<PAGE> 1
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED OCTOBER 31, 1999
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
[LOGO]
Seeking Growth of Capital and of Income
KEMPER
BLUE CHIP FUND
"... The gains of the recent period were earned
against the backdrop of a rotational and
challenging market climate. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
9
INDUSTRY SECTORS
10
LARGEST HOLDINGS
11
PORTFOLIO OF INVESTMENTS
15
FINANCIAL STATEMENTS
17
NOTES TO FINANCIAL STATEMENTS
22
FINANCIAL HIGHLIGHTS
25
REPORT OF INDEPENDENT AUDITORS
At A GLANCE
TERMS TO KNOW
KEMPER BLUE CHIP FUND
TOTAL RETURNS
FOR THE YEAR ENDED OCTOBER 31, 1999
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER BLUE CHIP FUND KEMPER BLUE CHIP FUND LIPPER MULTI-CAP CORE
KEMPER BLUE CHIP FUND CLASS A CLASS B CLASS C FUNDS CATEGORY AVERAGE*
- ----------------------------- --------------------- --------------------- -----------------------
<S> <C> <C> <C>
27.96% 26.83% 26.91% 23.12%
</TABLE>
RETURNS AND RANKINGS ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE, SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN ORIGINAL COST.
*LIPPER ANALYTICAL SERVICES, INC. RETURNS AND RANKINGS ARE BASED UPON CHANGES IN
NET ASSET VALUE WITH ALL DIVIDENDS REINVESTED AND DO NOT INCLUDE THE EFFECT OF
SALES CHARGES; IF SALES CHARGES HAD BEEN INCLUDED, RESULTS MAY HAVE BEEN LESS
FAVORABLE.
NET ASSET VALUE
<TABLE>
<CAPTION>
AS OF AS OF
10/31/99 10/31/98
.........................................................
<S> <C> <C>
KEMPER BLUE CHIP FUND
CLASS A $20.76 $16.61
.........................................................
KEMPER BLUE CHIP FUND
CLASS B $20.50 $16.55
.........................................................
KEMPER BLUE CHIP FUND
CLASS C $20.64 $16.65
.........................................................
</TABLE>
KEMPER BLUE CHIP FUND
RANKINGS AS OF 10/31/99
COMPARED WITH ALL OTHER FUNDS IN THE LIPPER MULTI-CAP CORE FUNDS CATEGORY*
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
.........................................................
<S> <C> <C> <C>
1-YEAR #84 of #95 of #94 of
348 funds 348 funds 348 funds
.........................................................
5-YEAR #30 of #49 of #45 of
139 funds 139 funds 139 funds
.........................................................
10-YEAR #27 of 68 N/A N/A
funds
.........................................................
</TABLE>
DIVIDEND REVIEW
DURING THE YEAR ENDED OCTOBER 31, 1999, KEMPER BLUE CHIP FUND MADE THE
FOLLOWING DISTRIBUTIONS 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>
YOUR FUND'S STYLE
MORNINGSTAR EQUITY STYLE BOX
<TABLE>
<S> <C>
[MORNINGSTAR EQUITY STYLE Source: Morningstar, Inc. Chicago, IL (312)
BOX] 696-6000. The Morningstar Style Box placement is
based on two variables: a fund's market
capitalization relative to the movements of the
market and a fund's valuation, which is
calculated by comparing the stocks in the fund's
portfolio with the most relevant of the three
market-cap groups.
PLEASE NOTE THAT STYLE BOXES DO NOT REPRESENT AN
EXACT ASSESSMENT OF RISK AND DO NOT REPRESENT
FUTURE PERFORMANCE. THE FUND'S PORTFOLIO CHANGES
FROM DAY TO DAY. A LONGER-TERM VIEW IS
REPRESENTED BY THE FUND'S MORNINGSTAR CATEGORY,
WHICH IS BASED ON ITS ACTUAL INVESTMENT STYLE AS
MEASURED BY ITS UNDERLYING PORTFOLIO HOLDINGS
OVER THE PAST THREE YEARS. MORNINGSTAR HAS PLACED
KEMPER BLUE CHIP FUND IN THE LARGE BLEND
CATEGORY. PLEASE CONSULT THE PROSPECTUS FOR A
DESCRIPTION OF INVESTMENT POLICIES.
</TABLE>
BALANCE SHEET A condensed financial statement showing what a company owns, what
it owes and the ownership interest in the company of its stockholders, at a
certain time.
BENCHMARK A gauge of relative performance, often a broad market index. A fund
may evaluate its performance against how well its benchmark performed. Kemper
Blue Chip Fund's benchmark is the S&P 500 index. A fund may also benchmark its
performance against funds of a similar style -- for instance, large-cap growth
funds.
CYCLICAL STOCK A stock that carries a higher degree of economic sensitivity. In
accelerating economies, cyclical stocks tend to rise quickly; in decelerating
economies, they tend to decline quickly. Cyclical stocks include industrial
machinery, paper and forestry, automobiles and construction.
GROWTH STOCK A stock in a company that is expected to experience rapid growth
resulting from strong sales, talented management and dominant market position.
Because growth stocks are typically in demand, they tend to carry relatively
high price tags and can also be volatile, based on changing perceptions of the
companies' growth.
<PAGE> 3
ECONOMIC OVERVIEW
Scudder Kemper Investments, the investment manager for Kemper Funds, is one of
the largest and most experienced investment management organizations in the
world, managing more than $290 billion in assets for institutional and corporate
clients, retirement and pension plans, insurance companies, mutual fund
investors and individuals. Scudder Kemper Investments offers a full range of
investment counsel and asset management capabilities based on a combination of
proprietary research and disciplined, long-term investment strategies.
DEAR KEMPER FUNDS SHAREHOLDER:
Markets have been aquiver about inflation risks. Growth in the United States
continues to exceed most expectations. Labor markets are visibly tight. These
are the precursors to inflation -- everybody knows it.
Everybody except us, that is. We don't buy it in principle, and reality is
proving our theory correct.
First, let's look at growth. The traditional economic view is that growth
causes inflation. Today, we're seeing exactly the opposite: Low inflation is
causing growth. Low inflation keeps interest rates down, and low interest rates
spur investment by making borrowing money cheap. Investment allows companies to
add capacity, keeping competition fierce. As a result, companies aren't raising
prices; they're competing for business by keeping goods attractive and prices
low. That's true for the old economy, in which consumers were buying t-shirts,
and the new economy, in which consumers are buying Internet services. Everywhere
they look, consumers see bargains -- in the malls, in the auto showrooms, at the
mortgage companies.
As for tight labor markets, the traditional economic view is that tight
labor -- i.e., many "help-wanted" signs -- forces companies to pay a premium for
talent. That, in turn, forces companies to raise their prices in order to
protect their profits. And raising prices results in inflation. In contrast, we
believe that tight labor markets won't cause wages to surge. Why?
To start with, temporary agencies have proliferated, accounting for 2.2
percent of jobs, up from 0.5 percent in the early 1980s. They get just the right
amount and type of labor to the right spot at the right time to get the job
done.
Immigration also keeps a lid on wage rates, since it replenishes the work
force much faster than births. Immigration is at its highest level ever; an
amazing 10 percent of the population is foreign-born. Nearly 1 million people
enter the United States legally each year, and another 300,000 just show up.
When they get here, they look for jobs. And often, they're willing to accept
lower-paying jobs than the average citizen.
Finally, and perhaps most importantly, wage rates are kept in check by
executives' intense profit focus. Payroll is a company's biggest expense. When
payroll skyrockets, profits decline -- and that would be bad for a CEO who
promised Wall Street double-digit earnings growth from now to the end of time.
If investors are disappointed in earnings growth, they sell their stock. And
when they sell their stock, the stock options that are an essential part of many
executives' compensation are as valuable as scrap paper.
Supporting our theory are two distinct and important sets of data released
in late October: The Bureau of Economic Analysis released its third-quarter
estimate of gross domestic product (GDP), the value of all goods and services
produced in the United States, and the Bureau of Labor Statistics released its
employment cost index (ECI), which measures what employers pay for their
workers' wages, salaries and benefits.
GDP grew at a 4.8 percent rate in the third quarter, up sharply from the
revised 1.9 percent second-quarter pace and just slightly above the consensus
estimate of 4.7 percent.
At the same time, however, the ECI rose by 0.8 percent in the July-September
period, down from a 1.1 percent increase in the second quarter. The
third-quarter gain also was lower than the 0.9 percent increase forecast by
economists in a Reuters poll. (The report, by the way, is said to be one of the
favorites of Federal Reserve Chairman Alan Greenspan, who uses it as a key
indicator of inflation pressures in the world's largest economy.)
In essence, then, the U.S. economy posted its strongest growth so far this
year in the third quarter, while wage costs remained tame. The combination of
strong consumer demand and the lowest unemployment in a generation just isn't
igniting wage-driven inflation.
Nevertheless, the Federal Reserve Board raised the federal funds rate and
the discount rate by one quarter of a point (0.25%) each at its Nov. 16 meeting.
Do we think the Fed made a bad decision? Actually, no.
First, the Fed has to guard against the possibility that the old
relationship between growth and inflation will soon reassert itself. Even if the
Fed shared our belief that
3
<PAGE> 4
ECONOMIC OVERVIEW
- --------------------------------------------------------------------------------
ECONOMIC GUIDEPOSTS
- --------------------------------------------------------------------------------
Economic activity is a key influence on investment performance and shareholder
decision-making. Periods of recession or boom, inflation or deflation, credit
expansion or credit crunch have a significant impact on mutual fund performance.
The following are some significant economic guideposts and their investment
rationale that may help your investment decision-making. The 10-year Treasury
rate and the prime rate are prevailing interest rates. The other data report
year-to-year percentage changes.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (11/30/99) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
-------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate(1) 6.00 5.50 4.80 5.90
Prime rate(2) 8.50 7.75 8.00 8.50
Inflation rate(3)* 2.60 2.30 1.50 2.00
The U.S. dollar(4) -0.7 -0.9 1.20 9.40
Capital goods orders(5)* 12.60 2.50 -0.6 6.40
Industrial production(5)* 3.30 2.90 3.50 6.90
Employment growth(6)* 2.10 2.10 2.30 2.70
</TABLE>
(1) FALLING INTEREST RATES IN RECENT YEARS HAVE BEEN A BIG PLUS FOR FINANCIAL
ASSETS.
(2) THE INTEREST RATE THAT COMMERCIAL LENDERS CHARGE THEIR BEST BORROWERS.
(3) INFLATION REDUCES AN INVESTOR'S REAL RETURN. IN THE LAST FIVE YEARS,
INFLATION HAS BEEN AS HIGH AS 6 PERCENT. THE LOW, MODERATE INFLATION OF THE
LAST FEW YEARS HAS MEANT HIGH REAL RETURNS.
(4) CHANGES IN THE EXCHANGE VALUE OF THE DOLLAR IMPACT U.S. EXPORTERS AND THE
VALUE OF U.S. FIRMS' FOREIGN PROFITS.
(5) THESE INFLUENCE CORPORATE PROFITS AND EQUITY PERFORMANCE.
(6) AN INFLUENCE ON FAMILY INCOME AND RETAIL SALES.
*DATA AS OF 10/30/99.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
strong consumer demand and low unemployment isn't igniting wage-driven
inflation, the organization wouldn't be doing its job if it didn't act in the
face of any possibility that inflation might reassert itself.
More important, the Fed has to be concerned about the explosion in credit
we've seen during the last year. Almost everyone but Uncle Sam has been loading
up on debt. Companies have borrowed heavily to fund mergers, share buybacks and
new investments. Homeowners have taken out bigger mortgages on their houses and
new home equity loans. Equity shareholders have ramped up their margin debt.
Financial institutions have issued record amounts of new paper to fund their
aggressive growth. The Fed's decision to raise interest rates, thereby making
borrowing costlier, should take the frenzy out of this borrowing binge. That is
a good thing for future financial stability.
Indeed, the early positive market reaction to the Fed's move suggests that
the markets share our views that the Fed made the right decision.
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
Scudder Kemper Investments Economics Group
The information contained in this piece has been taken from sources believed to
be reliable, but the accuracy of the information is not guaranteed. the opinions
and forecasts expressed are those of the economic advisors of Scudder Kemper
Investments, Inc. as of November 18, 1999, and may not actually come to pass.
this information is subject to change. no part of this material is intended as
an investment recommendation.
To obtain a Kemper Funds prospectus, download one from www.kemper.com, talk to
your financial representative or call Shareholder Services at (800) 621-1048.
The prospectus contains more complete information, including management fees and
expenses. Please read it carefully before you invest or send money.
4
<PAGE> 5
PERFORMANCE UPDATE
[MCCORMICK PHOTO]
TRACY MCCORMICK JOINED SCUDDER KEMPER INVESTMENTS, INC. IN 1994 AND SERVES AS A
MANAGING DIRECTOR. MCCORMICK RECEIVED BOTH HER BACHELOR OF ARTS AND M.B.A.
DEGREES FROM MICHIGAN STATE UNIVERSITY. SHE CONTRIBUTES MORE THAN 15 YEARS OF
INVESTMENT INDUSTRY EXPERIENCE. PORTFOLIO MANAGER GARY LANGBAUM, CFA, ALSO
PROVIDES INVESTMENT MANAGEMENT EXPERTISE.
MCCORMICK'S TEAM DRAWS ON THE RESOURCES OF SCUDDER KEMPER INVESTMENTS' LARGE
STAFF OF ANALYSTS, RESEARCHERS, TRADERS AND ECONOMISTS.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO 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.
ALTHOUGH THE STOCK MARKET DELIVERED PLENTY OF UPS AND DOWNS DURING THE ANNUAL
PERIOD, KEMPER BLUE CHIP FUND ROSE TO THE OCCASION. UNDER THE DIRECTION OF LEAD
PORTFOLIO MANAGER TRACY MCCORMICK, THE FUND TOPPED ITS BENCHMARK AS WELL AS ITS
PEER-GROUP AVERAGES. IN THIS SECTION, MCCORMICK DISCUSSES THE MARKET CLIMATE,
HER INVESTMENT STRATEGY AND THE FACTORS THAT SHAPED THE FUND'S PERFORMANCE.
Q TRACY, HOW DID KEMPER BLUE CHIP FUND PERFORM DURING THE ANNUAL PERIOD?
A We're very pleased with the fund's performance. For the one-year period
ending October 31, 1999, Kemper Blue Chip Fund earned 27.96 percent (Class A
shares, unadjusted for any sales charges). The fund surpassed its benchmark, the
Standard & Poor's 500 index (S&P 500), which gained 25.66 percent for the
one-year period. The fund's return also compares very favorably with its peers.
For the one-year period, Kemper Blue Chip Fund lands among the top quartile of
the Lipper multi-cap core group.
Q BEFORE YOU DISCUSS THE FUND'S PERFORMANCE IN GREATER DETAIL, PLEASE
PROVIDE US WITH AN OVERVIEW OF SOME OF THE KEY FACTORS THAT SHAPED THE DOMESTIC
STOCK MARKET.
A Generally, the fiscal year was a strong period for the U.S. economy and
stock market. Let's take a look at the S&P 500, an index frequently cited as a
gauge of overall market performance. During the past 20 calendar years, the S&P
500 has returned about 18 percent per year. So, within this longer historical
context, we can see that the index's fiscal-year gain of 25.66 percent is quite
robust.
However, the gains of the recent period were earned against the backdrop of a
rotational and challenging market climate. Not all stocks enjoyed equally good
fortune. The Russian debt default in August of 1998 and the Asian economic
crisis of 1997 continued to serve as uncomfortable reminders about stock-market
volatility. For most investors, household-name stocks inspired greater
confidence and allayed anxiety. Therefore, during the final months of 1998
through the first months of 1999, investors generally favored large-cap domestic
growth stocks over other types of equity investments.
Thanks to the explosive growth of the Internet and electronic commerce,
technology stocks were leading performers. In a climate of high consumer
confidence and low unemployment, media and retail stocks also thrived.
The stock market changed directions rapidly in April of 1999, rotating away
from growth stocks toward more cyclical issues and smaller-cap stocks. Despite
low inflationary and labor-cost pressures, many investors believed that the
economy was growing rapidly, a scenario that benefits cyclical stocks. The
Federal Reserve's move to raise interest rates in June, as well as increasing
oil prices, supported this view. In this climate, traditional growth stocks such
as health-care and consumer nondurable stocks yielded to more typical cyclical
fare: oil, chemical and industrial stocks. Technology stocks took a tumble, as
many investors became concerned about the high valuations of Internet stocks.
5
<PAGE> 6
PERFORMANCE UPDATE
This cyclical rotation proved to be short-lived. By June, the market rotated
again. Concerns of additional interest-rate increases faded, soothing many
investors. Low inflation, high consumer confidence, good corporate profits and
productivity remained in place, signaling to many investors a continuation of
slow and steady economic growth. Large-cap growth stocks then closed the fiscal
year on a bright note.
Q HOW DO YOU SELECT STOCKS WHEN THE MARKET CLIMATE IS ALWAYS CHANGING? DO
YOU HAVE TO ADJUST YOUR STOCK-SELECTION PROCESS?
A Regardless of the market climate, we stick to a consistent,
research-driven investment philosophy. We don't let the conventional Wall Street
buzz guide us. Before we invest, we need to understand a company inside and out.
To do this, we'll meet with a company's management, tour their facilities, and
scrutinize their balance sheets. It's a rigorous, research-intensive process,
but we wouldn't want it any other way.
As the fund's name indicates, we invest primarily in blue-chip companies --
established, large-cap domestic companies. Before we buy a stock, we need to
see:
- - Excellent company fundamentals
- - Strong earnings growth prospects
- - Catalysts for potential growth, such as new management, products, services or
business strategies
- - Attractive stock prices
We search for blue chips in all corners of the market, from technology to
consumer products to energy. Our goal is to uncover stocks in industries that
are experiencing favorable secular or cyclical change.
Of course, it's not enough to select a good stock; we also have to make sure
that the factors that attracted us to it remain intact. We reduce positions when
prices approach predetermined targets. Plus, we keep an eye on deteriorating
fundamentals, such as changes in management and unexpected shifts in strategic
direction.
Q TRACY, AS YOU MENTIONED, TECHNOLOGY STOCKS HAVE BEEN STRONG PERFORMERS
DURING THE ANNUAL PERIOD. THEY'RE ALSO A SIGNIFICANT COMPONENT OF KEMPER BLUE
CHIP FUND. COULD YOU TELL US ABOUT THE TECHNOLOGY SEGMENT OF THE PORTFOLIO?
A Technology stocks currently represent about a fifth of the portfolio,
roughly in line with the S&P 500 index, our benchmark. Consistent with our
blue-chip focus, though, we're not investing in untested ".com" stocks. But,
through exposure to established technology leaders, the fund is participating in
the tremendous growth potential of the Internet and electronic commerce.
During the fiscal year, the fund has reaped considerable gains from many
technology stocks, particularly those of semiconductor companies, such as
Motorola, Applied Materials, Xilinx and Texas Instruments. As Asian economies
began to recover from their 1997 downturn, demand for semiconductors has
increased, allowing semiconductor companies to sell their products at better
prices.
Large positions in Cisco Systems and Microsoft have also contributed
positively to performance. Cisco Systems is the leading provider of computer
networking, an essential component for the build-out of the Internet's
infrastructure, while Microsoft's product line features an extensive array of
Internet-oriented software and services, including a well-developed Internet
access site. Our analysis suggests that although Microsoft is involved in legal
issues, the company continues to offer outstanding growth potential, thanks to a
strong product pipeline.
In fact, several of our technology stocks provide good examples of our
stock-selection process in action. For instance, we purchased Motorola in the
summer of 1998, at a point when many investors weren't paying much attention to
the company. We got ahead of the crowd and realized that Motorola offered many
catalysts for growth, including clarified focus, new product initiatives and
cost controls. Now Motorola is a well-received and widely followed stock. We're
pleased that our early recognition of change placed the fund ahead of the pack
and helped us provide the fund's shareholders with solid gains.
Q WHAT ELSE WORKED OUT WELL FOR THE FUND DURING THE ANNUAL PERIOD?
A Media stocks enhanced performance. Because they derive significant
revenues from advertising, media stocks flourished in a climate of high consumer
confidence. Consolidation trends within the industry have further bolstered
investor approval. Revenue streams also increased due to an Internet-linked
pattern: Many young Internet companies are turning to radio advertising as their
primary means of establishing name recognition. Companies such as Clear Channel
Communications, a leading provider of outdoor advertising and radio
broadcasting, have benefited from these trends. Certain other media companies
also offer additional exposure to the Internet. For instance, as well as
profiting from advertising revenue and the sale of programming content, AT&T -
Liberty Media Group has premium bandwidth that can fetch a high price.
6
<PAGE> 7
PERFORMANCE UPDATE
Other top-performing media stocks include CBS, Infinity Broadcasting and
Univision Communications. As with Motorola, Univision Communications also
typifies our investment process in action. While Univision may not be a
household name today, we believe that it offers tremendous potential. Univision
is a leading player in the rapidly growing segment of Spanish-language radio and
television broadcasting. It's a well-managed company and has demonstrated an
ability to dominate an expanding market niche.
Several of our retail stocks, such as Wal-Mart and Dayton Hudson, have also
contributed positive performance. Here too, strong consumer confidence has
helped these quality retailers.
Telecommunications stocks, such as MCI WorldCom, SBC Communications and Bell
Atlantic, proved profitable. In addition to traditional telephone service, these
companies are involved in a variety of information and networking services.
Furthermore, each has displayed a flair in making profitable, well-focused
acquisitions.
Q YOU MENTIONED THAT TRADITIONAL GROWTH STOCKS FALTERED AT POINTS DURING THE
YEAR. HOW DID THE FUND'S HEALTH-CARE SEGMENT PERFORM?
A Exposure to large-cap pharmaceuticals -- such as Abbott Laboratories and
Pfizer -- hindered the fund's gains, particularly when the markets took a
cyclical turn in the springtime. Many pharmaceutical firms grappled with slowing
product pipelines and regulatory uncertainty. Litigation concerns surrounding
the diet drug fen-phen translated into added struggles for American Home
Products.
Although we have shifted into some growth-oriented biotechnology companies, we
have not altogether abandoned large-cap pharmaceutical stocks. The aging of
America is an important demographic factor. Pharmaceutical companies will play
an essential role in providing much-needed medical products to an aging
populace. In selecting stocks, we're placing a premium on companies with robust
product pipelines. And, in the case of American Home Products, our analysis
suggests that the market has overreacted to the legislative issues and that the
company can continue to post attractive earnings.
Q DESPITE THE FUND'S STRONG GAIN, WERE THERE PORTFOLIO INVESTMENTS THAT DID
NOT PERFORM AS WELL AS ANTICIPATED?
A Until the final weeks of the fiscal year, financial-services stocks
produced lackluster returns. That's to be expected in a rising-rate environment.
Here, too, however, we've begun to see some changes for the positive, in the
wake of the passage of the Gramm-Leach-Bliley Act of 1999, which removes some
barriers to industry consolidation. We think financial services, particularly
insurance companies, could benefit in the upcoming period.
A variety of other stocks also fell short of expectations. Food companies such
as ConAgra floundered. Because we no longer felt a high degree of conviction in
its earnings growth potential, we eliminated ConAgra from the portfolio. Waste
Management also proved to be a disappointing investment. The stock fell short of
earnings, and it became apparent that company management was not appropriately
addressing accounting issues. Again relying on our proprietary research rather
than the conventional buzz, we liquidated our position promptly, avoiding much
of the price decline that followed.
Q DO YOU ALWAYS SELL STOCKS IF THEY DECLINE?
A No, not always. Sometimes, stocks experience short-term declines as a
result of an unfounded market reaction. That's why we rely on our own
independent analyses. For instance, toward the end of the fiscal year, Tyco
International and Hewlett-Packard experienced negative market sentiment, but we
feel that the market's concerns are not sufficiently supported. Our analysis
tells us that there is good potential for strong internal growth. We also have
confidence that Tyco's management is behaving in an open and up-front manner. In
the case of Hewlett-Packard, we still believe that the stock offers very
attractively priced growth potential. The catalysts that first attracted us to
the company -- including a spin-off of a division and a new chief executive
officer -- are still in place.
Q AS WE ENTER THE NEXT FISCAL YEAR -- AND THE NEXT MILLENNIUM -- DO YOU HAVE
ANY CONCLUDING WORDS FOR SHAREHOLDERS?
A As we always emphasize, no one can predict what the future will bring.
Stock investing is a long-term proposition, and volatility is part and parcel of
the process. Recognizing that even modest market fluctuations can be
disheartening to some shareholders, we'd also again highlight that it's often
the ups and downs that create new investment opportunities. It is in this
arena -- the evaluation of individual stock opportunities -- where we will
continue to focus our research efforts. While we cannot predict the overall
market direction, we feel confident about the long-term potential of the
individual stocks in the portfolio of Kemper Blue Chip Fund.
7
<PAGE> 8
PERFORMANCE UPDATE
AVERAGE ANNUAL TOTAL RETURNS*
For periods ended October 31, 1999 (adjusted for the maximum sales charge)
<TABLE>
<CAPTION>
1-YEAR 5-YEAR 10-YEAR LIFE OF CLASS
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
KEMPER BLUE CHIP FUND CLASS A 20.63% 20.72% 14.41% 13.48% (since 11/23/87)
....................................................................................................
KEMPER BLUE CHIP FUND CLASS B 23.83 21.07 N/A 19.37 (since 5/31/94)
....................................................................................................
KEMPER BLUE CHIP FUND CLASS C 26.91 21.26 N/A 19.60 (since 5/31/94)
....................................................................................................
</TABLE>
KEMPER BLUE CHIP FUND CLASS A
Growth of an assumed $10,000 investment in Class A
shares from 11/30/87 to 10/31/99
[LINE GRAPH]
<TABLE>
<CAPTION>
KEMPER BLUE CHIP FUND STANDARD & POOR'S 500
CLASS A(1) STOCK INDEX+ RUSSELL 1000 INDEX++
--------------------- --------------------- --------------------
<S> <C> <C> <C>
11/30/1987 9424 10000 10000
9518 10729 10733
8886 12059 12582
11308 15345 16410
11581 14339 15727
12/31/1991 16726 18111 20925
16526 18919 22816
17157 20254 25132
16273 19942 25227
12/31/1995 21435 26745 34756
27372 32164 42558
34546 42138 56539
39520 53375 71818
10/31/1999 45252 59181 79851
</TABLE>
KEMPER BLUE CHIP FUND CLASS B
Growth of an assumed $10,000 investment in Class B
shares from 5/31/94 to 10/31/99
[LINE GRAPH]
<TABLE>
<CAPTION>
KEMPER BLUE CHIP FUND STANDARD & POOR'S 500
CLASS B(1) STOCK INDEX+ RUSSELL 1000 INDEX++
--------------------- --------------------- --------------------
<S> <C> <C> <C>
5/31/94 10000 10000 10000
9809 10061 10191
12/31/95 12828 13492 14040
16232 16227 17192
12/31/97 20319 21258 22840
23094 26927 29012
10/31/99 26115 29856 32258
</TABLE>
KEMPER BLUE CHIP FUND CLASS C
Growth of an assumed $10,000 investment in Class C
shares from 5/31/94 to 10/31/99
[LINE GRAPH]
<TABLE>
<CAPTION>
KEMPER BLUE CHIP FUND STANDARD & POOR'S 500
CLASS C(1) STOCK INDEX+ RUSSELL 1000 INDEX++
--------------------- --------------------- --------------------
<S> <C> <C> <C>
5/31/94 10000 10000 10000
9838 10061 10191
12/31/95 12890 13492 14040
16310 16227 17192
12/31/97 20432 21258 22840
23207 26927 29012
10/31/99 26391 29856 32258
</TABLE>
PAST PERFORMANCE IS NOT A GUARANTEE OF
FUTURE RESULTS. INVESTMENT RETURNS AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT
SHARES, WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN ORIGINAL COST
* AVERAGE ANNUAL TOTAL RETURN AND TOTAL
RETURN MEASURES NET INVESTMENT INCOME
AND CAPITAL GAIN OR LOSS FROM
PORTFOLIO INVESTMENTS, ASSUMING
REINVESTMENT OF ALL DIVIDENDS AND,
FOR CLASS A SHARES, ADJUSTMENT FOR
THE MAXIMUM SALES CHARGE OF 5.75%,
AND FOR CLASS B SHARES, ADJUSTMENT
FOR THE APPLICABLE CONTINGENT
DEFERRED SALES CHARGE (CDSC). THE
MAXIMUM CDSC FOR CLASS B SHARES IS
4%. CLASS C SHARES HAVE NO SALES
CHARGE ADJUSTMENT. FOR CLASS C
SHARES, THERE IS A 1% CDSC ON CERTAIN
REDEMPTIONS WITHIN THE FIRST YEAR OF
PURCHASE. AVERAGE ANNUAL TOTAL RETURN
REFLECTS ANNUALIZED CHANGE, WHILE
TOTAL RETURN REFLECTS AGGREGATE
CHANGE. DURING THE PERIODS NOTED,
SECURITIES PRICES FLUCTUATED. FOR
ADDITIONAL INFORMATION, SEE THE
PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION AND THE
FINANCIAL HIGHLIGHTS AT THE END OF
THIS REPORT.
(1)PERFORMANCE INCLUDES REINVESTMENT
OF DIVIDENDS AND ADJUSTMENT FOR THE
MAXIMUM SALES CHARGE FOR CLASS A
SHARES AND THE CONTINGENT DEFERRED
SALES CHARGE IN EFFECT AT THE END
OF THE PERIOD FOR CLASS B SHARES.
IN COMPARING KEMPER BLUE CHIP FUND
CLASS A SHARES WITH THE STANDARD &
POORS 500 STOCK INDEX, YOU SHOULD
ALSO NOTE THAT THE FUND'S
PERFORMANCE REFLECTS THE MAXIMUM
SALES CHARGE, WHILE NO SUCH CHARGES
ARE REFLECTED IN THE PERFORMANCE OF
THE INDEX.
(+)THE STANDARD & POOR'S 500 STOCK INDEX
IS AN UNMANAGED INDEX GENERALLY
REPRESENTATIVE OF THE U.S. STOCK
MARKET. SOURCE IS WIESENBERGER.
(++)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. SOURCE IS
WIESENBERGER.
8
<PAGE> 9
INDUSTRY SECTORS
KEMPER BLUE CHIP FUNDS HOLDINGS
Data show the percentage of the common stocks in the portfolio that each sector
represented on October 31, 1999.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER BLUE CHIP FUND ON 10/31/99
---------------------------------
<S> <C>
TECHNOLOGY 18.6%
FINANCIAL 14.9%
HEALTH 12.9%
CONSUMER DISCRETIONARY 10.3%
MEDIA 9.8%
MANUFACTURING 7.2%
COMMUNICATIONS 6.3%
ENERGY 5.6%
CONSUMER STAPLES 5.4%
SERVICE INDUSTRIES 3.7%
MONEY MARKET INSTRUMENTS 2.9%
DURABLES 1.6%
TRANSPORTATION 0.8%
</TABLE>
KEMPER BLUE CHIP FUND ON 10/31/99
9
<PAGE> 10
LARGEST HOLDINGS
TOP 10 HOLDINGS*
Representing 23.4 percent of the fund's common stock on October 31, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
HOLDINGS PERCENT
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. GENERAL ELECTRIC A broadly diversified company with 3.2%
major businesses in power
generators, appliances, lighting,
plastics, medical systems, aircraft
engines, financial services and
broadcasting.
- ---------------------------------------------------------------------------------------
2. INTEL Engaged in the design, development, 2.9%
manufacture and sale of advanced
microcomputer components, including
semiconductors and other related
products.
- ---------------------------------------------------------------------------------------
3. MICROSOFT Develops, markets and supports a 2.8%
variety of software, operating
systems, and language and
application programs.
- ---------------------------------------------------------------------------------------
4. WAL-MART Large, global retailer with 2.3%
operations in the United States,
Asia and Latin America. Wal-Mart
operates Wal-Marts, Wal-Mart
Supercenters and Sam's Clubs. Sells
branded merchandise under the
Popular Mechanics, Better Homes &
Gardens and Sam's American Choice
labels.
- ---------------------------------------------------------------------------------------
5. CISCO SYSTEMS Large, comprehensive supplier of 2.2%
routing software and related systems
that direct the flow of data between
local networks.
- ---------------------------------------------------------------------------------------
6. MOTOROLA Manufactures components, notably 2.1%
semiconductors, and electronic
communications equipment.
- ---------------------------------------------------------------------------------------
7. SBC COMMUNICATIONS Regional Bell operating company, 2.1%
formerly Southwestern Bell and
Ameritech.
- ---------------------------------------------------------------------------------------
8. TANDY Major retailer of electronics, 2.0%
cellular phones, security systems
and accessories under the Radio
Shack name.
- ---------------------------------------------------------------------------------------
9. BELL ATLANTIC Provider of information and 1.9%
telecommunications services.
Subsidiaries provide telephone
services to the mid-Atlantic region,
cellular telecommunications,
software, network support and
computer maintenance.
- ---------------------------------------------------------------------------------------
10. CITIGROUP Leading global financial-services 1.9%
provider. Operations include a wide
variety of insurance products and
banking services, managed
health-care programs, asset
management, investment services and
credit-card services.
- ---------------------------------------------------------------------------------------
</TABLE>
*Portfolio composition and holdings are subject to change.
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
KEMPER BLUE CHIP FUND
PORTFOLIO OF INVESTMENTS AT OCTOBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSUMER DISCRETIONARY--9.5%
DEPARTMENT & CHAIN STORES--6.2%
Dayton Hudson Corp. 240,000 $ 15,510
(a) Federated Department Store, Inc. 175,000 7,470
Home Depot, Inc. 178,000 13,439
Wal-Mart Stores, Inc. 360,600 20,442
------------------------------------------------------------------------
56,861
RESTAURANTS--1.4%
McDonald's Corp. 305,000 12,581
------------------------------------------------------------------------
SPECIALTY RETAIL--1.9%
Tandy Corp. 285,000 17,937
------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--5.4%
FOOD & BEVERAGE--3.8%
Bestfoods 127,000 7,461
Dean Foods Co. 120,000 5,550
H.J. Heinz Co. 200,000 9,550
PepsiCo, Inc. 360,000 12,488
------------------------------------------------------------------------
35,049
PACKAGE GOODS/COSMETICS--1.6%
Procter & Gamble Co. 142,000 14,892
------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
HEALTH--12.9%
BIOTECHNOLOGY--1.2%
(a) Biogen, Inc. 85,000 6,300
(a) Genentech, Inc. 33,000 4,810
------------------------------------------------------------------------
11,110
MEDICAL SUPPLY & SPECIALTY--1.6%
Baxter International, Inc. 145,000 9,407
Medtronic, Inc. 164,254 5,687
------------------------------------------------------------------------
15,094
PHARMACEUTICALS--10.1%
Abbott Laboratories 175,000 7,066
Allergan, Inc. 101,300 10,877
American Home Products Corp. 233,400 12,195
Bristol-Myers Squibb Co. 194,000 14,902
Johnson & Johnson 105,000 10,999
Merck & Co., Inc. 80,000 6,365
Pfizer, Inc. 205,000 8,097
Schering-Plough Corp. 184,400 9,128
Warner-Lambert Co. 160,000 12,770
------------------------------------------------------------------------
92,399
- -------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS--6.3%
TELEPHONE/COMMUNICATIONS
AT&T Corp. 112,500 5,259
Bell Atlantic Corp. 265,000 17,208
(a) Global Crossing Ltd. 138,375 4,791
(a) MCI WorldCom, Inc. 137,700 11,816
SBC Communications, Inc. 372,818 18,990
------------------------------------------------------------------------
58,064
- -------------------------------------------------------------------------------------------------------------------------
FINANCIAL--14.9%
BANKS--4.5%
Chase Manhattan Corp. 73,600 6,431
Compass Bancshares, Inc. 206,300 5,506
First Tennessee National Corp. 209,000 7,106
J.P. Morgan & Co., Inc. 55,000 7,198
US Bancorp 150,000 5,559
Wells Fargo Co. 195,000 9,336
------------------------------------------------------------------------
41,136
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INSURANCE--4.4%
American International Group, Inc. 137,375 $ 14,141
Cigna Corp. 121,900 9,112
Hartford Financial Service Group, Inc. 4,200 218
Jefferson Pilot Corp. 113,150 8,493
St. Paul Companies, Inc. 271,000 8,672
------------------------------------------------------------------------
40,636
CONSUMER FINANCE--6.0%
American Express Credit Corp. 87,000 13,398
Capital One Finance Corp. 220,000 11,660
Citigroup, Inc. 305,000 16,508
Household International, Inc. 303,916 13,562
------------------------------------------------------------------------
55,128
- -------------------------------------------------------------------------------------------------------------------------
MEDIA--9.8%
ADVERTISING--.8%
Young & Rubicam, Inc. 170,300 7,791
------------------------------------------------------------------------
BROADCASTING & ENTERTAINMENT--5.0%
(a) CBS Corp. 219,400 10,709
(a) Clear Channel Communication, Inc. 101,012 8,119
(a) Infinity Broadcasting Corp. 283,800 9,809
Time Warner, Inc. 116,000 8,084
(a) Univision Communication, Inc. 106,900 9,093
------------------------------------------------------------------------
45,814
CABLE TELEVISION--2.8%
(a) AT&T Corp -- Liberty Media Group 240,000 9,525
Comcast Corp. "A" 190,000 8,004
(a) Media One Group, Inc. 110,000 7,817
------------------------------------------------------------------------
25,346
PRINT MEDIA--1.2%
Tribune Co. 180,000 10,800
------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
SERVICE INDUSTRIES--3.7%
EDP SERVICES--2.5%
Automatic Data Processing, Inc. 200,000 9,638
Electronic Data Systems Corp. 220,000 12,870
------------------------------------------------------------------------
22,508
INVESTMENT--.6%
Merrill Lynch & Co., Inc. 65,000 5,103
------------------------------------------------------------------------
PRINTING/PUBLISHING--.6%
McGraw-Hill, Inc. 98,700 5,885
------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
DURABLES--1.6%
AEROSPACE--.8%
United Technologies Corp. 115,000 6,958
------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT--.8%
Lucent Technologies, Inc. 120,000 7,710
------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
MANUFACTURING--7.2%
DIVERSIFIED MANUFACTURING--4.8%
General Electric Co. 212,800 28,848
Tyco International Ltd. (New) 384,744 15,366
------------------------------------------------------------------------
44,214
ELECTRICAL PRODUCTS--.7%
Emerson Electric Co. 105,900 6,361
------------------------------------------------------------------------
INDUSTRIAL SPECIALTY--.9%
Corning, Inc. 100,000 7,863
------------------------------------------------------------------------
MACHINERY/COMPONENTS/CONTROLS--.8%
Parker-Hannifin Corp. 165,000 7,559
------------------------------------------------------------------------
</TABLE>
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TECHNOLOGY--18.6%
COMPUTER SOFTWARE--3.9%
(a) Microsoft Corp. 270,000 $ 24,992
(a) Oracle Corp. 233,150 11,089
------------------------------------------------------------------------
36,081
DIVERSE ELECTRONIC PRODUCTS--5.6%
(a) Applied Materials, Inc. 136,800 12,286
Motorola, Inc. 195,000 19,000
(a) Solectron Corp. 167,000 12,567
(a) Teradyne, Inc. 192,000 7,392
------------------------------------------------------------------------
51,245
ELECTRONIC COMPONENTS/
DISTRIBUTORS--2.7%
(a) Altera Corp. 105,000 5,106
(a) Cisco Systems, Inc. 261,200 19,329
------------------------------------------------------------------------
24,435
ELECTRONIC DATA PROCESSING--2.7%
Hewlett-Packard Co. 117,000 8,665
International Business Machines Corp. 69,200 6,808
(a) Sun Microsystems, Inc. 87,000 9,206
------------------------------------------------------------------------
24,679
SEMICONDUCTORS--3.7%
Intel Corp. 328,400 25,430
Texas Instruments, Inc. 31,000 2,782
(a) Xilinx, Inc. 76,800 6,038
------------------------------------------------------------------------
34,250
- -------------------------------------------------------------------------------------------------------------------------
ENERGY--5.6%
OIL & GAS PRODUCTION--2.4%
Coastal Corp. 150,000 6,319
Conoco, Inc. "A" 191,800 5,263
Royal Dutch Petroleum Co. (New York
shares) 180,000 10,789
------------------------------------------------------------------------
22,371
OIL COMPANIES--2.4%
Exxon Corp. 100,000 7,406
Mobil Corp. 77,600 7,488
Texaco, Inc. 110,800 6,800
------------------------------------------------------------------------
21,694
OILFIELD SERVICES/EQUIPMENT--.8%
Schlumberger Ltd. 123,000 7,449
------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--.8%
RAILROADS
Canadian National Railway Co. 239,000 7,253
------------------------------------------------------------------------
TOTAL COMMON STOCKS--96.3%
(Cost: $697,666) 884,256
------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK
- -------------------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--.8%
DEPARTMENT & CHAIN STORES
CVS Corp. 93,600 7,242
------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCK--.8%
(Cost: $6,948) 7,242
------------------------------------------------------------------------
</TABLE>
13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET INSTRUMENTS--2.9%
(b) Repurchase agreement--
State Street Bank and Trust Company dated
10/29/99, 5.20%, due 11/1/99 $ 124 $ 124
Other
Yield--5.32% to 5.40%
Due--November 1999 27,000 26,984
------------------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--2.9%
(Cost: $27,108) 27,108
------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $731,722) 918,606
------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- -------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Repurchase agreement is fully collateralized by U.S. Treasury or Government
agency securities.
Based on the cost of investments of $731,983 for federal income tax purposes at
October 31, 1999, the gross unrealized appreciation was $191,120, the gross
unrealized depreciation was $4,497 and the net unrealized appreciation on
investments was $186,623.
See accompanying Notes to Financial Statements.
14
<PAGE> 15
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------
Investments at value
(Cost: $731,722) $918,606
- ------------------------------------------------------------------------
Receivable for:
Investments sold 4,118
- ------------------------------------------------------------------------
Fund shares sold 2,730
- ------------------------------------------------------------------------
Dividends and interest 548
- ------------------------------------------------------------------------
Foreign taxes recoverable 42
- ------------------------------------------------------------------------
TOTAL ASSETS 926,044
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------
Due to custodian bank 5
- ------------------------------------------------------------------------
Payable for:
Investments purchased 7,963
- ------------------------------------------------------------------------
Fund shares redeemed 1,723
- ------------------------------------------------------------------------
Management fee 420
- ------------------------------------------------------------------------
Other accrued expenses 925
- ------------------------------------------------------------------------
Total liabilities 11,036
- ------------------------------------------------------------------------
NET ASSETS $915,008
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investments $186,884
- ------------------------------------------------------------------------
Undistributed net realized gain (loss) on investments 33,696
- ------------------------------------------------------------------------
Paid-in capital 694,428
- ------------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE $915,008
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
NET ASSET VALUE
- ------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share ($547,027 /
26,352 shares outstanding) $20.76
- ------------------------------------------------------------------------
Maximum offering price per share (net asset value, plus
6.10% of net asset value or 5.75% of offering price) $22.03
- ------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge) per share ($314,154 /
15,327 shares outstanding) $20.50
- ------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge) per share ($44,158 /
2,139 shares outstanding) $20.64
- ------------------------------------------------------------------------
CLASS I SHARES
Net asset value and redemption price per share ($9,669 /
461 shares outstanding) $20.99
- ------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE> 16
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
NET INVESTMENT INCOME
- ------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $76) $ 8,368
- ------------------------------------------------------------------------
Interest 1,391
- ------------------------------------------------------------------------
Total investment income 9,759
- ------------------------------------------------------------------------
Expenses:
Management fee 4,172
- ------------------------------------------------------------------------
Distribution services fee 1,993
- ------------------------------------------------------------------------
Administrative services fee 1,830
- ------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 2,793
- ------------------------------------------------------------------------
Audit 33
- ------------------------------------------------------------------------
Legal 25
- ------------------------------------------------------------------------
Reports to shareholders 210
- ------------------------------------------------------------------------
Trustees' fees 17
- ------------------------------------------------------------------------
Registration fees 31
- ------------------------------------------------------------------------
Other 24
- ------------------------------------------------------------------------
Expenses, before expense reductions 11,128
- ------------------------------------------------------------------------
Expense reductions (20)
- ------------------------------------------------------------------------
Expenses, net 11,108
- ------------------------------------------------------------------------
NET INVESTMENT LOSS (1,349)
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
- ------------------------------------------------------------------------
Net realized gain (loss) on investments 35,073
- ------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) on
investments 138,413
- ------------------------------------------------------------------------
Net gain (loss) on investments 173,486
- ------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $172,137
- ------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------
1999 1998
- -------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income (loss) $ (1,349) 2,046
- -------------------------------------------------------------------------------------------
Net realized gain 35,073 14,402
- -------------------------------------------------------------------------------------------
Change in net unrealized appreciation 138,413 14,596
- -------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 172,137 31,044
- -------------------------------------------------------------------------------------------
Distribution from net investment income -- (3,360)
- -------------------------------------------------------------------------------------------
Distribution from net realized gain (14,610) (57,273)
- -------------------------------------------------------------------------------------------
Total dividends to shareholders (14,610) (60,633)
- -------------------------------------------------------------------------------------------
Net increase from capital share transactions 175,711 164,468
- -------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 333,238 134,879
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------
Beginning of period 581,770 446,891
- -------------------------------------------------------------------------------------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME
OF $0 AND $100, RESPECTIVELY) $915,008 581,770
- -------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF
THE FUND Kemper Blue Chip Fund (the "fund") is registered
under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end,
diversified management investment company organized
as a Massachusetts business trust.
The fund offers multiple classes of shares. Class A
shares are offered to investors subject to an
initial sales charge. Class B shares are offered
without an initial sales charge but are subject to
higher ongoing expenses than Class A shares and a
contingent deferred sales charge payable upon
certain redemptions. Class B shares automatically
convert to Class A shares six years after issuance.
Class C shares are offered without an initial sales
charge but are subject to higher ongoing expenses
than Class A shares and a contingent deferred sales
charge payable upon certain redemptions within one
year of purchase. Class C shares do not convert
into another class. Class I shares are offered to a
limited group of investors, are not subject to
initial or contingent deferred sales charges and
have lower ongoing expenses than other classes.
Investment income, realized and unrealized gains
and losses, and certain fund-level expenses and
expense reductions, if any, are borne pro rata on
the basis of relative net assets by the holders of
all classes of shares except that each class bears
certain expenses unique to that class such as
distribution services, shareholder services,
administrative services and certain other class
specific expenses. Differences in class expenses
may result in payment of different per share
dividends by class. All shares of the fund have
equal rights with respect to voting subject to
class specific arrangements.
The fund's financial statements are prepared in
accordance with generally accepted accounting
principles which require the use of management
estimates. The policies described below are
followed consistently by the fund in the
preparation of its financial statements.
- --------------------------------------------------------------------------------
2 SIGNIFICANT
ACCOUNTING POLICIES SECURITY VALUATION. Investments are stated at value
determined as of the close of regular trading on
the New York Stock Exchange. Securities which are
traded on U.S. or foreign stock exchanges are
valued at the most recent sale price reported on
the exchange on which the security is traded most
extensively. If no sale occurred, the security is
then valued at the calculated mean between the most
recent bid and asked quotations. If there are no
such bid and asked quotations, the most recent bid
quotation is used. Securities quoted on the Nasdaq
Stock market ("Nasdaq"), for which there have been
sales, are valued at the most recent sale price
reported. If there are no such sales, the value is
the most recent bid quotation. Securities which are
not quoted on Nasdaq but are traded in another
over-the-counter market are valued at the most
recent sale price, or if no sale occurred, at the
calculated mean between the most recent bid and
asked quotations on such market. Money market
instruments purchased with an original maturity of
sixty days or less are valued at amortized cost. If
there are no such bid and asked quotations, the
most recent bid quotation shall be used.
All other securities are valued at their fair value
as determined in good faith by the Valuation
Committee of the Board of Trustees.
FOREIGN CURRENCY TRANSLATIONS. The books and
records of the fund are maintained in U.S. dollars.
Investment securities and other assets and
liabilities
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
denominated in a foreign currency are translated
into U.S. dollars at the prevailing exchange rates
at period end. Purchases and sales of investment
securities, income and expenses are translated into
U.S. dollars at the prevailing exchange rates on
the respective dates of the transactions.
Net realized and unrealized gains and losses on
foreign currency transactions represent net gains
and losses between trade and settlement dates on
securities transactions, the disposition of forward
foreign currency exchange contracts and foreign
currencies, and the difference between the amount
of net investment income accrued and the U.S.
dollar amount actually received. That portion of
both realized and unrealized gains and losses on
investments that results from fluctuations in
foreign currency exchange rates is not separately
disclosed but is included with net realized and
unrealized gains and losses on investment
securities.
REPURCHASE AGREEMENTS. The fund may enter into
repurchase agreements with certain banks and
broker/dealers whereby the fund, through its
custodian or sub-custodian bank, receives delivery
of the underlying securities, the amount of which
at the time of purchase and each subsequent
business day is required to be maintained at such a
level that the market value is equal to at least
the principal amount of the repurchase price plus
accrued interest.
FEDERAL INCOME TAXES. The fund's policy is to
comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to
regulated investment companies and to distribute
all of its taxable income to its shareholders.
Accordingly, the fund paid no federal income taxes
and no federal income tax provision was required.
At October 31, 1999, the fund had a net tax basis
capital loss carryforward of approximately
$656,000, which may be applied with certain
limitations against any realized net taxable
capital gains of each succeeding year until fully
utilized or until October 31, 2004, the expiration
date, whichever occurs first.
DISTRIBUTION OF INCOME AND GAINS. Distributions of
net investment income, if any, are made
semiannually. Net realized gains from investment
transactions, in excess of available capital loss
carryforwards, would be taxable to the fund if not
distributed, and, therefore, will be distributed to
shareholders at least annually.
The timing and characterization of certain income
and capital gains distributions are determined
annually in accordance with federal tax regulations
which may differ from generally accepted accounting
principles. As a result, net investment income
(loss) and net realized gain (loss) on investment
transactions for a reporting period may differ
significantly from distributions during such
period. Accordingly, the fund may periodically make
reclassifications among certain of its capital
accounts without impacting the net asset value of
the fund.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date. Interest income is recorded on
the accrual basis. Dividend income is recorded on
the ex-dividend date. Certain dividends from
foreign securities may be recorded subsequent to
the ex-dividend date as soon as the fund is
informed of such dividends. Realized gains and
losses from investment transactions are recorded on
an identified cost basis.
All discounts are accreted for both tax and
financial reporting purposes.
18
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 $4,172,000 for the
year ended October 31, 1999.
UNDERWRITING AND DISTRIBUTION SERVICES
AGREEMENT. The fund has an underwriting and
distribution services agreement with Kemper
Distributors, Inc. (KDI). Underwriting commissions
retained by KDI in connection with the distribution
of Class A shares for the year ended October 31,
1999 are $159,000.
For services under the distribution services
agreement, the fund pays KDI a fee of .75% of
average daily net assets of the Class B and Class C
shares pursuant to separate Rule 12b-1 plans for
the Class B and Class C shares. Pursuant to the
agreement, KDI enters into related selling group
agreements with various firms at various rates for
sales of Class B and Class C shares. In addition,
KDI receives any contingent deferred sales charges
(CDSC) from redemptions of Class B and Class C
shares. Distribution fees and CDSC received by KDI
for the year ended October 31, 1999 are $2,642,000,
of which $485,000 is unpaid.
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 year ended October 31, 1999 is
$1,830,000 of which $217,000 is unpaid.
SHAREHOLDER SERVICE 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
$2,067,000 for the year ended October 31, 1999.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the fund are also officers or directors of
Scudder Kemper. For the year ended October 31,
1999, the fund made no payments to its officers and
incurred trustees fees of $17,000 to independent
trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the year ended October 31, 1999, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $701,678
Proceeds from sales 533,641
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the fund (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1999 OCTOBER 31, 1998
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 14,129 $ 272,091 11,964 $ 209,520
--------------------------------------------------------------------------------
Class B 9,083 173,987 5,871 100,251
--------------------------------------------------------------------------------
Class C 1,551 29,890 1,127 19,586
--------------------------------------------------------------------------------
Class I 243 4,718 618 5,130
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 513 9,053 2,455 39,357
--------------------------------------------------------------------------------
Class B 238 4,181 977 16,436
--------------------------------------------------------------------------------
Class C 32 564 88 1,411
--------------------------------------------------------------------------------
Class I 6 115 50 799
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SHARES REDEEMED
Class A (12,065) (232,506) (9,419) (162,406)
--------------------------------------------------------------------------------
Class B (4,169) (79,248) (2,905) (52,942)
--------------------------------------------------------------------------------
Class C (894) (17,299) (449) (7,602)
--------------------------------------------------------------------------------
Class I (240) (4,557) (620) (5,072)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 670 12,878 378 6,592
--------------------------------------------------------------------------------
Class B (677) (12,878) (379) (6,592)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SHARES ISSUED IN ACQUISITION (SEE NOTE 8)
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 $ 175,711 $ 164,468
--------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6 LINE OF
CREDIT The fund and several Kemper funds (the
"Participants") share in a $750 million revolving
credit facility for temporary or emergency
purposes, including the meeting of redemption
requests that otherwise might require the untimely
disposition of securities. The Participants are
charged an annual commitment fee which is allocated
pro rata among each of the Participants. Interest
is calculated based on the market rates at the time
of the borrowing. The fund may borrow up to a
maximum of 33 percent of its net assets under the
agreement.
- --------------------------------------------------------------------------------
7 EXPENSE OFF-SET
ARRANGEMENTS The fund has entered into arrangements with its
custodian whereby credits realized as a result of
uninvested cash balances were used to reduce a
portion of the fund's expenses. During the period,
the fund's custodian fees were reduced by $20,000
under these arrangements.
- --------------------------------------------------------------------------------
8 ACQUISITION OF ASSETS On February 5, 1999, the fund acquired all the net
assets of Kemper Quantitative Equity Fund pursuant
to a plan of reorganization approved by
shareholders on September 18, 1998. The acquisition
was accomplished by a tax-free exchanges of
324,000, 277,000, 84,000, and 116,000 shares of
Class A, Class B, Class C, and Class I
respectively, of the fund (valued at $5,950,000,
$5,074,000, $1,540,000 and $2,158,000) for 430,000,
376,000, 114,000, and 155,000 shares of Class A,
Class B, Class C and Class I, respectively, of
Kemper Quantitative Equity Fund outstanding on
February 5, 1999. Kemper Quantitative Equity Fund's
net assets at the date ($14,722,000), including
$3,618,000 of unrealized appreciation, were
combined with those of the fund. The aggregate net
assets of the fund immediately before the
acquisition were $666,287,000. The combined net
assets of the fund immediately following the
acquisition were $681,009,000.
21
<PAGE> 22
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-----------------------------------------------
CLASS A
-----------------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------------------
Net asset value, beginning of year $16.61 17.68 17.14 14.87 12.33
- ---------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .02 .11 .18 .22 .19
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 4.55 1.17 3.70 3.45 2.57
- ---------------------------------------------------------------------------------------------------
Total from investment operations 4.57 1.28 3.88 3.67 2.76
- ---------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- .16 .21 .20 .20
- ---------------------------------------------------------------------------------------------------
Net realized gain .42 2.19 3.13 1.20 .02
- ---------------------------------------------------------------------------------------------------
Total distributions .42 2.35 3.34 1.40 .22
- ---------------------------------------------------------------------------------------------------
Net asset value, end of year $20.76 16.61 17.68 17.14 14.87
- ---------------------------------------------------------------------------------------------------
TOTAL RETURN 27.96% 7.80 26.78 26.72 22.74
- ---------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------------------
Expenses, before expense reductions 1.19% 1.29 1.19 1.26 1.30
- ---------------------------------------------------------------------------------------------------
Expenses, net 1.19% 1.29 1.19 1.26 1.30
- ---------------------------------------------------------------------------------------------------
Net investment income (loss) .13% .62 1.07 1.40 1.47
- ---------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------
CLASS B
-----------------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------------------
Net asset value, beginning of year $16.55 17.61 17.09 14.82 12.29
- ---------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.14) (.03) .04 .10 .09
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 4.51 1.17 3.67 3.45 2.56
- ---------------------------------------------------------------------------------------------------
Total from investment operations 4.37 1.14 3.71 3.55 2.65
- ---------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- .01 .06 .08 .10
- ---------------------------------------------------------------------------------------------------
Net realized gain .42 2.19 3.13 1.20 .02
- ---------------------------------------------------------------------------------------------------
Total distributions .42 2.20 3.19 1.28 .12
- ---------------------------------------------------------------------------------------------------
Net asset value, end of year $20.50 16.55 17.61 17.09 14.82
- ---------------------------------------------------------------------------------------------------
TOTAL RETURN 26.83% 6.96 25.62 25.82 21.76
- ---------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------------------
Expenses, before expense reductions 2.07% 2.10 2.06 2.08 2.06
- ---------------------------------------------------------------------------------------------------
Expenses, net 2.07% 2.10 2.06 2.08 2.06
- ---------------------------------------------------------------------------------------------------
Net investment income (loss) (.75)% (.19) .20 .58 .71
- ---------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE> 23
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-------------------------------------------
CLASS C
-------------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------------
Net asset value, beginning of year $16.65 17.69 17.15 14.88 12.32
- --------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.13) (.01) .03 .10 .07
- --------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 4.54 1.18 3.71 3.45 2.62
- --------------------------------------------------------------------------------------
Total from investment operations 4.41 1.17 3.74 3.55 2.69
- --------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- .02 .07 .08 .11
- --------------------------------------------------------------------------------------
Net realized gain .42 2.19 3.13 1.20 .02
- --------------------------------------------------------------------------------------
Total distributions .42 2.21 3.20 1.28 .13
- --------------------------------------------------------------------------------------
Net asset value, end of year $20.64 16.65 17.69 17.15 14.88
- --------------------------------------------------------------------------------------
TOTAL RETURN 26.91% 7.08 25.71 25.75 22.04
- --------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------
Expenses, before expense reductions 1.98% 2.03 2.00 2.05 2.01
- --------------------------------------------------------------------------------------
Expenses, net 1.97% 2.03 2.00 2.05 2.01
- --------------------------------------------------------------------------------------
Net investment income (loss) (.65)% (.12) .26 .61 .76
- --------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------
CLASS I
------------------------------------------
NOVEMBER 22,
YEAR ENDED OCTOBER 31, 1995 TO
--------------------------- 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 .13 .21 .32 .36
- ----------------------------------------------------------------------------------------------
Net realized and unrealized gain 4.60 1.19 3.58 2.96
- ----------------------------------------------------------------------------------------------
Total from investment operations 4.73 1.40 3.90 3.32
- ----------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- .25 .23 .24
- ----------------------------------------------------------------------------------------------
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 $20.99 16.68 17.72 17.18
- ----------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 28.81% 8.53 26.89 21.89
- ----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------------
Expenses, before expense reductions .72% .68 .70 1.31
- ----------------------------------------------------------------------------------------------
Expenses, net .72% .68 .70 1.31
- ----------------------------------------------------------------------------------------------
Net investment income (loss) .60% 1.23 1.56 1.33
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ----------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets at end of period (in thousands) $915,008 581,770 446,891 256,172 168,266
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 75% 157 183 166 117
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Note: Total return does not reflect the effect of any sales charges. Per share
data for the year ended October 31, 1999 was determined based on average shares
outstanding.
23
<PAGE> 24
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
TAX INFORMATION
- -------------------------------------------------------------------------------
The fund paid distributions of $.42 per share from net long-term capital gains
during the year ended October 31, 1999, of which 100% represents 20% rate gains.
Pursuant to Section 852 of the Internal Revenue Code, the fund designates
$38,700,000, as capital gain dividends for the year ended October 31, 1999, of
which 100% represent 20% rate gains.
For corporate shareholders 100% of the income dividends paid during the year
ended October 31, 1999 qualified for the dividends received deduction.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your Kemper Fund account, please call 1-800-621-1048.
24
<PAGE> 25
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER BLUE CHIP FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper Blue Chip Fund as of October
31, 1999, the related statements of operations for the year then ended and
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the fiscal periods since 1995. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
October 31, 1999, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Kemper
Blue Chip Fund at October 31, 1999, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the fiscal periods
since 1995, in conformity with generally accepted accounting principles.
ERNST & YOUNG LOGO
Chicago, Illinois
December 20, 1999
25
<PAGE> 26
NOTES
26
<PAGE> 27
NOTES
27
<PAGE> 28
TRUSTEES & OFFICERS
TRUSTEES OFFICERS
JOHN W. BALLANTINE MARK S. CASADY LINDA J. WONDRACK
Trustee President Vice President
LEWIS A. BURNHAM PHILIP J. COLLORA MAUREEN E. KANE
Trustee Vice President and Assistant Secretary
Secretary
DONALD L. DUNAWAY CAROLINE PEARSON
Trustee JOHN R. HEBBLE Assistant Secretary
Treasurer
ROBERT B. HOFFMAN BRENDA LYONS
Trustee TRACY MCCORMICK Assistant Treasurer
Vice President
DONALD R. JONES
Trustee ANN M. MCCREARY
Vice President
THOMAS W. LITTAUER
Trustee and Vice President KATHRYN L. QUIRK
Vice President
SHIRLEY D. PETERSON
Trustee
CORNELIA SMALL
Trustee and
Vice President
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 219557
Kansas City, MO 64121
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
- --------------------------------------------------------------------------------
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606
www.kemper.com
[KEMPER FUNDS LOGO]
Long-term investing in a short-term world(SM)
Printed on recycled paper in the U.S.A.
This report is not to be distributed unless preceded or accompanied by a
Kemper Equity Fund/Growth Style prospectus.
KBCF - 2 (12/23/99) 1096630
