<PAGE> 1
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED APRIL 30, 1999
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
[MORNINGSTAR RATINGS LOGO]
SEEKING GROWTH OF CAPITAL AND OF INCOME
KEMPER
BLUE CHIP FUND
"... We believe that we best serve shareholders by
focusing our efforts and research capabilities on
pursuing quality blue-chip stocks. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
Economic Overview
5
Performance Update
9
Industry Sectors
10
Largest Holdings
11
Portfolio of Investments
14
Financial Statements
16
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, 1999 (UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 21.67
CLASS B 21.32
CLASS C 21.19
LIPPER GROWTH & INCOME FUNDS CATEGORY AVERAGE* 18.39
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Returns and rankings are historical and do not guarantee future results.
Investment returns and principal values will fluctuate so that shares, when
redeemed, may be worth more or less than original cost.
* Lipper Analytical Services, Inc. returns and rankings are based upon changes
in net asset value with all dividends reinvested and do not include the effect
of sales charges and, if they had, results may have been less favorable.
- -------------------------------------------------------------------------------
NET ASSET VALUE
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AS OF AS OF
4/30/99 10/31/98
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
KEMPER BLUE CHIP FUND CLASS A $19.75 $16.61
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KEMPER BLUE CHIP FUND CLASS B $19.61 $16.55
- ------------------------------------------------------------------------------------------------------------------
KEMPER BLUE CHIP FUND CLASS C $19.72 $16.65
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
KEMPER BLUE CHIP FUND
LIPPER RANKINGS AS OF 4/30/99
- -------------------------------------------------------------------------------
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 #402 of 815 funds #426 of 815 funds #431 of 815 funds
- ------------------------------------------------------------------------------------------------------------------
5-YEAR #154 of 319 funds N/A N/A
- ------------------------------------------------------------------------------------------------------------------
10-YEAR #54 of 148 funds N/A N/A
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
DURING THE SIX-MONTH PERIOD ENDED APRIL 30, 1999, KEMPER BLUE CHIP FUND PAID THE
FOLLOWING DIVIDENDS PER SHARE:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM CAPITAL GAIN $0.42 $0.42 $0.42
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
TERMS TO KNOW
YOUR FUND'S STYLE
- --------------------------------------------------------------------------------
MORNINGSTAR EQUITY STYLE BOX
- --------------------------------------------------------------------------------
[FIXED STYLE BOX]
Source: Morningstar, Inc. Chicago, IL. (312) 696-6000. The Morningstar Style Box
placement is based on two variables: a fund's market capitalization relative to
the movements of the market and a fund's valuation, which is calculated by
comparing the stocks in the fund's portfolio with the most relevant of the three
market-cap groups.
THE STYLEBOX REPRESENTS A SNAPSHOT OF THE FUND'S PORTFOLIO ON A SINGLE DAY. IT
IS NOT AN EXACT ASSESSMENT OF RISK AND DOES 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. CATEGORY PLACEMENTS OF NEW FUNDS ARE ESTIMATED. MORNINGSTAR HAS PLACED
KEMPER BLUE CHIP FUND IN THE LARGE BLEND CATEGORY. PLEASE CONSULT THE PROSPECTUS
FOR A DESCRIPTION OF INVESTMENT POLICIES.
BALANCE SHEET A listing of assets and net worth showing the position of a
company at a certain time.
BENCHMARK A point of comparision for gauging relative performance. A fund's
benchmark may be the overall stock market, an index or a peer group average.
CONSUMER NONDURABLES Consumer nondurable companies produce goods or services
that tend to be consumed or replaced within a relatively short period of time.
Due to the steadier demand for consumer nondurables, stocks in this sector are
often considered more defensive in nature than other stocks, including
technology stocks.
CYCLICAL STOCKS Cyclical stocks carry a higher degree of economic sensitivity.
In accelerating economies, cyclical stocks tend to rise quickly. In decelerating
economies, cyclicals tend to decline quickly. Cyclical stocks include industrial
machinery, paper and forestry, automobiles and construction.
VALUATION A stock's price relative to an underlying measure of worth.
<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.
SILVIA HOLDS A BACHELOR'S DEGREE AND PH.D. IN ECONOMICS FROM NORTHEASTERN
UNIVERSITY IN BOSTON AND A MASTER'S DEGREE IN ECONOMICS FROM BROWN UNIVERSITY IN
PROVIDENCE, R.I. PRIOR TO HIS CAREER AT SCUDDER KEMPER INVESTMENTS, HE WAS WITH
THE HARRIS BANK AND ALSO TAUGHT AT INDIANA UNIVERSITY.
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 $280 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:
In April, investor enthusiasm drove the market to its second milestone in a
year -- the Dow Jones Industrial Average rose to 11,000 just a month after it
broke 10,000 for the first time. In May, expectations of rising inflation and
higher short-term interest rates led to a slowdown. But in early June, the
market rallied again. What drove the market rallies, and what, at the same time,
led to investor anxiety?
Inflation worries have been seeping into the market for months. The growing
conviction that Asian and Latin American economies are recovering is raising
commodity prices, particularly oil. The price of West Texas Intermediate oil
surged from less than $12 in February to almost $19 in early May. That alone
almost guarantees a rise in the "headline" inflation rate this year, which is
the rate of inflation as measured by the entire CPI. But it's important to note
that the Federal Reserve Board looks primarily at the core inflation rate, which
is the CPI minus food and energy -- and the core inflation rate looks at if it
will remain low at about 2 percent this year. Investors should note, however,
that the Federal Reserve Board also considers what will happen to inflation next
year -- and all indications are that the Fed expects inflation to increase in
2000.
As a result, the Fed is considering a change in monetary policy. Recent Fed
policy has been reactive, not proactive, which means that the Fed tends to
respond to inflation only when it picks up. That may change as the Fed tries to
preemptively halt inflation momentum. Such a change in monetary policy would
likely lead to an increase in short-term interest rates before the end of the
year. However, the change is likely to be small. Because we don't see pressure
toward sustained inflation, there's no reason for the Fed to want a sharp
slowdown in the overall economy.
The long-term economic situation, however, appears to be positive. The
federal budget surplus continues to benefit from good revenue gains (which are
based on good income gains, especially for households), good capital gains and
continued restraint in federal spending. The surplus this year is expected to
approach $100 billion.
This positive environment is exactly what sometimes poses risk for
investors, and is key to understanding recent volatility in the market. A strong
economy has the potential to feed inflation fears and drive up interest rates.
Indeed, recent market events illustrate the domino effect of investors reacting
to positive economic news, which they consider troubling at this point, more
than eight years into the economic expansion. In April, the steady stream of
positive economic news led to a sell-off in the financial markets based on fears
that the strong pace of economic growth would eventually lead to higher
inflation. The benchmark 30-year Treasury bond yield rose, which pulled stocks
lower.
Where can we expect to go from here? The fundamentals by which we judge the
health of the economy suggest continued growth as we move into the second half
of 1999. For example, the gross domestic product (GDP), the value of all goods
and services produced in the U.S., rose at an annual rate of 4.5 percent in the
first quarter, following a tremendous fourth-quarter surge of 6 percent. This is
very much in line with what we've grown accustomed to over the past year -- over
the four quarters of 1998, the U.S. economy expanded by 4.3 percent. Some people
aren't surprised at all by strong GDP growth that once would have alarmed them.
That's partially because we've grown accustomed to a strong economy. But it's
also because we've been able to absorb growth without driving up inflation.
That's important for investors. If prices had been rising as the economy was
growing, the Fed would have most likely raised short-term interest rates by now,
and that would have changed the financial market outlook.
However, we do see some vulnerability on the economic front. Trade is a weak
spot in the economy right now. Exports of U.S. goods and services dropped in the
first quarter while imports soared. This reflects the fact that the U.S. is one
of the few countries financially fit enough to buy goods produced elsewhere in
the world. But for as long as less vibrant international economies are unable to
buy U.S. goods, the profitability of U.S. companies trying to export will be
challenged.
When you think about it, vulnerability in regard to the international
economy is nothing new. Globally, the outlook is slightly more positive than it
was a few months ago. For example, the European markets are slowing down, which
has already led to the European Central Bank lowering interest rates in order to
boost domestic spending. In many countries in Europe there are no fixed-rate
mortgages, only adjustable-rate mortgages. When interest rates go down, mortgage
payments are reduced and homeowners can spend money elsewhere. This has a huge
impact on consumer spending, and will help European equities over time.
Additionally, the situation in Japan remains unchanged. And, problems in the
emerging markets haven't had the negative impact many people expected -- both
the Mexican and Brazilian stock markets have actually risen in the past two
months.
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 (5/31/99) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10 Year Treasury Rate(1) 5.54 5.34 5.57 6.42
Prime Rate(2) 7.75 8.5 8.5 8.25
Inflation Rate(3)* 2.28 1.68 1.63 3.04
The U.S. Dollar(4) -1.22 8.17 5.05 7.67
Capital goods orders(5)* 11.67 3.05 12.61 3.93
Industrial production (5)* 2.01 2.71 5.92 6.44
Employment growth(6) 2.14 2.67 2.76 2.44
</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, 1999.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
But don't forget that international crises have the potential to affect the
U.S. markets dramatically. An increase in military spending on Kosovo by the 11
European Monetary Union (EMU) countries could force them to spend less in other
areas, which could have economic implications, including higher interest rates.
That's because many European countries have small economies and little leeway in
their budgets. Consequently, those countries finance unplanned military
expenditures by selling government bonds -- which, in Europe's small bond
market, typically raises interest rates. As an example, consider Italy, which
recently asked for more leeway on its deficit targets. When leeway was granted,
this led to a further sell-off in the eurodollar.
The international situation alone, however, is by no means an indicator of
a U.S. slowdown -- and without any such indications, complacency may be our
greatest concern. It's easy to look at the current U.S. economic situation and
behave as if no risk exists. But when you see the market soaring and are tempted
to jump in, note that the bull market grew to records on the strength of just a
few dozen stocks, while most other stock prices were flat or actually declined.
In summary, there are concerns that the current economy is unsustainable and
we soon could see an abrupt end. In many cases, however, people are looking for
a slowdown because they are fearful growth will drive up inflation these are
particularly older investors who are accustomed to inflation accompanying
growth. But again, sustained inflation seems unlikely, so a sharp slowdown is
not necessary. In the short term, we expect a modest economic slowdown but no
recession. The best approach now, as in any market, is to diversify and invest
for the long term.
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
/s/ JOHN E. SILVIA
John E. Silvia
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 DR. JOHN SILVIA AS OF JUNE 9, 1999, AND MAY
NOT ACTUALLY COME TO PASS. THIS INFORMATION IS SUBJECT TO CHANGE. NO PART OF
THIS MATERIAL IS INTENDED AS AN INVESTMENT RECOMMENDATION.
TO OBTAIN A KEMPER FUNDS PROSPECTUS, DOWNLOAD ONE FROM WWW.KEMPER.COM, TALK TO
YOUR FINANCIAL REPRESENTATIVE OR CALL SHAREHOLDER SERVICES AT (800) 621-1048.
THE PROSPECTUS CONTAINS MORE COMPLETE INFORMATION, INCLUDING MANAGEMENT FEES AND
EXPENSES. PLEASE READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
4
<PAGE> 5
PERFORMANCE UPDATE
[MCCORMICK PHOTO]
TRACY MCCORMICK IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC., AND
LEAD PORTFOLIO MANAGER OF KEMPER BLUE CHIP FUND. MCCORMICK BRINGS MORE THAN 15
YEARS OF INVESTMENT INDUSTRY EXPERIENCE TO THE FUND.
[LANGBAUM PHOTO]
PORTFOLIO MANAGER GARY LANGBAUM, CFA, ALSO CONTRIBUTES MORE THAN 20 YEARS OF
INVESTMENT INDUSTRY EXPERIENCE TO THE FUND. SCUDDER KEMPER INVESTMENTS' LARGE
STAFF OF RESEARCHERS, ANALYSTS, TRADERS AND ECONOMISTS IN OFFICES WORLDWIDE
SUPPORTS THE TEAM.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE
MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
AFTER LAST SUMMER'S DOWNTURN, STOCKS CAME BACK. LARGE-CAP GROWTH AND
INTERNET-RELATED STOCKS RALLIED THROUGH THE END OF 1998 AND INTO 1999. THEN, THE
TEMPO CHANGED, AND CYCLICAL STOCKS RE-EMERGED. LEAD PORTFOLIO MANAGER TRACY
MCCORMICK DISCUSSES HOW SHE STEERED KEMPER BLUE CHIP FUND TO A SIX-MONTH GAIN
THAT EASILY TOPPED THE PEER GROUP AVERAGE.
Q DURING THE SEMIANNUAL PERIOD ENDING APRIL 30, 1999, KEMPER BLUE CHIP FUND
RETURNED 21.67 PERCENT (CLASS A SHARES, UNADJUSTED FOR ANY SALES CHARGES).
TRACY, COULD YOU PUT THIS RETURN INTO CONTEXT FOR US?
A We're very happy with the fund's return. Compared to our peers in the
Lipper Growth and Income Funds Category, the fund's returns are quite good.
Kemper Blue Chip Fund's gain of 21.67 percent (Class A shares, unadjusted for
any sales charges) surpasses the category average of 18.39 percent.
We're also pleased that the fund's performance was competitive relative to
its benchmark. For the six-month period, the S&P 500 Index (an index generally
representative of the U.S. stock market) was up 22.31 percent (Source: Lipper
Analytical Services, Inc.). Of course, over the long-term, we set our sights on
beating not just our peers, but also our benchmark. But, when considering the
fund's performance relative to the index, it's important to keep in mind that
the S&P 500 is market-cap weighted. By "market-cap weighted," we mean that the
returns of the largest stocks are weighted more heavily than the returns of
smaller stocks. For most of the semiannual period, only a small handful of the
index's largest-cap, most expensive stocks earned the majority of the index's
gains. Our focus on reasonable valuations (see Terms To Know on page 2) meant
that we steered clear of the highfliers.
We encourage investors to put the performance of both the fund and the
index in a broader historical perspective. From 1949 through 1998, stocks
returned an average of just 14 percent annually. Given this longer-term
framework, we're particularly pleased with the fund's six-month gain.
Q TELL US ABOUT THE MARKET CLIMATE DURING THE SEMIANNUAL PERIOD.
A For most of the semiannual period, large-cap growth stocks and technology
stocks drove the market. When the fund began its fiscal year on November 1,
1998, the markets were rebounding from the steep sell-off triggered by the
Russian debt default in August 1998. Strong consumer confidence, low
unemployment, low interest-rate and inflation trends, and steady, modest
corporate growth contributed to the improved sentiment that fuelled the rally.
Yet, because investors remained nervous about market volatility, they
tended to gravitate to large-cap, household-name companies. These stocks offered
perceived stability. In a climate of strong consumer optimism, retail stocks
fared well, too.
Investors were also extremely enthusiastic about technology stocks. Many
technology stocks had struggled since the Asian economic crisis of 1997. But, by
the fourth quarter of 1998, investors returned in droves to technology. Low
valuations, an improving supply/demand environment
5
<PAGE> 6
PERFORMANCE UPDATE
and the explosive growth of the Internet drove the technology-stock rally.
In April, however, the markets rotated dramatically from growth stocks
into more-cyclical issues. Cyclical stocks typically thrive during times of
accelerating economic growth, and many investors believed that the economy was
indeed positioned to grow more rapidly. Oil, chemical, and industrial stocks
benefited from the change of market direction, while growth-oriented
health-care, consumer nondurable and technology stocks gave up some ground.
Q HOW DID YOU POSITION THE FUND DURING THE GROWTH-STOCK RALLY?
A When the market began to correct in August, we took the opportunity to
enhance the quality of the portfolio. Throughout early and mid 1998, there were
many companies that we thought offered excellent long-term growth potential and
superior fundamentals. We didn't own them then, however, because they were
priced beyond the parameters of our value-conscious price discipline. In the
wake of the Russian debt default, we found entry points to purchase high quality
stocks at attractive prices. Companies like Pfizer, Home Depot and Wal-Mart
joined the ranks of the portfolio and served the fund well.
Our analysis had also led us to attractive technology stocks, notably
semiconductor and computer hardware stocks, including Xilinx, Motorola, and
Hewlett-Packard. These, and many other technology stocks, provided good
opportunity to participate in the technology rally.
The fund's media stocks were also a boon to performance. We entered the
fiscal year with a strong contingent of media holdings, including Tribune, Time
Warner, AT&T-Liberty Media Group, and Univision Communication. These came alive
during the semiannual period. In addition to benefiting in a consumer-driven
economy, many of them also have "buried" Internet assets. For instance,
AT&T-Liberty Media Group has a corner on some highly valued bandwidth. We
believe that many of the largest Internet players would be willing to pay a
premium price for this bandwidth.
Q HOW DID THE FUND PERFORM IN APRIL WHEN THE MARKETS ROTATED INTO
CYCLICAL STOCKS?
A As the markets rotated, Kemper Blue Chip Fund held up well. In fact, the
fund's gain of 4.22 percent topped the S&P 500's return of 3.87 percent. We
believe that this success can be linked to our investment strategy. We take our
search for the best blue chips to all corners of the market -- from technology
to consumer products to energy.
In April, the fund reaped the rewards of our decision to include some
cyclically oriented growth stocks in the portfolio. The fund benefited from our
energy and railroad holdings, as well as from an assortment of other stocks,
such as Waste Management and Raytheon.
That said, we remind investors that Kemper Blue Chip Fund is a
growth-oriented fund. Although we include economically sensitive stocks in the
portfolio, Kemper Blue Chip Fund is not likely to dominate in commodity-driven
markets. Even as growth managers, we encourage investors to diversify into an
appropriate range of stock funds.
Q HOW DO YOU SELECT STOCKS?
A We follow a disciplined, research-intensive process. We invest primarily
in "blue-chip" stocks -- those of established, large-cap domestic companies.
Before we buy a stock, we require:
- Excellent company fundamentals
- Strong earnings-growth prospects
- Catalyst for potential growth, such as new management, products,
services or business strategies
- Attractive stock prices
In order to determine which stocks to buy, we rely on rigorous independent
analysis. We need to understand a company inside and out. To do this, we'll meet
with a company's management, visit facilities, dig into balance sheets (see
Terms To Know on page 2), and apply thorough quantitative screens. We don't let
the conventional Wall Street buzz sway our judgement.
Q COULD YOU GIVE US SOME EXAMPLES OF YOUR STOCK-SELECTION PROCESS IN ACTION?
A Certainly. We purchased Motorola last summer, when Wall Street's interest
in the stock was very low. Motorola sported attractive valuations, and we also
saw catalysts for future growth. The company had realigned its business groups,
clarifying its business direction to focus on communications and imbedded
controllers. Our research indicated that new product initiatives in Motorola's
cellular handset area could lead to accelerating top-line growth and increased
market share. We anticipated that these initiatives, as well as cost-control
measures, could translate into upward earnings surprises. Our independent
appraisal of Motorola proved to be on-track, and the stock has been a
significant contributor to performance. We're starting to see
6
<PAGE> 7
PERFORMANCE UPDATE
the rest of Wall Street catch up to us, with Motorola emerging as a popular
growth stock.
Tyco International is another stock that typifies our investment criteria.
Tyco, an industrial conglomerate that focuses on electronic products, offers
innovative management and a demonstrated ability to deliver earnings growth,
both through unit growth and cost controls.
We gained our stake in Tyco through our position in AMP, an attractively
valued electrical connections manufacturer that Tyco acquired earlier this year.
We felt that the acquisition itself was appealingly opportunistic, and that
Tyco's business plan is compelling. In fact, the stock now counts among our
largest holdings.
Q HOW DO YOU DECIDE WHAT STOCKS TO SELL?
A We'll begin to sell stocks when their prices reach the pre-established
targets we set for them. This sort of selling is often referred to as "profit
taking." Profit taking requires strict discipline, but we believe that this
discipline can keep us from getting caught up in emotion. We also eliminate
stocks when we see signs that company fundamentals could be weakening or
indications that growth potential could be deteriorating.
Let's take a closer look at Compaq Computer to see these principals in
action. We added Compaq to the portfolio early in 1998. At this point, the stock
had fallen out of favor with the Wall Street crowd and traded at a very
depressed price. However, we could see buried gems in Compaq, such as its
AltaVista Internet search engine. Our forward-looking independent analysis paid
off. Compaq got back on its feet and began to run. As its stock price rose to
our pre-set price target, we stuck to our discipline. We opted to take profits
and reduced our position.
We then began to see indications of deteriorating fundamentals and
weakening earnings-growth potential. Because we diligently follow every stock in
our portfolio, we noticed that Compaq's management was sending out a series of
signals that could be "yellow flags." The company's management seemed to be
going to great, even strained, lengths to bolster enthusiasm for the stock.
Then, the company issued its fourth-quarter earnings announcement. The numbers
weren't as clean as we believed they should be. We reduced our position
considerably. In the next six weeks or so, we continued to pare back Compaq,
eliminating the position entirely by February. Subsequently, Compaq again fell
short on earnings, and investors knocked the wind out of the stock. We were glad
that our careful monitoring of fundamental changes and our adherence to our
price targets allowed us to minimize the damage.
Q THE INTERNET IS AMONG THE HOTTEST TOPICS OF CONVERSATION THESE DAYS. DO
INTERNET STOCKS FIT KEMPER BLUE CHIP FUND'S STRICT INVESTMENT CRITERIA?
A Before we buy a stock, we need to see quality, seasoned management and a
demonstrated ability to deliver sustainable, consistent earnings growth. We
insist on attractive stock prices. At this time, we haven't found any pure-play
Internet stocks that meet these criteria.
And while we're not investing in the ".coms," we do believe that the
portfolio is well positioned to participate in the Internet revolution. One way
that Kemper Blue Chip Fund participates is through investments in companies that
are using the Internet to build their market share and increase profit
potential. More and more companies are embracing the Internet business model.
We're watching companies closely, placing a premium on companies that have the
"first move" advantage when it comes to exploiting the opportunities of
electronic commerce (e-commerce). We've been extremely impressed with General
Electric's e- commerce initiatives. IBM has also developed an innovative
e-commerce exposure, a strategy that the market has rewarded.
A second way that Kemper Blue Chip Fund participates in cutting-edge
technology is through the companies that are building and supporting the
infrastructure of the Internet. For example, our top ten holdings include
Microsoft and Intel.
Q ALTHOUGH THE FUND BEAT ITS PEER GROUP AVERAGE, WHAT DIDN'T WORK OUT AS
ANTICIPATED?
A There were some stocks that disappointed. Notably, food stocks caused
performance to suffer. Because the demand for their products tends to be fairly
stable, food stocks typically offer some downside protection in volatile
markets. While food stocks did display a degree of defensiveness during the
semiannual period, they did not thrive. Many were negatively impacted by
supermarket consolidation. As supermarkets consolidated, they were able to put
increased pricing pressure on food suppliers, dampening profits.
For instance, at the start of the fiscal year, ConAgra was a significant
position in the portfolio. Our analysis indicated that ConAgra's business was
turning and that its
7
<PAGE> 8
PERFORMANCE UPDATE
management was taking the appropriate steps to move the company forward. In
hindsight, however, our high level confidence was not merited, and ConAgra fell
short of expectations. We have since eliminated it from the portfolio. Other
faltering stocks included H.J. Heinz and McCormick and Company. We've eliminated
McCormick and significantly reduced H.J. Heinz.
There were also stocks that just didn't keep pace with the top performers.
For instance, while we didn't lose significant ground on our stake in Oracle
Systems, we took a "roundtrip" on this software stock. Initially, we had thought
that Oracle Systems presented a compelling opportunity. It was priced more
attractively relative to many of its competitors, and seemed to be turning the
corner on the problems it faced in 1997 and early 1998. The stock did rise in
value, only to sharply correct when earnings came in short. We still believe
that Oracle Systems will be a major beneficiary of the move to e-commerce, but
that the pay-off may be delayed.
Q AS THE FUND MOVES INTO THE SECOND HALF OF THE FISCAL YEAR, HOW HAVE YOU
POSITIONED THE PORTFOLIO?
A We continue to back many technology stocks with conviction. Here, we
continue to favor component, networking and hardware companies. We're being very
vigilant about companies that could be most susceptible to Year 2000 spending
slowdowns. (Many businesses are delaying purchases of new technology, notably
software, until next year.)
Within the financial services industry, we're more interested in banks
that have their consolidations under their belts, such as Bank of America. The
fund also holds a sprinkling of regional banks, including Compass Bancshares and
Summit Bancorp.
We've also added stocks that provide cyclical exposure without sacrificing
growth. Stocks that have met these duel criteria include Industrial-machinery
producer Parker-Hannifin, chemical manufacturer Air Products & Chemicals, and
auto-parts suppliers Federal Mogul and Dana Corp.
Consumer nondurable stocks are well represented in the portfolio, but
we're finding fewer opportunities. Here, it's been a question of valuations.
We've had difficulties finding reasonably priced choices.
Recently, we've opted to take profits in some of our media holdings. Media
stocks have benefited the fund significantly, but as their upside zone
decreases, we're paring back exposure. We've also reduced stakes in some
health-care stocks. Our analysis indicates that the valuations of many are
stretched. We're also concerned that the uncertainty surrounding Medicare could
make the investment climate less hospitable over the near term.
Q THANKS, TRACY. AS WE ENTER THE SECOND HALF OF THE FISCAL YEAR, DO YOU HAVE
ANY CLOSING WORDS FOR THE SHAREHOLDERS?
A
The semiannual period serves as a good reminder that the stock market can
change direction quickly and often: from correction, to rally, and from growth
to cyclical. No one can predict with certainty what each day will bring.
However, we've also seen that despite the volatility, investors who have
held tight have had an opportunity to reap rewards from stocks. As portfolio
managers, we're not going to try to guess the market's next move. We believe
that we best serve shareholders by focusing our efforts and research
capabilities on pursuing quality blue-chip stocks. On behalf of Kemper Blue Chip
Fund's shareholders, we remain committed to seeking the brightest opportunities
offered by the best of America's large-cap stocks.
8
<PAGE> 9
INDUSTRY SECTORS
A SIX-MONTH COMPARISON
Data shows the percentage of the common stocks in the portfolio that each sector
represented on April 30, 1999, and on October 31, 1998.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER BLUE CHIP FUND ON KEMPER BLUE CHIP FUND ON
4/30/99 10/31/98
<S> <C> <C>
Consumer non-durables 22.80 25.90
Technology 22.20 17.20
Finance 16.80 14.30
Health care 11.70 12.20
Capital goods 9.70 7.40
Energy 6.80 9.70
Utilities 6.40 9.80
Transportation 2.60 2.50
Basic industries 1.00 0.00
Consumer durables 0.00 1.00
</TABLE>
A COMPARISON WITH THE S&P 500 STOCK INDEX*
Data shows the percentage of the common stocks in the portfolio that each sector
of Kemper Blue Chip Fund represented on April 30, 1999, compared to the industry
sectors that make up the fund's benchmark, the S&P 500 Stock Index.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER BLUE CHIP FUND S&P 500 STOCK INDEX
ON 4/30/99 ON 4/30/99
<S> <C> <C>
Consumer non-durables 22.8 20.4
Technology 22.2 20
Finance 16.8 16.6
Health care 11.7 11.1
Capital goods 9.7 8.2
Energy 6.8 7
Utilities 6.4 10
Transportation 2.6 1
Basic industries 1 3.7
Consumer durables 0 2
</TABLE>
* The S&P 500 Stock Index is an unmanaged index generally representative of the
U.S. stock market.
9
<PAGE> 10
LARGEST HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS*
REPRESENTING 19.6 PERCENT OF THE FUND'S COMMON STOCK HOLDINGS ON APRIL 30, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
HOLDINGS PERCENT
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. GENERAL ELECTRIC A broadly diversified company with 2.7%
major businesses in power
generators, appliances, lighting,
plastics, medical systems,
aircraft engines, financial
services and broadcasting.
2. MOTOROLA Manufactures components, notably 2.2%
semiconductors, and electronic
communications equipment.
3. INTEL Engaged in the design, 2.2%
development, manufacture and sale
of advanced microcomputer
components.
4. MICROSOFT Develops, markets and supports a 1.9%
variety of microcomputer software,
operating systems, language and
application programs, related
books and peripheral devices.
5. HEWLETT-PACKARD Large supplier of enterprise 1.9%
computer systems. Products include
low-cost printers and personal
computers.
6. PROCTER & GAMBLE Manufactures and distributes 1.9%
household products including food,
personal care, diapers, laundry
and cleaning products.
7. TYCO INTERNATIONAL A broadly diversified company with 1.8%
operations in fire-protection
systems, electronic and electrical
components, packaging materials,
and contracting services. Tyco
acquired AMP, a manufacturer of
electrical and electronic
connection devices and wireless
communications components.
8. BELL ATLANTIC Provider of information and 1.7%
telecommunications services.
Subsidiaries provide telephone
services to mid-Atlantic region,
cellular telecommunications,
software, network support and
computer maintenance.
9. ROYAL DUTCH PETROLEUM Operations include the exploration 1.7%
and processing of oil and natural
gas. Other divisions are involved
in the production of base and
industrial chemicals.
10. AMERICAN EXPRESS CREDIT Provider of financial services, 1.6%
including financial plan-ning,
insurance, investment products and
international bank-ing. American
Express also provides travel
products and services.
</TABLE>
*Portfolio composition and holdings are subject to change.
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
KEMPER BLUE CHIP FUND
Portfolio of Investments at April 30,1999 (unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMUNICATIONS--6.2%
Ameritech Corp. 92,400 $ 6,324
AT&T Corp. 142,500 7,196
Bell Atlantic Corp. 215,000 12,389
Frontier Corp. 90,000 4,967
(a) MCI WorldCom, Inc. 97,700 8,030
SBC Communicatons, Inc. 132,000 7,392
-----------------------------------------------------------------------------
46,298
- ------------------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--6.6%
Dayton Hudson Corp. 110,000 7,404
Dollar General Corp. 180,000 6,311
Home Depot, Inc. 158,000 9,470
(a) Mirage Resorts, Inc. 354,800 7,961
(a) Newell Rubbermaid Inc. 172,500 8,183
Wal-Mart Stores Inc. 220,000 10,120
-----------------------------------------------------------------------------
49,449
- ------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--7.5%
Albertson's Inc. 125,000 6,438
Coca-Cola Co., Inc. 125,000 8,500
Colgate-Palmolive Co. 40,000 4,098
Dean Foods Co. 120,000 4,283
H.J. Heinz Co. 100,000 4,669
Pepsi Bottling Group, Inc. 225,000 4,739
PepsiCo Inc. 265,000 9,788
Procter & Gamble Co. 142,000 13,321
-----------------------------------------------------------------------------
55,836
- ------------------------------------------------------------------------------------------------------------------------
ENERGY--6.6%
Chevron Corp. 55,000 5,486
(a) Conoco Inc. "A" 141,800 3,846
Exxon Corp. 100,000 8,306
Mobil Corp. 77,600 8,129
Royal Dutch Petroleum Co. 210,000 12,324
Texaco Inc. 95,800 6,011
Unocal Corp. 120,000 4,988
-----------------------------------------------------------------------------
49,090
- ------------------------------------------------------------------------------------------------------------------------
FINANCIAL--16.1%
American Express Credit Corp. 87,000 11,370
American International Group, Inc. 89,900 10,558
Bank of America Corp. 138,702 9,987
Chase Manhattan Corp. 88,600 7,332
Cigna Corp. 114,900 10,018
CitiGroup Inc. 140,000 10,535
Compass Bancshares Inc. 206,300 5,622
Federal National Mortgage Association 33,300 2,362
First Tennessee National Corp. 100,000 4,312
Hartford Financial Services Group Inc. 4,200 248
Household International, Inc. 198,916 10,008
J.P. Morgan & Co., Inc. 55,000 7,411
Jefferson Pilot Corp. 88,150 5,939
St. Paul Companies, Inc. 196,000 5,623
Summit Bancorp. 100,000 4,238
UNUM Corp. 127,000 6,937
Washington Mutual, Inc. 200,000 8,225
-----------------------------------------------------------------------------
120,725
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
(Dollars in thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HEALTH--11.3%
Abbott Laboratories 225,000 $ 10,898
American Home Products Corp. 108,400 6,612
Baxter International Inc. 145,000 9,135
Becton, Dickinson & Co. 130,000 4,834
Bristol-Myers Squibb Co. 139,000 8,835
Eli Lilly & Co. 80,000 5,890
Medtronic Inc. 142,127 10,224
Pfizer, Inc. 65,000 7,479
Schering-Plough Corp. 144,400 6,976
SmithKline Beecham PLC (ADR) 100,000 6,569
Warner-Lambert Co. 100,000 6,794
-----------------------------------------------------------------------------
84,246
- ------------------------------------------------------------------------------------------------------------------------
MANUFACTURING--9.3%
Air Products & Chemicals, Inc. 135,600 6,373
Corning Inc. 75,000 4,293
Dana Corp. 120,000 5,655
Emerson Electric Co. 150,900 9,733
(a) Federal-Mogul Corp. 146,600 6,432
General Electric Co. 182,800 19,285
Parker-Hannifin Corp. 100,000 4,694
Tyco International Ltd. 159,872 12,990
-----------------------------------------------------------------------------
69,455
- ------------------------------------------------------------------------------------------------------------------------
MEDIA--7.8%
AT&T Corp. - Liberty Media Group 120,000 7,665
CBS Corp. 164,400 7,490
(a) Infinity Broadcasting Corp. 193,800 5,366
(a) Jacor Communications, Inc. "A" 70,000 5,618
(a) Media One Group, Inc. 55,000 4,486
Time Warner Inc. 106,000 7,420
Tribune Co. 90,000 7,509
(a) Univision Communication Inc. 106,900 6,187
(a) Young & Rubicam Inc. 170,300 6,780
-----------------------------------------------------------------------------
58,521
- ------------------------------------------------------------------------------------------------------------------------
SERVICE INDUSTRIES--1.0%
Waste Management, Inc. 134,837 7,618
-----------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--21.4%
(a) Applied Materials, Inc. 121,800 6,532
Automatic Data Processing, Inc. 180,000 8,010
(a) Cisco Systems, Inc. 70,600 8,053
(a) EMC Corp. 50,000 5,447
Hewlett-Packard Co. 175,000 13,803
Intel Corp. 253,400 15,505
International Business Machines Corp. 49,600 10,376
(a) Intuit Inc. 57,000 4,909
(a) Microsoft Corp. 170,000 13,823
Motorola Inc. 200,000 16,025
(a) Novell Inc. 150,000 3,338
(a) Oracle Systems Corp. 263,150 7,121
Raytheon Co. "A" 114,368 7,913
(a) Seagate Technology, Inc. 220,000 6,133
(a) Solectron Corp. 117,000 5,675
(a) Sun Microsystems, Inc. 102,000 6,101
Texas Instruments Inc. 69,000 7,047
Xerox Corp. 147,800 8,683
(a) Xilinx Inc. 111,800 5,101
-----------------------------------------------------------------------------
159,595
</TABLE>
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
(Dollars in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TRANSPORTATION--2.5%
Canadian National Railway Co. 149,500 $ 9,433
Norfolk Southern Corp. 281,200 9,192
-----------------------------------------------------------------------------
18,625
-----------------------------------------------------------------------------
TOTAL COMMON STOCKS--96.3%
(Cost: $584,137) 719,458
-----------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS
- ------------------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--1.0%
CVS Corp.
(Cost: $6,299) 85,000 7,198
-----------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C>
MONEY MARKET
INSTRUMENTS--2.7%
Yield--4.65% to 4.87%
Due--May, 1999
(Cost: $20,458) $20,000 20,458
-----------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $610,894) $747,114
-----------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $610,894,000 for federal income tax purposes
at April 30, 1999, the gross unrealized appreciation was $140,949,000, the gross
unrealized depreciation was $4,729,000 and the net unrealized appreciation on
investments was $136,220,000.
See accompanying Notes to Financial Statements.
13
<PAGE> 14
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1999 (unaudited)
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------
Investments at value
(Cost: $610,894) $747,114
- ------------------------------------------------------------------------
Cash 4
- ------------------------------------------------------------------------
Receivable for:
Investments sold 13,571
- ------------------------------------------------------------------------
Fund shares sold 392
- ------------------------------------------------------------------------
Dividends and interest 705
- ------------------------------------------------------------------------
TOTAL ASSETS 761,786
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ------------------------------------------------------------------------
Payable for:
Investments purchased 3,800
- ------------------------------------------------------------------------
Fund shares redeemed 400
- ------------------------------------------------------------------------
Management fee 347
- ------------------------------------------------------------------------
Distribution services fee 269
- ------------------------------------------------------------------------
Administrative services fee 151
- ------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 456
- ------------------------------------------------------------------------
Trustees' fees and other 117
- ------------------------------------------------------------------------
Total liabilities 5,540
- ------------------------------------------------------------------------
NET ASSETS $756,246
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- ------------------------------------------------------------------------
Paid-in capital $577,170
- ------------------------------------------------------------------------
Undistributed net realized gain on investments 43,386
- ------------------------------------------------------------------------
Net unrealized appreciation on investments 136,220
- ------------------------------------------------------------------------
Accumulated net investment loss (530)
- ------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $756,246
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
THE PRICING OF SHARES
- ------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share ($476,715 /
24,142 shares outstanding) $19.75
- ------------------------------------------------------------------------
Maximum offering price per share (net asset value, plus
6.10% of net asset value or 5.75% of offering price) $20.95
- ------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge) per share ($236,441 /
12,056 shares outstanding) $19.61
- ------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge) per share ($34,936 /
1,772 shares outstanding) $19.72
- ------------------------------------------------------------------------
CLASS I SHARES
Net asset value and redemption price per share ($8,154 /
408 shares outstanding) $19.98
- ------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
14
<PAGE> 15
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Six months ended April 30, 1999 (unaudited)
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
NET INVESTMENT INCOME
- ------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $21) $ 4,226
- ------------------------------------------------------------------------
Interest 396
- ------------------------------------------------------------------------
Total investment income 4,622
- ------------------------------------------------------------------------
Expenses:
Management fee 1,881
- ------------------------------------------------------------------------
Distribution services fee 897
- ------------------------------------------------------------------------
Administrative services fee 660
- ------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 1,657
- ------------------------------------------------------------------------
Professional fees 39
- ------------------------------------------------------------------------
Reports to shareholders 56
- ------------------------------------------------------------------------
Trustees' fees and other 62
- ------------------------------------------------------------------------
Total expenses 5,252
- ------------------------------------------------------------------------
NET INVESTMENT LOSS (630)
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
- ------------------------------------------------------------------------
Net realized gain on sales of investments 43,758
- ------------------------------------------------------------------------
Change in net unrealized appreciation on investments 87,749
- ------------------------------------------------------------------------
Net gain on investments 131,507
- ------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $130,877
- ------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED
1999 OCTOBER 31,
(UNAUDITED) 1998
<S> <C> <C>
- ---------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- ---------------------------------------------------------------------------------------------
Net investment income (loss) $ (630) 2,046
- ---------------------------------------------------------------------------------------------
Net realized gain 43,758 14,402
- ---------------------------------------------------------------------------------------------
Change in net unrealized appreciation 87,749 14,596
- ---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 130,877 31,044
- ---------------------------------------------------------------------------------------------
Distribution from net investment income -- (3,360)
- ---------------------------------------------------------------------------------------------
Distribution from net realized gain (14,608) (57,273)
- ---------------------------------------------------------------------------------------------
Total dividends to shareholders (14,608) (60,633)
- ---------------------------------------------------------------------------------------------
Net increase from capital share transactions 58,207 164,468
- ---------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 174,476 134,879
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------
Beginning of period 581,770 446,891
- ---------------------------------------------------------------------------------------------
END OF PERIOD
(including undistributed net investment income
of $100 at October 31, 1998) $756,246 581,770
- ---------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1 DESCRIPTION OF
THE FUND Kemper Blue Chip Fund (the fund) is an open-end
management investment company organized as a
business trust under the laws of Massachusetts. On
February 5, 1999, the fund acquired the net assets
of Kemper Quantitative Equity Fund in a tax-free
reorganization. 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 generally 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 SECURITY VALUATION. Investments are stated at
value. Portfolio securities which are traded on a
U.S. stock exchange 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. If there are
no such sales, the value is the most recent bid
quotation. Securities which are not quoted on the
Nasdaq but are traded in another over-the-counter
market are valued at the most recent sale price on
such market. 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 shall be used. Money market investments
purchased with an original maturity of sixty days
or less are valued at amortized cost. All other
securities are valued at their fair market value as
determined in good faith by the Valuation Committee
of the Board of Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on the
trade date. 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 close of the Exchange. The net
asset value per
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
share is determined separately for each class 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'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.
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.
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The fund has a management
agreement with Scudder Kemper Investments, Inc.
(Scudder Kemper) and pays a monthly investment
management fee of 1/12 of the annual rate of .58%
of the first $250 million of average daily net
assets declining to .42% of average daily net
assets in excess of $12.5 billion. The fund
incurred a management fee of $1,881,000 for the six
months ended April 30, 1999.
UNDERWRITING AND DISTRIBUTION SERVICES
AGREEMENT. The fund has an underwriting and
distribution services agreement with Kemper
Distributors, Inc. (KDI). Underwriting commissions
paid in connection with the distribution of Class A
shares for the six months ended April 30, 1999 are
$56,000.
For services under the distribution services
agreement, the fund pays KDI a fee of .75% of
average daily net assets of the Class B and Class C
shares pursuant to separate Rule 12b-1 plans for
the Class B and Class C shares. Pursuant to the
agreement, KDI enters into related selling group
agreements with various firms at various rates for
sales of Class B and Class C shares. In addition,
KDI receives any contingent deferred sales charges
(CDSC) from redemptions of Class B and Class C
shares. Distribution fees and CDSC received by KDI
for the six months ended April 30, 1999 are
$1,182,000.
ADMINISTRATIVE SERVICES AGREEMENT. The fund has an
administrative services agreement with KDI. For
providing information and administrative services
to Class A, Class B and Class C shareholders, the
fund pays KDI a fee at an annual rate of up to .25%
of average daily net assets of each class. KDI in
turn has various agreements with financial services
firms that provide these services and pays these
firms based on assets of fund accounts the firms
service. Administrative services fees paid by the
fund to KDI for the six months ended April 30, 1999
are $660,000, of which $2,000 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 $902,000
for the six months ended April 30, 1999.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the fund are also officers or directors of
Scudder Kemper. For the six months ended April 30,
1999, the fund made no payments to its officers and
incurred trustees' fees of $15,000 to independent
trustees.
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the six months ended April 30, 1999, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $347,825
Proceeds from sales 302,652
- --------------------------------------------------------------------------------
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, 1999 OCTOBER 31, 1998
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------
SHARES SOLD
-----------------------------------------------------------------------------
Class A 6,351 $ 116,474 11,964 $ 209,520
-----------------------------------------------------------------------------
Class B 3,434 62,489 5,871 100,251
-----------------------------------------------------------------------------
Class C 621 11,371 1,127 19,586
-----------------------------------------------------------------------------
Class I 132 2,461 618 5,130
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
-----------------------------------------------------------------------------
Class A 513 9,053 2,455 39,357
-----------------------------------------------------------------------------
Class B 238 4,180 977 16,436
-----------------------------------------------------------------------------
Class C 32 564 88 1,411
-----------------------------------------------------------------------------
Class I 6 115 50 799
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
SHARES REDEEMED
-----------------------------------------------------------------------------
Class A (6,194) (115,243) (9,419) (162,406)
-----------------------------------------------------------------------------
Class B (2,098) (38,457) (2,905) (52,942)
-----------------------------------------------------------------------------
Class C (331) (6,110) (449) (7,602)
-----------------------------------------------------------------------------
Class I (182) (3,379) (620) (5,072)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
CONVERSION OF SHARES
-----------------------------------------------------------------------------
Class A 367 6,811 378 6,592
-----------------------------------------------------------------------------
Class B (370) (6,844) (379) (6,592)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
(A) SHARES ISSUED IN ACQUISITION
-----------------------------------------------------------------------------
Class A 324 5,950 -- --
-----------------------------------------------------------------------------
Class B 277 5,074 -- --
-----------------------------------------------------------------------------
Class C 84 1,540 -- --
-----------------------------------------------------------------------------
Class I 116 2,158 -- --
-----------------------------------------------------------------------------
NET INCREASE FROM CAPITAL
SHARE TRANSACTIONS $ 58,207 $ 164,468
-----------------------------------------------------------------------------
</TABLE>
(a) On February 5, 1999, the fund acquired the net
assets of Kemper Quantative Equity Fund, amounting
to $14.7 million, and issued .8 million shares in a
tax-free exchange. The aggregate net assets of the
fund immediately after the exchange were $681.0
million.
18
<PAGE> 19
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------
CLASS A
---------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------
Net asset value, beginning of period $16.61 17.68 17.14 14.87 12.33
- -----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income -- .11 .18 .22 .19
- -----------------------------------------------------------------------------------------
Net realized and unrealized gain 3.56 1.17 3.70 3.45 2.57
- -----------------------------------------------------------------------------------------
Total from investment operations 3.56 1.28 3.88 3.67 2.76
- -----------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- .16 .21 .20 .20
- -----------------------------------------------------------------------------------------
Distribution from net realized gain .42 2.19 3.13 1.20 .02
- -----------------------------------------------------------------------------------------
Total dividends .42 2.35 3.34 1.40 .22
- -----------------------------------------------------------------------------------------
Net asset value, end of period $19.75 16.61 17.68 17.14 14.87
- -----------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 21.67% 7.80 26.78 26.72 22.74
- -----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------
Expenses 1.36% 1.29 1.19 1.26 1.30
- -----------------------------------------------------------------------------------------
Net investment income .01% .62 1.07 1.40 1.47
- -----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------
CLASS B
SIX MONTHS ---------------------------------
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------
Net asset value, beginning of period $16.55 17.61 17.09 14.82 12.29
- ------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.04) (.03) .04 .10 .09
- ------------------------------------------------------------------------------------------
Net realized and unrealized gain 3.52 1.17 3.67 3.45 2.56
- ------------------------------------------------------------------------------------------
Total from investment operations 3.48 1.14 3.71 3.55 2.65
- ------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- .01 .06 .08 .10
- ------------------------------------------------------------------------------------------
Distribution from net realized gain .42 2.19 3.13 1.20 .02
- ------------------------------------------------------------------------------------------
Total dividends .42 2.20 3.19 1.28 .12
- ------------------------------------------------------------------------------------------
Net asset value, end of period $19.61 16.55 17.61 17.09 14.82
- ------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 21.32% 6.96 25.62 25.82 21.76
- ------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------------
Expenses 1.88% 2.10 2.06 2.08 2.06
- ------------------------------------------------------------------------------------------
Net investment income (loss) (.51)% (.19) .20 .58 .71
- ------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------------
CLASS C
SIX MONTHS ---------------------------------------------
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $16.65 17.69 17.15 14.88 12.32
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.05) (.01) .03 .10 .07
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 3.54 1.18 3.71 3.45 2.62
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.49 1.17 3.74 3.55 2.69
- ------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- .02 .07 .08 .11
- ------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .42 2.19 3.13 1.20 .02
- ------------------------------------------------------------------------------------------------------------------------
Total dividends .42 2.21 3.20 1.28 .13
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.72 16.65 17.69 17.15 14.88
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 21.19% 7.08 25.71 25.75 22.04
- ------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------------------------------------------
Expenses 2.01% 2.03 2.00 2.05 2.01
- ------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.64)% (.12) .26 .61 .76
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 21
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------------
CLASS I
---------------------------------------------
SIX MONTHS NOVEMBER 22,
ENDED YEAR ENDED OCTOBER 31, 1995 TO
APRIL 30, ------------------------ OCTOBER 31,
1999 1998 1997 1996
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $16.68 17.72 17.18 15.30
- ---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .09 .21 .32 .36
- ---------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 3.63 1.19 3.58 2.96
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.72 1.40 3.90 3.32
- ---------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- .25 .23 .24
- ---------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .42 2.19 3.13 1.20
- ---------------------------------------------------------------------------------------------------------------------
Total dividends .42 2.44 3.36 1.44
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.98 16.68 17.72 17.18
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 22.61% 8.53 26.89 21.89
- ---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------------------
Expenses .30% .68 .70 1.31
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 1.07% 1.23 1.56 1.33
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- -----------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, -----------------------------------------------------
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets at end of period (in thousands) $756,246 581,770 446,891 256,172 168,266
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 91% 157 183 166 117
- -----------------------------------------------------------------------------------------------------------------------
Note: Total return does not reflect the effect of any sales charges. Data for the period ended April 30, 1999 is
unaudited.
</TABLE>
21
<PAGE> 22
SHAREHOLDERS' MEETING
SPECIAL SHAREHOLDERS' MEETING
On December 17, 1998, a special shareholders' meeting was held. Kemper Blue Chip
Fund shareholders were asked to vote on two separate issues: approval of the new
Investment Management Agreement between the fund and Scudder Kemper Investments,
Inc., and to modify or eliminate certain policies and to eliminate the
shareholder approval requirements as to certain other matters. The following are
the results.
1) Approval of the new Investment Management Agreement between the fund and
Scudder Kemper Investments, Inc. This item was approved.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
18,733,217 333,454 858,098
</TABLE>
2) To modify or eliminate certain policies and to eliminate the shareholder
approval requirements as to certain other matters. These items were approved.
Investment Objectives
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
13,450,442 714,501 1,290,405 4,469,412
</TABLE>
Investment policies
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
13,452,777 710,279 1,292,291 4,469,412
</TABLE>
Diversification
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
13,457,467 705,590 1,292,291 4,469,412
</TABLE>
Borrowing
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
13,443,962 719,094 1,292,291 4,469,412
</TABLE>
Senior securities
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
13,460,308 702,749 1,292,291 4,469,412
</TABLE>
Concentration
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
13,456,179 706,878 1,292,291 4,469,412
</TABLE>
Underwriting of securities
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
13,453,615 709,441 1,292,291 4,469,412
</TABLE>
Investment in real estate
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
13,452,871 710,185 1,292,291 4,469,412
</TABLE>
Purchase of commodities
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
13,437,610 725,446 1,292,291 4,469,412
</TABLE>
Lending
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
13,436,827 726,229 1,292,291 4,469,412
</TABLE>
Margin purchases and short sales
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
13,411,239 751,817 1,292,291 4,469,412
</TABLE>
Pledging of assets
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
13,413,525 749,532 1,292,291 4,469,412
</TABLE>
Purchases of securities
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
13,457,234 705,823 1,292,291 4,469,412
</TABLE>
Purchases of options and warrants
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
13,429,660 733,397 1,292,291 4,469,412
</TABLE>
22
<PAGE> 23
NOTES
23
<PAGE> 24
TRUSTEES AND OFFICERS
TRUSTEES OFFICERS
DANIEL PIERCE MARK S. CASADY LINDA J. WONDRACK
Chairman and Trustee President Vice President
JOHN W. BALLANTINE PHILIP J. COLLORA MAUREEN E. KANE
Trustee Vice President and Assistant Secretary
Secretary
LEWIS A. BURNHAM CAROLINE PEARSON
Trustee JOHN R. HEBBLE Assistant Secretary
Treasurer
DONALD L. DUNAWAY ELIZABETH C. WERTH
Trustee TRACY MCCORMICK CHESTER Assistant Secretary
Vice President
ROBERT B. HOFFMAN BRENDA LYONS
Trustee ANN M. MCCREARY Assistant Treasurer
Vice President
DONALD R. JONES
Trustee KATHRYN L. QUIRK
Vice President
THOMAS W. LITTAUER
Trustee and Vice President CORNELIA SMALL
Vice President
SHIRLEY D. PETERSON
Trustee
WILLIAM P. SOMMERS
Trustee
- --------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 419557
Kansas City, MO 64141
- --------------------------------------------------------------------------------
CUSTODIAN STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, MA 02110
- --------------------------------------------------------------------------------
TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
801 Pennsylvania Avenue
Kansas City, MO 64105
- --------------------------------------------------------------------------------
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606
www.kemper.com
[KEMPER FUNDS LOGO]
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
Printed on recycled paper in the U.S.A. This report is not to be distributed
unless preceded or accompanied by a Kemper Equity Fund/Growth Style prospectus.
KBCF - 3 (6/21/99) 1076850
