<PAGE> 1
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED MARCH 31, 1998
[LOGO]
Seeking growth of capital through
diversification of investment securities
having potential for capital appreciation
KEMPER GROWTH FUND
"...The market's October correction
provided us with a great chance to
buy a lot of solid growth companies
after they were beaten down..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
7
SHAREHOLDERS' MEETING
8
INDUSTRY SECTORS
9
LARGEST HOLDINGS
10
PORTFOLIO OF INVESTMENTS
13
FINANCIAL STATEMENTS
15
NOTES TO FINANCIAL STATEMENTS
19
FINANCIAL HIGHLIGHTS
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER GROWTH FUND
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 1998
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 14.34%
CLASS B 13.77%
CLASS C 13.91%
LIPPER GROWTH FUNDS CATEGORY AVERAGE* 11.55%
</TABLE>
Returns and rankings are historical and do not represent future performance.
Returns and net asset value fluctuate. Shares are redeemable at current net
asset value, which may be more or less than original cost.
* Lipper Analytical Services, Inc. returns and rankings are based upon changes
in net asset value with all dividends reinvested and do not include the
effect of sales charges and, if they had, results may have been less
favorable.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
3/31/98 9/30/97
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER GROWTH FUND CLASS A $15.19 $15.47
- --------------------------------------------------------------------------------
KEMPER GROWTH FUND CLASS B $14.38 $14.83
- --------------------------------------------------------------------------------
KEMPER GROWTH FUND CLASS C $14.49 $14.91
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
KEMPER GROWTH FUND LIPPER
RANKINGS*
- --------------------------------------------------------------------------------
COMPARED TO ALL OTHER FUNDS IN THE LIPPER GROWTH FUNDS CATEGORY
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1-YEAR #342 of 858 funds #404 of 858 funds #389 of 858 funds
- --------------------------------------------------------------------------------
5-YEAR #291 of 328 funds N/A N/A
- --------------------------------------------------------------------------------
10-YEAR #94 of 181 funds N/A N/A
- --------------------------------------------------------------------------------
15-YEAR #70 of 115 funds N/A N/A
- --------------------------------------------------------------------------------
20-YEAR #44 of 101 funds N/A N/A
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
DURING THE PERIOD, THE FUND MADE THE FOLLOWING PER SHARE DISTRIBUTIONS:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term
Capital Gain $1.26 $1.26 $1.26
- --------------------------------------------------------------------------------
Long-Term
Capital Gain $0.83 $0.83 $0.83
- --------------------------------------------------------------------------------
</TABLE>
TERMS TO KNOW
YOUR FUND'S STYLE
- --------------------------------------------------------------------------------
MORNINGSTAR EQUITY STYLE BOX
- --------------------------------------------------------------------------------
Source: Morningstar, Inc., Chicago, IL (312) 696-6000. (Morningstar Style Box
is based on a portfolio date as of March 31, 1998.) The Equity Style Box
placement is based on a fund's price-to-earnings and price-to-book ratio
relative to the S&P 500, as well as the size of the companies in which it
invests, or median market capitalization.
Please note that style boxes do not represent an exact assessment of risk and
do not represent future performance. Please consult the prospectus for a
description of investment policies.
CORRECTION A reverse movement, usually downward, in the price of a group of
stocks or the overall market. Corrections are to be expected over a long term.
GRAY MONDAY The name used to identify Monday, October 27, 1997. On that day the
Dow Jones Industrial Average lost 554 points, or seven percent of its total
value. Gray Monday is a comparison to Black Monday, October 19, 1987, when the
market lost almost 23 percent of its total value.
SECTOR Stocks usually found in related industries. Stocks within a market sector
may be similarly affected by financial, economic, business or other
developments.
3
<PAGE> 3
ECONOMIC OVERVIEW
[SILVA'S PHOTO]
DR. JOHN E. SILVIA IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.
HIS PRIMARY RESPONSIBILITIES INCLUDE ANALYSIS, MODELING AND FORECASTING OF
ECONOMIC DEVELOPMENTS AND FEDERAL RESERVE ACTIVITY THAT AFFECT FINANCIAL
MARKETS, ESPECIALLY INTEREST RATE TRENDS. THIS EFFORT INCLUDES CLOSE
COLLABORATION WITH BOTH INCOME AND EQUITY MUTUAL FUND MANAGERS AND PENSION FUND
MANAGERS. HE IS ALSO A MEMBER OF THE INVESTMENT POLICY AND STRATEGY COMMITTEE
FOR KEMPER FUNDS.
SILVIA HOLDS A BACHELOR OF ARTS AND PH.D. IN ECONOMICS FROM NORTHEASTERN
UNIVERSITY IN BOSTON AND HAS A MASTER'S DEGREE IN ECONOMICS FROM BROWN
UNIVERSITY IN PROVIDENCE, R.I. PRIOR TO HIS CAREER AT SCUDDER KEMPER, HE WAS
WITH THE HARRIS BANK AND ALSO TAUGHT AT INDIANA UNIVERSITY.
SCUDDER KEMPER INVESTMENTS, INC. IS THE INVESTMENT MANAGER FOR KEMPER FUNDS.
IT IS ONE OF THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT
ORGANIZATIONS WORLDWIDE, MANAGING MORE THAN $200 BILLION IN ASSETS GLOBALLY FOR
MUTUAL FUND INVESTORS, RETIREMENT AND PENSION PLANS, INSTITUTIONAL AND
CORPORATE CLIENTS, INSURANCE COMPANIES AND PRIVATE, FAMILY AND INDIVIDUAL
ACCOUNTS. IT IS ONE OF THE 10 LARGEST MUTUAL FUND COMPLEXES IN THE UNITED
STATES.
DEAR SHAREHOLDERS,
Stable economic growth, low interest rates and sustained lower inflation have
continued to produce a beneficial market environment for investors in the second
quarter of 1998. Despite heightened sensitivity to earnings estimates and
announcements, the market continued to support financial assets. We can expect
this favorable climate to continue--in spite of the sensitivity--at least over
the shorter term.
As always, expectations have been at the heart of the actions and reactions
that move the markets. Expectations appear to be high, as demonstrated by a
record flow of new cash--$37.5 billion--into mutual funds in March. This record
flow surpassed the prior monthly record of $32.7 billion in net mutual fund
investing set in January 1996. Two years ago, many experts were concerned that
the bull market was close to being on its last legs. Quite remarkably today,
investors are still betting on equities. Nearly 75 percent of the new cash
flowing into mutual funds in March went into stock funds, according to the
Investment Company Institute, a trade organization that monitors the mutual
fund industry.
Unfortunately, high expectations often combine with high anxiety--today's
investors are attuned to even the smallest hint of economic change. The result
is volatility. Many who believe that our long-running bull market is too good to
be true or that stock prices are too high are wondering when the market will
reverse.
While a reversal may not be on the immediate horizon, investors are wise to
watch for several signs that change is underway: rising prices, indicating
higher inflation; repercussions of the Asian economic crisis on American
business, which could appear in the form of reduced earnings; and a continued
widening of our trade deficit, a serious imbalance caused by heightened American
demand for foreign goods and services.
On Monday, April 27, expectations were tested by reports that the Federal
Reserve Board (Fed) was considering a hike in interest rates. The markets
reacted immediately to this news, driving stock prices downward. Ultimately, we
do not anticipate that an interest rate hike will materialize in the second
quarter; however, the Fed's monetary policy meeting shortly after the release of
this overview will provide more information.
Our positive outlook for this quarter is based primarily on the current
resiliency of our marketplace. The United States appears to be firmly planted in
the middle of an economic cycle, with no evidence of detrimental pressures that
might be associated with the market's phenomenal growth. We are not seeing price
increases for goods and services or a downturn in the housing market, both of
which we might expect late in an economic cycle.
Equities have continued to reward investors. The U.S. stock market, as
measured by the Standard & Poor's 500, gained nearly 14 percent in the first
quarter of 1998 and returned more than 15 percent year-to-date as of April 30.
Bonds have also rewarded investors in terms of real return, which is total
return less the rate of inflation. The high yield and corporate debt
fixed-income markets also have performed well.
U.S. economic growth, as measured by the gross domestic product (GDP) growth
rate, was slightly above 4 percent for the first quarter. Our general
expectation for the year is that growth will increase between 2.5 and 3 percent
over last year. In other words, the economy will remain strong, but will slow
down as the year progresses.
Consumer spending and corporate fixed investments have fueled the economy's
solid growth. Spending on both capital goods and high technology has been
strong. Corporate profits have grown between 5 and 10 percent, which appears to
be acceptable in an environment of stable interest rates. U.S. employment growth
has ranged from 2 to 2.25 percent, continuing to exceed expectations. Consumer
confidence has continued to hit near all-time highs. The increase in output
prices, an indicator of inflation measured by the Consumer Price Index (CPI),
has remained at 1.5 to 2 percent.
Adding to the good news, all seems to be quiet on the domestic policy front.
At the end of February, the U.S. federal budget deficit essentially vanished.
Recent efforts to reduce the deficit, combined with higher federal revenues due
to the robust economy, have left us with an expected budget surplus of $40
billion to $50 billion for fiscal 1998. To date, our Democratic president and
Republican Congress have not agreed on any significant legislation regarding tax
credits, spending cuts or health care that could threaten the newfound federal
budget surplus.
3
<PAGE> 4
ECONOMIC OVERVIEW
- --------------------------------------------------------------------------------
ECONOMIC GUIDEPOSTS
- --------------------------------------------------------------------------------
Economic activity is a key influence on investment performance and shareholder
decision-making. Periods of recession or boom, inflation or deflation, credit
expansion or credit crunch have a significant impact on mutual fund performance.
The following are some significant economic guideposts and their investment
rationale that may help your investment decision-making. The 10-year Treasury
rate and the prime rate are prevailing interest rates. The other data report
year-to-year percentage changes.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (4/30/98) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1) 5.64 5.88 6.71 6.74
PRIME RATE(2) 8.5 8.5 8.5 8.25
INFLATION RATE(3)* 1.38 2.08 2.43 2.9
THE U.S. DOLLAR(4) 3.92 9.65 6.55 8.51
CAPITAL GOODS ORDERS(5)* 10.89 11.72 8.17 6.82
INDUSTRIAL PRODUCTION(5)* 4.27 5.77 4.72 3.49
EMPLOYMENT GROWTH(6)* 2.59 2.36 2.27 1.78
</TABLE>
(1) Falling interest rates in recent years have been a big plus for financial
assets.
(2) The interest rate that commercial lenders charge their best borrowers.
(3) Inflation reduces as investor's real return. In the last five years,
inflation has been as high as 6 percent. The low, moderate inflation of
the last few years has meant high real returns.
(4) Changes in the exchange value of the dollar impact U.S. exporters and the
value of U.S. firms' foreign profits.
(5) These influence corporate profits and equity performance.
(6) An influence on family income and retail sales.
* Data as of March 31, 1998.
Can we expect a little more excitement from overseas? A full-scale global
recession from last year's Asian economic crisis seems unlikely at this point.
The crisis has yet to hurt most U.S. businesses and investors. Quite the
contrary. While the mere threat of repercussions from the Asian crisis added to
the anxiety mentioned earlier, it has also had the effect of keeping U.S.
interest rates and prices in check, making the U.S. economy all the more
attractive to investors around the world.
In the global economy, the U.S. dollar continues to appreciate in value
compared to other currencies. In fact, more capital is flowing into U.S. markets
as investors generally avoid Asia. Europe has also been benefiting from the
crisis. Canada, which is a commodity-producing exporter, has been somewhat
negatively affected as commodity prices have fallen.
Other major developments abroad include the final selection of countries to
participate in Europe's single currency next year. Many European countries are
adopting more restrictive fiscal policy and reducing inflation in anticipation
of the momentous European Economic and Monetary Union (EMU). But after the EMU
is established in 1999, tensions may indeed mount as countries work to adapt to
the new structure.
As we approach the turn of the century, one caveat remains: Don't
underestimate the potential of the Year 2000 computer code problem. It appears
that a significant number of federal government agencies will not meet the
criteria necessary to avoid the problem. Many businesses are revealing that
billions of dollars are being spent on the situation. Some experts say a global
recession is in store. Others adamantly disagree. In any event, we may indeed
see a reduction in capital spending toward the end of 1998 and the first half of
next year as companies focus on fixing existing computers rather than on
purchasing new equipment. We'll keep you posted!
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
/s/ JOHN E. SILVIA
JOHN E. SILVIA
May 8, 1998
4
<PAGE> 5
PERFORMANCE UPDATE
[REYNOLDS PHOTO]
STEVEN H. REYNOLDS IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.
AND CHIEF INVESTMENT OFFICER FOR EQUITY INVESTMENTS OF KEMPER FUNDS. REYNOLDS IS
CURRENTLY MANAGING THE KEMPER GROWTH FUND. REYNOLDS JOINED SCUDDER KEMPER
INVESTMENTS IN 1996 WITH NEARLY 30 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE. HE
HOLDS A B.A. IN ECONOMICS FROM JOHNS HOPKINS UNIVERSITY AND AN M.B.A. IN FINANCE
FROM THE UNIVERSITY OF VIRGINIA.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
DESPITE A ROCKY START IN OCTOBER PROMPTED BY TURBULENT ASIAN ECONOMIES, THE
U.S. STOCK MARKET RALLIED TO NEW RECORD HIGHS BY MARCH 31, 1998. THE FUND
PERFORMED WELL DURING THE MARKET RALLY, AND IN FACT BEAT THE MARKET DURING THE
FIRST QUARTER OF 1998. BELOW, PORTFOLIO MANAGER STEVE REYNOLDS DISCUSSES THE
MARKET'S PSYCHOLOGY, AND HOW THE FUND POSTED ITS STRONG RESULTS.
Q STEVE, COULD YOU DESCRIBE THE STOCK MARKET ENVIRONMENT FOR THE SIX-MONTH
PERIOD ENDED MARCH 31?
A It was really like two different markets: the last quarter of 1997, and
the first quarter of 1998. During the last quarter of 1997, fundamental problems
in the economies of several Asian countries came to the fore. Investors began to
question the ability of these countries to defend their currencies, pay their
debts and maintain even modest economic growth. That led investors here to worry
that the slowdown in Asia would impact exports of U.S. companies and put
earnings under pressure. The result was a steep market sell-off commencing with
"Gray Monday" at the end of October, and continuing through the next couple of
months. Technology stocks in particular felt the brunt of the uncertainty.
However, as the weeks passed and investors had a chance to digest the
potential earnings impact, the consensus was that the effect of Asia's problems
on U.S. companies wouldn't be extreme. The market changed course and, at the end
of the year, the market had recovered all it lost in the previous months. The
rally continued into the first quarter of 1998, and the market hit a series of
all-time highs as the first quarter grew to a close.
Q HOW DID KEMPER GROWTH FUND PERFORM IN COMPARISON?
A As the market went, so did the fund, only a little more so. During the
last quarter of 1997, the fund declined more than the market, but outperformed
the market in the first quarter of 1998. The net result was a 14.34 percent
return for the fund (Class A shares unadjusted for any sales charge) in the
six-month period, versus 17.21 percent for the S&P 500 Stock Index.
Q THE FUND LAGGED THE INDEX, ALBEIT BY A SLIM MARGIN. WHAT ACCOUNTED FOR THE
DIFFERENCE?
A In part, it was the result of our investment philosophy of "growth at the
right price," or "GARP." As GARP investors, we look for established,
solidly-managed companies with projected growth rates that are greater than the
overall market, and we try to buy them as cheaply as possible. Ideally, we seek
stocks that are mispriced due to very short-term fundamental problems or
negative market psychology. In short, we try to identify stocks of high quality
companies that are down for the wrong reasons.
Once we've identified such opportunities, we're willing to overweight
sectors that we believe are particularly attractive.
The market's October correction provided us with a great chance to buy a
lot of solid growth companies after they were beaten down. This was
especially true of technology companies, where we really loaded
5
<PAGE> 6
PERFORMANCE UPDATE
up the portfolio. While this hurt us in the last quarter of 1997 when the stocks
continued to get cheaper as we were buying them, the strategy paid off in 1998
when tech firms bounced back.
However, being a successful GARP investor takes patience, and we believe
that the fund will ultimately benefit from these purchases. We began to see that
happen in the first quarter of 1998.
Q HOW DID THIS GARP PHILOSOPHY GUIDE YOUR OTHER DECISIONS?
A Areas besides tech where we overweighted the fund versus the market were
retail, health care -- particularly pharmaceutical companies -- and finance.
Retail posted strong gains late last year as the economy continued to provide
consumers with more disposable income. In fact, we took profits in early 1998 as
the stocks became fairly valued. Large drug companies also rallied, including
SmithKline Beecham, Warner-Lambert, United Healthcare (the fund's largest
holding as of March 31) and Bristol-Myers Squibb. Financial Services was an area
that was one of the better performing sectors of the market in 1997, but it
remains attractively valued and has continued to be a strong performer in 1998.
Q WHERE DO YOU SEE SOLID GARP PLAYS RIGHT NOW?
A We plan to stay overweighted in technology, but we're shifting our
emphasis from software companies, which have become pretty fully valued, to
hardware companies -- PC makers like Hewlett Packard and Compaq, for example --
which still haven't recovered from the perception that they are prime candidates
to catch the "Asian flu." We believe that problems in Japan and elsewhere will
be worked out sooner rather than later, because these countries have got to act
quickly if they wish to remain competitive.
We also intend to maintain our overweighting in financial companies. This
is a GARP play where there are some compelling values. In our opinion, the
insurance area is particularly attractive, because there will likely be
consolidation among those companies as there has been in banking and brokerages
over the last two years.
Two sectors that appear depressed for short term reasons are rails and
energy companies. Rail carriers such as Norfolk Southern and CSX are under a
cloud right now because they haven't been able to move high volumes of traffic
efficiently. But we think they'll get these problems straightened out soon. As
for energy companies, the warm winter and the Asian slowdown have created a
temporary oversupply, and many such oil service companies like Baker Hughes,
Halliburton and Schlumberger should enjoy good gains when prices return to a
more normal, sustainable range.
Areas that we're avoiding are basic industries, capital goods and consumer
durables such as autos and housing. They appear to be attractively priced, but
in today's low inflation environment, they don't appear to have the ability to
make price increases stick. So it's unlikely they'll be able to substantially
increase earnings.
Q ANY IDEAS THAT DIDN'T WORK OUT?
A Our timing on technology was a little early, but broadly speaking, there
were only two areas that significantly hampered our performance. One was
semiconductors like Intel and National Semiconductor. These companies have had
trouble transitioning their inventory, and they have been forced to cut prices,
which reduced profits. But we think many of these companies should bounce back
in the last half of this year. Second was an underweight in telecommunication,
which impeded our performance versus our benchmark index because regional
"Bells" did well.
Q WHAT'S YOUR OUTLOOK FOR THE REMAINDER OF 1998?
A We expect the stock market to move moderately higher, spurred by investor
liquidity -- there is a massive amount of money coming into the market right
now, and it has to be invested. But that said, there will likely be a lot of
internal volatility, with strong rotation between sectors. Energy out of favor
then in, pharmaceuticals in then out, for example.
In this environment, stock selection will be important. Even within
groups, you have to be careful because the market will not look favorably on
companies that fall short of earnings expectations. However, such
instances just give patient GARP investors like us more options should investor
overreaction push down the prices of good companies.
Overall, it's still a great environment for stocks. Inflation is under
control, the Federal Reserve is keeping interest rates steady, and corporate
profits remain strong although not as robust as the last several years. The
difficulties in Asia continue to overhang the market, but if you're a long-term
investor, it's tough to argue against the positive fundamentals of the vibrant,
competitive global economy.
6
<PAGE> 7
SHAREHOLDERS' MEETING
SPECIAL SHAREHOLDERS' MEETING
On December 3, 1997, a special shareholders' meeting was held and adjourned as
necessary. Kemper Growth Fund shareholders were asked to vote on five separate
issues: election of the nine members to the Board of Trustees, ratification of
Ernst & Young LLP as independent auditors, approval of new investment management
agreement with Scudder Kemper Investments, Inc., approval of changes in the
fund's fundamental investment policies to permit a master/feeder fund structure
and approval of a new rule 12b-1 distribution plan with Zurich Kemper
Distributors, Inc. for Class B shares and Class C shares. The following are the
results for each issue:
1) Election of Trustees
<TABLE>
<CAPTION>
For Withheld
<S> <C> <C>
David W. Belin 94,603,630 2,183,477
Lewis A. Burnham 94,702,292 2,084,814
Donald L. Dunaway 94,707,233 2,079,873
Robert B. Hoffman 94,721,273 2,065,833
Donald R. Jones 94,686,941 2,100,165
Shirley D. Peterson 94,609,340 2,177,766
Daniel Pierce 94,629,339 2,157,768
William P. Sommers 94,722,406 2,064,701
Edmond D. Villani 94,626,198 2,160,908
</TABLE>
2) Ratification of the selection of Ernst & Young LLP as independent auditors
for the current fiscal year.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
93,547,792 1,027,181 2,212,134
</TABLE>
3) Approval of new investment management agreement with Scudder Kemper
Investments, Inc.
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
88,592,782 2,082,545 3,220,579 2,891,200
</TABLE>
4) Approval of changes in the fund's fundamental investment policies to permit a
master/feeder fund structure.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
83,426,072 4,263,519 6,338,391
</TABLE>
5) To approve a new rule 12b-1 distribution plan with Zurich Kemper
Distributors, Inc.
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C> <C>
Class B 28,299,714 832,309 2,178,848 169,857
Class C 585,940 12,117 23,514 0
</TABLE>
7
<PAGE> 8
INDUSTRY SECTORS
A SIX-MONTH COMPARISON
Data show the percentage of the common stocks in the portfolio that each sector
represented on March 31, 1998, and on September 30, 1997.
[EQUITY PORTION BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER GROWTH FUND KEMPER GROWTH FUND
ON 3/31/98 ON 9/30/97
<S> <C> <C>
TECHNOLOGY 27.3% 28.9%
HEALTH CARE 20.2% 21.9%
FINANCE 18.0% 18.8%
CONSUMER NON-DURABLES 14.0% 15.8%
ENERGY 10.8% 2.3%
UTILITIES/TELECOMMUNICATIONS 4.7% 1.1%
TRANSPORATIONS 2.9% 2.2%
CAPITAL GOODS 2.1% 8.2%
BASIC INDUSTRIES - 0.7%
CONSUMER DURABLES - 0.1%
</TABLE>
A COMPARISON WITH THE RUSSELL 1000 GROWTH INDEX*
Data show the percentage of the common stocks in the portfolio that each sector
of the Kemper Growth Fund represented on March 31, 1998, compared to the
industry sectors that make up the fund's benchmark, the Russell 1000 Growth
Index.
[RUSSELL COMPARISON BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER GROWTH FUND RUSSELL 1000 GROWTH INDEX
ON 3/31/98 ON 9/30/97
<S> <C> <C>
TECHNOLOGY 27.3% 23.5%
HEALTH CARE 20.2% 20.8%
FINANCE 18.0% 7.2%
CONSUMER NON-DURABLES 14.0% 31.5%
ENERGY 10.8% 2.4%
UTILITIES/TELECOMMUNICATIONS 4.7% 5.9%
TRANSPORATIONS 2.9% 0.3%
CAPITAL GOODS 2.1% 0.8%
CONSUMER DURABLES - 7.6%
</TABLE>
* The Russell 1000 Growth Index is an unmanaged index comprised of common stocks
of larger U.S. companies with greater than average growth orientation and
represents the universe of stocks from which "earnings/growth" money managers
typically select.
8
<PAGE> 9
LARGEST HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS*
Representing 25.0 percent of the fund's total net assets on March 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
HOLDINGS PERCENT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
1. UNITED HEALTHCARE Provides health care management services to health 3.3%
maintenance organizations, preferred provider
organizations and other health care providers.
- --------------------------------------------------------------------------------------------------------
2. CADENCE DESIGN SYSTEMS Develops, markets and supports computer aided design 3.0%
software products and services that automate, enhance
and accelerate the design and verification of
integrated circuits and other related products.
- --------------------------------------------------------------------------------------------------------
3. NATIONSBANK Provides consumer banking services, plus corporate 2.8%
finance and investment services.
- --------------------------------------------------------------------------------------------------------
4. SCHLUMBERGER A worldwide leader in oilfield services, measurement 2.7%
systems, and information technology with operations in
over 100 countries.
- --------------------------------------------------------------------------------------------------------
5. AMGEN A global biotechnology company that discovers, 2.4%
develops, manufactures and markets human therapeutics
based on advanced cellular and molecular biology.
- --------------------------------------------------------------------------------------------------------
6. FEDERATED DEPARTMENT As one of the nation's leading department store 2.3%
STORES retailers, Federated operates over 350 department
stores and operates over 100 specialty and clearance
stores in 35 states. Federated's stores operate under
the names Bloomingdale's, The Bon Marche, Burdine's,
Goldsmith's, Lazarus, Macy's, Rich's and Stern's.
- --------------------------------------------------------------------------------------------------------
7. BAKER HUGHES A leading provider of products and services for the 2.2%
oil, gas and process industries.
- --------------------------------------------------------------------------------------------------------
8. AMERICAN HOME PRODUCTS Manufactures and markets health care products, 2.1%
including pharmaceuticals, consumer health care
products and medical supplies.
- --------------------------------------------------------------------------------------------------------
9. CISCO SYSTEMS Largest, most comprehensive supplier of routing 2.1%
software and related systems that direct the flow of
data between local area networks. A play on the
explosive growth of the Internet.
- --------------------------------------------------------------------------------------------------------
10. WARNER-LAMBERT Engaged in development, manufacturing and selling of 2.1%
health care and consumer products.
- --------------------------------------------------------------------------------------------------------
</TABLE>
* PORTFOLIO COMPOSITION AND HOLDINGS ARE SUBJECT TO CHANGE.
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
KEMPER GROWTH FUND
PORTFOLIO OF INVESTMENTS AT MARCH 31, 1998 (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CAPITAL GOODS--2.1% Goodyear Tire & Rubber Co. 421,500 $ 31,929
United Technologies 327,800 30,260
------------------------------------------------------------------------------
62,189
- ------------------------------------------------------------------------------------------------------------------------
COMPUTER SYSTEMS (a)Cadence Design Systems 2,616,800 90,607
AND SOFTWARE--15.5% Compaq Computer Corp. 623,900 16,143
Computer Associates International 433,300 25,023
(a)Gartner Group, "A" 1,484,200 55,472
Hewlett-Packard Co. 655,000 41,511
(a)Novellus Systems 218,800 9,463
(a)Parametric Technology Corp. 1,716,800 57,191
(a)PeopleSoft, Inc. 619,000 32,614
(a)Seagate Technology 1,331,900 33,630
(a)Solectron Corp. 435,400 18,396
(a)Sterling Commerce, Inc. 764,700 35,463
(a)Sun Microsystems 915,300 38,185
(a)Xilinx, Inc. 400,000 14,975
------------------------------------------------------------------------------
468,673
- ------------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--8.4% (a)AutoZone, Inc. 1,265,000 42,852
(a)Consolidated Stores Corp. 400,000 17,175
Dayton Hudson Corp. 77,200 6,794
(a)Federated Department Stores 1,360,700 70,501
Hilton Hotels Corp. 1,200,000 38,250
Interpublic Group of Companies 191,700 11,909
May Department Stores Co. 708,100 44,964
(a)Mirage Resorts, Inc. 445,900 10,841
(a)Proffitt's, Inc. 276,800 10,034
------------------------------------------------------------------------------
253,320
- ------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--5.2% Avon Products 314,200 24,508
Coca Cola Co. 250,000 19,359
Gillette Co. 205,100 24,343
International Flavors & Fragrances 581,600 27,408
Kimberly-Clark Corp. 500,000 25,062
Wm. Wrigley Jr. Co. 435,000 35,561
------------------------------------------------------------------------------
156,241
- ------------------------------------------------------------------------------------------------------------------------
ENERGY--10.4% (a)BJ Services Co. 1,337,800 48,746
Baker Hughes, Inc. 1,649,900 66,408
Diamond Offshore Drilling, Inc. 735,000 33,351
Halliburton Co. 704,900 35,377
Schlumberger, Ltd. 1,077,600 81,628
Texaco 22,500 1,356
Transocean Offshore, Inc. 921,600 47,405
------------------------------------------------------------------------------
314,271
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCE--17.4% American Express Co. 374,000 $ 34,338
Banc One Corp. 817,899 51,732
BankAmerica Corp. 155,500 12,848
CIGNA Corp. 250,000 51,250
Chase Manhattan Corp. 50,000 6,744
Citicorp 107,000 15,194
Hartford Financial Services 554,300 60,142
Household International 316,900 43,653
MGIC Investment Corp. 66,700 4,381
Merrill Lynch & Co. 284,300 23,597
Morgan Stanley, Dean Witter Discover & Co. 596,700 43,485
NationsBank 1,136,400 82,886
PNC Bank, N.A. 517,100 30,994
Travelers Group 688,700 41,322
Washington Mutual, Inc. 300,000 21,516
------------------------------------------------------------------------------
524,082
- ------------------------------------------------------------------------------------------------------------------------
HEALTH CARE--19.5% American Home Products Corp. 675,400 64,416
Amgen, Inc. 1,190,000 72,441
Baxter International 638,500 35,197
Bristol-Myers Squibb Co. 213,700 22,292
Eli Lilly & Co. 908,600 54,175
Guidant Corp. 308,900 22,666
(a)HEALTHSOUTH Corp. 281,700 7,905
Medtronic, Inc. 873,600 45,318
Perkin-Elmer Corp. 555,600 40,177
Schering-Plough Corp. 200,000 16,337
SmithKline Beecham Group PLC, ADR 759,400 47,510
United Healthcare Corp. 1,519,800 98,407
Warner-Lambert Co. 365,300 62,215
------------------------------------------------------------------------------
589,056
- ------------------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS AND AMP, Inc. 813,400 35,637
NETWORKING--10.9% (a)Analog Devices 1,060,000 35,245
(a)Applied Materials, Inc. 394,600 13,934
(a)Bay Networks 300,000 8,137
(a)Cisco Systems 911,150 62,300
Intel Corp. 777,900 60,725
(a)Lam Research Corp. 400,000 11,250
Linear Technology Corp. 406,600 28,055
(a)Microchip Technology 903,300 18,969
(a)National Semiconductor Corp. 634,300 13,281
(a)Teradyne 1,018,900 40,820
------------------------------------------------------------------------------
328,353
- ------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--4.5% (a)Ascend Communications, Inc. 435,800 16,506
CBS, Inc. 943,300 32,013
(a)Chancellor Media Corp. 349,900 16,052
Nokia Corp., ADR 138,000 14,895
(a)Tellabs, Inc. 236,500 15,875
(a)WorldCom, Inc. 960,900 41,379
------------------------------------------------------------------------------
136,720
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TRANSPORTATION--2.8% CSX Corp. 504,700 $ 30,030
(a)Federal Express Corp. 133,400 9,488
Norfolk Southern Corp. 765,000 28,592
(a)Wisconsin Central Transportation Corp. 550,000 15,486
------------------------------------------------------------------------------
83,596
------------------------------------------------------------------------------
TOTAL COMMON STOCKS--96.7%
(Cost: $2,385,838) 2,916,501
------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------
MONEY MARKET Yield--5.55% to 6.00%
INSTRUMENTS--3.2% Due--April 1998
(Cost: $97,182) $ 97,300 97,182
------------------------------------------------------------------------------
TOTAL INVESTMENTS--99.9%
(Cost: $2,483,020) 3,013,683
------------------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES--.1% 2,725
------------------------------------------------------------------------------
NET ASSETS--100% $3,016,408
------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security
Based on the cost of investments of $2,483,020,000 for federal income tax
purposes at March 31, 1998, the gross unrealized appreciation was $560,916,000,
the gross unrealized depreciation was $30,253,000 and the net unrealized
appreciation on investments was $530,663,000.
12
<PAGE> 13
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<S> <C>
- --------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------
Investments, at value
(Cost: $2,483,020) $3,013,683
- --------------------------------------------------------------------------
Receivable for:
Investments sold 14,785
- --------------------------------------------------------------------------
Dividends 2,200
- --------------------------------------------------------------------------
Fund shares sold 354
- --------------------------------------------------------------------------
TOTAL ASSETS 3,031,022
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- --------------------------------------------------------------------------
Cash overdraft 193
- --------------------------------------------------------------------------
Payable for:
Investments purchased 9,317
- --------------------------------------------------------------------------
Fund shares redeemed 1,476
- --------------------------------------------------------------------------
Management fee 1,333
- --------------------------------------------------------------------------
Distribution services fee 547
- --------------------------------------------------------------------------
Administrative services fee 586
- --------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 1,012
- --------------------------------------------------------------------------
Trustees' fees and other 150
- --------------------------------------------------------------------------
Total liabilities 14,614
- --------------------------------------------------------------------------
NET ASSETS $3,016,408
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- --------------------------------------------------------------------------
Paid-in capital $2,336,182
- --------------------------------------------------------------------------
Undistributed net realized gain on investments 135,774
- --------------------------------------------------------------------------
Net unrealized appreciation on investments 530,663
- --------------------------------------------------------------------------
Undistributed net investment income 13,789
- --------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $3,016,408
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
THE PRICING OF SHARES
- --------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($2,113,107 / 139,091 shares outstanding) $15.19
- --------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $16.12
- --------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($855,385 / 59,498 shares outstanding) $14.38
- --------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($21,003 / 1,449 shares outstanding) $14.49
- --------------------------------------------------------------------------
CLASS I SHARES
Net asset value and redemption price per share
($26,913 / 1,752 shares outstanding) $15.36
- --------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
13
<PAGE> 14
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
INVESTMENT INCOME
- ------------------------------------------------------------------------
Dividends $ 13,569
- ------------------------------------------------------------------------
Interest 1,227
- ------------------------------------------------------------------------
Total investment income 14,796
- ------------------------------------------------------------------------
Expenses:
Management fee 7,469
- ------------------------------------------------------------------------
Distribution services fee 3,183
- ------------------------------------------------------------------------
Administrative services fee 3,174
- ------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 4,678
- ------------------------------------------------------------------------
Reports to shareholders 419
- ------------------------------------------------------------------------
Professional fees 34
- ------------------------------------------------------------------------
Trustees' fees and other 69
- ------------------------------------------------------------------------
Total expenses 19,026
- ------------------------------------------------------------------------
NET INVESTMENT LOSS (4,230)
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
- ------------------------------------------------------------------------
Net realized gain on sales of investments 184,719
- ------------------------------------------------------------------------
Change in net unrealized appreciation on investments 194,849
- ------------------------------------------------------------------------
Net gain on investments 379,568
- ------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $375,338
- ------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED
1998 SEPTEMBER 30,
(UNAUDITED) 1997
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- ----------------------------------------------------------------------------------------------------
Net investment loss $ (4,230) (7,426)
- ----------------------------------------------------------------------------------------------------
Net realized gain 184,719 404,960
- ----------------------------------------------------------------------------------------------------
Change in net unrealized appreciation 194,849 88,101
- ----------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 375,338 485,635
- ----------------------------------------------------------------------------------------------------
Net equalization credits (charges) (2,531) 2,732
- ----------------------------------------------------------------------------------------------------
Distribution from net realized gain (376,132) (690,123)
- ----------------------------------------------------------------------------------------------------
Net increase from capital share transactions 192,168 291,018
- ----------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 188,843 89,262
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------------------------------------
Beginning of period 2,827,565 2,738,303
- ----------------------------------------------------------------------------------------------------
END OF PERIOD (including undistributed net investment
income of $13,789 and $20,550, respectively) $3,016,408 2,827,565
- ----------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE
FUND Kemper Growth Fund is an open-end management
investment company organized as a business trust
under the laws of Massachusetts. The Fund currently
offers four classes of shares. Class A shares are
sold to investors subject to an initial sales
charge. Class B shares are sold without an initial
sales charge but are subject to higher ongoing
expenses than Class A shares and a contingent
deferred sales charge payable upon certain
redemptions. Class B shares automatically convert
to Class A shares six years after issuance. Class C
shares are sold without an initial sales charge but
are subject to higher ongoing expenses than Class A
shares and a contingent deferred sales charge
payable upon certain redemptions within one year of
purchase. Class C shares do not convert into
another class. Class I shares are sold to a limited
group of investors, are not subject to initial or
contingent deferred sales charges and have lower
ongoing expenses than other classes. Differences in
class expenses will result in the payment of
different per share income dividends by class. All
shares of the Fund have equal rights with respect
to voting, dividends and assets, subject to class
specific preferences.
- --------------------------------------------------------------------------------
2 SIGNIFICANT
ACCOUNTING POLICIES INVESTMENT VALUATION. Investments are stated at
value. Portfolio securities that are traded on a
domestic securities exchange or securities listed
on the NASDAQ National Market are valued at the
last sale price on the exchange or market where
primarily traded or listed or, if there is no
recent sale, at the last current bid quotation.
Portfolio securities that are primarily traded on
foreign securities exchanges are generally valued
at the preceding closing values of such securities
on their respective exchanges where primarily
traded. Securities not so traded or listed are
valued at the last current bid quotation if market
quotations are available. Fixed income securities
are valued by using market quotations, or
independent pricing services that use prices
provided by market makers or estimates of market
values obtained from yield data relating to
instruments or securities with similar
characteristics. Equity options are valued at the
last sale price unless the bid price is higher or
the asked price is lower, in which event such bid
or asked price is used. Financial futures and
options thereon are valued at the settlement price
established each day by the board of trade or
exchange on which they are traded. Forward foreign
currency contracts are valued at the forward rates
prevailing on the day of valuation. Other
securities and assets are valued at fair value as
determined in good faith by the Board of Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on the
trade date (date the order to buy or sell is
executed). Dividend income is recorded on the
ex-dividend date, and interest income is recorded
on the accrual basis and includes discount
amortization on money market instruments. Realized
gains and losses from investment transactions are
reported on an identified cost basis.
FUND SHARE VALUATION. Fund shares are sold and
redeemed on a continuous basis at net asset value
(plus an initial sales charge on most sales of
Class A shares). Proceeds payable on redemption of
Class B and Class C shares will be reduced by the
amount of any applicable contingent deferred sales
charge. On each day the New York Stock Exchange is
open for trading, the net asset value per share is
determined as of the earlier of 3:00 p.m. Chicago
time or the close of the Exchange. The net asset
value per share is determined separately for each
class
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
by dividing the Fund's net assets attributable to
that class by the number of shares of the class
outstanding.
FEDERAL INCOME TAXES. The Fund has complied with
the special provisions of the Internal Revenue Code
available to investment companies for the six
months ended March 31, 1998.
DIVIDENDS TO SHAREHOLDERS. The Fund declares and
pays dividends of net investment income and net
realized capital gains annually, which are recorded
on the ex-dividend date. Dividends are determined
in accordance with income tax principles which may
treat certain transactions differently from
generally accepted accounting principles.
EQUALIZATION ACCOUNTING. A portion of proceeds from
sales and cost of redemptions of Fund shares is
credited or charged to undistributed net investment
income so that income per share available for
distribution is not affected by sales or
redemptions of shares.
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES INVESTMENT MANAGER COMBINATION. Effective December
31, 1997, Zurich Insurance Company, the parent of
Zurich Kemper Investments, Inc. (ZKI), acquired a
majority interest in Scudder, Stevens & Clark, Inc.
(Scudder), another major investment manager. As a
result of this transaction, the operations of ZKI
were combined with Scudder to form a new global
investment organization named Scudder Kemper
Investments, Inc. (Scudder Kemper). The transaction
resulted in the termination of the Fund's
investment management agreement with ZKI, however,
a new investment management agreement between the
Fund and Scudder Kemper was approved by the Fund's
Board of Trustees and by the Fund's shareholders.
The new management agreement, which was effective
December 31, 1997, is the same in all material
respects as the previous management agreement,
except that Scudder Kemper is the new investment
adviser to the Fund. In addition, the names of the
Fund's principal underwriter and shareholder
service agent were changed to Kemper Distributors,
Inc. (KDI) and Kemper Service Company (KSvC),
respectively.
MANAGEMENT AGREEMENT. The Fund has a management
agreement with Scudder Kemper and pays a management
fee at an annual rate of .58% of the first $250
million of average daily net assets declining to
.42% of average daily net assets in excess of $12.5
billion. The Fund incurred a management fee of
$7,469,000 for the six months ended March 31, 1998.
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
The Fund has an underwriting and distribution
services agreement with KDI. Underwriting
commissions paid in connection with the
distribution of Class A shares are as follows:
<TABLE>
<CAPTION>
COMMISSIONS
COMMISSIONS ALLOWED BY KDI
RETAINED BY KDI TO FIRMS
--------------- --------------
<S> <C> <C>
Six months ended
March 31, 1998 $156,000 711,000
</TABLE>
For services under the distribution services
agreement, the Fund pays KDI a fee of .75% of
average daily net assets of Class B and Class C
shares. Pursuant to the agreement, KDI enters into
related selling group agreements with various firms
at various rates for sales of Class B and Class C
shares. In addition, KDI receives any contingent
deferred sales charges (CDSC) from redemptions of
Class B and Class C shares. Distribution fees, CDSC
and commissions related to Class B and Class C
shares are as follows:
<TABLE>
<CAPTION>
DISTRIBUTION FEES COMMISSIONS AND
AND CDSC DISTRIBUTION FEES PAID
RECEIVED BY KDI BY KDI TO FIRMS
----------------- ----------------------
<S> <C> <C>
Six months ended
March 31, 1998 $3,796,000 1,387,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with KDI. For
providing information and administrative services
to shareholders, the Fund pays KDI a fee at an
annual rate of up to .25% of average daily net
assets of each class. KDI in turn has various
agreements with financial services firms that
provide these services and pays these firms based
on assets of Fund accounts the firms service.
Administrative services fees (ASF) paid are as
follows:
<TABLE>
<CAPTION>
ASF PAID BY KDI
ASF PAID BY ----------------------------
THE FUND TO KDI TO ALL FIRMS TO AFFILIATES
--------------- ------------ -------------
<S> <C> <C> <C>
Six months ended
March 31, 1998 $3,174,000 3,144,000 21,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
KSvC is the shareholder service agent of the Fund.
Under the agreement, KSvC received shareholder
services fees of $3,697,000 for the six months
ended March 31, 1998.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. During the six months ended March
31, 1998, the Fund made no payments to its officers
and incurred trustees' fees of $21,000 to
independent trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the six months ended March 31, 1998, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $1,716,237
Proceeds from sales 1,939,331
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1998 SEPTEMBER 30, 1997
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------
SHARES SOLD
--------------------------------------------------------------------------------
Class A 13,757 $ 198,528 14,894 $ 201,899
--------------------------------------------------------------------------------
Class B 5,554 78,156 11,567 165,154
--------------------------------------------------------------------------------
Class C 642 9,108 644 9,070
--------------------------------------------------------------------------------
Class I 221 2,900 520 7,229
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
--------------------------------------------------------------------------------
Class A 18,558 235,870 33,248 432,249
--------------------------------------------------------------------------------
Class B 9,480 114,331 17,442 219,275
--------------------------------------------------------------------------------
Class C 202 2,457 258 3,261
--------------------------------------------------------------------------------
Class I 264 3,387 634 8,270
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SHARES REDEEMED
--------------------------------------------------------------------------------
Class A (22,248) (317,412) (34,418) (481,224)
--------------------------------------------------------------------------------
Class B (8,471) (119,962) (17,846) (248,421)
--------------------------------------------------------------------------------
Class C (611) (8,761) (360) (5,003)
--------------------------------------------------------------------------------
Class I (480) (6,434) (1,472) (20,741)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CONVERSION OF SHARES
--------------------------------------------------------------------------------
Class A 5,714 82,081 4,026 56,318
--------------------------------------------------------------------------------
Class B (6,011) (82,081) (4,178) (56,318)
--------------------------------------------------------------------------------
NET INCREASE
FROM CAPITAL SHARE
TRANSACTIONS $ 192,168 $ 291,018
--------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 19
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------------
CLASS A
----------------------------------------------
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, ---------------------------------
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------------------------
Net asset value, beginning of period $15.47 17.21 16.07 12.93 15.33
- --------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income -- -- .12 .05 .01
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.81 2.61 2.74 3.27 (1.41)
- --------------------------------------------------------------------------------------------------
Total from investment operations 1.81 2.61 2.86 3.32 (1.40)
- --------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- -- .04 -- --
- --------------------------------------------------------------------------------------------------
Distribution from net realized gain 2.09 4.35 1.68 .18 1.00
- --------------------------------------------------------------------------------------------------
Total dividends 2.09 4.35 1.72 .18 1.00
- --------------------------------------------------------------------------------------------------
Net asset value, end of period $15.19 15.47 17.21 16.07 12.93
- --------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 14.34% 19.97 19.62 26.07 (9.39)
- --------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------------------------
Expenses 1.05% 1.06 1.07 1.17 1.09
- --------------------------------------------------------------------------------------------------
Net investment income .02% .07 .65 .43 .24
- --------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------
CLASS B
-----------------------------------------------------
SIX MONTHS MAY 31
ENDED YEAR ENDED SEPTEMBER 30, TO
MARCH 31, ------------------------ SEPT. 30,
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $14.83 16.82 15.85 12.88 13.10
- ---------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.07) (.16) (.09) (.08) (.03)
- ---------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.71 2.52 2.74 3.23 (.19)
- ---------------------------------------------------------------------------------------------------------
Total from investment operations 1.64 2.36 2.65 3.15 (.22)
- ---------------------------------------------------------------------------------------------------------
Less distribution from net realized gain 2.09 4.35 1.68 .18 --
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.38 14.83 16.82 15.85 12.88
- ---------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 13.77% 18.68 18.47 24.83 (1.68)
- ---------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------
Expenses 2.11% 2.13 2.05 2.17 2.11
- ---------------------------------------------------------------------------------------------------------
Net investment loss (1.04)% (1.00) (.33) (.57) (.76)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
FINANCIAL HIGHLIGHTS
[CAPTION]
<TABLE>
<CAPTION>
----------------------------------------------
CLASS C
----------------------------------------------
SIX MONTHS YEAR ENDED SEPTEMBER MAY 31
ENDED 30, TO
MARCH 31, --------------------- SEPT. 30,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------------------------
Net asset value, beginning of period $14.91 16.87 15.87 12.88 13.09
- --------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.06) (.13) (.06) (.07) (.02)
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.73 2.52 2.74 3.24 (.19)
- --------------------------------------------------------------------------------------------------
Total from investment operations 1.67 2.39 2.68 3.17 (.21)
- --------------------------------------------------------------------------------------------------
Less distribution from net realized gain 2.09 4.35 1.68 .18 --
- --------------------------------------------------------------------------------------------------
Net asset value, end of period $14.49 14.91 16.87 15.87 12.88
- --------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 13.91% 18.87 18.65 24.99 (1.60)
- --------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------------------------
Expenses 2.00% 1.99 1.95 2.03 2.09
- --------------------------------------------------------------------------------------------------
Net investment loss (.93)% (.86) (.23) (.43) (.67)
- --------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 21
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------------
CLASS I
--------------------------------------
SIX MONTHS YEAR ENDED JULY 3
ENDED SEPTEMBER 30, TO
MARCH 31, ------------- SEPT. 30,
1998 1997 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------
Net asset value, beginning of period $15.60 17.26 16.09 14.80
- ------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .03 .08 .19 .03
- ------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.82 2.61 2.74 1.26
- ------------------------------------------------------------------------------------------
Total from investment operations 1.85 2.69 2.93 1.29
- ------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- -- .08 --
- ------------------------------------------------------------------------------------------
Distribution from net realized gain 2.09 4.35 1.68 --
- ------------------------------------------------------------------------------------------
Total dividends 2.09 4.35 1.76 --
- ------------------------------------------------------------------------------------------
Net asset value, end of period $15.36 15.60 17.26 16.09
- ------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 14.49% 20.51 20.19 8.72
- ------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------------
Expenses .68% .70 .64 .59
- ------------------------------------------------------------------------------------------
Net investment income .39% .43 1.08 .92
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, --------------------------------------------------
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets at end of year (in thousands) $3,016,408 2,827,565 2,738,303 2,503,301 2,255,977
- -------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 125% 201 150 67 115
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Average commission rates paid per share on stock transactions for the six
months ended March 31, 1998 and the years ended September 30, 1997 and 1996 were
$.0580, $.0569 and $.0560, respectively.
NOTES: Total return does not reflect the effect of any sales charges. Per share
data for the six months ended March 31, 1998 were determined based on average
shares outstanding. Data for the period ended March 31, 1998 is unaudited.
21
<PAGE> 22
NOTES
22
<PAGE> 23
NOTES
23
<PAGE> 24
TRUSTEES & OFFICERS
TRUSTEES OFFICERS
DANIEL PIERCE MARK S. CASADY STEVEN H. REYNOLDS
Chairman and Trustee President Vice President
DAVID W. BELIN PHILIP J. COLLORA LINDA J. WONDRACK
Trustee Vice President, Vice President
Secretary and Treasurer
LEWIS A. BURNHAM JOHN R. HEBBLE
Trustee JERALD K. HARTMAN Assistant Treasurer
Vice President
DONALD L. DUNAWAY MAUREEN E. KANE
Trustee THOMAS W. LITTAUER Assistant Secretary
Vice President
ROBERT B. HOFFMAN CAROLINE PEARSON
Trustee ANN M. MCCREARY Assistant Secretary
Vice President
DONALD R. JONES ELIZABETH C. WERTH
Trustee KATHRYN L. QUIRK Assistant Secretary
Vice President
SHIRLEY D. PETERSON
Trustee
WILLIAM P. SOMMERS
Trustee
EDMOND D. VILLANI
Trustee
- --------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 419557
Kansas City, MO 64141
- --------------------------------------------------------------------------------
CUSTODIAN AND INVESTORS FIDUCIARY TRUST COMPANY
TRANSFER AGENT 801 Pennsylvania
Kansas City, MO 64105
- --------------------------------------------------------------------------------
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606-5808
www.kemper.com
[KEMPER FUNDS LOGO]
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
Printed on recycled paper in the U.S.A.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Equity Funds/Growth Style prospectus.
KGF - 3 (5/98) 1047020
