<PAGE> 1
1
KEMPER
U.S. GOVERNMENT
SECURITIES FUND
SEMIANNUAL REPORT TO SHAREHOLDERS FOR THE PERIOD ENDED APRIL 30, 1997
Offering investors the opportunity for high current income, liquidity and
security of principal
" . . . We erred on the side of caution
early in the period but were rewarded
later when rates did rise."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
Economic Overview
5
Performance Update
7
Portfolio Statistics
8
Portfolio of Investments
9
Financial Statements
11
Notes to Financial Statements
16
Financial Highlights
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER U.S. GOVERNMENT SECURITIES
FUND TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 1997
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 2.19%
CLASS B 1.71%
CLASS C 1.61%
LIPPER GNMA BOND FUNDS CATEGORY AVERAGE* 2.06%
- --------------------------------------------------------------------------------
</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.
* Lipper Analytical Services, Inc. returns and rankings are based upon changes
in net asset value with all dividends reinvested and do not include the
effect of sales charges and, if they had, results may have been less
favorable.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
04/30/97 10/31/96
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER U.S. GOVERNMENT
SECURITIES FUND CLASS A $8.61 $8.74
- --------------------------------------------------------------------------------
KEMPER U.S. GOVERNMENT
SECURITIES FUND CLASS B $8.60 $8.73
- --------------------------------------------------------------------------------
KEMPER U.S. GOVERNMENT
SECURITIES FUND CLASS C $8.61 $8.75
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
KEMPER U.S. GOVERNMENT SECURITIES
FUND RANKINGS*
- --------------------------------------------------------------------------------
COMPARED TO ALL OTHER FUNDS IN THE LIPPER GNMA BOND FUNDS CATEGORY
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1-YEAR #27 OF 51 FUNDS #46 OF 51 FUNDS #51 OF 51 FUNDS
- --------------------------------------------------------------------------------
5-YEAR #22 OF 30 FUNDS N/A N/A
- --------------------------------------------------------------------------------
10-YEAR #13 OF 22 FUNDS N/A N/A
- --------------------------------------------------------------------------------
15-YEAR #3 OF 5 FUNDS N/A N/A
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND AND YIELD REVIEW
- --------------------------------------------------------------------------------
THE FOLLOWING TABLE SHOWS, PER SHARE DIVIDEND AND YIELD INFORMATION FOR THE FUND
AS OF APRIL 30, 1997.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SIX-MONTHS INCOME: $0.3180 $0.2776 $0.2790
- --------------------------------------------------------------------------------
APRIL DIVIDEND: $0.0530 $0.0462 $0.0464
- --------------------------------------------------------------------------------
ANNUALIZED
DISTRIBUTION RATE+: 7.39% 6.45% 6.47%
- --------------------------------------------------------------------------------
SEC YIELD+: 6.43% 5.76% 5.78%
- --------------------------------------------------------------------------------
</TABLE>
+ Current annualized distribution rate is the latest monthly dividend shown as
an annualized percentage of net asset value on April 30, 1997.
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, 1997, 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
YOUR FUND'S STYLE
- --------------------------------------------------------------------------------
MORNINGSTAR FIXED-INCOME FUNDS STYLE BOX
- --------------------------------------------------------------------------------
Source: Morningstar, Inc., Chicago, IL (312) 696-6000. (Morningstar
Style Box is based on a portfolio date as of April 30, 1997.) The Fixed-Income
Style Box placement is based on a fund's average effective maturity or duration
and the average credit rating of the bond portfolio.
Please note that style boxes do not represent an exact assessment of
risk and do not represent future performance. Please consult the prospectus for
a description of investment policies.
Maturity
Short Intermediate Long
Quality
/ / /X/ / / High
/ / / / / / Medium
/ / / / / / Low
<PAGE> 3
ECONOMIC OVERVIEW
[TIMBERS PHOTO]
STEPHEN B. TIMBERS IS PRESIDENT, CHIEF INVESTMENT AND EXECUTIVE OFFICER OF
ZURICH KEMPER INVESTMENTS, INC. (ZKI). ZKI AND ITS AFFILIATES MANAGE
APPROXIMATELY $80 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 agreement between the White House and Republican leaders in Congress to
balance the federal budget has effectively ended the market correction that
began in the first quarter. Such sudden progress on balancing the budget, an
initiative that the bond market was anticipating resolution on more than one
year ago, is positive news.
The next several weeks will find Congress and the Clinton administration
negotiating toward a final agreement. Unlike previous failed proposals that
sought to balance the budget principally by increasing income taxes, the current
plan -- which starts from the base of a relatively small deficit -- proposes to
slow the growth of federal spending. As such, its prospects are promising.
Natural skeptics are waiting to see specific legislation to see if the
agreement has teeth. While we are optimistic, we need to temper our enthusiasm.
Much of the good news associated with a balanced budget was quickly discounted
in the higher prices in the stock and bond markets.
Of particular interest to equity investors is the agreement to reduce the
maximum tax rate on capital gains. Although details of the reduction are yet to
be known, the prospect of more favorable tax treatment on gains will have the
short-term effect of supporting stocks -- investors can be expected to postpone
selling until they can qualify for the lower tax rate. With equity sales
essentially "frozen" until the effective date is known, the stock market should
have a considerable underpinning. Once an effective date is determined, we would
expect the pent-up selling to occur. However, then we shall enjoy the long-term
positive effect of the lower tax rate on gains.
Talk of a balanced budget has shifted the spotlight away from the Federal
Reserve Board's upward pressure on interest rates. Having declined to raise
rates in May, the Fed may still act again at a later date. However, this action
may be the last for a while because the economy seems to be slowing down in the
second quarter, after the rapid 5.6 percent growth in the first quarter of the
year. A slower economy would reduce the threat of inflation and reduce the need
for further rate hikes by the Fed.
In fact, a review of the standard measures of the economy shows little to
be concerned about. As has been the pattern for more than five years, a few
strong quarters followed by a few weak quarters have produced an overall 2
percent to 3 percent rate of growth in gross domestic product (GDP). Job
creation and the unemployment rate are consistent with a moderately expanding
economy. Corporate profits continue to grow at an expected 4 to 5 percent rate
in 1997. The Consumer Price Index continues to track at a 2.5 percent to 3.0
percent rate.
Just as we see a limited downside to today's rising interest rate
environment, so is there a limited upside in the near future. The effect of
higher rates will have to work itself through the economy. Higher rates have
significant implications for corporate profitability, debt issuance, credit
extension and international trade. Post-correction cash flows into the financial
markets will be a subject of great scrutiny. One of the factors driving the
stock market to its recent all-time high was the unprecedented high level of
investment through mutual funds, 401(k)s and qualified contribution plans. It is
realistic to expect that, on the margin, some of that cash will find a home in
short-term, liquid investments while the stock market sorts itself out.
Leadership in the stock market has been quite narrow and concentrated for
the past six months in large, multinational companies with familiar consumer
brand names. The recent rally after the announcement of a balanced budget
agreement suggests that valuations of smaller capitalization stocks are
compelling and the market is broadening.
Higher interest rates are, of course, anathema to the fixed-income market.
However, bond investors in the last few weeks have been cheered by the balanced
budget proposal and by expectations that interest rates would not go much
higher. We expect the bond market to trade in a very narrow range -- with
long-term interest rates no lower than 6.50 percent
3
<PAGE> 4
ECONOMIC OVERVIEW
and no higher than 7.25 percent. One positive effect of the stock market
correction was the widening of spreads available on high yield bonds. As a
consequence, high yield bonds today are more reasonably priced.
A natural response to increased volatility in the U.S. equity market is to
look abroad. In fact, the valuations of many international markets are more
attractive than the U.S. However, the weak German and Japanese economies make it
difficult to identify many exciting near-term opportunities without careful
research.
Our recommendation to shareholders is to stay the course and to fight the
temptation to try to time when and where you should be invested without help.
Financial assets react much quicker today to events. Volatility has returned to
the market and with it heightened uncertainty. Now is the time to rely on your
financial representative for the expertise and the long-term investing
discipline that he or she can provide.
- --------------------------------------------------------------------------------
ECONOMIC GUIDEPOSTS
- --------------------------------------------------------------------------------
Economic activity is a key influence on investment performance and shareholder
decision-making. Periods of recessions 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 (5/31/97) 6 MONTHS AGO 1 YEAR AGO 2 YEAR AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1) 6.71 6.3 6.91 6.17
PRIME RATE(2) 8.5 8.25 8.25 9
INFLATION RATE(3) 2.3 3.31 2.75 3.04
THE U.S. DOLLAR(4) 6.55 4.36 9.15 -9.31
CAPITAL GOODS ORDERS(5)* 8.28 2.42 3.93 17.47
INDUSTRIAL PRODUCTION(5) 4.28 4.36 3.34 2.88
EMPLOYMENT GROWTH(6) 2.13 2.15 2.09 2.7
</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 family income and retail sales.
* Data as of April 30, 1997.
SOURCE: ECONOMICS DEPARTMENT, ZURICH KEMPER INVESTMENTS, INC.
With this commentary 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 9, 1997
4
<PAGE> 5
PERFORMANCE UPDATE
[VANDENBERG PHOTO]
RICHARD VANDENBERG JOINED ZKI IN MARCH 1996 AS SENIOR VICE PRESIDENT OF ZKI AND
PORTFOLIO 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 AN M.B.A. FROM THE UNIVERSITY OF WISCONSIN.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
PORTFOLIO MANAGER RICHARD VANDENBERG EXPLAINS HOW HE ADJUSTED THE
PORTFOLIO'S HOLDINGS TO BETTER POSITION THE FUND AS ECONOMIC GROWTH GAINED
MOMENTUM AND INTEREST RATES ROSE.
Q THERE WAS MUCH UNCERTAINTY ABOUT THE DIRECTION OF INTEREST RATES DURING THE
FUND'S SEMIANNUAL PERIOD, NOVEMBER 1, 1996 THROUGH APRIL 30, 1997. WHAT OCCURRED
IN THE ECONOMY THAT CAUSED THE FEDERAL RESERVE BOARD (THE FED) TO INCREASE
SHORT-TERM RATES IN MARCH AND WHAT WAS ITS IMPACT ON THE GOVERNMENT MARKET?
A Signs of stronger economic growth and concerns of potentially higher
inflation led to the Fed's 0.25 percent interest rate tightening. The market was
volatile throughout most of the period as it debated the likelihood and timing
of a Fed intervention. At the start of the fiscal year in November, the market
was also concerned about the presidential and congressional elections. Investors
feared the Republican party might lose control of the U.S. Congress and reduce
the likelihood of a balanced budget agreement in 1997. The markets rallied,
however, with news that Republicans had maintained control of Congress.
This bullish environment changed in December and the rally ended abruptly.
Investors became concerned after Federal Reserve Board Chairman Alan Greenspan
implied in passing that financial assets might be overvalued. This shook the
market and caused yields to rise and securities prices to fall. A suggestion of
strong holiday retail sales coupled with higher-than-expected fourth quarter GDP
growth caused further concern near year-end.
After Greenspan's "irrational exuberance" comment, investors
remained cautious in early 1997 as strong economic reports surfaced. A
stronger-than-expected employment report indicated a rise in average hourly
earnings and an increase in hours worked. These indicators suggested solid GDP
growth, which registered higher-than-expected for the fourth quarter. This
relatively strong GDP figure indicated to the market that the Fed would likely
raise interest rates to slow the economy. In February, Greenspan stated again
that financial assets might be overvalued. Specifically, Greenspan referenced
the level of wage inflation, and suggested that recent productivity advances
may not be able to offset the current level of wage increases. The Federal
Reserve Board did move to increase short-term rates by 0.25 percent in March.
This was considered a preemptive move aimed at slowing growth in the economy to
maintain a low rate of inflation. Remember, excessive growth in the economy
indicates the potential for higher inflation. Inflation is negative for bond
investors as it erodes the "real" value of fixed-income investments.
By the end of April, however, signs of more modest growth began to surface
and inflation remained benign. This helped fixed-income investments begin to
gain back some of the ground
5
<PAGE> 6
PERFORMANCE UPDATE
they had lost earlier. As a result, market yields began to fall again.
Q HOW DID YOU PREPARE THE FUND FOR THE POSSIBILITY OF A FED INTEREST RATE
INCREASE?
A We began preparing for a possible rate hike in January by shortening the
fund's duration to below that of the fund's peer group. Duration is a
measurement of a fund's sensitivity to interest rates -- the shorter the
duration, the less sensitive the fund is to interest rate changes. In addition,
we sold Treasury notes and purchased GNMA Mortgages, which boosted the fund's
mortgage allocation to 95 percent. As yields rose, the fund's Class A shares
were able to outperform its peer group average during the first three months of
1997 (Class A share -0.06% and Lipper -0.26%). This was due, in part, to the
funds' shorter, more defensive duration and higher mortgage allocation. The
fund's GNMA peer group, as categorized by Lipper Analytical Services, Inc.
currently consists of 54 funds including Kemper U.S. Government Securities Fund,
which invest primarily in Government National Mortgage Association (GNMA)
securities.
Q WHAT ADJUSTMENTS DID YOU MAKE TO THE PORTFOLIO TO ALTER THE FUND'S
DURATION?
A To alter duration we adjusted the level of mortgages and Treasuries
throughout the period. In anticipation of the rate hike, we reduced our Treasury
holdings in favor of mortgages, which tend to outperform Treasuries in a rising
interest rate environment.
Q LOOKING BACK IS THERE ANYTHING YOU WISH YOU WOULD HAVE DONE DIFFERENTLY?
A We maintained a neutral duration for the fund during the first couple
months of the period. That means that the portfolio's duration was similar in
length to that of our peers. In addition, we were underweighted in mortgages. In
hindsight, we now see that we could have positioned the fund with a longer
duration and a higher mortgage allocation, which would have helped the fund more
as the market rallied in November and through part of December. However,
economic data available at that time gave us conflicting signals about the true
strength of the economy. We erred on the side of caution early in the period but
were rewarded later when rates did rise.
Q WHAT IS YOUR OUTLOOK FOR THE ECONOMY AND THE GOVERNMENT MORTGAGE MARKET?
A Our outlook for the market is somewhat optimistic. We believe that there
has been some slowing in the economy since March. Although the possibility for
another interest rate tightening does still exist, we don't feel that the Fed
will need to be aggressive in order to keep growth slow and inflation benign. If
rates remain somewhat stable or continue to move lower, the bond market and
Kemper U.S. Government Securities Fund have the potential to perform well.
Q WHAT WOULD NEED TO HAPPEN TO ALTER YOUR OUTLOOK?
A If the economy takes off, the Fed would most likely be aggressive with
additional rate increases, which could hurt the bond market until growth truly
slows and rates stabilize. However, based on the current data, we don't expect a
surge in economic growth.
6
<PAGE> 7
PORTFOLIO STATISTICS
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
ON 4/30/97 ON 10/31/96
- -------------------------------------------------------------------------------
<S> <C> <C>
MORTGAGE-BACKED
GNMA 83% 77%
- -------------------------------------------------------------------------------
OTHER 12 12
- -------------------------------------------------------------------------------
SHORT-TERM GOVERNMENTS 3 8
- -------------------------------------------------------------------------------
INTERMEDIATE-TERM GOVERNMENTS -- 3
- -------------------------------------------------------------------------------
CASH AND EQUIVALENTS 2 --
- -------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 4/30/97 ON 10/31/96
* Portfolio composition is subject to change.
YEARS TO MATURITY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
ON 4/30/97 ON 10/31/96
- -------------------------------------------------------------------------------
<S> <C> <C>
LESS THAN 5 YEARS 8% 18%
- -------------------------------------------------------------------------------
5-10 YEARS 64 31
- -------------------------------------------------------------------------------
10-20 YEARS 28 50
- -------------------------------------------------------------------------------
20+ YEARS -- 1
- -------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 4/30/97 ON 10/31/96
AVERAGE MATURITY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
ON 4/30/97 ON 10/31/96
- -------------------------------------------------------------------------------
<S> <C> <C>
AVERAGE MATURITY 8.0 YEARS 8.7 YEARS
- -------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 8
PORTFOLIO OF INVESTMENTS
KEMPER U.S. GOVERNMENT SECURITIES FUND
Portfolio of Investments at April 30, 1997
(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 $ 3,775 $ 3,466
MORTGAGE ASSOCIATION - 82.7% Certificates 6.50 2023-2024 473,350 448,592
(Cost: $3,045,103) 7.00 2022-2026 698,399 679,030
7.50 2007-2027 628,443 625,419
8.00 2016-2027 733,135 745,878
8.50 2016-2027 248,809 257,313
9.00 2005-2027 201,183 212,124
9.50 2009-2027 77,475 83,295
10.00 2009-2022 55,842 61,025
10.50 2013-2021 22,061 24,377
--------------------------------------------------------------------------
3,140,519
- -----------------------------------------------------------------------------------------------------------------
U.S. TREASURY Notes 8.75-8.875 1997 284,000 288,079
SECURITIES - 22.4% 8.125-9.00 1998 290,000 297,667
(Cost: $872,772) 6.75 2000 4,900 4,940
Bonds 12.375 2004 28,000 36,798
12.75 2010 82,920 114,248
14.00 2011 59,650 89,205
12.50 2014 12,885 18,725
--------------------------------------------------------------------------
849,662
- -----------------------------------------------------------------------------------------------------------------
FEDERAL NATIONAL Pass-through 6.50 2026 551 520
MORTGAGE ASSOCIATION - 10.7% Certificates 7.00 2025-2027 261,062 252,875
(Cost: $403,707) 7.50 2027 81,000 80,241
8.00 2024 8,511 8,650
9.00 2024-2025 62,405 65,428
--------------------------------------------------------------------------
407,714
- -----------------------------------------------------------------------------------------------------------------
FEDERAL HOME LOAN Pass-through 9.50 2027 40,948 43,872
MORTGAGE CORPORATION - 1.2% Certificates
(Cost: $44,087)
--------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS--117.0%
(Cost: $4,365,669) 4,441,767
--------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
REPURCHASE Dated April, 1997. Collateralized by Federal Home Loan Mortgage
AGREEMENT - .6% Corporation and Federal National Mortgage Association securities which are
(Cost: $24,000) monitored daily to ensure their market value exceeds the carrying value of
the repurchase agreement.
CS First Boston Inc. 24,000 24,000
(held at The Chase Manhattan Bank, subcustodian)
5.58%, 5/1/97
--------------------------------------------------------------------------
TOTAL INVESTMENTS--117.6%
(Cost: $4,389,669) 4,465,767
--------------------------------------------------------------------------
LIABILITIES, LESS OTHER ASSETS--(17.6%) (670,309)
--------------------------------------------------------------------------
NET ASSETS--100% $3,795,458
--------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTE TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Based on the cost of investments of $4,389,669,000 for federal income tax
purposes at April 30, 1997, the gross unrealized appreciation was $104,841,000,
the gross unrealized depreciation was $28,743,000 and the net unrealized
appreciation on investments was $76,098,000.
See accompanying Notes to Financial Statements.
8
<PAGE> 9
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- --------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------
Investments, at value
(Cost: $4,389,669) $4,465,767
- --------------------------------------------------------------------------
Receivable for:
Fund shares sold 631
- --------------------------------------------------------------------------
Investments sold 20,159
- --------------------------------------------------------------------------
Interest 46,232
- --------------------------------------------------------------------------
TOTAL ASSETS 4,532,789
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- --------------------------------------------------------------------------
Cash overdraft 98,841
- --------------------------------------------------------------------------
Payable for:
Fund shares redeemed 2,844
- --------------------------------------------------------------------------
Investments purchased 633,292
- --------------------------------------------------------------------------
Management fee 1,301
- --------------------------------------------------------------------------
Administrative services fee 571
- --------------------------------------------------------------------------
Distribution services fee 47
- --------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 247
- --------------------------------------------------------------------------
Trustees' fees and other 188
- --------------------------------------------------------------------------
Total liabilities 737,331
- --------------------------------------------------------------------------
NET ASSETS $3,795,458
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- --------------------------------------------------------------------------
Paid-in capital $4,278,917
- --------------------------------------------------------------------------
Accumulated net realized loss on investments (691,233)
- --------------------------------------------------------------------------
Net unrealized appreciation on investments 76,098
- --------------------------------------------------------------------------
Undistributed net investment income 131,676
- --------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $3,795,458
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
THE PRICING OF SHARES
- --------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($3,712,454 / 431,346 shares outstanding) $8.61
- --------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 4.71% of net asset value or 4.50%
of offering price) $9.02
- --------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge) per share
($69,468 / 8,080 shares outstanding) $8.60
- --------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge) per share
($7,762 / 901 shares outstanding) $8.61
- --------------------------------------------------------------------------
CLASS I SHARES
Net asset value and redemption price per share
($5,774 / 671 shares outstanding) $8.60
- --------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
NET INVESTMENT INCOME
- ------------------------------------------------------------------------
Interest income $162,515
- ------------------------------------------------------------------------
Expenses:
Management fee 8,213
- ------------------------------------------------------------------------
Administrative services fee 3,585
- ------------------------------------------------------------------------
Distribution services fee 289
- ------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 2,831
- ------------------------------------------------------------------------
Professional fees 53
- ------------------------------------------------------------------------
Reports to shareholders 306
- ------------------------------------------------------------------------
Trustees' fees and other 45
- ------------------------------------------------------------------------
Total expenses 15,322
- ------------------------------------------------------------------------
NET INVESTMENT INCOME 147,193
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------------------------
Net realized loss on sales of investments (including
options purchased) (13,146)
- ------------------------------------------------------------------------
Net realized gain from futures transactions 1,984
- ------------------------------------------------------------------------
Net realized loss (11,162)
- ------------------------------------------------------------------------
Change in net unrealized appreciation on investments (50,501)
- ------------------------------------------------------------------------
Net loss on investments (61,663)
- ------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 85,530
- ------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, OCTOBER 31,
1997 1996
- -------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income $ 147,193 315,979
- -------------------------------------------------------------------------------------------------
Net realized loss (11,162) (51,944)
- -------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (50,501) (39,840)
- -------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 85,530 224,195
- -------------------------------------------------------------------------------------------------
Net equalization charges (10,945) (17,437)
- -------------------------------------------------------------------------------------------------
Distribution from net investment income (145,554) (319,368)
- -------------------------------------------------------------------------------------------------
Net decrease from capital share transactions (296,730) (462,648)
- -------------------------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS (367,699) (575,258)
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------
Beginning of period 4,163,157 4,738,415
- -------------------------------------------------------------------------------------------------
END OF PERIOD
(including undistributed net investment income of
$131,676 and $140,982, respectively) $3,795,458 4,163,157
- -------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
10
<PAGE> 11
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 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.
Differences in class expenses will result in the
payment of different per share income dividends by
class. All shares of the Fund have equal rights
with respect to voting, dividends and assets,
subject to class specific preferences.
- --------------------------------------------------------------------------------
2 SIGNIFICANT
ACCOUNTING POLICIES INVESTMENT VALUATION. Investments are stated at
value. 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 financial futures
and options are valued at the settlement price
established each day by the board of trade or
exchange on which they are traded. Over-the-counter
traded options are valued based upon prices
provided by market makers. 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
payments 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, 1997 the Fund had $625,875,000 in
purchase commitments outstanding (16% of net
assets) with a corresponding amount of assets
segregated.
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
11
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
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, 1997. The accumulated net
realized loss on sales of investments for federal
income tax purposes at April 30, 1997, amounting to
approximately $691,153,000, is available to offset
future taxable gains. If not applied, the loss
carryover expires during the period 1998 through
2005.
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), 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 $8,213,000 for the six
months ended April 30, 1997.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
The Fund has an underwriting and distribution
services agreement with Zurich Kemper Distributors,
Inc. (ZKDI) (formerly known as Kemper Distributors,
Inc.). Underwriting commissions paid in connection
with the distribution of Class A shares are as
follows:
<TABLE>
<CAPTION>
COMMISSIONS
COMMISSIONS ALLOWED BY ZKDI
RETAINED BY -----------------------------
ZKDI TO ALL FIRMS TO AFFILIATES
--------------- ------------- -------------
<S> <C> <C> <C>
Six months ended April 30, 1997 $112,000 808,000 7,000
</TABLE>
12
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
For services under the distribution services
agreement, the Fund pays ZKDI a fee of .75% of
average daily net assets of Class B and Class C
shares. Pursuant to the agreement, ZKDI enters into
related selling group agreements with various firms
at various rates for sales of Class B and Class C
shares. In addition, ZKDI 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>
DISTRIBUTION FEES COMMISSIONS AND
AND CDSC DISTRIBUTION FEES
RECEIVED BY PAID BY ZKDI
ZKDI TO FIRMS
----------------- -----------------
<S> <C> <C>
Six months ended April 30, 1997 $426,000 384,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with ZKDI. For
providing information and administrative services
to Class A, Class B and Class C shareholders, the
Fund pays ZKDI a fee at an annual rate of up to
.25% of average daily net assets of each class.
ZKDI 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 ZKDI
ASF PAID BY ------------------------------
THE FUND TO ZKDI TO ALL FIRMS TO AFFILIATES
----------------- ------------- --------------
<S> <C> <C> <C>
Six months ended April 30, 1997 $3,585,000 3,608,000 18,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
Zurich Kemper Service Company (ZKSvC) (formerly
known as Kemper Service Company) is the shareholder
service agent of the Fund. Under the agreement,
ZKSvC received shareholder services fees of
$1,839,000 for the six months ended April 30, 1997.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of ZKI.
For the six months ended April 30, 1997, the Fund
made no direct payments to its officers and
incurred trustees' fees of $23,000 to independent
trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the six months ended April 30, 1997, investment
transactions (excluding short-term investments) are
as follows (in thousands):
Purchases $5,013,451
Proceeds from sales 5,093,286
13
<PAGE> 14
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, 1997 OCTOBER 31, 1996
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 6,983 $ 55,750 17,046 $ 139,065
--------------------------------------------------------------------------------
Class B 1,428 12,290 4,933 43,005
--------------------------------------------------------------------------------
Class C 132 1,130 584 5,086
--------------------------------------------------------------------------------
Class I 116 1,005 520 4,565
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 9,763 84,493 21,176 184,996
--------------------------------------------------------------------------------
Class B 176 1,522 316 2,751
--------------------------------------------------------------------------------
Class C 23 198 41 356
--------------------------------------------------------------------------------
Class I 17 151 57 497
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SHARES REDEEMED
Class A (52,359) (437,982) (95,205) (806,232)
--------------------------------------------------------------------------------
Class B (1,540) (13,330) (3,093) (26,978)
--------------------------------------------------------------------------------
Class C (158) (1,357) (262) (2,252)
--------------------------------------------------------------------------------
Class I (69) (600) (853) (7,507)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 51 439 81 710
--------------------------------------------------------------------------------
Class B (51) (439) (81) (710)
--------------------------------------------------------------------------------
NET DECREASE
FROM CAPITAL
SHARE TRANSACTIONS $(296,730) $(462,648)
--------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 15
0000NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6 FINANCIAL FUTURES
CONTRACTS The Fund has entered into exchange traded financial
futures contracts in order to help protect itself
from anticipated market conditions and, as such,
bears the risk that arises from entering into 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 its broker as the market value
of the futures contract fluctuates. At April 30,
1997, the market value of assets pledged by the
Fund to cover margin requirements for open futures
positions was $26,447,000. The Fund also had liquid
securities in its portfolio in excess of the face
amount of the following short futures positions,
open at April 30, 1997 (in thousands):
<TABLE>
<CAPTION>
FACE EXPIRATION GAIN AT
TYPE AMOUNT MONTH 4/30/97
---------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Note $246,066 June '97 $278
---------------------------------------------------------------------------
U.S. Treasury Bond 89,237 June '97 64
---------------------------------------------------------------------------
Eurodollar 120,317 June '97 142
---------------------------------------------------------------------------
Eurodollar 189,137 September '97 22
---------------------------------------------------------------------------
Eurodollar 55,339 December '97 97
---------------------------------------------------------------------------
Eurodollar 28,580 March '98 59
---------------------------------------------------------------------------
Eurodollar 12,637 June '98 29
---------------------------------------------------------------------------
Eurodollar 7,951 September '98 20
---------------------------------------------------------------------------
Total $711
---------------------------------------------------------------------------
</TABLE>
15
<PAGE> 16
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------------------
CLASS A
--------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, -------------------------------
1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------
Net asset value, beginning of period $8.74 8.92 8.35 9.29 9.30
- ---------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .33 .63 .66 .67 .69
- ---------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.14) (.17) .56 (.97) (.01)
- ---------------------------------------------------------------------------------------
Total from investment operations .19 .46 1.22 (.30) .68
- ---------------------------------------------------------------------------------------
Less distribution from net investment
income .32 .64 .65 .64 .69
- ---------------------------------------------------------------------------------------
Net asset value, end of period $8.61 8.74 8.92 8.35 9.29
- ---------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 2.19% 5.36 15.24 (3.37) 7.60
- ---------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ---------------------------------------------------------------------------------------
Expenses .75% .77 .72 .75 .65
- ---------------------------------------------------------------------------------------
Net investment income 7.42% 7.17 7.68 7.58 7.36
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------
CLASS B
----------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31, MAY 31 TO
APRIL 30, ------------------------- OCTOBER 31,
1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------
Net asset value, beginning of period $8.73 8.91 8.34 8.67
- -----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .29 .54 .58 .28
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.14) (.17) .56 (.38)
- -----------------------------------------------------------------------------------------------
Total from investment operations .15 .37 1.14 (.10)
- -----------------------------------------------------------------------------------------------
Less distribution from net investment
income .28 .55 .57 .23
- -----------------------------------------------------------------------------------------------
Net asset value, end of period $8.60 8.73 8.91 8.34
- -----------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 1.71% 4.36 14.18 (1.15)
- -----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------------
Expenses 1.72% 1.73 1.69 1.71
- -----------------------------------------------------------------------------------------------
Net investment income 6.45% 6.21 6.71 7.09
- -----------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
------------------------------------------ ----------------------------------------
CLASS C CLASS I
------------------------------------------ ----------------------------------------
SIX MONTHS YEAR ENDED SIX MONTHS
ENDED OCTOBER 31, MAY 31 TO ENDED YEAR ENDED JULY 3 TO
APRIL 30, ------------- OCTOBER 31, APRIL 30, OCTOBER 31, OCTOBER 31,
1997 1996 1995 1994 1997 1996 1995
- ----------------------------------------------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------- ----------------------------------------
Net asset value, beginning of
period $8.75 8.93 8.35 8.67 8.74 8.92 8.88
- ----------------------------------------------------------------------------- ----------------------------------------
Income from investment
operations:
Net investment income .28 .55 .60 .29 .32 .64 .22
- ----------------------------------------------------------------------------- ----------------------------------------
Net realized and unrealized
gain (loss) (.14) (.17) .56 (.38) (.14) (.17) .04
- ----------------------------------------------------------------------------- ----------------------------------------
Total from investment
operations .14 .38 1.16 (.09) .18 .47 .26
- ----------------------------------------------------------------------------- ----------------------------------------
Less distribution from net
investment income .28 .56 .58 .23 .32 .65 .22
- ----------------------------------------------------------------------------- ----------------------------------------
Net asset value, end of period $8.61 8.75 8.93 8.35 8.60 8.74 8.92
- -------------------------------------------------------------------------- --------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 1.61% 4.40 14.33 (1.01) 2.15 5.56 3.02
- ----------------------------------------------------------------------------- ----------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ----------------------------------------------------------------------------- ----------------------------------------
Expenses 1.74% 1.70 1.64 1.68 .69 .59 .53
- ----------------------------------------------------------------------------- ----------------------------------------
Net investment income 6.43% 6.24 6.76 7.12 7.48 7.35 7.07
- ----------------------------------------------------------------------------- ----------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- --------------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ----------------------------------------------------------
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets at end of period (in thousands) $3,795,458 4,163,157 4,738,415 4,941,451 6,686,735
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 233% 391 362 1,000 550
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Total return does not reflect the effect of any sales charges.
17
<PAGE> 18
NOTES
18
<PAGE> 19
NOTES
19
<PAGE> 20
TRUSTEES & OFFICERS
TRUSTEES OFFICERS
STEPHEN B. TIMBERS J. PATRICK BEIMFORD, JR.
President and Trustee Vice President
DAVID W. BELIN CHARLES R. MANZONI, JR.
Trustee Vice President
LEWIS A. BURNHAM JOHN E. NEAL
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 ZURICH KEMPER SERVICE COMPANY
P.O. Box 419557
Kansas City, MO 64141
- --------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
127 West 10th Street
Kansas City, MO 64105
- --------------------------------------------------------------------------------
INVESTMENT MANAGER ZURICH KEMPER INVESTMENTS, INC.
PRINCIPAL UNDERWRITER ZURICH KEMPER DISTRIBUTORS, INC.
222 Riverside Plaza Chicago, IL 60606
www.kemper.com
[RECYCLED LOGO]
Printed on recycled paper.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Fixed Income Funds prospectus.
KGSF - 3 (6/97) 1033410
Printed in the U.S.A. [KEMPER FUNDS LOGO]
