<PAGE> 1
KEMPER U.S. GOVERNMENT
SECURITIES FUND
SEMIANNUAL REPORT TO SHAREHOLDERS
FOR THE PERIOD ENDED APRIL 30, 1996
Offering investors the opportunity for high current income, liquidity and
security of principal
"As interest rates shifted, we managed the fund more defensively by
shortening its duration and changing its
portfolio composition."
<PAGE> 2
Table Of
Contents
2
Terms to Know
3
General
Economic Overview
5
Performance Update
7
Portfolio Statistics
8
Portfolio of Investments
10
Financial Statements
13
Notes to
Financial Statements
17
Financial Highlights
AT A GLANCE
Kemper U.S. Government Securities Fund Total Returns for the six-month period
ended April 30, 1996 (unadjusted for any sales charge)
[BAR GRAPH]
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------
Class A 0.84%
- -----------------------------------------------------------------------------
Class B 0.37%
- -----------------------------------------------------------------------------
Class C 0.40%
- -----------------------------------------------------------------------------
Lipper GNMA Bond
Funds Category
Average * 0.83%
- -----------------------------------------------------------------------------
</TABLE>
Returns and rankings are historical and do not represent future performance.
Returns and net asset value fluctuate. Shares are redeemable at current net
asset value, which may be more or less than original cost.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
NET ASSET VALUE
- -----------------------------------------------------------------------------
AS OF AS OF
4/30/96 10/31/95
- -----------------------------------------------------------------------------
<S> <C> <C>
KEMPER U.S. GOVERNMENT
SECURITIES FUND CLASS A $8.68 $ 8.92
- -----------------------------------------------------------------------------
KEMPER U.S. GOVERNMENT
SECURITIES FUND CLASS B $8.67 $ 8.91
- -----------------------------------------------------------------------------
KEMPER U.S. GOVERNMENT
SECURITIES FUND CLASS C $8.69 $ 8.93
- -----------------------------------------------------------------------------
</TABLE>
- -----------------------------------------------------------------------------
KEMPER U.S. GOVERNMENT
SECURITIES FUND RANKINGS*
- -----------------------------------------------------------------------------
Compared to all other funds in the Lipper GNMA Bond Funds Category
<TABLE>
<CAPTION>
1-YEAR 5-YEAR 10-YEAR 15-YEAR
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A #13 OF 57 #19 OF 30 #10 OF 19 #3 OF 4
FUNDS FUNDS FUNDS FUNDS
- -----------------------------------------------------------------------------
CLASS B #39 OF 57
FUNDS N/A N/A N/A
- -----------------------------------------------------------------------------
CLASS C #40 OF 57
FUNDS N/A N/A N/A
- -----------------------------------------------------------------------------
</TABLE>
*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.
- -----------------------------------------------------------------------------
DIVIDEND AND YIELD REVIEW
- -----------------------------------------------------------------------------
The following table shows per share dividend and yield information for the fund
as of April 30, 1996.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
SIX-MONTHS INCOME: $0.3180 $0.2760 $0.2784
- -----------------------------------------------------------------------------
APRIL DIVIDEND: $0.0530 $0.0461 $0.0459
- -----------------------------------------------------------------------------
ANNUALIZED
DISTRIBUTION RATE+: 7.33% 6.38% 6.34%
- -----------------------------------------------------------------------------
SEC YIELD+: 6.28% 5.61% 5.62%
- -----------------------------------------------------------------------------
</TABLE>
+Current annualized distribution rate is the latest monthly dividend shown as an
annualized percentage of net asset value on April 30, 1996. Distribution rate
simply measures the level of dividends and is not a complete measure of
performance. The SEC yield is net investment income per share earned over the
month ended April 30, 1996 shown as an annualized percentage of the maximum
offering price on that date. The SEC yield is computed in accordance with a
standardized method prescribed by the Securities and Exchange Commission.
TERMS TO KNOW
DURATION Duration is a measure of the interest rate sensitivity of a fixed-
income portfolio incorporating time to maturity and coupon size. The longer the
duration, the greater the interest rate risk.
TOTAL RETURN A fund's total return figure measures both the net investment
income and any realized and unrealized appreciation or depreciation of the
underlying investments in its portfolio for the period, assuming the
reinvestment of all dividends. It represents the aggregate percentage or dollar
value change over the period.
YIELD A fund's yield is a measure of the net investment income per share earned
over a specific one month or 30-day period expressed as a percentage of the
maximum offering price of the fund's shares at the end of the period.
<PAGE> 3
GENERAL ECONOMIC OVERVIEW
[TIMBERS PHOTO]
Stephen B. Timbers is president, chief executive and chief investment officer
of Zurich Kemper Investments, Inc. (ZKI). ZKI and its affiliates manage
approximately $79 billion in assets, including $45 billion in retail mutual
funds. Timbers is a graduate of Yale University and holds an M.B.A. from
Harvard University.
DEAR SHAREHOLDER,
The first five months of 1996 have provided a few surprises. As the year began,
most of us expected sluggish economic and corporate growth -- which the Federal
Reserve Board would address by reducing short-term interest rates. Yet, what we
experienced was stronger-than-anticipated economic growth, better corporate
earnings and rising interest rates. Although such surprises unsettled the bond
market, the stock market has followed a spectacular 1995 with strength so far
this year.
Where is the economy headed now? Its direction is even less predictable as we
draw nearer to the November elections. Half of the country's leading economists
are forecasting 3 percent growth while an equal number are looking for no better
than 1 percent growth. At Kemper Funds, we suspect that the economy is growing
at a subpar rate of 2 percent. Although commodity prices may suggest otherwise,
we think inflation is holding at less than 3 percent. We see no reason to expect
the Fed to reduce rates to stimulate growth but neither is it likely to raise
rates significantly to control growth. In an environment of stable or gently
rising rates, we would expect corporate earnings to grow at a rate of about 7 to
8 percent -- that's somewhat higher than we believed likely at the start of the
year.
Our forecast calls for a generally comfortable environment for investors. But
both the economy and the general direction of the markets are due for a
reversal. In June, the U.S. economy entered its 63rd month of consecutive
growth. This is the longest expansion without a single quarter of negative
output growth since George Washington was president. Today's bull market started
in October 1990, which makes it one of the longest running bull markets in
history. By virtue of its length alone, the stock market is vulnerable to a
correction.
As expected, volatility has returned to the market this year. For example: The
stock market's performance on March 8, the date that a surprisingly strong
employment report was released, betrayed some level of investor skittishness.
But while the Standard & Poor's lost 3.1 percent that day, it quickly regained
the ground and moved higher.
- ----------------------------------------------------------------------------
Consumers and Job Security
- ----------------------------------------------------------------------------
The restructuring of corporate America, which is generally credited for its
improved profitability, has been an important influence on the consumer.
Economic growth is heavily dependent upon consumer spending which, in turn, is
a function of inflation, pay raises and fear of job loss. While the first two
have not been a recent concern, fear of losing one's job has dampened consumer
confidence.
Such anxiety in the workplace was the subject of a recent study by the
Council of Economic Advisors. According to that report, more than two-thirds of
the new jobs created in the United States in 1994 and 1995 paid better than the
average job. The report found that the rate at which jobs were eliminated has
risen slightly despite strong economic growth of recent years - however, it
reported that the length of time most workers spend unemployed has declined.
The graph below tracks Bureau of Labor Statistics data that show the recent
relationship between number of jobs created versus the number of jobs lost.
[LINE GRAPH]
<TABLE>
<CAPTION>
Jobs Created Jobs Lost
<S> <C> <C>
12/31/91 (300,000) 40,000
12/31/92 120,000 30,000
12/31/93 300,000 70,000
12/31/94 180,000 70,000
12/31/95 (80,000) 40,000
3/31/96 490,000 10,000
</TABLE>
Source: Bureau of Labor Statistics
3
<PAGE> 4
GENERAL 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
(4/30/96) 6 months ago 1 year ago 2 years ago
<S> <C> <C> <C> <C>
10-year Treasury rate(1) 6.51 5.93 6.63 7.18
Prime rate(2) 8.25 8.75 9.00 6.99
Inflation rate(3) 2.90 2.60 3.12 2.29
The U.S. dollar(4) 8.94 (1.57) (10.02) 2.34
Capital goods orders(5) 7.94 10.38 17.84 19.99
Industrial production(6) 2.56 1.71 3.31 6.22
Employment growth(7) 1.47 (1.55) 2.30 2.93
</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%. 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 corporate profits and equity performance.
(7) An influence on family income and retail sales.
Source: Economics Department, Zurich Kemper Investments, Inc.
Such ebb and flow is to be expected in investing, especially at this point
in the cycle. Attempting to "prepare" for a correction is futile, we
believe. Those whose caution caused them to excuse themselves from the market
early this year, for example, would have forgone its significant gain year to
date.
Several opportunities exist today for the careful investor. First, having
settled down some from a raucous 1995, the technology sector continues to enjoy
the product and market demand that make it the dominant sector of the 1990s.
Second, equity investors willing to look overseas may find opportunities in
countries whose economies today are at a point where the U.S. economy was in
1995. Our forecast assumes that strength in foreign markets could boost those
countries' currencies, which would weaken the value of the dollar.
We expect the fixed-income markets to continue to be sensitive to interest
rate and inflation news. However, for as long as economic growth is positive and
earnings are growing, we believe the high-yield market is one market segment
that has significant potential.
Finally, we look for political activity to have less and less bearing on the
markets' performance. Although they may continue to debate tax reform,
federal budget deficit reduction and health care reform, the incumbent
legislators are running out of time to take action before the November
elections. If there is any suspense by November, it is likely to be in whether
the Republicans can retain control of Congress. Their success would make a
balanced budget and tax reform likely agenda topics for 1997.
With that as an economic backdrop, we encourage you to read the following
detailed report of your fund, including an interview with your fund's portfolio
management. Thank you for your continued support. We appreciate the opportunity
to serve your investment needs.
Sincerely,
/s/ Stephen B. Timbers
STEPHEN B. TIMBERS
President, Chief Investment and Executive Officer
Zurich Kemper Investments, Inc.
June 5, 1996
4
<PAGE> 5
PERFORMANCE UPDATE
[BEIMFORD PHOTO]
J. PATRICK BEIMFORD, JR., JOINED ZURICH KEMPER INVESTMENTS, INC. (ZKI) IN 1976.
HE IS EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER FOR FIXED-INCOME
INVESTMENTS. MR. BEIMFORD IS ALSO PORTFOLIO CO-MANAGER FOR KEMPER U.S.
GOVERNMENT SECURITIES FUND. HE RECEIVED A BACHELOR OF SCIENCE AND INDUSTRIAL
MANAGEMENT DEGREE FROM PURDUE UNIVERSITY AND EARNED AN M.B.A. FROM THE
UNIVERSITY OF CHICAGO.
[VANDENBERG PHOTO]
RICHARD VANDENBERG JOINED ZURICH KEMPER INVESTMENTS, INC. (ZKI) IN MARCH 1996,
AS SENIOR VICE PRESIDENT AND PORTFOLIO CO-MANAGER OF KEMPER U.S. GOVERNMENT
SECURITIES FUND. VANDENBERG HAS MORE THAN 22 YEARS OF FIXED-INCOME PORTFOLIO
MANAGEMENT EXPERIENCE. HE RECEIVED BOTH A BACHELORS DEGREE AND M.B.A. FROM THE
UNIVERSITY OF WISCONSIN.
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.
DURING THE FIRST HALF OF THE FISCAL YEAR -- NOVEMBER 1995, THROUGH APRIL
1996 -- RICHARD VANDENBERG JOINED J. PATRICK BEIMFORD AS PORTFOLIO CO-MANAGER
OF KEMPER U.S. GOVERNMENT SECURITIES FUND. BELOW THEY EXPLAIN THE POLITICAL AND
ECONOMIC EVENTS THAT FUELED A STRONG GOVERNMENT MARKET RALLY AND AN EVEN
STRONGER TURNABOUT IN INTEREST RATES DURING THE PERIOD.
Q AT THE START OF THE FISCAL YEAR, NOVEMBER 1995, INTEREST RATES WERE
DECLINING.
NOW RATES HAVE RISEN BEYOND THOSE EARLIER LEVELS. WHAT BROUGHT ABOUT THIS SHIFT
IN RATE DIRECTION?
A Rates reversed direction as expectations for the pace of economic growth
shifted. At the start of the fiscal year, in November 1995, investors were
optimistic about the government market. It was expected that the economy would
continue to grow slowly, inflation would remain low, and that the Federal
Reserve Board (the Fed) would lower short-term interest rates. The market was
also hopeful, at that point, that the negotiations underway in Washington D.C.
would soon lead to a balanced budget agreement with a solid plan for reducing
the federal budget deficit. All of these events were positive for fixed-income
government investments because they supported a slow-growth, benign inflation
environment.
Economic growth continued to falter in the fourth quarter of 1995 and the
market rallied as investors speculated that more interest rate reductions would
be forthcoming in the new year. The Federal Reserve Board did lower interest
rates in December 1995, and again in January 1996. Higher market prices ensued.
In February 1996, political and economic events caused investors
to re-evaluate whether the economy could continue on its slow growth, low
inflation path. Federal budget negotiations stalled, and an impasse developed,
which effectively eliminated the chances for a balanced budget in the first
quarter of 1996. Additionally, columnist and presidential candidate Patrick
Buchanan's strong early showing in the Republican primaries caused concern as
the market viewed many of his proposals to be potentially inflationary. Finally,
in his testimony before Congress, Fed Chairman Alan Greenspan intimated that the
pace of economic growth was improving. This caused some investors to conclude
that another reduction in interest rates was not imminent. These events prompted
investors to sell, and interest rates rose.
The most dramatic rise in market rates during the period occurred in early
March, when the U.S. Department of Labor announced an unanticipated and dramatic
increase in employment growth. Many bond investors saw this data as evidence
that the economy was re-establishing firm footing and the manufacturing sector
was recovering from fourth quarter 1995 weakness. The news caused a sell-off in
the market because more rapid economic growth is associated with higher
inflation, which erodes the value of fixed-income investments. Rates continued
to rise through April.
5
<PAGE> 6
Q WHAT IMPACT DID THESE SHIFTS IN INTEREST RATES HAVE ON THE FUND'S
PERFORMANCE?
A In November and December 1995, the fund outperformed the average of its
peers. This outperformance was due to the fund's relatively long duration. We
anticipated that rates would fall so we had extended duration beyond the
average of our peers. Duration is a measurement of a fund's sensitivity to
interest rates. The longer the duration, the more sensitive it is to
interest rate changes. This means that as interest rates were falling, the
portfolio's longer duration enabled the fund to gain more than it could have
with a shorter duration.
We entered 1996 with a fairly long duration of 4.7 years. However, mid-way
through January we shortened duration as the market rallied. We believed that
the market had priced in a great deal of optimism about the course of future
events such as the federal budget deficit accord. We positioned the fund for a
more stable interest rate environment and by the end of February, duration was
4.1 years. Unfortunately, the employment release in early March caused the
market to trade down sharply and the fund's slightly longer than average
duration hurt returns. By the end of March we had adjusted the fund's duration
to 3.2 years. In April, as the market traded down, we extended duration slightly
to about 4.3 years. This was a neutral position vis-a-vis our peers. We plan to
maintain the fund's neutral duration until the direction of rates becomes more
clear.
Q WHAT TYPES OF ADJUSTMENTS DID YOU MAKE TO THE PORTFOLIO TO ALTER THE
FUND'S DURATION?
A As interest rates shifted, we managed the fund more defensively by
shortening its duration and changing its portfolio composition. During
November, December and January, we altered our level of mortgages versus
Treasuries to take advantage of the market rally and to manage the fund's
exposure to mortgage prepayment risk. The risk of prepayments is always more
prevalent when rates fall because borrowers are likely to refinance into lower
rate mortgages. As this happens, mortgages with higher interest rates are paid
off early and the proceeds are reinvested at lower market rates. Treasuries,
however, perform much better when rates decline and offer better price
appreciation potential.
At the start of the fiscal year, long-term Treasury holdings represented
17 percent of the portfolio. This was increased to 21 percent by the end of
December. Although mortgages generally provide higher yields, Treasuries, at
that point, offered the potential for a higher total return. Total return,
remember, includes both income on the investments and price appreciation.
In January 1996, we began selling long-term Treasuries to reduce the
fund's duration and to increase its investment in mortgages. By the end of
March, we had moved completely out of long-term governments. Our expectation
was that rates would not continue to decline so dramatically. With a more
stable interest rate environment, mortgages tend to outperform Treasuries. We
also wanted to align the fund's portfolio more closely to the defensive
positioning favored by our peers.
Q WHAT'S YOUR OUTLOOK FOR THE GOVERNMENT SECURITIES MARKET AND KEMPER U.S.
GOVERNMENT SECURITIES FUND IN PARTICULAR?
A Although we don't expect to see returns of the magnitude we had in 1995
and can not predict future market conditions, we believe that the government
market and the fund both have the potential for positive returns in 1996. Our
outlook is for moderate growth with controlled inflation. Although rates have
risen, we expect them to stabilize. This environment should be positive for
fixed-income markets. Last year, Treasuries provided a great deal of price
appreciation due to the declining interest rate environment. This year we
expect to favor mortgages, which should generate a solid level of income for
shareholders.
Q WHAT COULD THREATEN YOUR OUTLOOK?
A There would need to be a major change in economic fundamentals to change
our outlook at this point. If interest rates would begin to fall dramatically,
we'd need to adjust our strategy. We'd lengthen the fund's duration and
probably invest in longer-term Treasuries to enhance the fund's total return
potential.
6
<PAGE> 7
PORTFOLIO STATISTICS
PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
ON 4/30/96 ON 10/31/95
- --------------------------------------------------------------------------
<S> <C> <C>
MORTGAGE-BACKED
GNMA 79% 80%
- --------------------------------------------------------------------------
OTHER 6 3
- --------------------------------------------------------------------------
SHORT-TERM GOVERNMENTS 15 --
- --------------------------------------------------------------------------
LONG-TERM GOVERNMENTS -- 17
- --------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHARTS]
YEARS TO MATURITY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
ON 4/30/96 ON 10/31/95
- --------------------------------------------------------------------------
<S> <C> <C>
LESS THAN 5 22% 7%
- --------------------------------------------------------------------------
5-10 YEARS 19 37
- --------------------------------------------------------------------------
10-20 YEARS 59 43
- --------------------------------------------------------------------------
20+ YEARS -- 13
- --------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHARTS]
AVERAGE MATURITY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
ON 4/30/96 ON 10/31/95
- --------------------------------------------------------------------------
<S> <C> <C>
AVERAGE MATURITY 8.8 YEARS 11.7 YEARS
- -------------------------------------------------------------------------
</TABLE>
7
<PAGE> 8
PORTFOLIO OF INVESTMENTS
KEMPER U.S. GOVERNMENT SECURITIES FUND
Portfolio of Investments at April 30, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
COUPON PRINCIPAL
U.S. GOVERNMENT OBLIGATIONS TYPE RATE MATURITY AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GOVERNMENT NATIONAL Pass-through 6.00% 2023-2026 $ 24,254 $ 22,086
MORTGAGE ASSOCIATION - 79.1% Certificates 6.50 2023-2026 700,878 655,978
(Cost: $3,386,266) 7.00 2022-2026 1,180,026 1,136,029
7.50 2021-2027 824,124 815,111
8.00 2016-2026 643,158 506,008
8.50 2016-2025 61,811 63,868
9.00 2005-2023 82,723 86,911
9.50 2009-2023 59,664 63,990
10.00 2009-2022 71,716 78,686
10.50 2013-2021 28,907 31,987
---------------------------------------------------------------------------
3,460,654
- ------------------------------------------------------------------------------------------------------------
U.S. TREASURY Notes 8.75-8.875 1997 284,000 295,568
SECURITIES - 22.8% 8.125-9.00 1998 290,000 304,156
(Cost: $1,008,081) 8.875 1999 116,000 123,830
6.75 2000 4,900 4,967
Bonds 12.375 2004 28,000 37,817
10.00-12.75 2010 91,000 119,782
14.00 2011 59,650 91,348
12.00 2013 14,300 20,208
---------------------------------------------------------------------------
997,676
- ------------------------------------------------------------------------------------------------------------
FEDERAL NATIONAL Pass-through 6.50 2026 116,000 108,786
MORTGAGE ASSOCIATION - 6.2% Certificates 8.00 2024 9,764 9,836
(Cost: $270,565) 9.00 2026 145,000 151,480
---------------------------------------------------------------------------
270,102
---------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS--108.1%
(Cost: $4,664,912) 4,728,432
---------------------------------------------------------------------------
</TABLE>
8
<PAGE> 9
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(Dollars in thousands)
- ------------------------------------------------------------------------------------------------------------
PRINCIPAL
TYPE AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE
AGREEMENTS(a) - 4.2%
Yield--5.30% to 5.43%, Dated April 1996,
Due May 1996
Bear, Stearns & Company $ 25,000 $ 25,000
Nikko Securities International 60,000 60,000
(held at The Bank of New York)
Salomon Brothers 100,000 100,000
(held at The Bank of New York)
---------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost: $185,000) 185,000
---------------------------------------------------------------------------
TOTAL INVESTMENTS--112.3%
(Cost: $4,849,912) 4,913,432
---------------------------------------------------------------------------
LIABILITIES, LESS OTHER ASSETS--(12.3%) (537,873)
---------------------------------------------------------------------------
NET ASSETS--100% $4,375,559
---------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities. All collateral is held at the Fund's custodian
bank, Investor's Fiduciary Trust Company, or at subcustodian banks, as
indicated. The collateral is monitored daily by the Fund so that its market
value exceeds the carrying value of the repurchase agreement.
Based on the cost of investments of $4,849,912,000 for federal income tax
purposes at April 30, 1996, the gross unrealized appreciation was $108,159,000,
the gross unrealized depreciation was $44,639,000 and the net unrealized
appreciation of investments was $63,520,000.
See accompanying Notes to Financial Statements.
9
<PAGE> 10
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1996
(in thousands)
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------
Investments, at value
(Cost: $4,849,912) $4,913,432
- -------------------------------------------------------------------------------------------------------
Receivable for:
Fund shares sold 819
- -------------------------------------------------------------------------------------------------------
Investments sold 151,470
- -------------------------------------------------------------------------------------------------------
Interest 49,769
- -------------------------------------------------------------------------------------------------------
TOTAL ASSETS 5,115,490
- -------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- -------------------------------------------------------------------------------------------------------
Cash overdraft 2,526
- -------------------------------------------------------------------------------------------------------
Payable for:
Fund shares redeemed 2,335
- -------------------------------------------------------------------------------------------------------
Investments purchased 732,110
- -------------------------------------------------------------------------------------------------------
Management fee 1,513
- -------------------------------------------------------------------------------------------------------
Administrative services fee 653
- -------------------------------------------------------------------------------------------------------
Distribution services fee 44
- -------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 738
- -------------------------------------------------------------------------------------------------------
Trustees' fees and other 12
- -------------------------------------------------------------------------------------------------------
Total liabilities 739,931
- -------------------------------------------------------------------------------------------------------
NET ASSETS $4,375,559
- -------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -------------------------------------------------------------------------------------------------------
Paid-in capital $4,804,878
- -------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (639,221)
- -------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 63,520
- -------------------------------------------------------------------------------------------------------
Undistributed net investment income 146,382
- -------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $4,375,559
- -------------------------------------------------------------------------------------------------------
THE PRICING OF SHARES
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($4,298,344 / 495,216 shares outstanding) $8.68
- -------------------------------------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 4.71% of
net asset value or 4.50% of offering price) $9.09
- -------------------------------------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($63,470 / 7,318 shares outstanding) $8.67
- -------------------------------------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($7,026 / 809 shares outstanding) $8.69
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES
Net asset value and redemption price per share
($6,719 / 774 shares outstanding) $8.68
- -------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
10
<PAGE> 11
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Six months ended April 30, 1996
(in thousands)
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME
- -------------------------------------------------------------------------------------------------------
Interest income $ 174,963
- -------------------------------------------------------------------------------------------------------
Expenses:
Management fee 9,481
- -------------------------------------------------------------------------------------------------------
Administrative services fee 3,961
- -------------------------------------------------------------------------------------------------------
Distribution services fee 248
- -------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 3,504
- -------------------------------------------------------------------------------------------------------
Professional fees 40
- -------------------------------------------------------------------------------------------------------
Reports to shareholders 324
- -------------------------------------------------------------------------------------------------------
Trustees' fees and other 57
- -------------------------------------------------------------------------------------------------------
Total expenses 17,615
- -------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 157,348
- -------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- -------------------------------------------------------------------------------------------------------
Net realized loss on sales of investments
(including options purchased) (32,179)
- -------------------------------------------------------------------------------------------------------
Net realized gain from futures transactions 21,062
- -------------------------------------------------------------------------------------------------------
Net realized loss (11,117)
- -------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation on investments (102,919)
- -------------------------------------------------------------------------------------------------------
Net loss on investments (114,036)
- -------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 43,312
- -------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED APRIL 30, OCTOBER 31,
1996 1995
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- ----------------------------------------------------------------------------------------------------------
Net investment income $ 157,348 368,383
- ----------------------------------------------------------------------------------------------------------
Net realized loss (11,117) (71,028)
- ----------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation/depreciation (102,919) 380,732
- ----------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 43,312 678,087
- ----------------------------------------------------------------------------------------------------------
Net equalization charges (8,753) (21,081)
- ----------------------------------------------------------------------------------------------------------
Distribution from net investment income (163,998) (362,971)
- ----------------------------------------------------------------------------------------------------------
Net decrease from capital share transactions (233,417) (497,071)
- ----------------------------------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS (362,856) (203,036)
- ----------------------------------------------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------------------------------------------
Beginning of period 4,738,415 4,941,451
- ----------------------------------------------------------------------------------------------------------
END OF PERIOD (including undistributed net investment
income of $146,382 and $161,785, respectively) $ 4,375,559 4,738,415
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
12
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE FUND Kemper U.S. Government Securities Fund is an
open-end management investment company organized as
a business trust under the laws of Massachusetts.
The Fund offers four classes of shares. Class A
shares are sold to investors subject to an initial
sales charge. Class B shares are sold without an
initial sales charge but are subject to higher
ongoing expenses than Class A shares and a
contingent deferred sales charge payable upon
certain redemptions. Class B shares automatically
convert to Class A shares six years after issuance.
Class C shares are sold without an initial sales
charge but are subject to higher ongoing expenses
than Class A shares and, for shares sold on or
after April 1, 1996, 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, which are sold
to a limited group of investors, are not subject to
initial or contingent deferred sales charges and
have lower ongoing expenses than other classes.
Differences in class expenses will result in the
payment of different per share income dividends by
class. Each share represents an identical interest
in the investments of the Fund and has the same
rights.
- --------------------------------------------------------------------------------
2 SIGNIFICANT
ACCOUNTING POLICIES INVESTMENT VALUATION. Investments are stated at
value. Fixed income securities are valued by using
market quotations, or independent pricing services
that use prices provided by market makers or
estimates of market values obtained from yield data
relating to instruments or securities with similar
characteristics. Exchange traded options are valued
at the last sale price unless there is no sale
price, in which event prices provided by market
makers are used. Over-the-counter traded fixed
income options are valued based upon prices
provided by market makers. Financial futures and
options thereon are valued at the settlement price
established each day by the board of trade or
exchange on which they are traded. Other securities
and assets are valued at fair value as determined
in good faith by the Board of Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on the
trade date (date the order to buy or sell is
executed). Interest income is recorded on the
accrual basis and includes discount amortization on
all fixed income securities and premium
amortization on mortgage-backed securities.
Realized gains and losses from investment
transactions are reported on an identified cost
basis.
The Fund may purchase securities with delivery or
payment to occur at a later date. At the time the
Fund enters into a commitment to purchase a
security, the transaction is recorded and the value
of the security is reflected in the net asset
value. The value of the security may vary with
market fluctuations. No interest accrues to the
Fund until payment takes place. At the time the
Fund enters into this type of transaction it is
required to segregate cash or other liquid assets
equal to the value of the securities purchased. At
April 30, 1996 the Fund had $730,462,000 in
purchase commitments outstanding (17% of net
assets) with a corresponding amount of assets
segregated.
13
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
FUND SHARE VALUATION. Fund shares are sold and
redeemed on a continuous basis at net asset value
(plus an initial sales charge on most sales of
Class A shares). Proceeds payable on redemption of
Class B and Class C shares will be reduced by the
amount of any applicable contingent deferred sales
charge. On each day the New York Stock Exchange is
open for trading, the net asset value per share is
determined as of the earlier of 3:00 p.m. Chicago
time or the close of the Exchange. The net asset
value per share is determined separately for each
class by dividing the Fund's net assets
attributable to that class by the number of shares
of the class outstanding.
FEDERAL INCOME TAXES. The Fund has complied with
the special provisions of the Internal Revenue Code
available to investment companies for the six
months ended April 30, 1996. The accumulated net
realized loss on sales of investments for federal
income tax purposes at April 30, 1996, amounting to
approximately $639,164,000, is available to offset
future taxable gains. If not applied, the loss
carryover expires during the period 1998 through
2003.
DIVIDENDS TO SHAREHOLDERS. The Fund declares and
pays dividends of net investment income monthly and
any net realized capital gains annually, which are
recorded on the ex-dividend date. Dividends are
determined in accordance with income tax principles
which may treat certain transactions differently
from generally accepted accounting principles.
EQUALIZATION ACCOUNTING. A portion of proceeds from
sales and cost of redemptions of Fund shares is
credited or charged to undistributed net investment
income so that income per share available for
distribution is not affected by sales or
redemptions of shares.
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The Fund has a management
agreement with Zurich Kemper Investments, Inc.
(ZKI) (formerly known as Kemper Financial Services,
Inc.), and pays a management fee at an annual rate
of .45% of the first $250 million of average daily
net assets declining to .32% of average daily net
assets in excess of $12.5 billion. The Fund
incurred a management fee of $9,481,000 for the six
months ended April 30, 1996.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
The Fund has an underwriting and distribution
services agreement with Kemper Distributors, Inc.
(KDI). Underwriting commissions paid in connection
with the distribution of Class A shares are as
follows:
<TABLE>
<CAPTION>
COMMISSIONS
ALLOWED BY KDI
COMMISSIONS -------------------------------
RETAINED BY KDI TO ALL FIRMS TO AFFILIATES
--------------- -------------- --------------
<S> <C> <C> <C>
Six months ended April 30, 1996 $ 192,000 1,193,000 73,000
</TABLE>
For services under the distribution services
agreement, the Fund pays KDI a fee of .75% of
average daily net assets of 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
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
shares. In addition, KDI receives any contingent
deferred sales charges (CDSC) from redemptions of
Class B and Class C shares. Distribution fees and
commissions paid in connection with the sale of
Class B and Class C shares and the CDSC received in
connection with the redemption of such shares are
as follows:
<TABLE>
<CAPTION>
COMMISSIONS AND DISTRIBUTION
DISTRIBUTION FEES FEES PAID BY KDI
AND CDSC RECEIVED ------------------------------
BY KDI TO ALL FIRMS TO AFFILIATES
----------------- ------------- --------------
<S> <C> <C> <C>
Six months ended
April 30, 1996 $ 332,000 699,000 60,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with KDI. For
providing information and administrative services
to Class A, Class B and Class C shareholders, the
Fund pays KDI a fee at an annual rate of up to .25%
of average daily net assets of each class. KDI in
turn has various agreements with financial services
firms that provide these services and pays these
firms based on assets of Fund accounts the firms
service. Administrative services fees (ASF) paid
are as follows:
<TABLE>
<CAPTION>
ASF PAID BY KDI
ASF PAID BY ------------------------------
THE FUND TO KDI TO ALL FIRMS TO AFFILIATES
---------------- ------------- --------------
<S> <C> <C> <C>
Six months ended
April 30, 1996 $3,961,000 3,973,000 248,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
Kemper Service Company (KSvC) is the shareholder
service agent of the Fund. Under the agreement,
KSvC received shareholder services fees of
$2,063,000 for the six months ended April 30, 1996.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of ZKI.
For the six months ended April 30, 1996, the Fund
made no direct payments to its officers and
incurred trustees' fees of $32,000 to independent
trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the six months ended April 30, 1996, investment
transactions (excluding short-term investments) are
as follows (in thousands):
Purchases $10,175,525
Proceeds from sales 10,524,280
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1996 OCTOBER 31, 1995
-------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SHARES SOLD
------------------------------------------------------------------------------------
Class A 9,674 $ 80,607 23,085 $ 184,675
Class B 2,573 22,820 7,843 66,852
------------------------------------------------------------------------------------
Class C 311 2,764 842 7,173
------------------------------------------------------------------------------------
Class I 221 1,968 939 8,333
------------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
------------------------------------------------------------------------------------
Class A 10,731 95,341 24,837 213,222
------------------------------------------------------------------------------------
Class B 143 1,274 168 1,462
------------------------------------------------------------------------------------
Class C 18 162 16 135
------------------------------------------------------------------------------------
Class I 29 263 14 122
------------------------------------------------------------------------------------
SHARES REDEEMED
------------------------------------------------------------------------------------
Class A (49,032) (422,796) (114,637) (947,816)
------------------------------------------------------------------------------------
Class B (1,357) (12,031) (3,157) (27,011)
------------------------------------------------------------------------------------
Class C (61) (546) (424) (3,604)
------------------------------------------------------------------------------------
Class I (359) (3,243) (70) (614)
------------------------------------------------------------------------------------
CONVERSION OF SHARES
------------------------------------------------------------------------------------
Class A 33 291 52 450
------------------------------------------------------------------------------------
Class B (33) (291) (51) (450)
------------------------------------------------------------------------------------
NET DECREASE
FROM CAPITAL
SHARE TRANSACTIONS $(233,417) $(497,071)
------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
6 FINANCIAL FUTURES
CONTRACTS The Fund has entered into exchange traded financial
futures contracts in order to help protect it from
anticipated market conditions and, as such, bears
the risk that arises from owning these contracts.
At the time the Fund enters into a futures
contract, it is required to make a margin deposit
with its custodian. Subsequently, gain or loss is
recognized and payments are made on a daily basis
between the Fund and the broker as the market value
of the futures contract changes. At April 30, 1996,
the market value of assets segregated at the
custodian to cover margin requirements was
$14,038,000. The Fund also had liquid securities in
its portfolio sufficient to cover the following
short futures position open at April 30, 1996:
<TABLE>
<CAPTION>
EXPIRATION GAIN AT
TYPE FACE AMOUNT MONTH 4/30/96
------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Securities $354,161,000 June '96 $1,562,000
------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------
Net asset value, beginning of period $8.92 8.35 9.29 9.30 9.32
- -----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .30 .66 .67 .69 .78
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.22) .56 (.97) (.01) (.02)
- -----------------------------------------------------------------------------------------------
Total from investment operations .08 1.22 (.30) .68 .76
- -----------------------------------------------------------------------------------------------
Less distribution from net investment income .32 .65 .64 .69 .78
- -----------------------------------------------------------------------------------------------
Net asset value, end of period $8.68 8.92 8.35 9.29 9.30
- -----------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) .84% 15.24 (3.37) 7.60 8.44
- -----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------------
Expenses .75% .72 .75 .65 .64
- -----------------------------------------------------------------------------------------------
Net investment income 6.83 7.68 7.58 7.36 8.31
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------
SIX MONTHS YEAR MAY 31,
ENDED ENDED 1994 TO
APRIL 30, OCT. 31, OCT. 31,
1996 1995 1994
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------
Net asset value, beginning of period $8.91 8.34 8.67
- ---------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .26 .58 .28
- ---------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.22) .56 (.38)
- ---------------------------------------------------------------------------------------
Total from investment operations .04 1.14 (.10)
- ---------------------------------------------------------------------------------------
Less distribution from net investment income .28 .57 .23
- ---------------------------------------------------------------------------------------
Net asset value, end of period $8.67 8.91 8.34
- ---------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) .37% 14.18 (1.15)
- ---------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ---------------------------------------------------------------------------------------
Expenses 1.70% 1.69 1.71
- ---------------------------------------------------------------------------------------
Net investment income 5.88 6.71 7.09
- ---------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 18
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------------- ------------------------
CLASS C CLASS I
------------------------------------- ------------------------
SIX MONTHS YEAR MAY 31, SIX MONTHS JULY 3,
ENDED ENDED 1994 TO ENDED 1995 TO
APRIL 30, OCT. 31, OCT. 31, APRIL 30, OCT. 31,
1996 1995 1994 1996 1995
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $8.93 8.35 8.67 8.92 8.88
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .26 .60 .29 .31 .22
- -----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.22) .56 (.38) (.22) .04
- -----------------------------------------------------------------------------------------------------------------------
Total from investment operations .04 1.16 (.09) .09 .26
- -----------------------------------------------------------------------------------------------------------------------
Less distribution from net investment income .28 .58 .23 .33 .22
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.69 8.93 8.35 8.68 8.92
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) .40% 14.33 (1.01) .94 3.02
- -----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------------------------------------
Expenses 1.67% 1.64 1.68 .55 .53
- -----------------------------------------------------------------------------------------------------------------------
Net investment income 5.91 6.76 7.12 7.03 7.07
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- -----------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $4,375,559 4,738,415 4,941,451 6,686,735 6,683,092
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 426% 362 1,000 550 569
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Total return does not reflect the effect of any sales charges.
18
<PAGE> 19
NOTES
19
<PAGE> 20
TRUSTEES AND OFFICERS
TRUSTEES OFFICERS
STEPHEN B. TIMBERS J. PATRICK BEIMFORD, JR.
President and Trustee Vice President
DAVID W. BELIN JOHN E. NEAL
Trustee Vice President
LEWIS A. BURNHAM JOHN E. PETERS
Trustee Vice President
DONALD L. DUNAWAY RICHARD L. VANDENBERG
Trustee Vice President
ROBERT B. HOFFMAN PHILIP J. COLLORA
Trustee Vice President
and Secretary
DONALD R. JONES
Trustee JEROME L. DUFFY
Treasurer
DOMINIQUE P. MORAX
Trustee ELIZABETH C. WERTH
Assistant Secretary
SHIRLEY D. PETERSON
Trustee
WILLIAM P. SOMMERS
Trustee
- --------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICE AGENT KEMPER SERVICE COMPANY
P.O. Box 419557
Kansas City, MO 64141
1-800-621-1048
- --------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
127 West 10th Street
Kansas City, MO 64105
- --------------------------------------------------------------------------------
INVESTMENT MANAGER ZURICH KEMPER INVESTMENTS, INC.
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
120 South LaSalle Street Chicago, IL 60603
http://www.kemper.com
(RECYCLE LOGO)
Printed on recycled paper. (KEMPER LOGO)
This report is not to be distributed
unless preceded or accompanied by a
Kemper Fixed Income Funds prospectus. 1016860
KGSF - 3 (6/96) Printed in the U.S.A.
