<PAGE> 1
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED APRIL 30, 2000
Seeking growth of capital and of income
KEMPER
BLUE CHIP FUND
"... Our more conservative approach to
equity investing helped us minimize our
downside risk in a volatile market climate. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
8
INDUSTRY SECTORS
9
LARGEST HOLDINGS
10
PORTFOLIO OF INVESTMENTS
14
FINANCIAL STATEMENTS
17
FINANCIAL HIGHLIGHTS
19
NOTES TO FINANCIAL STATEMENTS
AT A GLANCE
KEMPER BLUE CHIP FUND TOTAL RETURNS
FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 2000 (UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER BLUE CHIP FUND KEMPER BLUE CHIP FUND LIPPER GROWTH & INCOME
KEMPER BLUE CHIP FUND CLASS A CLASS B CLASS C FUNDS CATEGORY AVERAGE*
----------------------------- --------------------- --------------------- -----------------------
<S> <C> <C> <C>
8.06 7.62 7.67 10.79
</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
4/30/00 10/31/99
..........................................................
<S> <C> <C> <C> <C>
KEMPER BLUE CHIP FUND CLASS A $21.67 $20.76
..........................................................
KEMPER BLUE CHIP FUND CLASS B $21.30 $20.50
..........................................................
KEMPER BLUE CHIP FUND CLASS C $21.46 $20.64
..........................................................
</TABLE>
KEMPER BLUE CHIP FUND LIPPER
RANKINGS AS OF 4/30/00
COMPARED WITH ALL OTHER FUNDS IN THE LIPPER GROWTH AND INCOME FUNDS CATEGORY*
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
....................................................................................
<S> <C> <C> <C> <C> <C>
1-YEAR #179 of 423 funds #229 of 423 funds #216 of 423 funds
....................................................................................
5-YEAR #93 of 140 funds #110 of 140 funds #109 of 140 funds
....................................................................................
10-YEAR #41 of 56 funds N/A N/A
....................................................................................
</TABLE>
DIVIDEND REVIEW
DURING THE SIX-MONTH PERIOD, KEMPER BLUE CHIP FUND PAID THE FOLLOWING DIVIDENDS
PER SHARE:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
................................................................................................
<S> <C> <C> <C> <C> <C>
LONG-TERM
CAPITAL GAIN: $0.75 $0.75 $0.75
................................................................................................
</TABLE>
TERMS TO KNOW
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.
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.
</TABLE>
BALANCE SHEET A listing of assets and net worth showing the position of a
company at a certain time.
BENCHMARK A point of comparison for gauging relative performance. A fund's
benchmark may be the overall stock market, an index or a peer-group average. To
use a given benchmark effectively, it's essential to consider any differences
between the benchmark and the fund.
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.
PRICE-TO-EARNINGS (P/E) RATIO The P/E ratio indicates about how much investors
are paying for a company's earning power. The higher the P/E ratio, the more
investors are paying and the more earnings growth they are expecting.
VALUATION A stock's price relative to an underlying measure of worth.
<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,
As we enter summer, there isn't much to complain about. For all the yammering
about the "new" economy, the old economy is doing pretty well. Consumers may
hanker for a new GPS handset or a Palm Pilot, but they lust after a suburban
mansion with a garage big enough to hold their luxury car and SUV -- and state
and local governments are laying old-fashioned asphalt almost as fast as
businesses are building the information superhighway. Satisfying both old and
new desires got the economy off to a fast start in the new century -- GDP growth
rose at an annual rate of more than 5 percent in the first quarter. Even with a
modest slowdown possible in the second half, growth for the year 2000 is likely
to be close to 5 percent.
So everyone is happy, right? Well, almost everyone. Consumers seldom have felt
so confident; businesspeople seldom have behaved so expansively. But there's
still one grump: Federal Reserve Board Chairman Alan Greenspan, who's become
increasingly worried that rapid growth will bring on inflation, and raised
interest rates by half a percentage point (0.50%) accordingly on May 16. The
Fed's move puts the benchmark federal funds rate at 6.5 percent, its highest
level since February 1991, and the more symbolic discount rate at 6.0 percent.
Despite Greenspan's attempt to slow spending by raising interest rates,
consumers are still splurging, and they show few signs of stopping. We know this
because shoppers are buying the big-ticket items they usually purchase early in
a cycle -- items such as personal computers, mobile phones, jewelry, fancy
kitchen appliances, exercise equipment and big boats. Why are consumers still
buying despite Greenspan's attempts to slow their splurging? There are three
answers: deflation, wealth and easy credit.
Falling prices have made big-ticket items almost irresistible. Since 1997,
prices of kitchen appliances have fallen 4.5 percent, TVs and VCRs 16 percent
and sporting equipment 6.5 percent. Even auto showrooms no longer produce
sticker shock, and drivers have responded with gusto, buying a record 16.9
million cars and light trucks in 1999. 2000 is likely to be the first year in
which automotive sales top 17 million.
Some of that spending has been made possible by stock market gains: Wall
Street has handed out windfalls to almost anyone holding equities in the past
few years. But consumers who don't own stocks are also spending, thanks to a
decade of debt. Young, poor or new to America? In the 1990s, it didn't matter;
lenders still loved you. While high-income families have been borrowing less,
those lower on the income scale have been borrowing more.
But it's not just consumers that Greenspan is concerned about; businesses are
splurging as well. During 1999, businesses increased spending on computers and
peripherals by 35 percent and spending on communications equipment by 25 percent
(both after adjusting for price declines). Far from slowing down this year, we
expect investment in these two categories to accelerate -- to 40 percent growth
for computers and 30 percent growth for communications equipment.
And just like consumers, businesses are borrowing to buy. You may think that
with booming sales, entrepreneurs are cash-rich and can afford it. But while
1999 saw economy-wide earnings jump 10 percent and profits of Standard and
Poor's (S&P) 500 companies leap nearly 14 percent, internal cash covered less
than 84 percent of capital spending. With the exception of 1998, that's the
lowest on record. Last year alone, corporate debt shot up by more than 11
percent to $560 billion. And new economy companies are no exception; they have
more debt than most people realize, issuing more than half of all convertible
bonds.
All this debt could cause problems. Although we've increased our 2001
inflation outlook to nearly 3 percent -- an entire percentage point higher than
our prediction three months ago -- we're not particularly worried about
inflation. It's the heavy borrowing we're concerned about. Debt continues to
exceed income growth, and when Greenspan succeeds in slowing the economy with
higher interest rates (which he will succeed in doing), all of the debt American
consumers and businesses are taking on could be tricky to handle. Private
financial obligations must be paid with personal income and corporate profits.
When the economy slows, personal income stagnates and corporate profits often
fall -- which makes it harder to pay off those debts. Consumers and businesses
may have to sell their assets to pay off the debt, and they may risk going into
default.
That being the case, a gradual economic slowdown may be in everyone's best
interest. But "gradual" is the key. Both the old and new economy have a lot
riding on the Fed's ability to rein in growth softly and smoothly, because
abrupt slowdowns encourage consumers and businesses to sell assets -- and
perhaps risk bankruptcy -- to pay off debt, as described above.
A gradual slowdown seems to be what the Fed is seeking, but for all of
Greenspan's semi-tough talk, some indicators suggest that monetary policy has
actually been lax. Broad money and credit creation have vastly exceeded
economic activity since 1995, and no central bank can allow that to continue
indefinitely without creating
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 (5/31/00) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 6.40 6.00 5.50 5.60
Prime rate (2) 9.50 8.50 7.75 8.50
Inflation rate (3)* 3.00 2.60 2.30 1.50
The U.S. dollar (4) 4.30 -0.70 -0.90 6.40
Capital goods orders (5)* 17.00 12.30 2.50 14.50
Industrial production (5)* 6.10 3.70 2.90 5.20
Employment growth (6) 2.60 2.20 2.30 2.60
</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 4/30/00.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
inflation. If we begin to see higher core inflation, the Fed will have to deal
with all that money it's created in a less gradualist manner -- and that could
get tricky. Financial turmoil accompanied each of the Fed's last two efforts to
slow the economy down. In 1994, there was a bond market meltdown that resulted
in a Mexican debt crisis. After a more timid Fed tightening in 1997, crises in
Asia were followed by problems with Russian debt, Brazilian debt and a large
American hedge fund. We don't think this is a coincidence: The global debt
market is so vast and interconnected that it's highly vulnerable to a rise in
the cost of its basic raw material -- short-term funds.
Let's hope, then, that the Fed can slow the economy without upsetting the
financial applecart, because that could affect everyone. After all, the old
economy and the new economy are wedded in many ways. Much of the money that
flows to IPOs is available because mature industries have borrowed to carry out
mergers and share buybacks. Old economy companies are the biggest customers of
new economy products. And e-commerce sites are all about moving traditional
goods over old-fashioned highways. Despite a lot of talk about old and new,
we're all in this economy together.
Happily, financial markets got some better news along that front in late May
and early June. A range of economic data, from retail sales to mortgage
applications to the all-important employment report, began to point to somewhat
softer economic growth. If the Fed believes that the economy is finally slowing
in response to its tightening, the end of the rate hikes could be in sight.
Markets certainly were willing to believe, and they staged a strong relief rally
in late May and early June. While we don't expect a quick end to market
volatility, a slowdown in growth would be most welcome, and would make the
outlook for both stocks and bonds better for the remainder of the year.
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 JUNE 6, 2000, AND MAY NOT ACTUALLY COME TO PASS. THIS
INFORMATION IS SUBJECT TO CHANGE. NO PART OF THIS MATERIAL IS INTENDED AS AN
INVESTMENT RECOMMENDATION.
TO OBTAIN A KEMPER FUNDS PROSPECTUS, DOWNLOAD ONE FROM WWW.KEMPER.COM, TALK TO
YOUR FINANCIAL REPRESENTATIVE OR CALL SHAREHOLDER SERVICES AT (800) 621-1048.
THE PROSPECTUS CONTAINS MORE COMPLETE INFORMATION, INCLUDING MANAGEMENT FEES AND
EXPENSES. PLEASE READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
4
<PAGE> 5
PERFORMANCE UPDATE
[McCORMICK PHOTO]
PORTFOLIO MANAGER 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 A. LANGBAUM, CFA, CONTRIBUTES MORE THAN 20 YEARS OF
INVESTMENT INDUSTRY EXPERIENCE TO THE FUND. THE MANAGEMENT TEAM IS SUPPORTED BY
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.
LARGE-CAP GROWTH AND TECHNOLOGY STOCKS WERE THE PERFORMANCE STORY OF KEMPER BLUE
CHIP FUND'S SEMIANNUAL PERIOD --NOVEMBER 1, 1999, THROUGH APRIL 30, 2000. THE
TECHNOLOGY-DRIVEN MARKET CONTINUED TO NARROW UNTIL A CORRECTION OCCURRED IN
MARCH AND APRIL. LEAD PORTFOLIO MANAGER TRACY MCCORMICK DISCUSSES HOW SHE GUIDED
KEMPER BLUE CHIP FUND THROUGH A VOLATILE AND CHALLENGING SIX-MONTH PERIOD.
Q BEFORE YOU GO INTO DETAIL ABOUT KEMPER BLUE CHIP FUND, COULD YOU TELL US
ABOUT THE MARKET CLIMATE DURING THE SEMIANNUAL PERIOD?
A This has been a unique period characterized by increased volatility. We
ended 1999 on a strong note, but most of 2000 has presented a challenging market
for growth investing in a time of rising interest rates. For most of the period,
technology performance was the most noteworthy. However, after a market high in
February, these stocks made a sharp correction, which was driven by investors
retreating from high-P/E technology and Internet-related stocks, and moving into
other equity areas with more reasonable valuations. Since that time, the market
has remained rather volatile.
Q HOW DID KEMPER BLUE CHIP FUND PERFORM DURING THIS VOLATILE PERIOD?
A For the six-month period ending April 30, 2000, Kemper Blue Chip Fund
gained 8.06 percent (A shares, unadjusted for any sales charge), outperforming
our benchmark, the S&P 500 index, which returned 7.18 percent. This
outperformance can be attributed to our intensive stock selection process, which
leads us to some of the most attractive blue-chip stocks from a wide variety of
market sectors. And, we kept pace with our peers -- the Lipper Large-Cap Core
Funds category, which gained 10.79 percent.
Over the long term, we set our sights on beating our benchmark, as well as
outperforming our peers. 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. And during
this period, it was the large technology issues that drove much of the index
return, while most of the other stocks in the index struggled.
Q HOW DID THE FUND'S TECHNOLOGY HOLDINGS IMPACT PERFORMANCE?
A We did not make a huge investment in technology, but the moves we did make
worked well. In comparison with the S&P 500 benchmark, we are slightly
underweighted in this sector. As of April 30, we had 28.4 percent invested in
technology, compared with the S&P 500 weighting of 33.4 percent. This is a
direct result of our more conservative approach, which involves intensive stock
analysis and a disciplined selection process.
A significant portion of our technology position is in
semiconductors -- computer hardware and chips that are the building blocks for
cellular and wireless telecommunications, computers and calculators as well as a
host of other goods.
5
<PAGE> 6
PERFORMANCE UPDATE
While this sector has been expanding for more than a year, we believe it still
has a way to go.
Some of our top performers were semiconductor stocks such as Applied Materials
and Teradyne. But when technology hit a wall in March, these stocks did too.
Outside of semiconductors, we are looking at some fast-growing technology
companies where we have conviction about their dynamics, business model and
management. Right now we are just seeking the right entry points.
Q IS THE FUND INVESTING IN THE INTERNET?
A We have not yet found any pure Internet companies that meet our strict
investment criteria. We won't invest unless we see quality, seasoned management
and a demonstrated ability to deliver sustainable, consistent earnings growth.
At the same time, we insist on attractive stock prices, which have been hard to
find in this area.
And while we may not be investing directly in the "dot-com" stocks, we do
believe that the portfolio is well positioned to participate in this
still-growing segment of technology.
One way we participate is through companies that are building and supporting
the infrastructure of the Internet. This would include holdings in media,
communications and electronic hardware, to name a few. Another way we are
participating 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.
Q WHAT WERE SOME AREAS BEYOND TECHNOLOGY THAT WORKED FOR THE FUND?
A During the first half of the period, media stocks helped. CBS, which
merged with Viacom, and Liberty Media were among the best performers. Some of
our biggest names in this sector have "buried" Internet holdings -- subsidiaries
or divisions directly involved in the Internet business -- that had previously
enhanced portfolio performance. But even in a hypercharged, consumer-driven
economy, our media stocks took a downward turn late in the period. This was a
direct result of investor concern over the business plans of some of the spin-
off companies in the "buried" Internet start-ups the media holdings controlled,
as well as concern that advertising would weaken in a rising-interest-rate
environment. We view this as a temporary setback and believe Liberty and Viacom
will regain their momentum.
The energy sector has also come back to life with higher oil prices and
increased global demand. We believe that stronger oil prices will translate into
greater cash flow, which should ultimately lead to additional capital spending.
The oil service companies will likely be the primary beneficiaries as the large
integrated companies increase their drilling and exploration businesses.
Q THE HEALTH CARE SECTOR, AND MORE SPECIFICALLY BIOTECHNOLOGY, GRABBED QUITE
A BIT OF MARKET ATTENTION DURING THE PERIOD. CAN YOU GIVE US YOUR COMMENTS ON
THIS?
A Biotech stocks exhibited a pattern similar to technology. Many of the
high-flying biotech companies were hurt as investors became concerned about
spiraling valuations. Some of the portfolio was invested in biotechnology
companies, and when the subsector underperformed, it hurt the fund. We
redeployed some of the proceeds from the sale of biotech issues into large-cap
pharmaceutical companies with improving fundamentals, such as Abbott Labs. We
believe the valuations of pharmaceutical companies are more reasonable, and they
have more consistent earnings patterns than the more speculative biotech
companies.
There has been a tug of war going on in health care with regard to what
element is going to continue to drive this group -- pharmaceuticals, biotech, or
a combination of both types of companies. We're paying close attention to this
area.
Q WERE THERE ANY SECTORS THAT DISAPPOINTED?
A Consolidation within the communication services sector led to a difficult
environment, including the blurring of markets and increased competition. Some
of our holdings posted disappointing returns. This includes some of our RBOC
holdings (Regional Bell Operating Companies) and wireless leader Vodafone, which
had issues with UK Cellular. However, we had already exited AT&T, which had
competition problems with its long-distance service, and MCI WorldCom, which was
hurt by concern that the government would not allow its takeover of Sprint as
well as concerns about slowing revenue growth, before these problems arose.
Communication service companies comprise 10.6 percent of the portfolio (as of
April 30, 2000). This represents a decrease in our position. We are concerned
about this
6
<PAGE> 7
PERFORMANCE UPDATE
sector because competitive lines are becoming blurred in a market in which
companies are competing for market share. This can create a difficult pricing
environment, ultimately impacting stock prices.
Some of our retail holdings were hurt by the rising-interest-rate environment.
Investors became concerned that rising rates would lead to an economic slowdown
that could stifle profits of retailers. This hurt some of our retail holdings,
such as Wal-Mart and Target. However, we're not concerned about a sustained
downturn. In fact, we believe we'll see continued growth in the labor force,
which would create more income and increased discretionary spending. Dominant
retailers, such as those we hold in the fund, should do well.
Q WHAT EFFECT DID RISING INTEREST RATES HAVE ON THE FUND, SPECIFICALLY ITS
FINANCIAL HOLDINGS?
A Despite the hostile interest-rate environment, financials made a comeback
late in the period as technology stumbled. We started to eliminate our position
in regional banks prior to the rate hike. These stocks tend to be quite
sensitive to higher interest rates, as investors fear that the banks' loan
business will fall off in a higher-rate environment and amid concern over credit
risk. We're underweighted in banks and focused on financial stocks that are less
credit sensitive such as insurance companies. Our biggest financial holdings in
this area include St. Paul, AIG and Marsh & McLennan. We are slightly
underweighted in this sector as compared to our benchmark, the S&P 500 stock
index, motivated by the belief that we are near the trough in the pricing cycle
for property and casualty rates.
Q HOW DID THE PORTFOLIO PERFORM AS THE MARKET DECLINED?
A The generally conservative nature of the portfolio helped us during this
challenging time. Earlier in the period, we were unable to keep pace with our
peers who held many of the more aggressive technology names and small-cap
stocks. However, when the market dropped, many of these issues took a hit. Since
we didn't hold them, we were able to make up some lost ground. Our more
conservative approach to equity investing helped us minimize the fund's downside
risk in a volatile market climate, while posting gains.
Q HOW DO YOU FIND ATTRACTIVE STOCKS THAT HELP YOU MANAGE DOWNSIDE RISK?
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 the company's management, visit facilities, dig into balance sheets (see
Terms To Know on page 2) and apply thorough quantitative screens.
Q WHEN DO YOU SELL FUND HOLDINGS?
A We'll begin to sell stocks when their prices reach the preestablished
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.
Q WHAT IS YOUR OUTLOOK FOR THE SECOND HALF OF THE YEAR?
A Right now the market lacks notable trends, and investors are looking ahead
for signs of where to move next. With the technology decline, there seems to be
a lack of conviction in any one sector.
We expect interest rates to increase moderately, and that may have a negative
effect on the market. We do not anticipate the Federal Reserve Board tightening
into a recession. Typically, market activities slow in the summer months. Such a
summer slowdown may give growth stocks a chance to grow into their valuations,
and we think that would be constructive. We will use this opportunity to enhance
the quality of the portfolio, looking for companies with excellent long-term
potential and superior fundamentals. We remain committed to serving our
shareholders by seeking out the brightest opportunities offered by the best of
America's large-cap companies.
7
<PAGE> 8
INDUSTRY SECTORS
A SIX-MONTH COMPARISON
Data shows the percentage of the stock holdings in the portfolio that each
sector represented on April 30, 2000 and on October 31, 1999.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER BLUE CHIP FUND ON KEMPER BLUE CHIP FUND ON
4/30/00 10/31/99
------------------------ ------------------------
<S> <C> <C>
Technology 28.4 18.6
Consumer nondurables 16.2 19.4
Finance 12.9 14.9
Health care 11.3 12.9
Communication services 10.6 16.1
Capital goods 10.4 8.8
Energy 6 5.6
Basic materials 6 2
Other 4.2 2.9
Transportation 0 0.8
</TABLE>
A COMPARISON WITH THE S&P 500 STOCK INDEX*
Data shows the percentage of stock holdings in the portfolio that each sector of
Kemper Blue Chip Fund represented on April 30, 2000, 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 ON
4/30/00 S&P 500 STOCK INDEX ON 4/30/00
------------------------ ------------------------------
<S> <C> <C>
Technology 28.4 33.4
Consumer nondurables 16.2 18
Finance 12.9 13
Health care 11.3 9.1
Communication services 10.6 7.6
Capital goods 10.4 8.2
Energy 6 5.4
Other 4.2 0
Utilities 0 2.3
Basic materials 0 2.3
Transportation 0 0.7
</TABLE>
* THE S&P 500 STOCK INDEX IS AN UNMANAGED INDEX GENERALLY REPRESENTATIVE OF THE
U.S. STOCK MARKET.
8
<PAGE> 9
LARGEST HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS*
Representing 25.3 percent of the portfolio on April 30, 2000
<TABLE>
<CAPTION>
HOLDINGS PERCENT
<S> <C> <C> <C>
--------------------------------------------------------------------------------------
1. INTEL Engaged in the design, 3.9%
development, manufacture and sale
of advanced semiconductors and
integrated circuits.
--------------------------------------------------------------------------------------
2. CISCO SYSTEMS Large, comprehensive supplier of 3.6%
routing software and related
systems that direct the flow of
data between local networks.
--------------------------------------------------------------------------------------
3. GENERAL ELECTRIC A broadly diversified company with 3.4%
major businesses in power
generators, appliances, lighting,
plastics, medical systems,
aircraft engines, financial
services and broadcasting.
--------------------------------------------------------------------------------------
4. MICROSOFT Develops, markets and supports a 2.8%
variety of microcomputer software,
operating systems, language and
application programs, related
books and peripheral devices.
--------------------------------------------------------------------------------------
5. WAL-MART Large, global retailer with 2.1%
operations in the United States,
Asia and Latin America. Wal-Mart
operates Wal-Marts, Wal-Mart
Supercenters and Sam's Clubs. The
company sells brand merchandise
under the Popular Mechanics,
Better Homes & Gardens and Sam's
America's Choice labels.
--------------------------------------------------------------------------------------
6. EXXON MOBIL Engaged in the exploration, 2.0%
production, manufacture,
transportation and sale of crude
oil, natural gas and petroleum
products.
--------------------------------------------------------------------------------------
7. PEPSI One of the largest international 1.9%
snack food and soft drink
producers.
--------------------------------------------------------------------------------------
8. ORACLE A leading global provider of 1.9%
database management software.
--------------------------------------------------------------------------------------
9. ELECTRONIC DATA SYSTEMS Electronic Data Systems (EDS) is 1.9%
the largest independent systems
consulting firm in the United
States. EDS offers corporate
outsourcing, data center
management, online consulting. and
reengineering for businesses and
the U.S. and foreign governments.
--------------------------------------------------------------------------------------
10. TARGET Retail merchandise seller 1.8%
operating department and discount
stores including Target, Mervyn's,
Dayton Hudson and Marshall
Field's.
--------------------------------------------------------------------------------------
</TABLE>
*Portfolio composition and holdings are subject to change.
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
KEMPER BLUE CHIP FUND
Portfolio of Investments at April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
REPURCHASE AGREEMENT--0.1% PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
State Street Bank and Trust Company,
dated 04/30/2000 at 5.680%, to be
repurchased at $907,429 on
05/01/00 (a) (Cost $907,000) $ 907,000 $ 907,000
-------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COMMERCIAL PAPER--4.1%
<S> <C> <C> <C> <C> <C>
COMMUNICATIONS--1.1%
TELEPHONE/COMMUNICATIONS
Bell Atlantic Network Funding Corp
Discount Note, 6.000%, 05/02/2000 13,000,000 12,997,833
-------------------------------------------------------------------------------
MISCELLANEOUS--3.0%
MISCELLANEOUS
Conagra, Inc., 6.150%, 05/10/2000 8,000,000 7,987,700
Dow Chemical Co., 5.970%, 05/03/2000 13,500,000 13,495,523
Eastman Kodak, 6.180%, 06/12/2000 4,000,000 3,971,160
Finova Capital Corp, 6.230%, 05/01/2000 10,000,000 10,000,000
-------------------------------------------------------------------------------
35,454,383
-------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost $48,452,216) 48,452,216
-------------------------------------------------------------------------------
<CAPTION>
COMMON STOCKS--95.8% NUMBER OF SHARES
<S> <C> <C> <C> <C> <C>
CONSUMER DISCRETIONARY--7.1%
DEPARTMENT & CHAIN STORES--5.3%
Home Depot, Inc. 292,000 16,370,250
Target Corp. 320,000 21,300,000
Wal-Mart Stores, Inc. 440,600 24,398,225
-------------------------------------------------------------------------------
62,068,475
SPECIALTY RETAIL--1.8%
Tandy Corp. 370,000 21,090,000
-------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--4.3%
FOOD & BEVERAGE--3.3%
Bestfoods 182,000 9,145,500
H.J. Heinz Co. 190,000 6,460,000
PepsiCo, Inc. 610,000 22,379,375
-------------------------------------------------------------------------------
37,984,875
PACKAGE GOODS/ COSMETICS--1.0%
Colgate-Palmolive Co. 200,000 11,425,000
-------------------------------------------------------------------------------
</TABLE>
10 The accompanying notes are an integral part of the financial statements.
<PAGE> 11
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE
<S> <C> <C> <C> <C> <C>
HEALTH--11.3%
BIOTECHNOLOGY--1.9%
Amgen Inc.* 147,000 $ 8,232,000
Genentech, Inc.* 41,000 4,797,000
PE Corp-PE Biosystems Group 145,000 8,700,000
-------------------------------------------------------------------------------
21,729,000
MEDICAL SUPPLY & SPECIALTY--2.4%
Baxter International, Inc. 280,000 18,235,000
Becton, Dickinson & Co. 349,000 8,943,125
Edwards Lifesciences Corp.* 52,000 780,000
-------------------------------------------------------------------------------
27,958,125
PHARMACEUTICALS--7.0%
Abbott Laboratories 370,000 14,221,875
Allergan, Inc. 222,600 13,105,575
Forest Laboratories, Inc.* 145,000 12,189,063
Merck & Co., Inc. 210,000 14,595,000
Pfizer, Inc. 310,000 13,058,750
Warner-Lambert Co. 130,000 14,795,625
-------------------------------------------------------------------------------
81,965,888
----------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS--4.6%
CELLULAR TELEPHONE--0.9%
Vodafone AirTouch PLC (ADR) 225,000 10,575,000
-------------------------------------------------------------------------------
TELEPHONE/ COMMUNICATIONS--3.7%
AT&T Corp.* 262,500 12,255,469
Bell Atlantic Corp. 200,000 11,850,000
BroadWing, Inc.* 456,600 12,927,487
Qwest Communications International,
Inc.* 150,000 6,506,250
-------------------------------------------------------------------------------
43,539,206
----------------------------------------------------------------------------------------------------------------------------
FINANCIAL--12.9%
BANKS--0.7%
Wells Fargo Co. 205,000 8,417,812
-------------------------------------------------------------------------------
INSURANCE--4.8%
American International Group, Inc. 167,375 18,358,945
Aon Corp. 282,900 7,655,981
Cigna Corp. 126,900 10,120,275
Hartford Financial Services Group, Inc. 4,200 219,188
Jefferson Pilot Corp. 113,150 7,531,547
St. Paul Companies, Inc. 336,000 11,970,000
-------------------------------------------------------------------------------
55,855,936
CONSUMER FINANCE--5.3%
American Express Co. 82,000 12,305,125
Capital One Finance Corp. 300,000 13,125,000
Citigroup, Inc. 310,000 18,425,625
Household International, Inc. 418,916 17,489,743
-------------------------------------------------------------------------------
61,345,493
OTHER FINANCIAL COMPANIES--2.1%
Federal National Mortgage Association 215,000 12,967,187
Marsh & McLennan Companies, Inc. 120,000 11,827,500
-------------------------------------------------------------------------------
24,794,687
</TABLE>
The accompanying notes are an integral part of the financial statements. 11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE
<S> <C> <C> <C> <C> <C>
MEDIA--6.0%
BROADCASTING & ENTERTAINMENT--5.1%
CBS Corp.* 239,400 $ 14,064,750
Clear Channel Communications, Inc.* 116,012 8,352,864
Infinity Broadcasting Corp. "A"* 478,800 16,249,275
Univision Communication, Inc.* 84,900 9,275,325
Walt Disney Co.* 275,000 11,910,937
-------------------------------------------------------------------------------
59,853,151
CABLE TELEVISION--0.9%
AT&T Corp. -- Liberty Media Group "A"* 210,000 10,486,875
-------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
SERVICE INDUSTRIES--4.8%
EDP SERVICES--3.1%
Electronic Data Systems Corp. 315,000 21,656,250
First Data Corp. 290,000 14,119,375
-------------------------------------------------------------------------------
35,775,625
INVESTMENT--0.7%
Merrill Lynch & Co., Inc. 80,000 8,155,000
-------------------------------------------------------------------------------
PRINTING/PUBLISHING--1.0%
McGraw-Hill, Inc. 223,700 11,744,250
-------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
DURABLES--2.4%
AEROSPACE
Boeing Co. 225,000 8,929,687
United Technologies Corp. 305,000 18,967,188
-------------------------------------------------------------------------------
27,896,875
----------------------------------------------------------------------------------------------------------------------------
MANUFACTURING--8.0%
DIVERSIFIED MANUFACTURING--4.8%
General Electric Co. 252,800 39,752,800
Tyco International Ltd. 359,744 16,525,740
-------------------------------------------------------------------------------
56,278,540
INDUSTRIAL SPECIALTY--0.6%
Corning, Inc. 33,000 6,517,500
-------------------------------------------------------------------------------
MACHINERY/COMPONENTS--1.3%
Parker-Hannifin Corp. 315,000 14,647,500
-------------------------------------------------------------------------------
OFFICE EQUIPMENT/ SUPPLIES--1.3%
Lexmark International Group, Inc. "A"* 130,000 15,340,000
-------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--28.4%
COMPUTER SOFTWARE--5.7%
Intuit, Inc.* 150,000 5,390,625
Siebel Systems, Inc.* 47,000 5,775,125
Microsoft Corp.* 470,000 32,782,500
Oracle Corp.* 276,300 22,086,731
-------------------------------------------------------------------------------
66,034,981
DIVERSE ELECTRONIC PRODUCTS--7.2%
Applied Materials, Inc. 153,600 15,638,400
Dell Computer Corp.* 245,000 12,280,625
General Motors Corp. "H" (New)* 120,000 11,557,500
Motorola Inc. 135,000 16,073,438
Solectron Corp.* 364,000 17,039,750
Teradyne, Inc.* 109,000 11,990,000
-------------------------------------------------------------------------------
84,579,713
</TABLE>
12 The accompanying notes are an integral part of the financial statements.
<PAGE> 13
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE
<S> <C> <C> <C> <C> <C>
ELECTRONIC COMPONENTS--3.6%
Cisco Systems, Inc.* 612,400 $ 42,456,544
-------------------------------------------------------------------------------
ELECTRONIC DATA PROCESSING--3.8%
Hewlett-Packard Co. 149,800 20,223,000
International Business Machines Corp. 100,000 11,162,500
Sun Microsystems, Inc.* 144,000 13,239,000
-------------------------------------------------------------------------------
44,624,500
SEMICONDUCTORS--7.2%
Intel Corp. 358,400 45,449,600
KLA Tencor Corp.* 120,000 8,985,000
Texas Instruments, Inc. 115,000 18,730,625
Xilinx, Inc.* 143,600 10,518,700
-------------------------------------------------------------------------------
83,683,925
MISCELLANEOUS--0.9%
Agilent Technologies, Inc.* 114,000 10,103,250
-------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
ENERGY--6.0%
OIL & GAS PRODUCTION--3.2%
Exxon Mobil Corp. 302,443 23,496,040
Royal Dutch Petroleum Co. (New York
shares) 250,000 14,343,750
-------------------------------------------------------------------------------
37,839,790
OILFIELD SERVICES--2.8%
Halliburton Co. 170,000 7,511,875
Transocean Sedo Forex, Inc. 179,460 8,434,620
Schlumberger Ltd. 223,000 17,073,438
-------------------------------------------------------------------------------
33,019,933
-------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $881,339,327) 1,117,787,449
-------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100.0%
(Cost $930,698,543) (b) $1,167,146,665
-------------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
* Non-income producing.
(a) Repurchase agreement is fully collateralized by U.S. Treasury or Government
agency securities.
(b) The cost for federal income tax purposes was $930,698,543. At April 30,
2000, the net unrealized appreciation for all securities based on tax cost
was $236,448,122. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess market value over tax cost
of $272,716,394 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$36,268,272.
<TABLE>
<CAPTION>
ACRONYM NAME
------- ----
<S> <C>
ADR American Depositary Receipt
</TABLE>
The accompanying notes are an integral part of the financial statements. 13
<PAGE> 14
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
As of April 30, 2000 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $930,698,543) $1,167,146,665
------------------------------------------------------------------------------
Cash 477
------------------------------------------------------------------------------
Receivable for investments sold 7,117,030
------------------------------------------------------------------------------
Dividend receivable 575,865
------------------------------------------------------------------------------
Interest receivable 429
------------------------------------------------------------------------------
Receivable for Fund shares sold 2,311,007
------------------------------------------------------------------------------
Foreign taxes recoverable 7,925
------------------------------------------------------------------------------
Other assets 6,000
------------------------------------------------------------------------------
TOTAL ASSETS 1,177,165,398
------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased 13,259,584
------------------------------------------------------------------------------
Payable for Fund shares redeemed 1,741,018
------------------------------------------------------------------------------
Accrued management fee 534,451
------------------------------------------------------------------------------
Accrued distribution services fee 584,068
------------------------------------------------------------------------------
Accrued administrative services fee 287,437
------------------------------------------------------------------------------
Other accrued expenses 404,586
------------------------------------------------------------------------------
TOTAL LIABILITIES 16,811,144
------------------------------------------------------------------------------
NET ASSETS, AT VALUE $1,160,354,254
------------------------------------------------------------------------------
NET ASSETS
Net assets consist of:
Accumulated net investment loss $ (2,511,364)
------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
transactions 236,448,122
------------------------------------------------------------------------------
Accumulated net realized gain (loss) 27,410,491
------------------------------------------------------------------------------
Paid-in capital 899,007,005
------------------------------------------------------------------------------
NET ASSETS, AT VALUE $1,160,354,254
------------------------------------------------------------------------------
NET ASSET VALUE AND OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($645,181,354 / 29,771,441 shares outstanding of
beneficial interest, $.01 par value, unlimited number of
shares authorized) $21.67
------------------------------------------------------------------------------
Maximum offering price per share (100/94.25 of $21.67) $22.99
------------------------------------------------------------------------------
CLASS B SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share ($438,239,816
/ 20,578,459 shares outstanding of beneficial interest,
$.01 par value, unlimited number of shares authorized) $21.30
------------------------------------------------------------------------------
CLASS C SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share ($66,532,543 /
3,100,101 shares outstanding of beneficial interest, $.01
par value, unlimited number of shares authorized) $21.46
------------------------------------------------------------------------------
CLASS I SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share ($10,400,541 /
473,487 shares outstanding of beneficial interest, $.01
par value, unlimited number of shares authorized) $21.97
------------------------------------------------------------------------------
</TABLE>
14 The accompanying notes are an integral part of the financial statements.
<PAGE> 15
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Six months ended April 30, 2000 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $37,330) $ 4,013,029
---------------------------------------------------------------------------
Interest 1,615,043
---------------------------------------------------------------------------
Total income 5,628,072
---------------------------------------------------------------------------
Expenses:
Management fee 2,946,516
---------------------------------------------------------------------------
Services to shareholders 1,646,869
---------------------------------------------------------------------------
Custodian fees 19,633
---------------------------------------------------------------------------
Distribution services fees 1,677,642
---------------------------------------------------------------------------
Administrative services fees 1,317,107
---------------------------------------------------------------------------
Auditing 17,535
---------------------------------------------------------------------------
Legal 6,376
---------------------------------------------------------------------------
Trustees' fees and expenses 11,820
---------------------------------------------------------------------------
Reports to shareholders 442,628
---------------------------------------------------------------------------
Registration fees 86,844
---------------------------------------------------------------------------
Other 3,412
---------------------------------------------------------------------------
Total expenses, before expense reductions 8,176,382
---------------------------------------------------------------------------
Expense reductions (36,946)
---------------------------------------------------------------------------
Total expenses, after expense reductions 8,139,436
---------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (2,511,364)
---------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments 28,723,550
---------------------------------------------------------------------------
Foreign currency related transactions 46
---------------------------------------------------------------------------
28,723,596
---------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
of investment transactions 49,564,001
---------------------------------------------------------------------------
Net gain (loss) on investment transactions 78,287,597
---------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $75,776,233
---------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 15
<PAGE> 16
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS YEAR
ENDED ENDED
APRIL 30 OCTOBER 31
-------------- ------------
2000 1999
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $ (2,511,364) (1,348,906)
------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions 28,723,596 35,072,714
------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
on investment transactions 49,564,001 138,413,121
------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 75,776,233 172,136,929
------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net realized gains:
Class A (20,180,159) (9,482,133)
------------------------------------------------------------------------------------------------------
Class B (12,653,435) (4,421,632)
------------------------------------------------------------------------------------------------------
Class C (1,821,315) (590,807)
------------------------------------------------------------------------------------------------------
Class I (354,023) (115,367)
------------------------------------------------------------------------------------------------------
(35,008,932) (14,609,939)
------------------------------------------------------------------------------------------------------
Fund share transactions:
Proceeds from shares sold 513,399,116 508,285,929
------------------------------------------------------------------------------------------------------
Reinvestment of distributions 33,066,819 13,913,535
------------------------------------------------------------------------------------------------------
Cost of shares redeemed (341,886,825) (346,488,611)
------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions 204,579,110 175,710,853
------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 245,346,411 333,237,843
------------------------------------------------------------------------------------------------------
Net assets at beginning of period 915,007,843 581,770,000
------------------------------------------------------------------------------------------------------
NET ASSETS AT END OF PERIOD (including accumulated net
investment loss of $2,511,364 at April 30, 2000) $1,160,354,254 915,007,843
------------------------------------------------------------------------------------------------------
</TABLE>
16 The accompanying notes are an integral part of the financial statements.
<PAGE> 17
FINANCIAL HIGHLIGHTS
THE FOLLOWING TABLES INCLUDE SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
CLASS A
(UNAUDITED)
SIX MONTHS
ENDED
APRIL 30, YEARS ENDED OCTOBER 31,
----------- -----------------------------------------------------
2000 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $ 20.76 16.61 17.68 17.14 14.87 12.33
-----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (a) (.07) .02 .11 .18 .22 .19
-----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions 1.73 4.55 1.17 3.70 3.45 2.57
-----------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.66 4.57 1.28 3.88 3.67 2.76
-----------------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- -- (.16) (.21) (.20) (.20)
-----------------------------------------------------------------------------------------------------------------------
Net realized gain on investment transactions (.75) (.42) (2.19) (3.13) (1.20) (.02)
-----------------------------------------------------------------------------------------------------------------------
Total distributions (.75) (.42) (2.35) (3.34) (1.40) (.22)
-----------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 21.67 20.76 16.61 17.68 17.14 14.87
-----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN % (B)(C) 8.06* 27.96 7.80 26.78 26.72 22.74
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 645,181 547,027 378,450 307,726 198,968 153
-----------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.19** 1.19 1.29 1.19 1.26 1.30
-----------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.19** 1.19 1.29 1.19 1.26 1.30
-----------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.12)** .13 .62 1.07 1.40 1.47
-----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 89** 75 157 183 166 117
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
(UNAUDITED)
SIX MONTHS
ENDED
APRIL 30, YEARS ENDED OCTOBER 31,
----------- -------------------------------------------------
2000 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $ 20.50 16.55 17.61 17.09 14.82 12.29
-----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (a) (.24) (.14) (.03) .04 .10 .09
-----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions 1.79 4.51 1.17 3.67 3.45 2.56
-----------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.55 4.37 1.14 3.71 3.55 2.65
-----------------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- -- (.01) (.06) (.08) (.10)
-----------------------------------------------------------------------------------------------------------------------
Net realized gain on investment transactions (.75) (.42) (2.19) (3.13) (1.20) (.02)
-----------------------------------------------------------------------------------------------------------------------
Total distributions (.75) (.42) (2.20) (3.19) (1.28) (.12)
-----------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 21.30 20.50 16.55 17.61 17.09 14.82
-----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN % (B)(C) 7.62* 26.83 6.96 25.62 25.82 21.76
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 438,240 314,154 174,475 123,449 54,085 14
-----------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 2.03** 2.07 2.10 2.06 2.08 2.06
-----------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 2.03** 2.07 2.10 2.06 2.08 2.06
-----------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.97)** (.75) (.19) .20 .58 .71
-----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 89** 75 157 183 166 117
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 18
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C
(UNAUDITED)
SIX MONTHS
ENDED
APRIL 30, YEARS ENDED OCTOBER 31,
----------- -----------------------------------------------------
2000 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $20.64 16.65 17.69 17.15 14.88 12.32
----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (a) (.20) (.13) (.01) .03 .10 .07
----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions 1.77 4.54 1.18 3.71 3.45 2.62
----------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.57 4.41 1.17 3.74 3.55 2.69
----------------------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- -- (.02) (.07) (.08) (.11)
----------------------------------------------------------------------------------------------------------------------------
Net realized gain on investment transactions (.75) (.42) (2.19) (3.13) (1.20) (.02)
----------------------------------------------------------------------------------------------------------------------------
Total distributions (.75) (.42) (2.21) (3.20) (1.28) (.13)
----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $21.46 20.64 16.65 17.69 17.15 14.88
----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN % (B)(C) 7.67* 26.91 7.08 25.71 25.75 22.04
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 66,532 44,158 22,745 10,609 3,105 1
----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.98** 1.98 2.03 2.00 2.05 2.01
----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.98** 1.97 2.03 2.00 2.05 2.01
----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.92)** (.65) (.12) .26 .61 .76
----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 89** 75 157 183 166 117
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS I
(UNAUDITED)
SIX MONTHS
ENDED NOVEMBER 22
APRIL 30, YEARS ENDED OCTOBER 31, 1995 TO
----------- --------------------------- OCTOBER 31,
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $20.99 16.68 17.72 17.18 15.30
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (a) .12 .13 .21 .32 .36
-------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions 1.61 4.60 1.19 3.58 2.96
-------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.73 4.73 1.40 3.90 3.32
-------------------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- -- (.25) (.23) (.24)
-------------------------------------------------------------------------------------------------------------------------
Net realized gain on investment transactions (.75) (.42) (2.19) (3.13) (1.20)
-------------------------------------------------------------------------------------------------------------------------
Total distributions (.75) (.42) (2.44) (3.36) (1.44)
-------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $21.97 20.99 16.68 17.72 17.18
-------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN % (B)(C) 8.32* 28.81 8.53 26.89 21.89*
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 10,401 9,669 5,600 5,107 14
-------------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) .71** .72 .68 .70 1.31**
-------------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .71** .72 .68 .70 1.31**
-------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) .35** .60 1.23 1.56 1.33**
-------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 89** 75 157 183 166**
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
(a) Based on monthly average shares outstanding during the period.
(b) Total return does not reflect the effect of sales charge.
(c) Total return would have been lower had certain expenses not been waived.
18
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1 SIGNIFICANT
ACCOUNTING POLICIES 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.
SECURITY VALUATION. Investments are stated at value
determined as of the close of regular trading on
the New York Stock Exchange. Securities which are
traded on U.S. or foreign stock exchanges are
valued at the most recent sale price reported on
the exchange on which the security is traded most
extensively. If no sale occurred, the security is
then valued at the calculated mean between the most
recent bid and asked quotations. If there are no
such bid and asked quotations, the most recent bid
quotation is used. Securities quoted on the Nasdaq
Stock market ("Nasdaq"), for which there have been
sales, are valued at the most recent sale price
reported. If there are no such sales, the value is
the most recent bid quotation. Securities which are
not quoted on Nasdaq but are traded in another
over-the-counter market are valued at the most
recent sale price, or if no sale occurred, at the
calculated mean between the most recent bid and
asked quotations on such market. If there are no
such bid and asked quotations, the most recent bid
quotation shall be used.
Money market instruments purchased with an original
maturity of sixty days or less are valued at
amortized cost.
All other securities are valued at their fair value
as determined in good faith by the Valuation
Committee of the Board of Trustees.
FOREIGN CURRENCY TRANSLATIONS. The books and
records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and
liabilities denominated in a foreign currency are
translated into U.S. dollars at the
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
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.
20
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
2 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The Fund has a management
agreement with Scudder Kemper Investments, Inc.
(Scudder Kemper) and pays a monthly investment
management fee of 1/12 of the annual rate of 0.58%
of the first $250 million of average daily net
assets declining to 0.42% of average daily net
assets in excess of $12.5 billion. The Fund
incurred a management fee of $2,946,516 for the six
months ended April 30, 2000.
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 six months ended April
30, 2000 are $91,851.
For services under the distribution services
agreement, the Fund pays KDI a fee of 0.75% of
average daily net assets of the Class B and Class C
shares pursuant to separate Rule 12b-1 plans for
the Class B and Class C shares. Pursuant to the
agreement, KDI enters into related selling group
agreements with various firms at various rates for
sales of Class B and Class C shares. In addition,
KDI receives any contingent deferred sales charges
(CDSC) from redemptions of Class B and Class C
shares. Distribution fees and CDSC received by KDI
for the six months ended April 30, 2000 are
$2,249,832.
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with KDI. For
providing information and administrative services
to Class A, Class B and Class C shareholders, the
Fund pays KDI a fee at an annual rate of up to
0.25% of average daily net assets of each class.
KDI in turn has various agreements with financial
services firms that provide these services and pays
these firms based on assets of Fund accounts the
firms service. Administrative services fees paid by
the Fund to KDI for the six months ended April 30,
2000 are $1,317,107, and of which $2,332 was paid
to KDI affiliates.
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
$1,297,443 for the six months ended April 30, 2000.
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,
2000, the Fund made no payments to its officers and
incurred trustees fees of $11,820 to independent
trustees.
--------------------------------------------------------------------------------
3 INVESTMENT
TRANSACTIONS For the six months ended April 30, 2000, investment
transactions (excluding short-term instruments) are
as follows:
Purchases $598,594,218
Proceeds from sales 450,592,536
21
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
4
CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2000 OCTOBER 31, 1999
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 13,221,016 $ 285,742,394 14,128,703 $ 272,091,695
-----------------------------------------------------------------------------------------
Class B 8,854,713 187,583,136 9,082,693 173,986,763
-----------------------------------------------------------------------------------------
Class C 1,694,066 36,067,661 1,551,314 29,889,535
-----------------------------------------------------------------------------------------
Class I 181,130 4,005,925 242,600 4,717,775
-----------------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 903,104 19,208,931 513,215 9,053,120
-----------------------------------------------------------------------------------------
Class B 562,027 11,785,689 237,981 4,181,337
-----------------------------------------------------------------------------------------
Class C 81,353 1,718,180 31,920 563,712
-----------------------------------------------------------------------------------------
Class I 16,443 354,019 6,474 115,366
-----------------------------------------------------------------------------------------
SHARES REDEEMED
Class A (10,970,385) (238,133,342) (12,065,224) (232,506,262)
-----------------------------------------------------------------------------------------
Class B (3,895,519) (82,402,985) (4,168,565) (79,247,862)
-----------------------------------------------------------------------------------------
Class C (814,300) (17,319,450) (894,470) (17,299,123)
-----------------------------------------------------------------------------------------
Class I (184,747) (4,031,048) (240,192) (4,557,203)
-----------------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 265,683 5,735,408 670,452 12,878,161
-----------------------------------------------------------------------------------------
Class B (269,746) (5,735,408) (677,251) (12,878,161)
-----------------------------------------------------------------------------------------
SHARES ISSUED IN ACQUISITION (SEE NOTE 8)
Class A -- -- 324,000 5,950,000
-----------------------------------------------------------------------------------------
Class B -- -- 277,000 5,074,000
-----------------------------------------------------------------------------------------
Class C -- -- 84,000 1,540,000
-----------------------------------------------------------------------------------------
Class I -- -- 116,000 2,158,000
-----------------------------------------------------------------------------------------
NET INCREASE
FROM CAPITAL
SHARE TRANSACTIONS $ 204,579,110 $ 175,710,853
-----------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
5
EXPENSE OFF-SET
ARRANGEMENTS The Fund has entered into arrangements with its
custodian whereby credits realized as a result of
uninvested cash balances were used to reduce a
portion of the Fund's expenses. During the six
months ended, the Fund's custodian fees and
transfer agent fees were reduced by $2,069 and
$34,877, respectively, under these arrangements.
--------------------------------------------------------------------------------
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.
22
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
7 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.
23
<PAGE> 24
TRUSTEES&OFFICERS
<TABLE>
<S> <C> <C>
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
LINDA C. COUGHLIN CAROLINE PEARSON
Trustee JOHN R. HEBBLE Assistant Secretary
Treasurer
DONALD L. DUNAWAY BRENDA LYONS
Trustee TRACY MCCORMICK Assistant Treasurer
Vice President
ROBERT B. HOFFMAN
Trustee ANN M. MCCREARY
Vice President
DONALD R. JONES
Trustee KATHRYN L. QUIRK
Vice President
THOMAS W. LITTAUER
Trustee and Vice President WILLIAM F. TRUSCOTT
Vice President
SHIRLEY D. PETERSON
Trustee
WILLIAM P. SOMMERS
Trustee
</TABLE>
<TABLE>
<S> <C>
.............................................................................................
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
.............................................................................................
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 219557
Kansas City, MO 64121
.............................................................................................
CUSTODIAN 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
</TABLE>
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LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)