<PAGE> 1
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED MARCH 31, 2000
[LOGO]
Seeking growth of capital through professional management
and diversification of investments in securities having potential for capital
appreciation
KEMPER GROWTH FUND
"... Our efforts to keep the fund closely in line with the sector weightings of
the Russell 1000 Growth index really paid off, particularly when technology
stocks crumbled toward the end of the period. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
8
INDUSTRY SECTORS
9
LARGEST HOLDINGS
10
PORTFOLIO OF
INVESTMENTS
13
FINANCIAL STATEMENTS
16
FINANCIAL HIGHLIGHTS
18
NOTES TO
FINANCIAL STATEMENTS
AT A GLANCE
KEMPER GROWTH FUND TOTAL RETURNS
FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2000 (UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER GROWTH FUND KEMPER GROWTH FUND LIPPERLARGE-CAP GROWTH
KEMPER GROWTH FUND CLASS A CLASS B CLASS C FUNDS CATEGORY AVERAGE*
- -------------------------- ------------------ ------------------ -----------------------
<S> <C> <C> <C>
39.4 38.86 38.79 37.61
</TABLE>
RETURNS AND RANKINGS ARE HISTORICAL AND DO NOT GUARANTEE FUTURE PERFORMANCE.
INVESTMENT RETURNS AND PRINCIPAL VALUES WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN ORIGINAL COST.
*LIPPER ANALYTICAL SERVICES, INC. RETURNS AND RANKINGS ARE BASED UPON CHANGES IN
NET ASSET VALUE WITH ALL DIVIDENDS REINVESTED AND DO NOT INCLUDE THE EFFECT OF
SALES CHARGES; IF SALES CHARGES HAD BEEN INCLUDED, RESULTS MIGHT HAVE BEEN LESS
FAVORABLE.
NET ASSET VALUE
<TABLE>
<CAPTION>
AS OF AS OF
3/31/00 9/30/99
.........................................................
<S> <C> <C> <C> <C>
KEMPER GROWTH FUND CLASS A $20.05 $15.79
.........................................................
KEMPER GROWTH FUND CLASS B $18.44 $14.69
.........................................................
KEMPER GROWTH FUND CLASS C $18.67 $14.87
.........................................................
</TABLE>
KEMPER GROWTH FUND
LIPPER RANKINGS AS OF 3/31/00*
COMPARED WITH ALL OTHER FUNDS IN THE LIPPER GROWTH FUNDS CATEGORY
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
..................................................................................
<S> <C> <C> <C> <C> <C>
1-YEAR #200 of 436 funds #210 of 436 funds #209 of 436 funds
..................................................................................
5-YEAR #169 of 185 funds #174 of 185 funds #173 of 185 funds
..................................................................................
10-YEAR #52 of 63 funds N/A N/A
..................................................................................
15-YEAR #30 of 39 funds N/A N/A
..................................................................................
20-YEAR #22 of 30 funds N/A N/A
..................................................................................
</TABLE>
DIVIDEND REVIEW
DURING THE SIX-MONTH PERIOD, THE FUND PAID THE FOLLOWING DIVIDENDS PER SHARE:
<TABLE>
<CAPTION>
LONG-TERM
CAPITAL GAIN
.........................................................
<S> <C> <C> <C>
KEMPER GROWTH FUND CLASS A $1.76
.........................................................
KEMPER GROWTH FUND CLASS B $1.76
.........................................................
KEMPER GROWTH FUND CLASS C $1.76
.........................................................
</TABLE>
TERMS TO KNOW
YOUR FUND'S STYLE
MORNINGSTAR EQUITY STYLE BOX
<TABLE>
<S> <C>
[MORNINGSTAR EQUITY STYLE Source: Morningstar, Inc. Chicago, IL. (312)
BOX] 696-6000. The Equity Style Box placement is based
on two variables: a fund's market capitalization
relative to the movements of the market, and a
fund's valuation, which is calculated by
comparing the stocks in the fund's portfolio with
the most recent of the three market-cap groups.
THE STYLE BOX REPRESENTS A SNAPSHOT OF THE FUND'S
PORTFOLIO ON A SINGLE DAY. PLEASE NOTE THAT STYLE
BOXES DO NOT REPRESENT AN EXACT ASSESSMENT OF
RISK AND DO NOT REPRESENT FUTURE PERFORMANCE. THE
FUND'S PORTFOLIO CHANGES FROM DAY TO DAY. A
LONGER-TERM VIEW IS REPRESENTED BY THE FUND'S
MORNINGSTAR CATEGORY, WHICH IS BASED ON ITS
ACTUAL INVESTMENT STYLE AS MEASURED BY ITS
UNDERLYING PORTFOLIO HOLDINGS OVER THE PAST THREE
YEARS. MORNINGSTAR HAS PLACED KEMPER GROWTH FUND
IN THE LARGE-CAP GROWTH CATEGORY. PLEASE CONSULT
THE PROSPECTUS FOR A DESCRIPTION OF INVESTMENT
POLICIES.
</TABLE>
CAPITALIZATION/MARKET CAPITALIZATION A measure of the size of a company that
offers publicly traded stock, as determined by multiplying the current share
price by the number of shares outstanding.
CYCLICAL STOCK A stock that carries a high degree of economic sensitivity. In
accelerating economies, cyclical stocks tend to rise quickly; in decelerating
economies, they tend to decline quickly. Cyclical stocks include industrial
machinery, paper and forestry, automobiles and construction.
GROWTH STOCK A stock in a company that is expected to experience rapid growth
resulting from strong sales, talented management and dominant market position.
Because growth 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.
<PAGE> 3
SCUDDER KEMPER INVESTMENTS, THE INVESTMENT MANAGER FOR KEMPER FUNDS, IS ONE OF
THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS IN THE
WORLD, MANAGING MORE THAN $290 BILLION IN ASSETS FOR INSTITUTIONAL AND CORPORATE
CLIENTS, RETIREMENT AND PENSION PLANS, INSURANCE COMPANIES, MUTUAL FUND
INVESTORS AND INDIVIDUALS. SCUDDER KEMPER INVESTMENTS OFFERS A FULL RANGE OF
INVESTMENT COUNSEL AND ASSET MANAGEMENT CAPABILITIES BASED ON A COMBINATION OF
PROPRIETARY RESEARCH AND DISCIPLINED, LONG-TERM INVESTMENT STRATEGIES.
ECONOMIC OVERVIEW
DEAR KEMPER FUNDS SHAREHOLDER,
As spring moves along towards summer, there isn't much to complain about. For
all the yammering about the "new" economy, the old economy is doing pretty well.
Consumers may hanker for a new GPS handset or a Palm Pilot, but they lust after
a suburban mansion with a garage big enough to hold their luxury car and SUV --
and state and local governments are laying old-fashioned asphalt almost as fast
as businesses are building the information superhighway. Satisfying both old and
new desires got the economy off to a fast start in the new century -- GDP growth
rose at an annual rate of more than 5 percent in the first quarter. Even with a
modest slowdown possible in the second half, growth for the year 2000 is likely
to be close to 5 percent.
So everyone is happy, right? Well, almost everyone. Consumers seldom have felt
so confident; businesspeople seldom have behaved so expansively. But there's
still one grump: Federal Reserve Board Chairman Alan Greenspan, who's become
increasingly worried that rapid growth will bring on inflation.
Despite Greenspan's attempt to slow spending by raising interest rates,
consumers are still splurging, and they show no signs of stopping. We know this
because shoppers are buying the big-ticket items they usually purchase early in
a cycle -- items such as personal computers, mobile phones, jewelry, fancy
kitchen appliances, exercise equipment and big boats.
Why are consumers still buying despite Greenspan's attempts to slow their
splurging? There are three answers: deflation, wealth and easy credit.
Falling prices have made big-ticket items almost irresistible. Since 1997,
prices of kitchen appliances have fallen 4.5 percent, TVs and VCRs 16 percent
and sporting equipment 6.5 percent. Even auto showrooms no longer produce
sticker shock, and drivers have responded with gusto, buying a record 16.9
million cars and light trucks in 1999. 2000 is likely to be the first year in
which automotive sales top 17 million.
Some of that spending has been made possible by stock market gains: Wall
Street has handed out windfalls to almost anyone holding equities in the past
few years. But consumers who don't own stocks are also spending, thanks to a
decade of debt. Young, poor or new to America? In the 1990s, it didn't matter;
lenders still loved you. While high-income families have been borrowing less,
those lower on the income scale have been borrowing more.
But it's not just consumers that Greenspan is concerned about; businesses are
splurging as well. During 1999, businesses increased spending on computers and
peripherals by 35 percent and spending on communications equipment by 25 percent
(both after adjusting for price declines). Far from slowing down this year, we
expect investment in these two categories to accelerate -- to 40 percent growth
for computers and 30 percent growth for communications equipment.
And just like consumers, businesses are borrowing to buy. You may think that
with booming sales, entrepreneurs are cash-rich. But while 1999 saw economy-wide
earnings jump 10 percent and profits of Standard and Poor's (S&P) 500 companies
leap nearly 14 percent, internal cash covered less than 84 percent of capital
spending. With the exception of 1998, that's the lowest on record. Last year
alone, corporate debt shot up by more than 11 percent to $560 billion. New
economy companies are no exception; they have more debt than most people
realize, issuing more than half of all convertible bonds.
All this debt could cause problems. Although we've increased our 2001
inflation outlook to nearly 3 percent -- an entire percentage point higher than
our prediction three months ago -- we're not particularly worried about
inflation. It's the heavy borrowing we're concerned about. Debt continues to
exceed income growth, and when Greenspan succeeds in slowing the economy with
higher interest rates (which he will succeed in doing), all of the debt American
consumers and businesses are taking on could be tricky to handle. Private
financial obligations must be paid with personal income and corporate profits.
When the economy slows, personal income stagnates and corporate profits often
fall -- which makes it harder to pay off those debts. Consumers and businesses
may have to sell their assets to pay off the debt, and they may risk going into
default.
That being the case, a gradual economic slowdown may be in everyone's best
interest. But "gradual" is the key. Both the old and new economy have a lot
riding on the Fed's ability to rein in growth softly and smoothly, because
abrupt slowdowns encourage consumers and businesses to sell assets -- and
perhaps risk bankruptcy -- to pay off debt, as described above.
3
<PAGE> 4
ECONOMIC OVERVIEW
ECONOMIC GUIDEPOSTS
ECONOMIC ACTIVITY IS A KEY INFLUENCE ON INVESTMENT PERFORMANCE AND
SHAREHOLDER DECISION-MAKING. PERIODS OF RECESSION OR BOOM, INFLATION OR
DEFLATION, CREDIT EXPANSION OR CREDIT CRUNCH HAVE A SIGNIFICANT IMPACT ON
MUTUAL FUND PERFORMANCE.
THE FOLLOWING ARE SOME SIGNIFICANT ECONOMIC GUIDEPOSTS AND THEIR
INVESTMENT RATIONALE THAT MAY HELP YOUR INVESTMENT DECISION-MAKING. THE
10-YEAR TREASURY RATE AND THE PRIME RATE ARE PREVAILING INTEREST RATES.
THE OTHER DATA REPORT YEAR-TO-YEAR PERCENTAGE CHANGES.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (3/31/00) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 6.00 6.10 5.20 5.60
Prime rate (2) 9.00 8.25 7.75 8.50
Inflation rate (3)* 3.70 2.60 1.80 1.40
The U.S. dollar (4) 1.10 -0.90 -0.50 4.10
Capital goods orders (5)* 10.10 4.70 5.50 11.50
Industrial production (5)* 5.10 3.50 3.10 5.30
Employment growth (6) 2.30 2.20 2.30 2.60
</TABLE>
(1) FALLING INTEREST RATES IN RECENT YEARS HAVE BEEN A BIG PLUS FOR FINANCIAL
ASSETS.
(2) THE INTEREST RATE THAT COMMERCIAL LENDERS CHARGE THEIR BEST BORROWERS.
(3) INFLATION REDUCES AN INVESTOR'S REAL RETURN. IN THE LAST FIVE YEARS,
INFLATION HAS BEEN AS HIGH AS 6 PERCENT. THE LOW, MODERATE INFLATION OF THE
LAST FEW YEARS HAS MEANT HIGH REAL RETURNS.
(4) CHANGES IN THE EXCHANGE VALUE OF THE DOLLAR IMPACT U.S. EXPORTERS AND THE
VALUE OF U.S. FIRMS' FOREIGN PROFITS.
(5) THESE INFLUENCE CORPORATE PROFITS AND EQUITY PERFORMANCE.
(6) AN INFLUENCE ON FAMILY INCOME AND RETAIL SALES.
*DATA AS OF 2/29/00.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
A gradual slowdown seems to be what the Fed is seeking, but for all of
Greenspan's semi-tough talk, some indicators suggest that monetary policy has
actually been lax. Broad money and credit creation have vastly exceeded economic
activity since 1995, and no central bank can allow that to continue indefinitely
without creating inflation. If we begin to see higher core inflation, the Fed
will have to deal with all that money it's created in a less gradualist
manner -- and that could get tricky. Financial turmoil accompanied each of the
Fed's last two efforts to slow the economy down. In 1994, there was a bond
market meltdown that resulted in a Mexican debt crisis. After a more timid Fed
tightening in 1997, crises in Asia were followed by problems with Russian debt,
Brazilian debt and a large American hedge fund. We don't think this is a
coincidence: The global debt market is so vast and interconnected that it's
highly vulnerable to a rise in the cost of its basic raw material -- short-term
funds.
Let's hope, then, that the Fed can slow the economy without upsetting the
financial applecart, because that could affect everyone. After all, the old
economy and the new economy are wedded in many ways. Much of the money that
flows to IPOs is available because mature industries have borrowed to carry out
mergers and share buybacks. Old economy companies are the biggest customers of
new economy products. And e-commerce sites are all about moving traditional
goods over old-fashioned highways. Despite a lot of talk about old and new,
we're all in this economy together.
Sincerely,
Scudder Kemper Investments Economics Group
THE INFORMATION CONTAINED IN THIS PIECE HAS BEEN TAKEN FROM SOURCES BELIEVED TO
BE RELIABLE, BUT THE ACCURACY OF THE INFORMATION IS NOT GUARANTEED. THE OPINIONS
AND FORECASTS EXPRESSED ARE THOSE OF THE ECONOMIC ADVISORS OF SCUDDER KEMPER
INVESTMENTS, INC. AS OF MAY 8, 2000, AND MAY NOT ACTUALLY COME TO PASS. THIS
INFORMATION IS SUBJECT TO CHANGE. NO PART OF THIS MATERIAL IS INTENDED AS AN
INVESTMENT RECOMMENDATION.
TO OBTAIN A KEMPER FUNDS PROSPECTUS, DOWNLOAD ONE FROM WWW.KEMPER.COM, TALK TO
YOUR FINANCIAL REPRESENTATIVE OR CALL SHAREHOLDER SERVICES AT (800) 621-1048.
THE PROSPECTUS CONTAINS MORE COMPLETE INFORMATION, INCLUDING MANAGEMENT FEES AND
EXPENSES. PLEASE READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
4
<PAGE> 5
PERFORMANCE UPDATE
[MALTER PHOTO]
VALERIE F. MALTER IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC. AND
IS A CO-LEAD PORTFOLIO MANAGER OF KEMPER GROWTH FUND. SHE IS ALSO A CERTIFIED
FINANCIAL ANALYST. SHE HAS MORE THAN 15 YEARS OF INVESTMENT MANAGEMENT
EXPERIENCE.
KEMPER GROWTH FUND POSTED EXCELLENT RETURNS FOR THE SEMIANNUAL PERIOD. BELOW,
LEAD PORTFOLIO MANAGER VALERIE MALTER DISCUSSES THE MARKET CLIMATE AND HER
PURE-GROWTH APPROACH TO QUALITY LARGE-CAP STOCKS.
Q HOW DID KEMPER GROWTH FUND PERFORM DURING THE SEMI-ANNUAL PERIOD?
A Despite sustained stock market volatility, fund performance was extremely
strong. The fund gained 39.40 percent (Class A shares, unadjusted for any sales
charges) for the six months ended March 31, 2000. The fund outpaced its
benchmark, the Russell 1000 Growth index, which rose 34.06 percent, and its
peer-group average, the Morningstar Large Company Growth category, which was up
37.61 percent.
Our efforts to keep the fund closely in line with the sector weightings of the
Russell 1000 Growth index really paid off, particularly when technology stocks
crumbled toward the end of the period. While our investment strategy is not
quite sector neutral, we are committed to controlling risk through
diversification. We aim to keep our sector weightings within plus or minus 5
percent of each sector in the Russell 1000 Growth index. This discipline keeps
us from trying to guess the next hot sector, or being seduced by stocks with a
lot of MOJO. And it helps ensure that the fund will be positioned to capture
gains when sectors bounce back, as it did during the period.
Q COULD YOU PROVIDE AN OVERVIEW OF THE MARKET CLIMATE, HIGHLIGHTING
SPECIFIC CHALLENGES YOU FACED IN MANAGING THE FUND?
A The market provided a textbook example of why diversification and a
long-term, rational outlook are so important. Throughout the six-month period,
we continued to see unprecedented levels of market volatility. Despite the
fluctuations, however, most market indices, along with large-cap stocks,
ultimately climbed to new highs.
The period began in October with strong performance in large-cap domestic
growth stocks -- the mainstay of Kemper Growth Fund. In November and December,
investors seemingly turned a blind eye to fundamentals, rewarding lower-quality
stocks over higher ones. Smaller, high-flying tech stocks -- many of them the
untested, trendy ".com" stocks that we stay away from -- were grabbing headlines
with strong performance. After some profit taking in January, the fund quickly
regained its footing when the market surged ahead once again. Fund performance
continued apace throughout February and the first half of March, buoyed by
biotech stocks, consumer discretionary stocks, retailers and technology stocks.
The period ended on a low note, with a collapse of the tech sector and a
precipitous drop in some consumer staples, most notably Procter & Gamble -- one
of the fund's longtime holdings.
Q THE FEDERAL RESERVE BOARD INCREASED INTEREST RATES REPEATEDLY THROUGHOUT
THE PERIOD. HOW DID RISING RATES AFFECT LARGE-CAP GROWTH STOCK PERFORMANCE?
A A rising-interest-rate environment typically takes its toll on growth
stocks. That's because rising rates generally signal an accelerating economy, a
scenario that tends to drive investors toward more cyclical
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.
5
<PAGE> 6
PERFORMANCE UPDATE
stocks. During the period, we did see rotation between growth and cyclical value
stocks as well as large-and small-cap stocks.
While we're closely monitoring and researching how economic trends affect
individual companies, we do not allow short-term macroeconomic fluctuations to
drive our investment discipline. Regardless of the direction of interest rates,
our job is to seek growth stocks with superior fundamentals and earnings
potential.
So, while other fund managers would eliminate positions in sectors that tend
to underperform in rising-rate environments, we examine each company's
fundamental ability to sustain momentum regardless of sector. The prudence of
this strategy is evidenced by the performance of Morgan Stanley. Financial
services stocks generally suffer when rates rise, but the company was up
significantly for the period. In our opinions, Morgan Stanley is one of the most
well-managed of the investment banks. It has the broadest business interests and
consistently lands the highest-profile deals.
Q WHAT WORKED WELL FOR THE FUND?
A Again diversification and adherence to a strict investment discipline
were key. Most sectors experienced wild swings -- as much as 5 to 15 percent.
Anticipating rotations and trading issues is tough in any market, but it was
almost impossible in this one. And since performance of individual stocks within
sectors was uneven, we needed to be especially careful about subsector exposure
as well.
In January and February, the fund benefited from robust gains in biotech
stocks, in which the fund has a modest overweight compared with the benchmark,
and in pharmaceuticals. Two of the fund's largest holdings, Pfizer and Warner
Lambert, did especially well. Despite the slide in technology at the tail end of
March, many of the fund's tech holdings turned in strong performance for the
period. Notably, semiconductor stocks AMAT and Teredyne posted very strong
gains. Holdings in retailers, including Home Depot and The Gap, also contributed
to the fund's overall returns.
Q DESPITE THE FUND'S STRONG GAINS, WAS THERE ANYTHING THAT HINDERED
PERFORMANCE?
A As I mentioned earlier, we were disappointed by one of the fund's
significant, longtime holdings, Procter & Gamble (P&G). In February, it became
known that P&G was considering the acquisitions of Warner Lambert and American
Home. This raised some red flags for us, and we decided, at that time, to reduce
the fund's holdings in the stock by half, to 1 percent. Until recently, company
management had been successful in controlling costs, executing new product
introductions and managing distribution. An earnings disappointment in March,
however, sent the stock plunging 35 percent.
P&G was unfortunately not alone. Most consumer staples stocks suffered losses
for the period. These are primarily the so-called old-economy stocks in which
many of today's investors appear to have lost interest. We firmly believe that
the intense focus on the so-called new economy is myopic. People will continue
to need and want the products these long established companies produce, and
their prospects for earnings growth remain positive. Though it's impossible to
say for sure, the broad sell-off in technology stocks and the strong performance
of consumer staples in March suggests that some investors are realizing the
wisdom of time-tested valuation methods and that old-economy stocks are
returning to favor.
Financial stocks also underperformed, with the notable exceptions of Morgan
Stanley, as we mentioned earlier, and Charles Schwab.
Q THE FUND'S TOP 10 HOLDINGS INCLUDE EIGHT OF THE SAME NAMES THAT WERE
INCLUDED AT THE BEGINNING OF THE SEMIANNUAL PERIOD. IS IT PART OF YOUR STRATEGY
TO BUY AND HOLD?
A Absolutely. Before we buy a stock, we must believe in its long-term
merits. We evaluate each stock, using rigorous proprietary fundamental research
supplemented by quantitative measures. Once we've purchased a stock, we're not
going to sell it because of short-term nonfundamental price changes. Also, we
don't believe that constantly shifting the portfolio serves our shareholders.
Q GIVEN THE CHALLENGES OF THE RECENT MARKET, WHAT IS YOUR OUTLOOK FOR
EQUITY INVESTING IN THE NEAR TERM?
A It's important to remember that no one can predict with certainty how the
markets or any sector will perform. However, we believe that slower economic
growth is likely. There is an inverse relationship between price-earnings ratios
and rising interest rates; therefore, it is also likely that investors will have
to pay a premium for companies with rapidly growing earnings.
If the Federal Reserve Board is successful at dramatically slowing
6
<PAGE> 7
PERFORMANCE UPDATE
the current economic growth, we believe the tech sector will slow down as well.
This could surprise some investors who seem to believe that the tech market is
impenetrable by outside global forces. We will continue to look for the
companies with the strongest fundamentals and take advantage of price weaknesses
to "nibble away" at those we want over the long term, but have been unable to
buy at higher prices. We'll look particularly at the semiconductor subsector. As
the demand for better, faster data transmission continues to grow, many
manufacturers are seeing orders accelerate and business fundamentals improve.
We're keeping a lookout for retailers who can grow their concepts via the Web.
Most traditional retailers are currently in an expansion phase. We believe that
those with systems in place will continue to use the Internet to their advantage
to build sales and increase efficiencies.
In addition, we think that investors have been overly pessimistic about
pharmaceutical stocks. Demographic trends, combined with the capacity of some
companies to develop new products, make the prospects for large pharmaceuticals
better than ever. This suggests that there will be more valuable drugs
introduced in the near future. If opportunities present themselves, we may
increase exposure to certain names or add others.
Despite the market's recent challenges, we remain committed to our pure-growth
investment philosophy. We believe that over time, companies with strong
franchises, skilled management and sustainable, consistent earnings growth can
produce superior long-term returns. Especially in times of market turbulence,
it's important to maintain a long-term outlook. We continue to believe that
quality large-cap domestic growth stocks offer excellent prospects for fund
investors.
7
<PAGE> 8
INDUSTRY SECTORS
A SIX-MONTH COMPARISON
DATA SHOWS THE PERCENTAGE OF THE COMMON STOCKS IN THE PORTFOLIO THAT EACH SECTOR
REPRESENTED ON MARCH 31, 2000, AND ON SEPTEMBER 30, 1999.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER GROWTH FUND ON KEMPER GROWTH FUND ON
3/31/00 9/30/99
--------------------- ---------------------
<S> <C> <C>
Technology 40.4 31.2
Consumer nondurables 20.8 23.2
Health care 13.9 16.7
Communications services 11.2 11.3
Capital goods 8.7 11.6
Finance 3.8 5
Energy 1.2 1
</TABLE>
A COMPARISON WITH THE RUSSELL 1000 GROWTH INDEX*
DATA SHOWS THE PERCENTAGE OF THE COMMON STOCKS IN THE PORTFOLIO THAT EACH SECTOR
OF THE KEMPER GROWTH FUND REPRESENTED ON MARCH 31, 2000, COMPARED WITH THE
INDUSTRY SECTORS THAT MAKE UP THE FUND'S BENCHMARK, THE RUSSELL 1000 GROWTH
INDEX.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER GROWTH FUND ON RUSSELL 1000 GROWTH INDEX ON
3/31/00 3/31/00
--------------------- ----------------------------
<S> <C> <C>
Technology 40.40 50.30
Consumer nondurables 20.80 20.20
Health care 13.90 13.20
Communications services 11.20 3.70
Capital goods 8.70 8.40
Finance 3.80 2.90
Energy 1.20 0.30
Utilities 0.00 0.50
Transportation 0.00 0.20
Basic industries 0.00 0.50
</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 38.4 percent of the fund's total net assets on March 31, 2000.
<TABLE>
<CAPTION>
HOLDINGS PERCENT
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
1. CISCO SYSTEMS Large, comprehensive supplier of 7.3%
routing software and related systems
that direct the flow of data between
local networks.
- ---------------------------------------------------------------------------------------
2. INTEL Engaged in the design, development, 6.0%
manufacture and sale of advanced
semiconductors and integrated
circuits.
- ---------------------------------------------------------------------------------------
3. MICROSOFT Develops, markets and supports a 5.1%
variety of software, operating
systems, language and application
programs.
- ---------------------------------------------------------------------------------------
4. GENERAL ELECTRIC A broadly diversified company with 4.4%
major businesses in power
generators, appliances, lighting,
plastics, medical systems, aircraft
engines, financial services and
broadcasting.
- ---------------------------------------------------------------------------------------
5. SUN MICROSYSTEMS A provider of high-performance 3.5%
workstations, servers and networking
software for the engineering,
scientific, commercial and technical
industries.
- ---------------------------------------------------------------------------------------
6. HOME DEPOT Operates retail stores carrying 2.7%
building supplies and home-
improvement products.
- ---------------------------------------------------------------------------------------
7. MEDTRONIC Manufactures medical devices that 2.5%
help regulate erratic heartbeats,
tremors, and incontinence. About
half of its sales come from
defibrillators and pacing products.
- ---------------------------------------------------------------------------------------
8. PFIZER Global diversified research-based 2.4%
healthcare company that develops,
manufactures and markets a wide
variety of products for human and
animal health care.
- ---------------------------------------------------------------------------------------
9. AMERICA ONLINE Global leader in consumer on-line 2.3%
services, including Internet access,
e-mail, software, computer support
and electronic periodicals. Owns
Netscape Communications.
- ---------------------------------------------------------------------------------------
10. APPLIED MATERIALS A leading maker of the complex 2.2%
manufacturing equipment used in
semiconductor factories, or fabs.
- ---------------------------------------------------------------------------------------
</TABLE>
*Portfolio composition and holdings are subject to change.
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
KEMPER GROWTH FUND
Portfolio of Investments at March 31, 2000 (unaudited)
<TABLE>
<CAPTION>
SHORT-TERM NOTES--1.6% PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
REPURCHASE
AGREEMENT--.9%
State Street Bank and Trust
Company,
6.05%, 4/3/2000, to be
repurchased at $31,238,742
(Cost $31,223,000) $31,223,000 $ 31,223,000
--------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--.7%
Deutsche Bank Financial, Inc.,
5.83%, 04/13/2000
(Cost $24,951,417) 25,000,000 24,951,417
--------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
COMMON STOCKS--98.4% NUMBER OF SHARES VALUE
<S> <C> <C> <C> <C> <C>
CONSUMER
DISCRETIONARY--10.0%
DEPARTMENT & CHAIN
STORES--8.3%
Costco Wholesale Corp.* 960,100 50,465,256
Gap, Inc. 612,500 30,510,156
Home Depot, Inc. 1,433,550 92,463,975
Target Corp. 523,800 39,154,050
Wal-Mart Stores, Inc. 1,327,300 73,665,150
--------------------------------------------------------------------------
286,258,587
RECREATIONAL PRODUCTS--.5%
Premier Parks, Inc.* 741,600 15,573,600
--------------------------------------------------------------------------
SPECIALTY RETAIL--1.2%
Circuit City Stores, Inc. 700,000 42,612,500
--------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--6.8%
FOOD & BEVERAGE--2.0%
Bestfoods 592,200 27,722,362
PepsiCo, Inc. 1,242,400 42,940,450
--------------------------------------------------------------------------
70,662,812
PACKAGE GOODS/
COSMETICS--4.8%
Colgate-Palmolive Co. 999,500 56,346,812
Estee Lauder Companies Inc. "A" 814,700 40,785,919
Gillette Co. 1,039,200 39,164,850
Procter & Gamble Co. 549,400 30,903,750
--------------------------------------------------------------------------
167,201,331
- -----------------------------------------------------------------------------------------------------------------------
HEALTH--13.8%
BIOTECHNOLOGY--2.9%
Amgen Inc.* 494,500 30,349,937
Genentech, Inc.* 188,700 28,682,400
MedImmune, Inc.* 228,700 39,822,388
--------------------------------------------------------------------------
98,854,725
MEDICAL SUPPLY &
SPECIALTY--2.5%
Medtronic, Inc. 1,665,420 85,665,041
--------------------------------------------------------------------------
PHARMACEUTICALS--8.4%
Allergan, Inc. 553,200 27,660,000
Bristol-Myers Squibb Co. 454,600 26,253,150
Johnson & Johnson, Inc. 522,400 36,600,650
Merck & Co., Inc. 925,800 57,515,325
Pfizer, Inc. 2,279,500 83,344,219
Warner-Lambert Co. 614,400 59,904,000
--------------------------------------------------------------------------
291,277,344
</TABLE>
10 The accompanying notes are an integral part of the financial statements.
<PAGE> 11
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
COMMON STOCKS NUMBER OF SHARES VALUE
<S> <C> <C> <C> <C> <C>
COMMUNICATIONS--3.6%
CELLULAR TELEPHONE--1.7%
American Tower Corp. "A"* 480,000 $ 23,700,000
Vodafone AirTouch PLC (ADR) 658,300 36,576,794
--------------------------------------------------------------------------
60,276,794
TELEPHONE/
COMMUNICATIONS--1.9%
JDS Uniphase Corp.* 544,900 65,694,506
--------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
FINANCIAL--3.7%
INSURANCE--.9%
American International Group, Inc. 288,000 31,536,000
--------------------------------------------------------------------------
CONSUMER FINANCE--1.5%
American Express Co. 178,100 26,525,769
Capital One Finance Corp. 545,600 26,154,700
--------------------------------------------------------------------------
52,680,469
OTHER FINANCIAL
COMPANIES--1.3%
Morgan Stanley Dean Witter & Co. 559,800 45,658,688
--------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
MEDIA--7.5%
ADVERTISING--1.4%
Omnicom Group, Inc. 501,500 46,858,906
--------------------------------------------------------------------------
BROADCASTING & ENTERTAINMENT--3.7%
Clear Channel Communications, Inc.* 746,800 51,575,875
Infinity Broadcasting Corp. "A"* 1,135,425 36,759,384
Univision Communication, Inc.* 356,250 40,256,250
--------------------------------------------------------------------------
128,591,509
CABLE TELEVISION -- 2.4%
AT&T Corp. -- Liberty Media
Group "A"* 730,400 43,276,200
EchoStar Communications Corp. "A"* 492,200 38,883,800
--------------------------------------------------------------------------
82,160,000
- -----------------------------------------------------------------------------------------------------------------------
SERVICE INDUSTRIES--3.6%
EDP SERVICES--1.7%
Electronic Data Systems Corp. 936,250 60,095,547
--------------------------------------------------------------------------
INVESTMENT--1.0%
Charles Schwab Corp. 598,500 34,002,281
--------------------------------------------------------------------------
MISCELLANEOUS
COMMERCIAL--.4%
Siebel Systems, Inc.* 105,400 12,588,713
--------------------------------------------------------------------------
MISCELLANEOUS CONSUMER--.5%
eBay, Inc.* 106,700 18,779,200
--------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
DURABLES--1.4%
TELECOMMUNICATIONS
EQUIPMENT--1.4%
Lucent Technologies, Inc. 791,900 48,107,925
--------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
MANUFACTURING--7.2%
DIVERSIFIED MANUFACTURING--5.8%
General Electric Co. 974,400 151,214,700
Textron, Inc. 840,800 51,183,700
--------------------------------------------------------------------------
202,398,400
INDUSTRIAL SPECIALTY--1.4%
QUALCOMM Inc.* 320,990 47,927,819
--------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
COMMON STOCKS NUMBER OF SHARES VALUE
<S> <C> <C> <C> <C> <C>
TECHNOLOGY--39.6%
COMPUTER SOFTWARE--9.7%
America Online, Inc.* 1,163,800 $ 78,265,550
Computer Associates International,
Inc.* 455,300 26,948,069
I2 Technologies Inc.* 90,800 11,088,950
Microsoft Corp.* 1,651,350 175,455,938
Oracle Corp.* 562,800 43,933,575
----------------------------------------------------------------------------
335,692,082
DIVERSE ELECTRONIC
PRODUCTS--6.0%
Aether Systems, Inc.* 104,700 19,003,050
Applied Materials, Inc.* 797,600 75,173,800
Dell Computer Corp.* 454,600 24,519,987
Motorola Inc. 270,200 38,469,725
Teradyne, Inc.* 618,300 50,855,175
----------------------------------------------------------------------------
208,021,737
EDP PERIPHERALS--2.3%
Ariba, Inc.* 192,350 40,321,369
EMC Corp.* 330,800 41,350,000
----------------------------------------------------------------------------
81,671,369
ELECTRONIC COMPONENTS--7.9%
Broadcom Corp.* 46,400 11,269,400
Cisco Systems, Inc.* 3,282,200 253,755,087
Juniper Networks, Inc.* 28,900 7,616,956
----------------------------------------------------------------------------
272,641,443
ELECTRONIC DATA
PROCESSING--4.5%
International Business Machines Corp. 294,900 34,798,200
Sun Microsystems, Inc.* 1,302,900 122,085,802
----------------------------------------------------------------------------
156,884,002
SEMICONDUCTORS--9.2%
Intel Corp. 1,582,900 208,843,869
Linear Technology Corp. 800,700 44,038,500
Vitesse Semiconductor Corp.* 700,150 67,389,438
----------------------------------------------------------------------------
320,271,807
- -------------------------------------------------------------------------------------------------------------------------
ENERGY--1.2%
OILFIELD SERVICES--1.2%
Schlumberger Ltd. 554,600 42,426,900
----------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost $2,181,443,016) 3,413,072,037
----------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost $2,237,617,433) $3,469,246,454
----------------------------------------------------------------------------
</TABLE>
NOTE TO PORTFOLIO OF INVESTMENTS
* Non-income producing security.
(a) Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities.
(b) The cost for federal income tax purposes was $2,237,617,433. At March 31,
2000, net unrealized appreciation for all securities based on tax cost was
$1,231,629,021. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of value over tax cost of
$1,334,219,169 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value of
$102,590,148.
12 The accompanying notes are an integral part of the financial statements.
<PAGE> 13
FINANCIAL STATEMENTS
STATEMENT OF ASSETS & LIABILITIES
March 31, 2000 (unaudited)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $2,237,617,433) $3,469,246,454
- ------------------------------------------------------------------------------
Cash 733
- ------------------------------------------------------------------------------
Dividends receivable 1,502,190
- ------------------------------------------------------------------------------
Interest receivable 5,247
- ------------------------------------------------------------------------------
Receivable for Fund shares sold 20,119,716
- ------------------------------------------------------------------------------
Other assets 73,525
- ------------------------------------------------------------------------------
TOTAL ASSETS 3,490,947,865
- ------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased 11,803,470
- ------------------------------------------------------------------------------
Payable for Fund shares redeemed 1,009,346
- ------------------------------------------------------------------------------
Accrued management fee 1,525,871
- ------------------------------------------------------------------------------
Other accrued expenses 3,862,292
- ------------------------------------------------------------------------------
Total liabilities 18,200,979
- ------------------------------------------------------------------------------
NET ASSETS, AT VALUE $3,472,746,886
- ------------------------------------------------------------------------------
NET ASSETS
Net assets consist of:
Undistributed net investment income (loss) $ (10,178,807)
- ------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
securities 1,231,629,021
- ------------------------------------------------------------------------------
Accumulated net realized gain (loss) 253,900,146
- ------------------------------------------------------------------------------
Paid-in capital 1,997,396,526
- ------------------------------------------------------------------------------
NET ASSETS, AT VALUE $3,472,746,886
- ------------------------------------------------------------------------------
NET ASSET VALUE AND OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($2,798,766,048 / 139,610,783 shares outstanding of
beneficial interest, $.01 par value, unlimited number of
shares authorized) $20.05
- ------------------------------------------------------------------------------
Maximum offering price per share (100/94.25 of 20.05) $21.27
- ------------------------------------------------------------------------------
CLASS B SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share ($608,662,421
/ 33,005,258 shares outstanding of beneficial interest,
$.01 par value, unlimited number of shares authorized) $18.44
- ------------------------------------------------------------------------------
CLASS C SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share ($39,868,770 /
2,135,057 shares outstanding of beneficial interest, $.01
par value, unlimited number of shares authorized) $18.67
- ------------------------------------------------------------------------------
CLASS I SHARES
Net asset value, offering and redemption price
($25,449,647 / 1,242,786 shares outstanding of beneficial
interest, $.01 par value, unlimited number of shares
authorized) $20.48
- ------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 13
<PAGE> 14
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Six months ended March 31, 2000 (unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 6,265,492
- ------------------------------------------------------------------------------
Interest 2,197,442
- ------------------------------------------------------------------------------
Total income 8,462,934
- ------------------------------------------------------------------------------
Expenses:
Management fee 8,290,368
- ------------------------------------------------------------------------------
Services to shareholders 3,723,473
- ------------------------------------------------------------------------------
Custodian fees 39,022
- ------------------------------------------------------------------------------
Distribution services fees 2,211,443
- ------------------------------------------------------------------------------
Administrative service fees 3,804,221
- ------------------------------------------------------------------------------
Auditing 47,068
- ------------------------------------------------------------------------------
Legal 8,526
- ------------------------------------------------------------------------------
Trustees' fees and expenses 66,092
- ------------------------------------------------------------------------------
Reports to shareholders 481,162
- ------------------------------------------------------------------------------
Registration fees 31,951
- ------------------------------------------------------------------------------
Other 37,884
- ------------------------------------------------------------------------------
Total expenses, before expense reductions 18,741,210
- ------------------------------------------------------------------------------
Expense reductions (99,469)
- ------------------------------------------------------------------------------
Total expenses, after expense reductions 18,641,741
- ------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (10,178,807)
- ------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from investments 259,026,917
- ------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
on investments 752,580,354
- ------------------------------------------------------------------------------
Net gain (loss) on investment transactions 1,011,607,271
- ------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $1,001,428,464
- ------------------------------------------------------------------------------
</TABLE>
14 The accompanying notes are an integral part of the financial statements.
<PAGE> 15
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED
2000 SEPTEMBER 30,
(UNAUDITED) 1999
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
- ---------------------------------------------------------------------------------------------------------
Net investment income (loss) $ (10,178,807) $ (15,952,901)
- ---------------------------------------------------------------------------------------------------------
Net realized gain (loss) 259,026,917 282,344,381
- ---------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
transactions during the period 752,580,354 498,225,667
- ---------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 1,001,428,464 764,617,147
- ---------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net realized gains
Class A (226,717,830) (8,410,627)
- ---------------------------------------------------------------------------------------------------------
Class B (54,577,473) (99,496)
- ---------------------------------------------------------------------------------------------------------
Class C (2,976,203) (100,564)
- ---------------------------------------------------------------------------------------------------------
Class I (2,054,267) (2,647,071)
- ---------------------------------------------------------------------------------------------------------
Fund share transactions:
Proceeds from shares sold 961,619,651 1,002,052,000
- ---------------------------------------------------------------------------------------------------------
Reinvestment of distributions 270,011,586 10,651,000
- ---------------------------------------------------------------------------------------------------------
Cost of shares redeemed (1,052,231,339) 1,397,339,092
- ---------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from fund share
transactions 179,399,898 (384,636,092)
- ---------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 894,502,589 368,723,297
- ---------------------------------------------------------------------------------------------------------
Net assets at beginning of period 2,578,244,297 2,209,521,000
- ---------------------------------------------------------------------------------------------------------
NET ASSETS AT END OF PERIOD (including undistributed net
investment income of ($10,178,807) and $0, respectively) $ 3,472,746,886 $2,578,244,297
- ---------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 15
<PAGE> 16
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each period and other performance information derived for the financial
statements.
<TABLE>
<CAPTION>
CLASS A
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
2000 -------------------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period
$ 15.79 $ 11.72 15.47 17.21 16.07 12.93
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05)(c) (0.05)(c) (0.01)(c) 0.00 0.12 0.05
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investment transactions 6.07 4.18 (1.65) 2.61 2.74 3.27
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 6.02 4.13 (1.66) 2.61 2.86 3.32
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- -- -- -- (0.04) --
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gains on investment
transactions (1.76) (0.06) (2.09) (4.35) (1.68) (0.18)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.76) (0.06) (2.09) (4.35) (1.72) (0.18)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 20.05 $ 15.79 11.72 15.47 17.21 16.07
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN %(A)(B) 39.40** 35.29 (11.78) 19.97 19.62 26.07
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in
thousands) 2,798,766 2,054,353 1,646,444 1,907,904 1,817,163 1,685,271
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense
reductions (%) 1.10* 1.05 1.04 1.06 1.07 1.17
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense
reductions (%) 1.09* 1.05 1.04 1.06 1.07 1.17
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) (%) (0.54)* (0.36) (0.09) 0.07 0.65 0.43
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 54* 97 122 201 150 67
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
2000 ----------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period
$ 14.69 $ 11.03 14.83 16.82 15.85 12.88
- ----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10)(c) (0.21)(c) (0.16)(c) (0.16) (0.09) (0.08)
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions 5.61 3.93 (1.55) 2.52 2.74 3.23
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 5.51 3.72 (1.71) 2.36 2.65 3.15
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions from:
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized gains on investment transactions (1.76) (0.06) (2.09) (4.35) (1.68) (0.18)
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.76) (0.06) (2.09) (4.35) (1.68) (0.18)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 18.44 $ 14.69 11.03 14.83 16.82 15.85
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN %(A)(B) 38.86** 33.77 (12.73) 18.68 18.47 24.83
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 608,662 479,151 526,921 874,293 874,132 780,522
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.72* 2.17 2.14 2.13 2.05 2.17
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.72* 2.17 2.14 2.13 2.05 2.17
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (1.17)* (1.48) (1.19) (1.00) (0.33) (0.57)
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 54* 97 122 201 150 67
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
2000 ---------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period
$ 14.87 11.13 14.91 16.87 15.87 12.88
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.12)(c) (0.18)(c) (0.14)(c) (0.13) (0.06) (0.07)
- -----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions 5.68 3.98 (1.55) 2.52 2.74 3.24
- -----------------------------------------------------------------------------------------------------------------------
Total from investment operations 5.56 3.80 (1.69) 2.39 2.68 3.17
- -----------------------------------------------------------------------------------------------------------------------
Less distributions from:
- -----------------------------------------------------------------------------------------------------------------------
Net realized gains on investment transactions (1.76) (0.06) (2.09) (4.35) (1.68) (0.18)
- -----------------------------------------------------------------------------------------------------------------------
Total distributions (1.76) (0.06) (2.09) (4.35) (1.68) (0.18)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 18.67 $14.87 11.13 14.91 16.87 15.87
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN %(A)(B) 38.79** 34.19 (12.50) 18.87 18.65 24.99
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 39,869 25,838 15,569 18,128 11,359 5,161
- -----------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.95* 1.90 1.98 1.99 1.95 2.03
- -----------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.95* 1.90 1.98 1.99 1.95 2.03
- -----------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (1.40)* (1.21) (1.03) (0.86) (0.23) (0.43)
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 54* 97 122 201 150 67
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS I
SIX MONTHS
ENDED JULY 3
MARCH 31, YEAR ENDED SEPTEMBER 30, TO
2000 ----------------------------------------- SEPTEMBER 30,
(UNAUDITED) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 16.07 11.88 15.60 17.26 16.09 14.80
- ---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)(c) --(c) 0.05(c) 0.08 0.19 0.03
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions 6.18 4.25 (1.68) 2.61 2.74 1.26
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations 6.17 4.25 (1.63) 2.69 2.93 1.29
- ---------------------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- -- -- -- (0.08) --
- ---------------------------------------------------------------------------------------------------------------------------
Net realized gains on investment transactions (1.76) (0.06) (2.09) (4.35) (1.68) --
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (1.76) (0.06) (2.09) (4.35) (1.76) --
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 20.48 16.07 11.88 15.60 17.26 16.09
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN %(A)(B) 39.66** 35.82 (11.45) 20.51 20.19 8.72**
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 25,450 18,902 20,587 27,240 35,649 32,347
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 0.62* 0.71 0.65 0.70 0.64 0.59*
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 0.62* 0.71 0.65 0.70 0.64 0.59*
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (0.07)* (0.02) 0.30 0.43 1.08 0.92*
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 54* 97 122 201 150 67
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not annualized.
(a) Total return does not reflect the effect of sales charges.
(b) Total return would have been lower had certain expenses not been reduced.
(c) Based on monthly average shares outstanding during the period.
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 SIGNIFICANT ACCOUNTING
POLICIES Kemper Growth Fund (the "Fund") is registered under
the Investment Company Act of 1940, as amended (the
"1940 Act"), as an open-end diversified management
investment company organized as a Massachusetts
business trust.
The Fund offers multiple classes of shares. Class A
shares are offered to investors subject to an
initial sales charge. Class B shares are offered
without an initial sales charge but are subject to
higher ongoing expenses than Class A shares and a
contingent deferred sales charge payable upon
certain redemptions. Class B shares automatically
convert to Class A shares six years after issuance.
Class C shares are offered without an initial sales
charge but are subject to higher ongoing expenses
than Class A shares and a contingent deferred sales
charge payable upon certain redemptions within one
year of purchase. Class C shares do not convert
into another class. Class I shares are offered to a
limited group of investors, are not subject to
initial or contingent deferred sales charges and
have lower ongoing expenses than the other classes.
Investment income, realized and unrealized gains
and losses, and certain fund-level expenses and
expense reductions, if any, are borne pro rata on
the basis of relative net assets by the holders of
all classes of shares except that each class bears
certain expenses unique to that class such as
distribution services, shareholder services,
administrative services and certain other class
specific expenses. Differences in class expenses
may result in payment of different per share
dividends by class. All shares of the Fund have
equal rights with respect to voting subject to
class specific arrangements.
The Fund's financial statements are prepared in
accordance with generally accepted accounting
principles which require the use of management
estimates. The policies described below are
followed consistently by the Fund in the
preparation of its financial statements.
SECURITY VALUATION Investments are stated at value
determined as of the close of regular trading on
the New York Stock Exchange. Securities which are
traded on U.S. or foreign stock exchanges are
valued at the most recent sale price reported on
the exchange on which the security is traded most
extensively. If no sale occurred, the security is
then valued at the calculated mean between the most
recent bid and asked quotations. If there are no
such bid and asked quotations, the most recent bid
quotation is used. Securities quoted on the Nasdaq
Stock Market ("Nasdaq"), for which there have been
sales, are valued at the most recent sale price
reported. If there are no such sales, the value is
the most recent bid quotation. Securities which are
not quoted on Nasdaq but are traded in another
over-the-counter market are valued at the most
recent sale price, or if no sale occurred, at the
calculated mean between the most recent bid and
asked quotations on such market. If there are no
such bid and asked quotations, the most recent bid
quotation shall be used. Money market instruments
purchased with an original maturity of sixty days
or less are valued at amortized cost. All other
securities are valued at their fair value as
determined in good faith by the Valuation Committee
of the Board of Trustees.
REPURCHASE AGREEMENTS. The Fund may enter into
repurchase agreements with certain banks and
broker/dealers whereby the Fund, through its
custodian or sub-custodian bank, receives delivery
of the underlying securities, the amount of
18
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
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.
EXPENSES. Expenses arising in connection with a
specific Fund are allocated to that Fund. Other
Trust expenses are allocated between the Funds in
proportion to their relative net assets.
- --------------------------------------------------------------------------------
2 PURCHASE & SALES OF
SECURITIES For the six months ended March 31, 2000, investment
transactions (excluding short-term instruments) are
as follows:
<TABLE>
<S> <C>
Purchases $811,789,059
Proceeds from sales 946,664,133
</TABLE>
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The Fund has a management
agreement with Scudder Kemper Investments, Inc.
("Scudder Kemper") and pays a monthly investment
management fee of 1/12 of the annual rate of .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 $8,290,368 for the six
months ended March 31, 2000.
UNDERWRITING AND DISTRIBUTION SERVICES
AGREEMENT. The Fund has an underwriting and
distribution services agreement with Kemper
Distributors, Inc. ("KDI"). Underwriting
commissions retained by KDI in connection with the
distribution of Class A shares for the six months
ended March 31, 2000 are $132,516.
For services under the distribution services
agreement, the Fund pays KDI a fee of .75% of
average daily net assets of the Class B and Class C
shares pursuant
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
to separate Rule 12b-1 plans for Class B and Class
C shares. Pursuant to the agreement, KDI enters
into related selling group agreements with various
firms at various rates for sales of Class B and
Class C shares. In addition, KDI receives any
contingent deferred sales charge ("CDSC") from
redemptions of Class B and Class C shares.
Distribution fees and CDSC received by KDI for the
six months ended March 31, 2000 are $2,955,544, of
which $414,004 was unpaid at March 31, 2000.
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with KDI. For
providing information and administrative services
to Class A, Class B and Class C shareholders, the
Fund pays KDI a fee at an annual rate of up to .25%
of average daily net assets of each class. KDI in
turn has various agreements with financial services
firms that provide these services and pays these
firms based on assets of Fund accounts the firms
service. Administrative services fees paid by KDI
for the six months ended March 31, 2000 are
$3,804,221, of which $1,089,869 was unpaid at March
31, 2000. In addition $5,016 was paid by KDI to
affiliates.
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
Kemper Service Company ("KSvC") is the shareholder
service agent of the Fund. Under the agreement,
KSvC received shareholder services fees of
$2,927,258 for the six months ended March 31, 2000,
of which $1,932,139 was unpaid at March 31, 2000.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. During the six months ended March
31, 2000, the Fund made no payments to its officers
and incurred trustees' fees of $66,092 to
independent trustees.
20
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2000 SEPTEMBER 30, 1999
---------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 42,294,916 $ 777,319,279 45,110,454 $ 674,753,589
-------------------------------------------------------------------------------------
Class B 9,128,478 $ 153,291,079 14,097,353 198,182,746
-------------------------------------------------------------------------------------
Class C 1,698,831 $ 28,360,365 8,918,271 124,349,113
-------------------------------------------------------------------------------------
Class I 140,880 $ 2,648,928 305,404 4,765,806
-------------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDEND:
Class A 11,868,240 212,323,204 545,912 7,903,899
-------------------------------------------------------------------------------------
Class B 3,199,318 52,724,750 187,669 2,548,546
-------------------------------------------------------------------------------------
Class C 174,318 2,909,369 7,235 99,269
-------------------------------------------------------------------------------------
Class I 112,562 2,054,263 6,762 99,332
-------------------------------------------------------------------------------------
SHARES REDEEMED
Class A (47,894,205) (882,679,952) (66,868,785) (1,009,461,661)
-------------------------------------------------------------------------------------
Class B (6,399,625) (141,460,840) (17,906,651) (254,201,670)
-------------------------------------------------------------------------------------
Class C (1,475,844) (24,520,373) (8,586,442) (120,182,177)
-------------------------------------------------------------------------------------
Class I (187,215) (3,570,174) (868,670) (13,492,914)
-------------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 3,276,631 $ 60,183,245 10,799,272 162,773,248
-------------------------------------------------------------------------------------
Class B (3,542,707) (60,183,245) (11,534,355) (162,773,248)
-------------------------------------------------------------------------------------
NET INCREASE
FROM CAPITAL SHARES TRANSACTIONS
$ 179,399,898 $ (384,636,000)
-------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
5 EXPENSE OFF-SET
ARRANGEMENTS The Fund has entered into arrangements with its
custodian and transfer agent whereby credits
realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's
expenses. During the period, the Fund's custodian
and transfer agent fees were reduced by $909 and
$98,560, respectively, under these arrangements.
- --------------------------------------------------------------------------------
6 LINE OF CREDIT The Fund and several Kemper Funds (the "the
Participants") share in a $750 million revolving
credit facility for temporary or emergency
purposes, including the meeting of redemptions
requests that otherwise might require the untimely
disposition of securities. The Participants are
changed an annual commitment fee which is allocated
pro rata among each of the Participants. Interest
is calculated based on the market rates at the time
of the borrowing. The Fund may borrow up to a
maximum of 33 percent of its net assets under this
agreement.
21
<PAGE> 22
NOTES
22
<PAGE> 23
NOTES
23
<PAGE> 24
<TABLE>
<S> <C> <C>
TRUSTEES OFFICERS
JOHN W. BALLANTINE MARK S. CASADY LINDA J. WONDRACK
Trustee President Vice President
LEWIS A. BURNHAM PHILIP J. COLLORA MAUREEN E. KANE
Trustee Vice President Assistant Secretary
and Secretary
LINDA C. COUGHLIN CAROLINE PEARSON
Trustee JOHN R. HEBBLE Assistant Secretary
Treasurer
DONALD L. DUNAWAY BRENDA LYONS
Trustee ANN M. MCCREARY Assistant Treasurer
Vice President
ROBERT B. HOFFMAN
Trustee KATHRYN L. QUIRK
Vice President
DONALD R. JONES
Trustee
THOMAS W. LITTAUER
Trustee and Vice President
SHIRLEY D. PETERSON
Trustee
WILLIAM P. SOMMERS
Trustee
</TABLE>
<TABLE>
<S> <C>
.............................................................................................
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
.............................................................................................
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 219557
Kansas City, MO 64121
.............................................................................................
CUSTODIAN STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, MA 02109
.............................................................................................
TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
801 Pennsylvania Avenue
Kansas City, MO 64105
.............................................................................................
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
.............................................................................................
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza
Chicago, IL 60606-5808
www.kemper.com
</TABLE>
TRUSTEES&OFFICERS
[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 (5/25/00) 1111790
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
