<PAGE> 1
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED OCTOBER 31, 1999
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
[MORNINGSTAR RATINGS LOGO]
SEEKING GROWTH OF CAPITAL
[KEMPER TECHNOLOGY FUND]
"... We're seeing tremendous innovations and applications for
today's technologies. Truly, our society is in the midst of a
period of unprecedented and dynamic growth. Technology
companies are leading us across an exciting new frontier.
..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
Economic Overview
5
Performance Update
10
Industry Sectors
11
Largest Holdings
12
Portfolio of Investments
16
Financial Statements
18
Notes to Financial Statements
22
Financial Highlights
24
Report of Independent Auditors
AT A GLANCE
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KEMPER TECHNOLOGY FUND
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED OCTOBER 31, 1999
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 94.71
CLASS B 92.59
CLASS C 92.68
LIPPER SCIENCE AND TECHNOLOGY FUNDS CATEGORY AVERAGE* 105.66
- --------------------------------------------------------------------------------
</TABLE>
RETURNS AND RANKINGS ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE, SO THAT SHARES WHEN
REDEEMED MAY BE WORTH MORE OR LESS THAN ORIGINAL COST.
*LIPPER ANALYTICAL SERVICES, INC. RETURNS AND RANKINGS ARE BASED UPON CHANGES
IN NET ASSET VALUE WITH ALL DIVIDENDS REINVESTED AND DO NOT INCLUDE THE EFFECT
OF SALES CHARGES; IF SALES CHARGE HAD BEEN INCLUDED, RESULTS MAY HAVE BEEN
LESS FAVORABLE.
INVESTMENT BY THE FUND IN EMERGING TECHNOLOGY COMPANIES PRESENTS GREATER RISK
THAN INVESTMENT IN MORE ESTABLISHED COMPANIES.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
10/31/99 10/31/98
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER TECHNOLOGY FUND
CLASS A $21.29 $11.77
- --------------------------------------------------------------------------------
KEMPER TECHNOLOGY FUND
CLASS B $19.62 $11.03
- --------------------------------------------------------------------------------
KEMPER TECHNOLOGY FUND
CLASS C $19.91 $11.17
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
KEMPER TECHNOLOGY FUND
RANKINGS AS OF 10/31/99
- --------------------------------------------------------------------------------
COMPARED WITH ALL OTHER FUNDS IN THE LIPPER SCIENCE AND TECHNOLOGY FUNDS
CATEGORY*
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1-YEAR #50 of 89 funds #52 of 89 funds #51 of 89 funds
- --------------------------------------------------------------------------------
5-YEAR #14 of 29 funds #19 of 29 funds #18 of 29 funds
.............................................................................
10-YEAR #9 of 12 funds N/A N/A
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15-YEAR #5 of 8 funds N/A N/A
- --------------------------------------------------------------------------------
20-YEAR #2 of 3 funds N/A N/A
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
DURING THE YEAR ENDED OCTOBER 31, 1999, KEMPER TECHNOLOGY FUND MADE THE
FOLLOWING DISTRIBUTIONS PER SHARE:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM CAPITAL GAIN $1.07 $1.07 $1.07
- --------------------------------------------------------------------------------
</TABLE>
TERMS TO KNOW
YOUR FUND'S STYLE
- --------------------------------------------------------------------------------
MORNINGSTAR EQUITY STYLE BOX
- --------------------------------------------------------------------------------
Source: Morningstar, Inc. Chicago, IL (312) 696-6000. The Morningstar Style Box
placement is based on two variables: a fund's market capitalization relative to
the movements of the market and a fund's valuation, which is calculated by
comparing the stocks in the fund's portfolio with the most 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 TECHNOLOGY
FUND IN THE SPECIALTY- TECHNOLOGY CATEGORY. PLEASE CONSULT THE PROSPECTUS FOR A
DESCRIPTION OF INVESTMENT POLICIES.
BALANCE SHEET A condensed financial statement showing what a company owns, what
it owes and the ownership interest in the company of its stockholders, at a
certain time.
VOLATILITY Characteristic of a security, commodity or market to rise or fall
sharply in price within a short period of time. A stock may be volatile due to
uncertainty in a company, industry, market or economy. Compared with many other
types of stocks, technology stocks are subject to a higher degree of volatility.
SEMICONDUCTOR The essential parts that make it possible to build small,
inexpensive electronic systems.
<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:
Markets have been aquiver about inflation risks. Growth in the United States
continues to exceed most expectations. Labor markets are visibly tight. These
are the precursors to inflation -- everybody knows it.
Everybody except us, that is. We don't buy it in principle, and reality is
proving our theory correct.
First, let's look at growth. The traditional economic view is that growth
causes inflation. Today, we're seeing exactly the opposite: Low inflation is
causing growth. Low inflation keeps interest rates down, and low interest rates
spur investment by making borrowing money cheap. Investment allows companies to
add capacity, keeping competition fierce. As a result, companies aren't raising
prices; they're competing for business by keeping goods attractive and prices
low. That's true for the old economy, in which consumers were buying t-shirts,
and the new economy, in which consumers are buying Internet services. Everywhere
they look, consumers see bargains -- in the malls, in the auto showrooms, at the
mortgage companies.
As for tight labor markets, the traditional economic view is that tight
labor -- i.e., many "help-wanted" signs -- forces companies to pay a premium for
talent. That, in turn, forces companies to raise their prices in order to
protect their profits. And raising prices results in inflation. In contrast, we
believe that tight labor markets won't cause wages to surge. Why?
To start with, temporary agencies have proliferated, accounting for 2.2
percent of jobs, up from 0.5 percent in the early 1980s. They get just the right
amount and type of labor to the right spot at the right time to get the job
done.
Immigration also keeps a lid on wage rates, since it replenishes the work
force much faster than births. Immigration is at its highest level ever; an
amazing 10 percent of the population is foreign-born. Nearly 1 million people
enter the United States legally each year, and another 300,000 just show up.
When they get here, they look for jobs. And often, they're willing to accept
lower-paying jobs than the average citizen.
Finally, and perhaps most importantly, wage rates are kept in check by
executives' intense profit focus. Payroll is a company's biggest expense. When
payroll skyrockets, profits decline -- and that would be bad for a CEO who
promised Wall Street double-digit earnings growth from now to the end of time.
If investors are disappointed in earnings growth, they sell their stock. And
when they sell their stock, the stock options that are an essential part of many
executives' compensation are as valuable as scrap paper.
Supporting our theory are two distinct and important sets of data released
in late October: The Bureau of Economic Analysis released its third-quarter
estimate of gross domestic product (GDP), the value of all goods and services
produced in the United States, and the Bureau of Labor Statistics released its
employment cost index (ECI), which measures what employers pay for their
workers' wages, salaries and benefits.
GDP grew at a 4.8 percent rate in the third quarter, up sharply from the
revised 1.9 percent second-quarter pace and just slightly above the consensus
estimate of 4.7 percent.
At the same time, however, the ECI rose by 0.8 percent in the July-September
period, down from a 1.1 percent increase in the second quarter. The
third-quarter gain also was lower than the 0.9 percent increase forecast by
economists in a Reuters poll. (The report, by the way, is said to be one of the
favorites of Federal Reserve Chairman Alan Greenspan, who uses it as a key
indicator of inflation pressures in the world's largest economy.)
In essence, then, the U.S. economy posted its strongest growth so far this
year in the third quarter, while wage costs remained tame. The combination of
strong consumer demand and the lowest unemployment in a generation just isn't
igniting wage-driven inflation.
Nevertheless, the Federal Reserve Board raised the federal funds rate and
the discount rate by one quarter of a point (0.25%) each at its Nov. 16 meeting.
Do we think the Fed made a bad decision? Actually, no.
First, the Fed has to guard against the possibility that the old
relationship between growth and inflation will soon reassert itself. Even if the
Fed shared our belief that
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 (11/30/99) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
-------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate(1) 6.00 5.50 4.80 5.90
Prime rate(2) 8.50 7.75 8.00 8.50
Inflation rate(3)* 2.60 2.30 1.50 2.00
The U.S. dollar(4) -0.7 -0.9 1.20 9.40
Capital goods orders(5)* 12.60 2.50 -0.6 6.40
Industrial production(5)* 3.30 2.90 3.50 6.90
Employment growth(6)* 2.10 2.10 2.30 2.70
</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 10/30/99.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
strong consumer demand and low unemployment isn't igniting wage-driven
inflation, the organization wouldn't be doing its job if it didn't act in the
face of any possibility that inflation might reassert itself.
More important, the Fed has to be concerned about the explosion in credit
we've seen during the last year. Almost everyone but Uncle Sam has been loading
up on debt. Companies have borrowed heavily to fund mergers, share buybacks and
new investments. Homeowners have taken out bigger mortgages on their houses and
new home equity loans. Equity shareholders have ramped up their margin debt.
Financial institutions have issued record amounts of new paper to fund their
aggressive growth. The Fed's decision to raise interest rates, thereby making
borrowing costlier, should take the frenzy out of this borrowing binge. That is
a good thing for future financial stability.
Indeed, the early positive market reaction to the Fed's move suggests that
the markets share our views that the Fed made the right decision.
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
Scudder Kemper Investments Economics Group
The information contained in this piece has been taken from sources believed to
be reliable, but the accuracy of the information is not guaranteed. the opinions
and forecasts expressed are those of the economic advisors of Scudder Kemper
Investments, Inc. as of November 18, 1999, and may not actually come to pass.
this information is subject to change. no part of this material is intended as
an investment recommendation.
To obtain a Kemper Funds prospectus, download one from www.kemper.com, talk to
your financial representative or call Shareholder Services at (800) 621-1048.
The prospectus contains more complete information, including management fees and
expenses. Please read it carefully before you invest or send money.
4
<PAGE> 5
PERFORMANCE UPDATE
[BURKART PHOTO]
JIM BURKART IS LEAD PORTFOLIO MANAGER OF KEMPER TECHNOLOGY FUND. HE IS A VICE
PRESIDENT OF SCUDDER KEMPER INVESTMENTS AND A MEMBER OF THE FIRM'S GLOBAL EQUITY
GROUP. LEADING A TEAM OF FIVE PORTFOLIO MANAGERS, BURKART BRINGS MORE THAN 25
YEARS OF INVESTMENT INDUSTRY EXPERIENCE TO THE FUND.
BURKART'S TEAM DRAWS ON THE RESOURCES OF SCUDDER KEMPER INVESTMENTS' LARGE STAFF
OF ANALYSTS, RESEARCHERS, TRADERS AND ECONOMISTS.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
THE EXPLOSIVE GROWTH OF THE INTERNET AND ELECTRONIC COMMERCE PROPELLED
TECHNOLOGY STOCKS TO NEW HEIGHTS DURING THE ANNUAL PERIOD. LEAD PORTFOLIO
MANAGER JIM BURKART PROVIDES AN ANALYSIS OF THIS EXCITING BUT VOLATILE MARKET
CLIMATE. HE ALSO HIGHLIGHTS THE FACTORS THAT DROVE KEMPER TECHNOLOGY FUND'S
GAINS FOR THE ONE-YEAR PERIOD AND PROVIDES A HISTORICAL CONTEXT FOR RECENT
PERFORMANCE.
Q FOR THE ONE-YEAR PERIOD ENDING OCTOBER 31, 1999, KEMPER TECHNOLOGY FUND
EARNED 94.71 PERCENT (CLASS A SHARES, UNADJUSTED FOR ANY SALES CHARGES). COULD
YOU PUT THIS RETURN INTO CONTEXT FOR US?
A Technology stocks are known for their powerful ups and downs. This year,
technology-stock investors enjoyed a tremendous up. For instance, the Hambrecht
& Quist Technology index gained 96.28% percent for the one-year period. The fund
also earned an outstanding return for the one-year period. We are certainly very
pleased to report to shareholders that their investment in the fund has returned
more than three and a half times as much as the Standard & Poor's 500 index.
While we don't want to rain on the parade, we do encourage a longer-term
perspective -- even in good times like these. Shareholders should remember that
this most recent fiscal year has been exceptionally strong, both for Kemper
Technology Fund and for the technology sector overall. Let's consider
longer-term historical trends. For instance, for the 10-year period, the fund
has earned an average annualized return of 22.22 percent, while the Hambrecht &
Quist Technology index has posted an average annualized gain of 27.16 percent.
Those are still very solid gains, though not in the same ballpark as the
shorter-term figures. And much higher than the historical averages we have in
the overall market.
Q BEFORE YOU DISCUSS THE FUND'S PERFORMANCE IN GREATER DETAIL, COULD YOU
PROVIDE US WITH AN OVERVIEW OF THE MARKET CLIMATE?
A When we began the fiscal year in November 1998, investors were returning
to technology companies with renewed enthusiasm. This resurgence had been a long
time coming. Battered by the Asian economic turmoil in 1997, technology stocks
had languished throughout much of 1998. By autumn of 1998, many of the demand
problems were abating, however. What's more, many technology stocks were trading
at attractive valuations, further bolstering their appeal. These factors, along
with excitement about the Internet, unleashed a dramatic rally in technology
stocks.
These gains were earned against a backdrop of considerable volatility.
While the technology sector rebounded briskly during the final months of 1998
and the first months of 1999, a sharp downturn in February cast a chill across
the sector. The climate improved in March, only to slow markedly in April and
May. Similarly, strong gains in June were followed by sluggish performance for
the remainder of the summer and early fall.
5
<PAGE> 6
PERFORMANCE UPDATE
The fiscal year ended on a bright note for technology investors, and the
traditional October turmoil was kept at bay. All in all, the past year
demonstrated that despite the high potential returns, technology stocks are not
for the faint of heart.
In addition to the dynamic expansion of the Internet, two other important
factors shaped the market during the fiscal year. First, we saw a new breed of
investor enter the technology arena en masse: the "day trader." Often trading
over the Internet and typically favoring fledgling technology stocks, these
novice investors played a role in creating a speculative and volatile market
climate. Second, uncertainty about the potential impact of the Year 2000
computer glitch has cast a shadow throughout the whole market, and over
technology stocks in particular.
Q GIVEN THE VOLATILITY OF THE TECHNOLOGY SECTOR, WHAT FACTORS DO YOU
CONSIDER WHEN CHOOSING STOCKS?
A When it comes to technology stocks, there can be plenty of buzz. Our job
is to look beyond the trends and the noise, and instead seek quality companies
that have the ability to generate sustainable, powerful growth. Using rigorous,
proprietary research, we target companies with:
- - Sustainable, above-average earnings-per-share momentum
- - Large, growing markets for their products or services
- - Innovative management and products
- - Excellent balance sheets
Simply put, our goal is to invest in companies that offer quality, innovation
and the ability to lead the technology revolution into the next decade. This has
led us to invest primarily in large-cap, domestic technology companies. However,
innovative companies come in all sizes, and the fund is not invested exclusively
in large companies. The portfolio also includes stocks of some smaller, less
well-known companies. Of course, regardless of company size, we require
high-quality fundamentals and earnings-growth potential.
Q UNLIKE SOME FUNDS THAT CONFINE THEMSELVES TO A NARROWER SEGMENT OF THE
TECHNOLOGY SECTOR, SUCH AS THE INTERNET OR ELECTRONICS, KEMPER TECHNOLOGY FUND
IS A DIVERSIFIED TECHNOLOGY FUND, INVESTING THROUGHOUT THE TECHNOLOGY SECTOR.
WHAT ARE THE POTENTIAL BENEFITS OF A DIVERSIFIED APPROACH?
A Diversification offers two potential benefits. First, we have the
flexibility to invest where we believe the opportunities are brightest. Second,
diversification is a well-recognized strategy for managing overall portfolio
risk. Diversification means that you put your eggs in more than one basket. So,
if one area of the technology sector falters, other areas may be able to offset
the declines.
Of course, keep in mind that even though Kemper Technology Fund follows a
diversified approach, the fund still concentrates its investments in the
technology sector. This sort of concentration entails a higher level of risk
than a fund that invests across many sectors.
Q WHAT WORKED PARTICULARLY WELL FOR THE FUND?
A While we enjoyed strong performance from most of our stocks,
semiconductors and component-based technology companies provided an especially
strong pocket of performance. These companies produce computer chips: the
building blocks for cellular and wireless telecommunications, computers,
calculators and a host of other goods. Top-performing semiconductor stocks
included Xilinx, Texas Instruments, Applied Materials, Linear Technology and
Motorola.
Data-communications and telecommunications companies also tallied excellent
returns. In this area, Lucent Technologies, Tellabs, Nortel Networks and Cisco
Systems provided top-notch gains. All provided profitable exposure to the
build-out of the Internet's infrastructure, demonstrating that the growth of the
Internet is about more than ".com" stocks.
Despite some bumps along the way, America Online contributed an outstanding
gain for the annual period. While our focus on quality, established companies
limited our participation in pure-play Internet stocks during much of the year,
we have backed America Online with conviction throughout the period. In fact,
we've held it since 1997, before its meteoric rise. Thanks in large
TECHNOLOGY FUNDS: WHAT EVERY INVESTOR SHOULD KNOW
Ups and downs are par for the course when it comes to technology stocks.
That's why an investment in technology stocks is a long-term proposition.
Kemper Technology Fund is designed for investors who are comfortable with the
price fluctuations associated with more aggressive investments. Concentration
of investments in the technology sector, as well as exposure to emerging
companies, presents greater risk than investments in a more diversified fund.
6
<PAGE> 7
PERFORMANCE UPDATE
part to capital appreciation, America Online was the fund's largest holding
during portions of the year. While America Online remains among our current
top-10 holdings, we've since reduced our exposure to avoid having too many eggs
in one basket.
Q DESPITE THE FUND'S VERY STRONG FISCAL-YEAR GAIN, WERE THERE FACTORS THAT
HINDERED PERFORMANCE?
A While their returns were often still good in absolute terms, several
computer-hardware stocks fell far behind the pack. These companies produce items
such as personal computers and larger mainframe computers for businesses. Dell
Computer, International Business Machines (IBM) and Hewlett-Packard all faded as
the fiscal year progressed. These companies suffered as a result of fluctuating
spending patterns triggered by year 2000 issues. In an effort to build year
2000-resilient systems, many corporations spent a great deal to upgrade their
computer hardware during the first half of 1999. These uncharacteristically high
levels of spending have tapered down, however.
Seagate Technology also generated a lackluster return. Seagate is a leading
provider of computer memory storage and retrieval devices, such as hard-disk
drives. Oversupply and limited demand has hindered Seagate's ability to sell its
products at good prices.
In more general terms, we lagged some of our more aggressive peers,
particularly during the first half of the annual period. Because we place a high
premium on quality fundamentals and solid business models, we were more cautious
about many of the untested ".com" companies than were some other technology
funds. We felt it was more prudent to give these Internet companies a chance to
show their true colors. We're glad we waited. In even a few short months, a much
clearer picture is emerging. We believe we can better discern which companies
have the greatest potential to dominate, and which companies will likely be more
buzz than substance.
Q COULD YOU PROVIDE US WITH AN OVERVIEW OF HOW YOU'VE POSITIONED THE
PORTFOLIO? WHAT AREAS HOLD THE GREATEST APPEAL?
A We remain very optimistic about semiconductor companies, which currently
enjoy the largest representation in the portfolio. As we noted, these companies
produce the building blocks of today's technologies.
Internet-infrastructure companies are another important theme in the
portfolio. We're investing in the Internet/e-commerce revolution in a variety of
ways. For instance, the fund holds a strong contingent of Internet-oriented
software companies, including Vignette, BroadVision, I2 Technologies and Mercury
Interactive. These companies have produced innovative products that allow
customers to manage Internet traffic and create electronic-commerce strategies.
Oracle, a leading developer of database software, is also well positioned to
profit from the growth of the Internet. Software giant Microsoft -- currently
the fund's largest holding -- also provides a well-designed group of Internet
services, as well as a very popular Internet-access engine. While this
technology powerhouse has faced judicial woes, we're still very positive about
its strong product line.
We've increased our exposure to quality, pure-play Internet companies. In
addition to America Online, the portfolio includes Yahoo!, Amazon.com and eBay.
America Online is the preeminent Internet service provider, with a dominant
market position and a strong, forward-looking business plan. As the second
largest Internet-portal company, Yahoo! also captures a wide audience. Because
Yahoo! and America Online control such a large customer base, they can attract
significant advertising revenue.
Among the newer kids on the block, Amazon.com and eBay have already
distinguished themselves from the pack. Both have attracted loyal and growing
audiences, and they both have innovative business strategies and management.
We're also keen on companies that we believe will benefit from the end of the
year 2000 lockdown. Our analysis suggests that many corporations have deferred
software expenditures until year 2000 concerns abate. We feel that software
firms such as SAP, Rational Software and Microsoft could all benefit after the
spending freeze is lifted.
Q HOW COULD YEAR 2000 AFFECT TECHNOLOGY COMPANIES?
A Well, no one can predict the future, and the impact of year 2000 is no
exception. For instance, we can't be certain how corporate spending trends will
play out in the first half of 2000. If companies have stockpiled various
technology products (such as personal computers, semiconductors and other
components) in 1999, there could be a drop-off in some areas of spending next
year. But other areas could benefit after the year 2000 hurdle has been cleared.
Many companies have gone into a "lockdown" mode. In lockdown mode, companies
freeze any additions or changes to
7
<PAGE> 8
PERFORMANCE UPDATE
their technology infrastructures in an effort to avoid introducing potential
year 2000 glitches into their systems. When the lockdown ends, companies could
begin the projects they deferred. Our analysis indicates that software companies
could be prime post-lockdown beneficiaries.
Q IN THE PREVIOUS SEMIANNUAL REPORT, YOU EXPRESSED OPTIMISM ABOUT THE
CONTINUED GROWTH POTENTIAL OF LARGE-CAPITALIZATION TECHNOLOGY COMPANIES. IS YOUR
OUTLOOK SIMILARLY POSITIVE TODAY?
A Yes, we remain optimistic about large technology companies. First, as
we've noted in previous reports, the leading large-cap domestic technology
companies have demonstrated impressive entrepreneurial vision, as well as the
willingness to make their products more convenient and affordable. Also, there
is no indication that these companies are resting on their laurels.
In fact, the pool of attractive opportunities is broadening. Recently, we've
seen smaller and mid-cap technology companies build momentum, thanks in part to
a strong macroeconomic climate. What's more, these smaller companies often carry
lower price tags than their more richly valued large-cap counterparts. We've
found several opportunities to add smaller companies to the portfolio, and we
anticipate increasing our exposure in the future.
Q AS WE ENTER THE NEW FISCAL YEAR, WHAT'S YOUR OUTLOOK FOR TECHNOLOGY
STOCKS?
A We're looking forward to the next year. While no one can predict with
certainty what the future will bring, many factors bode well for the technology
sector. Excluding the possibility of additional interest-rate increases, the
U.S. economy appears to be on track. Corporate profits are growing at a steady,
above-average rate. Because many technology companies have international
exposure through their supply/ demand relationships, we need to look beyond the
United States and consider the global economic climate. Here, too, we find cause
for continued optimism. After facing an inhospitable, recessionary climate in
1998 and early 1999, the Asian economies are enjoying a recovery. Europe is also
picking up steam.
Additionally, the period from November to April is typically robust for
technology companies. During the holiday season, consumers traditionally
increase their purchases of such items as cell phones, VCRs, televisions and
video games. Corporations often spend more on infrastructure upgrades during the
last several months of a calendar year.
But perhaps most important, the Internet revolution shows no signs of losing
steam. Both consumers and business have embraced the Internet and electronic
commerce. Every week, we're seeing tremendous innovations and applications for
today's technologies. Truly, our society is in the midst of a period of
unprecedented and dynamic growth. Technology companies are leading us across an
exciting new frontier.
8
<PAGE> 9
PERFORMANCE UPDATE
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
For periods ended October 31, 1999 (adjusted for the maximum sales charge)
<TABLE>
<CAPTION>
1-YEAR 5-YEAR 10-YEAR LIFE OF CLASS
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
KEMPER TECHNOLOGY FUND CLASS A 83.48% 29.87% 21.50% 14.27% (since 9/7/48)
- --------------------------------------------------------------------------------------------------
KEMPER TECHNOLOGY FUND CLASS B 89.59 30.00 N/A 30.63 (since 5/31/94)
- --------------------------------------------------------------------------------------------------
KEMPER TECHNOLOGY FUND CLASS C 92.68 30.31 N/A 30.91 (since 5/31/94)
- --------------------------------------------------------------------------------------------------
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER TECHNOLOGY FUND CLASS A
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Class A shares from 1/31/88 to
10/31/99
<TABLE>
<CAPTION>
KEMPER TECHNOLOGY RUSSELL 1000 GROWTH STANDARD & POOR'S HAMBRECHT & QUIST
FUND CLASS A1 INDEX+ 500 STOCK INDEX++ INDEX+++
----------------- ------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
1/31/88 9427 10000 10000 10000
9794 10998 10803 9390
12224 14949 13747 10070
12278 14910 12846 8946
12/31/91 17723 21048 16225 13003
17513 22101 16949 15433
19560 22742 18145 18120
21781 23346 17866 21766
12/31/95 31096 32028 23960 32950
37502 39433 28815 40952
40170 51455 37750 48007
57680 71371 47817 74681
10/31/99 86601 81671 53018 112587
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER TECHNOLOGY FUND CLASS B
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Class B shares from 5/31/94 to
10/31/99
<TABLE>
<CAPTION>
KEMPER TECHNOLOGY RUSSELL 1000 GROWTH STANDARD & POOR'S HAMBRECHT & QUIST
FUND CLASS B1 INDEX+ 500 STOCK INDEX++ INDEX+++
----------------- ------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
5/31/94 10000 10000 10000 10000
11276 10529 10061 11891
12/31/95 15924 14444 13492 18001
18993 17784 16227 22373
12/31/97 20165 23206 21258 26227
28668 32188 26927 40800
10/31/99 42566 36834 29856 61509
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER TECHNOLOGY FUND CLASS C
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Class C shares from 5/31/94 to
10/31/99
<TABLE>
<CAPTION>
KEMPER TECHNOLOGY RUSSELL 1000 GROWTH STANDARD & POOR'S HAMBRECHT & QUIST
FUND CLASS C1 INDEX+ 500 STOCK INDEX++ INDEX+++
----------------- ------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
5/31/94 10000 10000 10000 10000
11286 10529 10061 11891
12/31/95 16004 14444 13492 18001
19101 17784 16227 22373
12/31/97 20269 23206 21258 26227
28941 32188 26927 40800
10/31/99 43064 36834 29856 61509
</TABLE>
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURNS AND
PRINCIPAL VALUE WILL FLUCTUATE, SO THAT SHARES WHEN REDEEMED MAY BE WORTH MORE
OR LESS THAN ORIGINAL COST.
* AVERAGE ANNUAL TOTAL RETURN AND TOTAL RETURN MEASURES 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%, AND FOR CLASS B SHARES, ADJUSTMENT FOR THE APPLICABLE
CONTINGENT DEFERRED SALES CHARGE (CDSC). THE MAXIMUM CDSC FOR CLASS B SHARES
IS 4%. CLASS C SHARES HAVE NO SALES CHARGE ADJUSTMENT. 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 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 HAMBRECHT
& QUIST INDEX IS JANUARY 1, 1988. AS A RESULT, WE ARE NOT ABLE TO ILLUSTRATE
THE LIFE-OF-FUND PERFORMANCE (SINCE SEPTEMBER 7, 1948) FOR KEMPER TECHNOLOGY
FUND CLASS A SHARES. IN COMPARING THE FUND WITH THE RUSSELL 1000 GROWTH
INDEX AND THE STANDARD & POOR'S 500 STOCK INDEX, 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. BEGINNING WITH THE
NEXT ANNUAL REPORT, THE HAMBRECHT & QUIST INDEX, A MORE REPRESENTATIVE INDEX
FOR THE FUND, WILL BE SHOWN INSTEAD OF THE RUSSELL 1000 GROWTH INDEX.
+ THE RUSSELL 1000 GROWTH INDEX IS AN UNMANAGED INDEX COMPRISING 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.
++ THE STANDARD & POOR'S 500 STOCK INDEX IS AN UNMANAGED INDEX GENERALLY
REPRESENTATIVE OF THE U.S. STOCK MARKET. SOURCE IS WIESENBERGER.
+++ HAMBRECHT & QUIST INDEX IS COMPOSED OF APPROXIMATELY 275 TECHNOLOGY STOCKS,
SELECTED AS REPRESENTATIVE OF THE OVERALL TECHNOLOGY SECTOR. THE INDEX
INCLUDES COMPANIES FROM FIVE TECHNOLOGY GROUPS: COMPUTER HARDWARE, COMPUTER
SOFTWARE, COMMUNICATIONS, SEMICONDUCTORS AND INFORMATION SERVICES. SOURCE IS
HAMBRECHT & QUIST.
9
<PAGE> 10
INDUSTRY SECTORS
A YEAR-TO-YEAR COMPARISON
Data show the percentage of the common stocks in the portfolio that each sector
represented on October 31, 1999, and on October 31, 1998.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER TECHNOLOGY FUND ON KEMPER TECHNOLOGY FUND ON
10/31/99 10/31/98
<S> <C> <C>
Systems, software & services 48.40 45.70
Electronic parts 24.70 21.20
Other 18.40 0.00
Communications 7.80 18.40
Industrial technology/miscellaneous 0.70 1.70
Personal computing 0.00 8.70
Life sciences 0.00 4.30
</TABLE>
10
<PAGE> 11
LARGEST HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS*
Representing 32.5 percent of the fund's total common stock holdings on October
31, 1999
<TABLE>
<CAPTION>
HOLDINGS PERCENT
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------
1. MICROSOFT Develops, markets and supports a 4.1%
variety of software, operating
systems, language and application
programs.
- --------------------------------------------------------------------------------------
2. AMERICA ONLINE Global leader in consumer on-line 3.9%
services, including Internet
access, E-mail, software and
computer support.
- --------------------------------------------------------------------------------------
3. CISCO SYSTEMS Large, comprehensive supplier of 3.7%
routing software and related
systems that direct the flow of
data between local networks.
- --------------------------------------------------------------------------------------
4. MOTOROLA Manufactures components, notably 3.7%
semiconductors, and electronic
communications equipment.
- --------------------------------------------------------------------------------------
5. XILINX Designs, develops and markets 3.4%
computer circuits and software
design tools, and provides field
engineering support.
- --------------------------------------------------------------------------------------
6. TEXAS INSTRUMENTS A leading manufacturer of a 2.9%
variety of products, including
semiconductors, defense electronic
systems, software productivity
tools, computer and peripheral
products, and consumer products.
Texas Instruments is the leading
supplier of semiconductors to the
wireless communications industry.
- --------------------------------------------------------------------------------------
7. SUN MICROSYSTEMS A provider of high-performance 2.9%
workstations, servers and
networking software for the
engineering, scientific,
commercial and technical
industries.
- --------------------------------------------------------------------------------------
8. APPLIED MATERIALS Develops, manufactures and markets 2.9%
equipment used in the production
of semiconductors.
- --------------------------------------------------------------------------------------
9. ORACLE A leading global provider of 2.6%
database management software.
- --------------------------------------------------------------------------------------
10. INTEL Engaged in the design, 2.4%
development, manufacture and sale
of advanced semiconductors and
integrated circuits.
- --------------------------------------------------------------------------------------
</TABLE>
*Portfolio composition and holdings are subject to change.
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
KEMPER TECHNOLOGY FUND
PORTFOLIO OF INVESTMENTS AT OCTOBER 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--94.5% NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HEALTH--.7%
BIOTECHNOLOGY--.3%
(b) Genentech, Inc. 47,800 $ 6,967
---------------------------------------------------------------------------
MEDICAL SUPPLY & SPECIALTY--.4%
(b) ArthroCare Corp. 14,579 1,057
Biomet Inc. 300,000 9,037
FPA Medical Mgmt, Inc. 6,935 0
(a)(b) Survivalink Corp. 150,000 450
(a)(b) Survivalink Corp., Warrants expiring 110,000 495
2001
(b) Trex Medical Corp. 60,000 180
---------------------------------------------------------------------------
11,219
PHARMACEUTICALS--0.0%
(b) Pharmos Corp. 411,349 488
---------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS--5.4%
CELLULAR TELEPHONE--.8%
Nokia Oy "A" (ADR) 200,000 23,112
---------------------------------------------------------------------------
TELEPHONE/ COMMUNICATIONS--4.6%
(b) Allied Riser Communications Corp. 200,900 3,629
(b) Global Crossing Ltd. 2,500 86
(b) ICG Communications, Inc. 7,270 119
(b) Inet Technologies, Inc. 231,500 8,855
(b) JDS Uniphase Corp. 270,000 45,056
(b) MCI WorldCom, Inc. 209,000 17,935
(b) McLeodUSA Inc. "A" 200,000 8,925
Nortel Networks Corp. 600,000 37,162
(b) Time Warner Telecom Inc. "A" 110,400 2,781
(b) Triton PCS Holdings, Inc. "A" 74,000 2,608
---------------------------------------------------------------------------
127,156
- -------------------------------------------------------------------------------------------------------------------------
FINANCIAL--1.5%
CONSUMER FINANCE--0.0%
(b) Onyx Acceptance Corp. 14,905 102
---------------------------------------------------------------------------
OTHER FINANCIAL COMPANIES--1.5%
(a)(b) Adams Capital Management, L.P., 3.6% -- 1,623
limited partnership interest
(a)(b) Asset Management Association 1996, L.P., -- 2,466
2.5% limited partnership interest
(a)(b) Asset Management Association 1998, L.P., -- 1,201
3.5% limited partnership interest
(a)(b) Crosspoint Venture Partners 1993, -- 26,143
L.P., 3.1% limited partnership
interest
(a)(b) GeoCapital III. L.P., 5.0% limited -- 726
partnership interest
(a)(b) GeoCapital IV, L.P., 2.9% limited -- 3,411
partnership interest
(a)(b) Med Venture Associates II, L.P., 6.1% -- 1,437
limited partnership interest
(a)(b) Med Venture Associates III, L.P., 2.7% -- 504
limited partnership interest
(a)(b) Sevin Rosen Fund V, L.P., 2.8% limited -- 3,418
partnership interest
---------------------------------------------------------------------------
40,929
- -------------------------------------------------------------------------------------------------------------------------
MEDIA--1.8%
ADVERTISING--.6%
(b) DoubleClick, Inc. 114,840 16,078
---------------------------------------------------------------------------
BROADCASTING & ENTERTAINMENT--.1%
(b) MP3.com, Inc. 33,800 1,639
---------------------------------------------------------------------------
CABLE TELEVISION--1.1%
(b) AT&T Corp -- Liberty Media Group 600,000 23,812
(b) Insight Communications Co., Inc. 316,800 7,484
---------------------------------------------------------------------------
31,296
</TABLE>
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SERVICE INDUSTRIES--8.5%
EDP SERVICES--4.4%
(b) Concord Communications,Inc. 130,000 $ 6,752
Electronic Data Systems Corp. 900,000 52,650
First Data Corp. 820,000 37,464
(b) PSINet, Inc. 250,000 9,000
(b) VeriSign, Inc. 135,800 16,771
---------------------------------------------------------------------------
122,637
MISCELLANEOUS COMMERCIAL--.8%
(b) Internap Network Services Corp. 34,200 3,159
(b) Siebel Systems, Inc. 100,000 10,981
(b) Whittman-Hart, Inc. 250,000 9,609
---------------------------------------------------------------------------
23,749
MISCELLANEOUS CONSUMER--3.3%
(b) Akamai Technologies, Inc. 28,300 4,109
(b) At Home Corp. "A" 150,000 5,606
(b) Autoweb.com, Inc. 28,791 246
(b) Yahoo! Inc. 300,000 53,719
(b) eBay, Inc. 200,000 27,025
---------------------------------------------------------------------------
90,705
- -------------------------------------------------------------------------------------------------------------------------
DURABLES--3.7%
TELECOMMUNICATIONS EQUIPMENT--3.7%
(b) Com21, Inc. 28,824 382
Lucent Technologies, Inc. 855,000 54,934
(b) Newbridge Networks Corp. 100,000 1,975
(b) Tellabs, Inc. 700,000 44,275
---------------------------------------------------------------------------
101,566
- -------------------------------------------------------------------------------------------------------------------------
MANUFACTURING--3.2%
INDUSTRIAL SPECIALTY--2.1%
Corning, Inc. 300,000 23,587
(b) QUALCOMM Inc. 150,000 33,412
---------------------------------------------------------------------------
56,999
OFFICE EQUIPMENT/SUPPLIES--1.1%
(b) Lexmark International Group Inc. "A" 400,000 31,225
---------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--69.7%
COMPUTER SOFTWARE--23.1%
(b) Advanced Digital Information Corp. 500,000 18,625
(b) America Online Inc. 800,000 103,750
(b) Art Technology Group, Inc. 50,000 2,700
(b) BEA Systems, Inc. 300,000 13,687
(b) BMC Software Inc. 100,000 6,419
(b) Broadvision, Inc. 150,000 10,950
(b) Brocade Communications Systems, Inc. 32,349 8,702
(b) Digex, Inc. 110,500 3,163
(b) Electronic Arts Inc. 750,000 60,609
(b) Entrust Technologies Inc. 50,000 1,256
(b) I2 Technologies Inc. 275,100 21,716
(b) Inktomi Corp. 100,000 10,144
(b) Intertrust Technologies Corp. 14,800 807
(b) Intuit Inc. 1,530,000 44,561
(b) Legato Systems, Inc. 270,000 14,512
(b) Macromedia, Inc. 200,500 12,920
(b) Microsoft Corp. 1,150,000 106,447
(b) NVIDIA Corp. 100,000 2,212
(b) Oracle Systems Corp. 1,450,000 68,966
(b) Parametric Technology Corp. 819,176 15,616
(b) Rational Software Corp. 300,000 12,825
(b) RealNetworks, Inc. 100,000 10,969
SAP AG (Sponsored ADR) 1,000,000 36,563
(b) Sycamore Networks, Inc. 50,900 10,944
(b) Synopsys Ltd. 375,000 23,367
(b) Vignette Corp. 74,600 11,787
(b) Wind River Systems 400,000 8,150
---------------------------------------------------------------------------
642,367
</TABLE>
13
<PAGE> 14
(DOLLARS IN THOUSANDS)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DIVERSE ELECTRONIC PRODUCTS--11.1%
(b) Applied Materials, Inc. 840,000 $ 75,443
(b) Dell Computer Corp. 1,040,000 41,730
(b) KLA Tencor Corp. 420,000 33,259
Motorola, Inc. 1,000,000 97,438
(b) Solectron Corp. 670,000 50,418
(b) Teradyne, Inc. 300,000 11,550
---------------------------------------------------------------------------
309,838
EDP PERIPHERALS--4.8%
(b) EMC Corp. 600,000 43,800
(b) Mercury Interactive Corp. 500,000 40,563
(b) Seagate Technology, Inc. 500,800 14,742
(b) VERITAS Software Corp. 320,000 34,520
---------------------------------------------------------------------------
133,625
ELECTRONIC COMPONENTS/
DISTRIBUTORS--7.4%
(b) Broadcom Corp. 150,000 19,172
(b) Cisco Systems, Inc. 1,335,429 98,822
(b) Gateway Inc. 400,000 26,425
(b) Juniper Networks, Inc. 99,300 27,370
Molex Inc. "A" 725,000 23,925
(b) SCI Systems, Inc. 200,000 9,875
---------------------------------------------------------------------------
205,589
ELECTRONIC DATA PROCESSING--4.4%
Compaq Computer Corp. 263,600 5,008
Hewlett-Packard Co. 205,000 15,183
International Business Machines Corp. 270,000 26,561
(b) Sun Microsystems, Inc. 714,400 75,592
---------------------------------------------------------------------------
122,344
OFFICE/PLANT AUTOMATION--.7%
(b) Metrika Systems Corp. 66,666 398
(b) Novell Inc. 960,000 19,260
---------------------------------------------------------------------------
19,658
SEMICONDUCTORS--18.2%
(b) Burr-Brown Corp. 105,000 4,128
(b) Conexant Systems, Inc. 202,000 18,862
(b) DuPont Photomasks, Inc. 100,000 4,950
Intel Corp. 801,400 62,058
Linear Technology Corp. 600,000 41,963
(b) Maxim Integrated Products Inc. 550,000 43,416
(b) Micron Technology Inc. 750,000 53,484
(b) PMC-Sierra, Inc. 200,000 18,850
STMicroelectronics N.V. (New York
shares) 400,000 36,350
(b) Sanmina Corp. 350,000 31,522
Texas Instruments, Inc. 864,800 77,616
(b) Transwitch Corp. 20,134 948
(b) Vitesse Semiconductor Corp. 508,000 23,305
(b) Xilinx, Inc. 1,119,400 88,013
---------------------------------------------------------------------------
505,465
---------------------------------------------------------------------------
TOTAL COMMON STOCKS--94.5%
(Cost $1,425,422) 2,624,753
---------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS--1.1%
(c) Repurchase Agreement with State Street
Bank and Trust Company dated
10/29/1999, 5.200% due 11/01/1999
(Cost $31,886) $ 31,886 $ 31,886
--------------------------------------------------------------------------
</TABLE>
14
<PAGE> 15
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET INSTRUMENTS--4.4% Lexington Parker Capital Corp., 6.143%,
02/25/2000 $ 6,000 $ 5,884
Northern Rock PLC, 5.548%, 01/21/2000 30,000 29,636
Toyota Motor Credit Corp., 5.275%, 15,000 14,969
11/15/99
UBS Finance, Inc., 5.313%, 11/29/1999 20,000 19,919
Wal-Mart Stores, Inc., 5.312%, 11/01/99 23,000 23,000
Wal-Mart Stores, Inc., 5.307%, 11/09/99 4,000 3,995
Wal-Mart Stores, Inc., 5.313%, 12/06/99 23,000 22,882
Walt Disney Co., 5.333%, 11/05/1999 1,000 999
---------------------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS
(Cost $121,284) 121,284
---------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost $1,578,592) 2,777,923
---------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The following securities may require registration under the Securities Act
of 1933 or an exemption therefrom in order to effect sale in the ordinary
course of business; they were valued at cost on the dates of acquisition.
These securities are valued at fair value as determined in good faith by the
Board of Trustees of the fund. At October 31, 1999 the value of the fund's
restricted securities was $41,874 which represented 1.5% of net assets.
<TABLE>
<CAPTION>
DATE OF NUMBER
SECURITY DESCRIPTION ACQUISITION OF SHARES COST
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
September 1997 3.6% limited
Adams Capital Management , L.P. to April 1999 partnership interest $1,477,817
- --------------------------------------------------------------------------------------------------------------
June 1996 2.5% limited
Asset Management Associates 1996, L.P. to March 1998 partnership interest 1,743,204
- --------------------------------------------------------------------------------------------------------------
3.5% limited
Asset Management Associates 1998, L.P. May 1998 partnership interest 1,200,000
- --------------------------------------------------------------------------------------------------------------
April 1993 3.1% limited
Crosspoint Venture Partners 1993, L.P. to March 1998 partnership interest 727,982
- --------------------------------------------------------------------------------------------------------------
December 1993 5.0% limited
GEO Capital III, L.P. to March 1998 partnership interest 1,305,070
- --------------------------------------------------------------------------------------------------------------
April 1996 2.9% limited
GEO Capital IV, L.P. to March 1998 partnership interest 2,572,648
- --------------------------------------------------------------------------------------------------------------
May 1996 6.1% limited
Med Venture Associates II, L.P. to March 1998 partnership interest 1,413,540
- --------------------------------------------------------------------------------------------------------------
2.7% limited
Med Venture Associates III, L.P. September 1998 partnership interest 550,000
- --------------------------------------------------------------------------------------------------------------
April 1996 2.8% limited
Sevin Rosen Fund V, L.P. to March 1998 partnership interest 2,155,004
- --------------------------------------------------------------------------------------------------------------
Survivalink Corp.
common stock December 1995 150,000 shrs. 3.00 per share
warrants expiring 2001 to October 1996 110,000 shrs. 4.50 per share
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(b) Non-income producing security.
(c) Repurchase agreements are fully collateralized by U.S. Treasury or
Government securities.
Based on the cost of investments of $1,578,592 for federal income tax purposes
at October 31, 1999, the gross unrealized appreciation was $1,217,193, the gross
unrealized depreciation was $17,862 and the net unrealized appreciation on
investments was $1,199,331.
See accompanying Notes to Financial Statements.
15
<PAGE> 16
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
(IN THOUSANDS)
<TABLE>
<S> <C>
- --------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------
Investments, at value
(Cost: $1,578,592) $2,777,923
- --------------------------------------------------------------------------
Cash 1
- --------------------------------------------------------------------------
Receivable for:
Investments sold 27,366
- --------------------------------------------------------------------------
Fund shares sold 15,586
- --------------------------------------------------------------------------
Dividends and interest 155
- --------------------------------------------------------------------------
Foreign taxes recoverable 3
- --------------------------------------------------------------------------
TOTAL ASSETS 2,821,034
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------
Payable for:
Investments purchased 6,492
- --------------------------------------------------------------------------
Fund shares redeemed 6,138
- --------------------------------------------------------------------------
Management fee 1,153
- --------------------------------------------------------------------------
Other accrued expenses 1,600
- --------------------------------------------------------------------------
Total liabilities 15,383
- --------------------------------------------------------------------------
NET ASSETS, AT VALUE $2,805,651
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation (depreciation) on investment
securities 1,199,331
- --------------------------------------------------------------------------
Accumulated net realized gain 277,036
- --------------------------------------------------------------------------
Paid-in capital 1,329,284
- --------------------------------------------------------------------------
NET ASSETS, AT VALUE $2,805,651
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($2,233,116 / 104,913 shares outstanding) $21.29
- --------------------------------------------------------------------------
Maximum offering price per share (net asset value, plus
6.10% of net asset value or 5.75% of offering price) $22.59
- --------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($465,164 / 23,705 shares outstanding) $19.62
- --------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($73,285 / 3,681 shares outstanding) $19.91
- --------------------------------------------------------------------------
CLASS I SHARES
Net asset value and redemption price per share
$34,086 / 1,583 shares outstanding) $21.54
- --------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE> 17
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Year ended October 31, 1999
(IN THOUSANDS)
<TABLE>
<S> <C>
- --------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Interest $ 8,576
- --------------------------------------------------------------------------
Dividends (net foreign taxes withheld of $38) 2,377
- --------------------------------------------------------------------------
Total income 10,953
- --------------------------------------------------------------------------
Expenses:
Management fee 10,608
- --------------------------------------------------------------------------
Administrative service fees 3,559
- --------------------------------------------------------------------------
Custodian and transfer agent fees 4,503
- --------------------------------------------------------------------------
Trustees' fees 41
- --------------------------------------------------------------------------
Reports to shareholders 305
- --------------------------------------------------------------------------
Auditing 107
- --------------------------------------------------------------------------
Legal 10
- --------------------------------------------------------------------------
Registration fees 38
- --------------------------------------------------------------------------
Distribution fees 2,218
- --------------------------------------------------------------------------
Other 89
- --------------------------------------------------------------------------
Expenses before expense reductions 21,478
- --------------------------------------------------------------------------
Expense reductions (44)
- --------------------------------------------------------------------------
Expenses, net 21,434
- --------------------------------------------------------------------------
NET INVESTMENT LOSS (10,481)
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------------
Net realized gain (loss) from investment securities 287,902
- --------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
on investment securities 945,575
- --------------------------------------------------------------------------
Net gain (loss) on investment transactions 1,233,477
- --------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $1,222,996
- --------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
-------------------------------
1999 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
- -----------------------------------------------------------------------------------------------
Operations:
Net investment loss $ (10,481) (5,757)
- -----------------------------------------------------------------------------------------------
Net realized gain 287,902 112,666
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the
period 945,575 (7,862)
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,222,996 99,047
- -----------------------------------------------------------------------------------------------
Distributions to shareholders from capital gains (112,712) (198,743)
- -----------------------------------------------------------------------------------------------
Net increase in net assets from capital share transactions 447,376 137,964
- -----------------------------------------------------------------------------------------------
Increase in net assets 1,557,660 38,268
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------
Net assets at beginning of year 1,247,991 1,209,723
- -----------------------------------------------------------------------------------------------
NET ASSETS AT END OF YEAR $2,805,651 1,247,991
- -----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE
FUND Kemper Technology Fund (the "fund") is registered
under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end,
non-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 other classes.
Investment income, realized and unrealized gains
and losses, and certain fund-level expenses and
expense reductions, if any, are borne pro rata on
the basis of relative net assets by the holders of
all classes of shares except that each class bears
certain expenses unique to that class such as
distribution services, shareholder services,
administrative services and certain other class
specific expenses. Differences in class expenses
may result in payment of different per share
dividends by class. All shares of the fund have
equal rights with respect to voting subject to
class specific arrangements.
The fund's financial statements are prepared in
accordance with generally accepted accounting
principles which require the use of management
estimates. The policies described below are
followed consistently by the fund in the
preparation of its financial statements.
- --------------------------------------------------------------------------------
2 SIGNIFICANT
ACCOUNTING POLICIES SECURITY VALUATION. Investments are stated at value
determined as of the close of regular trading on
the New York Stock Exchange. Securities which are
traded on U.S. or foreign stock exchanges are
valued at the most recent sale price reported on
the exchange on which the security is traded most
extensively. If no sale occurred, the security is
then valued at the calculated mean between the most
recent bid and asked quotations. If there are no
such bid and asked quotations, the most recent bid
quotation is used. Securities quoted on the Nasdaq
Stock Market ("Nasdaq"), for which there have been
sales, are valued at the most recent sale price
reported. If there are no such sales, the value is
the most recent bid quotation. Securities which are
not quoted on Nasdaq but are traded in another
over-the-counter market are valued at the most
recent sale price, or if no sale occurred, at the
calculated mean between the most recent bid and
asked quotations on such market. If there are no
such bid and asked quotations, the most recent bid
quotation shall be used. Money market instruments
purchased with an original maturity of sixty days
or less are valued at amortized cost. All other
securities are valued at their fair value as
determined in good faith by the Valuation Committee
of the Board of Trustees.
REPURCHASE AGREEMENTS. The fund may enter into
repurchase agreements with certain banks and
broker/dealers whereby the fund, through its
custodian or sub-custodian bank, receives delivery
of the underlying securities, the amount of
18
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
which at the time of purchase and each subsequent
business day is required to be maintained at such a
level that the market value is equal to at least
the principal amount of the repurchase price plus
accrued interest.
FEDERAL INCOME TAXES. The fund's policy is to
comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to
regulated investment companies and to distribute
all of its taxable income to is 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.
- --------------------------------------------------------------------------------
3 TRANSACTIONS
WITH AFFILIATES MANAGEMENT AGREEMENT. The fund has a management
agreement with Scudder Kemper Investments, Inc.
(Scudder Kemper) and pays a monthly investment
management fee of 1/12 of the annual rate of .58%
of the first $250 million of average daily net
assets declining to .42% of average daily net
assets in excess of $12.5 billion. The fund
incurred a management fee of $10,608,000 for the
year ended October 31, 1999.
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 October 31,
1999 are $393,000.
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 October 31, 1999 are $2,780,000.
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
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
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 the fund to KDI for the year
ended October 31, 1999 are $3,559,000, of which
$6,000 was paid by KDI to affiliates, and of which
$308,000 is unpaid.
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
$3,357,000 for the year ended October 31, 1999.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the fund are also officers or directors of
Scudder Kemper. For the year ended October 31,
1999, the fund made no payments to its officers and
incurred trustees' fees of $41,000 to independent
trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the year ended October 31, 1999, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $1,304,267
Proceeds from sales 1,058,086
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the fund (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1999 1998
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 163,261 $ 2,717,319 96,699 $ 1,142,790
-----------------------------------------------------------------------------
Class B 19,259 307,696 5,628 62,605
-----------------------------------------------------------------------------
Class C 11,891 187,903 17,085 191,902
-----------------------------------------------------------------------------
Class I 1,946 32,608 960 11,469
-----------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 5,614 77,078 13,549 140,294
-----------------------------------------------------------------------------
Class B 916 11,698 1,790 17,510
-----------------------------------------------------------------------------
Class C 129 1,674 156 1,528
-----------------------------------------------------------------------------
Class I 120 1,654 307 3,187
-----------------------------------------------------------------------------
SHARES REDEEMED
Class A (156,882) (2,591,142) (100,751) (1,195,484)
-----------------------------------------------------------------------------
Class B (8,909) (110,192) (3,520) (39,015)
-----------------------------------------------------------------------------
Class C (9,906) (154,043) (16,431) (185,199)
-----------------------------------------------------------------------------
Class I (2,118) (34,877) (1,149) (13,623)
-----------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 837 13,856 712 8,375
-----------------------------------------------------------------------------
Class B 902 (13,856) (755) (8,375)
-----------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $ 447,376 $ 137,964
-----------------------------------------------------------------------------
</TABLE>
20
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6 LINE OF CREDIT The fund and several Kemper funds (the
"Participants") share in a $750 million revolving
credit facility 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 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 the
agreement.
- --------------------------------------------------------------------------------
7 EXPENSE OFF-SET
ARRANGEMENTS The fund has entered into arrangements with its
custodian 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 fees were reduced by $44,000,
under these arrangements.
21
<PAGE> 22
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------------
CLASS A
--------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $11.77 13.13 13.16 14.63 11.50
- ---------------------------------------------------------------------------------
Income from investment operations:
Net investment gain (loss) (.06) (.04) (.06) (.08) (.03)
- ---------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 10.65 .82 2.14 .74 4.66
- ---------------------------------------------------------------------------------
Total from investment operations 10.59 .78 2.08 .66 4.63
- ---------------------------------------------------------------------------------
Less distribution from net realized gain 1.07 2.14 2.11 2.13 1.50
- ---------------------------------------------------------------------------------
Net asset value, end of year $21.29 11.77 13.13 13.16 14.63
- ---------------------------------------------------------------------------------
TOTAL RETURN 94.71% 8.21 17.11 7.83 47.30
RATIOS TO AVERAGE NET ASSETS
Expenses, before expense reductions .93% .92 .89 .89 .88
- ---------------------------------------------------------------------------------
Expenses, net .93% .92 .89 .89 .88
- ---------------------------------------------------------------------------------
Net investment loss (.38)% (.37) (.42) (.62) (.23)
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
--------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998 1997 1996 1995
--------------------------------------
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $11.03 12.54 12.77 14.39 11.45
- ---------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.22) (.14) (.18) (.19) (.15)
- ---------------------------------------------------------------------------------
Net realized and unrealized gain 9.88 .77 2.06 .70 4.59
- ---------------------------------------------------------------------------------
Total from investment operations 9.66 .63 1.88 .51 4.44
- ---------------------------------------------------------------------------------
Less distribution from net realized gain 1.07 2.14 2.11 2.13 1.50
- ---------------------------------------------------------------------------------
Net asset value, end of year $19.62 11.03 12.54 12.77 14.39
- ---------------------------------------------------------------------------------
TOTAL RETURN 92.59% 7.24 15.91 6.76 45.65
RATIOS TO AVERAGE NET ASSETS
Expenses, before expense reductions 1.92% 1.85 1.85 1.87 1.82
- ---------------------------------------------------------------------------------
Expenses, net 1.92% 1.85 1.85 1.87 1.82
- ---------------------------------------------------------------------------------
Net investment loss (1.37)% (1.30) (1.38) (1.60) (1.17)
- ---------------------------------------------------------------------------------
</TABLE>
22
<PAGE> 23
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C
--------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998 1997 1996 1995
--------------------------------------
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $11.17 12.64 12.85 14.45 11.45
- ---------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.21) (.14) (.17) (.18) (.15)
- ---------------------------------------------------------------------------------
Net realized and unrealized gain 10.02 .81 2.07 .71 4.65
- ---------------------------------------------------------------------------------
Total from investment operations 9.81 .67 1.90 .53 4.50
- ---------------------------------------------------------------------------------
Less distribution from net realized gain 1.07 2.14 2.11 2.13 1.50
- ---------------------------------------------------------------------------------
Net asset value, end of year $19.91 11.17 12.64 12.85 14.45
- ---------------------------------------------------------------------------------
TOTAL RETURN 92.68% 7.57 15.98 6.88 46.23
RATIOS TO AVERAGE NET ASSETS
Expenses, before expense reductions 1.82% 1.81 1.82 1.82 1.76
- ---------------------------------------------------------------------------------
Expenses, net 1.82% 1.81 1.82 1.82 1.76
- ---------------------------------------------------------------------------------
Net investment loss (1.27)% (1.26) (1.35) (1.55) (1.11)
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS I
----------------------------- JULY 3 TO
YEAR ENDED OCTOBER 31, OCTOBER 31,
1999 1998 1997 1996 1995
-------------------------------------------
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $11.86 13.19 13.20 14.64 12.72
- ---------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.02) (.02) (.04) (.07) (.02)
- ---------------------------------------------------------------------------------------
Net realized and unrealized gain 10.77 .83 2.14 .76 1.94
- ---------------------------------------------------------------------------------------
Total from investment operations 10.75 .81 2.10 .69 1.92
- ---------------------------------------------------------------------------------------
Less distribution from net realized gain 1.07 2.14 2.11 2.13 --
- ---------------------------------------------------------------------------------------
Net asset value, end of period $21.54 11.86 13.19 13.20 14.64
- ---------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 95.39% 8.44 17.23 8.06 15.09
- ---------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses, before expense reductions .65% .67 .74 .76 .65
- ---------------------------------------------------------------------------------------
Expenses, net .64% .67 .74 .76 .65
- ---------------------------------------------------------------------------------------
Net investment loss (.09)% (.12) (.27) (.49) (.33)
- ---------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998 1997 1996 1995
--------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets at end of year (in thousands) $2,805,651 1,247,991 1,209,723 1,062,813 1,017,955
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover rate 59% 146 192 121 105
- ---------------------------------------------------------------------------------------------------------
</TABLE>
NOTES: Total return does not reflect the effect of any sales charges. Per share
data for 1995 through 1999 was determined based on average shares outstanding.
TAX INFORMATION
The fund paid a distribution of $1.07 per share from net long-term capital gains
during the year ended October 31, 1999, of which 100% represents 20% rate gains.
Pursuant to Section 852 of the Internal Revenue Code, the fund designates
$242,000,000 as capital gain dividends for the year ended October 31, 1999, of
which 100% represents 20% rate gains.
Please consult 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 Kemper Fund account, please call 1-800-621-1048.
23
<PAGE> 24
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER TECHNOLOGY FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper Technology Fund, as of October
31, 1999, and the related statements of operations for the year then ended and
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 1995. 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 generally accepted auditing
standards. 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
October 31, 1999, 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
Technology Fund at October 31, 1999, 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 1995, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
December 17, 1999
24
<PAGE> 25
NOTES
25
<PAGE> 26
NOTES
26
<PAGE> 27
NOTES
27
<PAGE> 28
TRUSTEES & OFFICERS
TRUSTEES OFFICERS
JOHN W. BALLANTINE MARK S. CASADY
Trustee President
LEWIS A. BURNHAM PHILIP J. COLLORA
Trustee Vice President and
Secretary
DONALD L. DUNAWAY
Trustee JOHN R. HEBBLE
Treasurer
ROBERT B. HOFFMAN
Trustee TRACY MCCORMICK
Vice President
DONALD R. JONES
Trustee ANN M. MCCREARY
Vice President
THOMAS W. LITTAUER
Trustee and Vice President KATHRYN L. QUIRK
Vice President
SHIRLEY D. PETERSON
Trustee LINDA J. WONDRACK
Vice President
CORNELIA SMALL
Trustee and Vice President MAUREEN E. KANE
Assistant Secretary
WILLIAM P. SOMMERS
Trustee CAROLINE PEARSON
Assistant Secretary
BRENDA LYONS
Assistant Treasure
- --------------------------------------------------------------------------------
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 AGENT STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, MA 02110
- ------------------------------------------------------------------------------
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
www.kemper.com
[KEMPER FUNDS LOGO]
Long-term investing in a short-term world(SM)
Printed on recycled paper in the U.S.A.
This report is not to be distributed unless preceded or accompanied by a Kemper
Equity Funds/Growth Style prospectus.
KTF - 2 (12/23/99) 109660
