State Street Bank and Trust Company, 5.68%,
to be repurchased at $5,455,581 on
5/1/2000**
(Cost $5,453,000) $ 5,453,000 $ 5,453,000
---------------------------------------------------------------------------
<CAPTION>
U.S. GOVERNMENT AGENCY OBLIGATIONS--2.5%
<S> <C> <C> <C> <C> <C>
Federal Home Loan Bank, 5.88%, 5/1/2000
(Cost $10,000,000) 10,000,000 10,000,000
---------------------------------------------------------------------------
<CAPTION>
COMMON STOCKS--96.1% SHARES
<S> <C> <C> <C> <C> <C>
CONSUMER DISCRETIONARY--7.3%
DEPARTMENT & CHAIN STORES--5.7%
Home Depot, Inc. 150,650 8,445,816
Target Corp. 98,600 6,563,063
Wal-Mart Stores, Inc. 141,600 7,841,100
---------------------------------------------------------------------------
22,849,979
---------------------------------------------------------------------------
RECREATIONAL PRODUCTS--0.6%
Premier Parks, Inc.* 105,300 2,270,531
---------------------------------------------------------------------------
SPECIALTY RETAIL--1.0%
Circuit City Stores, Inc. 68,300 4,016,894
---------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--6.5%
ALCOHOL & TOBACCO--1.3%
Anheuser-Busch Companies, Inc. 75,600 5,334,525
---------------------------------------------------------------------------
FOOD & BEVERAGE--2.8%
Bestfoods 72,900 3,663,225
PepsiCo, Inc. 208,300 7,642,006
---------------------------------------------------------------------------
11,305,231
PACKAGE GOODS/ COSMETICS--2.4%
Colgate-Palmolive Co. 65,500 3,741,688
Gillette Co. 159,200 5,890,400
---------------------------------------------------------------------------
9,632,088
---------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
HEALTH--12.5%
BIOTECHNOLOGY--2.1%
Amgen Inc.* 12,000 672,000
Genentech, Inc.* 28,000 3,276,000
MedImmune, Inc.* 14,800 2,367,075
PE Corp--PE Biosystems Group 35,400 2,124,000
---------------------------------------------------------------------------
8,439,075
---------------------------------------------------------------------------
MEDICAL SUPPLY & SPECIALTY--4.0%
Baxter International, Inc. 114,750 7,473,094
Becton, Dickinson & Co. 120,200 3,080,125
Edwards Lifesciences Corp.* 22,910 343,650
Medtronic, Inc. 96,300 5,001,581
---------------------------------------------------------------------------
15,898,450
---------------------------------------------------------------------------
PHARMACEUTICALS--6.4%
Allergan, Inc. 75,700 4,456,832
Merck & Co., Inc. 106,900 7,429,550
Warner-Lambert Co. 123,100 14,010,319
---------------------------------------------------------------------------
25,896,701
---------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES VALUE ($)
<S> <C> <C> <C> <C> <C>
COMMUNICATIONS--6.7%
CELLULAR TELEPHONE--2.6%
Nokia Oyj (ADR) 94,200 $ 5,357,625
Vodafone AirTouch PLC (ADR) 108,500 5,099,500
---------------------------------------------------------------------------
10,457,125
---------------------------------------------------------------------------
TELEPHONE/ COMMUNICATIONS--4.1%
AT&T Wireless Group* 124,900 3,973,381
Bell Atlantic Corp. 75,750 4,488,188
Broadwing, Inc. 142,700 4,040,194
US West, Inc. 54,000 3,844,125
---------------------------------------------------------------------------
16,345,888
---------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
FINANCIAL--8.4%
INSURANCE--1.8%
American International Group, Inc. 66,850 7,332,609
---------------------------------------------------------------------------
CONSUMER FINANCE--4.5%
American Express Co. 65,500 9,829,094
Citigroup, Inc. 137,450 8,169,684
---------------------------------------------------------------------------
17,998,778
---------------------------------------------------------------------------
OTHER FINANCIAL COMPANIES--2.1%
Federal National Mortgage Association 66,500 4,010,781
Marsh & McLennan Companies, Inc. 44,000 4,336,750
---------------------------------------------------------------------------
8,347,531
---------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
MEDIA--6.4%
ADVERTISING--1.7%
Interpublic Group of Companies, Inc. 79,200 3,247,200
Omnicom Group, Inc. 37,900 3,451,269
---------------------------------------------------------------------------
6,698,469
---------------------------------------------------------------------------
BROADCASTING & ENTERTAINMENT--1.7%
Infinity Broadcasting Corp. "A"* 88,800 3,013,650
Viacom, Inc. "B"* 74,300 4,040,063
---------------------------------------------------------------------------
7,053,713
---------------------------------------------------------------------------
CABLE TELEVISION--3.0%
AT&T Corp. -- Liberty Media Group "A"* 180,000 8,988,750
Comcast Corp. "A"* 73,600 2,948,600
---------------------------------------------------------------------------
11,937,350
---------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
SERVICE INDUSTRIES--4.6%
EDP SERVICES--3.5%
Automatic Data Processing, Inc. 96,200 5,176,763
Electronic Data Systems Corp. 131,300 9,026,875
---------------------------------------------------------------------------
14,203,638
---------------------------------------------------------------------------
MISCELLANEOUS COMMERCIAL
SERVICES--0.8%
Siebel Systems, Inc.* 26,400 3,243,900
---------------------------------------------------------------------------
MISCELLANEOUS CONSUMER SERVICES--0.3%
eBay, Inc.* 7,100 1,130,231
---------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
DURABLES--1.7%
AEROSPACE
United Technologies Corp. 112,600 7,002,313
---------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES VALUE ($)
<S> <C> <C> <C> <C> <C>
MANUFACTURING--7.8%
DIVERSIFIED MANUFACTURING--4.0%
General Electric Co. 99,000 $ 15,567,750
Textron, Inc. 6,800 421,175
---------------------------------------------------------------------------
15,988,925
---------------------------------------------------------------------------
INDUSTRIAL SPECIALTY--3.8%
Corning, Inc. 41,400 8,176,500
JDS Uniphase Corp.* 48,600 5,039,213
QUALCOMM Inc.* 20,500 2,222,969
---------------------------------------------------------------------------
15,438,682
---------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--29.2%
COMPUTER SOFTWARE--6.8%
America Online, Inc.* 86,500 5,173,781
i2Technologies, Inc.* 12,600 1,628,550
Microsoft Corp.* 169,100 11,794,725
Oracle Corp.* 110,400 8,825,100
---------------------------------------------------------------------------
27,422,156
---------------------------------------------------------------------------
DIVERSE ELECTRONIC PRODUCTS--4.7%
Dell Computer Corp.* 112,600 5,644,075
Motorola, Inc. 39,400 4,691,063
Solectron Corp.* 128,800 6,029,450
Teradyne, Inc.* 22,800 2,508,000
---------------------------------------------------------------------------
18,872,588
---------------------------------------------------------------------------
EDP PERIPHERALS--2.7%
EMC Corp.* 78,400 10,892,700
---------------------------------------------------------------------------
ELECTRONIC COMPONENTS/
DISTRIBUTORS--3.6%
Cisco Systems, Inc.* 209,900 14,551,973
---------------------------------------------------------------------------
ELECTRONIC DATA PROCESSING--4.2%
International Business Machines Corp. 76,100 8,494,663
Sun Microsystems, Inc.* 90,100 8,283,569
---------------------------------------------------------------------------
16,778,232
---------------------------------------------------------------------------
SEMICONDUCTORS--7.2%
Applied Materials, Inc.* 45,700 4,652,831
Intel Corp. 139,240 17,657,373
Vitesse Semiconductor Corp.* 49,000 3,335,063
Xilinx, Inc.* 45,600 3,340,200
---------------------------------------------------------------------------
28,985,467
---------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
ENERGY--5.0%
OIL & GAS PRODUCTION--2.8%
Exxon Mobil Corp. 93,236 7,243,272
Royal Dutch Petroleum Co. (New York shares) 66,900 3,838,388
---------------------------------------------------------------------------
11,081,660
---------------------------------------------------------------------------
OILFIELD SERVICES/ EQUIPMENT--2.2%
Schlumberger Ltd. 117,300 8,980,781
---------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $319,898,314) 386,388,183
---------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100.0%
(Cost $335,351,314) (a) $401,841,183
---------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
PORTFOLIO OF INVESTMENTS
NOTE TO PORTFOLIO OF INVESTMENTS
* Non-income producing security.
** Repurchase agreements are fully collateralized by U.S. Treasury or Government
agency securities.
(a) The cost for federal income tax purposes was $335,661,255. At April 30,
2000, net unrealized appreciation for all securities based on tax cost was
$66,179,928. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost of
$77,059,189 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over market value of $10,879,261.
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
as of April 30, 2000
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $335,351,314) $401,841,183
----------------------------------------------------------------------------
Cash 1,327
----------------------------------------------------------------------------
Receivable for investments sold 4,579,365
----------------------------------------------------------------------------
Dividends receivable 184,801
----------------------------------------------------------------------------
Interest receivable 2,581
----------------------------------------------------------------------------
Receivable for Fund shares sold 1,674,294
----------------------------------------------------------------------------
Deferred organization expenses 10,590
----------------------------------------------------------------------------
Due from Adviser 117,600
----------------------------------------------------------------------------
Other assets 1,147
----------------------------------------------------------------------------
TOTAL ASSETS $408,412,888
----------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased 10,729,125
----------------------------------------------------------------------------
Payable for Fund shares redeemed 198,248
----------------------------------------------------------------------------
Accrued Trustees' fees and expenses 36,092
----------------------------------------------------------------------------
Other accrued expenses and payables 653,503
----------------------------------------------------------------------------
Total liabilities 11,616,968
----------------------------------------------------------------------------
NET ASSETS, AT VALUE $396,795,920
----------------------------------------------------------------------------
NET ASSETS Net assets consist of:
Accumulated net investment (loss) (1,181,405)
----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investments 66,489,869
----------------------------------------------------------------------------
Accumulated net realized gain (loss) 21,212,803
----------------------------------------------------------------------------
Paid-in capital 310,274,653
----------------------------------------------------------------------------
NET ASSETS, AT VALUE $396,795,920
----------------------------------------------------------------------------
NET ASSET VALUE
CLASS A SHARES
Net asset value and redemption price per share
($112,960,338 / 4,226,204 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares
authorized) $26.73
----------------------------------------------------------------------------
Maximum offering price per share (100 / 94.25 of $26.73) $28.36
----------------------------------------------------------------------------
CLASS B SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share ($92,389,425 /
3,521,499 outstanding shares of beneficial interest, $.01
par value, unlimited number of shares authorized) $26.24
----------------------------------------------------------------------------
CLASS C SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share ($18,102,527 /
691,528 outstanding shares of beneficial interest, $.01
par value, unlimited number of shares authorized) $26.18
----------------------------------------------------------------------------
CLASS S SHARES
Net asset value, offering and redemption price per share
($173,343,630 / 6,516,132 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares
authorized) $26.60
----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS
for the Six Months ended April 30, 2000
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $2,587) $ 1,047,459
---------------------------------------------------------------------------
Interest 374,337
---------------------------------------------------------------------------
Total income 1,421,796
---------------------------------------------------------------------------
Expenses:
Management fee 1,170,032
---------------------------------------------------------------------------
Services to shareholders 945,107
---------------------------------------------------------------------------
Custodian and accounting fees 103,030
---------------------------------------------------------------------------
Distribution services fees 303,012
---------------------------------------------------------------------------
Administrative services fees 212,757
---------------------------------------------------------------------------
Auditing 19,372
---------------------------------------------------------------------------
Legal 18,006
---------------------------------------------------------------------------
Trustees' fees and expenses 77,442
---------------------------------------------------------------------------
Reports to shareholders 90,032
---------------------------------------------------------------------------
Registration fees 90,788
---------------------------------------------------------------------------
Amortization of organization expenses 2,390
---------------------------------------------------------------------------
Other 18,007
---------------------------------------------------------------------------
Total expenses, before expense reductions 3,049,975
---------------------------------------------------------------------------
Expense reductions (446,774)
---------------------------------------------------------------------------
Total expenses, after expense reductions 2,603,201
---------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (1,181,405)
---------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from investments 21,940,703
---------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
on investments 18,530,618
---------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENT TRANSACTIONS 40,471,321
---------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $39,289,916
---------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED TWO MONTHS
APRIL 30, ENDED YEAR ENDED
2000 OCTOBER 31, AUGUST 31,
(UNAUDITED) 1999 1999
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $ (1,181,405) $ (293,550) $ (932,342)
-----------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions 21,940,703 2,343,968 9,396,870
-----------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
transactions during the period 18,530,618 14,900,813 44,795,107
-----------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS 39,289,916 16,951,231 53,259,635
-----------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net realized gains -- Class S (6,409,116) -- (4,994,696)
-----------------------------------------------------------------------------------------------------------
Net realized gains -- Class A (3,258,435) -- (734,391)
-----------------------------------------------------------------------------------------------------------
Net realized gains -- Class B (2,296,884) -- (597,986)
-----------------------------------------------------------------------------------------------------------
Net realized gains -- Class C (410,739) -- (91,871)
-----------------------------------------------------------------------------------------------------------
Fund share transactions:
Proceeds from shares sold 217,410,373 22,858,479 167,868,674
-----------------------------------------------------------------------------------------------------------
Reinvestment of distributions 12,138,255 -- 6,289,899
-----------------------------------------------------------------------------------------------------------
Cost of shares redeemed (110,041,068) (13,479,531) (114,518,626)
-----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions 119,507,560 9,378,948 59,639,947
-----------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 146,422,302 26,330,179 106,480,638
-----------------------------------------------------------------------------------------------------------
Net assets at beginning of period 250,373,618 224,043,439 117,562,801
-----------------------------------------------------------------------------------------------------------
NET ASSETS AT END OF PERIOD (including accumulated net
investment loss of $1,181,405 at April 30, 2000) $ 396,795,920 $250,373,618 $ 224,043,439
-----------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables include selected data for a share outstanding throughout
each period (a) and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
CLASS A
2000(B) 1999(C) 1999(D) 1998(E)
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $24.30 $22.63 $16.62 $20.30
-------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.05) (.02) (.04) .01
-------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment
transactions 3.59 1.69 6.86 (3.69)
-------------------------------------------------------------------------------------------------------------
Total from investment operations 3.54 1.67 6.82 (3.68)
-------------------------------------------------------------------------------------------------------------
Less distributions from:
Net realized gains on investment transactions (1.11) -- (.81) --
-------------------------------------------------------------------------------------------------------------
Net asset value, end of period $26.73 $24.30 $22.63 $16.62
-------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (F) (G) 14.67** 7.38** 41.54 (18.13)**
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) 113.0 62.6 54.7 7.2
-------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.48(h)* 1.52* 1.65 1.74*
-------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.23(h)* 1.27* 1.24 1.24*
-------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.37)* (.44)* (.17) .10*
-------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 88* 58* 68 49
-------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) For the six months ended April 30, 2000 (Unaudited).
(c) For the two months ended October 31, 1999.
(d) For the year ended August 31, 1999.
(e) For the period April 16, 1998 (commencement of sale of Class A shares) to
August 31, 1998.
(f) Total return would have been lower had certain expenses not been reduced.
(g) Total return does not reflect the effect of any sales charges.
(h) The ratios of operating expenses excluding costs incurred in connection with
the reorganization before and after expense reductions were 1.46% and 1.22%,
respectively.
* Annualized
** Not annualized
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS B
2000(B) 1999(C) 1999(D) 1998(E)
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $23.98 $22.37 $16.57 $20.30
-------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.17) (.05) (.22) (.05)
-------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment
transactions 3.54 1.66 6.83 (3.68)
-------------------------------------------------------------------------------------------------------------
Total from investment operations 3.37 1.61 6.61 (3.73)
-------------------------------------------------------------------------------------------------------------
Less distributions from:
Net realized gains on investment transactions (1.11) -- (.81) --
-------------------------------------------------------------------------------------------------------------
Net asset value, end of period $26.24 $23.98 $22.37 $16.57
-------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (F) (G) 14.15** 7.20** 40.30 (18.37)**
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) 92.4 37.4 30.5 5.9
-------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 2.88(h)* 2.47* 2.51 2.52*
-------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 2.63(h)* 2.22* 2.12 2.12*
-------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (1.31)* (1.38)* (1.04) (.79)*
-------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 88* 58* 68 49
-------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) For the six months ended April 30, 2000 (Unaudited).
(c) For the two months ended October 31, 1999.
(d) For the year ended August 31, 1999.
(e) For the period April 16, 1998 (commencement of sale of Class B shares) to
August 31, 1998.
(f) Total return would have been lower had certain expenses not been reduced.
(g) Total return does not reflect the effect of any sales charges.
(h) The ratios of operating expenses excluding costs incurred in connection with
the reorganization before and after expense reductions were 2.41% and 2.62%,
respectively.
* Annualized
** Not annualized
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C
2000(B) 1999(C) 1999(D) 1998(E)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $23.97 $22.38 $16.57 $20.30
-------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.23) (.07) (.22) (.05)
-------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment
transactions 3.55 1.66 6.84 (3.68)
-------------------------------------------------------------------------------------------------------------
Total from investment operations 3.32 1.59 6.62 (3.73)
-------------------------------------------------------------------------------------------------------------
Less distributions from:
Net realized gains on investment transactions (1.11) -- (.81) --
-------------------------------------------------------------------------------------------------------------
Net asset value, end of period $26.18 $23.97 $22.38 $16.57
-------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (F) (G) 13.93** 7.10** 40.42 (18.37)**
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) 18.1 7.1 5.6 .9
-------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 2.88(h)* 2.94* 2.88 3.00*
-------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 2.63(h)* 2.69* 2.09 2.09*
-------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (1.77)* (1.86)* (1.02) (.73)*
-------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 88* 58* 68 49
-------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) For the six months ended April 30, 2000 (Unaudited).
(c) For the two months ended October 31, 1999.
(d) For the year ended August 31, 1999.
(e) For the period April 16, 1998 (commencement of sale of Class C shares) to
August 31, 1998.
(f) Total return would have been lower had certain expenses not been reduced.
(g) Total return does not reflect the effect of any sales charges.
(h) The ratios of operating expenses excluding costs incurred in connection with
the reorganization before and after expense reductions were 2.86% and 2.62%,
respectively.
* Annualized
** Not annualized
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1 SIGNIFICANT
ACCOUNTING POLICIES Classic Growth Fund (the "Fund") is a
diversified series of Investment Trust (the
"Trust") which is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"),
as an open-end management investment company
organized as a Massachusetts business trust.
On August 10, 1999, the Fund changed its fiscal
year end for financial reporting and federal income
tax purposes to October 31 from August 31.
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. Scudder Shares, generally not
available to new investors, are not subject to
initial or contingent deferred sales charges.
Certain detailed financial information for the
Class S shares is provided separately and is
available upon request.
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.
Portfolio debt securities purchased with an
original maturity greater than sixty days are
valued by pricing agents approved by the officers
of the Trust, whose quotations reflect
broker/dealer-supplied valuations and electronic
data
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
processing techniques. If the pricing agents are
unable to provide such quotations, the most recent
bid quotation supplied by a bona fide market maker
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 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.
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.
--------------------------------------------------------------------------------
2 PURCHASES AND SALES
OF SECURITIES For the six months ended April 30, 2000,
purchases and sales of investment securities
(excluding short-term investments) aggregated
$243,170,078 and $141,131,229, respectively.
--------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES Under the Management Agreement (the "Agreement")
with Scudder Kemper Investments, Inc. ("Scudder
Kemper" or the "Adviser") the Adviser directs the
investments of the Fund in accordance with its
investment objectives, policies, and restrictions.
The Adviser determines the securities, instruments,
and other contracts relating to investments to be
purchased, sold or entered into by the Fund. In
addition to portfolio management services, the
Adviser provides certain administrative services in
accordance with the Agreement. The management fee
payable under the Agreement is equal to an annual
rate of 0.70% of the Fund's average daily net
assets, computed and accrued daily and payable
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS
monthly. Effective April 16, 1998, the Adviser has
agreed to waive 0.25% of its management fee until
January 31, 2001. For the six months ended April
30, 2000, the Adviser did not impose a portion of
its management fee amounting to $415,019, and the
fee imposed amounted to $755,013.
DISTRIBUTION SERVICE AGREEMENT. In accordance with
Rule 12b-1 under the Investment Company Act of
1940, Kemper Distributors, Inc. ("KDI"), a
subsidiary of the Adviser, receives a fee of 0.75%
of average daily net assets of Classes B and C.
Pursuant to the agreement, KDI enters into related
selling group agreements with various firms at
various rates for sales of Class B and C shares.
For the six months ended April 30, 2000, the
Distribution Fee was as follows:
<TABLE>
<CAPTION>
TOTAL UNPAID AT
DISTRIBUTION FEE AGGREGATED APRIL 30, 2000
-----------------------------------------------------------------------------
<S> <C> <C>
Class B $254,176 $204,272
Class C 48,836 35,248
-------- --------
$303,012 $239,520
</TABLE>
UNDERWRITING AGREEMENT AND CONTINGENT DEFERRED
SALES CHARGE. KDI is the principal underwriter for
Classes A, B and C. Underwriting commissions paid
in connection with the distribution of Class A
shares for the six months ended April 30, 2000
aggregated $173,636, of which $139,910 was paid to
other firms.
In addition, KDI receives any contingent deferred
sales charge (CDSC) from Class B share redemptions
occurring within six years of purchase and Class C
share redemptions occurring within one year of
purchase. There is no such charge upon redemption
of any share appreciation or reinvested dividends.
Contingent deferred sales charges are based on
declining rates ranging from 4% to 1% for Class B
and 1% for Class C, of the value of the shares
redeemed. For the six months ended April 30, 2000,
the CDSC for Classes B and C aggregated $69,618 and
$317, respectively.
ADMINISTRATIVE SERVICE FEES. KDI provides
information and administrative services to Classes
A, B and C shareholders at an annual rate of up to
0.25% of average daily net assets for each such
class. KDI in turn has various agreements with
financial services firms that provide these
services and pays these firms based on assets of
shareholder accounts the firms service. For the six
months ended April 30, 2000, the Administrative
Services Fee was as follows:
<TABLE>
<CAPTION>
TOTAL UNPAID AT
ADMINISTRATIVE SERVICES FEE AGGREGATED APRIL 30, 2000
-----------------------------------------------------------------------------
<S> <C> <C>
Class A $111,753 $25,441
Class B 84,726 1,459
Class C 16,278 842
-------- -------
$212,757 $27,742
</TABLE>
SHAREHOLDER SERVICES FEES. Kemper Service Company
("KSC"), an affiliate of the Adviser, is the
transfer, dividend-paying and shareholder service
agent for the Fund's Classes A, B and C Shares. For
the six months ended April 30, 2000, the amount
charged to Classes A, B and C by KSC aggregated
$134,120, $141,107, and $38,856, respectively, of
which $96,453 is unpaid at April 30, 2000. Scudder
Service Corporation ("SSC"), a subsidiary of the
Adviser, is the transfer, dividend-paying and
shareholder service agent for the Class S Shares.
For the six months ended April 30, 2000, the amount
charged to the Class S Shares by SSC for
shareholder services aggregated $156,294, of which
$23,272 is unpaid at April 30, 2000.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
The Class S Shares of the Fund are one of several
Scudder Funds (the "Underlying Funds") in which the
Scudder Pathway Series Portfolios (the
"Portfolios") invest. In accordance with the
Special Servicing Agreement entered into by the
Adviser, the Portfolios, the Underlying Funds, SSC,
SFAC, STC, and Scudder Investor Services, Inc.,
expenses from the operation of the Portfolios are
borne by the Underlying Funds based on each
Underlying Fund's proportionate share of assets
owned by the Portfolios. No Underlying Funds will
be charged expenses that exceed the estimated
savings to such Underlying Fund. These estimated
savings result from the elimination of separate
shareholder accounts which either currently are or
have potential to be invested in the Underlying
Funds. For the six months ended April 30, 2000, the
Special Servicing Agreement expense charged to the
Class S Shares amounted to $335,412, of which
$39,120 is unpaid at April 30, 2000.
Scudder Trust Company ("STC"), a subsidiary of the
Adviser, provides recordkeeping and other services
in connection with certain retirement and employee
benefit plans invested in the Class S Shares of the
Fund. For the six months ended April 30, 2000, the
amount charged to the Class S Shares by STC
aggregated $10,077, all of which is unpaid at April
30, 2000.
FUND ACCOUNTING FEES. Scudder Fund Accounting
Corporation ("SFAC"), a subsidiary of the Adviser,
is responsible for determining the daily net asset
value per share and maintaining the portfolio and
general accounting records of the Fund. For the six
months ended April 30, 2000, the amount charged to
the Fund by SFAC aggregated $69,065, of which
$9,840 is unpaid at April 30, 2000.
TRUSTEES FEES. The Trust pays each of its Trustees
not affiliated with the Adviser an annual retainer
plus specified amounts for attended board and
committee meetings. For the six months ended April
30, 2000, the Trustees' fees and expenses
aggregated $20,566. In addition, a one-time fee of
$56,876 was accrued for payment to those Trustees
not affiliated with the Adviser who are not
standing for re-election, under the reorganization
discussed in Note 7. Inasmuch as the Adviser will
also benefit from administrative efficiencies of a
consolidated Board, the Adviser has agreed to bear
$28,438 of such costs.
--------------------------------------------------------------------------------
4 EXPENSE OFF-SET
ARRANGEMENTS The Fund has entered into arrangements with its
custodian and transfer agents 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 $36 and
$3,281, respectively, under these arrangements.
--------------------------------------------------------------------------------
5 LINE OF CREDIT The Fund and several other Scudder Funds (the
"Participants") share in a $1 billion revolving
credit facility for temporary or emergency
purposes, including the meeting of redemption
requests that otherwise might require the untimely
disposition of securities. The Participants are
charged an annual commitment fee which is
allocated, pro rata based upon net assets, among
each of the Participants. Interest is calculated
based on the market rates at the time of borrowing.
The Fund may borrow up to a maximum of 33 percent
of its net assets under the agreement.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
6 SHARE TRANSACTIONS The following tables summarizes shares of
beneficial interest and dollar activity in the
Fund:
<TABLE>
<CAPTION>
SIX MONTHS ENDED TWO MONTHS ENDED
APRIL 30, 2000 OCTOBER 31, 1999
--------------------------- ------------------------
SHARES DOLLARS SHARES DOLLARS
<S> <C> <C> <C> <C>
SHARES SOLD
Class S 1,493,857 $ 39,081,048 191,253 $ 4,368,502
--------------------------------------------------------------------------------
Class A 4,015,926 105,892,291 467,676 10,792,550
--------------------------------------------------------------------------------
Class B 2,321,929 59,800,222 282,287 6,387,191
--------------------------------------------------------------------------------
Class C 489,853 12,636,812 57,839 1,310,236
--------------------------------------------------------------------------------
8,321,565 $ 217,410,373 999,055 $ 22,858,479
--------------------------------------------------------------------------------
SHARES ISSUED TO SHAREHOLDERS IN REINVESTMENT OF DISTRIBUTIONS
Class S 246,889 $ 6,362,305 -- --
--------------------------------------------------------------------------------
Class A 123,957 3,209,231 -- --
--------------------------------------------------------------------------------
Class B 85,399 2,176,832 -- --
--------------------------------------------------------------------------------
Class C 15,301 389,887 -- --
--------------------------------------------------------------------------------
471,546 $ 12,138,255 -- --
--------------------------------------------------------------------------------
SHARES REDEEMED
Class S (1,140,960) $ (29,519,662) (186,095) $ (4,242,573)
--------------------------------------------------------------------------------
Class A (2,490,915) (66,118,673) (307,088) (7,090,317)
--------------------------------------------------------------------------------
Class B (447,275) (11,546,753) (83,158) (1,889,264)
--------------------------------------------------------------------------------
Class C (110,811) (2,855,980) (11,341) (257,377)
--------------------------------------------------------------------------------
(4,189,961) $(110,041,068) (587,682) $(13,479,531)
--------------------------------------------------------------------------------
NET INCREASE (DECREASE)
Class S 599,786 $ 15,923,691 5,158 $ 125,929
--------------------------------------------------------------------------------
Class A 1,648,968 42,982,849 160,588 3,702,233
--------------------------------------------------------------------------------
Class B 1,960,053 50,430,301 199,129 4,497,927
--------------------------------------------------------------------------------
Class C 394,343 10,170,719 46,498 1,052,859
--------------------------------------------------------------------------------
4,603,150 $ 119,507,560 411,373 $ 9,378,948
--------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
YEAR ENDED
AUGUST 31, 1999
---------------------------
SHARES DOLLARS
<S> <C> <C>
SHARES SOLD
Class S 1,767,053 $ 36,814,454
----------------------------------------------------------------------------
Class A 4,181,810 89,719,684
----------------------------------------------------------------------------
Class B 1,703,242 35,213,582
----------------------------------------------------------------------------
Class C 290,638 6,120,954
----------------------------------------------------------------------------
7,942,743 $ 167,868,674
----------------------------------------------------------------------------
SHARES ISSUED TO SHAREHOLDERS IN REINVESTMENT OF DISTRIBUTIONS
Class S 241,446 $ 4,918,255
----------------------------------------------------------------------------
Class A 34,363 700,664
----------------------------------------------------------------------------
Class B 28,770 583,153
----------------------------------------------------------------------------
Class C 4,331 87,827
----------------------------------------------------------------------------
308,910 $ 6,289,899
----------------------------------------------------------------------------
SHARES REDEEMED
Class S (2,330,780) $ (48,909,586)
----------------------------------------------------------------------------
Class A (2,232,659) (48,175,880)
----------------------------------------------------------------------------
Class B (727,039) (15,294,433)
----------------------------------------------------------------------------
Class C (99,616) (2,138,727)
----------------------------------------------------------------------------
(5,390,094) $(114,518,626)
----------------------------------------------------------------------------
NET INCREASE (DECREASE)
Class S (322,281) $ (7,176,877)
----------------------------------------------------------------------------
Class A 1,983,514 42,244,468
----------------------------------------------------------------------------
Class B 1,004,973 20,502,302
----------------------------------------------------------------------------
Class C 195,353 4,070,054
----------------------------------------------------------------------------
2,861,559 $ 59,639,947
----------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
7 REORGANIZATION In early 2000, Scudder Kemper initiated a
restructuring program for most of its Scudder
no-load open-end funds in response to changing
industry conditions and investor needs. The program
proposes to streamline the management and
operations of most of the no-load open-end funds
Scudder Kemper advises principally through the
liquidation of several small funds, mergers of
certain funds with similar investment objectives,
the creation of one Board of Directors/ Trustees
and the adoption of an administrative fee covering
the provision of most of the services currently
paid for by the affected funds. Costs incurred in
connection with this restructuring initiative are
being borne jointly by Scudder Kemper and certain
of the affected funds.
25
<PAGE>
NOTES
26
<PAGE>
NOTES
27
<PAGE>
TRUSTEES&OFFICERS
<TABLE>
<S> <C> <C>
TRUSTEES OFFICERS
LYNN S. BIRDSONG BRUCE F. BEATY ROBERT TYMOCZKO
President Vice President Vice President
HENRY P. BECTON, JR. JENNIFER P. CARTER JOHN R. HEBBLE
Trustee Vice President Treasurer
LINDA C. COUGHLIN MAC EYSENBACH CAROLINE PEARSON
Trustee Vice President Assistant Secretary
DAWN-MARIE DRISCOLL WILLIAM F. GADSDEN
Trustee Vice President
PETER B. FREEMAN VALERIE F. MALTER
Trustee Vice President
GEORGE M. LOVEJOY, JR. KATHLEEN T. MILLARD
Trustee Vice President
WESLEY W. MARPLE, JR. JOHN MILLETTE
Trustee Vice President and
Secretary
JEAN C. TEMPEL
Trustee ANN M. MCCREARY
Vice President
KATHRYN L. QUIRK
Trustee, Vice President
and Assistant Secretary
</TABLE>
<TABLE>
<S> <C>
----------------------------------------------------------------------------------------------
LEGAL COUNSEL DECHERT PRICE & RHOADS
Ten Post Office Square South
Boston, MA 02109
----------------------------------------------------------------------------------------------
TRANSFER AND SHAREHOLDER SERVICE KEMPER SERVICE COMPANY
AGENT P.O. Box 219557
Kansas City, MO 64121
----------------------------------------------------------------------------------------------
CUSTODIAN STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, MA 02109
----------------------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS PRICEWATERHOUSECOOPERS LLP
160 Federal Street
Boston, MA 02110
----------------------------------------------------------------------------------------------
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606-5808
www.kemper.com
</TABLE>
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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 Fund
prospectus. KCGF-3 (6/25/00) 1114200
