<PAGE> 1
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED SEPTEMBER 30, 2000
Seeking long-term growth of capital,
current income and growth of income
KEMPER U.S. GROWTH AND
INCOME FUND
"... Through the first three quarters of 2000, the result of this repositioning
has been a marked improvement in relative performance, as well as reduced
downside volatility. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
7
PERFORMANCE UPDATE
9
TERMS TO KNOW
11
INDUSTRY SECTORS
12
LARGEST HOLDINGS
13
PORTFOLIO OF INVESTMENTS
16
FINANCIAL STATEMENTS
19
FINANCIAL HIGHLIGHTS
21
NOTES TO FINANCIAL STATEMENTS
25
REPORT OF INDEPENDENT AUDITORS
26
TAX INFORMATION
AT A GLANCE
KEMPER U.S. GROWTH AND INCOME
FUND TOTAL RETURNS*
FOR THE YEAR ENDED SEPTEMBER 30, 2000 (UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
<TABLE>
<S> <C>
Kemper U.S. Growth And Income Fund Class A 9.9
Kemper U.S. Growth And Income Fund Class B 9.2
Kemper U.S. Growth And Income Fund Class C 9.21
Lipper Multi-Cap Value Funds Category Average* 11.94
</TABLE>
PERFORMANCE IS HISTORICAL AND INCLUDES REINVESTMENT OF DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE WITH CHANGING MARKET
CONDITIONS, SO THAT WHEN REDEEMED, SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST.
*TOTAL RETURN MEASURES NET INVESTMENT INCOME AND CAPITAL GAIN OR LOSS FROM
PORTFOLIO INVESTMENTS, ASSUMING REINVESTMENT OF ALL DIVIDENDS. DURING THE PERIOD
NOTED, SECURITIES PRICES FLUCTUATED. FOR ADDITIONAL INFORMATION SEE THE
PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND FINANCIAL HIGHLIGHTS AT THE
END OF THIS REPORT.
NET ASSET VALUE
<TABLE>
<CAPTION>
AS OF AS OF
9/30/00 9/30/99
.........................................................
<S> <C> <C> <C> <C>
KEMPER U.S. GROWTH AND INCOME
FUND CLASS A $10.94 $9.99
.........................................................
KEMPER U.S. GROWTH AND INCOME
FUND CLASS B $10.88 $9.98
.........................................................
KEMPER U.S. GROWTH AND INCOME
FUND CLASS C $10.87 $9.97
.........................................................
</TABLE>
KEMPER U.S. GROWTH AND INCOME
FUND RANKINGS AS OF 9/30/00+
COMPARED WITH ALL OTHER FUNDS IN THE LIPPER LARGE-CAP VALUE FUNDS CATEGORY
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
..........................................................................................
<S> <C> <C> <C> <C> <C>
1-YEAR #255 of #267 of #266 of
475 funds 475 funds 475 funds
..........................................................................................
</TABLE>
+LIPPER, INC. RETURNS 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 MAY HAVE BEEN LESS FAVORABLE.
DIVIDEND REVIEW
DURING THE YEAR ENDED SEPTEMBER 30, 2000, KEMPER U.S. GROWTH AND INCOME FUND
PAID THE FOLLOWING DIVIDEND.
<TABLE>
<CAPTION>
INCOME
DIVIDEND
....................................................................
<S> <C> <C> <C>
KEMPER U.S. GROWTH AND INCOME FUND
CLASS A $0.0370
....................................................................
KEMPER U.S. GROWTH AND INCOME FUND
CLASS B $0.0170
....................................................................
KEMPER U.S. GROWTH AND INCOME FUND
CLASS C $0.0180
....................................................................
</TABLE>
YOUR FUND'S STYLE
MORNINGSTAR EQUITY STYLE BOX(TM)
<TABLE>
<S> <C>
[MORNINGSTAR EQUITY STYLE Source: Data provided by Morningstar, Inc. Chicago,
BOX] Il (312) 696-6000. The Equity Style Box(TM)
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 calculation
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 ASSET 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 AN ACTUAL INVESTMENT
STYLE AS MEASURED BY ITS UNDERLYING PORTFOLIO
HOLDINGS. MORNINGSTAR HAS PLACED KEMPER U.S. GROWTH
AND INCOME FUND IN THE LARGE VALUE CATEGORY. PLEASE
CONSULT THE PROSPECTUS FOR A DESCRIPTION OF INVEST-
MENT POLICIES.
</TABLE>
<PAGE> 3
ECONOMIC OVERVIEW
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.
DEAR KEMPER FUNDS SHAREHOLDER:
Times have been good. During the first half of 2000, the global economy grew
faster than it has in over a decade. All regions participated. The United
States, of course, was still powering ahead. The growth rate in Europe was
nearly 4 percent. Asia fed off an electronics boom and a revitalized China.
South America got a boost from an improved credit rating. New money pumped up
energy producers from Mexico to the Middle East.
Now for the bad news, which is that the best news is probably behind us.
Global growth peaked in the spring, and in the United States, at least, the
slowdown was abrupt. After 6 percent growth in the year ending June 30, the
economy grew at a rate of just 2.7 percent during the summer. It seems that
expensive energy, currency volatility and more widespread profit problems, are
bringing the exuberant global economy, including the United States, to heel.
Let's explore these factors in more detail.
OIL, OIL, TOIL AND TROUBLE
Although oil prices have receded somewhat, everyone's still jittery, and with
good reason: Of the seven recessions since World War II, six were preceded by a
spike in crude oil prices.
Oil prices have already been strong enough for long enough to crimp growth,
and they're biting the rest of the world even harder than the United States. But
there are two factors working to our advantage. First, oil prices are still
historically low. Oil is slightly more than $30 per barrel today, but it peaked
at over $75 per barrel back in 1980 (stated in today's dollars). Second, our
dependence on oil has decreased: The United States uses only roughly half as
much oil to produce a unit of GDP as it did thirty years ago. This gives us hope
that the economy can escape recession this time around.
What would make us worry more? Outright energy shortages or a political
crisis. If either happens, the odds of a recession occurring would rise steeply.
People panic or become excessively cautious when they have to fret. Can I fill
up my oil tank? Will there be a war? Their loss of confidence can be much more
devastating than price increases alone.
CURRENCY CONCERNS
Currency turmoil is a second danger to the economy. Central bankers have
intervened to halt the euro's decline, and they're right that the euro is
fundamentally undervalued. But intervention is a hazardous game. Let's hope they
don't convince the markets that the euro should rise a lot very quickly. A
suddenly weak dollar might make Europeans think about selling all those American
stocks and bonds they've been buying, and would greatly complicate the Fed's
inflation fight.
BUSINESS: BIG PLANS BUT PROFIT DISAPPOINTMENTS
Profit warnings escalated late this summer, and we believe there's fire amid
that smoke.
Sure, businesses have had a voracious appetite for money -- and until very
recently, corporate treasurers were finding it easily: Banks increased business
lending by 10.8 percent in the past year. Bond markets have suddenly become a
lot more picky, especially for low-quality credits, but money is still available
for investment grade borrowers. Capital goods orders reflect executives'
enthusiasm -- they've been accelerating since early in the year, and in
September were up more than 20 percent compared to a year ago.
Still, we expect total capital spending to slow, from this year's estimated 14
percent to 12.5 percent in 2001. The reason? A profit squeeze is about to take
some of the edge off executives' animal spirits.
We've always been more cautious than Wall Street about 2001 profits, and our
forecast hasn't changed. Profits are likely to be flat to down next year for
several reasons. First, the growth slowdown will make it harder to keep up the
productivity gains that have kept labor costs under control. Second, interest
expense will surge thanks to higher rates and all that new debt. Third,
depreciation costs are escalating. And finally, the excessively weak euro and
higher oil costs will sap earnings.
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 (10/31/00) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
-------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 5.70 6.00 6.10 4.50
Prime rate (2) 9.50 9.00 8.25 8.25
Inflation rate (3)* 3.50 3.80 2.60 1.40
The U.S. dollar (4) 11.30 1.10 -0.90 1.10
Capital goods orders (5)* 22.70 13.30 4.70 8.60
Industrial production (5)* 5.70 5.40 3.50 3.70
Employment growth (6) 1.80 2.50 2.30 2.50
</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 9/30/00.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
SAVING GRACES: FISCAL POLICY AND CONSUMER SPENDING
While growth has peaked and is now slowing, we can be thankful that growth
probably won't slow too much, thanks in part to a more stimulative fiscal policy
and consumer spending.
Fiscal policy is likely to be more stimulative. Of course, most economists
agree that the last thing this pumped-up economy needs is another shot of
stimulants -- too much stimulus, after all, is widely believed to cause
inflation. But economists weren't running for office; politicians were. And
inflation risk was about the last thing on the mind of either candidate in the
heat of election campaigning. They wanted to win votes, and the time-tested way
to do so was to make promises. Although we didn't have the name of the winner as
of press time, neither candidate seems to be planning a lot of fiscal
restraint -- but the good news is that neither candidate's plan is likely to be
enacted until 2002 at the earliest.
Second, consumers continue to spend, spend, spend. The personal savings rate
keeps falling, from an already low 2.2 percent last year to a nearly invisible
0.1 percent this year. Critics of this admittedly squishy statistic claim it
doesn't adequately capture households' growing wealth. As it turns out, however,
the average American not only doesn't save much, but he's not getting wealthier
in leaps and bounds, either.
Net worth for the median family where the head of the household is over 45
(and where thoughts are presumably beginning to turn to retirement), rose less
than $13,000 between 1995 and 1998. That's less than a 12 percent gain during
the same three years the stock market nearly doubled and the market value of
owner-occupied homes jumped 21 percent. Why didn't the average family get richer
in that time? Because they were borrowing and spending like crazy. House values
were up 21 percent -- but mortgage debt rose even faster, by 25 percent!
Consumers' profligacy worries many financial professionals. Some people aren't
saving enough for retirement because they have inflated expectations of future
investment returns. Other people aren't saving enough for retirement because
they don't realize just how much money they'll need. Either way, people aren't
saving.
Still, no one wants consumers to change their profligate ways too fast. After
all, hearty consumer spending is a prime reason America's growth has stayed on a
fast track so far. Most economists would like to see shoppers be a bit more
moderate -- but only a bit. If Americans suddenly turned thrifty, the economy
would lurch into reverse.
4
<PAGE> 5
ECONOMIC OVERVIEW
Luckily, there's little chance of that happening, unless lenders get cold
feet. So far, they're hot to trot. In the past year, mortgage lending by banks
rocketed nearly 17 percent while loans to consumers jumped 10 percent. Brokers
are selling the loans banks don't want on their balance sheets to mortgage pools
and the asset-backed securities market, where eager non-bank lenders are
snapping them up. In the past year, these markets provided $625 billion of new
credit, a leap of more than 12 percent.
With so much money at their disposal, consumers didn't stay out of the
shopping centers and restaurants for long. Consumer spending growth jumped up to
4.5 percent in the summer, and we expect it to stay well above 3 percent through
2001.
OMINOUS SIGNS?
Decelerations are always tricky, to be sure. But barring some unexpected
shock, overall economic growth should to pop back into the 3.5 percent to 4
percent range in 2001. Why? Borrowing costs a little more than it did last year,
but money is still freely available for most borrowers. Capital goods orders are
strong, so there's a lot of life left in business spending. Shoppers are a
little pickier, but they're still more interested in visiting the mall than in
filling their piggy banks. And after the election, no matter who wins, fiscal
policy is likely to be more stimulative than it has been for years. The price to
pay will likely be a rise in core inflation (inflation excluding food and
energy). We expect it to hit 3 percent next year, up from its recent rate of 2.5
percent. We believe we'll make it safely through 2001, but investors should keep
their hands on the wheel and their eyes peeled.
Sincerely,
Kemper Distributors, Inc.
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 NOVEMBER 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.
5
<PAGE> 6
ECONOMIC OVERVIEW
[INTENTIONALLY LEFT BLANK]
6
<PAGE> 7
PERFORMANCE UPDATE
[MILLARD PHOTO]
KATHLEEN MILLARD JOINED SCUDDER KEMPER INVESTMENTS, INC. IN 1991 AS A PORTFOLIO
MANAGER AND BEGAN HER INVESTMENT CAREER IN 1983. MILLARD HAS MORE THAN 15 YEARS
OF INVESTMENT INDUSTRY EXPERIENCE AS A PORTFOLIO MANAGER SPECIALIZING IN
VALUE-STYLE PORTFOLIOS AND IS A CHARTERED FINANCIAL ANALYST. GREGORY ADAMS, WHO
JOINED THE FIRM IN 1999, IS A PORTFOLIO MANAGER OF THE FUND. HE IS ALSO A
CHARTERED FINANCIAL ANALYST.
THE TEAM IS SUPPORTED BY INVESTMENT PROFESSIONALS INCLUDING ECONOMISTS, RESEARCH
ANALYSTS, TRADERS AND OTHER INVESTMENT SPECIALISTS THROUGHOUT THE UNITED STATES
AND ABROAD.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF KATHLEEN MILLARD AND GREGORY
ADAMS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS, AND SHOULD NOT BE CONSIDERED AS A RECOMMENDATION OF ANY SPECIFIC
SECURITY.
IN THE FOLLOWING INTERVIEW, LEAD PORTFOLIO MANAGER KATHLEEN MILLARD AND
PORTFOLIO CO-MANAGER GREG ADAMS DISCUSS THE MARKET ENVIRONMENT AND THE FUND'S
INVESTMENT STRATEGY DURING THE 12-MONTH PERIOD ENDED SEPTEMBER 30, 2000.
Q KEMPER U.S. GROWTH AND INCOME FUND TRAILED ITS BENCHMARK OVER THE FULL
YEAR, BUT IT HAS DEMONSTRATED IMPROVED PERFORMANCE YEAR-TO-DATE. WHY?
A The fund's 12-month total return was 9.90 percent (Class A shares,
unadjusted for any sales charges), below the 13.27 percent return of its
unmanaged benchmark, the S&P 500 Stock index (S&P). For the calendar year-to-
date, however, the fund has produced a return of 2.05 percent, versus a loss of
1.39 percent for the index. We believe that the fund's recent strength
demonstrates the value of the repositioning that we undertook in October of last
year.
The bulk of the fund's underperformance was recorded in the first half of the
period, during which investors eschewed quality companies in favor of "momentum"
stocks in the technology, media and telecommunications (TMT) areas. As stocks in
these sectors grabbed headlines with outrageous gains, the vast majority of
stocks outside of these areas remained mired in a bear market. Since we pursue a
value-oriented strategy, the fund was not invested in the types of high-flying
technology stocks that led the market in the first half of the reporting period.
As a result, its six-month return as of March 31, 2000, stood at 8.59 percent,
below the 17.50 percent gain by the S&P.
In the last six months, however, the market environment has changed
dramatically. Higher-valuation technology stocks have declined sharply,
momentum-based strategies have fallen out of favor, and investors have turned
their attention to stocks with more reasonable valuations. The onset of a more
challenging environment allowed the value of the fund's repositioning to become
evident: over the final six months of the fiscal year, it posted a return of
1.20 percent, beating the 3.60 percent loss by the S&P. In outperforming the S&P
during this volatile period, we achieved one of the fund's key objectives:
providing a margin of safety to investors at the times when the market is
falling. In fact, the fund outperformed the benchmark in four of the six months
that the S&P has fallen so far in 2000. We feel that the fund's recent
performance illustrates the potential effectiveness of a strategy that seeks to
reduce downside risk.
Q YOU MENTIONED THAT THE FUND WAS REPOSITIONED. WILL YOU PROVIDE SOME
DETAIL ON THE CHANGES?
A In October of 1999, we took over management of the fund. At that time we
made some changes to the fund's investment approach and repositioned the fund's
portfolio. Our goal was to broaden the fund's investment universe beyond that of
stocks with high relative dividend yields, a criterion that had become
increasingly limiting in the "new economy." We also sought to move the fund to
an investment that "blends" growth with value traits.
Through the first three quarters of 2000, the result of this repositioning has
been a marked improvement in relative performance, as well as
7
<PAGE> 8
PERFORMANCE UPDATE
reduced downside volatility. After underperforming the broad stock market -- as
well as much of its peer group in 1999, Kemper U.S. Growth And Income Fund
(Class A shares, unadjusted for a sales charge) solidly outperformed the S&P in
the first nine months of 2000. In keeping with our goal of managing risk in down
markets, the fund has also weathered this year's volatile market environment.
Q HOW DO YOU PICK STOCKS FOR THE FUND?
A Our investment process breaks down into three basic steps. First, on a
monthly basis, we use a quantitative screen to sort a universe of 1,000 stocks
based on traditional valuation methods, including low price-to-earnings ratio,
low price-to-cash-flow, high relative dividend yield, and other measures such as
the direction of earnings revisions.
Next, our team of in-house equity analysts looks at each of the stocks that
passed the quantitative screen to determine its fundamental strength. They look
for companies with stable or improving fundamentals, such as positive trends in
earnings and sales growth. If our analysts' findings warrant further
investigation, we will often make on-site visits to gain a better understanding
of the business objectives and strategies of our potential buy candidates.
Finally, we employ a variety of risk management techniques in an effort to
limit downside volatility and ensure that the portfolio's performance does not
vary widely from that of the fund's peer group and the S&P 500 index.
Q WILL YOU DESCRIBE A FUND HOLDING THAT HELPS TO ILLUSTRATE THE WAY THIS
INVESTMENT PROCESS IS PUT INTO PRACTICE?
A An excellent example is Marsh & McLennan Companies, a diversified
financial services firm that includes the world's largest insurance brokerage.
We felt that the company was extremely attractive in terms of both its
valuation -- as determined by our quantitative analysis -- and its fundamental
strengths. In addition, our insurance analyst predicted a positive turn in
pricing trends in the insurance industry and identified Marsh & McLennan as one
of the companies that would be the first to benefit. We increased our holdings
in the stock on that basis, making it one of the portfolio's top 10 positions.
It has contributed a great deal to the fund's performance this year.
Q WHAT SECTORS HELPED AND HURT KEMPER U.S. GROWTH AND INCOME FUND'S
PERFORMANCE DURING THE FISCAL YEAR?
A In terms of sector allocation, the fund is most heavily weighted in
financial and technology stocks respectively. However, we are underweight in
technology relative to the S&P 500, reflecting a more negative view on the
sector's valuations and fundamentals. We acquired the bulk of our technology
positions during corrections in the fourth quarter of 1999 and the second
quarter of 2000.
These downturns presented some extraordinary opportunities to purchase what we
believed to be fundamentally sound growth companies at reasonable valuations.
The fund's underweight position in tech stocks (relative to the S&P 500), as
well as our strong stock picking within the group, helped boost its relative
performance over the full year.
The fund's overweight in financials, reflects our positive view on the sector.
But as a value-oriented blend fund, however, the portfolio is underweighted in
financials compared with pure value funds. Specifically, we are overweight in
insurance, a position that helped performance significantly early in the year,
and underweight banks. The portfolio's heavier weighting in financials proved
beneficial to performance during the second half of the period.
Strong stock selection in the consumer staples area, particularly food and
consumer products names such as Pepsi and Anheuser-Busch, was an additional
positive, as was our decision to add to the health care sector during the course
of the year. Energy stocks helped on an absolute basis, but our decision to
overweight the major integrated oils -- at the expense of oil services firms --
proved to be a negative. A key detractor was the fund's weighting in basic
materials stocks.
Individual stocks that hurt performance include the advertising agency
Interpublic Group and Wal-Mart. Although these names have posted losses for the
fund, we remain positive on their outlook going forward.
8
<PAGE> 9
PERFORMANCE UPDATE
Q WHAT IS YOUR OUTLOOK FOR VALUE STOCKS FROM HERE?
A In light of the volatile nature of the recent market environment, it is
difficult to predict the outlook for any single group. However, we believe that
given the increasingly rational nature of the investment backdrop -- as well as
growing risk aversion among investors -- value stocks will be better positioned
to outperform than they have been during the past three years. Opportunities
appear to be broadening, and we are optimistic about the prospects for Kemper
U.S. Growth And Income Fund's systematic approach to building a value-oriented
portfolio.
TERMS TO KNOW
CONSUMER STAPLES Products purchased by consumers on a regular basis, such as
food, beverages, alcohol and tobacco. In the aggregate, sales of consumer
staples tend to be steady and less sensitive to economic fluctuations.
FUNDAMENTAL RESEARCH Analysis of companies based on the projected impact of
management, products, sales and earnings on their balance sheets and income
statements. Distinct from technical analysis, which evaluates the attractiveness
of a stock based on historical price and trading volume movements, rather than
the financial results of the underlying company.
MOMENTUM INVESTING The prac-tice of investing in the market's top-performing
stocks in order to capture additional upward movements in their prices.
VALUE STOCK A company whose stock price does not fully reflect its intrinsic
value, as indicated by price/earnings ratio, price/book value ratio, dividend
yield or some other valuation measure, relative to its industry or the market
overall. Value stocks tend to display less price volatility and may carry higher
dividend yields. Distinct from growth stock.
WEIGHTING (OVER/UNDER) The allocation of assets -- usually in terms of sectors,
industries or countries -- within a portfolio relative to the portfolio's
benchmark index or investment universe.
9
<PAGE> 10
PERFORMANCE UPDATE
AVERAGE ANNUAL TOTAL RETURNS*
FOR THE PERIOD ENDED SEPTEMBER 30, 2000 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
1-YEAR LIFE OF CLASS
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
KEMPER U.S. GROWTH AND INCOME FUND CLASS A 3.57% 3.98% (since 1/30/98)
....................................................................................................
KEMPER U.S. GROWTH AND INCOME FUND CLASS B 6.20 4.55 (since 1/30/98)
....................................................................................................
KEMPER U.S. GROWTH AND INCOME FUND CLASS C 9.21 5.56 (since 1/30/98)
....................................................................................................
</TABLE>
KEMPER U.S. GROWTH AND INCOME FUND CLASS A
Growth of an assumed $10,000 investment in Class A
shares from 1/31/98 to 9/30/00
[LINE GRAPH]
<TABLE>
<CAPTION>
KEMPER U.S. GROWTH AND STANDARD & POOR'S 500 U.S. CONSUMER PRICE
INCOME FUND CLASS A1 STOCK INDEX* INDEX+
---------------------- --------------------- -------------------
<S> <C> <C> <C>
1/31/98 9425.00 10000.00 10000.00
10446.00 11239.00 10037.00
10179.00 11566.00 10087.00
9/30/98 9108.00 10375.00 10124.00
10123.00 12540.00 10142.00
10241.00 13122.00 10210.00
11371.00 14003.00 10285.00
9/30/99 10000.00 13085.00 10390.00
10875.00 14988.00 10415.00
11004.00 15287.00 10594.00
11021.00 14839.00 10668.00
9/30/00 11174.00 14654.00 10695.00
</TABLE>
KEMPER U.S. GROWTH AND INCOME FUND CLASS B
Growth of an assumed $10,000 investment in Class B
shares from 1/31/98 to 9/30/00
[LINE GRAPH]
<TABLE>
<CAPTION>
KEMPER U.S. GROWTH AND STANDARD & POOR'S 500 U.S. CONSUMER PRICE
INCOME FUND CLASS B1 STOCK INDEX* INDEX+
---------------------- --------------------- -------------------
<S> <C> <C> <C>
1/31/98 10000.00 10000.00 10000.00
11074.00 11239.00 10037.00
10769.00 11566.00 10087.00
9/30/98 9628.00 10375.00 10124.00
10673.00 12540.00 10142.00
10780.00 13122.00 10210.00
11947.00 14003.00 10285.00
9/30/99 10588.00 13085.00 10390.00
11391.00 14988.00 10415.00
11473.00 15287.00 10594.00
11441.00 14839.00 10668.00
9/30/00 11288.00 14654.00 10695.00
</TABLE>
KEMPER U.S. GROWTH AND INCOME FUND CLASS C
Growth of an assumed $10,000 investment in Class C
shares from 1/31/98 to 1/31/98
[LINE GRAPH]
<TABLE>
<CAPTION>
KEMPER U.S. GROWTH AND STANDARD & POOR'S 500 U.S. CONSUMER PRICE
INCOME FUND CLASS C1 STOCK INDEX* INDEX+
---------------------- --------------------- -------------------
<S> <C> <C> <C>
1/31/98 10000.00 10000.00 10000.00
11074.00 11239.00 10037.00
10770.00 11566.00 10087.00
9/30/98 9629.00 10375.00 10124.00
10664.00 12540.00 10142.00
10771.00 13122.00 10210.00
11940.00 14003.00 10285.00
9/30/99 10580.00 13085.00 10390.00
11374.00 14988.00 10415.00
11468.00 15287.00 10594.00
11436.00 14839.00 10668.00
9/30/00 11574.00 14654.00 10695.00
</TABLE>
PERFORMANCE IS HISTORICAL AND INCLUDES
REINVESTMENT OF DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE WITH CHANGING
MARKET CONDITIONS, SO THAT WHEN
REDEEMED, SHARES MAY BE WORTH MORE OR
LESS THAN THEIR ORIGINAL COST.
*AVERAGE ANNUAL TOTAL RETURN AND TOTAL
RETURN MEASURE NET INVESTMENT INCOME
AND CAPITAL GAIN OR LOSS FROM
PORTFOLIO INVESTMENTS, ASSUMING
REINVESTMENT OF ALL DIVIDENDS AND, FOR
CLASS A SHARES, ADJUSTMENT FOR THE
MAXIMUM SALES CHARGE OF 5.75 PERCENT;
FOR CLASS B SHARES, ADJUSTMENT FOR THE
APPLICABLE CONTINGENT DEFERRED SALES
CHARGE (CDSC) OF 3% AND FOR CLASS C
SHARES, NO ADJUSTMENT FOR SALES
CHARGE. THE MAXIMUM CDSC FOR CLASS B
SHARES IS 4%. FOR CLASS C SHARES,
THERE IS A 1% CDSC ON CERTAIN
REDEMPTIONS WITHIN THE FIRST YEAR OF
PURCHASE. DURING THE PERIODS NOTED,
SECURITIES PRICES FLUCTUATED. FOR
ADDITIONAL INFORMATION, SEE THE
PROSPECTUS, STATEMENT OF ADDITIONAL
INFORMATION AND FINANCIAL HIGHLIGHTS
AT THE END OF THIS REPORT.
(1)PERFORMANCE INCLUDES REINVESTMENT OF
DIVIDENDS AND ADJUSTMENT FOR THE
MAXIMUM SALES CHARGE FOR CLASS A
SHARES AND THE CDSC IN EFFECT AT THE
END OF THE PERIOD FOR CLASS B
SHARES. IN COMPARING KEMPER U.S.
GROWTH AND INCOME FUND WITH THE
STANDARD & POOR'S 500 STOCK INDEX*
AND THE U.S. CONSUMER PRICE INDEX+,
YOU SHOULD NOTE THAT THE FUND'S
PERFORMANCE REFLECTS THE MAXIMUM
SALES CHARGE, WHILE NO SUCH CHARGES
ARE REFLECTED IN THE PERFORMANCE OF
THE INDICES.
*THE STANDARD & POOR'S 500 STOCK INDEX
IS AN UNMANAGED INDEX GENERALLY
REPRESENTATIVE OF THE U.S. STOCK
MARKET. SOURCE IS WIESENBERGER(R).
+THE U.S. CONSUMER PRICE INDEX IS A
STATISTICAL MEASURE OF CHANGE, OVER
TIME, IN THE PRICES OF GOODS AND
SERVICES IN MAJOR EXPENDITURE GROUPS
FOR ALL URBAN CONSUMERS. IT IS
GENERALLY CONSIDERED TO BE A MEASURE
OF INFLATION. SOURCE IS
WIESENBERGER(R).
10
<PAGE> 11
INDUSTRY SECTORS
KEMPER U.S. GROWTH AND INCOME FUND'S COMPOSITION BY SECTOR
DATA SHOWS THE PERCENTAGE OF THE COMMON STOCKS IN THE PORTFOLIO THAT EACH SECTOR
REPRESENTED ON SEPTEMBER 30, 2000.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER U.S. GROWTH AND KEMPER U.S. GROWTH AND
INCOME FUND ON 9/30/00 INCOME FUND ON 9/30/99
---------------------- ----------------------
<S> <C> <C>
Finance 19.1 14.1
Technology 16.2 4.9
Consumer nondurables 15.7 12.9
Communication services 13.2 17.8
Health care 12.1 4.9
Energy 9 10.9
Other 6 3.3
Basic materials 5.2 4.1
Utilities 3.5 3.7
Transportation 0 5.5
Capital goods 0 17.9
</TABLE>
A COMPARISON WITH THE STANDARD & POOR'S 500 STOCK INDEX*
DATA SHOWS THE PERCENTAGE OF THE COMMON STOCKS IN THE PORTFOLIO THAT EACH SECTOR
OF KEMPER U.S. GROWTH AND INCOME FUND REPRESENTED ON SEPTEMBER 30, 2000,
COMPARED WITH THE INDUSTRY SECTORS THAT MAKE UP THE FUND'S BENCHMARK, THE
STANDARD & POOR'S 500 STOCK INDEX.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER U.S. GROWTH AND STANDARD & POOR'S 500 STOCK
INCOME FUND AS OF 9/30/00 INDEX AS OF 9/30/00
------------------------- ---------------------------
<S> <C> <C>
Finance 19.1 14.5
Technology 16.2 34.1
Consumer nondurables 15.7 16.1
Communication services 13.2 6
Health care 12.1 10.3
Energy 9 5.4
Other 6 0
Basic materials 5.2 1.9
Utilities 3.5 2.9
Transportation 0 0.5
Capital goods 0 8.3
</TABLE>
* The Standard & Poor's 500 Stock index is an unmanaged index generally
representative of the U.S. stock market. Source is Wiesenberger(R).
11
<PAGE> 12
LARGEST HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS*
Representing 34.9 percent of the fund's common stock holdings on September 30,
2000.
<TABLE>
<CAPTION>
HOLDINGS DESCRIPTION PERCENT
<S> <C> <C> <C>
-----------------------------------------------------------------------------------
1. EXXON MOBIL The largest integrated oil company 5.3%
in the world. Engages in oil and
gas exploration, production,
supply, transportation and
marketing.
-----------------------------------------------------------------------------------
2. CORNING The world's leading manufacturer of 4.7%
fiber-optic cable. Also makes
photonic components, industrial and
scientific products (emission
controls and semiconductor
materials) and glass products for
televisions, VCRs and flat-panel
displays.
-----------------------------------------------------------------------------------
3. CITIGROUP The largest financial services firm 3.7%
in the U.S., formed from the merger
of Citicorp and Travelers Group.
Together with its subsidiaries,
including Citibank and Salomon
Smith Barney, offers credit card,
banking, insurance and investment
services in approximately 100
countries.
-----------------------------------------------------------------------------------
4. ORACLE A leading developer of database 3.4%
management systems software,
software development tools and
corporate resource management
applications. Also offers
consulting services and technical
support.
-----------------------------------------------------------------------------------
5. GENERAL ELECTRIC A broadly diversified company with 3.3%
major businesses, including power
generators, appliances, lighting,
plastics, medical systems, aircraft
engines, financial services and
broadcasting.
-----------------------------------------------------------------------------------
6. AMERICAN INTERNATIONAL A leading provider of 3.2%
GROUP property/casualty and specialty
insurance in the U.S. and life
insurance operations abroad.
Together with its subsidiaries, the
company provides financial services
and asset management, auto
insurance, mortgage guaranties and
annuities.
-----------------------------------------------------------------------------------
7. MARSH & The world's largest insurance 3.1%
MCLENNAN brokerage, providing reinsurance,
insurance program management
services, and insurance industry
investment and advisory services.
-----------------------------------------------------------------------------------
8. INTEL Engaged in the design, development, 2.8%
manufacturing and sale of advanced
semiconductors and integrated
circuits.
-----------------------------------------------------------------------------------
9. PEPSICO A diversified manufacturer of food 2.7%
products, including soft drinks
(Pepsi, Mountain Dew, Slice), snack
foods (Doritos, Fritos, Lays,
Ruffles, Rold Gold pretzels), fruit
juices (Tropicana Pure Premium) and
bottled water (Aquafina).
-----------------------------------------------------------------------------------
10. AMERICAN HOME PRODUCTS Distributor of pharmaceuticals and 2.7%
consumer health care products
developed by subsidiaries,
including Wyeth-Ayerst Laboratories
(maker of Premarin, the most widely
prescribed drug in the U.S.) and
Whitehall-Robins Healthcare
(producer of Advil, Robitussin and
Preparation H).
-----------------------------------------------------------------------------------
</TABLE>
*The fund's holdings are subject to change.
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
KEMPER U.S. GROWTH & INCOME FUND
Portfolio of Investments at September 30, 2000
<TABLE>
<CAPTION>
REPURCHASE AGREEMENTS--3.5% PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
State Street Bank & Trust Company,
6.48%, to be repurchased at
$1,245,672 on 10/02/2000**
(Cost $1,245,000) $1,245,000 $ 1,245,000
---------------------------------------------------------------------------
<CAPTION>
NUMBER OF
COMMON STOCKS--96.5% SHARES
<S> <C> <C> <C> <C> <C>
CONSUMER DISCRETIONARY--1.9%
DEPARTMENT & CHAIN STORES
Wal-Mart Stores, Inc. 14,300 688,188
---------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--7.4%
ALCOHOL & TOBACCO--2.2%
Anheuser-Busch Companies, Inc. 18,200 770,088
---------------------------------------------------------------------------
FOOD & BEVERAGE--2.6%
PepsiCo, Inc. 20,200 929,200
---------------------------------------------------------------------------
PACKAGE GOODS/ COSMETICS--2.6%
Avon Products, Inc. 18,100 739,838
Procter & Gamble Co. 2,700 180,900
---------------------------------------------------------------------------
920,738
------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS--6.4%
TELEPHONE/COMMUNICATIONS
BellSouth Corp. 13,000 523,250
SBC Communications, Inc. 15,911 795,550
Sprint Corp. 6,900 202,256
Verizon Communications 15,586 754,940
---------------------------------------------------------------------------
2,275,996
------------------------------------------------------------------------------------------------------------------------
DURABLES--3.3%
AEROSPACE--1.8%
Boeing Co. 10,200 642,600
---------------------------------------------------------------------------
AUTOMOBILES--0.7%
Ford Motor Co. 10,357 262,162
---------------------------------------------------------------------------
CONSTRUCTION/AGRICULTURAL
EQUIPMENT--0.8%
Deere & Co. 8,500 282,625
---------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
ENERGY--8.7%
OIL & GAS PRODUCTION--5.7%
Burlington Resources, Inc. 5,300 195,106
Exxon Mobil Corp. 20,449 1,822,517
---------------------------------------------------------------------------
2,017,623
OIL COMPANIES--2.0%
Chevron Corp. 8,275 705,444
---------------------------------------------------------------------------
OILFIELD SERVICES--1.0%
Schlumberger, Ltd. 4,600 378,638
---------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
<S> <C> <C> <C> <C> <C>
FINANCIAL--20.1%
BANKS--5.3%
Bank One Corp. 10,700 $ 413,288
Chase Manhattan Corp. 11,775 543,858
FleetBoston Financial Corp. 11,500 448,500
Washington Mutual, Inc. 12,500 497,656
---------------------------------------------------------------------------
1,903,302
INSURANCE--3.1%
American International Group, Inc. 11,550 1,105,191
---------------------------------------------------------------------------
CONSUMER FINANCE--5.6%
American Express Co. 4,200 255,150
Citigroup, Inc. 23,366 1,263,224
Mellon Financial Corp. 10,300 477,663
---------------------------------------------------------------------------
1,996,037
OTHER FINANCIAL COMPANIES--6.1%
Federal National Mortgage Association 6,875 491,563
Marsh & McLennan Companies, Inc. 8,000 1,062,000
Morgan Stanley Dean Witter & Co. 6,600 603,488
---------------------------------------------------------------------------
2,157,051
------------------------------------------------------------------------------------------------------------------------
HEALTH--11.7%
BIOTECHNOLOGY--0.5%
Amgen, Inc.* 1,200 83,794
Genzyme Corp.* 1,200 81,825
---------------------------------------------------------------------------
165,619
MEDICAL SUPPLY & SPECIALTY--2.1%
Baxter International, Inc. 4,600 367,138
Medtronic, Inc. 7,400 383,413
---------------------------------------------------------------------------
750,551
PHARMACEUTICALS--9.1%
American Home Products Corp. 16,300 921,969
Bristol-Myers Squibb Co. 6,950 397,019
Eli Lilly & Co. 7,000 567,875
Johnson & Johnson 4,700 441,506
Merck & Co., Inc. 7,500 558,281
Pfizer, Inc. 8,200 368,488
---------------------------------------------------------------------------
3,255,138
------------------------------------------------------------------------------------------------------------------------
MANUFACTURING--9.5%
CHEMICALS--0.9%
Dow Chemical Co. 12,200 304,238
---------------------------------------------------------------------------
CONTAINERS & PAPER--0.7%
International Paper Co. 9,300 266,794
---------------------------------------------------------------------------
DIVERSIFIED MANUFACTURING--3.2%
General Electric Co. 19,600 1,130,675
---------------------------------------------------------------------------
INDUSTRIAL SPECIALTY--4.5%
Corning, Inc. 5,375 1,596,375
---------------------------------------------------------------------------
MACHINERY/COMPONENTS/ CONTROLS--0.2%
Parker-Hannifin Corp. 2,500 84,375
---------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
MEDIA--4.3%
ADVERTISING--0.9%
Interpublic Group of Companies, Inc. 9,700 330,406
---------------------------------------------------------------------------
BROADCASTING & ENTERTAINMENT--2.0%
Walt Disney Co. 18,200 696,150
---------------------------------------------------------------------------
CABLE TELEVISION--1.4%
Comcast Corp. - Special "A"* 12,100 495,344
---------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
METALS & MINERALS--0.7%
STEEL & METALS
Alcoa, Inc. 10,000 253,125
---------------------------------------------------------------------------
</TABLE>
14 The accompanying notes are an integral part of the financial statements.
<PAGE> 15
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
<S> <C> <C> <C> <C> <C>
SERVICE INDUSTRIES--2.1%
PRINTING/PUBLISHING
McGraw-Hill, Inc. 11,500 $ 730,969
---------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--16.7%
COMPUTER SOFTWARE--5.9
America Online, Inc.* 7,100 381,625
Intuit, Inc.* 4,400 250,800
Microsoft Corp.* 5,000 301,250
Oracle Corp.* 15,000 1,181,250
---------------------------------------------------------------------------
2,114,925
EDP PERIPHERALS--1.7%
EMC Corp.* 6,000 594,750
---------------------------------------------------------------------------
ELECTRONIC COMPONENTS/
DISTRIBUTORS--2.6%
Analog Devices, Inc.* 2,100 173,381
Cisco Systems, Inc.* 13,600 751,400
---------------------------------------------------------------------------
924,781
ELECTRONIC DATA PROCESSING--3.6%
Compaq Computer Corp. 19,400 535,052
Hewlett-Packard Co. 3,700 358,900
International Business Machines Corp. 3,500 393,750
---------------------------------------------------------------------------
1,287,702
SEMICONDUCTORS--2.9%
Intel Corp. 22,700 943,469
Linear Technology Corp. 1,300 84,175
---------------------------------------------------------------------------
1,027,644
------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--0.3%
AIRLINES
AMR Corp.* 3,300 107,869
---------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
UTILITIES--3.4%
ELECTRIC UTILITIES
FPL Group, Inc. 6,900 453,675
Unicom Corp. 13,425 754,317
---------------------------------------------------------------------------
1,207,992
---------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $28,549,066) $34,360,305
---------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100.0%
(Cost $29,794,066) $35,605,305
---------------------------------------------------------------------------
</TABLE>
NOTE TO PORTFOLIO OF INVESTMENTS
* Non-income producing security.
** Repurchase agreements are fully collateralized by U.S. Treasury or Government
agency securities.
(a) The cost for federal income tax purposes was $29,852,585. At September 30,
2000, net unrealized appreciation for all investment securities based on tax
cost of $5,752,720. This consisted of aggregate gross unrealized
appreciation for all investments in which there was an excess of value over
tax cost of $6,801,174 and aggregate gross unrealized depreciation for all
investment securities in which there was an excess of tax cost over value of
$1,048,454.
The accompanying notes are an integral part of the financial statements. 15
<PAGE> 16
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
As of September 30, 2000
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $29,794,066) $35,605,305
---------------------------------------------------------------------------
Receivable for investments sold 333,184
---------------------------------------------------------------------------
Dividends receivable 19,449
---------------------------------------------------------------------------
Interest receivable 448
---------------------------------------------------------------------------
Receivable for Fund shares sold 69,410
---------------------------------------------------------------------------
Deferred organization expense 4,804
---------------------------------------------------------------------------
TOTAL ASSETS $36,032,600
---------------------------------------------------------------------------
LIABILITIES
Due to custodian bank 1,097
---------------------------------------------------------------------------
Payable for investments purchased 554,863
---------------------------------------------------------------------------
Payable for Fund shares redeemed 48,126
---------------------------------------------------------------------------
Accrued management fee 128,032
---------------------------------------------------------------------------
Other accrued expenses 3,987
---------------------------------------------------------------------------
Total liabilities 736,105
---------------------------------------------------------------------------
NET ASSETS, AT VALUE $35,296,495
---------------------------------------------------------------------------
NET ASSETS
Net assets consist of:
Accumulated distributions in excess of net investment income $ (2,146)
---------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
securities 5,811,239
---------------------------------------------------------------------------
Accumulated net realized gain (loss) (3,208,483)
---------------------------------------------------------------------------
Paid-in capital 32,695,885
---------------------------------------------------------------------------
NET ASSETS, AT VALUE $35,296,495
---------------------------------------------------------------------------
NET ASSET VALUE AND OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($15,973,207 / 1,460,012 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares
authorized) $10.94
---------------------------------------------------------------------------
Maximum offering price per share (100/94.25 of $10.94) $11.61
---------------------------------------------------------------------------
CLASS B SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share ($15,665,300 /
1,439,438 outstanding shares of beneficial interest, $.01
par value, unlimited number of shares authorized) $10.88
---------------------------------------------------------------------------
CLASS C SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share ($3,657,988 /
336,419 outstanding shares of beneficial interest, $.01
par value, unlimited number of shares authorized) $10.87
---------------------------------------------------------------------------
</TABLE>
16 The accompanying notes are an integral part of the financial statements.
<PAGE> 17
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Year ended September 30, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $158) $ 548,823
---------------------------------------------------------------------------
Interest 80,966
---------------------------------------------------------------------------
Total income 629,789
---------------------------------------------------------------------------
Expenses:
Management fee 219,154
---------------------------------------------------------------------------
Services to shareholders 216,248
---------------------------------------------------------------------------
Custodian and accounting fees 70,275
---------------------------------------------------------------------------
Distribution services fees 142,540
---------------------------------------------------------------------------
Administrative services fees 88,817
---------------------------------------------------------------------------
Auditing 35,000
---------------------------------------------------------------------------
Legal 10,433
---------------------------------------------------------------------------
Trustees' fees and expenses 9,406
---------------------------------------------------------------------------
Reports to shareholders 21,200
---------------------------------------------------------------------------
Registration fees 37,403
---------------------------------------------------------------------------
Organization expense 2,196
---------------------------------------------------------------------------
Other 7,788
---------------------------------------------------------------------------
Total expenses, before expense reductions 860,460
---------------------------------------------------------------------------
Expense reductions (241,874)
---------------------------------------------------------------------------
Total expenses, after expense reductions 618,586
---------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 11,203
---------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from investments (2,192,745)
---------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
on investments 5,376,327
---------------------------------------------------------------------------
Net gain (loss) on investment transactions 3,183,582
---------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $ 3,194,785
---------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 17
<PAGE> 18
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $ 11,203 $ 269,093
------------------------------------------------------------------------------------------------------
Net realized gain (loss) (2,192,745) (583,498)
------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
transaction 5,376,327 1,958,912
------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 3,194,785 1,644,507
------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net investment income
Class A (22,699) (174,068)
------------------------------------------------------------------------------------------------------
Class B (8,774) (52,381)
------------------------------------------------------------------------------------------------------
Class C (2,002) (23,486)
------------------------------------------------------------------------------------------------------
From tax return of capital
Class A (44,918) --
------------------------------------------------------------------------------------------------------
Class B (17,364) --
------------------------------------------------------------------------------------------------------
Class C (3,961) --
------------------------------------------------------------------------------------------------------
Fund share transactions:
Proceeds from shares sold 18,117,524 27,739,907
------------------------------------------------------------------------------------------------------
Reinvestment of distributions 92,391 236,074
------------------------------------------------------------------------------------------------------
Cost of shares redeemed (20,493,053) (13,448,987)
------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions (2,283,138) 14,526,994
------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 811,929 15,921,566
------------------------------------------------------------------------------------------------------
Net assets at beginning of period 34,484,566 18,563,000
------------------------------------------------------------------------------------------------------
Net assets at end of period (including accumulated
distributions in excess of and undistributed net investment
income of ($2,146) and $23,755, respectively) $ 35,296,495 $ 34,484,566
------------------------------------------------------------------------------------------------------
</TABLE>
18 The accompanying notes are an integral part of the financial statements.
<PAGE> 19
FINANCIAL HIGHLIGHTS
THE FOLLOWING TABLES INCLUDE SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
CLASS A
FOR THE PERIOD
JANUARY 30, 1998
(COMMENCEMENT OF
YEAR ENDED YEAR ENDED OPERATIONS) TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2000 1999 1998
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $9.99 9.12 9.50
-------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (a) .04 .13 .07
-------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions .95 .86 (.38)
-------------------------------------------------------------------------------------------------
Total from investment operations .99 .99 (.31)
-------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.01) (.12) (.07)
-------------------------------------------------------------------------------------------------
Tax return of capital (.03) -- --
-------------------------------------------------------------------------------------------------
Total distributions (.04) (.12) (.07)
-------------------------------------------------------------------------------------------------
Net asset value, end of period 10.94 9.99 9.12
-------------------------------------------------------------------------------------------------
TOTAL RETURN % (B)(C) 9.90 10.87 (3.36)**
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 15,973 17,118 8,777
-------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.86 2.10 2.59*
-------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.36 1.24 1.36*
-------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) .38 1.29 1.56*
-------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 79 74 93*
-------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
FOR PERIOD
JANUARY 30, 1998
(COMMENCEMENT OF
YEAR ENDED YEAR ENDED OPERATIONS) TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2000 1999 1998
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $9.98 9.12 9.50
-------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (a) (.03) .05 .03
-------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions .95 .86 (.38)
-------------------------------------------------------------------------------------------------
Total from investment operations .92 .91 (.35)
-------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.01) (.05) (.03)
-------------------------------------------------------------------------------------------------
Tax return of capital (.01) -- --
-------------------------------------------------------------------------------------------------
Total distributions (.02) (.05) (.03)
-------------------------------------------------------------------------------------------------
Net asset value, end of period 10.88 9.98 9.12
-------------------------------------------------------------------------------------------------
TOTAL RETURN % (B)(C) 9.20 9.96 (3.72)**
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 15,665 14,564 6,661
-------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 2.74 2.97 3.49*
-------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 2.01 2.01 2.01*
-------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.29) .52 .91*
-------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 79 74 93*
-------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C
FOR THE PERIOD
JANUARY 30, 1998
(COMMENCEMENT OF
YEAR ENDED YEAR ENDED OPERATIONS) TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2000 1999 1998
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $9.97 9.12 9.50
-----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (a) (.03) .06 .03
-----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions .95 .84 (.38)
-----------------------------------------------------------------------------------------------------------
Total from investment operations .92 .90 (.35)
-----------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.01) (.05) (.03)
-----------------------------------------------------------------------------------------------------------
Tax return of capital (.01) -- --
-----------------------------------------------------------------------------------------------------------
Total distributions (.02) (.05) (.03)
-----------------------------------------------------------------------------------------------------------
Net asset value, end of period 10.87 9.97 9.12
-----------------------------------------------------------------------------------------------------------
TOTAL RETURN % (B)(C) 9.21 9.88 (3.71)**
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 3,658 2,803 3,125
-----------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 3.16 2.78 3.25*
-----------------------------------------------------------------------------------------------------------
Ratio of expenses after expenses reductions (%) 1.99 1.99 1.99*
-----------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.28) .54 .93*
-----------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 79 74 93*
-----------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not annualized
(a) Based on monthly average shares outstanding during the period.
(b) Total return does not reflect the effect of any sales charges.
(c) Total return would have been lower had certain expenses not been reduced.
20
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1 SIGNIFICANT
ACCOUNTING POLICIES Kemper U.S. Growth and Income 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.
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 accounting principles generally
accepted in the United States which require the use
of management estimates. The policies described
below are followed consistently by the Fund in the
preparation of its financial statements.
SECURITY VALUATION. Investments are stated at value
determined as of the close of regular trading on
the New York Stock Exchange. Securities which are
traded on U.S. or foreign stock exchanges are
valued at the most recent sale price reported on
the exchange on which the security is traded most
extensively. If no sale occurred, the security is
then valued at the calculated mean between the most
recent bid and asked quotations. If there are no
such bid and asked quotations, the most recent bid
quotation is used. Securities quoted on the Nasdaq
Stock Market ("Nasdaq"), for which there have been
sales, are valued at the most recent sale price
reported. If there are no such sales, the value is
the most recent bid quotation. Securities which are
not quoted on Nasdaq but are traded in another
over-the-counter market are valued at the most
recent sale price, or if no sale occurred, at the
calculated mean between the most recent bid and
asked quotations on such market. If there are no
such bid and asked quotations, the most recent bid
quotation shall be used.
Portfolio debt securities purchased with an
original maturity greater than sixty days are
valued by pricing agents approved by the officers
of the Trust, whose quotations reflect
broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents
are unable to provide such quotations, the most
recent bid quotation supplied by a bona fide market
maker shall be used. Money market instruments
purchased with an original maturity of sixty days
or less are valued at amortized cost. All other
securities are valued at their fair
21
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS
value as determined in good faith by the Valuation
Committee of the Board of Trustees.
REPURCHASE AGREEMENTS. The Fund may enter into
repurchase agreements with certain banks and
broker/dealers whereby the Fund, through its
custodian or sub-custodian bank, receives delivery
of the underlying securities, the amount of which
at the time of purchase and each subsequent
business day is required to be maintained at such a
level that the market value is equal to at least
the principal amount of the repurchase price plus
accrued interest.
FEDERAL INCOME TAXES. The Fund's policy is to
comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to
regulated investment companies and to distribute
all of its taxable income to its shareholders.
Accordingly, the Fund paid no federal income taxes
and no federal income tax provision was required.
At September 30, 2000, the Fund had a net tax basis
capital loss carryforward of approximately
$1,354,000 which may be applied against any
realized net taxable gains of each succeeding year
until fully utilized or until September 30, 2006
($407,000), September 30, 2007 ($263,000) and
September 30, 2008 ($684,000), the respective
expiration dates, whichever occurs first. In
addition, from November 1, 1999 through September
30, 2000, the Fund incurred approximately
$1,796,000 of net realized capital losses. As
permitted by tax regulations, the Fund intends to
defer these losses and treat them as arising in the
fiscal year ended September 30, 2001.
DISTRIBUTION OF INCOME AND GAINS. Distributions of
net investment income, if any, are made quarterly.
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. These differences relate primarily to
certain securities sold at a loss. 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.
ORGANIZATIONAL COSTS. Costs incurred by the Fund in
connection with its organization have been deferred
and are being amortized on a straight-line basis
over a five-year period.
--------------------------------------------------------------------------------
2 PURCHASES AND
SALES OF SECURITIES For the year ended September 30, 2000, investment
transactions (excluding short-term instruments) are
as follows:
<TABLE>
<S> <C>
Purchases $27,737,761
Proceeds from sales 30,449,086
</TABLE>
22
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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 .60%
of the first $250 million of average daily net
assets declining to .53% of average daily net
assets in excess of $2.5 billion. The Fund incurred
a management fee of $164,366 after an expense
waiver by Scudder Kemper of $54,788 for the year
ended September 30, 2000. This was equivalent to an
annual effective rate of .45% for the year ended
September 30, 2000.
Scudder Kemper agreed to temporarily waive and
reimburse certain operating expenses of the Fund.
Under this arrangement, Scudder Kemper waived
expenses of $185,072.
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 year ended September 30,
2000 are $7,196.
For services under the distribution services
agreement, the Fund pays KDI a fee of .75% of
average daily net assets of the Class B and Class C
shares pursuant to separate Rule 12b-1 plans for
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 and CDSC received by KDI
for the year ended September 30, 2000 were
$191,857, of which $68,919 is unpaid at September
30, 2000.
ADMINISTRATIVE SERVICES AGREEMENT. The Trust has an
administrative services agreement with KDI. For
providing information and administrative services
to shareholders, the Fund pays KDI a fee at an
annual rate of up to .25% of average daily net
assets. KDI in turn has various agreements with
financial services firms that provided these
services and pays these firms based on assets of
fund accounts the firms service. Administrative
services fees incurred by the Fund to KDI for the
year ended September 30, 2000 were $88,817, of
which $68,340 is unpaid at September 30, 2000.
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 $166,084
for the year ended September 30, 2000, of which
$75,428 is unpaid at September 30, 2000.
FUND ACCOUNTING AGENT. Scudder Fund Accounting
Corporation, a subsidiary of Scudder Kemper, is
responsible for determining the daily net asset
value per share and maintaining the portfolio and
general accounting records of the Fund. For the
year ended September 30, 2000, the amount charged
to the Fund by SFAC aggregated $62,250 of which
$15,563 is unpaid at September, 2000.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or trustees of
Scudder Kemper. For the year ended September 30,
2000, the Fund made no payments to its officers and
incurred trustees' fees of $9,406 to independent
trustees.
23
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
4 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
-------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 816,162 $ 8,574,774 1,269,644 $13,509,855
----------------------------------------------------------------------------------
Class B 640,610 6,740,098 988,435 10,194,577
----------------------------------------------------------------------------------
Class C 265,723 2,802,652 395,004 4,035,475
----------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 5,997 62,844 16,213 164,090
----------------------------------------------------------------------------------
Class B 2,326 24,351 5,024 49,999
----------------------------------------------------------------------------------
Class C 497 5,196 2,212 21,985
----------------------------------------------------------------------------------
SHARES REDEEMED
Class A (1,076,078) (11,316,337) (547,923) (5,724,499)
----------------------------------------------------------------------------------
Class B (662,643) (6,973,579) (251,501) (2,915,653)
----------------------------------------------------------------------------------
Class C (210,912) (2,203,137) (458,960) (4,808,835)
----------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A -- -- 13,296 140,252
----------------------------------------------------------------------------------
Class B -- -- (13,321) (140,252)
----------------------------------------------------------------------------------
NET INCREASE (DECREASE) FROM
CAPITAL SHARE TRANSACTIONS $ (2,283,138) $14,526,994
----------------------------------------------------------------------------------
</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 year ended September 30, 2000,
the Fund's custodian and transfer agent fees were
reduced by $820 and $1,194 respectively, under
these arrangements.
--------------------------------------------------------------------------------
6 LINE OF CREDIT The Fund and several Kemper funds (the
"Participants") share in a $750 million revolving
credit facility with Chase Manhattan Bank for
temporary or emergency purposes, including the
meeting of redemption requests that otherwise might
require the untimely disposition of securities. The
Participants are charged an annual commitment fee
which is allocated, pro rata based on net assets,
among each of the Participants. Interest is
calculated based on the market rates at the time of
the borrowing. The Funds may borrow up to a maximum
of 33 percent of their net assets under the
agreement.
24
<PAGE> 25
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER U.S. GROWTH AND INCOME FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper U.S. Growth And Income Fund as
of September 30, 2000, the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended and the financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We have conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of investments
owned as of September 30, 2000, by correspondence with the custodian and brokers
or other appropriate auditing procedures when replies from brokers were not
received. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Kemper
U.S. Growth And Income Fund at September 30, 2000, the results of its
operations, the changes in its net assets and the financial highlights for the
periods referred to above, in conformity with accounting principles generally
accepted in the United States.
ERNST & YOUNG LLP
Boston, Massachusetts
November 13, 2000
25
<PAGE> 26
TAX INFORMATION
TAX INFORMATION (UNAUDITED)
For corporate shareholders of Kemper U.S. Growth and Income Fund 100%, of the
income earned during the year ended September 30, 2000 qualified for the
dividends received deduction.
Please contact a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your account, please call 1-800-Scudder.
26
<PAGE> 27
NOTES
27
<PAGE> 28
TRUSTEES&OFFICERS
<TABLE>
<S> <C> <C>
TRUSTEES OFFICERS
JAMES E. AKINS MARK S. CASADY WILLIAM F. TRUSCOTT
Trustee President Vice President
JAMES R. EDGAR PHILLIP J. COLLORA LINDA J. WONDRACK
Trustee Vice President and Vice President
Secretary
ARTHUR R. GOTTSCHALK MAUREEN E. KANE
Trustee JOHN R. HEBBLE Assistant Secretary
Treasurer
FREDERICK T. KELSEY CAROLINE PEARSON
Trustee JAMES M. EYSENBACH Assistant Secretary
Vice President
THOMAS W. LITTAUER BRENDA LYONS
Chairman and Vice President ANN M. MCCREARY Assistant Treasurer
Vice President
FRED B. RENWICK
Trustee KATHLEEN MILLARD
Vice President
JOHN G. WEITHERS
Trustee KATHRYN L. QUIRK
</TABLE> Vice President
<TABLE>
<S> <C>
.............................................................................................
LEGAL COUNSEL DECHERT
Ten Post Office Square South
Boston, MA 02109
.............................................................................................
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 219557
Kansas City, MO 64121
.............................................................................................
CUSTODIAN AND STATE STREET BANK AND TRUST COMPANY
TRANSFER AGENT 225 Franklin Street
Boston, MA 02109
.............................................................................................
INDEPENDENT AUDITORS ERNST & YOUNG
233 South Wacker Drive
Chicago, IL 60606
.............................................................................................
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606
www.kemper.com
</TABLE>
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 Style/Value Style prospectus.
KUSGIF - 2(11/25/00) 1124180
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
