<PAGE> 1
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED APRIL 30, 1998
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
[LOGO]
Seeking growth of capital and income
KEMPER
BLUE CHIP FUND
"...In an uncertain market climate,
we found attractive valuations
and new opportunities. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
Economic Overview
5
Performance Update
8
Industry Sectors
9
Largest Holdings
10
Portfolio of Investments
13
Financial Statements
15
Notes to Financial Statements
19
Financial Highlights
22
Shareholders' Meeting
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER BLUE CHIP
FUND TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 1998
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 17.78%
CLASS B 17.30%
CLASS C 17.37%
LIPPER GROWTH & INCOME FUNDS CATEGORY AVERAGE* 17.38%
- --------------------------------------------------------------------------------
</TABLE>
Returns and rankings are historical and do not represent future performance.
Returns, rankings and net asset value fluctuate. Shares are redeemable at
current net asset value, which may be more or less than original cost.
* Lipper Analytical Services, Inc. returns and rankings are based upon changes
in net asset value with all dividends reinvested and do not include the
effect of sales charges and, if they had, results may have been less
favorable.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
4/30/98 10/31/97
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER BLUE CHIP
FUND CLASS A $18.22 $17.68
- --------------------------------------------------------------------------------
KEMPER BLUE CHIP
FUND CLASS B $18.15 $17.61
- --------------------------------------------------------------------------------
KEMPER BLUE CHIP
FUND CLASS C $18.25 $17.69
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</TABLE>
KEMPER BLUE CHIP
FUND RANKINGS
- --------------------------------------------------------------------------------
COMPARED TO ALL OTHER FUNDS IN THE LIPPER GROWTH AND INCOME FUNDS CATEGORY*
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1-YEAR #405 OF 657 FUNDS #452 OF 657 FUNDS #449 OF 657 FUNDS
- --------------------------------------------------------------------------------
5-YEAR #188 OF 260 FUNDS N/A N/A
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10-YEAR #110 OF 140 FUNDS N/A N/A
- --------------------------------------------------------------------------------
</TABLE>
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DIVIDEND REVIEW
- --------------------------------------------------------------------------------
DURING THE PERIOD, KEMPER BLUE CHIP FUND MADE THE FOLLOWING DISTRIBUTIONS PER
SHARE:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME DIVIDEND $.0925 $.0122 $.0178
- --------------------------------------------------------------------------------
SHORT-TERM CAPITAL GAIN $ 1.69 $ 1.69 $ 1.69
- --------------------------------------------------------------------------------
LONG-TERM CAPITAL GAIN $ .50 $ .50 $ .50
- --------------------------------------------------------------------------------
</TABLE>
TERMS TO KNOW
YOUR FUNDS' STYLE
EQUITY STYLE BOX
- --------------------------------------------------------------------------------
MORNINGSTAR EQUITY STYLE BOX
- --------------------------------------------------------------------------------
Source: Morningstar, Inc., Chicago, IL 312-696-6000. (Morningstar's Style Box
is based on a portfolio date as of April 30, 1998.) The Equity Style Box
placement is based on a fund's price-to-earnings and price-to-book ratio
relative to the S&P 500, as well as the size of the companies in which it
invests, or median market capitalization.
Please note that style boxes do not represent an exact assessment of risk and
do not represent future performance. Please consult the prospectus for a '
description of investment policies.
GROWTH STOCK The stock of a company whose earnings growth has consistently
exceeded the growth rate of the overall market and whose growth is expected to
continue or accelerate.
VALUE STOCK The stock of a company that is out of favor with investors because
the market underestimates its value or overlooks its potential.
VOLATILITY Characteristic of a security, commodity or market to rise or fall
sharply in price within a short period of time. A stock may be volatile because
the outlook for the company is particularly uncertain or because of various
other reasons.
GRAY MONDAY On Monday, October 27, 1997, turmoil in Southeast Asian markets
triggered a one-day drop of 7 percent in the U.S. equity market.
<PAGE> 3
ECONOMIC OVERVIEW
[SILVIA PHOTO]
DR. JOHN E. SILVIA IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.
HIS PRIMARY RESPONSIBILITIES INCLUDE ANALYSIS, MODELING AND FORECASTING OF
ECONOMIC DEVELOPMENTS AND FEDERAL RESERVE ACTIVITY THAT AFFECT FINANCIAL
MARKETS, ESPECIALLY INTEREST RATE TRENDS. THIS EFFORT INCLUDES CLOSE
COLLABORATION WITH BOTH INCOME AND EQUITY MUTUAL FUND MANAGERS AND PENSION FUND
MANAGERS. HE IS ALSO A MEMBER OF THE INVESTMENT POLICY AND STRATEGY COMMITTEE
FOR KEMPER FUNDS.
SILVIA HOLDS BACHELOR OF ARTS AND PH.D. DEGREES IN ECONOMICS FROM NORTHEASTERN
UNIVERSITY IN BOSTON AND HAS A MASTER'S DEGREE IN ECONOMICS FROM BROWN
UNIVERSITY IN PROVIDENCE, R.I. PRIOR TO HIS CAREER AT SCUDDER KEMPER, HE WAS
WITH THE HARRIS BANK AND ALSO TAUGHT AT INDIANA UNIVERSITY.
SCUDDER KEMPER INVESTMENTS, INC. IS THE INVESTMENT MANAGER FOR KEMPER FUNDS. IT
IS ONE OF THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS
WORLDWIDE, MANAGING MORE THAN $200 BILLION IN ASSETS GLOBALLY FOR MUTUAL FUND
INVESTORS, RETIREMENT AND PENSION PLANS, INSTITUTIONAL AND CORPORATE CLIENTS,
INSURANCE COMPANIES AND PRIVATE, FAMILY AND INDIVIDUAL ACCOUNTS. IT IS ONE OF
THE 10 LARGEST MUTUAL FUND COMPLEXES IN THE UNITED STATES.
DEAR SHAREHOLDERS,
Stable economic growth, low interest rates and sustained lower inflation have
continued to produce a beneficial market environment for investors in the second
quarter of 1998. Despite heightened sensitivity to earnings estimates and
announcements, the market continued to support financial assets. We expect this
favorable climate to continue -- in spite of the sensitivity -- at least over
the shorter term.
As always, expectations have been at the heart of the actions and reactions
that move the markets. Expectations appear to be high, as demonstrated by a
record flow of new cash into mutual funds. As of April 30, 1998, a record $5
trillion in mutual fund assets surpassed total assets of the nation's banks,
according to the Investment Company Institute, a trade organization that
monitors the mutual fund industry, and the Federal Reserve Bank in Washington.
Unfortunately, high expectations often combine with high anxiety -- today's
investors are attuned to even the smallest hint of economic change. The result
is volatility. Many who believe that our long-running bull market is too good to
be true or that stock prices are too high are wondering when the market will
reverse.
While a reversal may not be on the immediate horizon, investors are wise to
watch for several signs that change is underway: rising prices, indicating
higher inflation; repercussions of the Asian economic crisis on American
business, which could appear in the form of reduced earnings; and a continued
widening of our trade deficit, a serious imbalance caused by heightened American
demand for foreign goods and services.
On April 27, expectations were tested by reports that the Federal Reserve
Board ("the Fed") was considering a hike in interest rates. The markets reacted
immediately to this news, driving stock prices downward. But at its monetary
policy meeting on May 19, the Fed chose to leave interest rates alone. In the
coming months, the Fed could raise rates if inflation accelerates or if growth
appears to be too rapid compared to the Fed's expectations.
Our positive outlook for the short term is based primarily on the current
resiliency of our marketplace. The United States appears to be firmly planted in
the middle of an economic cycle, with no evidence of detrimental pressures that
might be associated with the market's phenomenal growth. We are not seeing price
increases for goods and services or a downturn in the housing market, both of
which we might expect late in an economic cycle.
Equities have continued to reward investors. The U.S. stock market, as
measured by the Standard & Poor's 500, gained nearly 14 percent in the first
quarter of 1998 and returned more than 13 percent year-to-date through the end
of May. Bonds have also rewarded investors in terms of real return, which is
total return less the rate of inflation. The high yield and corporate debt
fixed-income markets also have performed well.
U.S. economic growth, as measured by the gross domestic product (GDP)
growth rate, was slightly above 4 percent for the first quarter. Our general
expectation for the year is that growth in all of 1998 will increase between 2.5
and 3 percent over last year. In other words, the economy will remain strong,
but will slow down as the year progresses.
Consumer spending and corporate fixed investment have fueled the economy's
solid growth. Spending on both capital goods and high technology has been
strong. Corporate profits have grown between 5 and 10 percent, which appears to
be acceptable in an environment of stable interest rates. U.S. employment growth
has ranged from 2 to 2.25 percent, continuing to exceed expectations. Consumer
confidence has continued to hit near all-time highs. The increase in output
prices, an indicator of inflation measured by the Consumer Price Index (CPI),
has remained at 1.5 to 2 percent.
Adding to the good news, all seems to be quiet on the domestic policy
front. At the end of February, the U.S. federal budget deficit essentially
vanished. Recent efforts to reduce the deficit, combined with higher federal
revenues due to the robust economy, have left us with an expected budget
surplus of $60 billion to $80 billion for fiscal 1998. To date, our Democratic
president and Republican Congress have not agreed on any significant
legislation regarding tax credits, spending cuts or health care that could
threaten the newfound federal budget surplus.
Can we expect a little more excitement from overseas? A full-scale global
recession from last year's Asian economic crisis seems unlikely at this point.
The crisis has yet
3
<PAGE> 4
ECONOMIC OVERVIEW
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ECONOMIC GUIDEPOSTS
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Economic activity is a key influence on investment performance and shareholder
decision-making. Periods of recession or boom, inflation or deflation, credit
expansion or credit crunch have a significant impact on mutual fund
performance.
The following are some significant economic guideposts and their
investment rationale that may help your investment decision-making. The 10-year
Treasury rate and the prime rate are prevailing interest rates. The other data
report year-to-year percentage changes.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (5/31/98) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1) 5.65 5.81 6.49 6.91
PRIME RATE(2) 8.5 8.5 8.5 8.25
INFLATION RATE(3)* 1.5 1.89 2.23 2.89
THE U.S. DOLLAR(4) 6.86 10.26 5.52 9.15
CAPITAL GOODS ORDERS(5)* 9.28 10.28 7.16 3.48
INDUSTRIAL PRODUCTION(5)* 3.85 5.76 4.28 3.79
EMPLOYMENT GROWTH(6) 2.61 2.8 2.5 2.13
</TABLE>
(1) Falling interest rates in recent years have been a big plus for financial
assets.
(2) The interest rate that commercial lenders charge their best borrowers.
(3) Inflation reduces an investor's real return. In the last five years,
inflation has been as high as 6 percent. The low, moderate inflation of the
last few years has meant high real returns.
(4) Changes in the exchange value of the dollar impact U.S. exporters and the
value of U.S. firms' foreign profits.
(5) These influence corporate profits and equity performance.
(6) An influence on family income and retail sales.
* Data as of April 30, 1998.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
to hurt most U.S. businesses and investors. Quite the contrary. While the mere
threat of repercussions from the Asian crisis added to the anxiety mentioned
earlier, it has also had the effect of keeping U.S. interest rates and prices in
check, making the U.S. economy all the more attractive to investors around the
world.
In the global economy, the U.S. dollar continues to appreciate in value
compared to other currencies. In fact, more capital is flowing into U.S. markets
as investors generally avoid Asia. Europe also has been benefiting from the
crisis. Canada, which is a commodity-producing exporter, has been somewhat
negatively affected as commodity prices have fallen. Political unrest in
Indonesia, nuclear tests in India and Pakistan and economic turmoil in Russia
have been keeping international investors on the edges of their seats.
Other major developments abroad include the final selection of countries to
participate in Europe's single currency next year. Many European countries are
adopting more restrictive fiscal policy and reducing inflation in anticipation
of the momentous European Economic and Monetary Union (EMU). But after the EMU
is established in 1999, tensions may indeed mount as countries work to adapt to
the new structure.
As we approach the turn of the century, one caveat remains: Don't
underestimate the potential of the Year 2000 computer code problem. It appears
that a significant number of federal government agencies will not meet the
criteria necessary to avoid the problem. Many businesses are revealing that
billions of dollars are being spent on the situation. Some experts say a global
recession is in store. Others adamantly disagree. In any event, we may indeed
see a reduction in capital spending toward the end of 1998 and the first half of
next year as companies focus on fixing existing computers rather than on
purchasing new equipment. We'll keep you posted!
Thank you for your continued support. We appreciate the opportunity to
serve your investment needs.
Sincerely,
/s/ John E. Silvia
JOHN E. SILVIA
June 10, 1998
4
<PAGE> 5
PERFORMANCE UPDATE
[CHESTER PHOTO]
TRACY MCCORMICK CHESTER JOINED SCUDDER KEMPER INVESTMENTS, INC. IN 1994 AND IS A
MANAGING DIRECTOR. SHE IS ALSO A VICE PRESIDENT AND LEAD PORTFOLIO MANAGER OF
KEMPER BLUE CHIP FUND. MCCORMICK CHESTER RECEIVED BOTH HER B.A. AND M.B.A.
DEGREES FROM MICHIGAN STATE UNIVERSITY.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
DURING THE PERIOD FROM OCTOBER 31, 1997 THROUGH APRIL 30, 1998, THE MARKET
PERFORMED ROBUSTLY BUT EXPERIENCED A GREAT DEAL OF VOLATILITY. LEAD PORTFOLIO
MANAGER TRACY MCCORMICK CHESTER DISCUSSES HOW SHE POSITIONED THE FUND TO TURN
IN ABOVE-AVERAGE PERFORMANCE RELATIVE TO ITS PEER GROUP.
Q HOW WOULD YOU DESCRIBE THE STOCK MARKET DURING THESE PAST SIX MONTHS?
A Overall, the stock market posted strong gains, but not without
considerable volatility along the way. The Russell 1000 Index, a benchmark for
large-capitalization growth stocks, returned 21.93 percent, and the S&P 500
Index gained 22.50 percent. The market favored large-cap stocks over smaller
company issues, and the U.S. outperformed international markets. These gains
were made in a choppy and rotational market climate. We began the semiannual
reporting period in the wake of "Gray Monday," the start of a steep global
correction. Turmoil in Asia cast a shadow of uncertainty across domestic and
international markets, hitting technology stocks with particular force. Concerns
that the Federal Reserve would raise interest rates added to market anxiety.
In the first quarter of 1998, we saw the tide change dramatically. The fourth
quarter correction gave way to a fast-paced rally here in the United States. But
the first quarter's bounce back was still a rocky ride. All in all, the past
half year again proves the importance of keeping a long-term focus. Investors
who held on ended up with tidy gains for the semiannual period.
Q HOW DID THE FUND PERFORM?
A The fund turned in solid returns. For the six months ended April 30, 1998,
Kemper Blue Chip Fund returned 17.78 percent (Class A shares unadjusted for any
sales charge). Relative to our peers, the fund did quite well. It outpaced the
Lipper Growth and Income category average of 17.38 percent for the semiannual
period.
Q HOW DID YOU POSITION THE FUND DURING THIS CHANGING MARKET?
A We were good in anticipating the crisis in Asia, and the portfolio had
limited exposure to the troubled Asian markets. In the wake of the turmoil in
Asia, the market drove down prices of many stocks, most notably technology,
money-center banks, and cyclicals. In an uncertain market climate, we found
attractive valuations and new opportunities. For instance, in technology, we
built positions in quality companies including Hewlett-Packard, Sun Microsystems
and IBM. Our conviction in these firms paid off, and the fund is reaping returns
from all three. In addition to being good stocks, they also enhance our
diversification among technology subsectors, which, in turn, helps us mitigate
potential volatility.
We also found good values in cyclical stocks. Our research led us to two
chemical companies, PPG Industries and United Kingdom based Imperial Chemical
Industries. Both are exceptionally managed companies with good fundamentals.
Moreover, each is in the midst of restructuring, a potential catalyst for
improved growth.
5
<PAGE> 6
PERFORMANCE UPDATE
Q HOW DO YOU FIND STOCKS THAT PERFORM WELL OVER THE LONG-TERM?
A Research and discipline are key tools in crafting a solid portfolio. We
add value through intensive research. Our goal is to get in front of the
conventional Wall Street wisdom, and uncover stocks with great growth potential
that the market is overlooking. Shareholders benefit by our early recognition of
changing conditions, both within specific companies and across industries.
Through this intensive process, we hone in on companies undergoing management or
other structural changes, and on those launching new products. On an industry
level, we seek out those areas poised for significant events, such as
consolidations.
The second key is discipline. We seek out companies that have sustainable
earnings growth, and good market positions or potential. We don't let ourselves
get carried away by the market's vicissitudes. This unflinching adherence to
growth-at-the-right price (GARP) means that we may miss out on some short-term
gains. By searching out stocks with good fundamentals and sensible valuations,
we believe that we'll generate healthy, long-term returns. And our strict
discipline gets us out of stocks before their valuations get too high.
Q COULD YOU GIVE US SOME EXAMPLES OF THOSE PRINCIPLES IN ACTION?
A Certainly. Our attentiveness to company and market trends led us to
several companies undergoing restructuring. For instance, we own Stanley Works,
a global hardware firm that boasts a strong franchise and new management, and
R.R. Donnelley & Sons, a publishing firm which is also reaping the benefits of
restructuring. We also were attuned to management changes and restructuring at
Federal-Mogul, an auto-parts supplier. By recognizing these catalysts for growth
early, we have entered these stocks when they were still "value" stocks. If our
analysis is correct, we will reap benefits as the market recognizes the improved
"growth" and can justify higher valuation metrics.
Another good example of where our research paid off is ALZA, a
pharmaceutical manufacturer. We saw the potential of its drug delivery
technology before the company came into the spotlight, and added the stock to
the portfolio more than a year and a half ago. This year, we've seen ALZA
skyrocket, posting significant gains. However, we're not going to let
ourselves get overly attached. As its valuations rise, we've reduced the
fund's exposure.
Another example is General Motors -- Class H. We had General Motors --
Class H in the portfolio a couple of years ago, and became familiar with the
company. When GM Hughes Electronics segmented into several discrete units, we
returned to the satellite broadcasting stub, because we understood its value.
It wasn't covered extensively by Wall Street, but is now emerging as a
well-regarded play on satellite broadcast services.
Our research also drew us to Alcatel, an attractively valued American
depository receipt from a French telecommunications company. Alcatel has been
making positive strategic moves, such as spinning off divisions. In many ways,
Alcatel harkens back to what Lucent Technologies was two years ago.
Q WHAT HASN'T TURNED OUT AS WELL AS YOU'D HAVE LIKED?
A The fund's semiannual performance did trail the overall market, as well as
that of its benchmark, the Russell 1000 Index. In some cases, our more
conservative outlook held us back. We were surprised by how quickly the market
shrugged off the Asian situation. We had expected that money-center banks would
be more vulnerable, given their Asian exposure. These stocks performed better
than we had anticipated. We do own some of the key names, such as Nationsbank,
but we've gravitated towards high-quality regional banks instead.
Because of our valuation discipline, we were sidelined for portions of the
market rally. Our stock selection process focuses on "blue chip"
companies--established firms with hefty market capitalizations. The uncertainty
generated by the fourth quarter's correction made many investors skittish, and
caused them to seek a safe haven in large-company stocks. This flight caused
prices to rise, and pushed the multiples of some stocks out of a zone that we
believe is attractive and sustainable. We didn't participate fully in the
consumer staples run up.
We also reduced our health care exposure, because of valuation concerns.
We did enjoy nice gains from American Home Products, McKesson and ALZA which
were among the fund's briskly performing health care names.
Q WHAT STOCKS AND SECTORS HOLD APPEAL?
A We've been finding good values in insurance names. We think that going
forward insurance stocks could hold considerable potential. The insurance
industry is trending toward consolidation; and
6
<PAGE> 7
PERFORMANCE UPDATE
as bank deregulations continue, insurance stocks will continue to gain appeal.
During the semiannual period, we increased the fund's positions in American
General Corp. and Jefferson-Pilot Corp. We've also added new names to the
lineup, such as Lincoln National and Torchmark. We have a lot of conviction in
Torchmark, a provider of insurance and financial services, including direct
response marketing for banks. Its valuations are great and it counts among the
fund's largest holdings. In keeping with the fund's focus on income as well as
growth, we have also built up a small position (about two percent) in Real
Estate Investment Trusts (REITs) to bolster yield.
We've also been increasing our energy stake. The short-term, more
emotional outlook surrounding energy is poor, but the valuations are good. The
stocks are cheap, in terms of price and yield, and any sort of positive news
could generate a marked impact. (We've built up energy to a slightly
over-market weight.) During the semiannual period, we increased our existing
holdings (Chevron Corp., Exxon Corp.) and added some new names, including
Atlantic Richfield and Texaco.
The fund also has telecommunications exposure, favoring long distance
firms such as Sprint and WorldCom over regional bell operating companies. We
think that the telecommunications sector will continue to thrive in the current
economic climate. We've returned to Cincinnati Bell with considerable
conviction--it's the fund's largest position. The company is nicely diversified,
with direct marketing billing as well as regional telecommunication services.
Q HOW DO YOU FEEL ABOUT THE MARKET GOING FORWARD?
A We continue to be very positive about the long-term growth prospects of
the U.S. equity market. However, short-term volatility will continue to be par
for the course, and investors need to be prepared for ups and downs. By taking a
stock-by-stock approach, we are confident that our focus on well-researched,
large-cap companies will continue to provide shareholders with a reliable
investment vehicle.
7
<PAGE> 8
INDUSTRY SECTORS
A SIX-MONTH COMPARISON
Data show the percentage of the common stocks in the portfolio that each sector
represented on April 30, 1998, and on October 31, 1997.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER BLUE CHIP FUND KEMPER BLUE CHIP FUND
ON 4/30/98 ON 10/31/97
<S> <C> <C>
CONSUMER NONDURABLES 19.0% 24.6%
FINANCE 18.7% 20.5%
TECHNOLOGY 13.4% 13.1%
CAPITAL GOODS 9.8% 7.3%
ENERGY 9.3% 8.2%
HEALTH CARE 9.0% 12.1%
BASIC INDUSTRIES 6.4% 3.0%
UTILITIES 6.0% 4.8%
CONSUMER DURABLES 4.5% 1.5%
TRANSPORTATION 3.9% 4.9%
</TABLE>
A COMPARISON WITH THE RUSSELL 1000 INDEX*
Data show the percentage of the common stocks in the portfolio that each sector
of Kemper Blue Chip Fund represented on April 30, 1998, compared to the industry
sectors that make up the fund's benchmark, the Russell 1000 Index.
[RUSSELL COMPARISON BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER BLUE CHIP FUND RUSSELL 1000 INDEX
ON 4/30/98 ON 4/30/98
<S> <C> <C>
CONSUMER NONDURABLES 19.0% 20.6%
FINANCE 18.7% 18.9%
TECHNOLOGY 13.4% 14.6%
CAPITAL GOODS 9.8% 8.5%
ENERGY 9.3% 7.4%
HEALTH CARE 9.0% 11.8%
BASIC INDUSTRIES 6.4% 4.5%
UTILITIES 6.0% 9.8%
CONSUMER DURABLES 4.5% 2.5%
TRANSPORTATION 3.9% 1.4%
</TABLE>
* The Russell 1000 Index is an unmanaged capitalization weighted price only
index comprised of the largest capitalized U.S. companies whose common stocks
are traded in the United States. This large capitalization market oriented
index is highly correlated with the S&P 500 Stock Index.
8
<PAGE> 9
LARGEST HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS*
REPRESENTING 17.8 PERCENT OF THE FUND'S TOTAL NET ASSETS ON APRIL 30, 1998
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Holdings Percent
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Cincinnati Bell, Inc. Provides telecommunications services, information 2.0%
systems, and marketing services.
2. Hewlett-Packard Designs, manufactures, markets and services a broad 1.9%
array of precision electronic instruments and systems
for measurement, analysis and computation.
3. CIGNA Corp. A leading provider of insurance and related financial 1.9%
services throughout the United States and the world.
4. International Business Manufactures computers and computer-related products. 1.9%
Machines (IBM)
5. American General Corp. One of the nations largest consumer financial services 1.7%
organizations. It is a leading provider of retirement
annuities, consumer loans, and life insurance.
6. Torchmark Corp. An insurance and diversified financial services holding 1.7%
company engaged in the sale of individual and group
life and health insurance, annuities, financial
planning services and investment products.
7. Imperial Chemical Industries A United Kingdom based manufacturer of industrial 1.7%
chemicals, materials and paints.
8. Stanley Works A worldwide producer of tools, hardware and specialty 1.7%
hardware for consumer, home improvement, industrial and
professional use.
9. PPG Industries A global manufacturer of automotive, industrial and 1.7%
architectural coatings, glass and specialty chemicals.
10. American Home Products Engaged in the manufacture and marketing of health care 1.6%
products, including pharmaceuticals, consumer health
products and medical supplies.
</TABLE>
*Portfolio composition and holdings are subject to change.
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
KEMPER BLUE CHIP FUND
PORTFOLIO OF INVESTMENTS AT APRIL 30, 1998 (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BASIC INDUSTRIES--6.2% Bowater, Inc. 120,000 $ 6,713
Imperial Chemical Industries, PLC 140,000 10,176
Monsanto Co. 120,000 6,345
PPG Industries 140,000 9,896
Weyerhaeuser Co. 75,000 4,322
--------------------------------------------------------------------------
37,452
- -------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--9.5% Corning, Inc. 160,000 6,400
Emerson Electric Co. 80,900 5,147
General Electric Co. 100,400 8,547
General Motors Corp.--Class H 165,000 9,116
Raytheon Co. 149,368 8,243
Sundstrand Corp. 85,000 5,870
Textron, Inc. 120,000 9,390
U.S. Industries 175,000 4,747
--------------------------------------------------------------------------
57,460
- -------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--11.6% (a)CBS Corp. 200,000 7,125
(a)Consolidated Stores Corp. 190,000 7,600
J.C. Penney, Inc. 100,000 7,106
May Department Stores Co. 111,700 6,890
(a)Mirage Resorts, Inc. 220,000 4,854
Newell Co.
common stock 105,000 5,073
convertible preferred 62,000 3,550
(a)Proffitt's, Inc. 150,000 5,963
R.R. Donnelley & Sons Co. 199,000 8,768
(a)Univision Communications, Inc. 176,900 6,777
Walt Disney Co. 50,000 6,216
--------------------------------------------------------------------------
69,922
- -------------------------------------------------------------------------------------------------------------------
CONSUMER DURABLES--4.4% Federal-Mogul Corp.
common stock 40,000 2,588
convertible preferred 80,000 5,750
Goodyear Tire & Rubber Co. 113,200 7,924
Stanley Works 198,500 10,161
--------------------------------------------------------------------------
26,423
- -------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--6.9% Dial Corp. 341,500 8,324
H.J. Heinz Co. 80,000 4,360
International Flavors & Fragrances 100,000 4,894
Kimberly-Clark Corp. 135,000 6,851
McCormick & Co. 270,000 9,248
(a)MGM Grand 143,200 4,833
Procter & Gamble Co. 39,000 3,205
--------------------------------------------------------------------------
41,715
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ENERGY--9.1% Atlantic Richfield Co. 110,000 $ 8,580
Chevron Corp. 90,000 7,442
Enron Corp. 160,000 7,870
Exxon Corp. 75,000 5,470
Halliburton Co. 60,000 3,300
Mobil Corp. 112,600 8,895
Texaco 140,000 8,610
Unocal Corp. 111,000 4,544
--------------------------------------------------------------------------
54,711
- -------------------------------------------------------------------------------------------------------------------
FINANCE--18.3% American Express Co. 22,000 2,244
American General Corp. 155,000 10,327
AmSouth Bancorporation 60,000 3,742
Beneficial Corp. 20,000 2,608
Boston Properties Inc. 158,600 5,244
CIGNA Corp. 56,200 11,630
Compass Bancshares 99,200 4,811
Equity Residential Properties Trust 70,000 3,439
Federal National Mortgage Association 75,000 4,491
First Chicago NBD Corp. 30,000 2,786
Fleet Financial Group, Inc. 28,800 2,488
General Growth Properties, Inc. 84,800 3,042
Jefferson-Pilot Corp. 165,000 9,683
KeyCorp 115,000 4,564
Lincoln National Corp. 70,000 6,217
Mellon Bank Corp. 45,000 3,240
NationsBank 50,000 3,788
Summit Bancorp 50,000 2,506
Torchmark Corp. 230,000 10,249
Travelers Group 50,000 3,059
Washington Mutual, Inc. 85,400 5,983
Wells Fargo & Co. 10,000 3,685
--------------------------------------------------------------------------
109,826
- -------------------------------------------------------------------------------------------------------------------
HEALTH CARE--8.9% ALZA Corp. 40,000 1,917
Abbott Laboratories 85,000 6,216
American Home Products Corp. 105,000 9,778
Baxter International, Inc. 145,000 8,038
Bristol-Myers Squibb Co. 57,000 6,035
(a)Crescendo Pharmaceutical Corp. 6,182 77
(a)HEALTHSOUTH Corp. 155,000 4,679
McKesson Corp.
common stock 20,000 1,414
convertible preferred 30,000 2,929
Schering-Plough Corp. 90,200 7,227
(a)Wellpoint Health Networks 68,100 4,912
--------------------------------------------------------------------------
53,222
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TECHNOLOGY--13.1% Alcatel Alsthom 195,000 $ 7,069
(a)Cadence Design Systems 100,000 3,631
(a)Cisco Systems 45,000 3,296
Computer Sciences Corp. 60,000 3,165
(a)Gartner Group 130,000 4,306
Harris Corp. 110,000 5,321
Hewlett-Packard Co. 155,000 11,673
International Business Machines Corp. 100,000 11,588
Motorola 105,000 5,841
(a)Seagate Technology 100,000 2,669
(a)Sterling Commerce, Inc. 75,000 3,192
(a)Sun Microsystems 200,400 8,254
(a)Teradyne, Inc. 65,000 2,373
Texas Instruments 100,000 6,406
--------------------------------------------------------------------------
78,784
- -------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--3.8% CSX Corp. 140,000 7,350
Canadian Pacific, Ltd. 175,000 5,152
Norfolk Southern Corp. 160,000 5,350
Union Pacific Corp., convertible
preferred 95,000 5,011
--------------------------------------------------------------------------
22,863
- -------------------------------------------------------------------------------------------------------------------
UTILITIES--5.9% AT&T 65,000 3,904
Ameritech Corp. 114,000 4,852
Cincinnati Bell, Inc. 309,100 11,823
SBC Communications, Inc. 127,000 5,263
Sprint Corp. 65,000 4,440
(a)WorldCom, Inc. 125,000 5,348
--------------------------------------------------------------------------
35,630
--------------------------------------------------------------------------
TOTAL COMMON STOCKS--97.7%
(Cost: $514,634) 588,008
--------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL
CONVERTIBLE CORPORATE OBLIGATION AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HEALTH CARE--.8% ALZA Corp., 5.00%, 2006
(Cost: $3,196) $3,200 4,392
--------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
MONEY MARKET
INSTRUMENT--2.3%
Yield--5.49% to 5.64%
Due--May 1998
(Cost: $13,974) 14,000 13,975
--------------------------------------------------------------------------
TOTAL INVESTMENTS--100.8%
(Cost: $531,804) 606,375
--------------------------------------------------------------------------
LIABILITIES, LESS CASH AND OTHER ASSETS--(.8)% (4,590)
--------------------------------------------------------------------------
NET ASSETS--100% $601,785
--------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $531,804,000 for federal income tax purposes
at April 30, 1998, the gross unrealized appreciation was $79,475,000, the gross
unrealized depreciation was $4,904,000 and the net unrealized appreciation on
investments was $74,571,000.
See accompanying Notes to Financial Statements.
12
<PAGE> 13
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------
Investments, at value
(Cost: $531,804) $606,375
- ------------------------------------------------------------------------
Cash 2,016
- ------------------------------------------------------------------------
Receivable for:
Investments sold 3,501
- ------------------------------------------------------------------------
Fund shares sold 480
- ------------------------------------------------------------------------
Dividends and interest 700
- ------------------------------------------------------------------------
TOTAL ASSETS 613,072
- ------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ------------------------------------------------------------------------
Payable for:
Investments purchased 10,127
- ------------------------------------------------------------------------
Fund shares redeemed 335
- ------------------------------------------------------------------------
Management fee 280
- ------------------------------------------------------------------------
Distribution services fee 120
- ------------------------------------------------------------------------
Administrative services fee 125
- ------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 267
- ------------------------------------------------------------------------
Trustees' fees 33
- ------------------------------------------------------------------------
Total liabilities 11,287
- ------------------------------------------------------------------------
NET ASSETS $601,785
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- ------------------------------------------------------------------------
Paid-in capital $483,227
- ------------------------------------------------------------------------
Undistributed net realized gain on investments 42,598
- ------------------------------------------------------------------------
Net unrealized appreciation on investments 74,571
- ------------------------------------------------------------------------
Undistributed net investment income 1,389
- ------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $601,785
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
THE PRICING OF SHARES
- ------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($400,737 / 21,993 shares outstanding) $18.22
- ------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $19.33
- ------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($175,428 / 9,668 shares outstanding) $18.15
- ------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($18,788 / 1,029 shares outstanding) $18.25
- ------------------------------------------------------------------------
CLASS I SHARES
Net asset value and redemption price per share
($6,832 / 374 shares outstanding) $18.26
- ------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
13
<PAGE> 14
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------
NET INVESTMENT INCOME
- -----------------------------------------------------------------------------------------------
Dividends $ 4,246
- -----------------------------------------------------------------------------------------------
Interest 809
- -----------------------------------------------------------------------------------------------
Total investment income 5,055
- -----------------------------------------------------------------------------------------------
Expenses:
Management fee 1,471
- -----------------------------------------------------------------------------------------------
Distribution services fee 613
- -----------------------------------------------------------------------------------------------
Administrative services fee 612
- -----------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 997
- -----------------------------------------------------------------------------------------------
Professional fees 11
- -----------------------------------------------------------------------------------------------
Reports to shareholders 106
- -----------------------------------------------------------------------------------------------
Trustees' fees and other 66
- -----------------------------------------------------------------------------------------------
Total expenses 3,876
- -----------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,179
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
- -----------------------------------------------------------------------------------------------
Net realized gain on sales of investments 42,764
- -----------------------------------------------------------------------------------------------
Change in net unrealized appreciation on investments 40,696
- -----------------------------------------------------------------------------------------------
Net gain on investments 83,460
- -----------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $84,639
- -----------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31,
(UNAUDITED) 1997
- --------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income $ 1,179 2,978
- --------------------------------------------------------------------------------------------------
Net realized gain 42,764 56,879
- --------------------------------------------------------------------------------------------------
Change in net unrealized appreciation 40,696 14,551
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 84,639 74,408
- --------------------------------------------------------------------------------------------------
Net equalization credits 89 209
- --------------------------------------------------------------------------------------------------
Distribution from net investment income (1,759) (2,968)
- --------------------------------------------------------------------------------------------------
Distribution from net realized gain (57,273) (48,419)
- --------------------------------------------------------------------------------------------------
Total dividends to shareholders (59,032) (51,387)
- --------------------------------------------------------------------------------------------------
Net increase from capital share transactions 129,198 167,489
- --------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 154,894 190,719
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------------------------------
Beginning of period 446,891 256,172
- --------------------------------------------------------------------------------------------------
END OF PERIOD (including undistributed
net investment income of
$1,389 and $1,880, respectively) $601,785 446,891
- --------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE
FUND Kemper Blue Chip Fund is an open-end management
investment company organized as a business trust
under the laws of Massachusetts. The Fund currently
offers four classes of shares. Class A shares are
sold to investors subject to an initial sales
charge. Class B shares are sold without an initial
sales charge but are subject to higher ongoing
expenses than Class A shares and a contingent
deferred sales charge payable upon certain
redemptions. Class B shares automatically convert
to Class A shares six years after issuance. Class C
shares are sold without an initial sales charge but
are subject to higher ongoing expenses than Class A
shares and a contingent deferred sales charge
payable upon certain redemptions within one year of
purchase. Class C shares do not convert into
another class. Class I shares are sold to a limited
group of investors, are not subject to initial or
contingent deferred sales charges and have lower
ongoing expenses than other classes. Differences in
class expenses will result in the payment of
different per share income dividends by class. All
shares of the Fund have equal rights with respect
to voting, dividends and assets, subject to class
specific preferences.
- --------------------------------------------------------------------------------
2 SIGNIFICANT
ACCOUNTING POLICIES INVESTMENT VALUATION. Investments are stated at
value. Portfolio securities that are traded on a
domestic securities exchange or securities listed
on the NASDAQ National Market are valued at the
last sale price on the exchange or market where
primarily traded or listed or, if there is no
recent sale, at the last current bid quotation.
Portfolio securities that are primarily traded on
foreign securities exchanges are generally valued
at the preceding closing values of such securities
on their respective exchanges where primarily
traded. Securities not so traded or listed are
valued at the last current bid quotation if market
quotations are available. Fixed income securities
are valued by using market quotations, or
independent pricing services that use prices
provided by market makers or estimates of market
values obtained from yield data relating to
instruments or securities with similar
characteristics. Equity options are valued at the
last sale price unless the bid price is higher or
the asked price is lower, in which event such bid
or asked price is used. Financial futures and
options thereon are valued at the settlement price
established each day by the board of trade or
exchange on which they are traded. Forward foreign
currency contracts are valued at the forward rates
prevailing on the day of valuation. Other
securities and assets are valued at fair value as
determined in good faith by the Board of Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on the
trade date (date the order to buy or sell is
executed). Dividend income is recorded on the
ex-dividend date, and interest income is recorded
on the accrual basis and includes discount
amortization on fixed income securities. Realized
gains and losses from investment transactions are
reported on an identified cost basis.
FUND SHARE VALUATION. Fund shares are sold and
redeemed on a continuous basis at net asset value
(plus an initial sales charge on most sales of
Class A shares). Proceeds payable on redemption of
Class B and Class C shares will be reduced by the
amount of any applicable contingent deferred sales
charge. On each day the New York Stock Exchange is
open for trading, the net asset value per share is
determined as of the earlier of 3:00 p.m. Chicago
time or the close of the Exchange. The net asset
value per share is determined separately for each
class
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
by dividing the Fund's net assets attributable to
that class by the number of shares of the class
outstanding.
FEDERAL INCOME TAXES. The Fund has complied with
the special provisions of the Internal Revenue Code
available to investment companies during the six
months ended April 30, 1998.
DIVIDENDS TO SHAREHOLDERS. The Fund declares and
pays dividends of net investment income
semi-annually and net realized capital gains
annually, which are recorded on the ex-dividend
date. Dividends are determined in accordance with
income tax principles which may treat certain
transactions differently from generally accepted
accounting principles.
EQUALIZATION ACCOUNTING. A portion of proceeds from
sales and cost of redemptions of Fund shares is
credited or charged to undistributed net investment
income so that income per share available for
distribution is not affected by sales or
redemptions of shares.
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES INVESTMENT MANAGER COMBINATION. Effective December
31, 1997, Zurich Insurance Company, the parent of
Zurich Kemper Investments, Inc. (ZKI), acquired a
majority interest in Scudder, Stevens & Clark, Inc.
(Scudder), another major investment manager. As a
result of this transaction, the operations of ZKI
were combined with Scudder to form a new global
investment organization named Scudder Kemper
Investments, Inc. (Scudder Kemper). The transaction
resulted in the termination of the Fund's
investment management agreement with ZKI, however,
a new investment management agreement between the
Fund and Scudder Kemper was approved by the Fund's
Board of Trustees and by the Fund's shareholders.
The new management agreement, which was effective
December 31, 1997, is the same in all material
respects as the previous management agreement,
except that Scudder Kemper is the new investment
adviser to the Fund. In addition, the names of the
Fund's principal underwriter and shareholder
service agent were changed to Kemper Distributors,
Inc. (KDI) and Kemper Service Company (KSvC),
respectively.
MANAGEMENT AGREEMENT. The Fund has a management
agreement with Scudder Kemper and pays a management
fee at an annual rate of .58% of the first $250
million of average daily net assets declining to
.42% of average daily net assets in excess of $12.5
billion. The Fund incurred a management fee of
$1,471,000 for the six months ended April 30, 1998.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
The Fund has an underwriting and distribution
services agreement with KDI. Underwriting
commissions paid in connection with the
distribution of Class A shares are as follows:
<TABLE>
<CAPTION>
COMMISSIONS COMMISSIONS
RETAINED BY ALLOWED BY KDI
KDI TO FIRMS
----------- --------------
<S> <C> <C>
Six months ended April 30, 1998 $94,000 800,000
</TABLE>
For services under the distribution services
agreement, the Fund pays KDI a fee of .75% of
average daily net assets of the Class B and Class C
shares. Pursuant to the agreement, KDI enters into
related selling group agreements with various firms
at various rates for sales of Class B and Class C
shares. In addition, KDI receives any contingent
deferred sales charges (CDSC) from redemptions of
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
Class B and Class C shares. Distribution fees, CDSC
and commissions related to Class B and Class C
shares are as follows:
<TABLE>
<CAPTION>
DISTRIBUTION FEES COMMISSIONS AND
AND CDSC DISTRIBUTION FEES PAID
RECEIVED BY KDI BY KDI TO FIRMS
----------------- ----------------------
<S> <C> <C>
Six months ended April 30, 1998 $748,000 $1,277,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with KDI. For
providing information and administrative services
to Class A, Class B and Class C shareholders, the
Fund pays KDI a fee at an annual rate of up to .25%
of average daily net assets of each class. KDI in
turn has various agreements with financial services
firms that provide these services and pays these
firms based on assets of Fund accounts the firms
service. Administrative services fees (ASF) paid
are as follows:
<TABLE>
<CAPTION>
ASF PAID BY ASF PAID BY
THE FUND TO KDI KDI TO FIRMS
--------------- ------------
<S> <C> <C>
Six months ended April 30, 1998 $612,000 636,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
KSvC is the shareholder service agent of the Fund.
Under the agreement, KSvC received shareholder
services fees of $782,000 for the six months ended
April 30, 1998.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. During the six months ended April
30, 1998, the Fund made no payments to its officers
and incurred trustees' fees of $10,000 to
independent trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the six months ended April 30, 1998, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $503,615
Proceeds from sales 415,211
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, 1997
--------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 6,161 $ 110,120 6,618 $ 112,272
---------------------------------------------------------------------------------
Class B 3,039 52,693 5,184 87,500
---------------------------------------------------------------------------------
Class C 520 9,142 580 9,803
---------------------------------------------------------------------------------
Class I 192 3,403 407 7,030
---------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 2,373 37,892 2,615 38,297
---------------------------------------------------------------------------------
Class B 978 16,011 716 10,448
---------------------------------------------------------------------------------
Class C 88 1,411 40 586
---------------------------------------------------------------------------------
Class I 48 756 1 23
---------------------------------------------------------------------------------
SHARES REDEEMED
Class A (4,262) (75,004) (3,646) (61,114)
---------------------------------------------------------------------------------
Class B (1,041) (21,446) (1,845) (31,843)
---------------------------------------------------------------------------------
Class C (179) (3,127) (201) (3,375)
---------------------------------------------------------------------------------
Class I (154) (2,653) (121) (2,138)
---------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 318 5,504 209 3,585
---------------------------------------------------------------------------------
Class B (319) (5,504) (210) (3,585)
---------------------------------------------------------------------------------
NET INCREASE
FROM CAPITAL SHARE
TRANSACTIONS $ 129,198 $ 167,489
---------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 19
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-----------------------------------------------
CLASS A
-----------------------------------------------
SIX MONTHS YEAR ENDED OCTOBER 31,
ENDED APRIL ---------------------------------
30, 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------
Net asset value, beginning of period $17.68 17.14 14.87 12.33 13.88
- ------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .07 .18 .22 .19 .19
- ------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 2.75 3.70 3.45 2.57 (.71)
- ------------------------------------------------------------------------------------------
Total from investment operations 2.82 3.88 3.67 2.76 (.52)
- ------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .09 .21 .20 .20 .19
- ------------------------------------------------------------------------------------------
Distribution from net realized gain 2.19 3.13 1.20 .02 .84
- ------------------------------------------------------------------------------------------
Total dividends 2.28 3.34 1.40 .22 1.03
- ------------------------------------------------------------------------------------------
Net asset value, end of period $18.22 17.68 17.14 14.87 12.33
- ------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 17.78% 26.78 26.72 22.74 (3.82)
- ------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------------
Expenses 1.20% 1.19 1.26 1.30 1.48
- ------------------------------------------------------------------------------------------
Net investment income .73% 1.07 1.40 1.47 1.50
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------
CLASS B
--------------------------------------------------------
SIX MONTHS YEAR ENDED OCTOBER 31, MAY 31 TO
ENDED APRIL ---------------------- OCTOBER 31,
30, 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------------------
Net asset value, beginning of period $17.61 17.09 14.82 12.29 12.30
- ---------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.02) .04 .10 .09 .06
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 2.76 3.67 3.45 2.56 (.01)
- ---------------------------------------------------------------------------------------------------
Total from investment operations 2.74 3.71 3.55 2.65 .05
- ---------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .01 .06 .08 .10 .06
- ---------------------------------------------------------------------------------------------------
Distribution from net realized gain 2.19 3.13 1.20 .02 --
- ---------------------------------------------------------------------------------------------------
Total dividends 2.20 3.19 1.28 .12 .06
- ---------------------------------------------------------------------------------------------------
Net asset value, end of period $18.15 17.61 17.09 14.82 12.29
- ---------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 17.30% 25.62 25.82 21.76 .42
- ---------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------
Expenses 2.08% 2.06 2.08 2.06 2.43
- ---------------------------------------------------------------------------------------------------
Net investment income (loss) (.15)% .20 .58 .71 .33
- ---------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
------------------------------------------------
CLASS C
------------------------------------------------
SIX MONTHS MAY 31,
ENDED YEAR ENDED OCTOBER 31, TO
APRIL 30, ---------------------- OCTOBER 31,
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------
Net asset value, beginning of period $17.69 17.15 14.88 12.32 12.30
- -------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.01) .03 .10 .07 .09
- -------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 2.78 3.71 3.45 2.62 (.01)
- -------------------------------------------------------------------------------------------
Total from investment operations 2.77 3.74 3.55 2.69 .08
- -------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .02 .07 .08 .11 .06
- -------------------------------------------------------------------------------------------
Distribution from net realized gain 2.19 3.13 1.20 .02 --
- -------------------------------------------------------------------------------------------
Total dividends 2.21 3.20 1.28 .13 .06
- -------------------------------------------------------------------------------------------
Net asset value, end of period $18.25 17.69 17.15 14.88 12.32
- -------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 17.37% 25.71 25.75 22.04 .67
- -------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------------
Expenses 2.03% 2.00 2.05 2.01 2.33
- -------------------------------------------------------------------------------------------
Net investment income (loss) (.10)% .26 .61 .76 .43
- -------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 21
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------
CLASS I
----------------------------------------
SIX MONTHS NOVEMBER 22,
ENDED YEAR ENDED 1995 TO
APRIL 30, OCTOBER 31, OCTOBER 31,
1998 1997 1996
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------
Net asset value, beginning of period $17.72 17.18 15.30
- -----------------------------------------------------------------------------------
Income from investment operations:
Net investment income .11 .32 .36
- -----------------------------------------------------------------------------------
Net realized and unrealized gain 2.76 3.58 2.96
- -----------------------------------------------------------------------------------
Total from investment operations 2.87 3.90 3.32
- -----------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .14 .23 .24
- -----------------------------------------------------------------------------------
Distribution from net realized gain 2.19 3.13 1.20
- -----------------------------------------------------------------------------------
Total dividends 2.33 3.36 1.44
- -----------------------------------------------------------------------------------
Net asset value, end of period $18.26 17.72 17.18
- -----------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 18.07% 26.89 21.89
- -----------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------
Expenses .73% .70 1.31
- -----------------------------------------------------------------------------------
Net investment income 1.20% 1.56 1.33
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ---------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ------------------------------------------
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets at end of period (in
thousands) $601,785 446,891 256,172 168,266 153,172
- ---------------------------------------------------------------------------------------------------
Portfolio turnover rate 157% 183 166 117 131
- ---------------------------------------------------------------------------------------------------
Average commission rates paid per share on stock transactions for the six months ended April
30, 1998 and the years ended October 31, 1997 and 1996 were $.0585, $.0593 and $.0560,
respectively.
- ---------------------------------------------------------------------------------------------------
</TABLE>
NOTES: Total return does not reflect the effect of any sales charges. Data for
the period ended April 30, 1998 is unaudited.
21
<PAGE> 22
SHAREHOLDERS' MEETING
SPECIAL SHAREHOLDERS' MEETING
On December 3, 1997, a special shareholders' meeting was held and adjourned as
necessary. Kemper Blue Chip Fund shareholders were asked to vote on five
separate issues: election of the nine members to the Board of Trustees,
ratification of Ernst & Young LLP as independent auditors, approval of a new
investment management agreement with Scudder Kemper Investments, Inc., approval
of changes in the fund's fundamental investment policies to permit a
master/feeder fund structure and approval of a new rule 12b-1 distribution plan
with Zurich Kemper Distributors, Inc. for Class B shares and Class C shares. The
following are the results for each issue:
1) Election of Trustees
<TABLE>
<CAPTION>
For Withheld
<S> <C> <C>
David W. Belin 12,746,056 213,642
Lewis A. Burnham 12,760,038 199,660
Donald L. Dunaway 12,759,238 200,460
Robert B. Hoffman 12,759,451 200,247
Donald R. Jones 12,754,375 205,323
Shirley D. Peterson 12,753,997 205,701
Daniel Pierce 12,751,698 208,000
William P. Sommers 12,760,522 199,176
Edmond D. Villani 12,747,946 211,753
</TABLE>
2) Ratification of the selection of Ernst & Young LLP as independent auditors
for the current fiscal year.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
12,578,824 87,247 293,627
</TABLE>
3) Approval of new investment management agreement with Scudder Kemper
Investments, Inc.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
11,937,496 211,426 414,981
</TABLE>
4) Approval of changes in the fund's fundamental investment policies to permit a
master/feeder fund structure.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
11,272,684 472,198 825,979
</TABLE>
5) To approve a new rule 12b-1 distribution plan with Zurich Kemper
Distributors, Inc.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C> <C>
Class B 3,379,240 66,605 123,871
Class C 272,390 1,506 11,746
</TABLE>
22
<PAGE> 23
23
NOTES
<PAGE> 24
TRUSTEES & OFFICERS
TRUSTEES OFFICERS
DANIEL PIERCE MARK CASADY
Chairman and Trustee President
DAVID W. BELIN PHILIP J. COLLORA
Trustee Vice President and
Secretary
LEWIS A. BURNHAM JOHN R. HEBBLE
Trustee Treasurer
DONALD L. DUNAWAY TRACY MCCORMICK CHESTER
Trustee Vice President
ROBERT B. HOFFMAN JERALD K. HARTMAN
Trustee Vice President
DONALD R. JONES THOMAS W. LITTAUER
Trustee Vice President
SHIRLEY D. PETERSON ANN M. MCCREARY
Trustee Vice President
WILLIAM P. SOMMERS KATHRYN L. QUIRK
Trustee Vice President
EDMOND D. VILLANI STEVEN H. REYNOLDS
Trustee Vice President
LINDA J. WONDRACK
Vice President
MAUREEN E. KANE
Assistant Secretary
CAROLINE PEARSON
Assistant Secretary
ELIZABETH C. WERTH
Assistant Secretary
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- ------------------------------------------------------------------------------------------
SHAREHOLDER SERVICE AGENT KEMPER SERVICE COMPANY
P.O. Box 419557
Kansas City, MO 64141
- ------------------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
801 Pennsylvania
Kansas City, MO 64105
- ------------------------------------------------------------------------------------------
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606
www.kemper.com
</TABLE>
KEMPER LOGO
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.
KBCF - 3 (6/98) 1048340
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
