<PAGE> 1
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED SEPTEMBER 30, 2000
Seeking growth of capital through diversification of investment
securities having potential for capital appreciation
KEMPER GROWTH FUND
"... This extremely heavy position in technology concerned us because we
believed that it jeopardized our ability to maintain a well-diversified
portfolio ... As technology struggled ... our underweighting was extremely
beneficial for the fund. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
7
PERFORMANCE UPDATE
9
TERMS TO KNOW
12
INDIVIDUAL HOLDINGS
13
PORTFOLIO OF INVESTMENTS
16
FINANCIAL STATEMENTS
19
FINANCIAL HIGHLIGHTS
21
NOTES TO FINANCIAL STATEMENTS
25
TAX INFORMATION
26
REPORT OF INDEPENDENT AUDITORS
AT A GLANCE
KEMPER GROWTH FUND TOTAL RETURNS*
FOR THE YEAR ENDED SEPTEMBER 30, 2000 (UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER GROWTH FUND KEMPER GROWTH FUND LIPPER LARGE-CAP GROWTH
KEMPER GROWTH FUND CLASS A CLASS B CLASS C FUNDS CATEGORY AVERAGE*
-------------------------- ------------------ ------------------ -----------------------
<S> <C> <C> <C>
25.49 24.32 24.30 30.33
</TABLE>
PERFORMANCE IS HISTORICAL AND INCLUDES REINVESTMENT OF DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE 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 GROWTH FUND CLASS A $18.04 $15.79
.........................................................
KEMPER GROWTH FUND CLASS B $16.50 $14.69
.........................................................
KEMPER GROWTH FUND CLASS C $16.72 $14.87
.........................................................
</TABLE>
KEMPER GROWTH FUND
RANKINGS AS OF 9/30/00
COMPARED WITH ALL OTHER FUNDS IN THE LIPPER LARGE-CAP GROWTH FUNDS CATEGORY+
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
....................................................................................
<S> <C> <C> <C> <C> <C>
1-YEAR #281 of 496 funds #308 of 496 funds #309 of 496 funds
....................................................................................
5-YEAR #189 of 201 funds #194 of 201 funds #193 of 201 funds
....................................................................................
10-YEAR #59 of 66 funds n/a n/a
....................................................................................
15-YEAR #42 of 48 funds n/a n/a
....................................................................................
20-YEAR #27 of 32 funds n/a n/a
....................................................................................
</TABLE>
+LIPPER, 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. THE FUND IS COMPARED
WITH THE LIPPER LARGE-CAP GROWTH FUNDS CATEGORY.
DIVIDEND REVIEW
DURING THE YEAR ENDED SEPTEMBER 30, 2000, KEMPER GROWTH FUND MADE THE FOLLOWING
DISTRIBUTIONS PER SHARE:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
...............................................................
<S> <C> <C> <C> <C> <C>
LONG-TERM CAPITAL GAIN $1.76 $1.76 $1.76
...............................................................
</TABLE>
YOUR FUND'S STYLE
MORNINGSTAR EQUITY STYLE BOX(TM)
<TABLE>
<S> <C>
[MORNINGSTAR EQUITY STYLE Source: Morningstar, Inc. Chicago, IL (312)
BOX] 696-6000. The Morningstar 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
calculated by comparing the stocks in the fund's
portfolio with the most relevant of the three
market-cap groups.
PLEASE NOTE THAT STYLE BOXES DO NOT REPRESENT AN
EXACT ASSESSMENT OF RISK AND DO NOT REPRESENT
FUTURE PERFORMANCE. THE FUND'S PORTFOLIO CHANGES
FROM DAY TO DAY. A LONGER-TERM VIEW IS
REPRESENTED BY THE FUND'S MORNINGSTAR CATEGORY,
WHICH IS BASED ON ITS ACTUAL INVESTMENT STYLE AS
MEASURED BY ITS UNDERLYING PORTFOLIO HOLDINGS
OVER THE PAST THREE YEARS. MORNINGSTAR HAS PLACED
KEMPER GROWTH FUND IN THE LARGE-CAP GROWTH
CATEGORY. PLEASE CONSULT THE PROSPECTUS FOR A
DESCRIPTION OF INVESTMENT POLICIES.
</TABLE>
<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
[MALTER PHOTO]
VALERIE F. MALTER IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC. AND
IS A CO-LEAD PORTFOLIO MANAGER OF KEMPER GROWTH FUND. SHE IS ALSO A CERTIFIED
FINANCIAL ANALYST. SHE HAS MORE THAN 17 YEARS OF INVESTMENT MANAGEMENT
EXPERIENCE.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
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 A RECOMMENDATION OF ANY SPECIFIC SECURITY.
OVER THE LAST YEAR, VOLATILITY RULED THE MARKET.
MOST NOTABLY TECHNOLOGY STOCKS, WHICH SEEMED
UNSTOPPABLE IN RECENT YEARS BEGAN TO STRUGGLE.
DESPITE THE TURBULENCE, KEMPER GROWTH FUND POSTED
STRONG RETURNS FOR THE ANNUAL PERIOD -- OCTOBER 1,
1999 THROUGH SEPTEMBER 30, 2000. BELOW, LEAD
PORTFOLIO MANAGER VALERIE MALTER DISCUSSES HOW HER
COMMITMENT TO DIVERSIFICATION AND A PURE-GROWTH
INVESTMENT STRATEGY HELPED THE FUND OUTPERFORM ITS
BENCHMARK.
Q HOW DID KEMPER GROWTH FUND PERFORM DURING THE SEMIANNUAL PERIOD?
A Despite sustained stock market volatility, fund performance was strong.
The fund gained 25.49 percent (Class A shares, unadjusted for any sales charges)
for the 12 months ended September 30, 2000. We are extremely gratified that the
fund outpaced its benchmark, the Russell 1000 Growth index, which rose 23.43
percent.
Q HOW IS THE FUND POSITIONED RELATIVE TO ITS BENCHMARK, THE RUSSELL 1000
GROWTH INDEX?
A We make a profound effort to keep the fund closely in line with the sector
weightings of our benchmark. While our investment strategy is not quite sector
neutral, we are committed to managing risk through diversification. We generally
aim to keep our sector weightings within plus or minus 5 percent of each sector
in the Russell 1000 Growth index. This discipline keeps us from trying to guess
the next hot sector. And it helps ensure the fund will be positioned to capture
gains and minimize losses during bouts of extreme volatility such as those we
saw this period.
This year, however, we did make an exception to the rule, which benefitted the
fund. As you may already realize, over the last five years technology stocks
have made huge gains in value and therefore market capitalizations of technology
companies have increased dramatically. In June, when our benchmark was
reconstituted, technology was increased to represent approximately 60 percent of
the Russell 1000 Growth index. This extremely heavy position in technology
concerned us because we believed that it jeopardized our ability to maintain a
well-diversified portfolio. We therefore made a conscious decision to
underweight our technology position relative to the index. As technology has
struggled over the last six months, our underweighting was extremely beneficial
for the fund. [THE RUSSELL 1000 GROWTH INDEX MEASURES THE PERFORMANCE OF THE
HIGHER PRICE-TO-BOOK RATIOS AND HIGHER FORECASTED GROWTH VALUES OF 1,000 OF THE
LARGEST PUBLICLY TRADED COMPANIES BASED ON MARKET CAPITALIZATION (SEE TERMS TO
KNOW, ON PAGE 9). EACH JUNE, THE INDEX IS RECONSTITUTED AND THE WEIGHTINGS OF
THE SECTORS CHANGE BASED ON CHANGES IN MARKET CAPITALIZATION. YOU CANNOT INVEST
DIRECTLY IN THE INDEX.]
Q WOULD YOU DISCUSS WHAT THE VOLATILE MARKET MEANT FOR KEMPER GROWTH FUND'S
PERFORMANCE?
A The market provided a textbook example of why diversification and a
long-term
7
<PAGE> 8
PERFORMANCE UPDATE
rational outlook are so important. Throughout the period, we continued to see
unprecedented levels of market volatility.
The period began in October with strong performance in large-cap domestic
growth stocks -- the mainstay of Kemper Growth Fund. In November and December
investors seemingly turned a blind eye to fundamentals, rewarding lower-quality
stocks over higher ones. Smaller, high-flying tech stocks -- many of them the
untested, trendy ".com" stocks we stay away from -- were grabbing headlines with
strong performance. After some profit-taking in January, the fund quickly
regained its footing when the market surged ahead once again. Fund performance
continued apace throughout February and the first half of March, buoyed by
biotech stocks, consumer discretionary stocks, retailers and technology stocks.
The second half of the period began with the implosion of the technology
sector. A tug-of-war between growth and value stocks then took hold throughout
the remainder of the period. Our technology stocks, like most, were hurt.
However, our relative underweighting in technology helped the fund's overall
performance during the second half of the year.
Q HOW DID YOU MANAGE THE FUND'S TECHNOLOGY HOLDINGS THROUGH THE DOWNTURN? DO
YOU STILL MAINTAIN A MEANINGFUL TECHNOLOGY POSITION?
A As growth investors, technology companies have always been a meaningful
part of the fund's portfolio. When technology began its dramatic slide in March
and with the understanding that our benchmark would be increasing its exposure
to technology, we began adding to the sector. After the deepest declines, we
added to existing positions of fundamentally solid tech names already in the
portfolio and added new positions in stocks we liked, but believed were too
expensive prior to the tech stumble. So we did increase our technology position
on weakness, but kept it beneath our benchmark. As technology continued to
struggle, this underweighted position helped the fund's relative performance. We
believe this downturn is temporary and that we'll continue to see those tech
companies with strong fundamentals and good management prosper.
Q THE FEDERAL RESERVE BOARD INCREASED INTEREST RATES REPEATEDLY THROUGHOUT
THE PERIOD. HOW DID RISING RATES AFFECT LARGE-CAP GROWTH STOCK PERFORMANCE?
A A rising interest-rate environment typically takes its toll on growth
stocks. That's because rising rates generally signal an accelerating economy, a
scenario that tends to drive investors toward more cyclical stocks. During the
period, we did see rotation between growth and cyclical value stocks as well as
large-and small-cap stocks.
While we're closely monitoring and researching how economic trends affect
individual companies, we do not allow short-term macroeconomic fluctuations to
drive our investment discipline. Regardless of the direction of interest rates,
our job is to seek growth stocks with superior fundamentals and earnings
potential.
So while other fund managers would eliminate positions in sectors that tend to
underperform in rising rate environments, we examine each company's fundamental
ability to sustain momentum regardless of sector.
Q WHAT WORKED WELL FOR KEMPER GROWTH FUND?
A Again diversification and adherence to a strict investment discipline were
key. Most sectors experienced wild swings. Anticipating rotations and trading
issues is tough in any market, but almost impossible in this one.
For the 12-month period, we saw large gains in our health care holdings. These
gains came from both biotech and pharmaceutical companies. One of the standout
pharmaceutical performers was Merck, which has posted positive earnings quarter
after quarter for about the last two years. Despite these earnings results, the
market has been nervous about Merck's ability to continue delivering strong
earnings. That's because many of its product patents will begin to expire in
2001, and the company has not released news about potential new products it
plans to market. We're pleased with Merck's performance and feel confident it
will continue to bring new successful products to market as it has over the
years. As long as the company continues to meet our expectations, we'll hold the
stock. Other strong health care performers included Pfizer, Warner Lambert,
Genentech, Allergan and Medtronic.
Technology, despite its recent troubles, was a big contributor to performance
over the full 12-month period. Our holdings rallied strongly during the first
half of the period, and many of our tech stocks rebounded nicely after the
downturn last spring. The strongest performers
8
<PAGE> 9
PERFORMANCE UPDATE
included those companies involved in high-tech communications. Demand for faster
and better communications continues to swell, causing growth rates of these
companies to accelerate, which of course has been great for their stock prices.
Many communication stocks have recouped earlier losses and have since moved to
new highs. Some of the strongest fund performers include Sun Microsystems,
Ariba, EMC, Juniper Networks and Vitesse.
Q DESPITE THE FUND'S STRONG GAINS, WAS THERE ANYTHING THAT HINDERED
PERFORMANCE?
A Media stocks, which had been very strong contributors over the last couple
years, really hurt performance this year. The decline has been tied to a
decrease in demand for advertising space. Over the last couple years demand grew
as new Internet companies were launched and began vying for advertising space.
As incremental demand grew, so did the cost of advertising space. As many
Internet companies have struggled this year, we've seen a pull back in
advertising budgets, which has reduced demand and pricing. Earnings growth of
many media companies have therefore decelerated, disappointing investors.
We're of course disheartened to see these declines, but believe the
deceleration is temporary. Earnings growth may not soon reach last year's
extreme levels, but companies are still advertising and revenue will continue to
grow, albeit at a slower pace. We certainly have not given up on the sector,
although we have reduced our position somewhat. We're being more selective about
the companies we're holding -- looking for those that may turn the corner sooner
rather than later.
Q GIVEN THE CHALLENGES OF THE RECENT MARKET, WHAT IS YOUR OUTLOOK FOR EQUITY
INVESTING IN THE NEAR TERM?
A Despite the market's recent challenges, we remain committed to our
pure-growth investment philosophy. We believe that over time, companies with
strong franchises, skilled management and sustainable, consistent earnings
growth can produce superior long-term returns. Especially in times of market
turbulence, it's important to maintain a long-term outlook. We continue to
believe that quality large-cap domestic growth stocks offer excellent prospects
for fund investors.
TERMS TO KNOW
CAPITALIZATION/MARKET CAPITALIZATION A measure of the size of a company that
offers publicly traded stock, as determined by multiplying the current share
price by the number of shares outstanding.
GROWTH STOCK Stocks in companies that are expected to experience rapid growth
resulting from strong sales, talented management and dominant market position.
Because growth stocks are typically in demand, they tend to carry relatively
high price tags and can also be volatile, based on changing perceptions of the
companies' growth.
SECTOR A sector is a grouping of stocks that are usually found in related
industries, such as technology. The stocks within a market sector may be
similarly affected by financial, economic, business and other developments.
9
<PAGE> 10
PERFORMANCE UPDATE
AVERAGE ANNUAL TOTAL RETURNS*
For periods ended September 30, 2000 (adjusted for the maximum sales charge)
<TABLE>
<CAPTION>
1-YEAR 5-YEAR 10-YEAR LIFE OF CLASS
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
KEMPER GROWTH FUND CLASS A 18.30% 15.16% 16.04% 13.02% (since 4/4/66)
.........................................................................................................
KEMPER GROWTH FUND CLASS B 21.32 15.21 n/a 15.59 (since 5/31/94)
.........................................................................................................
KEMPER GROWTH FUND CLASS C 24.30 15.53 n/a 15.78 (since 5/31/94)
.........................................................................................................
</TABLE>
KEMPER GROWTH FUND CLASS A
Growth of an assumed $10,000 investment in Class A
shares from 12/31/78 to 9/30/00
[LINE GRAPH]
<TABLE>
<CAPTION>
KEMPER GROWTH FUND RUSSELL 1000 GROWTH STANDARD & POOR'S 500
CLASS A(1) INDEX(+) STOCK INDEX(++)
------------------ ------------------- ---------------------
<S> <C> <C> <C>
12/31/78 9429.00 10000.00 10000.00
13277.00 13538.00 11231.00
19130.00 16974.00 14125.00
16930.00 19492.00 12751.00
21840.00 25059.00 14633.00
27321.00 29064.00 17161.00
25368.00 28787.00 17401.00
12/31/85 32197.00 38245.00 21983.00
36514.00 44121.00 25197.00
38606.00 46462.00 25708.00
42782.00 51697.00 28896.00
55940.00 70268.00 36770.00
58100.00 70085.00 34359.00
96942.00 98935.00 43397.00
12/31/92 95431.00 103881.00 45335.00
96987.00 106898.00 48533.00
91253.00 109737.00 47786.00
120337.00 150543.00 64086.00
140005.00 185352.00 77072.00
163527.00 241860.00 100971.00
186784.00 335470.00 127898.00
255726.00 446654.00 152872.00
9/30/00 248562.00 440490.00 149466.00
</TABLE>
KEMPER GROWTH FUND CLASS B
Growth of an assumed $10,000 investment in Class B
shares from 5/31/94 to 9/30/00
[LINE GRAPH]
<TABLE>
<CAPTION>
KEMPER GROWTH FUND RUSSELL 1000 GROWTH STANDARD & POOR'S 500
CLASS B(1) INDEX(+) STOCK INDEX(++)
------------------ ------------------- ---------------------
<S> <C> <C> <C>
5/31/94 10000.00 10000.00 10000.00
9328.00 9705.00 9732.00
9832.00 10451.00 10136.00
9765.00 10529.00 10061.00
10516.00 11532.00 10968.00
11290.00 12666.00 11933.00
12274.00 13815.00 12802.00
12743.00 14444.00 13492.00
3/31/96 13348.00 15220.00 14140.00
13876.00 16188.00 14691.00
14541.00 16772.00 15057.00
14674.00 17784.00 16227.00
13580.00 17880.00 16585.00
15745.00 21261.00 19390.00
17258.00 22859.00 20751.00
16958.00 23206.00 21258.00
3/31/98 19634.00 26722.00 24135.00
19402.00 27934.00 24838.00
15060.00 25397.00 22278.00
19159.00 32188.00 26927.00
20557.00 34234.00 28179.00
20941.00 35552.00 30070.00
20146.00 34248.00 28099.00
25956.00 42856.00 32185.00
27974.00 45911.00 32828.00
26897.00 44669.00 31864.00
9/30/00 25045.00 42265.00 31468.00
</TABLE>
KEMPER GROWTH FUND CLASS C
Growth of an assumed $10,000 investment in Class C
shares from 5/31/94 to 9/30/00
[LINE GRAPH]
<TABLE>
<CAPTION>
KEMPER GROWTH FUND RUSSELL 1000 GROWTH STANDARD & POOR'S 500
CLASS C(1) INDEX(+) STOCK INDEX(++)
------------------ ------------------- ---------------------
<S> <C> <C> <C>
5/31/94 10000.00 10000.00 10000.00
9343.00 9705.00 9732.00
9840.00 10451.00 10136.00
9772.00 10529.00 10061.00
10532.00 11532.00 10968.00
11322.00 12666.00 11933.00
12299.00 13815.00 12802.00
12776.00 14444.00 13492.00
3/31/96 13390.00 15220.00 14140.00
13926.00 16188.00 14691.00
14593.00 16772.00 15057.00
14717.00 17784.00 16227.00
13635.00 17880.00 16585.00
15810.00 21261.00 19390.00
17346.00 22859.00 20751.00
17046.00 23206.00 21258.00
3/31/98 19760.00 26722.00 24135.00
19555.00 27934.00 24838.00
15178.00 25397.00 22278.00
19326.00 32188.00 26927.00
20736.00 34234.00 28179.00
21161.00 35552.00 30070.00
20367.00 34248.00 28099.00
26224.00 42856.00 32185.00
28268.00 45911.00 32828.00
27193.00 44669.00 31864.00
9/30/00 25315.00 42265.00 31468.00
</TABLE>
PERFORMANCE IS HISTORICAL AND INCLUDES
REINVESTMENT OF DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL
VALUE FLUCTUATE WITH CHANGING MARKET
CONDITIONS, SO THAT WHEN REDEEMED,
SHARES MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST.
*FOR CLASS A SHARES, ADJUSTMENT FOR THE
MAXIMUM SALES CHARGE OF 5.75% AND FOR
CLASS B SHARES, ADJUSTMENT FOR THE
APPLICABLE CONTINGENT DEFERRED SALES
CHARGE (CDSC) OF 3%, CLASS C SHARES HAVE
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. SHARE CLASSES INVEST
IN THE SAME UNDERLYING PORTFOLIO. DURING
THE PERIODS NOTED, SECURITIES PRICES
FLUCTUATED. FOR ADDITIONAL INFORMATION,
SEE THE PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION AND THE 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
CONTINGENT DEFERRED SALES CHARGE IN
EFFECT AT THE END OF THE PERIOD FOR
CLASS B SHARES. WHEN REVIEWING THE
PERFORMANCE CHART, PLEASE NOTE THAT THE
INCEPTION DATE FOR THE RUSSELL 1000
GROWTH INDEX IS JANUARY 1, 1979. AS A
RESULT, WE ARE NOT ABLE TO ILLUSTRATE
THE LIFE-OF-FUND PERFORMANCE (SINCE
APRIL 4, 1966) FOR KEMPER GROWTH FUND
CLASS A SHARES. IN COMPARING KEMPER
GROWTH FUND WITH THE INDICES, YOU SHOULD
ALSO NOTE THAT THE FUND'S PERFORMANCE
REFLECTS THE MAXIMUM SALES CHARGE, WHILE
NO SUCH CHARGES ARE REFLECTED IN THE
PERFORMANCE OF THE INDICES.
(+)THE RUSSELL 1000 GROWTH INDEX IS AN
UNMANAGED INDEX COMPRISED OF COMMON
STOCKS OF LARGER U.S. COMPANIES WITH
GREATER THAN AVERAGE GROWTH ORIENTATION
AND REPRESENTS THE UNIVERSE OF STOCKS
FROM WHICH EARNINGS/GROWTH MONEY
MANAGERS TYPICALLY SELECT. SOURCE IS
WIESENBERGER(R).
(++)THE STANDARD & POOR'S 500 STOCK INDEX
IS AN UNMANAGED INDEX GENERALLY
REPRESENTATIVE OF THE U.S. STOCK MARKET.
SOURCE IS WIESENBERGER(R).
10
<PAGE> 11
INDUSTRY SECTORS
A YEAR-TO-YEAR COMPARISON
Data shows the percentage of the common stocks in the portfolio that each sector
represented on September 30, 2000, and on September 30, 1999.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER GROWTH FUND ON KEMPER GROWTH FUND ON
9/30/00 9/30/99
--------------------- ---------------------
<S> <C> <C>
TECHNOLOGY 43.80% 31.20%
HEALTH CARE 17.30% 16.70%
COMMUNICATION SERVICES 10.40% 11.30%
CONSUMER NON-DURABLES 9.30% 23.20%
BASIC MATERIALS 7.20% 0.00%
CAPITAL GOODS 6.60% 11.60%
FINANCE 3.80% 5.00%
ENERGY 1.60% 1.00%
</TABLE>
A COMPARISON WITH THE RUSSELL 1000 GROWTH INDEX*
Data shows the percentage of the common stocks in the portfolio that each sector
of Kemper Growth Fund represented on September 30, 2000, compared with the
industry sectors that make up the fund's benchmark, the Russell 1000 Growth
index.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER GROWTH FUND ON RUSSELL 1000 GROWTH INDEX ON
9/30/00 9/30/00
--------------------- ----------------------------
<S> <C> <C>
TECHNOLOGY 43.80% 59.40%
HEALTH CARE 17.30% 13.90%
COMMUNICATION SERVICES 10.40% 2.80%
CONSUMER NON-DURABLES 9.30% 11.90%
BASIC MATERIALS 7.20% 0.00%
CAPITAL GOODS 6.60% 8.40%
FINANCE 3.80% 1.70%
ENERGY 1.60% 0.90%
UTILITIES 0.00% 0.90%
TRANSPORTATION 0.00% 0.10%
</TABLE>
* THE RUSSELL 1000 GROWTH INDEX IS AN UNMANAGED INDEX COMPRISED OF COMMON STOCKS
OF LARGER U.S. COMPANIES WITH GREATER-THAN-AVERAGE GROWTH ORIENTATION AND
REPRESENTS THE UNIVERSE OF STOCKS FROM WHICH EARNINGS/GROWTH MONEY MANAGERS
TYPICALLY SELECT.
11
<PAGE> 12
INDIVIDUAL HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS
Representing 40.3 percent of the fund's total net assets on September 30, 2000.
<TABLE>
<CAPTION>
HOLDINGS PERCENT
<S> <C> <C> <C>
----------------------------------------------------------------------------------------
1. CISCO SYSTEMS Large, comprehensive supplier of 6.2%
routing software and related
systems that direct the flow of
data between local networks.
----------------------------------------------------------------------------------------
2. PFIZER Globally diversified research-based 5.8%
health-care company that develops,
manufactures and markets a wide
variety of products for human and
animal health care.
----------------------------------------------------------------------------------------
3. GENERAL ELECTRIC A broadly diversified company with 5.5%
major businesses in power
generators, appliances, lighting,
plastics, medical systems, aircraft
engines, financial services and
broadcasting.
----------------------------------------------------------------------------------------
4. SUN MICROSYSTEMS A provider of high-performance 5.4%
workstations, servers and
networking software for the
engineering, scientific, commercial
and technical industries.
----------------------------------------------------------------------------------------
5. INTEL Engaged in the design, development, 4.2%
manufacture and sale of advanced
semiconductors and integrated
circuits.
----------------------------------------------------------------------------------------
6. MICROSOFT Develops, markets and supports a 3.6%
variety of software, operating
systems, language and application
programs.
----------------------------------------------------------------------------------------
7. EMC Designs, manufactures, markets and 2.5%
supports high performance storage
products and provides related
services. The storage products
include hardware, software and
switching products.
----------------------------------------------------------------------------------------
8. AMERICA ONLINE Global leader in consumer on-line 2.4%
services, including Internet
access, e-mail, software, computer
support and electronic periodicals.
Owns Netscape Communications.
----------------------------------------------------------------------------------------
9. ARIBA Provider of commerce management 2.4%
solutions that leverage
Internet-based technologies to
extend back-office applications,
automate operational processes, and
reduce the cost of buying and
selling goods and services.
----------------------------------------------------------------------------------------
10. MERCK A global pharmaceutical company 2.3%
that discovers, develops,
manufactures and markets human and
animal health products.
----------------------------------------------------------------------------------------
</TABLE>
*Portfolio composition and holdings are subject to change.
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
KEMPER GROWTH FUND
Portfolio of Investments at September 30, 2000
<TABLE>
<CAPTION>
REPURCHASE AGREEMENTS-- 3.9% PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
Chase Security Government, 6.65%,
to be repurchased at $100,055,416
on 10/2/2000**
(Cost $100,000,000) $100,000,000 $ 100,000,000
State Street Bank and Trust
Company, 6.480%, to be
repurchased at $15,515,373 on
10/2/2000** (Cost $15,507,000) 15,507,000 15,507,000
--------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $115,507,000) 115,507,000
--------------------------------------------------------------------------
<CAPTION>
COMMON STOCKS-- 96.1% SHARES
<S> <C> <C> <C> <C> <C>
CONSUMER
DISCRETIONARY--5.6%
DEPARTMENT & CHAIN STORES
Home Depot, Inc. 976,850 51,834,103
Kohl's Corp.* 603,300 34,802,869
Target Corp. 1,033,600 26,486,000
Wal-Mart Stores, Inc. 1,127,900 54,280,188
--------------------------------------------------------------------------
167,403,160
-----------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--6.3%
FOOD & BEVERAGE--3.4%
Coca-Cola Co. 704,000 38,808,000
PepsiCo, Inc. 1,388,400 63,866,400
--------------------------------------------------------------------------
102,674,400
PACKAGE GOODS/ COSMETICS--2.9%
Colgate-Palmolive Co. 1,089,700 51,433,840
Estee Lauder Companies, Inc. "A" 926,400 33,929,400
--------------------------------------------------------------------------
85,363,240
-----------------------------------------------------------------------------------------------------------------------
HEALTH--16.6%
BIOTECHNOLOGY--4.6%
Genentech, Inc.* 294,400 54,666,400
MedImmune, Inc.* 676,800 52,282,800
QLT, Inc.* 413,100 29,919,062
--------------------------------------------------------------------------
136,868,262
MEDICAL SUPPLY--2.6%
Baxter International, Inc. 582,500 46,490,781
Medtronic, Inc. 625,420 32,404,574
--------------------------------------------------------------------------
78,895,355
PHARMACEUTICALS--9.4%
Allergan, Inc. 434,900 36,721,869
Merck & Co., Inc. 913,300 67,983,769
Pfizer, Inc. 3,915,575 175,956,152
--------------------------------------------------------------------------
280,661,790
-----------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS--4.7%
CELLULAR TELEPHONE--1.8%
American Tower Corp., "A"* 572,400 21,572,325
Vodafone Group PLC 851,500 31,505,500
--------------------------------------------------------------------------
53,077,825
TELEPHONE/ COMMUNICATIONS--2.9%
JDS Uniphase Corp.* 588,770 55,749,159
Nortel Networks Corp. 497,300 29,620,431
--------------------------------------------------------------------------
85,369,590
</TABLE>
The accompanying notes are an integral part of the financial statements. 13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C> <C> <C> <C>
FINANCIAL--3.7%
INSURANCE--1.4%
American International Group, Inc. 426,150 $ 40,777,228
--------------------------------------------------------------------------
CONSUMER FINANCE--1.1%
American Express Co. 527,100 32,021,325
--------------------------------------------------------------------------
OTHER FINANCIAL COMPANIES--1.2%
Morgan Stanley Dean Witter & Co. 383,600 35,075,425
--------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
MEDIA--5.4%
ADVERTISING--.8%
Omnicom Group, Inc. 336,500 24,543,469
--------------------------------------------------------------------------
BROADCASTING & ENTERTAINMENT--3.7%
Clear Channel Communication, Inc. 424,200 23,967,300
The Walt Disney Co.* 798,700 30,550,275
Univision Communication, Inc.* 599,900 22,421,263
Viacom, Inc. "B"* 566,900 33,163,650
--------------------------------------------------------------------------
110,102,488
CABLE TELEVISION--.9%
AT&T Corp. -- Liberty Media Group
"A"* 1,441,200 25,941,594
--------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
SERVICE INDUSTRIES--3.3%
EDP SERVICE--.9%
Electronic Data Systems Co. 674,050 27,973,075
--------------------------------------------------------------------------
INVESTMENT--1.1%
Charles Schwab Corp. 885,600 31,438,800
--------------------------------------------------------------------------
MISCELLANEOUS COMMERCIAL
SERVICES--1.3%
Siebel Systems, Inc.* 359,900 40,061,369
--------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
MANUFACTURING--6.9%
DIVERSIFIED MANUFACTURING--6.9%
General Electric Co. 2,883,900 166,364,981
Textron, Inc. 829,500 38,260,688
--------------------------------------------------------------------------
204,625,669
-----------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--42.0%
COMPUTER SOFTWARE--9.0%
America Online, Inc.* 1,343,670 72,222,263
Microsoft Corp.* 1,784,290 107,503,473
Oracle Corp.* 608,030 47,882,363
i2 Technologies, Inc.* 229,840 42,994,445
--------------------------------------------------------------------------
270,602,544
DIVERSE ELECTRONIC PRODUCTS--4.0%
Aether Systems, Inc.* 214,870 22,668,785
Applied Materials, Inc.* 861,800 51,115,513
General Motors Corp. "H" (New)* 1,138,080 42,313,814
Teradyne, Inc.* 85,650 2,997,750
--------------------------------------------------------------------------
119,095,862
EDP PERIPHERALS--6.3%
Ariba, Inc.* 501,910 71,906,450
EMC Corp.* 766,000 75,929,750
Network Appliance, Inc.* 311,500 39,677,313
--------------------------------------------------------------------------
187,513,513
ELECTRONIC COMPONENTS/
DISTRIBUTORS--8.8%
Broadcom Corp. "A"* 145,870 35,555,813
Cisco Systems, Inc.* 3,395,050 187,576,513
Juniper Networks, Inc.* 183,630 40,203,493
--------------------------------------------------------------------------
263,335,819
ELECTRONIC DATA PROCESSING--5.5%
Sun Microsystems, Inc.* 1,407,800 164,360,650
--------------------------------------------------------------------------
SEMICONDUCTORS--8.4%
Intel Corp. 3,054,410 126,948,916
Linear Technology Corp. 865,080 56,013,930
Vitesse Semiconductor Corp.* 752,480 66,923,690
--------------------------------------------------------------------------
249,886,536
</TABLE>
14 The accompanying notes are an integral part of the financial statements.
<PAGE> 15
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C> <C> <C> <C>
ENERGY--1.5%
OILFIELD SERVICES/ EQUIPMENT--1.5%
Schlumberger Ltd. 547,100 $ 45,033,169
--------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
UTILITIES--.1%
ELECTRIC UTILITIES
Southern Energy, Inc.* 136,600 4,285,825
--------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost $1,927,326,439) 2,866,987,982
--------------------------------------------------------------------------
TOTAL INVESTMENTS--100.0%
(Cost $2,042,833,439)(a) $2,982,494,982
--------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
* Non-income producing security.
** Repurchase agreements are fully collateralized by U.S. Treasury or U.S.
Government agency securities. The collateral is monitored daily by the Fund
so that its market value exceeds the carrying value of the repurchase
agreement.
(a) Based on the cost of investments of $2,044,551,947 for federal income tax
purposes at September 30, 2000, the aggregate gross unrealized appreciation
was $1,033,657,486, the aggregate gross unrealized depreciation was
$95,714,451 and the net unrealized appreciation on investments was
$937,943,035.
The accompanying notes are an integral part of the financial statements. 15
<PAGE> 16
FINANCIAL STATEMENTS
STATEMENT OF ASSETS & LIABILITIES
As of September 30, 2000
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value, (cost $2,042,833,439) $2,982,494,982
------------------------------------------------------------------------------
Cash 120
------------------------------------------------------------------------------
Receivable for investments sold 52,499,694
------------------------------------------------------------------------------
Dividend receivable 1,369,366
------------------------------------------------------------------------------
Interest receivable 42,527
------------------------------------------------------------------------------
Receivable for Fund shares sold 2,121,869
------------------------------------------------------------------------------
TOTAL ASSETS 3,038,528,558
------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased 8,338,761
------------------------------------------------------------------------------
Payable for Fund shares redeemed 11,814,857
------------------------------------------------------------------------------
Accrued management fee 1,445,490
------------------------------------------------------------------------------
Other payables and accrued expenses 2,929,121
------------------------------------------------------------------------------
Total liabilities 24,528,229
------------------------------------------------------------------------------
NET ASSETS, AT VALUE $3,014,000,329
------------------------------------------------------------------------------
NET ASSETS
Net assets consist of:
Net unrealized appreciation (depreciation) on investments $ 939,661,543
------------------------------------------------------------------------------
Accumulated net realized gain (loss) 204,418,208
------------------------------------------------------------------------------
Paid-in-capital 1,869,920,578
------------------------------------------------------------------------------
NET ASSETS, AT VALUE $3,014,000,329
------------------------------------------------------------------------------
NET ASSETS VALUE AND OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($2,444,928,566 / 135,507,564 shares outstanding of
beneficial interest, $.01 par value, unlimited number of
shares authorized) $18.04
------------------------------------------------------------------------------
Maximum offering price per share (100/94.25 of net asset
value.) $19.14
------------------------------------------------------------------------------
CLASS B SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share ($504,076,140
/ 30,548,910 shares outstanding of beneficial interest,
$.01 par value, unlimited number of shares authorized) $16.50
------------------------------------------------------------------------------
CLASS C SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share ($41,802,515 /
2,499,422 shares outstanding of beneficial interest, $.01
par value, unlimited number of shares authorized) $16.72
------------------------------------------------------------------------------
CLASS I SHARES
Net asset value, offering and redemption price per share
($23,193,108 / 1,257,397 shares outstanding of beneficial
interest, $.01 par value, unlimited number of shares
authorized) $18.45
------------------------------------------------------------------------------
</TABLE>
16 The accompanying notes are an integral part of the financial statements.
<PAGE> 17
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
For the year ended September 30, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $9,263) $ 12,559,735
----------------------------------------------------------------------------
Interest 4,821,928
----------------------------------------------------------------------------
Total income 17,381,663
----------------------------------------------------------------------------
Expenses:
Management fee 16,908,574
----------------------------------------------------------------------------
Services to shareholders 7,007,833
----------------------------------------------------------------------------
Custodian fees 85,571
----------------------------------------------------------------------------
Distribution services fees 4,429,230
----------------------------------------------------------------------------
Administrative services fees 7,427,126
----------------------------------------------------------------------------
Auditing 65,109
----------------------------------------------------------------------------
Legal 37,632
----------------------------------------------------------------------------
Trustees' fees and expenses 65,824
----------------------------------------------------------------------------
Reports to shareholders 678,890
----------------------------------------------------------------------------
Registration fees 44,802
----------------------------------------------------------------------------
Other 117,436
----------------------------------------------------------------------------
Total expenses, before expense reductions 36,868,027
----------------------------------------------------------------------------
Expense reductions (218,664)
----------------------------------------------------------------------------
Total expenses, after expense reductions 36,649,363
----------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (19,267,700)
----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from investments 211,498,589
----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
on investments 460,612,876
----------------------------------------------------------------------------
Net gain (loss) on investment transactions 672,111,465
----------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $652,843,765
----------------------------------------------------------------------------
</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, 2000 SEPTEMBER 30, 1999
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
-----------------------------------------------------------------------------------------------------------
Net investment income (loss) $ (19,267,700) $ (15,952,901)
-----------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions 211,498,589 282,344,381
-----------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
transactions during the period 460,612,876 498,225,667
-----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 652,843,765 764,617,147
-----------------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (226,746,710) (8,410,627)
-----------------------------------------------------------------------------------------------------------
Class B (54,597,329) (99,496)
-----------------------------------------------------------------------------------------------------------
Class C (2,975,833) (100,564)
-----------------------------------------------------------------------------------------------------------
Class I (2,054,267) (2,647,071)
-----------------------------------------------------------------------------------------------------------
Fund share transactions:
Proceeds from shares sold 1,535,576,603 1,164,824,532
-----------------------------------------------------------------------------------------------------------
Reinvestment of distributions 270,014,395 10,651,046
-----------------------------------------------------------------------------------------------------------
Cost of shares redeemed (1,736,304,592) (1,560,111,670)
-----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions 69,286,406 (384,636,092)
-----------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 435,756,032 368,723,297
-----------------------------------------------------------------------------------------------------------
Net assets at beginning of period 2,578,244,297 2,209,521,000
-----------------------------------------------------------------------------------------------------------
NET ASSETS AT END OF PERIOD $ 3,014,000,329 $ 2,578,244,297
-----------------------------------------------------------------------------------------------------------
</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 for the financial
statements.
<TABLE>
<CAPTION>
CLASS A
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period
$15.79 11.72 15.47 17.21 16.07
---------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.08)(b) (0.05)(b) (0.01)(b) -- 0.12
---------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions 4.09 4.18 (1.65) 2.61 2.74
---------------------------------------------------------------------------------------------------------------
Total from investment operations 4.01 4.13 (1.66) 2.61 2.86
---------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- -- -- -- (0.04)
---------------------------------------------------------------------------------------------------------------
Net realized gains on investment transactions (1.76) (0.06) (2.09) (4.35) (1.68)
---------------------------------------------------------------------------------------------------------------
Total distributions (1.76) (0.06) (2.09) (4.35) (1.72)
---------------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.04 15.79 11.72 15.47 17.21
---------------------------------------------------------------------------------------------------------------
TOTAL RETURN %(A) 25.49 35.29 (11.78) 19.97 19.62
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in millions) 2,445 2,054 1,646 1,908 1,817
---------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.00 1.05 1.04 1.06 1.07
---------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 0.99 1.05 1.04 1.06 1.07
---------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (0.44) (0.36) (0.09) 0.07 0.65
---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 49 97 122 201 150
---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period
$14.69 11.03 14.83 16.82 15.85
------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.23)(b) (0.21)(b) (0.16)(b) (0.16) (0.09)
------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions 3.80 3.93 (1.55) 2.52 2.74
------------------------------------------------------------------------------------------------------------
Total from investment operations 3.57 3.72 (1.71) 2.36 2.65
------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- -- -- -- --
------------------------------------------------------------------------------------------------------------
Net realized gains on investment transactions (1.76) (0.06) (2.09) (4.35) (1.68)
------------------------------------------------------------------------------------------------------------
Total distributions (1.76) (0.06) (2.09) (4.35) (1.68)
------------------------------------------------------------------------------------------------------------
Net asset value, end of period $16.50 14.69 11.03 14.83 16.82
------------------------------------------------------------------------------------------------------------
TOTAL RETURN %(A) 24.32 33.77 (12.73) 18.68 18.47
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in millions) 504 479 527 874 874
------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.91 2.17 2.14 2.13 2.05
------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.90 2.17 2.14 2.13 2.05
------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (1.35) (1.48) (1.19) (1.00) (0.33)
------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 49 97 122 201 150
------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $14.87 11.13 14.91 16.87 15.87
-------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.23)(b) (0.18)(b) (0.14)(b) (0.13) (0.06)
-------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions 3.84 3.98 (1.55) 2.52 2.74
-------------------------------------------------------------------------------------------------------
Total from investment operations 3.61 3.80 (1.69) 2.39 2.68
-------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- -- -- -- --
-------------------------------------------------------------------------------------------------------
Net realized gains on investment
transactions (1.76) (0.06) (2.09) (4.35) (1.68)
-------------------------------------------------------------------------------------------------------
Total distributions (1.76) (0.06) (2.09) (4.35) (1.68)
-------------------------------------------------------------------------------------------------------
Net asset value, end of period $16.72 14.87 11.13 14.91 16.87
-------------------------------------------------------------------------------------------------------
TOTAL RETURN %(A) 24.30 34.19 (12.50) 18.87 18.65
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in millions) 42 26 16 18 11
-------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions
(%) 1.90 1.90 1.98 1.99 1.95
-------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.89 1.90 1.98 1.99 1.95
-------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)(%) (1.34) (1.21) (1.03) (0.86) (0.23)
-------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 49 97 122 201 150
-------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS I
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $16.07 11.88 15.60 17.26 16.09
-------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02)(b) --(b) 0.05(b) 0.08 0.19
-------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions 4.16 4.25 (1.68) 2.61 2.74
-------------------------------------------------------------------------------------------------------
Total from investment operations 4.14 4.25 (1.63) 2.69 2.93
-------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- -- -- -- (0.08)
-------------------------------------------------------------------------------------------------------
Net realized gains on investment
transactions (1.76) (0.06) (2.09) (4.35) (1.68)
-------------------------------------------------------------------------------------------------------
Total distributions (1.76) (0.06) (2.09) (4.35) (1.76)
-------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.45 16.07 11.88 15.60 17.26
-------------------------------------------------------------------------------------------------------
TOTAL RETURN %(A) 25.81 35.82 (11.45) 20.51 20.19
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in millions) 23 19 21 27 36
-------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions
(%) 0.69 0.71 0.65 0.70 0.64
-------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 0.68 0.71 0.65 0.70 0.64
-------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)(%) (0.13) (0.02) 0.30 0.43 1.08
-------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 49 97 122 201 150
-------------------------------------------------------------------------------------------------------
</TABLE>
NOTES:
(a) Total return does not reflect the effect of sales charges.
(b) Based on monthly average shares outstanding during the period.
20
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1 SIGNIFICANT
ACCOUNTING POLICIES Kemper Growth Fund (the "Fund") is registered under
the Investment Company Act of 1940, as amended (the
"1940 Act"), as an open-end diversified management
investment company organized as a Massachusetts
business trust.
The Fund offers multiple classes of shares. Class A
shares are offered to investors subject to an
initial sales charge. Class B shares are offered
without an initial sales charge but are subject to
higher ongoing expenses than Class A shares and a
contingent deferred sales charge payable upon
certain redemptions. Class B shares automatically
convert to Class A shares six years after issuance.
Class C shares are offered without an initial sales
charge but are subject to higher ongoing expenses
than Class A shares and a contingent deferred sales
charge payable upon certain redemptions within one
year of purchase. Class C shares do not convert
into another class. Class I shares are offered to a
limited group of investors, are not subject to
initial or contingent deferred sales charges and
have lower ongoing expenses than the other classes.
Investment income, realized and unrealized gains
and losses, and certain fund-level expenses and
expense reductions, if any, are borne pro rata on
the basis of relative net assets by the holders of
all classes of shares except that each class bears
certain expenses unique to that class such as
distribution services, shareholder services,
administrative services and certain other class
specific expenses. Differences in class expenses
may result in payment of different per share
dividends by class. All shares of the Fund have
equal rights with respect to voting subject to
class specific arrangements.
The Fund's financial statements are prepared in
accordance with 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. Money market instruments
purchased with an original maturity of sixty days
or less are valued at amortized cost. All other
securities are valued at their fair value as
determined in good faith by the Valuation Committee
of the Board of Trustees.
REPURCHASE AGREEMENTS. The Fund may enter into
repurchase agreements with certain banks and
broker/dealers whereby the Fund, through its
custodian or sub-custodian bank, receives delivery
of the underlying securities, the amount of which
at the time of purchase and each subsequent
business day is required to
21
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS
be maintained at such a level that the market value
is equal to at least the principal amount of the
repurchase price plus accrued interest.
FEDERAL INCOME TAXES. The Fund's policy is to
comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to
regulated investment companies and to distribute
all of its taxable income to its shareholders.
Accordingly, the Fund paid no federal income taxes
and no federal income tax provision was required.
DISTRIBUTION OF INCOME AND GAINS. Distributions of
net investment income, if any, are made annually.
Net realized gains from investment transactions, in
excess of available capital loss carryforwards,
would be taxable to the Fund if not distributed,
and, therefore, will be distributed to shareholders
at least annually.
The timing and characterization of certain income
and capital gains distributions are determined
annually in accordance with federal tax regulations
which may differ from generally accepted accounting
principles. As a result, net investment income
(loss) and net realized gain (loss) on investment
transactions for a reporting period may differ
significantly from distributions during such
period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital
accounts without impacting the net asset value of
the Fund.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date. Interest income is recorded on
the accrual basis. Dividend income is recorded on
the ex-dividend date. Realized gains and losses
from investment transactions are recorded on an
identified cost basis. All discounts are accreted
for both tax and financial reporting purposes.
EXPENSES. Expenses arising in connection with a
specific Fund are allocated to that Fund. Other
Trust expenses are allocated between the Funds in
proportion to their relative net assets.
--------------------------------------------------------------------------------
2 PURCHASE & SALES OF
SECURITIES For the year ended September 30, 2000, investment
transactions (excluding short-term instruments) are
as follows:
Purchases $1,478,316,738
Proceeds from
sales 1,819,761,616
--------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The Fund has a management
agreement with Scudder Kemper Investments, Inc.
("Scudder Kemper") and pays a monthly investment
management fee of 1/12 of the annual rate of .58%
of the first $250 million of average daily net
assets declining to .42% of average daily net
assets in excess of $12.5 billion. For the year
ended September 30, 2000 the Fund incurred a
management fee of $16,908,574 which is equivalent
to an annualized effective rate of 0.54% of the
Fund's average daily net assets.
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 $260,764.
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
22
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS
to separate Rule 12b-1 plans for Class B and Class
C shares. Pursuant to the agreement, KDI enters
into related selling group agreements with various
firms at various rates for sales of Class B and
Class C shares. In addition, KDI receives any
contingent deferred sales charge ("CDSC") from
redemptions of Class B and Class C shares.
Distribution fees and CDSC received by KDI for the
year ended September 30, 2000 are $5,642,739, of
which $378,335 was unpaid at September 30, 2000.
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with KDI. For
providing information and administrative services
to Class A, Class B and Class C shareholders, the
Fund pays KDI a fee at an annual rate of up to .25%
of average daily net assets of each class. KDI in
turn has various agreements with financial services
firms that provide these services and pays these
firms based on assets of Fund accounts the firms
service. Administrative services fees paid by KDI
for the year ended September 30, 2000 were
$7,427,126, of which $825,194 was unpaid at
September 30, 2000. In addition $10,122 was paid by
KDI to affiliates.
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
Kemper Service Company ("KSvC") is the shareholder
service agent of the Fund. Under the agreement,
KSvC received shareholder services fees of
$5,949,090 for the year ended September 30, 2000,
of which $1,464,391 was unpaid at September 30,
2000.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. During the year ended September 30,
2000, the Fund made no payments to its officers and
incurred trustees' fees of $65,824 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 61,164,943 $ 1,139,176,816 45,110,454 $ 674,753,619
---------------------------------------------------------------------------------------
Class B 13,712,810 234,563,095 14,097,353 198,182,746
---------------------------------------------------------------------------------------
Class C 2,958,176 50,881,802 8,918,271 124,349,113
---------------------------------------------------------------------------------------
Class I 210,431 4,010,848 305,404 4,765,806
---------------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 11,868,295 212,324,191 545,912 7,903,899
---------------------------------------------------------------------------------------
Class B 3,199,374 52,725,667 187,669 2,548,546
---------------------------------------------------------------------------------------
Class C 174,377 2,910,274 7,235 99,269
---------------------------------------------------------------------------------------
Class I 112,562 2,054,263 6,762 99,332
---------------------------------------------------------------------------------------
SHARES REDEEMED
Class A (73,344,426) (1,367,359,637) (66,868,785) (1,009,461,661)
---------------------------------------------------------------------------------------
Class B (12,740,160) (217,089,786) (17,906,651) (254,201,670)
---------------------------------------------------------------------------------------
Class C (2,370,882) (40,278,747) (8,586,442) (120,182,177)
---------------------------------------------------------------------------------------
Class I (242,155) (4,632,380) (868,670) (13,492,914)
---------------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 5,755,552 $ 106,944,042 10,799,272 162,773,248
---------------------------------------------------------------------------------------
Class B (6,242,908) (106,944,042) (11,534,355) (162,773,248)
---------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
FROM CAPITAL SHARE TRANSACTIONS
$ 69,286,406 $ (384,636,092)
---------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
5 EXPENSE OFF-SET
ARRANGEMENTS The Fund has entered into arrangements with its
custodian and transfer agent whereby credits
realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's
expenses. During the period, the Fund's custodian
and transfer agent fees were reduced by $6,994 and
$211,670, respectively, under these arrangements.
--------------------------------------------------------------------------------
6 LINE OF CREDIT The Fund and several Kemper Funds (the "the
Participants") share in a $750 million revolving
credit facility with Chase Manhattan Bank for
temporary or emergency purposes, including the
meeting of redemptions requests that otherwise
might require the untimely disposition of
securities. The Participants are charged an annual
commitment fee which is allocated, pro rata based
upon net assets, among each of the Participants.
Interest is calculated based on the market rates at
the time of the borrowing. The Fund may borrow up
to a maximum of 33 percent of its net assets under
this agreement.
24
<PAGE> 25
TAX INFORMATION
TAX INFORMATION (UNAUDITED)
The Fund paid distributions of $1.76 per share from net long-term capital gains
during its year ended September 30, 2000, of which 100% represents 20% rate
gains.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$219,000,000 as capital gain dividends for its year ended September 30, 2000, of
which 100% represents 20% rate gains.
Please consult a tax advisor 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 1-800-621-1048.
25
<PAGE> 26
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER GROWTH FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper Growth Fund, as of September
30, 2000, and the related statements of operations for the year then ended,
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the fiscal periods since 1996. 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 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. 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 provide 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
Growth Fund at September 30, 2000, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the fiscal periods
since 1996, in conformity with accounting principles generally accepted in the
United States.
ERNST & YOUNG LLP
Chicago, Illinois
November 14, 2000
26
<PAGE> 27
NOTES
27
<PAGE> 28
TRUSTEES&OFFICERS
<TABLE>
<S> <C> <C>
TRUSTEES OFFICERS
JOHN W. BALLANTINE MARK S. CASADY WILLIAM F. TRUSCOTT
Trustee President Vice President
LEWIS A. BURNHAM PHILLIP J. COLLORA LINDA J. WONDRACK
Trustee Vice President Vice President
and Secretary
LINDA C. COUGHLIN MAUREEN E. KANE
Trustee JOHN R. HEBBLE Assistant Secretary
Treasurer
DONALD L. DUNAWAY CAROLINE PEARSON
Trustee VALERIE F. MALTER Assistant Secretary
Vice President
ROBERT B. HOFFMAN BRENDA LYONS
Trustee ANN M. MCCREARY Assistant Treasurer
Vice President
DONALD R. JONES
Trustee KATHRYN L. QUIRK
Vice President
THOMAS W. LITTAUER
Chairman, Trustee and
Vice President
SHIRLEY D. PETERSON
Trustee
WILLIAM P. SOMMERS
Trustee
</TABLE>
<TABLE>
<S> <C>
.............................................................................................
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
.............................................................................................
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 219557
Kansas City, MO 64121
.............................................................................................
CUSTODIAN STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, MA 02109
.............................................................................................
TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
801 Pennsylvania Avenue
Kansas City, MO 64105
.............................................................................................
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
.............................................................................................
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza
Chicago, IL 60606-5808
www.kemper.com
</TABLE>
[KEMPER FUNDS LOGO] Long-term investing in a short-term world(SM)
Printed on recycled paper in the U.S.A.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Equity Funds/Growth Style prospectus.
KGF - 2 (11/25/00) 1124110
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
