<PAGE> 1
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED APRIL 30, 1998
LONG TERM INVESTING IN A SHORT TERM WORLD(SM)
[LOGO]
Seeking growth of capital
KEMPER
TECHNOLOGY FUND
"...We've made good progress in meeting
the goals we set coming into the semiannual
period, earning above-average gains in
a challenging market climate...."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
8
INDUSTRY SECTORS
9
LARGEST HOLDINGS
10
PORTFOLIO OF INVESTMENTS
14
FINANCIAL STATEMENTS
16
NOTES TO FINANCIAL STATEMENTS
20
FINANCIAL HIGHLIGHTS
22
SHAREHOLDERS' MEETING
At A GLANCE
- --------------------------------------------------------------------------------
KEMPER TECHNOLOGY
FUND TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 1998
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A $2.14
CLASS B $2.14
CLASS C $2.14
LONG-TERM CAPITAL GAIN
- --------------------------------------------------------------------------------
</TABLE>
Returns and rankings are historical and do not represent future performance.
Returns, rankings 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.
Investment by the fund in emerging technology companies presents greater risk
than investment in more established companies.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
4/30/98 10/31/97
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER TECHNOLOGY FUND
CLASS A $12.73 $13.13
- --------------------------------------------------------------------------------
KEMPER TECHNOLOGY FUND
CLASS B $11.99 $12.54
- --------------------------------------------------------------------------------
KEMPER TECHNOLOGY FUND
CLASS C $12.11 $12.64
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
KEMPER TECHNOLOGY
FUND RANKINGS
- --------------------------------------------------------------------------------
COMPARED TO ALL OTHER FUNDS IN THE LIPPER SCIENCE & TECHNOLOGY FUNDS CATEGORY*
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1-YEAR #35 of 61 fundS #39 of 61 fundS #40 of 61 fundS
- --------------------------------------------------------------------------------
5-YEAR #12 of 17 funds N/A N/A
- --------------------------------------------------------------------------------
10-YEAR #10 of 12 funds N/A N/A
- --------------------------------------------------------------------------------
15-YEAR #3 of 6 funds N/A N/A
- --------------------------------------------------------------------------------
20-YEAR #2 of 3 funds N/A N/A
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
DURING THE PERIOD, KEMPER TECHNOLOGY FUND MADE THE FOLLOWING DISTRIBUTIONS PER
SHARE:
<TABLE>
<S> <C>
[MORNINGSTAR EQUITY STYLE Source: Morningstar, Inc., Chicago, IL
BOX] 312-696-6000. (Morningstar Style Box is based
on a portfolio date as of April 30, 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.
</TABLE>
TERMS TO KNOW
YOUR FUND'S STYLE
- --------------------------------------------------------------------------------
MORNINGSTAR EQUITY STYLE BOX
- --------------------------------------------------------------------------------
VOLATILITY Characteristic of a security, commodity or market to rise or fall
sharply in price within a short period of time. A stock may be volatile because
the outlook for the company is uncertain or because of various other conditions.
LIQUIDITY The ease with which assets can be converted to cash without loss in
value.
SUBSECTOR A further division within a sector. A sector comprises stocks usually
found in related industries. Stocks within a market sector may be similarly
influenced by financial, economic, business and other developments. Subsectors
within the technology sector include semiconductors, networking and software.
<PAGE> 3
ECONOMIC OVERVIEW
[SILVIA PHOTO]
DR. JOHN E. SILVIA IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.
HIS PRIMARY RESPONSIBILITIES INCLUDE ANALYSIS, MODELING AND FORECASTING OF
ECONOMIC DEVELOPMENTS AND FEDERAL RESERVE ACTIVITY THAT AFFECT FINANCIAL
MARKETS, ESPECIALLY INTEREST RATE TRENDS. THIS EFFORT INCLUDES CLOSE
COLLABORATION WITH BOTH INCOME AND EQUITY MUTUAL FUND MANAGERS AND PENSION FUND
MANAGERS. HE IS ALSO A MEMBER OF THE INVESTMENT POLICY AND STRATEGY COMMITTEE
FOR KEMPER FUNDS.
SILVIA HOLDS BACHELOR OF ARTS AND PH.D. DEGREES 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 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 into mutual funds. As of April 30, 1998, a record $5
trillion in mutual fund assets surpassed total assets of the nation's banks,
according to the Investment Company Institute, a trade organization that
monitors the mutual fund industry, and the Federal Reserve Bank in Washington.
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 April 27, expectations were tested by reports that the Federal Reserve
Board ("the Fed") was considering a hike in interest rates. The markets reacted
immediately to this news, driving stock prices downward. But at its monetary
policy meeting on May 19, the Fed chose to leave interest rates alone. In the
coming months, the Fed could raise rates if inflation accelerates or if growth
appears to be too rapid compared to the Fed's expectations.
Our positive outlook for the short term 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 13 percent year-to-date through the end
of May. 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 in all of 1998 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 investment 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 $60 billion to $80 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.
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
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 (5/31/98) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1) 5.65 5.81 6.49 6.91
PRIME RATE(2) 8.5 8.5 8.5 8.25
INFLATION RATE(3)* 1.5 1.89 2.23 2.89
THE U.S. DOLLAR(4) 6.86 10.26 5.52 9.15
CAPITAL GOODS ORDERS(5)* 9.28 10.28 7.16 3.48
INDUSTRIAL PRODUCTION(5)* 3.85 5.76 4.28 3.79
EMPLOYMENT GROWTH(6) 2.61 2.8 2.5 2.13
</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 April 30, 1998.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
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 also has been benefiting from the
crisis. Canada, which is a commodity-producing exporter, has been somewhat
negatively affected as commodity prices have fallen. Political unrest in
Indonesia, nuclear tests in India and Pakistan and economic turmoil in Russia
have been keeping international investors on the edges of their seats.
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
June 10, 1998
4
<PAGE> 5
PERFORMANCE UPDATE
[MCCORMICK PHOTO]
TRACY MCCORMICK CHESTER JOINED SCUDDER KEMPER INVESTMENTS, INC. IN 1994 AND IS A
MANAGING DIRECTOR. SHE IS ALSO A VICE PRESIDENT AND LEAD PORTFOLIO MANAGER OF
KEMPER TECHNOLOGY FUND. MCCORMICK CHESTER RECEIVED BOTH HER B.A. AND M.B.A.
DEGREES FROM MICHIGAN STATE UNIVERSITY.
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.
TECHNOLOGY STOCKS HAVE HAD A ROCKY RIDE OVER THE PAST SIX MONTHS. LEAD
PORTFOLIO MANAGER TRACY MCCORMICK CHESTER DISCUSSES HOW SHE POSITIONED THE FUND
TO EARN SOLID RETURNS THAT LANDED THE FUND ABOVE ITS PEER GROUP AVERAGE.
Q HOW WOULD YOU DESCRIBE THE STOCK MARKET DURING THESE PAST SIX MONTHS?
A Overall, the stock market posted strong gains, but not without
considerable volatility along the way. The Russell 1000 Growth Index, a
benchmark for large-capitalization growth stocks, returned 23.07 percent, and
the Standard & Poor's 500 Index gained 22.50 percent. The market favored
large-cap stocks over smaller company issues, and the U.S. outperformed
international markets. These gains were made in a choppy and rotational market
climate. We began the semiannual reporting period in the wake of "Gray Monday,"
the start of a steep global correction. Turmoil in Asia cast a shadow of
uncertainty across domestic and international markets, hitting technology stocks
with particular force. Concerns that the Federal Reserve would raise interest
rates added to market anxiety.
In the first quarter of 1998, we saw the tide change dramatically. The
fourth quarter correction gave way to a fast-paced rally here in the United
States. But the first quarter's bounce back was still a rocky ride.
Technology stocks remained in the spotlight, experiencing dramatic swings both
upwards and downwards. Lackluster pre-earnings and earnings announcements
knocked the wind out of many technology stocks. Yet, overall, for the quarter,
the technology stock group continued to push forward.
Certainly, the past half year goes far in proving the importance of
keeping a long-term focus. Technology stocks and the mutual funds that invest
primarily in them are more susceptible to volatility than the market as a
whole. But, over time, technology stocks have provided healthy growth and
rewards to patient, long-term investors.
Q HOW DID THE FUND PERFORM IN COMPARISON?
A The fund did very well. From October 31, 1997 to April 30, 1998, the fund
returned 17.04 percent (Class A shares unadjusted for any sales charge). This
compares quite favorably to our peer group, the Lipper Science and Technology
category, which gained 15.93 percent.
Q HOW DO YOU SELECT STOCKS FOR THE FUND?
A As with any sector-specific fund, technology funds do entail a higher
degree of risk than investing in more diversified stock portfolios. When it
comes to investing in technology stocks, volatility is par for the course. We
use a disciplined, research-intensive strategy to target companies with good
fundamentals and attractive valuations. The market for technology stocks can be
fast-paced and quickly changing. One way to steer through frothy markets is to
maintain discipline. Growth and earnings potential are extremely important, but
to merit a place in the fund's portfolio, sound fundamentals and reasonable
prices must also be in place. As part of our research process, our investment
team considers management,
5
<PAGE> 6
PERFORMANCE UPDATE
product, growth potential and market niche. We take a stock-by-stock approach,
confident that this method serves shareholders better in stead of trying to
predict the rise and fall of the sectors.
Q HOW DID YOU POSITION THE FUND DURING THE SEMIANNUAL REPORTING PERIOD?
A After the market began its fourth quarter correction, the valuations of
many technology stocks were driven down. We sorted through the rubble, and our
research led us to opportunities. For instance, we stepped in and established
stakes in networking stocks, including FORE Systems.
By keeping our eyes peeled for quality companies, we found good openings
to invest in bigger computer system firms. We built up the fund's positions in a
trio of computer companies -- Hewlett-Packard, International Business Machines
and Sun Microsystems. These stocks currently make up the fund's top three
holdings. Companies such as these have time-tested records, and are involved in
multiple products, concepts and markets. We're not putting our eggs in a single
basket with these firms.
We've trimmed our position in Dell Computer Corp., and added Gateway 2000,
which boasted more appealing valuations. We're also building positions in
Seagate Technology and Quantum, two storage firms. During the fourth quarter, we
moved into these storage stocks a bit earlier than we perhaps should have, but
the horizon is looking better. As PC manufacturers balance out their inventory
and cost issues, we expect to see new products launched later this year. In such
a climate of increased demand, storage stocks should benefit.
During the first quarter, we built our software stake up to about 25
percent of the portfolio. Our lineup includes some strong companies, such as
Cadence Design Systems, Parametric Technology, J.D. Edwards, and BMC Software.
Cadence is our largest software position.
We're continuing to use telecommunications as a diversification tool. The
portfolio includes Globalstar Telecommunications and WorldCom, Inc. We also
initiated positions in STAR Telecommunications, General Motors -- Class H, and
Ascend Communications. These companies all have high growth potential, and we
expect them to thrive in the current economic environment.
Q IN LIGHT OF RECENT MARKET CONDITIONS AND SENTIMENTS, ARE THERE SECTORS AND
STOCKS THAT ARE LESS APPEALING?
A Among technology subsectors, technology services have historically been a
safe haven, but the market turmoil caused investors to retreat to these stocks.
As a result, many of these stocks began selling at rocketing prices. The year
2000 crisis has propelled the valuations of many of these stocks, and our
valuation discipline has compelled us to pare down exposure to this sector.
Throughout the semiannual period, we've also been reducing exposure to
semiconductors and related equipment, paring Texas Instruments and Intel and
eliminating some less liquid names.
We're skeptical of many Internet stocks at this time. The lion's share of
these are untested concept names which have no real earnings -- we're not
confident that their prices are being driven by sound fundamentals. We recognize
that because we are eschewing these highfliers, we may be sidelined for some
short-term gains, but we feel our bias is sensible for the long-term. We prefer
to look for companies with real earnings that are benefiting from the Internet
currently, such as Cisco and Intuit.
Similarly, valuation concerns have led us to reduce our health care
position. Health care stocks serve as a good diversifier and hedge -- given
their valuations are palatable, of course. Now, in the wake of the turbulence,
we're starting to see more appealing valuations in technology stocks, and
prefer them to health care.
Q WHAT HASN'T TURNED OUT AS WELL AS EXPECTED?
A There have been health care stocks and some technology stocks that haven't
performed as well as we had hoped.
Q TRACY, YOU TOOK THE REIGNS OF THIS FUND ABOUT A HALF-YEAR AGO. IN THE
ANNUAL REPORT (DATED OCTOBER 31, 1997), YOU SET FORTH GOALS FOR THE DIRECTION OF
THE FUND. COULD YOU RECAP THOSE?
A Certainly. As part of our strategy to generate robust long-term returns,
our investment team was committed to consolidating names, concentrating on
larger, quality companies, and reducing volatility where possible.
Q HOW HAS THAT GONE SO FAR?
A We've made good progress in meeting the goals we set coming into the
semiannual period, earning above-average gains in a challenging market climate.
Since assuming charge of the fund in November, we've gained considerable ground
relative to the technology fund group. At the end of October, the fund's
one-year rank within the
6
<PAGE> 7
PERFORMANCE UPDATE
Lipper Science and Technology category placed it in the 73rd percentile. As of
the end of this semiannual reporting period, the fund has moved up markedly. We
have driven up the fund's one-year rank to the 57th percentile.
We've honed the fund's holdings to 97, down from 121 holdings at the
beginning of the semiannual reporting period. We've focused on paring down
smaller and more illiquid names. We want to have conviction behind the stocks
in the portfolio, and are willing to have fewer but more meaningful positions.
We continue to build the portfolio around large, quality names. An
evaluation of the portfolio reveals that we have gravitated towards
more-established companies, and the top holdings are some of the most
recognized and solid technology firms. We feel that our penchant for large-cap
firms with demonstrated track records is another way we can help limit
potential volatility. Small, untested technology companies experience a higher
degree of volatility, and have less resilience in challenging economic
environments.
Volatility is inherent in technology stocks -- we can't eliminate it, and
shareholders should always be prepared for downs as well as ups. However, there
are strategies that we can employ which we believe can smooth over some of the
bumps. By focusing on larger more-established companies, and by diversifying
among technology subsectors, we seek to mitigate potential risk.
Q WHAT IS YOUR OUTLOOK FOR THE SECTOR?
A We are confident that our investment expertise and research base will
drive us to uncover a solid group of attractively valued, growth-oriented
technology stocks. When it comes to the technology sector, volatility will
always be present. However, with a disciplined stock selection strategy anchored
by detail-intensive research, we can translate much of the volatility into
opportunity.
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 APRIL 30, 1998, AND ON OCTOBER 31, 1997.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER TECHNOLOGY FUND KEMPER TECHNOLOGY FUND
ON 4/30/98 ON 10/31/97
<S> <C> <C>
SOFTWARE 25.0% 10.6%
COMMUNICATIONS 20.8% 16.5%
ELECTRONIC COMPONENTS 18.9% 23.4%
SYSTEMS 12.6% 8.8%
SERVICE 8.7% 7.1%
PERSONAL COMPUTING 7.4% 14.3%
LIFE SCIENCES 5.7% 12.5%
INDUSTRIAL TECHNOLOGY/ .8% 7.0%
MISC.
</TABLE>
8
<PAGE> 9
LARGEST HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS*
Representing 30.2 percent of the fund's total common stock holdings on April 30,
1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Holdings Percent
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. INTERNATIONAL BUSINESS Manufactures data processing equipment and systems. 3.9%
MACHINES (IBM)
2. HEWLETT PACKARD Designs, manufactures, markets and services a broad 3.6%
array of precision electronic instruments and systems
for measurement, analysis and computation.
3. SUN MICROSYSTEMS A provider of high performance workstations, servers, 3.6%
and networking software for the engineering,
scientific, commercial, and technical industries.
4. CISCO SYSTEMS Largest, most comprehensive supplier of routing 3.5%
software and related systems that direct the flow of
data between local area networks.
5. CADENCE DESIGN 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 electronic systems.
6. PARAMETRIC TECHNOLOGY Develops, markets and supports a family of 2.9%
fully-integrated software products for the automation
of the mechanical design-through-manufacturing process.
7. MICROSOFT CORP Develops, markets and supports a variety of 2.7%
microcomputer software, operating systems, language and
application programs, related books and peripheral
devices.
8. TEXAS INSTRUMENTS A high technology company with sales or manufacturing 2.4%
operations in over 30 countries. Products and services
include semiconductors, defense electronic systems,
software productivity tools, computer and peripheral
products and consumer products.
9. WORLDCOM One of the largest long distance telecommunications 2.4%
companies in the U.S., offering domestic and
international voice, data and video products and
services.
10. ALCATEL ALSTHOM A French based provider of telecommunication equipment, 2.2%
transportation services and power.
</TABLE>
*Portfolio composition and holdings are subject to change.
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
KEMPER TECHNOLOGY FUND
PORTFOLIO OF INVESTMENTS AT APRIL 30, 1998 (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ELECTRONIC
COMPONENTS--18.7%
(b)Altera Corp. 195,000 $ 7,898
(b)Analog Devices 550,666 21,442
(b)Berg Electronics Corp. 325,000 7,739
(b)Burr-Brown Corp. 275,000 8,370
Intel Corp. 300,700 24,300
(b)KLA-Tencor Corp. 250,000 10,078
(b)Lam Research Corp. 550,000 17,050
Linear Technology Corp. 250,000 20,125
(b)Maxim Integrated Products 450,000 18,169
Molex Inc. 200,000 5,375
(b)Novellus Systems 300,000 14,362
(b)SpeedFam International, Inc. 250,000 7,250
(b)Teradyne 609,000 22,228
Texas Instruments 500,000 32,031
(b)TranSwitch Corp. 13,423 167
(b)Vitesse Semiconductor Corp. 287,000 16,556
(b)Xilinx, Inc. 455,000 20,816
----------------------------------------------------------------------------
253,956
- -------------------------------------------------------------------------------------------------------------------------
PERSONAL
COMPUTING--7.3%
Compaq Computer Corp. 694,600 19,492
(b)Dell Computer Corp. 220,000 17,765
(b)Gateway 2000, Inc. 300,000 17,606
(b)Quantum Corp. 750,000 17,625
(b)Seagate Technology, Inc. 1,000,800 26,709
----------------------------------------------------------------------------
99,197
- -------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS--20.6%
Alcatel Alsthom S.A. 800,000 29,000
(b)America On-Line, Inc. 175,000 14,000
(b)Ascend Communications, Inc. 300,000 13,069
(b)Bay Networks, Inc. 630,000 14,766
(a)(b)Cisco Systems 643,777 47,157
(b)FORE Systems, Inc. 500,000 11,438
General Motors Corp., Class H 290,000 16,022
(b)Globalstar Telecommunications 294,547 20,324
Harris Corp. 149,000 7,208
(b)ICG Communications, Inc. 7,270 254
(b)Iridium World Communications Ltd. 150,000 9,975
Lucent Technologies, Inc. 300,000 22,837
Motorola, Inc. 300,000 16,688
(b)STAR Telecommunications, Inc. 300,000 8,119
(a)(b)Socket Communications, Inc. 134,756 107
(b)Tellabs, Inc. 225,000 15,947
(b)WorldCom, Inc. 744,000 31,829
(b)Xylan Corp. 43,679 1,243
----------------------------------------------------------------------------
279,983
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SOFTWARE--24.7%
Adobe Systems, Inc. 300,000 $ 15,019
(b)Arbor Software Corp. 300,000 14,119
(b)Aspec Technology, Inc. 65,000 902
Autodesk, Inc. 525,000 24,675
(b)BEA Systems, Inc. 250,000 5,562
(b)BMC Software 255,000 23,858
(b)Cadence Design Systems 1,112,800 40,772
(b)Cambridge Technology Partners 130,000 6,792
(b)Citrix Systems, Inc. 120,000 7,455
(b)EMC Corp. 300,000 13,838
(b)Getty Images, Inc. 9,133 209
(b)i2 Technologies, Inc. 100,000 6,675
(b)Intuit, Inc. 200,000 10,637
J.D. Edwards & Co. 350,000 12,469
(b)Logic Works 27,638 397
(b)Mercury Interactive Corp. 550,000 22,275
(b)Microsoft Corp. 400,000 36,050
(b)PMC - Sierra Inc. 200,000 9,100
Parametric Technology Co. 1,220,800 39,027
(b)PeopleSoft, Inc. 290,000 13,485
(b)Sterling Commerce, Inc. 675,000 28,730
(b)Ziff-Davis, Inc. 205,000 3,690
----------------------------------------------------------------------------
335,736
- -------------------------------------------------------------------------------------------------------------------------
SYSTEMS--12.5%
Hewlett-Packard Co. 650,000 48,953
International Business Machines 450,000 52,144
(b)Storage Technology Corp. 237,900 20,088
(b)Sun Microsystems, Inc. 1,175,000 48,395
----------------------------------------------------------------------------
169,580
- -------------------------------------------------------------------------------------------------------------------------
SERVICES--8.7%
(b)AccuStaff, Inc. 225,000 8,072
(b)Computer Horizons Corp. 225,000 8,536
(b)Computer Sciences Corp. 250,000 13,188
Electronic Data Systems Corp. 110,000 4,730
(b)Gartner Group 740,700 24,536
(b)Keane, Inc. 145,000 7,286
(b)Sanmina Corp. 150,000 13,500
(b)Solectron Corp. 335,000 14,845
(b)SunGard Data Systems 250,300 8,917
(b)Whittman-Hart, Inc. 315,000 13,821
----------------------------------------------------------------------------
117,431
- -------------------------------------------------------------------------------------------------------------------------
LIFE SCIENCES--5.6%
Biomet, Inc. 254,700 7,641
(b)Centocor, Inc. 300,000 12,656
(a)(b)FPA Medical Management, Inc. 6,935 87
HBO & Co. 325,000 19,439
(b)IDX Systems Corp. 300,000 13,069
(b)Ligand Pharmaceutical, Inc. 525,000 7,612
(a)(b)Med Venture Associates II, L.P. -- 1,162
6.1% limited partnership interest
(b)MedImmune, Inc. 100,000 5,275
(b)Pharmos Corp. 411,349 1,118
(b)Sepracor Inc. 150,000 6,937
(a)(b)Survivalink Corp.
common stock 150,000 450
110,000 warrants expiring 2001 110,000 495
(a)(b)Trex Medical Corp. 60,000 615
----------------------------------------------------------------------------
76,556
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INDUSTRIAL TECHNOLOGY AND
MISCELLANEOUS--.8%
(a)Adams Capital Management, L.P.,
3.6% limited partnership interest -- $ 462
(a)(b)Advanced Technology Ventures II, L.P.,
17.9% limited partnership interest -- 458
(a)Asset Management Associates 1996, L.P.,
2.5% limited partnership interest -- 1,018
(a)(b)Crosspoint Venture Partners 1993,
L.P.,
3.1% limited partnership interest -- 3,341
(a)(b)GEO Capital III, L.P.,
5.0% limited partnership interest -- 1,179
(a)(b)GEO Capital IV, L.P.,
2.9% limited partnership interest -- 1,327
(a)(b)Metrika Systems 66,667 850
(a)(b)Sevin Rosen Fund V, L.P.,
2.8% limited partnership interest -- 2,008
----------------------------------------------------------------------------
10,643
----------------------------------------------------------------------------
TOTAL COMMON STOCKS--98.9%
1,343,082
(Cost: $1,043,136)
----------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------
MONEY MARKET
INSTRUMENTS--2.0%
Yield--5.55% to 5.57%
Due--May 1998
(Cost: $27,284) $ 27,300 27,284
----------------------------------------------------------------------------
TOTAL INVESTMENTS--100.9%
(Cost: $1,070,420) 1,370,366
----------------------------------------------------------------------------
LIABILITIES, LESS CASH AND OTHER ASSETS--(.9)% (12,183)
----------------------------------------------------------------------------
NET ASSETS--100% $1,358,183
----------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Portfolio of Investments.
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The following securities may require registration under the Securities Act
of 1933 or an exemption therefrom in order to effect sale in the ordinary
course of business; they were valued at cost on the dates of acquisition. No
market quotations were available for unrestricted securities of the same
class on the dates of acquisition or on April 30, 1998, with the exception
of Socket Communications, Inc., which was valued at 85% of current market
value. These securities are valued at fair value as determined in good faith
by the Board of Trustees of the Fund. At April 30, 1998, the value of the
Fund's restricted securities was $14,410,000, which represented 1.06% of net
assets.
<TABLE>
<CAPTION>
DATE OF NUMBER
SECURITY DESCRIPTION ACQUISITION OF SHARES COST
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
September 1997 3.6% limited
Adams Capital Management, L.P. to March 1998 partnership interest $474,000
- --------------------------------------------------------------------------------------------------------------
17.9% limited
Advanced Technology Ventures II, L.P. December 1994 partnership interest 1,687,908
- --------------------------------------------------------------------------------------------------------------
June 1996 2.5% limited
Asset Management Associates 1996, L.P. to March 1998 partnership interest 1,100,000
- --------------------------------------------------------------------------------------------------------------
Cisco Systems April 1998 11,577 shs. 6.57 per share
- --------------------------------------------------------------------------------------------------------------
April 1993 3.1% limited
Crosspoint Venture Partners 1993, L.P. to March 1998 partnership interest 1,455,484
- --------------------------------------------------------------------------------------------------------------
FPA Medical Management, Inc. April 1998 6,935 shs. 6.57 per share
- --------------------------------------------------------------------------------------------------------------
December 1993 5.0% limited
GEO Capital III, L.P. to March 1998 partnership interest 1,617,037
- --------------------------------------------------------------------------------------------------------------
April 1996 2.9% limited
GEO Capital IV, L.P. to March 1998 partnership interest 1,436,660
- --------------------------------------------------------------------------------------------------------------
May 1996 6.1% limited
Med Venture Associates II, L.P. to March 1998 partnership interest 995,692
- --------------------------------------------------------------------------------------------------------------
Metrika Systems August 1997 66,667 shs. 12.75 per share
- --------------------------------------------------------------------------------------------------------------
April 1996 2.8% limited
Sevin Rosen Fund V, L.P. to March 1998 partnership interest 1,928,000
- --------------------------------------------------------------------------------------------------------------
May 1994
Socket Communications, Inc. to December 1994 134,756 shs. 4.62 per share
- --------------------------------------------------------------------------------------------------------------
Survivalink Corp.
common stock December 1995 150,000 shs. 3.00 per share
warrants expiring 2001 to October 1996 110,000 shs. 4.50 per share
- --------------------------------------------------------------------------------------------------------------
Trex Medical Corp. November 1995 60,000 shs. 10.25 per share
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(b) Non-income producing security.
Based on the cost of investments of $1,070,420,000 for federal income tax
purposes at April 30, 1998, the gross unrealized appreciation was $309,304,000,
the gross unrealized depreciation was $9,358,000 and the net unrealized
appreciation on investments was $299,946,000.
See accompanying Notes to Financial Statements.
13
<PAGE> 14
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<S> <C>
- --------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------
Investments, at value
(Cost: $1,070,420) $1,370,366
- --------------------------------------------------------------------------
Cash 5,034
- --------------------------------------------------------------------------
Receivable for:
Investments sold 15,881
- --------------------------------------------------------------------------
Fund shares sold 1,227
- --------------------------------------------------------------------------
Interest 79
- --------------------------------------------------------------------------
TOTAL ASSETS 1,392,587
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- --------------------------------------------------------------------------
Payable for:
Investments purchased 33,062
- --------------------------------------------------------------------------
Fund shares redeemed 106
- --------------------------------------------------------------------------
Management fee 604
- --------------------------------------------------------------------------
Distribution services fee 84
- --------------------------------------------------------------------------
Administrative services fee 193
- --------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 256
- --------------------------------------------------------------------------
Trustees' fees 99
- --------------------------------------------------------------------------
Total liabilities 34,404
- --------------------------------------------------------------------------
NET ASSETS $1,358,183
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- --------------------------------------------------------------------------
Paid-in capital $ 919,029
- --------------------------------------------------------------------------
Undistributed net realized gain on investments 139,208
- --------------------------------------------------------------------------
Net unrealized appreciation on investments 299,946
- --------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $1,358,183
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
THE PRICING OF SHARES
- --------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($1,198,397 / 94,113 shares outstanding) $12.73
- --------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $13.51
- --------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($125,805 / 10,496 shares outstanding) $11.99
- --------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($13,747 / 1,135 shares outstanding) $12.11
- --------------------------------------------------------------------------
CLASS I SHARES
Net asset value and redemption price per share
($20,234 / 1,580 shares outstanding) $12.81
- --------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
14
<PAGE> 15
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
INVESTMENT INCOME
- ------------------------------------------------------------------------
Dividends $ 1,505
- ------------------------------------------------------------------------
Interest 1,439
- ------------------------------------------------------------------------
Total investment income 2,944
- ------------------------------------------------------------------------
Expenses:
Management fee 3,378
- ------------------------------------------------------------------------
Distribution services fee 460
- ------------------------------------------------------------------------
Administrative services fee 1,034
- ------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 990
- ------------------------------------------------------------------------
Professional fees 40
- ------------------------------------------------------------------------
Reports to shareholders 189
- ------------------------------------------------------------------------
Trustees' fees and other 44
- ------------------------------------------------------------------------
Total expenses 6,135
- ------------------------------------------------------------------------
NET INVESTMENT LOSS (3,191)
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
- ------------------------------------------------------------------------
Net realized gain on sales of investments 163,556
- ------------------------------------------------------------------------
Change in net unrealized appreciation on investments 38,328
- ------------------------------------------------------------------------
Net gain on investments 201,884
- ------------------------------------------------------------------------
Net Increase In Net Assets Resulting From Operations $198,693
- ------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31,
(UNAUDITED) 1997
- ------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
<S> <C> <C>
Net investment loss $ (3,191) (5,980)
- ------------------------------------------------------------------------------------------------
Net realized gain 163,556 204,378
- ------------------------------------------------------------------------------------------------
Change in net unrealized appreciation 38,328 (21,135)
- ------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 198,693 177,263
- ------------------------------------------------------------------------------------------------
Distribution from net realized gain (198,742) (170,339)
- ------------------------------------------------------------------------------------------------
Net increase from capital share transactions 148,509 139,986
- ------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 148,460 146,910
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------
Beginning of period 1,209,723 1,062,813
- ------------------------------------------------------------------------------------------------
END OF PERIOD $1,358,183 1,209,723
- ------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1 DESCRIPTION OF THE
FUND Kemper Technology 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
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
class 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 during the six
months ended April 30, 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.
- --------------------------------------------------------------------------------
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
$3,378,000 for the six months ended April 30, 1998.
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 April 30, 1998 $97,000 504,000
</TABLE>
For services under the distribution services
agreement, the Fund pays KDI a fee of .75% of
average daily net assets of the Class B and Class C
shares. Pursuant to 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
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
Class B and Class C shares for the six months ended
April 30, 1998 are as follows:
<TABLE>
<CAPTION>
COMMISSIONS AND
DISTRIBUTION FEES DISTRIBUTION FEES
AND CDSC PAID BY KDI
RECEIVED BY KDI TO FIRMS
----------------- -----------------
<S> <C> <C>
Six months ended April 30, 1998 $600,000 722,000
</TABLE>
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 (ASF) paid
are as follows:
<TABLE>
<CAPTION>
ASF PAID BY
THE FUND TO ASF PAID BY
KDI KDI TO FIRMS
----------- ------------
<S> <C> <C>
Six months ended April 30, 1998 $1,034,000 1,060,000
</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 $678,000 for the six months ended
April 30, 1998.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. During the six months ended April
30, 1998, the Fund made no payments to its officers
and incurred trustees' fees of $18,000 to
independent trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the six months ended April 30, 1998, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $1,069,262
Proceeds from sales 1,060,703
18
<PAGE> 19
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
APRIL 30, 1998 OCTOBER 31, 1997
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 34,612 $ 412,058 17,481 $ 236,561
--------------------------------------------------------------------------------
Class B 2,556 28,510 4,963 61,311
--------------------------------------------------------------------------------
Class C 544 6,093 668 8,433
--------------------------------------------------------------------------------
Class I 516 6,130 1,319 16,563
--------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 13,549 140,295 10,359 125,757
--------------------------------------------------------------------------------
Class B 1,790 17,510 975 11,407
--------------------------------------------------------------------------------
Class C 156 1,537 57 675
--------------------------------------------------------------------------------
Class I 307 3,186 218 2,652
--------------------------------------------------------------------------------
SHARES REDEEMED
Class A (36,296) (433,605) (19,952) (267,634)
--------------------------------------------------------------------------------
Class B (1,848) (20,565) (2,774) (34,589)
--------------------------------------------------------------------------------
Class C (322) (3,684) (289) (3,645)
--------------------------------------------------------------------------------
Class I (760) (8,956) (1,371) (17,505)
--------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 374 4,399 219 2,856
--------------------------------------------------------------------------------
Class B (396) (4,399) (228) (2,856)
--------------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $ 148,509 $ 139,986
--------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
SIX MONTHS YEAR ENDED OCTOBER 31,
ENDED ----------------------------------
APRIL 30, 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $13.13 13.16 14.63 11.50 10.68
- -----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.05) (.06) (.08) (.03) --
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain 1.79 2.14 .74 4.66 1.49
- -----------------------------------------------------------------------------------------------
Total from investment operations 1.74 2.08 .66 4.63 1.49
- -----------------------------------------------------------------------------------------------
Less distribution from net realized gain 2.14 2.11 2.13 1.50 .67
- -----------------------------------------------------------------------------------------------
Net asset value, end of period $12.73 13.13 13.16 14.63 11.50
- -----------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 17.04% 17.11 7.83 47.30 14.95
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses .90% .89 .89 .88 .89
- -----------------------------------------------------------------------------------------------
Net investment income (loss) (.41)% (.42) (.62) (.23) .05
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
SIX MONTHS YEAR ENDED OCTOBER 31, MAY 31 TO
ENDED ---------------------- OCTOBER 31,
APRIL 30, 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $12.54 12.77 14.39 11.45 9.99
- -----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.14) (.18) (.19) (.15) (.05)
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gain 1.73 2.06 .70 4.59 1.51
- -----------------------------------------------------------------------------------------------------
Total from investment operations 1.59 1.88 .51 4.44 1.46
- -----------------------------------------------------------------------------------------------------
Less distribution from net realized gain 2.14 2.11 2.13 1.50 --
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period $11.99 12.54 12.77 14.39 11.45
- -----------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 16.58% 15.91 6.76 45.65 14.61
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 1.82% 1.85 1.87 1.82 1.99
- -----------------------------------------------------------------------------------------------------
Net investment loss (1.33)% (1.38) (1.60) (1.17) (1.08)
- -----------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 21
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------------------------------------
CLASS C
---------------------------------------------------------------------
MAY 31
SIX MONTHS YEAR ENDED OCTOBER 31, TO
ENDED ---------------------------------- OCTOBER 31,
APRIL 30, 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.64 12.85 14.45 11.45 9.99
- -------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.13) (.17) (.18) (.15) (.05)
- -------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 1.74 2.07 .71 4.65 1.51
- -------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.61 1.90 .53 4.50 1.46
- -------------------------------------------------------------------------------------------------------------------
Less distribution from net realized gain 2.14 2.11 2.13 1.50 --
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.11 12.64 12.85 14.45 11.45
- -------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 16.62% 15.98 6.88 46.23 14.61
- -------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------------------------------------
Expenses 1.68% 1.82 1.82 1.76 1.83
- -------------------------------------------------------------------------------------------------------------------
Net investment loss (1.19)% (1.35) (1.55) (1.11) (.92)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------
CLASS I
---------------------------------------------------------------------
YEAR ENDED JULY 3
SIX MONTHS OCTOBER 31, TO
ENDED ------------------- OCTOBER 31,
APRIL 30, 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $13.19 13.20 14.64 12.72
- -------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.03) (.04) (.07) (.02)
- -------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 1.79 2.14 .76 1.94
- -------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.76 2.10 .69 1.92
- -------------------------------------------------------------------------------------------------------------------
Less distribution from net realized gain 2.14 2.11 2.13 --
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.81 13.19 13.20 14.64
- -------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 17.12% 17.23 8.06 15.09
- -------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------------------------------------
Expenses .74% .74 .76 .65
- -------------------------------------------------------------------------------------------------------------------
Net investment loss (.25)% (.27) (.49) (.33)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- -------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED OCTOBER 31,
ENDED -----------------------------------------------
APRIL 30, 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets at end of period (in thousands) $1,358,183 1,209,723 1,062,813 1,017,955 713,654
- -------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 178% 192 121 105 81
- -------------------------------------------------------------------------------------------------------------------
Average commission rates paid per share on stock transactions for the period ended April 30, 1998 and for
the years ended October 31, 1997 and 1996 were $.0521, $.0583 and $.0558, respectively.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES: Total return does not reflect the effect of any sales charges. Per share
data for 1995 through 1998 were determined based on average shares outstanding.
Data for the period ended April 30, 1998 is unaudited.
21
<PAGE> 22
SHAREHOLDERS' MEETING
SPECIAL SHAREHOLDERS' MEETING
On December 3, 1997, a special shareholders' meeting was held and adjourned as
necessary. Kemper Technology 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 a 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 57,550,042 1,167,620
Lewis A. Burnham 57,586,426 1,131,236
Donald L. Dunaway 57,576,468 1,141,194
Robert B. Hoffman 57,573,614 1,144,048
Donald R. Jones 57,539,046 1,178,616
Shirley D. Peterson 57,420,638 1,297,024
Daniel Pierce 57,386,893 1,330,770
William P. Sommers 57,587,089 1,130,574
Edmond D. Villani 57,506,266 1,211,396
</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>
57,334,185 380,341 1,003,136
</TABLE>
3) Approval of a new investment management agreement with Scudder Kemper
Investments, Inc.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
54,117,028 1,394,050 2,044,987
</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>
47,015,444 2,703,606 3,203,485
</TABLE>
5) To approve a new rule 12b-1 distribution plan with Zurich Kemper
Distributors, Inc.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C> <C>
Class B 3,877,738 115,651 125,573
Class C 379,646 4,313 12,727
</TABLE>
22
<PAGE> 23
NOTES
23
<PAGE> 24
TRUSTEES&OFFICERS
TRUSTEES OFFICERS
DANIEL PIERCE MARK S. CASADY KATHRYN L. QUIRK
Chairman and Trustee President Vice President
DAVID W. BELIN PHILIP J. COLLORA LINDA J. WONDRACK
Trustee Vice President and Vice President
Secretary
LEWIS A. BURNHAM MAUREEN E. KANE
Trustee JOHN R. HEBBLE Assistant Secretary
Treasurer
DONALD L. DUNAWAY CAROLINE PEARSON
Trustee TRACY MCCORMICK CHESTER Assistant Secretary
Vice President
ROBERT B. HOFFMAN ELIZABETH C. WERTH
Trustee JERALD K. HARTMAN Assistant Secretary
Vice President
DONALD R. JONES
Trustee THOMAS W. LITTAUER
Vice President
SHIRLEY D. PETERSON
Trustee ANN M. MCCREARY
Vice President
WILLIAM P. SOMMERS
Trustee STEVEN H. REYNOLDS
Vice President
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
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.
KTEC - 3 (6/98) 1048310
