<PAGE> 1
KEMPER TOTAL RETURN FUND
SEMIANNUAL REPORT TO SHAREHOLDERS
FOR THE PERIOD ENDED APRIL 30, 1996
SEEKING THE HIGHEST TOTAL RETURN, A COMBINATION OF INCOME AND
CAPITAL APPRECIATION, CONSISTENT WITH REASONABLE RISK.
"...The sharp recovery...of many technology stocks...enabled us to
fulfill our objective of modestly reducing the fund's overweighted
exposure to technology..."
<PAGE> 2
TABLE OF
CONTENTS
2
Terms to Know
3
General
Economic Overview
5
Performance Update
8
Industry Sectors
9
Largest Holdings
10
Portfolio of Investments
16
Financial Statements
18
Notes to
Financial Statements
23
Financial Highlights
At A Glance
- --------------------------------------------------------------------------------
KEMPER TOTAL RETURN FUND
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 1996 (UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
AS OF
4/30/96
- ------------------------------------------------------------------------------
<S> <C>
KEMPER TOTAL RETURN FUND
CLASS A 6.18%
- ------------------------------------------------------------------------------
KEMPER TOTAL RETURN FUND
CLASS B 5.68%
- ------------------------------------------------------------------------------
KEMPER TOTAL RETURN FUND
CLASS C 5.66%
- ------------------------------------------------------------------------------
KEMPER TOTAL RETURN FUND
LIPPER BALANCED
FUNDS CATEGORY
AVERAGE* 8.31%
- ------------------------------------------------------------------------------
</TABLE>
Returns and rankings are historical and do not represent future results. 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.
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AS OF AS OF
4/30/96 10/31/95
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER TOTAL RETURN FUND
CLASS A $10.52 $10.60
- --------------------------------------------------------------------------------
KEMPER TOTAL RETURN FUND
CLASS B $10.51 $10.59
- --------------------------------------------------------------------------------
KEMPER TOTAL RETURN FUND
CLASS C $10.52 $10.61
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
KEMPER TOTAL RETURN FUND
LIPPER RANKINGS*
- --------------------------------------------------------------------------------
COMPARED TO ALL OTHER FUNDS IN THE LIPPER BALANCED FUNDS CATEGORY
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1-YEAR #121 OF #152 OF #150 OF
240 FUNDS 240 FUNDS 240 FUNDS
- --------------------------------------------------------------------------------
5-YEAR #45 OF 64
FUNDS N/A N/A
- --------------------------------------------------------------------------------
10-YEAR #19 OF 30
FUNDS N/A N/A
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
DURING THE PERIOD, KEMPER TOTAL RETURN FUND PAID THE FOLLOWING DIVIDENDS:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME DIVIDEND $0.20 $0.15 $0.1586
- --------------------------------------------------------------------------------
SHORT-TERM CAPITAL
GAIN $0.11 $0.11 $0.11
- --------------------------------------------------------------------------------
LONG-TERM CAPITAL
GAIN $0.39 $0.39 $0.39
- --------------------------------------------------------------------------------
</TABLE>
Terms to Know
DURATION Duration is a measure of the interest rate sensitivity of a fixed-
income investment or portfolio. The longer the duration, the greater the
interest rate sensitivity.
MARKET CAPITALIZATION Capitalization is a measure of the size of a publicly
traded company, as determined by multiplying the current price by the number of
shares outstanding. The market value of a company has bearing on its perceived
earnings potential and risk. Small cap companies (less than $750 million) may
present the potential for greater growth than larger, more established
companies. On the other hand, the stock of small cap companies may be expected
to be more volatile and therefore a greater risk to capital.
MARKET CORRECTION A reverse movement, usually downward, in the price of a group
of stocks or the overall market. Corrections are to be expected over a long
term.
TOTAL RETURN A fund's total return measures both the net investment income
generated by, and the effect of, any realized and unrealized appreciation or
depreciation of the underlying investments in its portfolio for the period.
Total return assumes the reinvestment of all dividends and it represents the
aggregate percentage or dollar value change over 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
[G. LANGBAUM PHOTO]
GARY A. LANGBAUM HAS BEEN WITH ZURICH KEMPER INVESTMENTS, INC. (ZKI) SINCE 1988.
HE IS SENIOR VICE PRESIDENT OF ZKI AND VICE PRESIDENT AND THE PORTFOLIO MANAGER
OF KEMPER TOTAL RETURN FUND. LANGBAUM IS A CHARTERED FINANCIAL ANALYST WITH 25
YEARS OF EXPERIENCE IN EQUITY RESEARCH AND SECURITIES ANALYSIS. HE RECEIVED HIS
BACHELOR'S DEGREE AND COMPLETED HIS MASTER'S OF BUSINESS ADMINISTRATION
COURSEWORK FROM THE UNIVERSITY OF MARYLAND.
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.
A REALLOCATION OF ASSETS FOR BROADER DIVERSIFICATION WAS PORTFOLIO MANAGER
GARY LANGBAUM'S RESPONSE TO MULTIPLE MARKET ROTATIONS, INCLUDING INVESTOR
DISENCHANTMENT WITH THE TECHNOLOGY SECTOR.
Q HOW DID KEMPER TOTAL RETURN FUND FARE IN THE LAST SIX MONTHS?
A It's been a bit of a struggle. The fixed-income portion of the portfolio
suffered from the bond market's reaction to perceived strength in the economy
and higher interest rates. On the equity portion of the portfolio, our
commitment to interest rate-sensitive and technology stocks was tested. It was
a period that presented more than its share of frustrations, challenges and
opportunities.
Q FIRST, LET'S REVIEW THE EQUITY PORTION OF THE PORTFOLIO (WHICH
REPRESENTS 60 TO 65 PERCENT OF ASSETS). YOU'VE PREVIOUSLY DESCRIBED THE 1995
STOCK MARKET AS A RISING TIDE THAT LIFTED MOST SHIPS -- OR STOCKS. HOW DID
THAT ENVIRONMENT CHANGE AS THE YEAR DREW TO A CLOSE?
A Most dramatically, the technology sector that provided most of the
excitement in 1995 began to fall from favor in November. A broad selloff
of technology stocks continued through January and some stocks
[BAR GRAPH]
FIXED-INCOME ASSET CLASSES TRAILED EQUITIES
DATA SHOW THE SIX-MONTH (NOVEMBER 1, 1995 TO APRIL 30, 1996)
COMPARATIVE TOTAL RETURNS FOR THE SIX ASSET CLASSES THAT KEMPER
TOTAL RETURN FUND INVESTS IN.*
U.S. stocks(1) 12.99%
International
stocks(2) 13.38%
U.S. gov't
bonds(3) 0.42%
Corporate
bonds(4) 0.53%
High-yield
bonds(5) 4.12%
International
bonds(6) -0.18%
(1) Russell 1000 Growth Index, an unmanaged index comprised of common stocks
of larger U.S. companies with greater than average growth orientation
and represents the universe of stocks from which "earnings/growth" money
managers typically select.
(2) Morgan Stanley Capital International EAFE Index, an unmanaged index that
is generally considered a measure of international equities in 15 major world
markets excluding the U.S. and Canada.
(3) Salomon Brothers Broad Investment-Grade Bond Index, including Treasury
issues with a maturity of one year or longer (unmanaged)
(4) Lehman Brothers Aggregate Bond Index, an unmanaged index generally
representative of intermediate-term government bonds, investment grade corporate
debt securities and mortgage backed securities.
(5) Salomon Brothers High Yield Index, generally representative of the below
investment grade corporate bonds.
(6) Salomon Brothers World Government, Non-U.S. Governments Index, including
the performance of leading government bond markets excluding the U.S.
(unmanaged).
* Data does not reflect performance of the fund's allocation to the asset
classes.
5
<PAGE> 6
PERFORMANCE UPDATE
had not fully recuperated by the end of April.
This had a significant impact on Kemper Total Return Fund. The fund has had a
much higher exposure to technology stocks than its peers in the balanced fund
category tracked by Lipper Analytical Services, Inc. In addition, its technology
weighting has been much higher than the technology weighting in the Russell 1000
Growth Index,* which serves as a performance benchmark.
The difference in the weighting contributed to the fund's strong performance
early last year and its underperformance late in the year. However, we continue
to believe in technology as a sector. In late 1995, however, it became clear
that Wall Street had unrealistic expectations -- and that it would punish
technology stocks for not being able to meet those expectations. We realize that
not even the most promising, fastest growing companies can continue to grow
their earnings at the same breakneck rate. Yet this is what Wall Street
continued to hope.
There was irony in the timing of this selloff: People were selling technology
because they had lost confidence in the companies' earning ability. But, at that
same time, interest rates were increasing in part in reaction to what many
believed was a strengthening of the economy. Yet obviously, an improving economy
should help technology stocks' earnings prospects.
Instead of supporting technology, though, investors rotated toward consumer
cyclical and capital goods stocks that stand to more directly benefit from
rising prices and volumes in an economic expansion.
The fund's Class A share total return of 6.18% for the period is a blended
rate that reflects both the equity and fixed income portions of the
portfolio. Taken alone, our equities returned approximately 10.96%, which can
be compared to the 12.99% return of the Russell 1000 Growth Index over the last
six months. This underperformance reflects weakness in the technology sector
and mixed performance in capital goods companies. Such weakness was offset by
strength in consumer cyclicals, energy and chemicals.
*THE RUSSELL 1000 GROWTH INDEX IS AN UNMANAGED INDEX COMPRISED OF COMMON STOCKS
OF LARGER U.S. COMPANIES WITH GREATER THAN AVERAGE GROWTH ORIENTATION. IT
REPRESENTS THE UNIVERSE OF STOCKS FROM WHICH "EARNINGS/GROWTH" MONEY MANAGERS
TYPICALLY SELECT.
Q NOW THAT WE HAVE A FAIR IDEA OF THE FRUSTRATIONS OF THE PERIOD, WHAT
ABOUT ITS CHALLENGES AND OPPORTUNITIES?
A Yes, there were plenty. In the last six months, we saw the market have a
sometimes violent reaction to economic news. Overreactions can drive the
price of a stock down temporarily, which creates opportunities on a stock by
stock basis.
As I review the last six months, I may be most pleased about our ability to
buy fundamentally attractive stocks at good prices.
Q WHAT ARE A FEW EXAMPLES?
A There are more than a few examples from when technology stocks got clob-
bered, but here's one. We bought BMC Software in November and December when it
was selling at depressed prices of approximately $40 per share although there
was absolutely nothing wrong with it. By April 30, 1996, it had climbed to $61
per share.
Alco Standard is an example of a growth company that offered significant
potential appreciation by restructuring its operations. We added to our position
in February at $45 per share, and it was selling for $58 per share by the end of
April.
Q WHAT WERE THE OTHER OPPORTUNITIES OF THE PERIOD?
A In addition to the buying opportunities, another significant opportunity
was the sharp recovery, which began in February, of many technology stocks. The
recovery enabled us to fulfill our objective of modestly reducing the
fund's overweighted exposure to technology by selling on strength. (TO SELL ON
STRENGTH MEANS THAT THE INVESTOR IS ABLE TO SELL WHEN THE PRICE IS RISING. THE
IDEAL STRATEGY IS TO SELL ON STRENGTH AND BUY ON WEAKNESS.) We eliminated some
holdings that had been solid performers for us, trimmed back other positions
and improved the overall quality of our holdings at reasonable prices.
Our objective was to reduce the risk level of the fund versus its peer
group, which we accomplished by reducing our overall technology weighting (20%
of the equity portion of the fund was exposed to the technology sector at the
end of April versus 28% at its high at the end of 1995) and by reorienting our
holdings. We've moved away from the semiconductor and related issues in favor
of software and networking companies in which we have greater confidence about
both their short-term
6
<PAGE> 7
PERFORMANCE UPDATE
earnings and long-term growth potential.
As we were reducing our technology weighting, we found several excellent
opportunities to diversify the portfolio. That's when we moved heavily into
consumer nondurable and interest-rate sensitive stocks and added to selected
capital goods companies. We believed that those who expected a robust economy
were mistaken and that the rise in interest rates would inhibit growth.
Yet another challenge of the period was the rotation toward smaller
capitalization stocks. This is a challenge for the fund because we do not invest
in small capitalization companies (companies whose capitalization is $750
million or less). But we have added some high-quality mid-capitalization stocks
where we found good values (Manpower, Leggett and Platt, MGIC). These were
companies that we have followed previously and merely moved back into, now that
the environment seems to favor smaller companies.
Q WE HEARD MORE ABOUT INTERNATIONAL INVESTING IN THE LAST SIX MONTHS, AS
WELL.
A That's true and we added to our international exposure in the last six
months. But we expect the U.S. stock market to continue to offer superior
opportunities than the international markets.
Q WHAT CAN YOU TELL US ABOUT THE PERFORMANCE OF THE FIXED-INCOME PORTION
OF THE PORTFOLIO?
A Remember that this was a period when economic news was often stronger than
anticipated, interest rates were generally rising and inflation appeared to be
picking up.
In the most recent six-month period, the yield on the 30-year U.S.
Treasury bond hit its low of 5.9% in January -- and then shot up to over
7% by the end of April. For the most part, the bond market had a very negative
reaction to such a dramatic move.
Q HOW WAS THE PORTFOLIO ADJUSTED IN RESPONSE?
A Our investment strategy provides significant flexibility, and we were
able to make many adjustments. We cut back our commitment to U.S. Treasuries to
14% by April 30. A more typical weighting would be 20%. And we shortened the
duration of the Treasuries that we continued to hold in the portfolio.
Shortening duration (PLEASE SEE TERMS TO KNOW) is one way of reducing interest
rate risk.
At the same time, we boosted our exposure to high-grade corporate bonds
and high yield bonds. The high yield market was one of the few segments of the
fixed-income market that produced positive results.
Q WHAT'S YOUR OUTLOOK FOR THE NEXT SEVERAL MONTHS?
A In the fund's report to shareholders six months ago, I predicted that the
Dow Jones Industrial Average would hit 6000 this year. When you consider that it
hit 5700 by the end of April in a less favorable interest rate environment than
we envisioned, I still believe 6000 is likely. I wouldn't be surprised if it
reached 6250 by year-end. That assumes that interest rates will stabilize right
around where they are at the close of this report.
At the same time, the recent runup in interest rates should have the effect of
slowing growth. With an economic slowdown, financial and interest rate-sensitive
stocks should do well. At the close of the period, the fund had twice the
weighting in financial stocks as the Russell 1000 Growth Index and was in line
with our peers in the balanced fund category. Consumer nondurables stocks, which
we have considerable exposure to, should outperform, as well.
If the most recent six months have had a lesson, it's the effect of sector
concentration. At any given time, the fund is going to be overweighted in
certain sectors, compared to other balanced funds or the Russell 1000 Growth
Index, but we must be aware of the appreciation potential of the stocks in
overweighted groups and be diligent about selling them as they approach full
valuations.
Q SLOWER GROWTH AND STABLE RATES COULD HELP CALM FIXED-INCOME INVESTORS --
ARE YOU LOOKING FOR IMPROVED PERFORMANCE FROM THE BOND MARKET?
A Yes, we believe that the bond market has already had most of its
correction. Today, the potential is greater for the equity market to
disappoint -- and if that happens, Kemper Total Return Fund's exposure to the
fixed-income market could serve as a buffer.
7
<PAGE> 8
INDUSTRY SECTORS
A SIX-MONTH COMPARISON OF THE EQUITY PORTION OF KEMPER TOTAL RETURN FUND
THE EQUITY PORTION OF KEMPER TOTAL RETURN FUND CAN BE REVIEWED ACCORDING TO THE
CONCENTRATION OF INDUSTRY SECTORS THAT THE FUND INVESTS IN. THE GRAPH BELOW
PROVIDES A LOOK AT HOW THE COMPOSITION OF THE EQUITY PORTION OF THE PORTFOLIO
HAS CHANGED IN THE LAST SIX MONTHS, BY PRESENTING THE FUND'S SECTORS REPRESENTED
ON APRIL 30, 1996, AND ON OCTOBER 31, 1995.
[SIX-MONTH COMPARISON BAR GRAPH]
<TABLE>
<CAPTION>
Kemper Total Return Kemper Total Return
Fund on 4/30/96 Fund on 10/31/95
------------------- -------------------
<S> <C> <C>
Consumer non-durables 25.3% 22.0%
Technology 20.2% 28.0%
Health care 13.4% 13.9%
Capital goods 13.3% 11.3%
Finance 11.9% 10.1%
Basic Industries 7.5% 6.8%
Utilities 2.7% 2.4%
Consumer durables 2.6% 2.0%
Energy 2.5% 2.1%
Transportation 0.6% 1.4%
</TABLE>
A COMPARISON WITH THE RUSSELL 1000 GROWTH INDEX, THE BENCHMARK FOR THE EQUITY
PORTION OF THE FUND
The equity portion of Kemper Total Return Fund can be compared to the Russell
1000 Growth Index as a benchmark. The Russell 1000 Growth Index is an unmanaged
index comprised of common stocks of larger U.S. companies with greater than
average growth orientation. It represents the universe of stocks from which
"earnings/growth" money managers typically select. The graph below shows the
percentage of the common stocks in the portfolio that each sector of Kemper
Total Return Fund represented on April 30, 1996, compared to the industry
sectors of the Russell 1000 Growth Index.
[Russell Comparison Bar Graph]
<TABLE>
<CAPTION>
Kemper Total Russell 1000
Return Fund Growth Index
on 4/30/96 on 4/30/96
------------ ------------
<S> <C> <C>
Consumer non-durables 25.3% 33.4%
Technology 20.2% 19.9%
Health care 13.4% 16.7%
Capital goods 13.3% 10.5%
Finance 11.9% 6.1%
Basic Industries 7.5% 4.6%
Utilities 2.7% 5.0%
Consumer durables 2.6% 0.9%
Energy 2.5% 2.3%
Transportation 0.6% 0.6%
</TABLE>
8
<PAGE> 9
LARGEST HOLDINGS
THE FUND'S LARGEST EQUITY HOLDINGS
REPRESENTING 8.1% OF THE FUND'S TOTAL NET ASSETS ON APRIL 30, 1996
<TABLE>
<CAPTION>
HOLDINGS PERCENT
- -----------------------------------------------------------------------------------
<S> <C> <C>
1. PHILIP The world's largest consumer marketing company with 2.1%
MORRIS diversified product offerings, including tobacco, Kraft
COMPANIES Cheese, Jello, Miller Brewing and Maxwell House Coffee.
- -----------------------------------------------------------------------------------
2. GENERAL Operates in major businesses including power generators, 1.9%
ELECTRIC appliances, lighting, plastics, medical systems,
CO. aircraft engines, financial services and broadcasting.
- -----------------------------------------------------------------------------------
3. JOHNSON & The world's largest and most comprehensive manufacturer 1.5%
JOHNSON of health care products serving the consumer,
pharmaceutical and professional markets. Johnson &
Johnson has a decentralized operating structure with 160
operating companies in 50 countries around the world,
selling products in more than 175 countries.
- -----------------------------------------------------------------------------------
4. CISCO Largest, most comprehensive supplier of routing software 1.4%
SYSTEMS and related systems that direct the flow of data between
local area networks. A play on the explosive growth of
the Internet.
- -----------------------------------------------------------------------------------
5. MONSANTO Manufactures and sells a wide variety of agricultural 1.2%
CO. and chemical products, manmade fiber, plastics and resin
products, prescription drugs and artificial sweeteners.
- -----------------------------------------------------------------------------------
</TABLE>
THE FUND'S LARGEST CORPORATE BOND HOLDINGS
REPRESENTING 2.3% OF THE FUND'S TOTAL NET ASSETS ON APRIL 30, 1996
<TABLE>
<CAPTION>
HOLDINGS PERCENT
- -----------------------------------------------------------------------------------
<S> <C> <C>
1. COMCAST Engaged in operating, developing and managing cable 0.5%
CORPORATION communication systems. The company is also prominent in
the cellular telephone industry in the mid-Atlantic
region.
- -----------------------------------------------------------------------------------
2. OWENS-ILLINOIS Leading diversified manufacturer of packaging products 0.5%
including glass bottles, plastic containers and
multipack plastic carriers. It is the largest
manufacturer of glass bottles and containers in the U.S.
- -----------------------------------------------------------------------------------
3. DELTA The third largest carrier in the U.S., with strong hubs 0.5%
AIRLINES in Atlanta, Cincinnati and Salt Lake City. Acquired
transatlantic routes from PanAm in 1990 and has a strong
alliance with Virgin Atlantic Airways of London.
- -----------------------------------------------------------------------------------
4. BOISE One of the largest integrated paper products companies 0.4%
CASCADE in the U.S., with an annual capacity of about 3.2
million tons of paper and paperboard products.
- -----------------------------------------------------------------------------------
5. USX Engaged in the production and sale of a wide range of 0.4%
CORPORATION steel mill products, coke and taconite pellets.
- -----------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
KEMPER TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS APRIL 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
GOVERNMENT OBLIGATIONS PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. TREASURY NOTES
8.75%, 2000 $ 7,300 $ 7,946
7.75%, 2000 14,000 14,652
7.75%, 2001 77,500 81,726
6.25%, 2003 12,500 12,287
7.25%, 2004 180,000 186,488
6.50%, 2005 20,800 20,520
--------------------------------------------------------------------------
323,619
- -----------------------------------------------------------------------------------------------------------
U.S. TREASURY BONDS
7.25%, 2016 89,600 91,378
8.75%, 2017 9,000 10,631
--------------------------------------------------------------------------
102,009
- -----------------------------------------------------------------------------------------------------------
GOVERNMENT OF CANADA
8.625%, 2005 9,500 10,270
--------------------------------------------------------------------------
TOTAL GOVERNMENT OBLIGATIONS--14.7%
(Cost: $436,751) 435,898
--------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BASIC INDUSTRIES--4.8%
Air Products & Chemicals 408,700 23,347
Alco Standard Corporation 425,000 24,597
Crown Cork & Seal Co. 147,500 6,951
(b)FMC Corp. 321,500 22,304
Praxair, Inc. 480,400 18,555
Monsanto Co. 243,700 36,921
Nucor Corp. 165,000 9,281
--------------------------------------------------------------------------
141,956
- -----------------------------------------------------------------------------------------------------------
CAPITAL GOODS--8.5%
Allied Signal 293,000 17,031
Boeing Co. 420,000 34,493
Emerson Electric Co. 312,600 26,141
Fluor Corp. 550,000 36,369
General Electric Co. 710,000 55,025
B. F. Goodrich Co. 500,000 19,875
Matsushita Electric Industrial Co., Ltd. 44,000 777
Mitsubishi Heavy Industries 82,000 731
Murata Manufacturing 21,000 814
Sumitomo Metal Industries 227,000 728
Toray Industries 105,000 714
Xerox Corporation 240,000 35,160
York International Corp. 531,500 25,512
--------------------------------------------------------------------------
253,370
- -----------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--9.0%
(b)AutoZone 276,800 10,103
Burton Group PLC 316,483 743
Carnival Corp. 900,000 26,100
(b)Circus Circus Enterprises 462,400 16,993
Dillard Department Stores 219,100 8,791
Walt Disney Company 500,000 31,000
(b)Federated Department Stores 925,000 30,872
Harcourt General 200,000 8,800
Hilton Hotels 152,000 16,036
(b)Liberty Media Group, "A" 650,000 17,794
Marriott International 145,800 7,108
May Department Stores Co. 370,000 18,870
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(b)Mirage Resorts, Inc. 400,000 $ 20,950
(b)OfficeMax Inc. 504,600 13,246
Pep Boys-Manny, Moe, & Jack 495,900 16,551
Reed International PLC 40,357 692
Tele-Communications, Inc. 1,000,000 19,125
(b)Thrifty Payless Holdings 109,250 478
VNU BV 40,313 677
--------------------------------------------------------------------------
264,929
- -----------------------------------------------------------------------------------------------------------
CONSUMER DURABLES--1.7%
Armstrong World Industries 300,000 17,100
Leggett & Platt Incorporated 500,700 12,893
Magna International Inc., "A" 405,000 18,782
--------------------------------------------------------------------------
48,775
- -----------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--7.3%
Avon Products 125,000 11,109
Duracell International 440,000 19,910
Gillette Co. 330,000 17,820
Heineken N.V. 3,305 691
Manpower, Inc. 400,000 14,800
Moet Hennessy Louis Vuitton 2,887 737
PepsiCo 471,800 29,959
Philip Morris Companies 685,200 61,755
Procter & Gamble Co. 395,900 33,454
Swire Pacific Ltd. 88,000 750
Warnaco Group 935,000 24,544
--------------------------------------------------------------------------
215,529
- -----------------------------------------------------------------------------------------------------------
ENERGY--1.6%
Enron Corp. 633,400 25,494
Mobil Corp. 137,000 15,755
Schlumberger Ltd. 70,000 6,177
Technip S.A. 7,803 701
--------------------------------------------------------------------------
48,127
- -----------------------------------------------------------------------------------------------------------
FINANCE--7.7%
Allstate Corp. 475,000 18,466
American International Group, Inc. 195,000 17,818
Bank of Ireland 108,254 775
CITIC Pacific Ltd. 187,000 735
Cheung Kong Holdings Ltd. 101,000 721
(a)(b)College Construction Loan Insurance
Association,
"A", convertible preferred 534,189 6,335
Dean Witter Discover 345,000 18,802
Development Bank of Singapore 59,000 747
Federal National Mortgage Association 1,200,000 36,750
First USA 329,900 18,557
General Re Corp. 135,000 19,288
(b)Internationale Nederlanden Groep 10,172 784
ITT Hartford Group 390,000 19,061
KeyCorp 450,000 17,381
Krung Thai Bank Public Co. Ltd. 143,400 704
MBIA Inc. 255,900 18,265
MGIC Investment Corp. 259,800 13,542
NationsBank 225,000 17,944
Nomura Securities Co. Ltd. 33,000 718
--------------------------------------------------------------------------
227,393
- -----------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HEALTH CARE--8.6%
American Home Products 220,000 $ 23,210
Astra AB 16,609 737
C. R. Bard 260,000 9,490
Baxter International 440,000 19,470
(b)Biogen 110,000 7,246
Columbia/HCA Healthcare Corp. 95,200 5,058
(b)Forest Laboratories 270,000 12,454
Glaxo Wellcome 60,342 729
Johnson & Johnson 475,600 43,993
Eli Lilly & Co. 330,000 19,470
Medtronic, Inc. 345,000 18,328
Merck & Co., Inc. 265,000 16,033
Perkin-Elmer Corp. 150,000 8,231
Pfizer Inc. 310,000 21,351
Roche Holding AG 90 710
(b)Sandoz, Ltd. 288,800 15,740
SmithKline Beecham PLC 400,000 21,600
(b)U.S. Bioscience 6,267 118
U.S. Healthcare 200,000 10,425
----------------------------------------------------------------------------
254,393
- -------------------------------------------------------------------------------------------------------------
TECHNOLOGY--13.0%
(b)Atmel Corporation 538,600 21,544
(b)BMC Software 170,000 10,349
(a)(b)Cimlinc Incorporated, "D", convertible
preferred 37,716 141
(b)Cisco Systems 800,000 41,500
Computer Associates International 270,000 19,811
(b)Computer Sciences Corp. 80,000 5,920
(b)Electronic Arts 300,000 8,025
L.M. Ericsson Telephone Co., "B" 36,205 732
First Data Corporation 222,286 16,894
General Motors - Electronic Data Systems 499,400 28,154
Harris Corp. 270,000 16,673
Hewlett-Packard, Co. 250,000 26,469
Intel Corp. 216,600 14,675
Linear Technology Corp. 409,600 14,080
(b)LSI Logic Corp. 413,000 14,868
(b)Microsoft Corp. 245,000 27,777
(b)Parametric Technology Corp. 248,000 9,982
(b)Seagate Technology 300,000 17,400
(b)Solectron Corp. 340,000 15,130
(b)Sun Microsystems 460,000 24,955
Texas Instruments 225,000 12,712
(b)3Com Corporation 800,000 36,900
----------------------------------------------------------------------------
384,691
- -------------------------------------------------------------------------------------------------------------
TRANSPORTATION--.4%
Canadian National Railway Company 39,452 750
Nippon Express 75,000 780
Union Pacific Corp. 150,000 10,219
----------------------------------------------------------------------------
11,749
- -------------------------------------------------------------------------------------------------------------
UTILITIES--1.7%
(b)AirTouch Communications 600,000 18,750
SBC Communications Inc. 350,000 17,500
(b)WorldCom 316,500 14,875
----------------------------------------------------------------------------
51,125
----------------------------------------------------------------------------
TOTAL COMMON STOCKS--64.3%
(Cost: $1,537,384) 1,902,037
----------------------------------------------------------------------------
</TABLE>
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BASIC INDUSTRIES--1.4%
Boise Cascade Corp.
9.85%, 2002 $ 4,000 $ 4,490
9.45%, 2009 5,500 6,134
Crown Paper, 11.00%, 2005 5,200 4,823
Owens-Illinois, Inc., 11.00%, 2003 13,590 14,864
Smurfit Capital Funding, 6.75%, 2005 9,500 9,020
Sweetheart Cup Company Inc., 10.50%, 2003 2,850 2,893
--------------------------------------------------------------------------
42,224
- -----------------------------------------------------------------------------------------------------------
CAPITAL GOODS--.8%
Case Corp., 7.25%, 2005 9,500 9,336
G-I Holdings, zero coupon, 1998 1,640 1,300
Lockheed Corp., 6.75%, 2003 5,000 4,911
Nortek, Inc., 9.875%, 2004 5,220 4,946
Northrop Grumman, 7.00%, 2006 4,000 3,865
--------------------------------------------------------------------------
24,358
- -----------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--7.1%
Adelphia Communications Corporation, 12.50%,
2002 1,870 1,898
American Radio System Corporation, 9.00%, 2006 5,740 5,539
Bally's Park Place Funding, 9.25%, 2004 8,200 8,384
CF Cable TV, Inc., 11.625%, 2005 1,060 1,150
Cablevision Industries Corporation, 10.75%,
2002 6,300 6,788
Cablevision Systems Corporation, 9.25%, 2005 8,200 7,995
Century Communications Corporation, 9.50%, 2005 7,000 6,982
Cinemark USA, Inc., 12.00%, 2002 3,230 3,513
Comcast Corporation, 10.625%, 2012 7,000 7,560
(c)Comcast UK Cable Partners Limited, 11.20%,
2007 13,120 7,815
Continental Cablevision, Inc.
8.875%, 2005 2,000 2,130
9.50%, 2013 5,000 5,487
(c)Diamond Cable Communications Co., 11.75%,
2005 850 516
Federated Department Stores, 10.00%, 2001 9,500 10,117
Granite Broadcasting Corp., 9.375%, 2005 5,640 5,302
ITT Corporation, 6.75%, 2005 9,500 9,029
K-III Communications Corporation, 8.50%, 2006 4,250 4,016
News American Holdings, 9.25%, 2013 9,500 10,279
P&C Food Markets, Inc., 11.50%, 2001 510 523
Pathmark Stores, Inc.
11.625%, 2002 3,700 3,737
9.625%, 2003 3,000 2,880
Penn Traffic Company
10.25%, 2002 150 146
10.65%, 2004 2,100 2,066
10.375%, 2004 4,160 4,027
Rogers Cablesystems Limited, 10.00%, 2005 4,900 5,023
Rogers Cantel, 11.125%, 2002 6,990 7,453
Sears Roebuck Acceptance Corp., 6.75%, 2005 9,500 9,170
Sinclair Broadcasting Group, Inc.,
10.00%, 2003 and 2005 7,790 7,605
TCI Communications, 8.65%, 2004 4,750 4,877
(c)TeleWest Communications PLC, 11.00%, 2007 16,400 10,086
360 Communications, 7.125%, 2003 9,500 9,087
Time Warner Entertainment Company, L.P.,
8.875%, 2012 4,750 5,069
Time Warner Inc., 9.125%, 2013 4,750 4,951
Trump Atlantic City, 11.25%, 2006 8,200 8,333
Univision TV, 11.75%, 2001 7,000 7,420
</TABLE>
13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Viacom International, Inc., 8.00%, 2006 $ 11,100 $ 10,379
(c)Videotron Holdings, 11.125%, 2004 2,800 2,065
--------------------------------------------------------------------------
209,397
- -----------------------------------------------------------------------------------------------------------
CONSUMER DURABLES--.4%
Magna International Inc., 5.00%, 2002 2,750 2,833
Philips Electronics N.V., 8.375%, 2006 4,500 4,796
WestPoint Stevens, 9.375%, 2005 4,100 4,008
--------------------------------------------------------------------------
11,637
- -----------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--.6%
Nabisco Inc., 8.00%, 2000 4,500 4,637
Philip Morris Companies
8.25%, 2003 4,500 4,736
7.25%, 2003 5,000 4,994
RJR Nabisco Inc., 8.75%, 2005 4,750 4,665
--------------------------------------------------------------------------
19,032
- -----------------------------------------------------------------------------------------------------------
ENERGY--1.5%
BHP Finance USA, 7.875%, 2002 9,500 9,902
Gulf Canada Resources Limited, 9.25%, 2004 7,000 6,982
Parker & Parsley Petroleum, 8.25%, 2007 6,000 6,206
Petronas Dagangan Bhd, 7.75%, 2015 4,500 4,481
Repsol International Finance, 7.00%, 2005 5,000 4,929
USX Corporation, 9.375%, 2012 9,500 10,465
--------------------------------------------------------------------------
42,965
- -----------------------------------------------------------------------------------------------------------
FINANCE--4.1%
ABN-AMRO Bank, 8.25%, 2009 9,500 9,879
Abbey National First Capital, 8.20%, 2004 9,500 10,069
Associates Corp. N.A., 8.25%, 1999 9,500 9,963
Banco Central Hispano Americano, 7.50%, 2005 4,000 3,971
Bangkok Bank Ltd., 7.25%, 2005 9,500 9,144
Capital One Bank, 8.125%, 2000 9,500 9,825
Citicorp, 7.625%, 2005 4,000 4,083
Commercial Credit, 7.375%, 2005 9,500 9,567
ERAC USA Finance, 6.95%, 2006 9,500 8,971
Equitable Life, 6.95%, 2005 5,500 5,280
First USA Bank, 8.10%, 1997 9,500 9,644
GMAC Medium Term Note, 8.50%, 2000 9,500 10,099
Lehman Brothers Holdings, 7.25%, 2003 9,500 9,418
Malayan Banking Berhad, 7.125%, 2005 5,000 4,874
Merita Bank Ltd., 6.50%, 2006 5,500 5,118
--------------------------------------------------------------------------
119,905
- -----------------------------------------------------------------------------------------------------------
HEALTH CARE--.9%
Columbia/HCA Healthcare Corp., 6.91%, 2005 9,500 9,277
Ornda HealthCorp.
12.25%, 2002 6,560 7,134
11.375%, 2004 1,890 2,112
Tenet Healthcare Corporation
9.625%, 2002 580 619
10.125%, 2005 6,420 6,853
--------------------------------------------------------------------------
25,995
- -----------------------------------------------------------------------------------------------------------
TECHNOLOGY--.3%
Raytheon Co., 6.50%, 2005 9,000 8,644
--------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 15
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TRANSPORTATION--.6%
Delta Airlines
9.875%, 2008 $ 3,180 $ 3,515
9.75%, 2021 9,250 10,558
United Air Lines, 9.56%, 2018 4,750 5,225
--------------------------------------------------------------------------
19,298
- -----------------------------------------------------------------------------------------------------------
UTILITIES--1.7%
Ameritech Capital Funding, 7.50%, 2005 9,500 9,766
(c)International CableTel Inc., 11.50%, 2006 13,000 7,573
(c)MFS Communications Company, Inc., 8.875%,
2006 15,400 9,606
(c)PanAmSat, L.P., 11.375%, 2003 8,200 7,011
Southwestern Bell Telephone, 6.625%, 2005 4,500 4,362
Tenaga Nasional Berhad, 7.875%, 2004 5,500 5,701
USA Mobile Communications, Inc., 9.50%, 2004 7,950 7,692
--------------------------------------------------------------------------
51,711
--------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS--19.4%
(Cost: $577,787) 575,166
--------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET
INSTRUMENTS--.2%
Yield--5.34% to 5.43%
Due--May 1996
(Cost: $5,391) 5,400 5,391
--------------------------------------------------------------------------
TOTAL INVESTMENTS--98.6%
(Cost: $2,557,313) 2,918,492
--------------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES--1.4% 40,618
--------------------------------------------------------------------------
NET ASSETS--100% $2,959,110
--------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The following securities may require registration under the Securities Act
of 1933 or an exemption therefrom in order to effect sale in the ordinary
course of business; they were valued at cost on the dates of acquisition.
These securities are valued at fair value as determined in good faith by the
Board of Trustees of the Fund. At April 30, 1996, the value of the Fund's
restricted securities was $6,476,000, which represented .22% of net assets.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
DATE OF NUMBER COST
SECURITY DESCRIPTION ACQUISITION OF SHARES PER SHARE
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cimlinc Incorporated, "D", convertible preferred December 1983 37,716 $8.75
-------------------------------------------------------------------------------------------------------------
College Construction Loan Insurance Association, "A",
convertible preferred September 1991 534,189 9.31
-------------------------------------------------------------------------------------------------------------
</TABLE>
(b) Non-income producing security.
(c) Deferred interest obligation; currently zero coupon under the terms of the
initial offering.
Based on the cost of investments of $2,557,313,000 for federal income tax
purposes at April 30, 1996, the gross unrealized appreciation was
$397,615,000, the gross unrealized depreciation was $36,436,000 and the net
unrealized appreciation on investments was $361,179,000.
See accompanying Notes to Financial Statements.
15
<PAGE> 16
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Investments, at value
(Cost: $2,557,313) $2,918,492
- -------------------------------------------------------------------------------------------------------
Cash 23,665
- -------------------------------------------------------------------------------------------------------
Receivable for:
Fund shares sold 234
- -------------------------------------------------------------------------------------------------------
Investments sold 39,540
- -------------------------------------------------------------------------------------------------------
Dividends and interest 23,669
- -------------------------------------------------------------------------------------------------------
TOTAL ASSETS 3,005,600
- -------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- -------------------------------------------------------------------------------------------------------
<S> <C>
Payable for:
Fund shares redeemed 891
- -------------------------------------------------------------------------------------------------------
Investments purchased 42,289
- -------------------------------------------------------------------------------------------------------
Management fee 1,312
- -------------------------------------------------------------------------------------------------------
Distribution services fee 709
- -------------------------------------------------------------------------------------------------------
Administrative services fee 561
- -------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 728
- -------------------------------------------------------------------------------------------------------
Total liabilities 46,490
- -------------------------------------------------------------------------------------------------------
NET ASSETS $2,959,110
- -------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -------------------------------------------------------------------------------------------------------
<S> <C>
Paid-in capital $2,409,499
- -------------------------------------------------------------------------------------------------------
Undistributed net realized gain on investments 175,968
- -------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 361,150
- -------------------------------------------------------------------------------------------------------
Undistributed net investment income 12,493
- -------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $2,959,110
- -------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------
THE PRICING OF SHARES
- -------------------------------------------------------------------------------------------------------
<S> <C>
CLASS A SHARES
Net asset value and redemption price per share
($1,803,643 / 171,449 shares outstanding) $10.52
- -------------------------------------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $11.16
- -------------------------------------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($1,133,807 / 107,879 shares outstanding) $10.51
- -------------------------------------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($8,257 / 785 shares outstanding) $10.52
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES
Net asset value and redemption price per share
($13,403 / 1,275 shares outstanding) $10.51
- -------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
16
<PAGE> 17
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Six months ended April 30, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME
- -------------------------------------------------------------------------------------------------------
Interest $ 42,768
- -------------------------------------------------------------------------------------------------------
Dividends 12,600
- -------------------------------------------------------------------------------------------------------
Total investment income 55,368
- -------------------------------------------------------------------------------------------------------
Expenses:
Management fee 7,936
- -------------------------------------------------------------------------------------------------------
Distribution services fee 4,306
- -------------------------------------------------------------------------------------------------------
Administrative services fee 3,495
- -------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 4,385
- -------------------------------------------------------------------------------------------------------
Professional fees 40
- -------------------------------------------------------------------------------------------------------
Reports to shareholders 238
- -------------------------------------------------------------------------------------------------------
Trustees' fees and other 39
- -------------------------------------------------------------------------------------------------------
Total expenses 20,439
- -------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 34,929
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- -------------------------------------------------------------------------------------------------------
Net realized gain on sales of investments 173,060
- -------------------------------------------------------------------------------------------------------
Net realized gain from futures transactions 511
- -------------------------------------------------------------------------------------------------------
Net realized gain 173,571
- -------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation on investments (37,648)
- -------------------------------------------------------------------------------------------------------
Net gain on investments 135,923
- -------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $170,852
- -------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
1996 1995
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- ---------------------------------------------------------------------------------------------------------
Net investment income $ 34,929 74,278
- ---------------------------------------------------------------------------------------------------------
Net realized gain 173,571 166,489
- ---------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (37,648) 250,703
- ---------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 170,852 491,470
- ---------------------------------------------------------------------------------------------------------
Net equalization charges (2,334) (3,257)
- ---------------------------------------------------------------------------------------------------------
Distribution from net investment income (49,916) (61,461)
- ---------------------------------------------------------------------------------------------------------
Distribution from net realized gain (136,617) --
- ---------------------------------------------------------------------------------------------------------
Total dividends to shareholders (186,533) (61,461)
- ---------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital share transactions 50,583 (364,532)
- ---------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 32,568 62,220
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------------------
Beginning of period 2,926,542 2,864,322
- ---------------------------------------------------------------------------------------------------------
END OF PERIOD (including undistributed
net investment income of
$12,493 and $29,814, respectively) $2,959,110 2,926,542
- ---------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE FUND Kemper Total Return 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. Portfolio securities that are traded on a
domestic securities exchange or securities listed
on the NASDAQ National Market are valued at the
last sale price on the exchange or market where
primarily traded or listed or, if there is no
recent sale, at the last current bid quotation.
Portfolio securities that are primarily traded on
foreign securities exchanges are generally valued
at the preceding closing values of such securities
on their respective exchanges where primarily
traded. Securities not so traded or listed are
valued at the last current bid quotation if market
quotations are available. 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. Equity options are valued at the
last sale price unless the bid price is higher or
the asked price is lower, in which event such bid
or asked price is used. Exchange traded fixed
income options are valued at the last sale price
unless there is no sale price, in which event
prices provided by market makers are used.
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. Forward foreign currency contracts are
valued at the forward rates prevailing on the day
of valuation. 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). Dividend income is recorded on the
ex-dividend date, and interest income is recorded
on the accrual basis and includes discount
amortization on fixed income securities. Realized
gains and losses from investment transactions are
reported on an identified cost basis.
18
<PAGE> 19
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 during the six
months ended April 30, 1996.
DIVIDENDS TO SHAREHOLDERS. The Fund declares and
pays dividends of net investment income quarterly
and net realized capital gains annually, which are
recorded on the ex-dividend date. Dividends are
determined in accordance with income tax principles
which may treat certain transactions differently
from generally accepted accounting principles.
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 .58% of the first $250 million of average daily
net assets declining to .42% of average daily net
assets in excess of $12.5 billion. The Fund
incurred a management fee of $7,936,000 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 $ 132,000 999,000 57,000
</TABLE>
For services under the distribution services
agreement, the Fund pays KDI a fee of .75% of
average daily net assets of the Class B and Class C
shares. Pursuant to the agreement, KDI enters into
related selling group agreements with various firms
at various rates for sales of Class B and Class C
shares. In addition, KDI receives any contingent
deferred sales charges (CDSC) from redemptions of
Class B and Class C shares. Distribution fees and
commissions paid in connection with the sale of
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
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
FEES
DISTRIBUTION FEES PAID BY KDI
AND CDSC RECEIVED ------------------------------
BY KDI TO ALL FIRMS TO AFFILIATES
----------------- ------------ -------------
<S> <C> <C> <C>
Six months ended
April 30, 1996 $ 5,489,000 2,074,000 61,000
</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 $ 3,495,000 3,540,000 145,000
</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
$3,881,000 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.
During the six months ended April 30, 1996, the
Fund made no payments to its officers and incurred
trustees' fees of $24,000 to independent trustees.
- --------------------------------------------------------------------------------
4
INVESTMENT
TRANSACTIONS For the six months ended April 30, 1996, investment
transactions (excluding short term instruments) are
as follows (in thousands):
Purchases $1,147,327
Proceeds from sales 1,170,617
20
<PAGE> 21
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>
------------------------------------------------------------------------------
SHARES SOLD
------------------------------------------------------------------------------
Class A 7,264 $ 76,610 14,502 $ 135,398
------------------------------------------------------------------------------
Class B 7,687 81,402 15,052 143,653
------------------------------------------------------------------------------
Class C 284 2,973 395 3,809
------------------------------------------------------------------------------
Class I 247 2,605 1,310 13,241
------------------------------------------------------------------------------
------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
------------------------------------------------------------------------------
Class A 10,647 107,187 4,083 39,343
------------------------------------------------------------------------------
Class B 6,572 66,101 1,801 17,381
------------------------------------------------------------------------------
Class C 35 354 6 61
------------------------------------------------------------------------------
Class I 83 838 10 108
------------------------------------------------------------------------------
------------------------------------------------------------------------------
SHARES REDEEMED
------------------------------------------------------------------------------
Class A (16,344) (170,031) (47,282) (445,366)
------------------------------------------------------------------------------
Class B (10,929) (114,537) (28,454) (269,650)
------------------------------------------------------------------------------
Class C (39) (412) (110) (1,072)
------------------------------------------------------------------------------
Class I (237) (2,507) (138) (1,438)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
CONVERSION OF SHARES
------------------------------------------------------------------------------
Class A 2,689 28,105 7,674 72,592
------------------------------------------------------------------------------
Class B (2,693) (28,105) (7,680) (72,592)
------------------------------------------------------------------------------
NET INCREASE (DECREASE)
FROM CAPITAL SHARE
TRANSACTIONS $ 50,583 $(364,532)
------------------------------------------------------------------------------
</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
$632,000. The Fund also had liquid securities in
its portfolio sufficient to cover the following
short futures positions 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 $44,587,000 June 96 $511,000
----------------------------------------------------------------------------
</TABLE>
21
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7 FORWARD FOREIGN
CURRENCY CONTRACTS In order to protect itself against a decline in the
value of particular foreign currencies against the
U.S. Dollar, the Fund has entered into forward
contracts to deliver foreign currency in exchange
for U.S. Dollars as described below. The Fund bears
the market risk that arises from changes in foreign
exchange rates, and accordingly, the net unrealized
loss on these contracts is reflected in the
accompanying financial statements. The Fund also
bears the credit risk if the counterparty fails to
perform under the contract. At April 30, 1996, the
Fund had the following forward foreign currency
contracts outstanding with settlement dates in
July, 1996:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACT GAIN
FOREIGN CURRENCY AMOUNT IN (LOSS)
TO BE DELIVERED U.S. DOLLARS AT 4/30/96
----------------------------------------------------------------
<C> <S> <C> <C>
580,000 British Pounds $ 876,000 $ 7,000
----------------------------------------------------------------
1,280,000 Dutch Guilders 764,000 14,000
----------------------------------------------------------------
5,935,000 French Francs 1,165,000 15,000
----------------------------------------------------------------
360,625,000 Japanese Yen 3,402,000 (75,000)
----------------------------------------------------------------
667,000 Swiss Francs 550,000 10,000
----------------------------------------------------------------
NET UNREALIZED LOSS $(29,000)
----------------------------------------------------------------
</TABLE>
22
<PAGE> 23
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- -------------------------------------------------- SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
CLASS A APRIL 30, 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.60 9.10 11.23 10.07 10.07
- -------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .14 .29 .19 .30 .22
- -------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .48 1.46 (1.01) 1.54 .37
- -------------------------------------------------------------------------------------------------------------
Total from investment operations .62 1.75 (.82) 1.84 .59
- -------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .20 .25 .23 .24 .29
- -------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .50 -- 1.08 .44 .30
- -------------------------------------------------------------------------------------------------------------
Total dividends .70 .25 1.31 .68 .59
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.52 10.60 9.10 11.23 10.07
- -------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 6.18% 19.46 (7.92) 19.08 6.09
- -------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------------------------------
Expenses 1.03% 1.12 1.13 1.02 1.06
- -------------------------------------------------------------------------------------------------------------
Net investment income 2.71% 3.00 2.34 2.94 2.23
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MAY 31, 1994
TO
- -------------------------------------------------- SIX MONTHS ENDED YEAR ENDED OCT. 31,
CLASS B APRIL 30, 1996 OCT. 31, 1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.59 9.09 9.24
- --------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .09 .20 .06
- --------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .48 1.46 (.16)
- --------------------------------------------------------------------------------------------------------
Total from investment operations .57 1.66 (.10)
- --------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .15 .16 .05
- --------------------------------------------------------------------------------------------------------
Distribution from net realized gain .50 -- --
- --------------------------------------------------------------------------------------------------------
Total dividends .65 .16 .05
- --------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.51 10.59 9.09
- --------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 5.68% 18.42 (1.06)
- --------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------------------------------
Expenses 1.95% 2.05 2.03
- --------------------------------------------------------------------------------------------------------
Net investment income 1.79% 2.07 1.57
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------
CLASS I
------------------------
SIX MONTHS SIX MONTHS JULY 3,
ENDED MAY 31, ENDED 1995 TO
- -------------------------------------------------- APRIL 30, YEAR ENDED 1994 TO APRIL 30, OCT. 31,
CLASS C 1996 OCT. 31, 1995 OCT. 31, 1994 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $10.61 9.09 9.24 10.61 10.07
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .09 .21 .06 .15 .10
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .48 1.48 (.16) .48 .52
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .57 1.69 (.10) .63 .62
- --------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .16 .17 .05 .23 .08
- --------------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .50 -- -- .50 --
- --------------------------------------------------------------------------------------------------------------------------------
Total dividends .66 .17 .05 .73 .08
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.52 10.61 9.09 10.51 10.61
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 5.66% 18.76 (1.05) 6.27 6.21
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------------------------------------------------------
Expenses 1.88% 1.86 2.00 .67 .61
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.86% 2.26 1.60 3.07 2.97
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED
- -------------------------------------------------- APRIL 30, YEAR ENDED OCTOBER 31,
SUPPLEMENTAL DATA FOR ALL CLASSES 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $2,959,110 2,926,542 2,864,322 1,509,687 1,212,896
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 78% 142 121 180 150
- -------------------------------------------------------------------------------------------------------------------------------
Average commission rate paid per share on stock transactions for the six months ended April 30, 1996 was $.0575.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Total return does not reflect the effect of any sales charges. Per share
data for the six months ended April 30, 1996 was determined based on average
shares outstanding.
23
<PAGE> 24
TRUSTEES AND OFFICERS
TRUSTEES OFFICERS
GARY A. LANGBAUM
STEPHEN B. TIMBERS Vice President
President and Trustee
JOHN E. NEAL
DAVID W. BELIN Vice President
Trustee
JOHN E. PETERS
LEWIS A. BURNHAM Vice President
Trustee
STEVEN H. REYNOLDS
DONALD L. DUNAWAY Vice President
Trustee
PHILIP J. COLLORA
ROBERT B. HOFFMAN Vice President
Trustee and Secretary
DONALD R. JONES JEROME L. DUFFY
Trustee Treasurer
DOMINIQUE P. MORAX ELIZABETH C. WERTH
Trustee 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 Equity Funds prospectus. 1016890
KTRF - 3 (6/96) Printed in the U.S.A.
