<PAGE> 1
SEMI-ANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED APRIL 30,1998
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
Seeking the highest total return, a combination of income
and capital appreciation, consistent with reasonable risk
[LOGO]
KEMPER
TOTAL RETURN FUND
"...One key to our success was consistent month-by-
month performance... Throughout the period,
our stock selection decisions were on track, and
our aggressive, disciplined approach to selling and
buying stocks translated into steady gains. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
7
INDUSTRY SECTORS
8
LARGEST HOLDINGS
9
PORTFOLIO OF
INVESTMENTS
16
FINANCIAL STATEMENTS
18
NOTES TO
FINANCIAL STATEMENTS
22
FINANCIAL HIGHLIGHTS
24
SHAREHOLDERS' MEETING
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER TOTAL RETURN FUND
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 1998
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 14.22%
CLASS B 13.60%
CLASS C 13.72%
LIPPER BALANCED FUNDS CATEGORY AVERAGE* 11.46%
- --------------------------------------------------------------------------------
</TABLE>
Returns and rankings are historical and do not represent future performance.
Returns, rankings 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
4/30/98 10/31/97
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER TOTAL RETURN FUND
CLASS A $11.05 $11.34
- --------------------------------------------------------------------------------
KEMPER TOTAL RETURN FUND
CLASS B $11.03 $11.33
- --------------------------------------------------------------------------------
KEMPER TOTAL RETURN FUND
CLASS C $11.05 $11.34
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
KEMPER TOTAL RETURN FUND
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 #118 of 365 funds #170 of 365 funds #160 of 365 funds
- --------------------------------------------------------------------------------
5-YEAR #71 of 123 funds N/A N/A
- --------------------------------------------------------------------------------
10-YEAR #14 of 52 funds N/A N/A
- --------------------------------------------------------------------------------
15-YEAR #21 of 29 funds N/A N/A
- --------------------------------------------------------------------------------
20-YEAR #6 of 27 funds N/A N/A
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
DURING THE PERIOD, KEMPER TOTAL RETURN FUND MADE THE FOLLOWING DISTRIBUTIONS
PER SHARE:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME DIVIDEND $0.1625 $0.1103 $0.1135
- --------------------------------------------------------------------------------
SHORT-TERM
CAPITAL GAIN $ 0.52 $ 0.52 $ 0.52
- --------------------------------------------------------------------------------
LONG-TERM
CAPITAL GAIN $ 1.03 $ 1.03 $ 1.03
- --------------------------------------------------------------------------------
</TABLE>
TERMS TO KNOW
YOUR FUND'S STYLE
- --------------------------------------------------------------------------------
MORNINGSTAR EQUITY STYLE BOX
- --------------------------------------------------------------------------------
[STYLE/SIZE DIAGRAM]
Source: Morningstar, Inc., Chicago, IL (312) 696-6000. (Morningstar's Style Box
is based on a portfolio date as of April 30, 1998.) The Equity Style Box
placement is based on a fund's price-to-earnings and price-to-book ratio
relative to the S&P 500, as well as the size of the companies in which it
invests, or median market capitalization.
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.
PRICE-TO-EARNINGS RATIO A company's stock price divided by its earnings for the
past four quarters, also referred to as its P/E.
TOTAL RETURN A fund's total return figure measures both the net investment
income and any realized and unrealized appreciation or depreciation of the
underlying investments in its portfolio for the period. Total return assumes the
reinvestment of all dividends and it represents the aggregate percentage or
dollar value change over the period.
VOLATILITY Characteristic of a security, commodity or market to rise or fall
sharply in price, within a short period of time. A stock may be volatile because
the outlook for the company is particularly uncertain or because of various
other reasons.
<PAGE> 3
ECONOMIC OVERVIEW
[SILVIA PHOTO]
DR. JOHN E. SILVIA IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.
HIS PRIMARY RESPONSIBILITIES INCLUDE ANALYSIS, MODELING AND FORECASTING OF
ECONOMIC DEVELOPMENTS AND FEDERAL RESERVE ACTIVITY THAT AFFECT FINANCIAL
MARKETS, ESPECIALLY INTEREST RATE TRENDS. THIS EFFORT INCLUDES CLOSE
COLLABORATION WITH BOTH INCOME AND EQUITY MUTUAL FUND MANAGERS AND PENSION FUND
MANAGERS. HE IS ALSO A MEMBER OF THE INVESTMENT POLICY AND STRATEGY COMMITTEE
FOR KEMPER FUNDS.
SILVIA HOLDS BACHELOR OF ARTS AND PH.D. DEGREES IN ECONOMICS FROM NORTHEASTERN
UNIVERSITY IN BOSTON AND HAS A MASTER'S DEGREE IN ECONOMICS FROM BROWN
UNIVERSITY IN PROVIDENCE, R.I. PRIOR TO HIS CAREER AT SCUDDER KEMPER, HE WAS
WITH THE HARRIS BANK AND ALSO TAUGHT AT INDIANA UNIVERSITY.
SCUDDER KEMPER INVESTMENTS, INC. IS THE INVESTMENT MANAGER FOR KEMPER FUNDS. IT
IS ONE OF THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS
WORLDWIDE, MANAGING MORE THAN $200 BILLION IN ASSETS GLOBALLY FOR MUTUAL FUND
INVESTORS, RETIREMENT AND PENSION PLANS, INSTITUTIONAL AND CORPORATE CLIENTS,
INSURANCE COMPANIES AND PRIVATE, FAMILY AND INDIVIDUAL ACCOUNTS. IT IS ONE OF
THE 10 LARGEST MUTUAL FUND COMPLEXES IN THE UNITED STATES.
DEAR SHAREHOLDERS,
Stable economic growth, low interest rates and sustained lower inflation have
continued to produce a beneficial market environment for investors in the second
quarter of 1998. Despite heightened sensitivity to earnings estimates and
announcements, the market continued to support financial assets. We expect this
favorable climate to continue -- in spite of the sensitivity -- at least over
the shorter term.
As always, expectations have been at the heart of the actions and reactions
that move the markets. Expectations appear to be high, as demonstrated by a
record flow of new cash into mutual funds. As of April 30, 1998, a record $5
trillion in mutual fund assets surpassed total assets of the nation's banks,
according to the Investment Company Institute, a trade organization that
monitors the mutual fund industry, and the Federal Reserve Bank in Washington.
Unfortunately, high expectations often combine with high anxiety -- today's
investors are attuned to even the smallest hint of economic change. The result
is volatility. Many who believe that our long-running bull market is too good to
be true or that stock prices are too high are wondering when the market will
reverse.
While a reversal may not be on the immediate horizon, investors are wise to
watch for several signs that change is underway: rising prices, indicating
higher inflation; repercussions of the Asian economic crisis on American
business, which could appear in the form of reduced earnings; and a continued
widening of our trade deficit, a serious imbalance caused by heightened American
demand for foreign goods and services.
On April 27, expectations were tested by reports that the Federal Reserve
Board ("the Fed") was considering a hike in interest rates. The markets reacted
immediately to this news, driving stock prices downward. But at its monetary
policy meeting on May 19, the Fed chose to leave interest rates alone. In the
coming months, the Fed could raise rates if inflation accelerates or if growth
appears to be too rapid compared to the Fed's expectations.
Our positive outlook for the short term is based primarily on the current
resiliency of our marketplace. The United States appears to be firmly planted in
the middle of an economic cycle, with no evidence of detrimental pressures that
might be associated with the market's phenomenal growth. We are not seeing price
increases for goods and services or a downturn in the housing market, both of
which we might expect late in an economic cycle.
Equities have continued to reward investors. The U.S. stock market, as
measured by the Standard & Poor's 500, gained nearly 14 percent in the first
quarter of 1998 and returned more than 13 percent year-to-date through the end
of May. Bonds have also rewarded investors in terms of real return, which is
total return less the rate of inflation. The high yield and corporate debt
fixed-income markets also have performed well.
U.S. economic growth, as measured by the gross domestic product (GDP)
growth rate, was slightly above 4 percent for the first quarter. Our general
expectation for the year is that growth in all of 1998 will increase between 2.5
and 3 percent over last year. In other words, the economy will remain strong,
but will slow down as the year progresses.
Consumer spending and corporate fixed investment have fueled the economy's
solid growth. Spending on both capital goods and high technology has been
strong. Corporate profits have grown between 5 and 10 percent, which appears to
be acceptable in an environment of stable interest rates. U.S. employment growth
has ranged from 2 to 2.25 percent, continuing to exceed expectations. Consumer
confidence has continued to hit near all-time highs. The increase in output
prices, an indicator of inflation measured by the Consumer Price Index (CPI),
has remained at 1.5 to 2 percent.
Adding to the good news, all seems to be quiet on the domestic policy
front. At the end of February, the U.S. federal budget deficit essentially
vanished. Recent efforts to reduce the deficit, combined with higher federal
revenues due to the robust economy, have left us with an expected budget
surplus of $60 billion to $80 billion for fiscal 1998. To date, our Democratic
president and Republican Congress have not agreed on any significant
legislation regarding tax credits, spending cuts or health care that could
threaten the newfound federal budget surplus.
Can we expect a little more excitement from overseas? A full-scale global
recession from last year's Asian economic crisis seems unlikely at this point.
The crisis has yet
3
<PAGE> 4
ECONOMIC OVERVIEW
- --------------------------------------------------------------------------------
ECONOMIC GUIDEPOSTS
- --------------------------------------------------------------------------------
Economic activity is a key influence on investment performance and shareholder
decision-making. Periods of recession or boom, inflation or deflation, credit
expansion or credit crunch have a significant impact on mutual fund
performance.
The following are some significant economic guideposts and their
investment rationale that may help your investment decision-making. The 10-year
Treasury rate and the prime rate are prevailing interest rates. The other data
report year-to-year percentage changes.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (5/31/98) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1) 5.65 5.81 6.49 6.91
PRIME RATE(2) 8.5 8.5 8.5 8.25
INFLATION RATE(3)* 1.5 1.89 2.23 2.89
THE U.S. DOLLAR(4) 6.86 10.26 5.52 9.15
CAPITAL GOODS ORDERS(5)* 9.28 10.28 7.16 3.48
INDUSTRIAL PRODUCTION(5)* 3.85 5.76 4.28 3.79
EMPLOYMENT GROWTH(6) 2.61 2.8 2.5 2.13
</TABLE>
(1) Falling interest rates in recent years have been a big plus for financial
assets.
(2) The interest rate that commercial lenders charge their best borrowers.
(3) Inflation reduces an investor's real return. In the last five years,
inflation has been as high as 6 percent. The low, moderate inflation of the
last few years has meant high real returns.
(4) Changes in the exchange value of the dollar impact U.S. exporters and the
value of U.S. firms' foreign profits.
(5) These influence corporate profits and equity performance.
(6) An influence on family income and retail sales.
* Data as of April 30, 1998.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
to hurt most U.S. businesses and investors. Quite the contrary. While the mere
threat of repercussions from the Asian crisis added to the anxiety mentioned
earlier, it has also had the effect of keeping U.S. interest rates and prices in
check, making the U.S. economy all the more attractive to investors around the
world.
In the global economy, the U.S. dollar continues to appreciate in value
compared to other currencies. In fact, more capital is flowing into U.S. markets
as investors generally avoid Asia. Europe also has been benefiting from the
crisis. Canada, which is a commodity-producing exporter, has been somewhat
negatively affected as commodity prices have fallen. Political unrest in
Indonesia, nuclear tests in India and Pakistan and economic turmoil in Russia
have been keeping international investors on the edges of their seats.
Other major developments abroad include the final selection of countries to
participate in Europe's single currency next year. Many European countries are
adopting more restrictive fiscal policy and reducing inflation in anticipation
of the momentous European Economic and Monetary Union (EMU). But after the EMU
is established in 1999, tensions may indeed mount as countries work to adapt to
the new structure.
As we approach the turn of the century, one caveat remains: Don't
underestimate the potential of the Year 2000 computer code problem. It appears
that a significant number of federal government agencies will not meet the
criteria necessary to avoid the problem. Many businesses are revealing that
billions of dollars are being spent on the situation. Some experts say a global
recession is in store. Others adamantly disagree. In any event, we may indeed
see a reduction in capital spending toward the end of 1998 and the first half of
next year as companies focus on fixing existing computers rather than on
purchasing new equipment. We'll keep you posted!
Thank you for your continued support. We appreciate the opportunity to
serve your investment needs.
Sincerely,
/s/ John E. Silvia
JOHN E. SILVIA
June 10, 1998
4
<PAGE> 5
PERFORMANCE UPDATE
[LANGBAUM PHOTO]
GARY A. LANGBAUM HAS BEEN WITH SCUDDER KEMPER INVESTMENTS, INC. SINCE 1988 AND
IS A MANAGING DIRECTOR. HE IS ALSO A VICE PRESIDENT AND LEAD PORTFOLIO MANAGER
OF KEMPER TOTAL RETURN FUND. LANGBAUM IS A CHARTERED FINANCIAL ANALYST WITH 26
YEARS OF EXPERIENCE IN EQUITY RESEARCH AND PORTFOLIO MANAGEMENT. 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.
DURING THE PERIOD FROM OCTOBER 31, 1997 THROUGH APRIL 30, 1998, THE
EQUITY MARKET PERFORMED STRONGLY BUT CONTINUED TO EXPERIENCE TURBULENCE. LEAD
PORTFOLIO MANAGER GARY LANGBAUM DISCUSSES HOW A DISCIPLINED APPROACH ALLOWED
HIM TO STEER THROUGH MARKET CLIMATE AND NAVIGATE THE FUND TO RETURNS THAT
OUTDISTANCED ITS PEER GROUP AVERAGE.
Q GARY, BEFORE YOU DISCUSS THE FUND'S PERFORMANCE DURING THE SEMIANNUAL
PERIOD, COULD YOU COMMENT ON MARKET CONDITIONS?
A We've seen a great stock market during the past six months. For the period
ending April 30, 1998, the Standard & Poor's 500 Index rose 22.50 percent. The
Russell 1000 Growth Index, a large company growth stock benchmark, gained 23.07
percent. Larger-cap stocks turned in stronger performance than small-cap issues.
Sticking close to home paid off as well -- domestic markets fared far better
than international ones. Despite these significant gains, the U.S. equity market
was not without volatility. Turbulence in Asia took its toll on global markets,
as did fears of Federal Reserve Board tightening, and there were many ups and
downs. Investors who held tight reaped the returns, however.
Q HOW DID THE FUND PERFORM IN THIS ENVIRONMENT?
A The fund performed very well. For the six-month period ending April 30,
1998, the fund's total return for Class A shares (unadjusted for any sales
charge) was 14.22 percent. This gain compared very favorably to our peers, the
Lipper Balanced Fund category. We surpassed the category average return of 11.46
percent.
One key to our success was consistent month-by-month performance. We
had six successive up months. Throughout the period, our stock selection
decisions were on track, and our aggressive, disciplined approach to selling
and buying stocks translated into steady gains. As a result, we saw the fund's
equity stake perform in line with the market.
Q THE FUND TAKES A BALANCED APPROACH, INVESTING IN BOTH STOCKS AND BONDS.
HOW DID THIS IMPACT RETURNS?
A The fund's overall returns were tempered by its fixed-income stake,
totaling about 35 percent of assets. During the six-month period, bond markets
were decent, but not overly robust. The bond portion of the portfolio certainly
contributed to returns, although not at the same brisk pace that we saw from our
equity holdings (about 65 percent of assets). However, within the bond
allocation, we struck a good balance between quality, stability and income. By
keeping the lion's share of bond assets in Treasuries and agencies, we
maintained quality and relative stability; and by favoring high-yield corporate
bonds over their high-grade counterparts, we received higher yields and better
price performance.
Q COULD YOU ELABORATE ON YOUR STOCK SELECTION DISCIPLINE?
A We've been able to turn in consistent performance as a result of our
growth at a reasonable price (GARP) strategy, which leads to aggressive trading
based on stock price movements. By combining a disciplined approach with a
commitment to strong fundamentals, we have been able to take advantage of the
opportunities presented by the market. We hone in on stocks with suitable
price-to-earnings and
5
<PAGE> 6
PERFORMANCE UPDATE
earnings growth potential, and purchase them when they are undervalued relative
to our perception of their true merits. Then, in order to help us avoid the
whipsaw of the market, we adhere to a strict sell discipline as stocks approach
and reach their target prices.
For instance, going into the semiannual period, the market had just
taken a wallop from problems in Asia which knocked the wind out of many stocks,
particularly technology. At that point, we had 15 percent of the portfolio in
technology. As these stocks' prices came down, more attractive valuations began
to emerge. We took advantage of those opportunities, and raised our technology
stake to about 18 percent in the next months. Early in 1998, the market began
to return to technology and stock prices rose. We sold into this strength, and
pared down our technology stake to about 13 percent by the end of the first
quarter.
We saw many of our technology holdings bolster gains, including Cadence
Design Systems and Cisco Systems. However, not all was positive in tech land,
and some of our positions underperformed, such as Intel and Sun Microsystems.
Q WHAT OTHER FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A Our financial exposure contributed to performance. Because of attractive
valuations, we have favored financial stocks. In fact, our exposure to the
financial sector reached a high of more than 20 percent during the preceding six
months. The market supported our belief that financial stocks would benefit from
economic conditions as well as from further consolidation within the sector. We
benefited from owning many of the names that participated in the flurry of
consolidation and had a stake in other financial names that moved with the
rising tide of merger activity.
We also benefited from an increased weighting in telecommunications
utilities. Our penchant for consumer cyclicals helped, too. We saw auto-parts
suppliers and media (Time Warner, Clear Channel Communications) contribute to
gains. The fund's low weightings in consumer nondurable and energy sectors --
due to our valuation parameters -- proved positive, but we did have several
positions that hurt performance including Kimberly Clark, Sara Lee and
Schlumberger.
Q WHAT DIDN'T WORK OUT AS WELL AS YOU WOULD HAVE LIKED?
A Although the fund's lineup included some strong performers from the health
care sector, including ALZA and Merck, the rich valuations of health care stocks
kept many of the other leading companies beyond our reach.We saw lackluster
performance from our energy stocks. We think the sector is showing improvement
now, but during the semiannual period, it was a drag on returns. Transportation,
a small portion of the portfolio, suffered as concerns about the railroad
industry dampened returns. Our gaming stocks (MGM, Mirage), didn't turn in the
gains that we would have hoped for; but with new facilities opening by year-end,
we remain optimistic. We have added to our positions during this period of
weakness.
Q THE FUND HAS TRADITIONALLY MAINTAINED LOW INTERNATIONAL EXPOSURE. IS THAT
STILL THE CASE?
A Yes. In keeping with our investment expertise and shareholder
expectations, we are staying true to the fund's domestic, large-cap focus. When
it comes to domestic stocks, our investment team has a deep knowledge base and
demonstrated research capabilities. As long as we can find attractive valuations
and fundamentals in domestic companies, we don't plan to frequently cast our
nets overseas. However, the combination of Zurich Kemper Investments, Inc. and
Scudder, Stevens & Clark, Inc. to form Scudder Kemper Investments has added to
our international research expertise and we have found some good opportunities
in Europe. We have taken positions in American depository receipts for Alcatel
(a French telecommunications firm), and Imperial Chemical (a United Kingdom
based chemical manufacturer). We feel that Europe presents some intriguing
possibilities -- the markets are in the early stages of recovery. We're steering
clear of Asia, because the problems there are not yet over.
Q IS YOUR CURRENT OUTLOOK ON THE MARKET STILL POSITIVE?
A Very much so. Although we won't likely see the rapid gains of the first
quarter continuing throughout 1998, I believe that the markets can continue to
grow at a healthy rate. Many positive factors are in place. We have moderate,
sustainable economic growth and low inflation. Corporate profits are increasing
modestly as consolidations continue. The bond market is giving investors a high
real rate of return, and the economies of Europe continue to improve. I believe
that we still could see another 10 percent return for the equity market in 1998,
thus achieving our prior forecast of another 20 percent appreciation, for the
fourth consecutive year. I also continue to believe that the Dow may top 10,000
before year-end.
Volatility will continue, and investors need to be prepared for periods of
choppy market climes. Investors should realize that future market conditions
cannot be predicted with certainty and there is no assurance that a particular
economic outlook will come to pass. Shareholders need to maintain a long-term
focus, and not get scared out of funds due to short-term market activity.
6
<PAGE> 7
INDUSTRY SECTORS
A SIX-MONTH COMPARISON OF THE EQUITY PORTION OF KEMPER TOTAL RETURN FUND
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, 1998, and on October 31 1997.
[EQUITY BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER TOTAL RETURN KEMPER TOTAL RETURN
ON 4/30/98 ON 10/31/97
<S> <C> <C>
CONSUMER NON-DURABLES 21.5% 22.0%
FINANCE 18.6% 20.6%
TECHNOLOGY 15.7% 15.8%
HEALTH CARE 11.3% 9.9%
CAPITAL GOODS 10.4% 8.8%
ENERGY 8.1% 9.1%
UTILITIES 6.2% 5.7%
CONSUMER DURABLES 3.9% 4.4%
BASIC INDUSTRIES 2.5% 1.9%
TRANSPORTATION 1.8% 1.8%
</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 graph below shows the percentage of the
common stocks in the portfolio that each sector of the Kemper Total Return Fund
represented on April 30, 1998, compared to the industry sectors of the Russell
1000 Growth Index.
[RUSSELL COMPARISON BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER TOTAL RETURN RUSSELL 1000 GROWTH INDEX
ON 4/30/98 ON 4/30/98
<S> <C> <C>
CONSUMER NON-DURABLES 21.5% 30.5%
FINANCE 18.6% 6.9%
TECHNOLOGY 15.7% 24.6%
HEALTH CARE 11.3% 20.9%
CAPITAL GOODS 10.4% 9.6%
ENERGY 8.1% 2.3%
UTILITIES 6.2% 1.8%
CONSUMER DURABLES 3.9% 0.6%
BASIC INDUSTRIES 2.5% 2.6%
TRANSPORTATION 1.8% 0.1%
</TABLE>
* THE RUSSELL 1000 GROWTH INDEX IS 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.
7
<PAGE> 8
LARGEST HOLDINGS
THE FUND'S LARGEST EQUITY HOLDINGS*
Representing 9.8 percent of the fund's total common stock holdings on April 30,
1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
HOLDINGS PERCENT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. GENERAL ELECTRIC CO. Operates in major businesses including power 3.2%
generators, appliances, lighting, plastics, medical
systems, aircraft engines, financial services and
broadcasting.
- -------------------------------------------------------------------------------------------------------
2. INTERNATIONAL BUSINESS MACHINES A manufacturer of data processing equipment 1.9%
CORP. and systems.
- -------------------------------------------------------------------------------------------------------
3. AMERICAN GENERAL CORP. One of the nation's largest consumer financial 1.7%
services organizations. It is a leading provider of
retirement annuities, consumer loans, and life
insurance.
- -------------------------------------------------------------------------------------------------------
4. MERCK & CO. A leading research-driven pharmaceutical products 1.5%
and services company that discovers, develops,
manufactures and markets a broad range of products
designed to improve human and animal health.
- -------------------------------------------------------------------------------------------------------
5. BRISTOL-MYERS A diversified manufacturer of health and personal 1.5%
SQUIBB CO. care products worldwide.
- -------------------------------------------------------------------------------------------------------
</TABLE>
THE FUND'S LARGEST CORPORATE BOND HOLDINGS*
Representing 15.6 percent of the fund's total long-term bond holdings on April
30, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
HOLDINGS PERCENT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. COMCAST Operates, develops and manages cable communication 4.8%
systems. The company is also prominent in the
cellular telephone industry in the Mid-Atlantic
region.
- -------------------------------------------------------------------------------------------------------
2. TELEWEST COMMUNICATIONS, PLC Owns and operates 16 cable franchises and has 3.1%
minority interests in seven others.
- -------------------------------------------------------------------------------------------------------
3. TENET HEALTHCARE Provides a broad range of health care services via 2.7%
acute care hospitals and related businesses.
- -------------------------------------------------------------------------------------------------------
4. PATHMARK STORES An established grocery store chain based primarily 2.6%
on the east coast.
- -------------------------------------------------------------------------------------------------------
5. DELCO REMY INTERNATIONAL One of the largest manufacturers of automotive 2.4%
batteries and other auto parts.
- -------------------------------------------------------------------------------------------------------
</TABLE>
*PORTFOLIO COMPOSITION AND HOLDINGS ARE SUBJECT TO CHANGE.
8
<PAGE> 9
PORTFOLIO OF INVESTMENTS
KEMPER TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS AT APRIL 30, 1998 (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
GOVERNMENT OBLIGATIONS PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. TREASURY BONDS 10.75%, 2003 $ 20,945 $ 25,405
10.75%, 2005 50,060 64,710
10.375%, 2009 24,405 30,323
9.125%, 2009 21,610 25,162
12.75%, 2010 18,535 26,247
13.875%, 2011 87,765 132,402
12.00%, 2013 8,200 12,019
10.625%, 2015 102,660 153,701
8.75%, 2020 14,000 18,605
6.50%, 2026 13,010 13,848
6.00%, 2026 5,110 5,096
6.625%, 2027 8,650 9,366
6.375%, 2027 7,400 7,793
6.125%, 2027 44,040 45,086
---------------------------------------------------------------------------
569,763
- ------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY NOTES
8.75%, 2000 4,300 4,586
6.375%, 2000 4,500 4,556
7.75%, 2001 77,500 81,702
6.625%, 2002 16,550 17,101
5.50%, 2003 30,000 29,799
7.25%, 2004 8,000 8,624
5.875%, 2004 700 707
7.50%, 2005 1,650 1,812
6.625%, 2007 1,725 1,829
6.125%, 2007 8,900 9,142
5.50%, 2008 6,795 6,705
---------------------------------------------------------------------------
166,563
- ------------------------------------------------------------------------------------------------------------------------
PROVINCE OF QUEBEC, CANADA
8.625%, 2005 8,250 9,270
---------------------------------------------------------------------------
TOTAL GOVERNMENT OBLIGATIONS--21.1%
(Cost: $732,896) 745,596
---------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BASIC INDUSTRIES--1.6%
Georgia-Pacific Corp. 125,000 shs. 9,649
Imperial Chemical Industries, PLC, ADR 225,000 16,355
PPG Industries 310,000 21,913
Weyerhaeuser Co. 150,000 8,644
---------------------------------------------------------------------------
56,561
- ------------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--6.8%
Allied Signal 510,000 22,344
Emerson Electric Co. 350,200 22,282
General Electric Co. 866,000 73,718
General Motors Corp. - Class H 465,000 25,691
Parker Hannifin Corp. 440,000 19,635
Raytheon Co.
Class A 126,540 6,983
Class B 375,000 21,258
Sundstrand Corp. 369,800 25,539
(a)USA Waste Services 240,500 11,800
U.S. Industries 390,800 10,601
---------------------------------------------------------------------------
239,851
</TABLE>
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSUMER CYCLICALS--8.8% (a)CBS Corp. 719,000 $ 25,614
CVS Corp. 257,300 18,976
Carnival Corp. 180,000 12,521
Clear Channel Communications 156,600 14,760
(a)Consolidated Stores Corp. 549,850 21,994
Dollar General Corp. 511,375 19,368
(a)Federated Department Stores 550,000 27,053
J.C. Penney Co. 380,000 27,004
May Department Stores Co. 401,900 24,792
Omnicom Group 400,000 18,950
(a)Proffit's, Inc. 600,000 23,850
R.R. Donnelley & Sons Co. 559,000 24,631
Time Warner, Inc. 300,000 23,550
(a)Univision Communications, Inc. 788,800 30,221
---------------------------------------------------------------------------
313,284
- ------------------------------------------------------------------------------------------------------------------------
CONSUMER DURABLES--2.6% Federal-Mogul Corp. 270,000 17,466
Goodyear Tire & Rubber Co. 212,500 14,875
(a)Lear Corp. 229,300 12,282
Leggett & Platt, Inc. 434,600 22,572
Stanley Works 459,100 23,500
---------------------------------------------------------------------------
90,695
- ------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--5.1% Colgate-Palmolive Co. 100,000 8,969
(a)Costco Companies, Inc. 230,000 12,851
Gillette Co. 145,000 16,738
H.J. Heinz Co. 300,000 16,350
International Flavors & Fragrances 300,000 14,681
Kimberly-Clark Corp. 450,000 22,838
(a)MGM Grand 417,100 14,077
Mirage Resorts 675,000 14,892
Newell Co. 522,200 25,229
Procter & Gamble Co. 269,800 22,174
Sara Lee Corp. 230,000 13,699
---------------------------------------------------------------------------
182,498
- ------------------------------------------------------------------------------------------------------------------------
ENERGY--5.3% Atlantic Richfield Co. 225,000 17,550
Baker Hughes, Inc. 300,000 12,150
Chevron Corp. 150,000 12,403
Enron Corp. 400,000 19,675
Exxon Corp. 436,800 31,859
Mobil Corp. 214,000 16,906
Royal Dutch Petroleum 380,000 21,494
Schlumberger, Ltd. 200,000 16,575
Texaco 300,000 18,450
Unocal Corp. 495,000 20,264
---------------------------------------------------------------------------
187,326
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCE--12.1% Allstate Corp. 240,000 $ 23,100
American Express Co. 150,000 15,300
American General Corp. 600,000 39,975
American International Group, Inc. 150,000 19,734
AmSouth Bancorporation 225,000 14,034
BankAmerica Corp. 125,000 10,625
Beneficial Corp. 235,000 30,638
CIGNA Corp. 139,400 28,847
Federal National Mortgage Association 375,000 22,453
First Chicago NBD Corp. 335,000 31,113
First Union Corp. 214,950 12,978
Fleet Financial Group, Inc. 157,200 13,578
H.F. Ahmanson & Co. 125,000 9,531
Jefferson-Pilot Corp. 535,500 31,427
KeyCorp 324,600 12,883
Merrill Lynch & Co. 160,000 14,040
Morgan Stanley, Dean Witter, Discover & Co. 160,000 12,620
NationsBank 210,000 15,908
Torchmark Corp. 500,000 22,281
Travelers Group 297,499 18,203
Washington Mutual, Inc. 243,800 17,081
Wells Fargo & Co. 35,000 12,898
---------------------------------------------------------------------------
429,247
- ------------------------------------------------------------------------------------------------------------------------
HEALTH CARE--7.4% ALZA Corp. 575,000 27,564
Abbott Laboratories 325,000 23,766
American Home Products Corp. 345,000 32,128
Baxter International, Inc. 450,000 24,947
Bristol-Myers Squibb Co. 320,000 33,880
(a)First Health Group Corp. 303,900 17,930
(a)HEALTHSOUTH Corp. 764,600 23,081
Merck & Co. 294,500 35,487
Schering-Plough Corp. 200,000 16,025
(a)Tenet Healthcare Corp. 400,000 14,975
(a)Wellpoint Health Networks 157,000 11,324
---------------------------------------------------------------------------
261,107
- ------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--10.1% Applied Materials 325,000 11,741
Alcatel Alsthom, ADR 300,000 10,875
(a)Cadence Design Systems 570,000 20,698
(a)Cimlinc, Inc., convertible preferred 37,716 141
(a)Cisco Systems 320,000 23,440
Computer Associates International 278,000 16,280
Computer Sciences Corp. 320,000 16,880
(a)Gartner Group 526,300 17,434
Harris Corp. 431,200 20,859
Hewlett-Packard Co. 285,000 21,464
Intel Corp. 350,000 28,284
International Business Machines Corp. 375,000 43,453
Linear Technology Corp. 192,000 15,456
Motorola 300,000 16,688
Parametric Technology Corp. 420,000 13,427
Pitney Bowes, Inc. 270,000 12,960
(a)Solectron Corp. 300,000 13,294
(a)Sterling Commerce, Inc. 386,600 16,455
(a)Sun Microsystems 725,000 29,861
(a)Teradyne, Inc. 250,000 9,125
---------------------------------------------------------------------------
358,815
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TRANSPORTATION--1.2% CSX Corp. 410,000 $ 21,525
Canadian Pacific, Ltd. 675,000 19,870
---------------------------------------------------------------------------
41,395
- ------------------------------------------------------------------------------------------------------------------------
UTILITIES--4.0% AT&T 360,000 21,623
Ameritech Corp. 660,000 28,091
(a)AirTouch Communications 375,000 19,922
BellSouth Corp. 225,000 14,442
SBC Communications, Inc. 690,000 28,592
(a)WorldCom, Inc. 715,600 30,614
---------------------------------------------------------------------------
143,284
---------------------------------------------------------------------------
TOTAL COMMON STOCKS--65.0%
(Cost: $1,763,615) 2,304,063
---------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSET BACKED SECURITIES--.1% Pacific Gas & Electric,
6.42%, 2008 $ 1,600 1,619
Southern California Edison Co.
6.22%, 2004 500 503
6.28%, 2005 250 252
---------------------------------------------------------------------------
2,374
- ------------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRIES--.5% Case Corp., 6.75%, 2007 2,500 2,544
Euramax International, 11.25%, 2006 8,400 9,177
MMI Products, Inc., 11.25%, 2007 1,600 1,764
Stone Container Corp., 12.58%, 2016 3,500 3,850
Stone Container Finance Corp.,
11.50%, 2006 2,500 2,725
---------------------------------------------------------------------------
20,060
- ------------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--.4% Neenah Corp., 11.125%, 2007 4,000 4,410
Nortek, 9.875%, 2004 5,220 5,377
Raytheon Co., 6.75%, 2007 3,100 3,164
---------------------------------------------------------------------------
12,951
</TABLE>
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSUMER CYCLICALS--5.5% AFC Enterprises, Inc., 10.25%, 2007 $ 2,840 $ 3,017
AMF Group
(b) 12.25%, 2006 1,041 843
10.875%, 2006 3,500 3,850
Big Flower Press, Inc., 8.875%, 2007 9,500 9,666
CSC Holdings, 9.25%, 2005 8,200 8,672
Cable & Wireless Communications,
6.625%, 2005 1,300 1,305
Cinemark USA, Inc., 9.625%, 2008 7,000 7,315
Cole National Group, 9.875%, 2006 3,360 3,629
Comcast Cable Communications,
8.50%, 2027 1,400 1,631
Comcast Corp., 9.375%, 2005 8,500 9,052
(b)Comcast UK Cable Partners, Ltd.,
11.20%, 2007 13,120 10,693
Dayton Hudson Corp., 7.50%, 2006 2,400 2,559
Delco Remy International, 10.625%, 2006 10,000 10,900
(b)Diamond Cable Communications, PLC
11.75%, 2005 1,660 1,324
10.75%, 2007 4,840 3,412
Federated Department Stores,
10.00%, 2001 8,150 8,936
Frontiervision, 11.00%, 2006 5,000 5,550
General Electric Co.
8.75%, 2007 4,350 5,079
8.625%, 2008 2,350 2,727
Granite Broadcasting Corp., 9.375%, 2005 5,640 5,781
K-III Communications Corp., 8.50%, 2006 4,250 4,314
Kinder-Care Learning Centers,
9.50%, 2009 8,500 8,521
News American Holdings,
9.25%, 2013 1,950 2,345
Pathmark Stores, Inc., 9.625%, 2003 11,400 11,514
Rogers Cantel Mobile, Inc., 8.80%, 2007 7,900 7,821
Royal Caribbean Cruises, Ltd.,
8.25%, 2005 4,250 4,587
Sinclair Broadcasting Group, Inc.,
8.75%, 2007 3,890 3,973
Tele-Communications, Inc., 9.80%, 2012 5,950 7,465
(b)TeleWest Communications, PLC,
11.00%, 2007 17,250 13,929
Time Warner, Inc.
9.125%, 2013 2,075 2,492
9.15%, 2023 2,325 2,873
Viacom, Inc., 8.00%, 2006 9,475 9,593
Windy Hill Pet Food Company, Inc.,
9.75%, 2007 3,320 3,486
WorldCom, Inc.
7.75%, 2007 1,050 1,133
7.75%, 2027 3,425 3,796
---------------------------------------------------------------------------
193,783
- ------------------------------------------------------------------------------------------------------------------------
CONSUMER DURABLES--.6% American Radio Systems, 9.00%, 2006 5,740 6,056
Del Webb Corp., 9.75%, 2008 8,400 8,694
WestPoint Stevens, 9.375%, 2005 5,100 5,431
---------------------------------------------------------------------------
20,181
</TABLE>
13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSUMER STAPLES--.3% Nabisco, Inc., 6.375%, 2035 $ 3,900 $ 3,795
Riverwood International, 10.25%, 2006 8,350 8,642
---------------------------------------------------------------------------
12,437
- ------------------------------------------------------------------------------------------------------------------------
ENERGY--.6% Benton Oil & Gas Co., 11.625%, 2003 1,750 1,877
Clark Refining, 8.875%, 2007 4,000 4,050
Dailey International Inc., 9.50%, 2008 3,000 3,000
Espirito Santos Centrais Electricas S.A.,
10.00%, 2007 4,000 3,830
GTE North Inc., 6.90%, 2008 2,500 2,596
Gulf Canada Resources, Ltd., 9.25%, 2004 7,000 7,333
---------------------------------------------------------------------------
22,686
- ------------------------------------------------------------------------------------------------------------------------
FINANCE--2.1% AB Spintab, 7.50%, 2049 4,100 4,245
ABN AMRO Bank, 8.25%, 2009 4,250 4,605
Abbey National, PLC, 6.69%, 2005 3,700 3,765
Aegon, N.V., 8.00%, 2006 4,000 4,392
Banco Central Hispano Americano
7.50%, 2005 4,000 4,204
7.70%, 2006 1,000 1,067
Crestar Financial Corp., 8.25%, 2002 2,400 2,571
Den Danske Bank, 7.40%, 2010 4,150 4,360
Empress River Casino Finance,
10.75%, 2002 2,000 2,150
FINOVA Capital Corp., 6.50%, 2002 2,950 2,969
Fleet Financial Group, Inc.
8.125%, 2004 525 570
8.625, 2007 3,325 3,791
Ford Motor Credit Corp., 7.75%, 2005 2,400 2,573
Lehman Brothers Holdings
7.25%, 2003 1,250 1,298
7.375%, 2007 4,000 4,207
Morgan Stanley Group, 6.875%, 2007 3,750 3,855
NationsBank Corp., 9.50%, 2004 2,400 2,779
Repsol International Finance, 7.00%,
2005 5,000 5,177
Scotland International Finance Co.,
8.80%, 2004 1,350 1,504
Skandinaviska Enskilda Banken,
6.625%, 2049 6,000 6,025
Svenska Handelsbanken, 7.125%, 2049 3,175 3,232
Wells Fargo & Co., 6.875%, 2006 3,750 3,864
---------------------------------------------------------------------------
73,203
- ------------------------------------------------------------------------------------------------------------------------
HEALTH CARE--.7% Magellan Health Services, 9.00%, 2008 10,000 10,025
(b)Paragon Health Networks, 10.50%, 2007 6,000 3,960
Tenet Healthcare Corp.
10.125%, 2005 6,420 7,110
8.625% 2007 5,000 5,113
---------------------------------------------------------------------------
26,208
</TABLE>
14
<PAGE> 15
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TRANSPORTATION--.5% Continental Airlines
7.75%, 2014 $ 1,898 $ 2,015
6.90%, 2018 1,850 1,854
Hayes Wheels International, Inc.,
11.00%, 2006 8,000 9,020
Norfork Southern Corp., 7.350%, 2007 3,100 3,302
---------------------------------------------------------------------------
16,191
- ------------------------------------------------------------------------------------------------------------------------
UTILITIES--1.4% (b)Call-Net Enterprises, Inc.,
13.25%, 2004 6,350 5,969
Commonwealth Edison
7.375%, 2004 3,800 3,944
7.00%, 2005 1,250 1,288
Hyder, PLC, 6.875%, 2007 2,800 2,852
(b)International CableTel, Inc.
12.75%, 2005 1,670 1,440
11.50%, 2006 11,330 9,206
(b)McLeod, Inc., 10.50%, 2007 11,700 8,775
(b)Nextel Communications, 9.95%, 2008 14,150 9,091
U.S. West Cap Funding, Inc., 7.90%, 2027 3,750 4,267
Yorkshire Power, 6.496%, 2008 2,125 2,104
---------------------------------------------------------------------------
48,936
---------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS--12.7%
(Cost: $435,906) 449,010
---------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
MONEY MARKET Yield--5.55% to 5.56%
INSTRUMENTS--1.3% Due--May 1998
(Cost: $45,024) 45,100 45,024
---------------------------------------------------------------------------
TOTAL INVESTMENTS--100.1%
(Cost: $2,977,441) 3,543,693
---------------------------------------------------------------------------
LIABILITIES, LESS OTHER ASSETS--(.1)% (4,470)
---------------------------------------------------------------------------
NET ASSETS--100% $3,539,223
---------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Deferred interest obligation; currently zero coupon under the terms of the
initial offering.
Based on the cost of investments of $2,977,441,000 for federal income tax
purposes at April 30, 1998, the gross unrealized appreciation was $582,209,000,
the gross unrealized depreciation was $15,957,000 and the net unrealized
appreciation on investments was $566,252,000.
See accompanying Notes to Financial Statements.
15
<PAGE> 16
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998 (unaudited)
(IN THOUSANDS)
<TABLE>
<S> <C>
- --------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------
Investments, at value
(Cost: $2,977,441) $3,543,693
- --------------------------------------------------------------------------
Receivable for:
Investments sold 6,187
- --------------------------------------------------------------------------
Fund shares sold 546
- --------------------------------------------------------------------------
Dividends and interest 28,918
- --------------------------------------------------------------------------
TOTAL ASSETS 3,579,344
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- --------------------------------------------------------------------------
Cash overdraft 627
- --------------------------------------------------------------------------
Payable for:
Investments purchased 33,751
- --------------------------------------------------------------------------
Fund shares redeemed 1,706
- --------------------------------------------------------------------------
Management fee 1,573
- --------------------------------------------------------------------------
Distribution services fee 699
- --------------------------------------------------------------------------
Administrative services fee 690
- --------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 939
- --------------------------------------------------------------------------
Trustees' fees 136
- --------------------------------------------------------------------------
Total liabilities 40,121
- --------------------------------------------------------------------------
NET ASSETS $3,539,223
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- --------------------------------------------------------------------------
Paid-in capital $2,765,300
- --------------------------------------------------------------------------
Undistributed net realized gain on investments 198,947
- --------------------------------------------------------------------------
Net unrealized appreciation on investments 566,252
- --------------------------------------------------------------------------
Undistributed net investment income 8,724
- --------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $3,539,223
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
THE PRICING OF SHARES
- --------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($2,430,288 / 219,939 shares outstanding) $11.05
- --------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $11.72
- --------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($1,072,680 / 97,252 shares outstanding) $11.03
- --------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($23,521 / 2,129 shares outstanding) $11.05
- --------------------------------------------------------------------------
CLASS I SHARES
Net asset value and redemption price per share
($12,734 / 1,153 shares outstanding) $11.04
- --------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1998 (unaudited)
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
NET INVESTMENT INCOME
- ------------------------------------------------------------------------
Interest $ 48,893
- ------------------------------------------------------------------------
Dividends 13,261
- ------------------------------------------------------------------------
Total investment income 62,154
- ------------------------------------------------------------------------
Expenses:
Management fee 9,024
- ------------------------------------------------------------------------
Distribution services fee 4,284
- ------------------------------------------------------------------------
Administrative services fee 3,936
- ------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 4,726
- ------------------------------------------------------------------------
Professional fees 31
- ------------------------------------------------------------------------
Reports to shareholders 543
- ------------------------------------------------------------------------
Trustees' fees and other 108
- ------------------------------------------------------------------------
Total expenses 22,652
- ------------------------------------------------------------------------
NET INVESTMENT INCOME 39,502
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
- ------------------------------------------------------------------------
Net realized gain on sales of investments 196,500
- ------------------------------------------------------------------------
Change in net unrealized appreciation on investments 208,499
- ------------------------------------------------------------------------
Net gain on investments 404,999
- ------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $444,501
- ------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31,
(UNAUDITED) 1997
- ------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income $ 39,502 82,022
- ------------------------------------------------------------------------------------------------
Net realized gain 196,500 438,347
- ------------------------------------------------------------------------------------------------
Change in net unrealized appreciation 208,499 17,097
- ------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 444,501 537,466
- ------------------------------------------------------------------------------------------------
Net equalization charges (795) (1,348)
- ------------------------------------------------------------------------------------------------
Distribution from net investment income (43,612) (81,608)
- ------------------------------------------------------------------------------------------------
Distribution from net realized gain (439,382) (395,023)
- ------------------------------------------------------------------------------------------------
Total dividends to shareholders (482,994) (476,631)
- ------------------------------------------------------------------------------------------------
Net increase from capital share transactions 337,128 161,098
- ------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 297,840 220,585
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------
Beginning of period 3,241,383 3,020,798
- ------------------------------------------------------------------------------------------------
END OF PERIOD (including undistributed
net investment income of
$8,724 and $13,629, respectively) $3,539,223 3,241,383
- ------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
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 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 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. 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. 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. 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.
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
18
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
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, 1998.
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 INVESTMENT MANAGER COMBINATION. Effective December
31, 1997, Zurich Insurance Company, the parent of
Zurich Kemper Investments, Inc. (ZKI), acquired a
majority interest in Scudder, Stevens & Clark, Inc.
(Scudder), another major investment manager. As a
result of this transaction, the operations of ZKI
were combined with Scudder to form a new global
investment organization named Scudder Kemper
Investments, Inc. (Scudder Kemper). The transaction
resulted in the termination of the Fund's
investment management agreement with ZKI, however,
a new investment management agreement between the
Fund and Scudder Kemper was approved by the Fund's
Board of Trustees and by the Fund's shareholders.
The new management agreement, which was effective
December 31, 1997, is the same in all material
respects as the previous management agreement,
except that Scudder Kemper is the new investment
adviser to the Fund. In addition, the names of the
Fund's principal underwriter and shareholder
service agent were changed to Kemper Distributors,
Inc. (KDI) and Kemper Service Company (KSvC),
respectively.
MANAGEMENT AGREEMENT. The Fund has a management
agreement with Scudder Kemper, 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 $9,024,000 for the six months
ended April 30, 1998.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
The Fund has an underwriting and distribution
services agreement with KDI. Underwriting
commissions paid in connection with the
distribution of Class A shares are as follows:
<TABLE>
<CAPTION>
COMMISSIONS
COMMISSIONS ALLOWED BY KDI
RETAINED BY KDI TO FIRMS
--------------- --------------
<S> <C> <C>
Six months ended April 30, 1998 $119,000 1,658,000
</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
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
Class B and Class C shares. Distribution fees, CDSC
and commissions related to Class B and Class C
shares are as follows:
<TABLE>
<CAPTION>
DISTRIBUTION FEES COMMISSIONS AND
AND CDSC DISTRIBUTION FEES PAID
RECEIVED BY KDI BY KDI TO FIRMS
----------------- ----------------------
<S> <C> <C>
Six months ended April 30, 1998 $4,930,000 2,020,000
</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, 1998 $3,936,000 4,002,000 11,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
KSvC is the shareholder service agent of the Fund.
Under the agreement, KSvC received shareholder
services fees of $3,781,000 for the six months
ended April 30, 1998.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. During the six months ended April
30, 1998, 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, 1998, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $1,349,652
Proceeds from sales 1,358,218
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, 1998 OCTOBER 31, 1997
----------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 8,952 $ 93,445 15,216 $ 167,389
---------------------------------------------------------------------------------
Class B 7,010 76,322 13,404 147,504
---------------------------------------------------------------------------------
Class C 572 6,154 748 8,218
---------------------------------------------------------------------------------
Class I 143 1,567 422 4,707
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 29,551 296,003 28,102 284,189
---------------------------------------------------------------------------------
Class B 15,482 154,638 16,342 164,518
---------------------------------------------------------------------------------
Class C 258 2,588 177 1,792
---------------------------------------------------------------------------------
Class I 184 1,835 180 1,820
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
SHARES REDEEMED
Class A (17,880) (192,266) (35,349) (386,500)
---------------------------------------------------------------------------------
Class B (9,236) (97,900) (20,367) (222,852)
---------------------------------------------------------------------------------
Class C (242) (2,622) (365) (4,008)
---------------------------------------------------------------------------------
Class I (250) (2,636) (509) (5,679)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 15,946 174,764 9,946 109,458
---------------------------------------------------------------------------------
Class B (15,971) (174,764) (9,963) (109,458)
---------------------------------------------------------------------------------
NET INCREASE
FROM CAPITAL SHARE
TRANSACTIONS $ 337,128 $ 161,098
---------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 22
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------------
CLASS A
----------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, -----------------------------
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------
Net asset value, beginning of period $11.34 11.28 10.60 9.10 11.23
- -----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .15 .31 .28 .29 .19
- -----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.27 1.57 1.24 1.46 (1.01)
- -----------------------------------------------------------------------------------------
Total from investment operations 1.42 1.88 1.52 1.75 (.82)
- -----------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .16 .33 .34 .25 .23
- -----------------------------------------------------------------------------------------
Distribution from net realized gain 1.55 1.49 .50 -- 1.08
- -----------------------------------------------------------------------------------------
Total dividends 1.71 1.82 .84 .25 1.31
- -----------------------------------------------------------------------------------------
Net asset value, end of period $11.05 11.34 11.28 10.60 9.10
- -----------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 14.22% 18.95 15.34 19.46 (7.92)
- -----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------
Expenses 1.01% 1.01 1.05 1.12 1.13
- -----------------------------------------------------------------------------------------
Net investment income 2.66% 2.92 2.76 3.00 2.34
- -----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------
CLASS B
------------------------------------------------
SIX MONTHS MAY 31
ENDED YEAR ENDED OCTOBER 31, TO
APRIL 30, ---------------------- OCTOBER 31,
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.33 11.27 10.59 9.09 9.24
- -------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .09 .22 .19 .20 .06
- -------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.27 1.55 1.23 1.46 (.16)
- -------------------------------------------------------------------------------------------
Total from investment operations 1.36 1.77 1.42 1.66 (.10)
- -------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .11 .22 .24 .16 .05
- -------------------------------------------------------------------------------------------
Distribution from net realized gain 1.55 1.49 .50 -- --
- -------------------------------------------------------------------------------------------
Total dividends 1.66 1.71 .74 .16 .05
- -------------------------------------------------------------------------------------------
Net asset value, end of period $11.03 11.33 11.27 10.59 9.09
- -------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 13.60% 17.86 14.28 18.42 (1.06)
- -------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------------
Expenses 1.97% 1.95 1.99 2.05 2.03
- -------------------------------------------------------------------------------------------
Net investment income 1.70% 1.98 1.82 2.07 1.57
- -------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE> 23
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
------------------------------------------------
CLASS C
------------------------------------------------
SIX MONTHS MAY 31
ENDED YEAR ENDED OCTOBER 31, TO
APRIL 30, ---------------------- OCTOBER 31,
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.34 11.28 10.61 9.09 9.24
- -------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .10 .22 .20 .21 .06
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.27 1.56 1.22 1.48 (.16)
- -------------------------------------------------------------------------------------------------
Total from investment operations 1.37 1.78 1.42 1.69 (.10)
- -------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .11 .23 .25 .17 .05
- -------------------------------------------------------------------------------------------------
Distribution from net realized gain 1.55 1.49 .50 -- --
- -------------------------------------------------------------------------------------------------
Total dividends 1.66 1.72 .75 .17 .05
- -------------------------------------------------------------------------------------------------
Net asset value, end of period $11.05 11.34 11.28 10.61 9.09
- -------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 13.72% 17.92 14.31 18.76 (1.05)
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------------------
Expenses 1.89% 1.90 1.89 1.86 2.00
- -------------------------------------------------------------------------------------------------
Net investment income 1.78% 2.03 1.92 2.26 1.60
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------
CLASS I
---------------------------------------------------
SIX MONTHS JULY 3
ENDED YEAR ENDED OCTOBER 31, TO OCTOBER
APRIL 30, ---------------------- 31,
1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.33 11.27 10.61 10.07
- -----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .17 .36 .32 .10
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gain 1.27 1.55 1.23 .52
- -----------------------------------------------------------------------------------------------------
Total from investment operations 1.44 1.91 1.55 .62
- -----------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .18 .36 .39 .08
- -----------------------------------------------------------------------------------------------------
Distribution from net realized gain 1.55 1.49 .50 --
- -----------------------------------------------------------------------------------------------------
Total dividends 1.73 1.85 .89 .08
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period $11.04 11.33 11.27 10.61
- -----------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 14.42% 19.40 15.64 6.21
- -----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------------------
Expenses .67% .71 .72 .61
- -----------------------------------------------------------------------------------------------------
Net investment income 3.00% 3.22 3.09 2.97
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ----------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, -------------------------------------------------
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets at end of period (in thousands) $3,539,223 3,241,383 3,020,798 2,926,542 2,864,322
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 74% 122 85 142 121
- ----------------------------------------------------------------------------------------------------------------
Average commission rates paid per share on stock transactions for the six months ended April 30, 1998 and the
years ended October 31, 1997 and 1996 were $.0579, $.0578 and $.0580, respectively.
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Total return does not reflect the effect of any sales charges. Data for
the period ended April 30, 1998 is unaudited.
23
<PAGE> 24
SHAREHOLDERS' MEETING
SPECIAL SHAREHOLDERS' MEETING
On December 3, 1997, a special shareholders' meeting was held and adjourned as
necessary. Kemper Total Return Fund shareholders were asked to vote on five
separate issues: election of the nine members to the Board of Trustees,
ratification of Ernst & Young LLP as independent auditors, approval of a new
investment management agreement with Scudder Kemper Investments, Inc., approval
of changes in the fund's fundamental investment policies to permit a
master/feeder fund structure and approval of a new rule 12b-1 distribution plan
with Zurich Kemper Distributors, Inc. for Class B shares and Class C shares. The
following are the results for each issue:
1) Election of Trustees
<TABLE>
<CAPTION>
For Withheld
<S> <C> <C>
David W. Belin 155,194,036 2,934,162
Lewis A. Burnham 155,322,545 2,805,652
Donald L. Dunaway 155,284,621 2,843,577
Robert B. Hoffman 155,307,190 2,821,008
Donald R. Jones 155,239,674 2,888,524
Shirley D. Peterson 155,221,444 2,906,754
Daniel Pierce 155,174,802 2,953,396
William P. Sommers 155,321,474 2,806,724
Edmond D. Villani 155,150,472 2,977,725
</TABLE>
2) Ratification of the selection of Ernst & Young LLP as independent auditors
for the current fiscal year.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
153,031,828 1,277,601 3,818,769
</TABLE>
3) Approval of new investment management agreement with Scudder Kemper
Investments, Inc.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
146,396,096 3,109,061 5,736,408
</TABLE>
4) Approval of changes in the fund's fundamental investment policies to permit a
master/feeder fund structure.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
145,101,505 7,093,529 10,926,392
</TABLE>
5) To approve a new rule 12b-1 distribution plan with Zurich Kemper
Distributors, Inc.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C> <C>
Class B 47,125,442 1,203,959 2,225,635
Class C 803,931 195 25,758
</TABLE>
24
<PAGE> 25
NOTES
25
<PAGE> 26
NOTES
26
<PAGE> 27
NOTES
27
<PAGE> 28
TRUSTEES&OFFICERS
TRUSTEES OFFICERS
DANIEL PIERCE MARK CASADY STEVEN H. REYNOLDS
Chairman and Trustee President Vice President
DAVID W. BELIN PHILIP J. COLLORA LINDA J. WONDRACK
Trustee Vice President and Vice President
Secretary
LEWIS A. BURNHAM MAUREEN E. KANE
Trustee JOHN R. HEBBLE Assistant Secretary
Treasurer
DONALD L. DUNAWAY CAROLINE PEARSON
Trustee JERALD K. HARTMAN Assistant Secretary
Vice President
ROBERT B. HOFFMAN ELIZABETH C. WERTH
Trustee GARY A. LANGBAUM Assistant Secretary
Vice President
DONALD R. JONES
Trustee THOMAS W. LITTAUER
Vice President
SHIRLEY D. PETERSON
Trustee ANN M. MCCREARY
Vice President
WILLIAM P. SOMMERS
Trustee KATHRYN L. QUIRK
Vice President
EDMOND D. VILLANI
Trustee
- --------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 419557
Kansas City, MO 64141
- --------------------------------------------------------------------------------
CUSTODIAN AND INVESTORS FIDUCIARY TRUST COMPANY
TRANSFER AGENT 801 Pennsylvania
Kansas City, MO 64105
- --------------------------------------------------------------------------------
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606
www.kemper.com
[KEMPER FUNDS LOGO]
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
Printed on recycled paper in the U.S.A.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Equity Funds/Growth Style prospectus.
KTRF - 3 (6/98) 1048320
