<PAGE> 1
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED OCTOBER 31, 2000
Seeking growth of capital
KEMPER TECHNOLOGY FUND
"... Maintaining a diverse portfolio of profitable technology companies helped
the fund provide strong results in an exceptionally volatile year. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
7
PERFORMANCE UPDATE
11
INDUSTRY SECTORS
12
LARGEST HOLDINGS
13
PORTFOLIO OF INVESTMENTS
18
FINANCIAL STATEMENTS
21
FINANCIAL HIGHLIGHTS
23
NOTES TO FINANCIAL STATEMENTS
27
REPORT OF INDEPENDENT AUDITORS
AT A GLANCE
KEMPER TECHNOLOGY FUND TOTAL RETURNS
FOR THE YEAR ENDED OCTOBER 31, 2000 (UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
<TABLE>
<CAPTION>
LIPPER SCIENCE &
KEMPER TECHNOLOGY FUND KEMPER TECHNOLOGY FUND TECHNOLOGY FUNDS
KEMPER TECHNOLOGY FUND CLASS A CLASS B CLASS C CATEGORY AVERAGE*
------------------------------ ---------------------- ---------------------- -----------------
<S> <C> <C> <C>
47.06 45.49 45.72 34.30
</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. KEEP IN MIND THESE RETURNS WERE ACHIEVED DURING A FAVORABLE
PERIOD IN THE MARKET AND MAY NOT BE REPEATED.
*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; IF
SALES CHARGES 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.
NET ASSET VALUE
<TABLE>
<CAPTION>
AS OF AS OF
10/31/00 10/31/99
.........................................................
<S> <C> <C> <C> <C>
KEMPER TECHNOLOGY FUND CLASS
A $29.18 $21.29
.........................................................
KEMPER TECHNOLOGY FUND CLASS
B $26.46 $19.62
.........................................................
KEMPER TECHNOLOGY FUND CLASS
C $26.91 $19.91
.........................................................
</TABLE>
KEMPER TECHNOLOGY FUND
RANKINGS AS OF 10/31/00
COMPARED WITH ALL OTHER FUNDS IN THE LIPPER SCIENCE & TECHNOLOGY FUNDS
CATEGORY*
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
....................................................................................
<S> <C> <C> <C> <C> <C>
1-YEAR #39 of 148 funds #43 of 148 funds #42 of 148 funds
....................................................................................
5-YEAR #15 of 32 funds #17 of 32 funds #16 of 32 funds
....................................................................................
10-YEAR #12 of 13 funds n/a n/a
....................................................................................
20-YEAR #2 of 3 funds n/a n/a
....................................................................................
</TABLE>
DIVIDEND REVIEW
DURING THE YEAR ENDED OCTOBER 31, 2000, KEMPER TECHNOLOGY 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 $1.54 $1.54 $1.54
................................................................................................
SHORT-TERM CAPITAL
GAIN $0.40 $0.40 $0.40
................................................................................................
</TABLE>
TERMS TO KNOW
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 TECHNOLOGY FUND IN THE
SPECIALTY-TECHNOLOGY CATEGORY. PLEASE CONSULT THE
PROSPECTUS FOR A DESCRIPTION OF INVESTMENT
POLICIES.
</TABLE>
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 The 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.
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.
SEMICONDUCTORS 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:
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 2.43 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 -- while volatile month-to-month, they have been up an average of 15
to 20 percent compared to a year ago for the past six months.
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. We saw the first
evidence of how productivity slows along with economic growth in the third
quarter: Productivity gains dipped to just 3.3 percent from the second quarter's
remarkable 6.1 percent. 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 (11/30/00) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
-------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 5.70 6.40 6.00 4.80
Prime rate (2) 9.50 9.25 8.50 8.00
Inflation rate (3)* 3.50 3.10 2.60 1.40
The U.S. dollar (4) 11.10 4.30 -0.70 1.20
Capital goods orders (5)* 7.00 17.10 12.30 -0.60
Industrial production (5)* 5.20 6.50 4.40 4.00
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 10/31/00.
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 good quality 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.
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 DECEMBER 6, 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.
Sincerely,
Scudder Kemper Investments, Economics Group
5
<PAGE> 6
ECONOMIC OVERVIEW
[INTENTIONALLY LEFT BLANK]
6
<PAGE> 7
DURING FISCAL YEAR 2000, JIM BURKART WAS LEAD PORTFOLIO MANAGER OF KEMPER
TECHNOLOGY FUND'S PORTFOLIO MANAGEMENT TEAM. IN NOVEMBER 2000, BURKART LEFT
SCUDDER KEMPER INVESTMENTS, INC. HE WAS REPLACED BY ROBERT HORTON, A PORTFOLIO
MANAGER OF SCUDDER TECHNOLOGY FUND. HORTON HAS ASSUMED LEAD PORTFOLIO MANAGER
RESPONSIBILITIES.
ROBERT HORTON JOINED SCUDDER KEMPER INVESTMENTS, INC. IN 1994. HORTON RECEIVED A
B.S. DEGREE IN ELECTRICAL ENGINEERING FROM LEHIGH UNIVERSITY IN 1988 AND AN
M.B.A. FROM THE UNIVERSITY OF CONNECTICUT IN 1992. A CERTIFIED FINANCIAL
ANALYST, HORTON WAS A SOFTWARE ENGINEER FOR FIVE YEARS BEFORE BECOMING AN
INVESTMENT PROFESSIONAL IN 1993.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE FUND'S PORTFOLIO
MANAGEMENT TEAM AS OF MID-NOVEMBER 2000. THE TEAM'S VIEWS ARE SUBJECT TO CHANGE
AT ANY TIME, BASED ON MARKET AND OTHER CONDITIONS AND SHOULD NOT BE CONSTRUED AS
A RECOMMENDATION OF ANY PARTICULAR SECURITY.
PERFORMANCE UPDATE
A DISCIPLINED INVESTMENT STRATEGY HELPED KEMPER TECHNOLOGY FUND ACHIEVE
ABOVE-AVERAGE RETURNS DURING A PERIOD OF HIGH MARKET VOLATILITY, RISING INTEREST
RATES AND INCREASED CORPORATE EARNINGS DISAPPOINTMENTS.
Q HOW DID KEMPER TECHNOLOGY FUND PERFORM DURING FISCAL YEAR 2000?
A We are pleased to report that Kemper Technology Fund's 47.06 percent
return (Class A shares unadjusted for a sales charge) for the 12 months ended
October 31, 2000, outpaced that of the average science and technology fund by
nearly 1,300 basis points (1.3 percent). The fund's results also outdistanced
the unmanaged Hambrecht & Quist Technology index, which rose 33.33 percent for
the period. Maintaining a diverse portfolio of profitable technology companies
helped the fund provide strong results in an exceptionally volatile year.
This past year was unusual in many ways. Not since the mass marketing of
television in the 1950s and the space race of the 1960s have Americans been so
obsessed with new technology. With wireless Internet access and complex
corporate networking systems, the way people work, play and communicate is being
radically transformed. Yet, profiting from investments in this technology
revolution has become more and more challenging. This past year some of
America's largest corporations such as AT&T fumbled badly as they attempted to
leverage technology to increase their competitive positions. Market conditions
changed rapidly, and many stocks that historically offered strong returns for
Kemper Technology Fund over the past several decades -- large-cap firms such as
Intel, Hewlett-Packard, Dell Computer and Motorola -- were either not in the
portfolio, reduced in weighting or eliminated during fiscal year 2000.
We think that the key to the fund's success this past year was a consistent
team approach, a long-term perspective and an ability to anticipate trends
within the technology sector. As America's oldest technology fund, we have a
deep pool of experience that has enabled
The Rise And Fall Of IPOs Since 1997 Bloomberg IPO Index
October 31, 1997, to October 31, 2000
[LINE CHART]
<TABLE>
<CAPTION>
BLOOMBERG IPO INDEX
-------------------
<S> <C>
10/97 426.85
399.45
424.58
433.9
474.5
514.35
517.28
499.44
501.5
454.79
343.73
367.09
10/98 390.31
442.06
476.26
514.62
478.53
610.6
720.13
713.38
763.32
722.74
739.1
790.05
10/99 1044.14
1370.68
1696.24
1629.99
2034.46
1809.57
1366.98
1088.95
1410.13
1464.94
1583.89
1422.31
10/00 1272.32
</TABLE>
Source: Bloomberg Business News
Past performance is not a guarantee of future results. The Bloomberg IPO index
is a capitalization-weighted index that measures the performance of stocks
during their first publicly traded year. It includes all companies with a market
value of at least $50 million at the initial public offering. The index was
developed with a base value of 100 as of 8/22/94. It is not intended to
represent the performance of any mutual fund offered by Scudder Kemper
Investments, Inc.
7
<PAGE> 8
PERFORMANCE UPDATE
Kemper Technology Fund to
outperform the unmanaged Standard & Poor's 500 index for the 50-year period
ended October 31, 2000.* The fund also outperformed the unmanaged NASDAQ
Composite index by more than 100 basis points (1 percentage point) for the life
of the index (created on December 31, 1971).
* SOURCE: WIESENBERGER(R)
PERFORMANCE IS BASED ON TOTAL RETURN WITH DISTRIBUTIONS REINVESTED. IT IS NOT
POSSIBLE TO INVEST DIRECTLY IN ANY INDEX.
Q
PRICES OF MANY TECHNOLOGY STOCKS FLUCTUATED BY MORE THAN 50 PERCENT DURING
FISCAL YEAR 2000. WHAT CAUSED THIS HIGH LEVEL OF VOLATILITY?
A
The short answer is that the dot.com bubble burst. The period from October
31, 1999, to early March 2000 was an ebullient time, marked by unusually high
returns for technology stocks, especially initial public offerings. Relative to
earnings, stock prices for some technology companies reached extreme levels last
winter.
However, beginning in mid-March, many technology stocks, particularly small
companies tied to the Internet, began to struggle. Large company stocks also
declined, and the technology market suffered a broad setback in October 2000. As
perceptions about U.S. interest rates and inflation shifted, unprofitable
technology firms full of marketing sound and fury but with weak business plans
lost support among investors. For some consumer-oriented dot.coms, their time
upon the market stage was over. As the market's volatility increased, we focused
on well-run companies with well-defined business plans, organizations that we
believe can generate significant earnings.
Q
MICROSOFT WAS THE FUND'S LARGEST HOLDING A YEAR AGO. IT WAS THE LARGEST
HOLDING AS OF OCTOBER 31, 2000, TOO. HOW DID THE STOCK PERFORM THIS PAST YEAR,
AND WHY DO YOU OWN IT?
A
Microsoft was hit especially hard this past spring in the wake of negative
developments in the federal government's antitrust case, while negative earnings
surprises hurt many telecom, personal computer and semiconductor companies. We
used Microsoft's price weakness to increase our holdings and, as of October 31,
2000, the stock was the largest holding in Kemper Technology Fund (4.17 percent
of net assets). Our positioning in Microsoft was a modest negative for portfolio
performance over the past fiscal year, costing the fund about 65 basis points in
total return (0.65 percent).
For the year ahead, we remain confident that the company's Windows 2000
product and other initiatives will help foster an attractive level of earnings
growth that will be recognized by investors. At the same time, we believe the
company's legal problems have the potential to abate. We share management's
view; which is that Microsoft is worth more as one company than as two. We also
believe Microsoft will prevail on appeal because of shortcomings in the
government's case as well as a lack of evidence that consumers have been harmed.
Q
WHAT STOCKS CONTRIBUTED THE MOST TO THE FUND'S RESULTS IN FISCAL YEAR
2000?
A
Overall, the fund enjoyed strong performance from investments in computer
software and semiconductor firms. We held 22 stocks that provided more than a
100 percent return for the 12 months ended October 31, 2000. Overall portfolio
performance was tempered by double-digit declines in some larger holdings,
notably in the personal computer area.
The most significant contributors to the fund's yearly results were Oracle
Corp. (the fund's fifth largest holding as of October 31, 2000), a Microsoft
rival, and BEA Systems, which provides e-commerce infrastructure software. BEA
(among the fund's top 15 holdings as of October 31, 2000) is helping build
Internet links for banking, securities, telecom, airline and manufacturing
firms. Many companies that produce computer chips -- the building blocks for
cellular and wireless telecommunications, computers and calculators -- also did
well.
Personal computer (PC) manufacturers faced a tough market environment this
past year. Intense price competition, coupled with the belief of many industry
analysts that the desktop and home "box" PC will lose market share to wireless
communications in the years ahead, caused stock prices to fall sharply. One of
the biggest drags on portfolio performance this past year was Dell Computer -- a
firm that sells PCs to consumers by mail. Dell's stock price decline cost the
fund 81 basis points in return (0.81 percent) for the 12 months ended October
31, 2000.
8
<PAGE> 9
PERFORMANCE UPDATE
During the first half of the fiscal year, data-communications and
telecommunications companies provided strong returns. Firms such as Cisco
Systems, Juniper Networks and JDS Uniphase were propelled by earnings that were
much better than expected. However, some of these stocks weakened between April
and October 2000.
Q WHAT DO YOU LOOK FOR WHEN YOU BUY STOCKS?
A We seek quality companies that have the ability to generate sustainable,
powerful growth. Using rigorous, proprietary research, and a team approach, 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
Despite the market's recent challenges, 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.
Q WHAT IS YOUR OUTLOOK FOR TECHNOLOGY INVESTING IN THE YEAR AHEAD?
A We believe the Federal Reserve's monetary policy actions in the coming
months have the potential to renew market enthusiasm for technology. Investors
will be searching for above-average growth potential as the U.S. economy heads
toward a soft landing, and we believe they'll find it in companies that are
nimble and innovative enough to navigate both the financial and market-share
challenges that may come as competition increases and access to capital for
expansion becomes more limited.
Technology firms continue to offer the best growth prospects, but we believe
investors need to be more selective than ever. For the five-year period ended
October 31, 2000, more than 45 percent of all (295 of 642) technology stocks had
negative average annual returns.* We feel that makes a powerful argument for
active management in this sector.
* SOURCE: WIESENBERGER(R)
9
<PAGE> 10
PERFORMANCE UPDATE
AVERAGE ANNUAL TOTAL RETURNS*
FOR PERIODS ENDED OCTOBER 31, 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 TECHNOLOGY FUND CLASS A 38.59% 29.81% 26.59% 14.82% (since 9/7/48)
..................................................................................................
KEMPER TECHNOLOGY FUND CLASS B 42.49 29.95 n/a 32.88 (since 5/31/94)
..................................................................................................
KEMPER TECHNOLOGY FUND CLASS C 45.72 30.20 n/a 33.10 (since 5/31/94)
..................................................................................................
</TABLE>
KEMPER TECHNOLOGY FUND CLASS A
Growth of an assumed $10,000 investment in Class A
shares from 1/31/88 to 10/31/00
[LINE GRAPH]
<TABLE>
<CAPTION>
KEMPER TECHNOLOGY FUND S&P 500 COMPOSITE HAMBRECHT & QUIST
A1 INDEX+ INDEX++
---------------------- ----------------- -----------------
<S> <C> <C> <C>
1/31/88 10000.00 10000.00 10000.00
9794.00 10803.00 9390.00
12224.00 13747.00 10070.00
12278.00 12846.00 8946.00
12/31/91 17723.00 16225.00 13003.00
17513.00 16949.00 15433.00
19560.00 18145.00 18120.00
21781.00 17866.00 21766.00
12/31/95 31096.00 23960.00 32850.00
37502.00 28815.00 40952.00
40170.00 37750.00 48007.00
57680.00 47817.00 74681.00
123606.00 57154.00 166594.00
10/31/00 127359.00 55604.00 150321.00
</TABLE>
KEMPER TECHNOLOGY FUND CLASS B
Growth of an assumed $10,000 investment in Class B
shares from 5/31/94 to 10/31/00
[LINE GRAPH]
<TABLE>
<CAPTION>
KEMPER TECHNOLOGY FUND S&P 500 COMPOSITE HAMBRECHT & QUIST
CLASS B1 INDEX+ INDEX++
---------------------- ----------------- -----------------
<S> <C> <C> <C>
5/31/94 10000.00 10000.00 10000.00
9429.00 9732.00 9390.00
10761.00 10136.00 10708.00
11276.00 10061.00 11891.00
12262.00 10968.00 13316.00
14524.00 11933.00 16611.00
16519.00 12802.00 18773.00
15924.00 13492.00 18268.00
16273.00 14140.00 20884.00
6/30/96 17068.00 14691.00 19654.00
18241.00 15057.00 20864.00
18993.00 16227.00 22373.00
17000.00 16585.00 21326.00
19570.00 19390.00 24551.00
23441.00 20751.00 31106.00
20165.00 21258.00 26227.00
23118.00 24135.00 31756.00
23740.00 24838.00 32515.00
20908.00 22278.00 28902.00
28668.00 26927.00 40800.00
3/31/99 32369.00 28179.00 44430.00
36396.00 30070.00 52618.00
38638.00 28099.00 55669.00
60760.00 32185.00 91100.00
72443.00 32828.00 102752.00
67001.00 31864.00 92118.00
66696.00 31468.00 90433.00
10/31/00 62074.00 31312.00 82201.00
</TABLE>
KEMPER TECHNOLOGY FUND CLASS C
Growth of an assumed $10,000 investment in Class C
shares from 5/31/94 to 10/31/00
[LINE GRAPH]
<TABLE>
<CAPTION>
KEMPER TECHNOLOGY FUND S&P 500 COMPOSITE HAMBRECHT & QUIST
CLASS C1 INDEX+ INDEX++
---------------------- ----------------- -----------------
<S> <C> <C> <C>
5/31/94 10000.00 10000.00 10000.00
9409.00 9732.00 9390.00
10761.00 10136.00 10708.00
11286.00 10061.00 11891.00
12272.00 10968.00 13316.00
14568.00 11933.00 16611.00
16575.00 12802.00 18773.00
16004.00 13492.00 18268.00
16338.00 14140.00 20884.00
6/30/96 17161.00 14691.00 19654.00
18346.00 15057.00 20864.00
19101.00 16227.00 22373.00
17095.00 16585.00 21326.00
19676.00 19390.00 24551.00
23572.00 20751.00 31106.00
20269.00 21258.00 26227.00
23270.00 24135.00 31756.00
23931.00 24838.00 32515.00
21109.00 22278.00 28902.00
28941.00 26927.00 40800.00
3/31/99 32602.00 28179.00 44430.00
36717.00 30070.00 52618.00
38992.00 28099.00 55669.00
61335.00 32185.00 91100.00
73201.00 32828.00 102752.00
67698.00 31864.00 92118.00
67418.00 31468.00 90433.00
10/31/00 62754.00 31312.00 82201.00
</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. KEEP IN MIND THESE
RETURNS WERE ACHIEVED DURING A FAVORABLE
PERIOD IN THE MARKET AND MAY NOT BE
REPEATED.
*FOR CLASS A SHARES, ADJUSTMENT FOR THE
MAXIMUM SALES CHARGE IS 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, 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
HAMBRECHT & QUIST 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.
+THE STANDARD & POOR'S 500 STOCK INDEX
IS AN UNMANAGED INDEX GENERALLY
REPRESENTATIVE OF THE U.S. STOCK
MARKET. SOURCE: WIESENBERGER(R).
++THE 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.
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 October 31, 2000, and on October 31, 1999.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER TECHNOLOGY FUND AS OF KEMPER TECHNOLOGY FUND AS OF
10/31/00 10/31/99
---------------------------- ----------------------------
<S> <C> <C>
Technology* 67.1 69.7
Other 11.2 5.5
Communications services 7.1 7.2
Consumer non-durables 6 8.5
Capital goods 5.9 6.9
Health Care 2.1 0.7
Financials 0.6 1.5
</TABLE>
*TECHNOLOGY SECTOR COMPARISON
A break out of the technology sector as of October 31, 2000, and October 31,
1999 for Kemper Technology Fund.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER TECHNOLOGY FUND AS OF KEMPER TECHNOLOGY FUND AS OF
10/31/00 10/31/99
---------------------------- ----------------------------
<S> <C> <C>
Computer Software 22.40 23.10
Semiconductors 13.10 18.20
Electronic components/distributions 12.10 7.40
Electronic data processing 7.80 4.40
Edp peripherals 5.90 4.80
Diverse electronic products 5.30 11.10
Other 0.50 0.00
Office/plant automation 0.00 0.70
</TABLE>
SECTOR WEIGHTINGS ARE SUBJECT TO CHANGE.
11
<PAGE> 12
LARGEST HOLDINGS
THE FUND'S 15 LARGEST HOLDINGS*
Representing 39.6 percent of the fund's total net assets on October 31, 2000
<TABLE>
<CAPTION>
HOLDINGS PERCENT
<S> <C> <C> <C>
-------------------------------------------------------------------------------------
1. MICROSOFT Develops, manufactures, licenses, 4.2%
sells, and supports software
products.
-------------------------------------------------------------------------------------
2. BROCADE COMMUNICATION Provides switching solutions for 3.8%
SERVICES storage area networks.
-------------------------------------------------------------------------------------
3. CISCO SYSTEMS Large, comprehensive supplier of 3.7%
routing software and related
systems that direct the flow of
data between local networks.
-------------------------------------------------------------------------------------
4. SANMINA Provides electronics contract 3.0%
manufacturing services. Services
include the manufacture of complex
printed circuit board assemblies
and subassemblies.
-------------------------------------------------------------------------------------
5. ORACLE Supplies software for enterprise 3.0%
information management. The
Company offers databases and
relational servers, application
development and decision support
tools, and enterprise business
applications.
-------------------------------------------------------------------------------------
6. INTUIT Develops and markets software 2.4%
products and related services. The
Company provides software units
that allow households and small
businesses to automate financial
tasks.
-------------------------------------------------------------------------------------
7. SIEBEL SYSTEMS Provides eBusiness applications. 2.4%
The Company's applications enable
organizations to sell to, market
to, and service its customers
across multiple channels,
including the Web, call centers,
field, resellers, retail, and
dealer networks.
-------------------------------------------------------------------------------------
8. SUN MICROSYSTEMS Provides products, services, and 2.3%
support solutions for building and
maintaining network computing
environments.
-------------------------------------------------------------------------------------
9. LINEAR TECHNOLOGY Designs, manufactures, and markets 2.3%
a line of linear integrated
circuits. The Company's products
are used in a variety of
applications including
telecommunications.
-------------------------------------------------------------------------------------
10. RATIONAL SOFTWARE Develops and markets a variety of 2.2%
software development tools,
services, and software engineering
best practices.
-------------------------------------------------------------------------------------
11. JUNIPER NETWORKS Provides Internet infrastructure 2.2%
solutions for Internet service
providers and other
telecommunications service
providers.
-------------------------------------------------------------------------------------
12. BEA SYSTEMS Provides e-commerce infrastructure 2.1%
software. The Company, along with
its e-commerce transaction
platform, provides consulting,
education, and support services
that help companies launch
e-commerce initiatives.
-------------------------------------------------------------------------------------
13. IBM Provides customer solutions 2.0%
through the use of advanced
information technology. The
Company's solutions include
technologies, systems, products,
services, software, and financing.
-------------------------------------------------------------------------------------
14. SEAGATE TECHNOLOGY Designs, manufactures, and markets 2.0%
products for storage, retrieval,
and management of data on computer
and data communications systems.
-------------------------------------------------------------------------------------
15. JDS UNIPHASE Provides advanced fiberoptic 2.0%
components and modules. The
Company's products are sold to
telecommunications and cable
television system providers
worldwide.
-------------------------------------------------------------------------------------
</TABLE>
*PORTFOLIO COMPOSITION AND HOLDINGS ARE SUBJECT TO CHANGE.
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
KEMPER TECHNOLOGY FUND
Portfolio of Investments at October 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
REPURCHASE AGREEMENTS--0.7% AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
State Street Bank and Trust Company,
6.550%, to be repurchased at $38,755,050
on 11/01/2000 (a) (Cost $38,748,000) $38,748,000 $ 38,748,000
------------------------------------------------------------------------------
<CAPTION>
COMMERCIAL PAPER--10.4%
<S> <C> <C> <C> <C> <C>
Baxter International, Inc.:
6.500%, 11/27/2000 15,000,000 14,929,583
6.560%, 11/20/2000 10,000,000 9,965,378
Coca-Cola Enterprises, 6.450%, 12/28/2000 20,000,000 19,795,750
Conagra, Inc., 6.570%, 11/21/2000 80,000,000 79,707,778
Deutsche Bank Financial, Inc.:
6.440%, 11/30/2000 30,000,000 29,844,367
6.450%, 11/30/2000 35,000,000 34,818,146
MCI Worldcom, Inc.:
6.590%, 11/14/2000 45,000,000 44,892,912
6.600%, 11/08/2000 40,000,000 39,948,667
6.600%, 11/15/2000 40,000,000 39,897,333
6.610%, 11/29/2000 40,000,000 39,794,355
6.610%, 11/30/2000 47,000,000 46,749,738
Private Export Funding, 6.520%, 11/06/2000 4,000,000 3,996,378
Verizon Network Funding:
6.470%, 11/08/2000 20,000,000 19,974,839
6.490%, 11/07/2000 50,000,000 49,945,917
6.500%, 12/06/2000 25,000,000 24,842,014
Wal-Mart Stores, Inc.:
6.470%, 12/05/2000 41,029,000 40,778,290
6.460%, 11/30/2000 17,000,000 16,911,534
------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost $556,792,979) 556,792,979
------------------------------------------------------------------------------
<CAPTION>
CORPORATE BONDS--0.1%
<S> <C> <C> <C> <C> <C>
TECHNOLOGY--0.0%
COMPUTER HARDWARE
NVIDIA Corp. Convertible Bond, 4.750%,
10/15/2007 2,400,000 2,212,500
------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS--0.1%
CYRAS Systems, Inc, 4.500%, 08/15/2005 5,450,000 5,886,000
------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost $7,850,000) 8,098,500
------------------------------------------------------------------------------
<CAPTION>
NUMBER OF
PREFERRED STOCKS--0.2% SHARES
<S> <C> <C> <C> <C> <C>
TECHNOLOGY--0.2%
COMPUTER SOFTWARE
Planetweb, Inc. (c) (Cost $9,999,998) 1,838,235 9,999,998
------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCKS--88.6% SHARES VALUE
<S> <C> <C> <C> <C> <C>
HEALTH--2.1%
BIOTECHNOLOGY--2.1%
Diversa Corp.* 365,000 $ 9,284,688
Genentech Inc.* 191,200 15,774,000
PE Corp. - PE Biosystems Group* 745,000 87,165,000
------------------------------------------------------------------------------
112,223,688
HOSPITAL MANAGEMENT--0.0%
FPA Medical Management, Inc.* 6,935 1
------------------------------------------------------------------------------
MEDICAL SUPPLY & SPECIALTY--0.0%
Survivalink Corp.* (b)(c) 150,000 15,000
Survivalink Corp., Warrants* (b)(c) 110,000 11,000
------------------------------------------------------------------------------
26,000
PHARMACEUTICALS--0.0%
Pharmos Corp. 161,349 458,836
------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS--4.6%
CELLULAR TELEPHONE--1.2%
Nokia Oyj (ADR) 1,467,000 62,714,250
------------------------------------------------------------------------------
TELEPHONE/
COMMUNICATIONS--3.4%
Efficient Networks, Inc.* 12,327 517,156
Cosine Communications, Inc.* 290,100 9,591,432
ICG Communications, Inc.* 7,270 3,181
JDS Uniphase Corp.* 1,280,000 104,160,000
Nortel Networks Corp.* 1,245,181 56,655,736
OPNET Technologies, Inc.* 84,000 2,934,750
Sierra Wireless, Inc.* 163,800 10,769,850
------------------------------------------------------------------------------
184,632,105
------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
FINANCIAL--0.6%
OTHER FINANCIAL COMPANIES--0.6%
Adams Capital Management, L.P.,
3.6% limited partnership interest* (b)(c) -- 3,886,894
Alloy Ventures 2000, L.P., 3.1%
limited partnership interest* (b)(c) -- 969,288
Asset Management Association 1996, L.P.,
2.5% limited partnership interest* (b)(c) -- 4,079,138
Asset Management Association 1998, L.P.,
3.5% limited partnership interest* (b)(c) -- 4,412,728
Crosspoint Venture Partners 1993, L.P.,
3.1% limited partnership interest* (b)(c) -- 2,137,118
GeoCapital III. L.P., 5.0% limited
partnership interest* (b)(c) -- 922,975
GeoCapital IV, L.P., 2.9% limited
partnership interest* (b)(c) -- 2,819,339
Med Venture Associates II, L.P., 6.1%
limited partnership interest* (b)(c) -- 2,047,100
Med Venture Associates III, L.P., 2.7%
limited partnership interest* (b)(c) -- 1,042,326
Sevin Rosen Fund V, L.P., 2.8% limited
partnership interest* (b)(c) -- 5,385,265
W.R. Hambrecht* (b)(c)(d) 140,000 3,500,000
------------------------------------------------------------------------------
31,202,171
--------------------------------------------------------------------------------------------------------------------------
MEDIA--2.5%
CABLE TELEVISION--1.9%
AT&T Corp. -- Liberty Media Group "A"* 1,200,000 21,600,000
Comcast Corp.* 1,000,000 40,750,000
EchoStar Communications Corp. "A"* 833,600 37,720,400
------------------------------------------------------------------------------
100,070,400
MISCELLANEOUS--0.6%
Gemstar-TV Guide International, Inc.* 500,000 34,281,250
------------------------------------------------------------------------------
</TABLE>
14 The accompanying notes are an integral part of the financial statements.
<PAGE> 15
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
<S> <C> <C> <C> <C> <C>
SERVICE INDUSTRIES--6.0%
EDP SERVICES--2.2%
First Data Corp. 520,000 $ 26,065,000
Sapient Corp.* 900,000 32,006,250
VeriSign, Inc.* 459,600 60,667,200
------------------------------------------------------------------------------
118,738,450
MISCELLANEOUS COMMERCIAL
SERVICES--3.0%
Diamond Technology Partners, Inc.* 350,000 15,618,750
Internap Network Services Corp.* 1,000,000 16,000,000
Siebel Systems, Inc.* 1,200,000 125,925,000
------------------------------------------------------------------------------
157,543,750
MISCELLANEOUS
CONSUMER SERVICES--0.8%
Yahoo!, Inc.* 400,000 23,450,000
eBay, Inc.* 400,000 20,600,000
------------------------------------------------------------------------------
44,050,000
--------------------------------------------------------------------------------------------------------------------------
DURABLES--1.9%
TELECOMMUNICATIONS EQUIPMENT
Tellabs, Inc.* 2,000,000 99,875,000
------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
MANUFACTURING--4.0%
ELECTRICAL PRODUCTS--1.2%
Amphenol Corp "A"* 900,000 57,825,000
Pemstar, Inc* 564,500 8,255,813
------------------------------------------------------------------------------
66,080,813
INDUSTRIAL SPECIALTY--2.8%
Corning, Inc. 1,300,000 99,450,000
QUALCOMM, Inc.* 800,000 52,087,500
------------------------------------------------------------------------------
151,537,500
--------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--66.9%
COMPUTER SOFTWARE--22.2%
BEA Systems, Inc.* 1,600,000 114,800,000
Brocade Communications Systems, Inc.* 888,166 201,946,745
Business Objects, S.A.* 500,000 39,398,438
Check Point Software Technologies Ltd.* 400,000 63,350,000
i2 Technologies, Inc.* 550,200 93,534,000
Intuit Inc.* 2,118,200 130,136,913
Microsoft Corp.* 3,227,400 222,284,467
NVIDIA Corp.* 400,000 24,856,250
Oracle Corp.* 4,800,000 158,400,000
Precise Software Solutions Ltd.* 175,600 4,016,850
Rational Software Corp.* 2,000,000 119,375,000
Synplicity, Inc.* 268,300 3,387,288
webMethods, Inc.* 200,000 17,775,000
------------------------------------------------------------------------------
1,193,260,951
DIVERSE ELECTRONIC PRODUCTS--5.3%
Applied Materials, Inc.* 1,480,000 78,625,000
Dell Computer Corp.* 3,000,000 88,499,993
Foundry Networks, Inc.* 575,000 38,201,563
Motorola, Inc. 1,990,000 49,625,625
Teradyne, Inc.* 943,700 29,490,625
------------------------------------------------------------------------------
284,442,806
EDP PERIPHERALS--5.9%
Ariba, Inc.* 500,000 63,187,500
EMC Corp.* 1,100,000 97,968,750
Mercury Interactive Corp.* 657,600 72,993,600
VERITAS Software Corp.* 600,000 84,609,375
------------------------------------------------------------------------------
318,759,225
</TABLE>
The accompanying notes are an integral part of the financial statements. 15
<PAGE> 16
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
<S> <C> <C> <C> <C> <C>
ELECTRONIC COMPONENTS--12.1%
Analog Devices, Inc.* 1,249,300 $ 81,204,500
Applied Micro Circuits Corp.* 700,000 53,462,500
Celestica, Inc.* 1,209,700 86,947,188
Cisco Systems, Inc.* 3,670,858 197,767,475
Gateway, Inc.* 500,000 25,805,000
Juniper Networks, Inc.* 595,800 116,181,000
Molex Inc. "A" 1,456,250 57,248,828
PMC-Sierra, Inc.* 200,000 33,900,000
------------------------------------------------------------------------------
652,516,491
ELECTRONIC DATA PROCESSING--7.8%
Compaq Computer Corp. 2,763,600 84,041,076
Hewlett-Packard Co. 10,000 464,375
International Business Machines Corp. 1,070,000 105,395,000
Seagate Technology, Inc.* 1,500,000 104,812,500
Sun Microsystems, Inc.* 1,128,800 125,155,700
------------------------------------------------------------------------------
419,868,651
SEMICONDUCTORS--13.1%
KLA Tencor Corp.* 1,800,000 60,862,500
Linear Technology Corp. 1,900,000 122,668,750
Maxim Integrated Products, Inc.* 1,450,000 96,153,125
Micron Technology, Inc.* 1,100,000 38,225,000
QLogic Corp.* 100,000 9,675,000
STMicroelectronics N.V. (New York shares) 1,200,000 62,325,000
Sanmina Corp.* 1,400,000 160,037,500
Texas Instruments, Corp. 1,329,600 65,233,500
Xilinx, Inc.* 1,238,800 89,735,575
------------------------------------------------------------------------------
704,915,950
MISCELLANEOUS--0.5%
Agilent Technologies, Inc.* 500,000 23,156,250
HomeStore.com, Inc.* 27,492 934,728
------------------------------------------------------------------------------
24,090,978
------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $2,899,465,505) 4,761,289,266
------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100.0%
(Cost $3,512,856,482) (e) $5,374,928,743
------------------------------------------------------------------------------
</TABLE>
16 The accompanying notes are an integral part of the financial statements.
<PAGE> 17
PORTFOLIO OF INVESTMENTS
NOTES TO PORTFOLIO OF INVESTMENTS
* Non-income producing security.
(a) Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities.
(b) Restricted Securities are securities which have not been registered with
the Securities and Exchange Commission under the Securities Act of 1933.
The aggregate fair value of restricted securities at October 31, 2000,
amounted to $31,228,171 which represents 0.59% of net assets. Information
concerning such restricted securities at October 31, 2000, is as follows:
<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 $1,896,700
-------------------------------------------------------------------------------------------------------------
3.1% limited
Alloy Ventures 2000, L.P. April 2000 partnership interest 1,000,000
-------------------------------------------------------------------------------------------------------------
June 1996 2.5% limited
Asset Management Associates 1996, L.P. to March 1998 partnership interest 1,717,279
-------------------------------------------------------------------------------------------------------------
3.5% limited
Asset Management Associates 1998, L.P. May 1998 partnership interest 2,447,550
-------------------------------------------------------------------------------------------------------------
April 1993 3.1% limited
Crosspoint Venture Partners 1993, L.P. to March 1998 partnership interest 433,920
-------------------------------------------------------------------------------------------------------------
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 2,642,588
-------------------------------------------------------------------------------------------------------------
May 1996 6.1% limited
Med Venture Associates II, L.P. to March 1998 partnership interest 1,713,540
-------------------------------------------------------------------------------------------------------------
2.7% limited
Med Venture Associates III, L.P. September 1998 partnership interest 1,034,160
-------------------------------------------------------------------------------------------------------------
April 1996 2.8% limited
Sevin Rosen Fund V, L.P. to March 1998 partnership interest 2,320,004
-------------------------------------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------------------------------------
W.R. Hambrecht March 2000 140,000 shrs. 50.00 per share
-------------------------------------------------------------------------------------------------------------
</TABLE>
(c) Securities valued in good faith by the Valuation Committee of the Board of
Trustees at fair value amounted to $41,228,169 (0.77% of net assets). Their
values have been estimated by the Board of Trustees in the absence of
readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of these
securities at October 31, 2000 aggregated $34,455,807. These securities may
also have certain restrictions as to resale.
(d) An officer of Scudder Kemper Investments, Inc. serves on the board of this
security.
(e) The cost for federal income tax purposes was 3,512,856,482. At October 31,
2000, net unrealized appreciation for all securities based on tax cost was
$1,862,072,261. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of value over tax cost of
$2,117,043,975 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value of
$254,971,714.
<TABLE>
<CAPTION>
ACRONYM NAME
------- ---------------------------
<S> <C> <C> <C>
ADR American Depository Receipt
</TABLE>
The accompanying notes are an integral part of the financial statements. 17
<PAGE> 18
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2000
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $3,512,856,482) $5,374,928,743
------------------------------------------------------------------------------
Receivable for investments sold 851,463
------------------------------------------------------------------------------
Dividend receivable 85,254
------------------------------------------------------------------------------
Interest receivable 62,798
------------------------------------------------------------------------------
Receivable for Fund shares sold 24,360,995
------------------------------------------------------------------------------
Foreign taxes recoverable 6,800
------------------------------------------------------------------------------
TOTAL ASSETS 5,400,296,053
------------------------------------------------------------------------------
LIABILITIES
Due to custodian bank 4,050
------------------------------------------------------------------------------
Payable for investments purchased 49,191,485
------------------------------------------------------------------------------
Payable for Fund shares redeemed 12,238,312
------------------------------------------------------------------------------
Accrued management fee 2,408,434
------------------------------------------------------------------------------
Other accrued expenses 5,341,575
------------------------------------------------------------------------------
TOTAL LIABILITIES 69,183,856
------------------------------------------------------------------------------
NET ASSETS, AT VALUE $5,331,112,197
------------------------------------------------------------------------------
NET ASSETS
Net assets consist of:
Undistributed net investment income $ 1,128,243
------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
transactions 1,862,072,261
------------------------------------------------------------------------------
Accumulated net realized gain (loss) 482,129,534
------------------------------------------------------------------------------
Paid-in-capital 2,985,782,159
------------------------------------------------------------------------------
NET ASSETS, AT VALUE $5,331,112,197
------------------------------------------------------------------------------
NET ASSET VALUE AND OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($3,710,596,667 / 127,182,017 shares outstanding of
beneficial interest, $.01 par value, unlimited number of
shares authorized) $29.18
------------------------------------------------------------------------------
Maximum offering price per share (100/94.25 of $29.18) $30.96
------------------------------------------------------------------------------
CLASS B SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share
($1,306,842,917 / 49,393,803 shares outstanding of
beneficial interest, $.01 par value, unlimited number of
shares authorized) $26.46
------------------------------------------------------------------------------
CLASS C SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share ($254,680,680
/ 9,465,277 shares outstanding of beneficial interest,
$.01 par value, unlimited number of shares authorized) $26.91
------------------------------------------------------------------------------
CLASS I SHARES
Net asset value, offering and redemption price per share
($58,991,933 / 1,988,036 shares outstanding of beneficial
interest, $.01 par value, unlimited number of shares
authorized) $29.67
------------------------------------------------------------------------------
</TABLE>
18 The accompanying notes are an integral part of the financial statements.
<PAGE> 19
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Year ended October 31, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 2,871,033
------------------------------------------------------------------------------
Interest 30,266,102
------------------------------------------------------------------------------
Total income 33,137,135
------------------------------------------------------------------------------
Expenses:
Management fee 26,538,107
------------------------------------------------------------------------------
Services to shareholders 11,501,225
------------------------------------------------------------------------------
Custodian fees 155,737
------------------------------------------------------------------------------
Distribution services fees 10,291,798
------------------------------------------------------------------------------
Administrative services fees 11,510,988
------------------------------------------------------------------------------
Auditing 116,226
------------------------------------------------------------------------------
Legal 88,671
------------------------------------------------------------------------------
Trustees' fees and expenses 22,708
------------------------------------------------------------------------------
Reports to shareholders 1,220,836
------------------------------------------------------------------------------
Registration fees 670,108
------------------------------------------------------------------------------
Other 117,970
------------------------------------------------------------------------------
Total expenses, before expense reductions 62,234,374
------------------------------------------------------------------------------
Expense reductions (364,190)
------------------------------------------------------------------------------
Total expenses, after expense reductions 61,870,184
------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (28,733,049)
------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from investments 661,441,591
------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
on investment transactions 662,741,450
------------------------------------------------------------------------------
Net gain (loss) on investment transactions 1,324,183,041
------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $1,295,449,992
------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 19
<PAGE> 20
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
------------------------------------------
2000 1999
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $ (28,733,049) $ (10,480,844)
----------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions 661,441,591 287,902,266
----------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
transactions during the period 662,741,450 945,575,003
----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 1,295,449,992 1,222,996,425
----------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net realized gains:
Class A (209,023,586) (97,069,394)
----------------------------------------------------------------------------------------------------------
Class B (56,601,619) (12,197,350)
----------------------------------------------------------------------------------------------------------
Class C (9,101,930) (1,786,861)
----------------------------------------------------------------------------------------------------------
Class I (3,494,975) (1,658,273)
----------------------------------------------------------------------------------------------------------
Fund share transactions:
Proceeds from shares sold 4,667,436,087 3,259,381,706
----------------------------------------------------------------------------------------------------------
Reinvestment of distributions 235,496,566 92,103,833
----------------------------------------------------------------------------------------------------------
Cost of shares redeemed (3,394,699,088) (2,904,110,336)
----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions 1,508,233,565 447,375,203
----------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 2,525,461,447 1,557,659,750
----------------------------------------------------------------------------------------------------------
Net assets at beginning of period 2,805,650,750 1,247,991,000
----------------------------------------------------------------------------------------------------------
NET ASSETS AT END OF PERIOD (including undistributed net
investment income of $1,128,243 at October 31, 2000) $ 5,331,112,197 2,805,650,750
----------------------------------------------------------------------------------------------------------
</TABLE>
20 The accompanying notes are an integral part of the financial statements.
<PAGE> 21
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
YEARS ENDED OCTOBER 31,
------------------------------------------------------------
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $21.29 11.77 13.13 13.16 14.63
---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(a) (.09) (.06) (.04) (.06) (.08)
---------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment
transactions 9.92 10.65 .82 2.14 .74
---------------------------------------------------------------------------------------------------------------------
Total from investment operations 9.83 10.59 .78 2.08 .66
---------------------------------------------------------------------------------------------------------------------
Less distributions from net realized gain on
investment transactions (1.94) (1.07) (2.14) (2.11) (2.13)
---------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $29.18 21.29 11.77 13.13 13.16
---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%)(B) 47.06 94.71 8.21 17.11 7.83
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 3,710,597 2,233,116 1,083,864 1,074,848 971,140
---------------------------------------------------------------------------------------------------------------------
Ratio of expense before expense reductions (%) 1.00 .93 .92 .89 .89
---------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .99 .93 .92 .89 .89
---------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.30) (.38) (.37) (.42) (.62)
---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 59 59 146 192 121
---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
YEARS ENDED OCTOBER 31,
------------------------------------------------------------
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $19.62 11.03 12.54 12.77 14.39
---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(a) (.36) (.22) (.14) (.18) (.19)
---------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment
transactions 9.14 9.88 .77 2.06 .70
---------------------------------------------------------------------------------------------------------------------
Total from investment operations 8.78 9.66 .63 1.88 .51
---------------------------------------------------------------------------------------------------------------------
Less distributions from net realized gain on
investment transactions (1.94) (1.07) (2.14) (2.11) (2.13)
---------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $26.46 19.62 11.03 12.54 12.77
---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%)(B) 45.49 92.59 7.24 15.91 6.76
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 1,306,843 465,164 127,238 105,299 69,712
---------------------------------------------------------------------------------------------------------------------
Ratio of expense before expense reductions (%) 1.87 1.92 1.85 1.85 1.87
---------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.86 1.92 1.85 1.85 1.87
---------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (1.30) (1.37) (1.30) (1.38) (1.60)
---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 59 59 146 192 121
---------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 22
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C
YEARS ENDED OCTOBER 31,
------------------------------------------------------------
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $19.91 11.17 12.64 12.85 14.45
---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(a) (.35) (.21) (.14) (.17) (.18)
---------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment
transactions 9.29 10.02 .81 2.07 .71
---------------------------------------------------------------------------------------------------------------------
Total from investment operations 8.94 9.81 .67 1.90 .53
---------------------------------------------------------------------------------------------------------------------
Less distributions from net realized gain on
investment transactions (1.94) (1.07) (2.14) (2.11) (2.13)
---------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $26.91 19.91 11.17 12.64 12.85
---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%)(B) 45.72 92.68 7.57 15.98 6.88
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 254,681 73,285 17,500 9,572 4,127
---------------------------------------------------------------------------------------------------------------------
Ratio of expense before expense reductions (%) 1.76 1.82 1.81 1.82 1.82
---------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.75 1.82 1.81 1.82 1.82
---------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (1.22) (1.27) (1.26) (1.35) (1.55)
---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 59 59 146 192 121
---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS I
YEARS ENDED OCTOBER 31,
------------------------------------------------------------
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $21.54 11.86 13.19 13.20 14.64
---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(a) -- (.02) (.02) (.04) (.07)
---------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment
transactions 10.07 10.77 .83 2.14 .76
---------------------------------------------------------------------------------------------------------------------
Total from investment operations 10.07 10.75 .81 2.10 .69
---------------------------------------------------------------------------------------------------------------------
Less distributions from net realized gain on
investment transactions (1.94) (1.07) (2.14) (2.11) (2.13)
---------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $29.67 21.54 11.86 13.19 13.20
---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%)(B) 47.62 95.39 8.44 17.23 8.06
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 58,992 34,086 19,389 20,004 17,834
---------------------------------------------------------------------------------------------------------------------
Ratio of expense before expense reductions (%) .70 .65 .67 .74 .76
---------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .69 .64 .67 .74 .76
---------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.01) (.09) (.12) (.27) (.49)
---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 59 59 146 192 121
---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total return does not reflect the effect of sales charge.
22
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1 SIGNIFICANT
ACCOUNTING POLICIES 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 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
23
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS
sub-custodian bank, receives delivery of the
underlying securities, the amount of which at the
time of purchase and each subsequent business day
is required to be maintained at such a level that
the market value is equal to at least the principal
amount of the repurchase price plus accrued
interest.
FEDERAL INCOME TAXES. The Fund's policy is to
comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to
regulated investment companies and to distribute
all of its taxable income to its shareholders.
Accordingly, the Fund paid no federal income taxes
and no federal income tax provision was required.
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 accounting principles
generally accepted in the United States. 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.
--------------------------------------------------------------------------------
2 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 0.58%
of the first $250 million of average daily net
assets declining to 0.42% of average daily net
assets in excess of $12.5 billion. The Fund
incurred a management fee of $26,538,107 for the
year ended October 31, 2000, which was equivalent
to an annualized effective rate of .52%.
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,
2000 are $1,319,675.
For services under the distribution services
agreement, the Fund pays KDI a fee of 0.75% 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
24
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS
year ended October 31, 2000 are $12,051,120, of
which $911,545 is unpaid at October 31, 2000.
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with KDI. For
providing information and administrative services
to Class A, Class B and Class C shareholders, the
Fund pays KDI a fee at an annual rate of up to
0.25% 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, 2000
are $10,239,705, of which $910,000 is unpaid at
October 31, 2000. In addition $12,176 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
$9,374,201 for the year ended October 31, 2000, of
which $2,630,604 is unpaid at October 31, 2000.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. For the year ended October 31,
2000, the Fund made no payments to its officers and
incurred trustees' fees of $16,708 to independent
trustees.
--------------------------------------------------------------------------------
3 INVESTMENT
TRANSACTIONS For the year ended October 31, 2000, investment
transactions (excluding short-term instruments) are
as follows:
Purchases $3,470,104,783
Proceeds from
sales 2,639,575,966
25
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
4 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
2000 1999
----------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 110,771,235 $ 3,303,945,167 163,261,120 $ 2,717,318,576
--------------------------------------------------------------------------------------
Class B 36,855,901 1,001,142,411 19,259,308 307,696,447
--------------------------------------------------------------------------------------
Class C 10,169,449 283,055,058 11,890,925 187,902,836
--------------------------------------------------------------------------------------
Class I 1,650,164 50,203,913 1,946,063 32,607,572
--------------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 6,254,930 170,697,727 5,613,804 77,077,534
--------------------------------------------------------------------------------------
Class B 2,117,394 52,850,101 916,082 11,698,363
--------------------------------------------------------------------------------------
Class C 333,377 8,453,766 129,269 1,674,030
--------------------------------------------------------------------------------------
Class I 126,446 3,494,972 119,502 1,653,906
--------------------------------------------------------------------------------------
SHARES REDEEMED
Class A (95,745,059) (2,857,442,699) (156,881,683) (2,591,141,873)
--------------------------------------------------------------------------------------
Class B (12,203,797) (334,256,462) (8,909,496) (110,192,458)
--------------------------------------------------------------------------------------
Class C (4,718,836) (131,511,103) (9,905,701) (154,042,977)
--------------------------------------------------------------------------------------
Class I (1,371,216) (42,399,286) (2,117,558) (34,876,753)
--------------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 987,628 29,089,538 837,002 13,856,275
--------------------------------------------------------------------------------------
Class B (1,081,227) (29,089,538) (902,208) (13,856,275)
--------------------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE
TRANSACTIONS $ 1,508,233,565 $ 447,375,203
--------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
5 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 year
ended October 31, 2000, the Fund's custodian fees
and transfer agent fees were reduced by $41,144 and
$323,046, respectively, under these arrangements.
--------------------------------------------------------------------------------
6 LINE OF CREDIT The Fund and several Kemper funds (the
"Participants") share in a $750 million revolving
credit facility with Chase Manhattan Bank for
temporary or emergency purposes, including the
meeting of redemption requests that otherwise might
require the untimely disposition of securities. The
Participants are charged an annual commitment fee
which is allocated, pro rata based 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 the
agreement.
26
<PAGE> 27
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, 2000, 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 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 October 31, 2000, by correspondence with the custodian or other
auditing procedures. 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, 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 LOGO]
Chicago, Illinois
December 15, 2000
27
<PAGE> 28
TAX INFORMATION
TAX INFORMATION (UNAUDITED)
The Fund paid distributions of $1.54 per share from net long-term capital gains
during its year ended October 31, 2000, of which 100% represents 20% rate gains.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$727,000,000 as capital gain dividends for its year ended October 31, 2000, 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 account, please call 1-800-621-1048.
28
<PAGE> 29
NOTES
29
<PAGE> 30
NOTES
30
<PAGE> 31
NOTES
31
<PAGE> 32
TRUSTEES&OFFICERS
<TABLE>
<S> <C> <C>
TRUSTEES OFFICERS
JOHN W. BALLANTINE MARK S. CASADY MAUREEN E. KANE
Trustee President Assistant Secretary
LEWIS A. BURNHAM PHILIP J. COLLORA CAROLINE PEARSON
Trustee Vice President and Secretary Assistant Secretary
LINDA C. COUGHLIN JOHN R. HEBBLE BRENDA LYONS
Trustee Treasurer Assistant Treasurer
DONALD L. DUNAWAY KATHRYN L. QUIRK
Trustee Vice President
ROBERT B. HOFFMAN WILLIAM F. TRUSCOTT
Trustee Vice President
DONALD R. JONES LINDA J. WONDRACK
Trustee Vice President
THOMAS W. LITTAUER
Chairman, Trustee
and Vice President
SHIRLEY D. PETERSON
Trustee
WILLIAM T. 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 AGENT STATE STREET BANK AND TRUST COMPANY
AND TRANSFER AGENT 225 Franklin Street
Boston, MA 02110
.............................................................................................
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
</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 Fund/Growth
Style prospectus.
KTF - 2 (12/22/00) 4830
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
