<PAGE> 1
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED APRIL 30, 1999
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
[MORNINGSTAR RATINGS LOGO]
SEEKING THE HIGHEST TOTAL RETURN, A COMBINATION OF INCOME
AND CAPITAL APPRECIATION, CONSISTENT WITH REASONABLE RISK
KEMPER
TOTAL RETURN FUND
"... As we did at the start of the semiannual period,
we continue to have an optimistic long-term
outlook for the domestic economy and
for large-cap, quality growth stocks. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
Economic Overview
5
Performance Update
8
Terms to Know
9
Industry Sectors
10
Largest Holdings
11
Portfolio of Investments
17
Financial Statements
19
Notes to Financial Statements
22
Financial Highlights
24
Shareholders' Meeting
AT A GLANCE
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KEMPER TOTAL RETURN FUND
TOTAL RETURNS*
- --------------------------------------------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 1999 (UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 15.62%
CLASS B 14.95%
CLASS C 14.93%
LIPPER BALANCED FUNDS CATEGORY AVERAGE* 11.67
- --------------------------------------------------------------------------------
</TABLE>
RETURNS AND RANKINGS ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUES WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN ORIGINAL COST.
* LIPPER ANALYTICAL SERVICES, INC. RETURNS AND RANKINGS ARE BASED UPON CHANGES
IN NET ASSET VALUE WITH ALL DIVIDENDS REINVESTED AND DO NOT INCLUDE THE
EFFECT OF SALES CHARGES AND, IF THEY HAD, RESULTS MAY HAVE BEEN LESS
FAVORABLE.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
4/30/99 10/31/98
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER TOTAL RETURN FUND CLASS A $11.28 $10.54
- --------------------------------------------------------------------------------
KEMPER TOTAL RETURN FUND CLASS B $11.25 $10.52
- --------------------------------------------------------------------------------
KEMPER TOTAL RETURN FUND CLASS C $11.26 $10.54
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
KEMPER TOTAL RETURN FUND
LIPPER RANKINGS AS OF 4/30/99*
- --------------------------------------------------------------------------------
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 #122 of #150 of #144 of
422 funds 422 funds 422 funds
- --------------------------------------------------------------------------------
5-YEAR #76 of N/A N/A
177 funds
- --------------------------------------------------------------------------------
10-YEAR #12 of N/A N/A
56 funds
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15-YEAR #16 of N/A N/A
29 funds
- --------------------------------------------------------------------------------
20-YEAR #6 of N/A N/A
28 funds
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
DURING THE PERIOD ENDED APRIL 30, 1999, KEMPER TOTAL RETURN FUND PAID THE
FOLLOWING DIVIDENDS PER SHARE:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS B
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME
DIVIDEND $0.1600 $0.1033 $0.1140
- --------------------------------------------------------------------------------
SHORT-TERM
CAPITAL GAIN $0.01 $0.01 $0.01
- --------------------------------------------------------------------------------
LONG-TERM
CAPITAL GAIN $0.67 $0.67 $0.67
- --------------------------------------------------------------------------------
</TABLE>
YOUR FUND'S STYLE
- --------------------------------------------------------------------------------
MORNINGSTAR EQUITY STYLE BOX
- --------------------------------------------------------------------------------
[MORNINGSTAR STYLE/SIZE DIAGRAM]
Source: Morningstar, Inc. Chicago, IL. (312)696-6000. The Equity Style Box
placement is based on two variables: a fund's market capitalization relative to
the movements of the market, and a fund's valuation, which is calculated by
comparing the stocks in the fund's portfolio with the most recent of the three
market-cap groups.
The style box represents a snapshot of the fund's portfolio on a single day.
It is not an exact assessment of risk and does not represent future performance.
The fund's portfolio changes from day-to-day. A longer-term view is represented
by the fund's Morningstar category, which is based on its actual investment
style as measured by its underlying portfolio holdings over the past three
years. Category placements of new funds are estimated. Morningstar has placed
Kemper total return fund in the domestic hybrid category. Please consult the
prospectus for a description of investment policies.
<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.
SILVIA HOLDS A BACHELOR'S DEGREE AND PH.D. IN ECONOMICS FROM NORTHEASTERN
UNIVERSITY IN BOSTON AND A MASTER'S DEGREE IN ECONOMICS FROM BROWN UNIVERSITY IN
PROVIDENCE, R.I. PRIOR TO HIS CAREER AT SCUDDER KEMPER INVESTMENTS, HE WAS WITH
THE HARRIS BANK AND ALSO TAUGHT AT INDIANA UNIVERSITY.
SCUDDER KEMPER INVESTMENTS, THE INVESTMENT MANAGER FOR KEMPER FUNDS, IS ONE OF
THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS IN THE
WORLD, MANAGING MORE THAN $280 BILLION IN ASSETS FOR INSTITUTIONAL AND CORPORATE
CLIENTS, RETIREMENT AND PENSION PLANS, INSURANCE COMPANIES, MUTUAL FUND
INVESTORS AND INDIVIDUALS. SCUDDER KEMPER INVESTMENTS OFFERS A FULL RANGE OF
INVESTMENT COUNSEL AND ASSET MANAGEMENT CAPABILITIES BASED ON A COMBINATION OF
PROPRIETARY RESEARCH AND DISCIPLINED, LONG-TERM INVESTMENT STRATEGIES.
DEAR KEMPER FUNDS SHAREHOLDER:
In April, investor enthusiasm drove the market to its second milestone in a
year -- the Dow Jones Industrial Average rose to 11,000 just a month after it
broke 10,000 for the first time. In May, expectations of rising inflation and
higher short-term interest rates led to a slowdown. But in early June, the
market rallied again. What drove the market rallies, and what, at the same time,
led to investor anxiety?
Inflation worries have been seeping into the market for months. The growing
conviction that Asian and Latin American economies are recovering is raising
commodity prices, particularly oil. The price of West Texas Intermediate oil
surged from less than $12 in February to almost $19 in early May. That alone
almost guarantees a rise in the "headline" inflation rate this year, which is
the rate of inflation as measured by the entire CPI. But it's important to note
that the Federal Reserve Board looks primarily at the core inflation rate, which
is the CPI minus food and energy -- and the core inflation rate looks at if it
will remain low at about 2 percent this year. Investors should note, however,
that the Federal Reserve Board also considers what will happen to inflation next
year -- and all indications are that the Fed expects inflation to increase in
2000.
As a result, the Fed is considering a change in monetary policy. Recent Fed
policy has been reactive, not proactive, which means that the Fed tends to
respond to inflation only when it picks up. That may change as the Fed tries to
preemptively halt inflation momentum. Such a change in monetary policy would
likely lead to an increase in short-term interest rates before the end of the
year. However, the change is likely to be small. Because we don't see pressure
toward sustained inflation, there's no reason for the Fed to want a sharp
slowdown in the overall economy.
The long-term economic situation, however, appears to be positive. The
federal budget surplus continues to benefit from good revenue gains (which are
based on good income gains, especially for households), good capital gains and
continued restraint in federal spending. The surplus this year is expected to
approach $100 billion.
This positive environment is exactly what sometimes poses risk for
investors, and is key to understanding recent volatility in the market. A strong
economy has the potential to feed inflation fears and drive up interest rates.
Indeed, recent market events illustrate the domino effect of investors reacting
to positive economic news, which they consider troubling at this point, more
than eight years into the economic expansion. In April, the steady stream of
positive economic news led to a sell-off in the financial markets based on fears
that the strong pace of economic growth would eventually lead to higher
inflation. The benchmark 30-year Treasury bond yield rose, which pulled stocks
lower.
Where can we expect to go from here? The fundamentals by which we judge the
health of the economy suggest continued growth as we move into the second half
of 1999. For example, the gross domestic product (GDP), the value of all goods
and services produced in the U.S., rose at an annual rate of 4.5 percent in the
first quarter, following a tremendous fourth-quarter surge of 6 percent. This is
very much in line with what we've grown accustomed to over the past year -- over
the four quarters of 1998, the U.S. economy expanded by 4.3 percent. Some people
aren't surprised at all by strong GDP growth that once would have alarmed them.
That's partially because we've grown accustomed to a strong economy. But it's
also because we've been able to absorb growth without driving up inflation.
That's important for investors. If prices had been rising as the economy was
growing, the Fed would have most likely raised short-term interest rates by now,
and that would have changed the financial market outlook.
However, we do see some vulnerability on the economic front. Trade is a weak
spot in the economy right now. Exports of U.S. goods and services dropped in the
first quarter while imports soared. This reflects the fact that the U.S. is one
of the few countries financially fit enough to buy goods produced elsewhere in
the world. But for as long as less vibrant international economies are unable to
buy U.S. goods, the profitability of U.S. companies trying to export will be
challenged.
When you think about it, vulnerability in regard to the international
economy is nothing new. Globally, the outlook is slightly more positive than it
was a few months ago. For example, the European markets are slowing down, which
has already led to the European Central Bank lowering interest rates in order to
boost domestic spending. In many countries in Europe there are no fixed-rate
mortgages, only adjustable-rate mortgages. When interest rates go down, mortgage
payments are reduced and homeowners can spend money elsewhere. This has a huge
impact on consumer spending, and will help European equities over time.
Additionally, the situation in Japan remains unchanged. And, problems in the
emerging markets haven't had the negative impact many people expected -- both
the Mexican and Brazilian stock markets have actually risen in the past two
months.
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 (5/31/99) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10 Year Treasury Rate(1) 5.54 5.34 5.57 6.42
Prime Rate(2) 7.75 8.5 8.5 8.25
Inflation Rate(3)* 2.28 1.68 1.63 3.04
The U.S. Dollar(4) -1.22 8.17 5.05 7.67
Capital goods orders(5)* 11.67 3.05 12.61 3.93
Industrial production (5)* 2.01 2.71 5.92 6.44
Employment growth(6) 2.14 2.67 2.76 2.44
</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, 1999.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
But don't forget that international crises have the potential to affect the
U.S. markets dramatically. An increase in military spending on Kosovo by the 11
European Monetary Union (EMU) countries could force them to spend less in other
areas, which could have economic implications, including higher interest rates.
That's because many European countries have small economies and little leeway in
their budgets. Consequently, those countries finance unplanned military
expenditures by selling government bonds -- which, in Europe's small bond
market, typically raises interest rates. As an example, consider Italy, which
recently asked for more leeway on its deficit targets. When leeway was granted,
this led to a further sell-off in the eurodollar.
The international situation alone, however, is by no means an indicator of
a U.S. slowdown -- and without any such indications, complacency may be our
greatest concern. It's easy to look at the current U.S. economic situation and
behave as if no risk exists. But when you see the market soaring and are tempted
to jump in, note that the bull market grew to records on the strength of just a
few dozen stocks, while most other stock prices were flat or actually declined.
In summary, there are concerns that the current economy is unsustainable and
we soon could see an abrupt end. In many cases, however, people are looking for
a slowdown because they are fearful growth will drive up inflation these are
particularly older investors who are accustomed to inflation accompanying
growth. But again, sustained inflation seems unlikely, so a sharp slowdown is
not necessary. In the short term, we expect a modest economic slowdown but no
recession. The best approach now, as in any market, is to diversify and invest
for the long term.
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
/s/ JOHN E. SILVIA
John E. Silvia
THE INFORMATION CONTAINED IN THIS PIECE HAS BEEN TAKEN FROM SOURCES BELIEVED TO
BE RELIABLE, BUT THE ACCURACY OF THE INFORMATION IS NOT GUARANTEED. THE OPINIONS
AND FORECASTS EXPRESSED ARE THOSE OF DR. JOHN SILVIA AS OF JUNE 9, 1999, AND MAY
NOT ACTUALLY COME TO PASS. THIS INFORMATION IS SUBJECT TO CHANGE. NO PART OF
THIS MATERIAL IS INTENDED AS AN INVESTMENT RECOMMENDATION.
TO OBTAIN A KEMPER FUNDS PROSPECTUS, DOWNLOAD ONE FROM WWW.KEMPER.COM, TALK TO
YOUR FINANCIAL REPRESENTATIVE OR CALL SHAREHOLDER SERVICES AT (800) 621-1048.
THE PROSPECTUS CONTAINS MORE COMPLETE INFORMATION, INCLUDING MANAGEMENT FEES AND
EXPENSES. PLEASE READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
4
<PAGE> 5
PERFORMANCE UPDATE
[LANGBAUM PHOTO]
GARY A. LANGBAUM HAS BEEN A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS,
INC. SINCE 1988. LANGBAUM IS A CHARTERED FINANCIAL ANALYST WITH 28 YEARS OF
EXPERIENCE IN EQUITY RESEARCH AND PORTFOLIO MANAGEMENT.
[MCCORMICK PHOTO]
PORTFOLIO MANAGER TRACY MCCORMICK IS A MANAGING DIRECTOR AND HAS MORE THAN 15
YEARS OF INVESTMENT INDUSTRY EXPERIENCE. MCCORMICK FOCUSES HER CONTRIBUTIONS ON
THE EQUITY PORTION OF THE PORTFOLIO.
PORTFOLIO MANAGER STEVEN WOHLER, A MANAGING DIRECTOR WITH THE FIRM, WITH 20
YEARS OF INVESTMENT INDUSTRY EXPERIENCE, CONTRIBUTES TO THE MANAGEMENT OF THE
BOND PORTION OF THE PORTFOLIO. HE IS ALSO A CHARTERED FINANCIAL ANALYST.
THE MANAGEMENT TEAM IS SUPPORTED BY SCUDDER KEMPER INVESTMENTS' LARGE STAFF OF
ANALYSTS, RESEARCHERS, TRADERS AND ECONOMISTS.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE
MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
UNDER THE DIRECTION OF LEAD PORTFOLIO MANAGER GARY LANGBAUM, KEMPER TOTAL RETURN
FUND EARNED A SOLID RETURN FOR THE SEMIANNUAL PERIOD, EASILY OUTDISTANCING THE
PEER GROUP AVERAGE. BELOW, LANGBAUM DISCUSSES THE EVENTS THAT SHAPED THE MARKET,
THE FUND'S BALANCED APPROACH AND HOW HE POSITIONED THE PORTFOLIO.
Q BEFORE YOU DISCUSS THE FUND, COULD YOU PROVIDE US WITH AN OVERVIEW OF THE
MARKET CLIMATE DURING THE SEMIANNUAL PERIOD?
A The past six months turned out to be a far more robust period than many
had anticipated. In the wake of last August's Russian debt default and the
ensuing market correction, many individuals were pessimistic about the health of
the global and domestic economies.
As we noted in our previous annual report (dated October 31, 1998), we
believed these dire warnings were not well founded. We're pleased to report that
the intervening months bore out our optimistic outlook. Despite the challenging
climate the markets saw in the summer and early fall of 1998, strong companies
survived and continued to be rewarded. We didn't enter a global recession.
Economic growth remained slow and steady, while inflation and interest rates
remained low. High employment rates, paired with strong consumer confidence,
further bolstered healthy economic growth and corporate profits.
Throughout the fall and early part of 1999, investors generally preferred
large-cap growth stocks to small-cap and value stocks. The global volatility of
recent months still cast a shadow across the market, and large-cap growth stocks
were better able to generate higher confidence. Consumer nondurable
stocks -- especially retail and media -- flourished. Excitement about the
Internet contributed to a strong technology rally.
Toward the end of the semiannual period, however, the market shifted
direction. Cyclical stocks began to gain ground. Cyclicals include basic
industries, capital goods and more commodity-oriented companies. These sectors
are considered to be more economically sensitive, typically thriving in
accelerating-growth or inflationary climates.
Q GARY, HOW DID KEMPER TOTAL RETURN FUND PERFORM DURING THE SEMIANNUAL
PERIOD?
A Kemper Total Return Fund posted strong gains during the semiannual period.
For the six-months ending April 30, 1999, Kemper Total Return Fund earned 15.62
percent (Class A shares, unadjusted for any sales charges).
In both absolute and comparative terms, the fund's performance stacks up
very well. First, from an absolute perspective, let's consider the long-term
performance of stocks. From 1949 through 1998, the average annual return for
stocks is about 14 percent. (Keep in mind past performance is no guarantee of
future results). During the past six months alone, we've beaten this historical
average.
The fund's gains compare favorably to its peers, as well. For the semiannual
period, the average return for the Lipper Balanced Fund category was 11.67
percent. Kemper Total Return Fund's gain surpasses the category average by a
nice margin.
5
<PAGE> 6
PERFORMANCE UPDATE
Q OFTEN, FUNDS COMPARE THEIR PERFORMANCE TO THE S&P 500 INDEX. HOW DID
KEMPER TOTAL RETURN STACK UP AGAINST THIS BENCHMARK?
A Reflecting the overall strength of the large-cap equity environment during
the semiannual period, the S&P 500 returned 22.31 percent. Bonds, in contrast,
enjoyed more muted performance. The Lehman Brothers Government/Corporate Bond
Index* fell 0.12%.
When you compare the gains of the fund relative to an all-stock benchmark
such as the S&P 500, it's essential to keep in mind that Kemper Total Return
Fund is a balanced fund. Balanced funds invest in both stocks and bonds.
Throughout the first half of the semiannual period, the fund typically held
approximately 65 percent of assets in stocks. The remainder was invested in a
core bond portfolio -- a mix of high-grade and high-yield corporate bonds and
U.S. Treasury bonds. Given the portion of assets we did invest in stocks, the
fund remained quite competitive with the benchmark.
*THE LEHMAN BROTHERS GOVERNMENT/ CORPORATE BOND INDEX IS AN UNMANAGED INDEX
COMPRISED OF INTERMEDIATE AND LONG-TERM GOVERNMENT AND INVESTMENT GRADE
CORPORATE DEBT SECURITIES. SOURCE IS LIPPER ANALYTICAL SERVICES, INC.
Q COULD YOU SUMMARIZE THE PRINCIPLES OF KEMPER TOTAL RETURN FUND'S BALANCED
APPROACH? WHAT ROLE COULD THE FUND PLAY IN AN INVESTOR'S PORTFOLIO?
A Kemper Total Return Fund seeks both capital growth and current income. To
pursue these goals, we combine stocks and bonds in a single portfolio. In
exchange for their higher return potential, stocks have tended to be more
volatile. Bonds, meanwhile, typically offer a lower level of return, but also
carry a lower degree of risk compared to stocks.
Kemper Total Return Fund provides exposure to both stocks and bonds. That
means your eggs aren't all in one basket. If stocks falter, bond returns may at
least partially offset the losses, and vice versa. Because of this
diversification, the fund may be a good choice for cautious investors who would
like a more conservative approach to growth, or for investors who'd like the
opportunity to pursue current income as well as growth.
Q KEMPER TOTAL RETURN'S CHARTER ALLOWS YOU TO ADJUST THE BALANCE BETWEEN
STOCKS AND BONDS. WHAT POTENTIAL BENEFITS DOES THIS FLEXIBILITY OFFER? HOW DO
YOU DETERMINE HOW MUCH YOU'LL INVEST IN STOCKS AND BONDS?
A We believe that active monitoring of the stock/bond allocation offers an
extra edge. We've all seen that the market climate can change quickly. The
fund's prospectus allows us to respond to fluctuating market conditions and
position the fund opportunistically.
We adjust the allocation based on our analysis of market and economic
conditions. We consider interest-rate and inflation trends, monetary policy,
domestic earnings growth and the global economy. A "neutral" mix would generally
be 60 percent stocks and 40 percent bonds. At the end of the semiannual period,
we held about 65 percent of assets in stocks, and 35 percent in bonds. This
current allocation emphasizes our positive outlook for stocks.
In normal market conditions, we don't expect to veer far from the neutral
allocations. However, we do believe that, over time, even slight shifts have the
potential to benefit the fund's performance.
Q HOW HAVE YOU POSITIONED THE FUND'S CORE-BOND COMPONENT?
A Within the fixed-income allocation, we seek a balance of stability and
income. Emphasizing quality, we've invested primarily in U.S. Treasuries and
investment-grade corporate bonds. To bolster income potential, we include a
smaller high-yield bond component. Currently, the fund holds 24 percent of total
net assets in U.S. Treasuries, 4 percent in high-grade corporate issues, and 7
percent in high-yield bonds.
Q WHAT DO YOU LOOK FOR WHEN YOU BUY AND SELL STOCKS?
A We understand that investors choose the fund for its quality-focused
approach. Accordingly, within our stock allocation, we favor established,
large-cap growth domestic companies with excellent fundamentals, strong
earnings-growth potential and reasonable stock prices. We're currently not
invested in small-caps, and have scant exposure to foreign stocks or mid-caps
(although we have the ability to invest in any size company, as well as foreign
companies). We begin to sell stocks when their prices reach the targets we've
pre-set. A key objective of this discipline is to have logic, not emotion, drive
the process. We also sell stocks when we see indications of potentially
deteriorating fundamentals or signs of slowing earnings growth.
We rely on independent and rigorous research to guide our stock-selection.
We use both fundamental and quantitative measures. Throughout, we actively
leverage Scudder Kemper Investments' extensive research and analytical
capabilities.
6
<PAGE> 7
PERFORMANCE UPDATE
Q GIVE US SOME EXAMPLES OF YOUR STOCK-SELECTION PROCESS IN ACTION.
A Univision Communications, a leading Spanish-language broadcaster, offers a
particularly good example of our stock-selection process in action. When we
initially established a stake in Univision Communications, Wall Street analysts
didn't pay much attention to the stock. To us, however, Univision
Communications' quality fundamentals and strong prospects for sustainable,
above-average earnings growth signaled a compelling opportunity. We also were
impressed by Univision Communications' dominant position within a specialized
and growing market segment. Given Univision Communications' potential, we
believed its stock was trading at an extremely attractive price. Our independent
analysis and patience paid off, and the stock has been a good performer
throughout the semiannual period. In keeping with our stock-selling discipline,
we've recently opted to take some profits, as Univision Communications' stock
price approached our pre-set target.
Citigroup, a leading money-center bank, also typifies our investment
discipline. The Russian debt default in August took a particularly heavy toll on
money-center banks. Investors panicked, and sold off money-center banks
frantically, fearing the potential exposure that these financial-service giants
had to the defaulted debt. In contrast, we took a longer-term view and relied on
fundamentals, not emotion, to drive our decisions. Our research indicated that
Citigroup would not be permanently hobbled, and that market emotion had driven
the stock price down to an attractive level. While others were selling, we added
to the fund's Citigroup position, and the stock's rebound rewarded our
conviction. Now, in keeping with the same discipline that led us to Citigroup,
we're paring back our stake as its price rises.
Q COULD YOU HIGHLIGHT SOME INSTANCES WHERE YOUR INVESTMENT DISCIPLINE SERVED
THE FUND WELL?
A On a broad allocation level, our bullish (see Terms To Know) outlook on
stocks benefited performance, as the bond market was weaker than the domestic
stock market. Within the fund's stock holdings, there were several areas of
notably strong performance.
TECHNOLOGY. Our focus on established companies and reasonably priced stocks
precluded us from owning the trendy but strong performing ".com" Internet
stocks. The fund nonetheless participated in the technology stock rally, through
the stocks of established companies involved in networking (Cisco Systems),
semiconductor and components (Xilinx) and computer systems (Sun Microsystems).
TELECOMMUNICATIONS. MCI WorldCom, Frontier and Ameritech also contributed
robust gains. Many telecommunications companies have bolstered their earnings
growth through innovative consolidations and strategic alliances.
MEDIA AND BROADCASTING. Media and broadcasting companies have benefited from
the slow and steady economic growth environment. Many also have exposure to the
Internet. Kemper Total Return Fund's holdings include CBS, Univision
Communications, Clear Channel Communications and Time Warner, all of which
contributed good performance during the semiannual period.
RETAIL. In an environment of high consumer confidence, quality retail stocks
performed briskly. Kemper Total Return Fund benefited from positions in stocks
such as Dayton-Hudson, Wal-Mart Stores and Dollar General.
NON-TRADITIONAL CAPITAL GOODS. During the final portion of the semiannual
period, the fund received a nice boost from an assorted group of economically
sensitive stocks, including Waste Management (pollution control),
Parker-Hannifin (industrial machinery), Raytheon (aerospace and defense) and
Emerson Electric (electrical equipment and components).
Q DESPITE THE FUND'S ROBUST GAIN, WERE THERE FACTORS THAT HINDERED
PERFORMANCE?
A The portfolio did include stocks that fell short of expectations. During
the semiannual period, several food and beverage companies disappointed. H.J.
Heinz, Coca-Cola, and PepsiCo slowed the fund's pace. Household goods producer
Colgate-Palmolive also turned in lackluster performance. We still hold stakes in
several of these stocks, however, as our analysis indicates that the market has
driven the prices of these stocks to unsustainably low levels.
Legislative and regulatory uncertainties have taken a toll on health care
stocks, including some of the stocks within the portfolio. American Home
Products, Bristol-Myers Squibb, Warner Lambert and Eli Lilly & Co. were less
successful than we anticipated. We believe that the recent price declines are
due in large part to investor sentiment, not fundamental long-term weakness.
Also, certain financial-service stocks, such as Federal National Mortgage
Association and Wells Fargo & Co.
7
<PAGE> 8
PERFORMANCE UPDATE
didn't keep pace with their better-performing peers.
Within the fixed-income allocation, we could have earned more if we had
invested a greater portion of assets in high-yield bonds. During the semiannual
period, high-yield bonds generally earned more substantial returns than
high-grade corporate or government bonds. Keep in mind, however, that high-yield
bonds do carry a higher degree of risk, in exchange for higher return potential.
We felt that our shareholders would be better served by a more conservative bond
allocation, especially considering how volatile the markets had been in 1998.
Q WHAT IMPACT COULD A SUSTAINED CYCLICAL MARKET HAVE ON KEMPER TOTAL RETURN
FUND?
A While a cyclical-oriented climate isn't necessarily optimal for a
growth-oriented fund such as Kemper Total Return Fund, we do believe that the
broadening market is a beneficial trend. Previously, the markets had been
unusually "narrow." By narrow, we mean that there was an extreme divergence of
stock performance: A few stocks earned very strong returns, while the vast
majority could not keep pace. Over the long-term, we believe a broader market is
healthier and more sustainable.
Even if the markets do maintain a more-cyclical orientation, we're not going
to throw in the towel or just "wait it out." Regardless of the market climate,
we have a high degree of conviction in the research capabilities of Scudder
Kemper Investments, Inc. to help guide the stock-selection process and to
recommend to us stocks which fit our criteria and have good potential to
outperform the market.
Lastly, we encourage shareholders to remember that one or two months don't
make a market. We believe that it is too soon to make a determination about
whether or not the market has changed direction. Many people point to rising oil
prices as a signal of an inflationary environment. However, we believe that
companies play a key role in setting inflation, by raising the prices of their
products and services. We haven't seen these increases.
Q AS KEMPER TOTAL RETURN FUND ENTERS THE SECOND HALF OF ITS FISCAL YEAR, IS
YOUR LONG-TERM VIEW STILL POSITIVE?
A Absolutely. As we did at the start of the semiannual period, we continue
to have an optimistic long-term outlook for the domestic economy and for
large-cap, quality growth stocks. But, when it comes to stocks, investors should
always be prepared for some ups-and-downs along the way.
In our view, both the volatility and the opportunity of the semiannual
period highlight the potential benefits of Kemper Total Return's balanced
approach. By combining quality large-cap domestic growth stocks with a core bond
portfolio, we provided a more conservative approach to growth, plus current
income. On behalf of the shareholders of Kemper Total Return Fund, we remain
committed to pursuing these objectives.
TERMS TO KNOW
BENCHMARK A point of comparison for gauging relative performance. A fund's
benchmark may be the overall stock market, an index or a peer group average. To
use a given benchmark effectively, it's essential to consider any differences
between the benchmark and the fund.
BULLISH Describes an optimistic or enthusiastic outlook. A bull is an investor
who has a positive view of a particular security or market. In contrast, a bear
has a cautious or pessimistic view of a security or market.
CONSUMER NONDURABLES Consumer nondurable companies produce goods or services
that tend to be consumed or replaced within a relatively short period of time.
Due to the steadier demand for consumer nondurables, stocks in this sector are
often considered more defensive in nature than other stocks, including
technology stocks.
CYCLICAL STOCKS Cyclical stocks carry a higher degree of economic sensitivity.
In accelerating economies, cyclical stocks tend to rise quickly. In decelerating
economies, cyclicals tend to decline quickly. Cyclical stocks include industrial
machinery, paper and forestry, automobiles and construction.
INDEX An unmanaged pool of stocks or bonds that is not available for direct
investment. Often, indexes serve as tools to gauge the relative performance of a
fund.
8
<PAGE> 9
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 graphs below
provide 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, 1999, and on October 31, 1998.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER TOTAL RETURN FUND ON KEMPER TOTAL RETURN FUND ON
4/30/99 10/31/98
--------------------------- ---------------------------
<S> <C> <C>
Consumer non-durables 24.0% 23.6%
Finance 19.3% 18.2%
Technology 18.2% 16.1%
Health care 9.8% 11.6%
Utilities 8.8% 9.5%
Capital goods 7.8% 8.0%
Energy 6.7% 9.0%
Basic industries 3.6% 0.0%
Consumer durables 0.9% 2.7%
Transportation 0.9% 1.3%
</TABLE>
A COMPARISON WITH THE S&P 500 STOCK INDEX, THE BENCHMARK FOR THE EQUITY PORTION
OF THE FUND
The equity portion of Kemper Total Return Fund can be compared to the S&P 500
Stock Index as a benchmark. The S&P 500 Stock Index is an unmanaged index
generally representative of the U.S. stock market. The chart below shows the
percentage of the common stocks in the portfolio that each sector of the Kemper
Total Return Fund represented on April 30, 1999, compared to the industry
sectors of the S&P 500 Stock Index.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER TOTAL RETURN FUND ON S&P 500 STOCK INDEX ON
4/30/99 4/30/99
--------------------------- ----------------------
<S> <C> <C>
Consumer non-durables 24.0% 20.4%
Finance 19.3% 16.6%
Technology 18.2% 20.0%
Health care 9.8% 11.1%
Utilities 8.8% 10.0%
Capital goods 7.8% 8.2%
Energy 6.7% 7.0%
Basic industries 3.6% 3.7%
Consumer durables 0.9% 2.0%
Transportation 0.9% 1.0%
</TABLE>
9
<PAGE> 10
LARGEST HOLDINGS
THE FUND'S LARGEST EQUITY HOLDINGS*
Representing 10.6% percent of the fund's total common stock holdings on April
30, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
HOLDINGS PERCENT
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------
1. GENERAL ELECTRIC A broadly diversified 3.3%
company with major
businesses in power
generators, appliances,
lighting, plastics,
medical systems, aircraft
engines, financial
services and broadcasting.
- ------------------------------------------------------------------------------
2. MICROSOFT Develops, markets and 1.9%
supports a variety of
microcomputer software,
operating systems,
language and application
programs, related books
and peripheral devices.
- ------------------------------------------------------------------------------
3. PROCTER & GAMBLE Manufactures and 1.8%
distributes household
products including food,
personal care, diapers,
laundry and cleaning
products.
- ------------------------------------------------------------------------------
4. INTEL Engaged in the design, 1.8%
development, manufacture
and sale of advanced
microcomputer components.
- ------------------------------------------------------------------------------
5. MOTOROLA Manufactures components, 1.8%
notably semiconductors,
and electronic
communications equipment.
- ------------------------------------------------------------------------------
</TABLE>
THE FUND'S LARGEST CORPORATE BOND HOLDINGS*
Representing 14.8% percent of the fund's total corporate bonds holdings on April
30, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
HOLDINGS PERCENT
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------
1. TELEWEST COMMUNICATIONS Owns and operates cable 3.9%
franchises, and has
minority interests in
additional cable
franchises.
- ------------------------------------------------------------------------------
2. DILLARD'S Operates retail 2.8%
department stores,
located primarily in the
midwest, southwest and
southeast.
- ------------------------------------------------------------------------------
3. NTL Develops, constructs and 2.8%
operates broadband
communication systems.
- ------------------------------------------------------------------------------
4. NEXTEL COMMUNICATIONS Provider of 2.8%
wireless-communication
services and equipment,
including cellular phones
and paging services.
- ------------------------------------------------------------------------------
5. BIG FLOWER PRESS Provides advertising and 2.5%
marketing services.
- ------------------------------------------------------------------------------
</TABLE>
*Portfolio composition and holdings are subject to change.
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
KEMPER TOTAL RETURN FUND
Portfolio of Investments at April 30, 1999 (unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
GOVERNMENT OBLIGATIONS PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. TREASURY BONDS 11.875%, 2003 $ 48,640 $ 61,264
10.75%, 2003 20,945 24,897
10.375%, 2009 24,405 29,992
9.125%, 2009 21,610 25,007
12.75%, 2010 64,515 89,696
13.875, 2011 87,765 129,782
12.00%, 2013 88,540 128,715
13.25%, 2014 22,355 35,181
8.75%, 2020 14,000 18,742
7.125%, 2023 36,000 41,473
6.50%, 2026 7,310 7,911
6.00%, 2026 5,110 5,184
6.625%, 2027 8,650 9,514
---------------------------------------------------------------
607,358
- --------------------------------------------------------------------------------------------
U.S. TREASURY NOTES
8.75%, 2000 56,300 58,860
6.375%, 2000 4,500 4,544
7.75%, 2001 77,500 80,963
6.625%, 2002 16,550 17,196
5.50%, 2003 30,000 30,267
5.25%, 2003 3,050 3,049
7.25%, 2004 8,000 8,688
5.875%, 2004 700 718
10.75%, 2005 26,500 33,941
7.50 %, 2005 18,575 20,549
6.625%, 2007 1,725 1,859
6.125%, 2007 8,900 9,309
5.625%, 2008 650 660
---------------------------------------------------------------
270,603
- --------------------------------------------------------------------------------------------
PROVINCE OF QUEBEC, CANADA 8.625%, 2005 8,250 9,262
---------------------------------------------------------------
TOTAL GOVERNMENT OBLIGATIONS--24.3%
(Cost: $903,326) 887,223
---------------------------------------------------------------
- --------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------
BASIC INDUSTRIES--2.3% Air Products & Chemicals 378,200shs. 17,775
Tyco International, Ltd. 508,263 41,296
Waste Management, Inc. 460,000 25,990
---------------------------------------------------------------
85,061
- --------------------------------------------------------------------------------------------
CAPITAL GOODS--5.1%
Dana Corp. 400,000 18,850
Emerson Electric Co. 475,200 30,650
General Electric Co. 736,000 77,648
Parker Hannifin Corp. 590,000 27,693
Raytheon Co., "B" 451,000 31,683
---------------------------------------------------------------
186,524
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSUMER CYCLICALS--8.5% (a) AT&T Corp. - Liberty Media Group 385,000 $ 24,592
(a) CBS Corp. 517,800 23,592
CVS Corp. 494,600 23,555
(a) Clear Channel Communications 313,200 21,767
Dayton Hudson Corp. 395,000 26,588
Dollar General Corp. 583,244 20,450
(a) Infinity Broadcasting 707,400 19,586
(a) Jacor Communications 100,000 8,025
(a) Media One Group, Inc. 160,000 13,050
(a) Mirage Resorts, Inc. 1,236,900 27,753
Omnicom Group 244,700 17,741
Time Warner, Inc. 392,400 27,468
(a) Univision Communications, Inc. 392,100 22,693
Wal-Mart Stores, Inc. 750,000 34,500
--------------------------------------------------------------------------
311,360
- ----------------------------------------------------------------------------------------------------------
CONSUMER DURABLES--.6% Federal-Mogul Corp. 496,100 21,766
--------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--7.1% Albertson's, Inc. 400,000 20,600
Coca-Cola Co. 355,000 24,140
Colgate-Palmolive Co. 100,000 10,244
H.J. Heinz Co. 400,000 18,675
Home Depot, Inc. 505,000 30,268
Newell Co. 552,200 26,195
Pepsi Bottling Group, Inc. 725,200 15,275
PepsiCo, Inc. 640,000 23,640
Procter & Gamble Co. 464,800 43,604
Tribune Co. 281,400 23,479
Warner-Lambert Co. 360,000 24,457
--------------------------------------------------------------------------
260,577
- ----------------------------------------------------------------------------------------------------------
ENERGY--4.3%
Anadarko Petroleum Corp. 325,000 12,330
Chevron Corp 175,000 17,456
Conoco, Inc. 500,000 13,563
Exxon Corp. 286,800 23,822
Mobil Corp. 244,000 25,559
Royal Dutch Petroleum 580,000 34,039
Texaco 240,000 15,060
Unocal Corp. 395,000 16,417
--------------------------------------------------------------------------
158,246
</TABLE>
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCE--12.6% American Express Co. 150,000 $ 19,603
American International Group, Inc. 260,000 30,534
Associates First Capital 620,000 27,474
BankAmerica Corp. 451,793 32,529
CIGNA Corp. 258,200 22,512
Capital One Financial Corp. 68,800 11,950
Chase Manhattan Corp. 315,000 26,066
Citigroup, Inc. 467,499 35,179
Federal National Mortgage Association 390,000 27,666
First Tennessee National Corp. 400,000 17,250
Household International, Inc. 673,022 33,861
J.P. Morgan & Co., Inc. 150,000 20,213
Jefferson-Pilot Corp. 250,500 16,877
Merrill Lynch & Co. 160,000 13,430
Morgan Stanley Dean Witter & Co. 150,000 14,878
Summit Bancorp 300,000 12,713
The St. Paul Companies 640,000 18,360
UNUM Corp. 420,000 22,943
Washington Mutual, Inc. 710,000 29,199
Wells Fargo & Co. 600,000 25,912
------------------------------------------------------------------------------------
459,149
- ----------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE--6.4% Abbott Laboratories 615,000 29,789
American Home Products Corp. 406,900 24,821
Baxter International, Inc. 393,900 24,816
Becton, Dickinson & Co. 400,000 14,875
Bristol-Myers Squibb Co. 440,000 27,967
Eli Lilly & Co. 250,000 18,406
Medtronic, Inc. 281,222 20,230
Pfizer, Inc. 300,000 34,519
Schering-PloughCorp. 400,000 19,325
SmithKline Beecham Group PLC 280,000 18,393
------------------------------------------------------------------------------------
233,141
- ----------------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--11.8% (a) Applied Materials 325,000 17,428
Automatic Data Processing 600,900 26,740
(a) Cimlinc, Inc., convertible preferred 37,716 141
(a) Cisco Systems 255,000 29,086
(a) EMC Corp. 130,000 14,162
Hewlett-Packard Co. 430,000 33,916
Intel Corp. 710,000 43,443
International Business Machines Corp. 190,000 39,746
(a) Intuit 205,000 17,656
(a) Microsoft Corp. 560,000 45,535
Motorola 520,000 41,665
(a) Oracle Corp. 815,000 22,056
(a) Seagate Technology, Inc. 500,000 13,938
(a) Solectron Corp. 415,000 20,128
(a) Sun Microsystems 310,000 18,542
Xerox Corp. 541,600 31,819
(a) Xilinx, Inc. 349,400 15,941
------------------------------------------------------------------------------------
431,942
- ----------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--.6%
Canadian National Railway Co. 330,000 20,823
------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
UTILITIES--5.7%
AT&T 465,000 $ 23,483
Ameritech Corp. 510,000 34,903
Bell Atlantic Corp. 565,000 32,558
BellSouth Corp. 600,000 26,850
Frontier Corp. 295,000 16,280
GTE Corp. 200,000 13,388
(a) MCI WorldCom, Inc. 420,600 34,568
SBC Communications, Inc. 490,000 27,440
-------------------------------------------------------------------------------------
209,470
-------------------------------------------------------------------------------------
TOTAL COMMON STOCKS--65.0%
(Cost: $1,725,722) 2,378,059
-------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRIES--.6%
Euramax International, 11.25%, 2006 $ 8,400 8,904
MMI Products, Inc., 11.25%, 2007 1,600 1,724
Plainwell, Inc., 11.00%, 2008 4,230 3,384
Stone Container Corp., 12.58%, 2016 3,500 3,741
Stone Container Finance Corp., 11.50%, 2006 2,500 2,725
-------------------------------------------------------------------------------------
20,478
- -----------------------------------------------------------------------------------------------------------------------------------
CABLE--.7%
CSC Holdings, Inc., 9.25%, 2005 8,290 8,881
Comcast Cable Communications, Inc.,
8.50%, 2027 1,400 1,629
Comcast Corp., 9.375%, 2005 8,500 9,040
Frontiervision, 11.00%, 2006 5,000 5,600
-------------------------------------------------------------------------------------
25,150
- -----------------------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--.6%
General Electric Capital Corp.
8.75%, 2007 4,350 5,098
8.625%, 2008 2,350 2,767
Lockheed Corp., 6.75%, 2003 4,600 4,706
Neenah Corp., 11.125%, 2007 4,000 4,040
Raytheon Co., 6.75%, 2007 3,100 3,182
United Rentals, Inc., 9.25%, 2009 2,660 2,680
-------------------------------------------------------------------------------------
22,473
- -----------------------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--.7%
AFC Enterprises, Inc., 10.25%, 2007 2,840 3,025
AMF Group
10.875%, 2006 3,500 2,730
(b) 12.25%, 2006 921 530
Kevco, Inc., 10.375%, 2007 2,765 1,659
Kinder-Care Learning Centers, 9.50%, 2009 8,500 8,904
Nortek, 9.875%, 2004 5,220 5,435
Royal Caribbean Cruises, Ltd., 8.25%, 2005 4,250 4,543
-------------------------------------------------------------------------------------
26,826
- -----------------------------------------------------------------------------------------------------------------------------------
CONSUMER DURABLES--.2%
Del Webb Corp., 9.75%,2008 7,920 7,979
-------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 15
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSUMER STAPLES--.7% Cole National Group, 9.875%, 2006 $ 3,360 $ 3,494
Dayton Hudson Corp., 7.50%, 2006 2,400 2,559
Dillard's, Inc.
6.17%, 2001 9,000 9,005
6.43%, 2004 2,000 1,962
Federated Department Stores, Inc., 6.125%, 2001 4,500 4,527
Pathmark Stores, Inc., 9.625%, 2003 4,140 4,223
Safeway, 6.05%, 2003 1,000 998
------------------------------------------------------------------------------------
26,768
- ----------------------------------------------------------------------------------------------------------------------------------
ENERGY--.3% Benton Oil & Gas Co., 11.625%, 2003 1,460 1,022
Clark Refining, 8.875%, 2007 1,290 1,116
Gulf Canada Resources, Ltd., 9.25%, 2004 7,000 7,197
Gulfmark Offshore, Inc., 8.75%, 2008 1,680 1,604
------------------------------------------------------------------------------------
10,939
- ----------------------------------------------------------------------------------------------------------------------------------
FINANCE--1.1% AB Spintab, 7.50%, 2049 4,100 4,224
ABN-AMRO Bank, 8.25%, 2009 4,250 4,582
Abbey National, PLC, 6.69%, 2005 3,700 3,766
BankAmerica Corp., 9.50%, 2004 2,400 2,745
Crestar Financial Corp., 8.25%, 2002 2,400 2,562
Den Danske Bank, 6.375%, 2008 4,150 4,124
FINOVA Capital Corp., 6.50%, 2002 2,950 2,985
Ford Motor Credit Corp., 7.75%, 2005 2,400 2,585
Repsol International Finance, 7.00%, 2005 5,000 5,151
Scotland International Finance Co., 8.80%, 2004 1,350 1,483
Svenska Handelsbanken, 7.125%, 2049 1,575 1,595
Wells Fargo & Co., 6.875%, 2006 5,000 5,176
------------------------------------------------------------------------------------
40,978
- ----------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE--.3% Magellan Health Services, 9.00%, 2008 10,000 8,425
(b) Mariner Post-Acute Network, Inc., 10.50%, 2007 6,000 1,920
------------------------------------------------------------------------------------
10,345
- ----------------------------------------------------------------------------------------------------------------------------------
MEDIA--1.2% American Radio Systems, 9.00%, 2006 3,680 3,965
Big Flower Press, Inc., 8.875%, 2007 9,500 9,690
Chancellor Media Corp., 9.00%, 2008 5,640 6,007
Cinemark USA, Inc., 9.625%, 2008 7,000 7,280
News American Holdings, Inc.,
9.25%, 2013 1,950 2,334
Sinclair Broadcasting Group, Inc., 8.75%, 2007 3,890 3,909
Time Warner, Inc.
9.125%, 2013 2,075 2,527
9.15%, 2023 2,325 2,870
United Artists Theatre Co., 9.75%, 2008 6,250 5,344
------------------------------------------------------------------------------------
43,926
- ----------------------------------------------------------------------------------------------------------------------------------
PAPER/PACKAGING--.3% Riverwood International, 10.25%, 2006 8,350 8,559
------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--.6% Continental Airlines, Inc.
7.75%, 2014 1,860 1,970
6.90%, 2017 1,850 1,870
Delco Remy International, 10.625%, 2006 8,620 9,396
Hayes Wheels International, Inc., 11.00%, 2006 8,000 8,880
------------------------------------------------------------------------------------
22,116
</TABLE>
15
<PAGE> 16
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
UTILITIES--3.4%
American Cellular Corp., 10.50%, 2008 $ 3,920 $ 4,204
BellSouth Telecommunications, Inc.,
6.375%, 2028 2,500 2,350
(b) Call-Net Enterprises, Inc., 13.25%, 2004 6,350 6,525
Commonwealth Edison
7.375%, 2004 3,800 4,004
7.00%, 2005 1,250 1,295
(b) Diamond Cable Communications, PLC
11.75%, 2005 1,660 1,500
10.75%, 2007 4,840 3,914
Esprit Telecom Group, PLC, 11.50%, 2007 2,370 2,595
GTE North, Inc., 6.90%, 2008 2,500 2,614
Intermedia Communications, 8.60%, 2008 4,370 4,370
K-III Communications Corp., 8.50%, 2006 4,250 4,356
MCI Worldcom, Inc.
6.4%, 2005 4,000 4,048
7.75%, 2007 1,050 1,135
7.75%, 2027 3,425 3,793
(b) McLeod, Inc., 10.50%, 2007 11,700 9,418
NTL, Inc.
(b) 11.50%, 2006 11,330 9,885
11.50%, 2008 475 536
(b) 12.375%, 2008 750 523
(b) Nextel Communications, 9.95%, 2008 14,150 10,825
PSINet, Inc.
10.00%, 2005 3,210 3,370
11.50%, 2008 4,030 4,483
Rogers Cantel Mobile, Inc., 8.80%, 2007 7,900 8,334
Tele-Communications, Inc., 9.80%, 2012 5,950 7,665
(b) TeleWest Communications, PLC, 11.00%, 2007 17,250 15,352
US West Cap Funding, Inc.
6.25%, 2005 2,000 2,012
6.375%, 2008 2,000 2,004
Yorkshire Power, 6.496%, 2008 2,125 2,084
------------------------------------------------------------------------------------
123,194
------------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS--10.7%
(Cost: $388,609) 389,731
------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $3,017,657) $3,655,013
------------------------------------------------------------------------------------
</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 $3,017,657,000 for federal income tax
purposes at April 30, 1999, the gross unrealized appreciation was $683,018,000,
the gross unrealized depreciation was $45,662,000 and the net unrealized
appreciation on investments was $637,356,000.
See accompanying Notes to Financial Statements.
16
<PAGE> 17
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1999 (unaudited)
(IN THOUSANDS)
<TABLE>
<S> <C>
- --------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------
Investments, at value
(Cost: $3,017,657) $3,655,013
- --------------------------------------------------------------------------
Receivable for:
Investments sold 39,164
- --------------------------------------------------------------------------
Dividends and interest 33,174
- --------------------------------------------------------------------------
Fund shares sold 467
- --------------------------------------------------------------------------
TOTAL ASSETS 3,727,818
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- --------------------------------------------------------------------------
Cash overdraft 12,708
- --------------------------------------------------------------------------
Payable for:
Investments purchased 21,940
- --------------------------------------------------------------------------
Fund shares redeemed 1,215
- --------------------------------------------------------------------------
Management fee 1,374
- --------------------------------------------------------------------------
Distribution services fee 473
- --------------------------------------------------------------------------
Administrative services fee 685
- --------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 1,778
- --------------------------------------------------------------------------
Trustees' fees 124
- --------------------------------------------------------------------------
Total liabilities 40,297
- --------------------------------------------------------------------------
NET ASSETS $3,687,521
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- --------------------------------------------------------------------------
Paid-in capital $2,830,707
- --------------------------------------------------------------------------
Undistributed net realized gain on investments 212,432
- --------------------------------------------------------------------------
Net unrealized appreciation on investments 637,356
- --------------------------------------------------------------------------
Undistributed net investment income 7,026
- --------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $3,687,521
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
THE PRICING OF SHARES
- --------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($2,792,923
/ 247,599 shares outstanding) $11.28
- --------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $11.97
- --------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge) per share
($846,912 / 75,269 shares outstanding) $11.25
- --------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge) per share
($37,112 / 3,295 shares outstanding) $11.26
- --------------------------------------------------------------------------
CLASS I SHARES
Net asset value and redemption price per share ($10,574 /
935 shares outstanding) $11.31
- --------------------------------------------------------------------------
</TABLE>
17
<PAGE> 18
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Six months ended April 30, 1999 (unaudited)
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
NET INVESTMENT INCOME
- ------------------------------------------------------------------------
Interest $ 53,686
- ------------------------------------------------------------------------
Dividends 13,443
- ------------------------------------------------------------------------
Total investment income 67,129
- ------------------------------------------------------------------------
Expenses:
Management fee 9,180
- ------------------------------------------------------------------------
Distribution services fee 3,344
- ------------------------------------------------------------------------
Administrative services fee 4,232
- ------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 5,277
- ------------------------------------------------------------------------
Professional fees 54
- ------------------------------------------------------------------------
Reports to shareholders 329
- ------------------------------------------------------------------------
Trustees' fees and other 201
- ------------------------------------------------------------------------
Total expenses 22,617
- ------------------------------------------------------------------------
NET INVESTMENT INCOME 44,512
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
- ------------------------------------------------------------------------
Net realized gain on sales of investment 209,735
- ------------------------------------------------------------------------
Change in net unrealized appreciation on investments 249,456
- ------------------------------------------------------------------------
Net gain on investments 459,191
- ------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $503,703
- ------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED
1999 OCTOBER 31,
(UNAUDITED) 1998
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- -----------------------------------------------------------------------------------------------------
Net investment income $ 44,512 82,585
- -----------------------------------------------------------------------------------------------------
Net realized gain 209,735 212,374
- -----------------------------------------------------------------------------------------------------
Change in net unrealized appreciation 249,456 30,147
- -----------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 503,703 325,106
- -----------------------------------------------------------------------------------------------------
Distribution from net investment income (46,604) (86,123)
- -----------------------------------------------------------------------------------------------------
Distribution from net realized gain (212,124) (439,382)
- -----------------------------------------------------------------------------------------------------
Total dividends to shareholders (258,728) (525,505)
- -----------------------------------------------------------------------------------------------------
Net increase from capital share transactions 121,292 280,270
- -----------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 366,267 79,871
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------
Beginning of period 3,321,254 3,241,383
- -----------------------------------------------------------------------------------------------------
END OF PERIOD (including undistributed
net investment income of
$7,026 and $9,118, respectively) $3,687,521 3,321,254
- -----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
18
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF
THE FUND Kemper Total Return Fund (the 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 generally
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 SECURITY VALUATION. Investments are stated at
value. Portfolio securities which are traded on
U.S. or foreign stock exchanges are valued at the
most recent sale price reported on the exchange on
which the security is traded most extensively. If
no sale occurred, the security is then valued at
the calculated mean between the most recent bid and
asked quotations. If there are no such bid and
asked quotations, the most recent bid quotation is
used. Securities quoted on the Nasdaq Stock Market
(Nasdaq), for which there have been sales, are
valued at the most recent sale price. If there are
no such sales, the value is the most recent bid
quotation. Securities which are not quoted on
Nasdaq but are traded in another over-the-counter
market are valued at the most recent sale price on
such market. If no sale occurred, the security is
then valued at the calculated mean between the most
recent bid and asked quotations. If there are no
such bid and asked quotations, the most recent bid
quotation shall be used.
Portfolio debt securities are valued by pricing
agents approved by the officers of the fund, whose
quotations reflect broker/dealer-supplied
valuations and electronic data processing
techniques. If the pricing agents are unable to
provide such quotations, the most recent bid
quotation supplied by a bona fide market maker
shall be used. All other securities are valued at
their fair market value as determined in good faith
by the Valuation Committee of the Board of
Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date. 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 close of the Exchange. The net
asset value per
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
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's policy is to
comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to
regulated investment companies, and to distribute
all of its taxable income to its shareholders.
Accordingly, the fund paid no federal income taxes
and no federal income tax provision was required.
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.
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The fund has a management
agreement with Scudder Kemper Investments, Inc.
(Scudder Kemper), and pays a monthly investment
management fee of 1/12 of the annual rate of .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 $9,180,000 for the six
months ended April 30, 1999.
UNDERWRITING AND DISTRIBUTION SERVICES
AGREEMENT. The fund has an underwriting and
distribution services agreement with Kemper
Distributors, Inc. (KDI). Underwriting commissions
retained by KDI in connection with the distribution
of Class A shares for the six months ended April
30, 1999 are $118,000, of which $1,000 was paid by
KDI to affiliates.
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 separate Rule 12b-1 plans for
the Class B and Class C shares. Pursuant to the
agreement, KDI enters into related selling group
agreements with various firms at various rates for
sales of Class B and Class C shares. In addition,
KDI receives any contingent deferred sales charges
(CDSC) from redemptions of Class B and Class C
shares. Distribution fees and CDSC received by KDI
for the six months ended April 30, 1999 are
$4,064,000.
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 paid by the
fund to KDI for the six months ended April 30, 1999
are $4,232,000, of which $6,000 was paid by KDI to
affiliates.
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
$3,788,000 for the six months ended April 30, 1999.
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, 1999, the
20
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
fund made no payments to its officers and incurred
trustees' fees of $21,000 to independent trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the six months ended April 30, 1999, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $884,956
Proceeds from sales 944,351
- --------------------------------------------------------------------------------
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, 1999 OCTOBER 31, 1998
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 13,678 $149,704 21,584 $229,022
------------------------------------------------------------------------------
Class B 8,339 90,973 13,596 146,824
------------------------------------------------------------------------------
Class C 1,023 11,138 1,252 13,430
------------------------------------------------------------------------------
Class I 452 4,949 408 4,356
------------------------------------------------------------------------------
------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 17,307 182,158 32,505 327,702
------------------------------------------------------------------------------
Class B 5,667 59,519 16,317 163,540
------------------------------------------------------------------------------
Class C 188 1,984 280 2,818
------------------------------------------------------------------------------
Class I 98 1,031 202 2,032
------------------------------------------------------------------------------
------------------------------------------------------------------------------
SHARES REDEEMED
Class A (24,847) (271,780) (38,307) (411,357)
------------------------------------------------------------------------------
Class B (8,809) (96,200) (17,413) (185,508)
------------------------------------------------------------------------------
Class C (353) (3,857) (636) (6,892)
------------------------------------------------------------------------------
Class I (761) (8,327) (540) (5,697)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 13,229 145,757 29,080 315,751
------------------------------------------------------------------------------
Class B (13,258) (145,757) (29,137) (315,751)
------------------------------------------------------------------------------
NET INCREASE
FROM CAPITAL SHARE
TRANSACTIONS $121,292 $280,270
------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 22
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------------
CLASS A
----------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------
Net asset value, beginning of period
$10.54 11.34 11.28 10.60 9.10
- -----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .15 .29 .31 .28 .29
- -----------------------------------------------------------------------------------------
Net realized and unrealized gain 1.43 .77 1.57 1.24 1.46
- -----------------------------------------------------------------------------------------
Total from investment operations 1.58 1.06 1.88 1.52 1.75
- -----------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .16 .31 .33 .34 .25
- -----------------------------------------------------------------------------------------
Distribution from net realized gain .68 1.55 1.49 .50 --
- -----------------------------------------------------------------------------------------
Total dividends .84 1.86 1.82 .84 .25
- -----------------------------------------------------------------------------------------
Net asset value, end of period $11.28 10.54 11.34 11.28 10.60
- -----------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 15.62% 10.47 18.95 15.34 19.46
- -----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------
Expenses .99% 1.01 1.01 1.05 1.12
- -----------------------------------------------------------------------------------------
Net investment income 2.79% 2.75 2.92 2.76 3.00
- -----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------
CLASS B
----------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------
Net asset value, beginning of period $10.52 11.33 11.27 10.59 9.09
- -----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .09 .19 .22 .19 .20
- -----------------------------------------------------------------------------------------
Net realized and unrealized gain 1.42 .75 1.55 1.23 1.46
- -----------------------------------------------------------------------------------------
Total from investment operations 1.51 .94 1.77 1.42 1.66
- -----------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .10 .20 .22 .24 .16
- -----------------------------------------------------------------------------------------
Distribution from net realized gain .68 1.55 1.49 .50 --
- -----------------------------------------------------------------------------------------
Total dividends .78 1.75 1.71 .74 .16
- -----------------------------------------------------------------------------------------
Net asset value, end of period $11.25 10.52 11.33 11.27 10.59
- -----------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 14.95% 9.30 17.86 14.28 18.42
- -----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------
Expenses 2.08% 2.01 1.95 1.99 2.05
- -----------------------------------------------------------------------------------------
Net investment income 1.70% 1.75 1.98 1.82 2.07
- -----------------------------------------------------------------------------------------
</TABLE>
22
<PAGE> 23
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------------
CLASS C
----------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.54 11.34 11.28 10.61 9.09
- ------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .11 .20 .22 .20 .21
- ------------------------------------------------------------------------------------------------
Net realized and unrealized gain 1.40 .77 1.56 1.22 1.48
- ------------------------------------------------------------------------------------------------
Total from investment operations 1.51 .97 1.78 1.42 1.69
- ------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .11 .22 .23 .25 .17
- ------------------------------------------------------------------------------------------------
Distribution from net realized gain .68 1.55 1.49 .50 --
- ------------------------------------------------------------------------------------------------
Total dividends .79 1.77 1.72 .75 .17
- ------------------------------------------------------------------------------------------------
Net asset value, end of period $11.26 10.54 11.34 11.28 10.61
- ------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 14.93% 9.50 17.92 14.31 18.76
- ------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------------------
Expenses 1.77% 1.90 1.90 1.89 1.86
- ------------------------------------------------------------------------------------------------
Net investment income 2.01% 1.86 2.03 1.92 2.26
- ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------
CLASS I
------------------------------------------------
SIX MONTHS YEAR ENDED OCTOBER
ENDED 31, JULY 3 TO
APRIL 30, --------------------- OCTOBER 31,
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.54 11.33 11.27 10.61 10.07
- -------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .15 .34 .36 .32 .10
- -------------------------------------------------------------------------------------------
Net realized and unrealized gain 1.48 .77 1.55 1.23 .52
- -------------------------------------------------------------------------------------------
Total from investment operations 1.63 1.11 1.91 1.55 .62
- -------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .18 .35 .36 .39 .08
- -------------------------------------------------------------------------------------------
Distribution from net realized gain .68 1.55 1.49 .50 --
- -------------------------------------------------------------------------------------------
Total dividends .86 1.90 1.85 .89 .08
- -------------------------------------------------------------------------------------------
Net asset value, end of period $11.31 10.54 11.33 11.27 10.61
- -------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 16.15% 10.98 19.40 15.64 6.21
- -------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------------
Expenses .64% .64 .71 .72 .61
- -------------------------------------------------------------------------------------------
Net investment income 3.14% 3.12 3.22 3.09 2.97
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- -----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ----------------------------------------------------------
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net assets at end of period (in
thousands) $3,687,521 3,321,254 3,241,383 3,020,798 2,926,542
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 49% 80 122 85 142
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Total return does not reflect the effect of any sales charges. Data for
the period ended April 30, 1999 is unaudited.
23
<PAGE> 24
SHAREHOLDERS' MEETING
SPECIAL SHAREHOLDERS' MEETING
On December 17, 1998, a special shareholders' meeting was held. Kemper Total
Return Fund shareholders were asked to vote on two separate issues: approval of
the new Investment Management Agreement between the fund and Scudder Kemper
Investments, Inc., and to modify or eliminate certain policies and to eliminate
the shareholder approval requirements as to certain other matters. The following
are the results.
1) Approval of the new Investment Management Agreement between the fund and
Scudder Kemper Investments, Inc. This item was approved.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
174,505,233 4,236,324 8,954,453
</TABLE>
2) To modify or eliminate certain policies and to eliminate the shareholder
approval requirements as to certain other matters. These items were approved.
Investment objectives
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
133,032,139 8,583,794 15,673,565 30,406,512
</TABLE>
Investment policies
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
133,028,769 8,567,261 15,693,467 30,406,512
</TABLE>
Diversification
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
133,224,485 8,370,687 15,694,325 30,406,512
</TABLE>
Borrowing
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
132,981,247 8,615,090 15,693,161 30,406,512
</TABLE>
Senior securities
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
133,229,390 8,366,946 15,693,161 30,406,512
</TABLE>
Concentration
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
133,213,205 8,381,967 15,694,325 30,406,512
</TABLE>
Underwriting of securities
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
133,231,658 8,364,679 15,693,161 30,406,512
</TABLE>
Investment in real estate
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
133,172,180 8,424,157 15,693,161 30,406,512
</TABLE>
Purchase of commodities
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
133,019,913 8,576,423 15,693,161 30,406,512
</TABLE>
Lending
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
133,029,840 8,565,097 15,694,560 30,406,512
</TABLE>
Margin purchases and short sales
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
132,779,218 8,817,118 15,693,161 30,406,512
</TABLE>
Pledging of assets
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
132,847,954 8,746,304 15,695,240 30,406,512
</TABLE>
Purchases of securities
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
133,155,642 8,437,355 15,696,500 30,406,512
</TABLE>
Purchases of options and warrants
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
133,037,001 8,558,075 15,694,421 30,406,512
</TABLE>
24
<PAGE> 25
NOTES
25
<PAGE> 26
NOTES
26
<PAGE> 27
NOTES
27
<PAGE> 28
TRUSTEES AND OFFICERS
TRUSTEES OFFICERS
DANIEL PIERCE MARK S. CASADY LINDA J. WONDRACK
Chairman and Trustee President Vice President
JOHN W. BALLANTINE PHILIP J. COLLORA MAUREEN E. KANE
Trustee Vice President and Assistant Secretary
Secretary
LEWIS A. BURNHAM CAROLINE PEARSON
Trustee JOHN R. HEBBLE Assistant Secretary
Treasurer
DONALD L. DUNAWAY ELIZABETH C. WERTH
Trustee GARY A. LANGBAUM Assistant Secretary
Vice President
ROBERT B. HOFFMAN BRENDA LYONS
Trustee ANN M. MCCREARY Assistant Treasurer
Vice President
DONALD R. JONES
Trustee KATHRYN L. QUIRK
Vice President
THOMAS W. LITTAUER
Trustee and Vice President CORNELIA SMALL
Vice President
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
- --------------------------------------------------------------------------------
CUSTODIAN STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, MA 02110
- --------------------------------------------------------------------------------
TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
801 Pennsylvania Avenue
Kansas City, MO 64105
- --------------------------------------------------------------------------------
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 (6/21/99) 1076830
