<PAGE> 1
Kemper Cash Reserves Fund
REPORT TO SHAREHOLDERS
FOR THE PERIOD ENDED SEPTEMBER 30, 1995
"[Positive economic data
has]...precipitated a
stable environment for
interest rates."
[KEMPER MUTUAL FUNDS LOGO]
<PAGE> 2
Table of Contents
3
Performance Update
4
Portfolio Statistics
4
Terms to Know
5
Portfolio of
Investments
7
Report of
Independent Auditors
8
Financial Statements
10
Notes to
Financial Statements
13
Financial
Highlights
About Your Report
CHANGE IN FISCAL YEAR
Because of a change in Kemper Cash Reserves Fund's fiscal year, we are
distributing an updated shareholder report. As you know, the Fund's prior
fiscal year extended from August 1, 1994, through July 31, 1995. The new fiscal
year runs from October 1 to September 30. You will receive your next
shareholder report, which will be a semi-annual update, in May, 1996.
For the two-month period from August 1, 1995 through September 30, 1995,
Class A Shares advanced 0.85%, Class B Shares 0.71% and Class C Shares 0.71%,
on a total return basis.
At A Glance
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
YIELDS
- ---------------------------------------------------------------------------
7-DAY ANNUALIZED YIELD FOR THE PERIOD ENDED SEPTEMBER 30, 1995
AS OF
9/30/95
- ---------------------------------------------------------------------------
<S> <C>
KEMPER CASH RESERVES FUND CLASS A 4.98%
KEMPER CASH RESERVES FUND CLASS B 4.12%
KEMPER CASH RESERVES FUND CLASS C 4.15%
- ---------------------------------------------------------------------------
</TABLE>
An investment in money market funds is neither insured nor guaranteed by the
U.S. Government, and there can be no assurance that a fund will be able to
maintain a stable value of $1.00 per share.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- ---------------------------------------------------------------------------
FOR PERIODS ENDED SEPTEMBER 30, 1995 (SHARES ADJUSTED FOR THE APPLICABLE SALES
CHARGE)
LIFE OF
1-YEAR 5-YEAR 10-YEAR CLASS
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEMPER CASH RESERVES CLASS A 5.20% N/A N/A 3.39% (SINCE 1/10/92)
KEMPER CASH RESERVES CLASS B 1.30 2.83% 4.43% 4.79 (SINCE 2/6/84)
KEMPER CASH RESERVES CLASS C 4.30 N/A N/A 3.90 (SINCE 5/31/94)
- ------------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance. Returns fluctuate.
Performance of share classes will differ. Consult the prospectus for details.
* Average annual total return measures net investment income and capital
gain or loss from portfolio investments, assuming reinvestment of all dividends
and for B Shares adjustment for the applicable contingent deferred sales charge
(CDSC) as follows: 1-year, 3%; 5-year, 1%; since inception 0%. The maximum CDSC
for B Shares is 4%. There is no sales charge for A Shares but the applicable
sales charge applies on exchange into Class A Shares of other Kemper Mutual
Funds. There is no sales charge adjustment for C Shares. For additional
information, see the Prospectus and Statement of Additional Information and the
Financial Highlights at the end of this report.
2
<PAGE> 3
Performance Update
[Picture of Frank Rachwalski]
FRANK RACHWALSKI IS SENIOR VICE PRESIDENT OF KEMPER FINANCIAL SERVICES, INC.
AND PORTFOLIO MANAGER OF KEMPER CASH RESERVES FUND. MR. RACHWALSKI HOLDS A
B.B.A. AND AN M.B.A. DEGREE FROM LOYOLA UNIVERSITY.
KEMPER CASH RESERVES FUND PORTFOLIO MANAGER FRANK RACHWALSKI EXPLAINS HOW HE
BEGAN TO MODESTLY LENGTHEN THE FUND'S AVERAGE MATURITY DURING THE SOMEWHAT
STABLE INTEREST RATE ENVIRONMENT.
Q. FRANK, WHAT HAPPENED IN THE MARKET IN THE LAST TWO MONTHS?
A. With a modestly growing economy and a relatively low rate of inflation, an
environment for possibly another lowering of the Federal Funds rate by the
Federal Reserve (Fed) developed. However, in September, economic data -- fairly
strong auto sales, an increase in consumer spending and a general leveling of
inventories -- suggested that the economy was strengthening. These positive
signs subsequently dispelled the prospects that the Fed would ease and
precipated a stable environment for interest rates.
Q. AFTER A YEAR OF RISING INTEREST RATES, HOW HAVE YOU MANAGED THE FUND IN
THIS STABLE ENVIRONMENT?
A. Going into these two months, we began to modestly lengthen the Fund's
average maturity. Currently, we continue to have a constructive stance and will
favor extension of maturities until there is a clearer indication that the
economy's strength will cause interest rate pressure. Therefore, we are
maintaining the Fund's average maturity positioned slightly longer than
neutral, keeping in mind that there is a possibility that rates could go lower.
Q. WHAT'S AHEAD FOR THE FUND?
A. Aside from the economy, the main focus is on the budget deficit. If a
reasonable package is enacted into law, the Fed is likely to lower rates. Of
course, the strength of the economy will be a driving factor. However, for the
balance of the year, we expect relatively flat rates.
3
<PAGE> 4
Portfolio Statistics
PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
- -------------------------------------------
ON 9/30/95
- -------------------------------------------
<S> <C>
COMMERCIAL PAPER, FIRST TIER 90%
DOMESTIC BANK CDS 10
- -------------------------------------------
100%
</TABLE>
[Pie Chart]
ON 9/30/95
- -------------------------------------------
- - COMMERCIAL PAPER FIRST TIER
- - DOMESTIC BANKS CDS
Terms To Know
FEDERAL FUNDS RATE the interest rate banks charge each other for overnight
loans that are needed to meet reserve requirements. Often considered the most
sensitive indicator of the direction of interest rates.
AVERAGE MATURITY the weighted average number of days in which securities in
the portfolio mature. A variable or floating rate security may at times be
treated as having a maturity that is shorter than on the face of the
instrument.
REPURCHASE AGREEMENTS (REPOS) arrangements under which a security is bought
under an agreement that the seller will repurchase that security at an agreed
upon price, time and yield to the buyer.
4
<PAGE> 5
Portfolio of Investments
KEMPER CASH RESERVES FUND
PORTFOLIO OF INVESTMENTS AT SEPTEMBER 30, 1995
(VALUE IN THOUSANDS)
<TABLE>
<CAPTION>
CORPORATE OBLIGATIONS VALUE
- --------------------------------------------------------------
<S> <C>
BANKING--2.8%
- --------------------------------------------------------------
Societe Generale North America Inc.
5.75%, 10/23/95 $ 4,983
--------------------------------------------------
- --------------------------------------------------------------
CAPTIVE BUSINESS FINANCE--16.9%
- --------------------------------------------------------------
Chrysler Financial Corporation
5.81%, 12/27/95 4,931
CSW Credit, Inc.
5.76%, 10/30/95 4,977
Enterprise Capital Funding Corporation
5.81%, 10/31/95 4,976
(a)Finova Capital Corporation
5.98%, 12/15/95 5,000
Hanson Finance (UK) PLC
5.74%, 10/24/95 4,982
Orix America, Inc.
5.90%, 12/1/95 4,951
--------------------------------------------------
29,817
- --------------------------------------------------------------
CONSUMER FINANCING--8.4%
- --------------------------------------------------------------
Countrywide Funding Corporation
6.02%, 10/18/95 4,986
Mitsubishi Motors Credit of America, Inc.
6.01%, 1/19/96 4,911
Whirlpool Financial Corporation
5.72%, 12/1/95 4,952
--------------------------------------------------
14,849
- --------------------------------------------------------------
CONSUMER PRODUCTS AND SERVICES--4.2%
- --------------------------------------------------------------
American Home Products Corporation
5.80%, 11/10/95 4,968
Coca-Cola Enterprises Inc.
6.70%, 10/2/95 2,500
--------------------------------------------------
7,468
- --------------------------------------------------------------
CORPORATE FINANCING--19.7%
- --------------------------------------------------------------
Astro Capital Corp.
5.91%, 11/30/95 4,952
CXC Incorporated
5.78%, 11/22/95 4,959
Corporate Asset Funding Company, Inc.
5.76%, 11/9/95 4,969
First Brands Commercial, Inc.
5.78%, 12/4/95 4,949
JTB Finance Americas
5.96%, 11/28/95 4,952
Philip Morris Capital Corporation
5.91%, 10/13/95 4,990
Ranger Funding Corporation
5.78%, 11/8/95 4,970
--------------------------------------------------
34,741
VALUE
- --------------------------------------------------------------
ENERGY AND UTILITIES--5.6%
- --------------------------------------------------------------
New Hampshire
Industrial Development Authority
5.82%, 12/13/95 $ 5,000
Ontario Hydro, Canada
5.80%, 11/20/95 4,960
--------------------------------------------------
9,960
- --------------------------------------------------------------
FINANCIAL SERVICES--16.1%
- --------------------------------------------------------------
(a)Bear Stearns Companies Inc.
5.86%, 10/19/95 5,000
Cargill Financial Services Corporation
6.35%, 10/2/95 5,999
(a)CS First Boston, Inc.
5.94%, 10/11/95 4,500
(a)Goldman, Sachs & Co.
5.88%, 10/25/95 5,000
(a)(b)Lehman Brothers Holdings Inc.
5.99%, 11/15/95 3,000
Nomura Holding America Inc.
5.72%, 12/7/95 4,947
--------------------------------------------------
28,446
- --------------------------------------------------------------
MUNICIPAL OBLIGATION--5.7%
- --------------------------------------------------------------
(a)(b)(c)Orange County, California
6.83%, 6/30/96
$10,000,000 (cost and par) 9,400
Letter of Credit from
The Bank of New York 600
--------------------------------------------------
10,000
- --------------------------------------------------------------
RECEIVABLES FINANCING--13.0%
- --------------------------------------------------------------
Clipper Receivables Corporation
5.80%, 10/23/95 4,982
JV Receivables Corporation
5.84%, 11/22/95 4,959
STRAIT Capital Corporation
5.83%, 10/31/95 4,976
WCP Funding Inc.
5.81%, 10/13/95 2,994
Working Capital Management Co. L.P.
5.91%, 11/22/95 4,958
--------------------------------------------------
22,869
==================================================
TOTAL CORPORATE
OBLIGATIONS--92.4%
(AVERAGE MATURITY: 40 DAYS) 163,133
==================================================
</TABLE>
5
<PAGE> 6
Portfolio of Investments
<TABLE>
<CAPTION>
(VALUE IN THOUSANDS)
BANK OBLIGATIONS VALUE
<S> <C>
Bank of America Illinois
5.75%, 11/9/95 $ 5,000
MBNA America Bank N.A.
5.90%, 2/5/96 5,000
Mellon Bank Corporation
5.75%, 2/6/96 8,000
=======================================================================
TOTAL BANK
OBLIGATIONS--10.2%
(AVERAGE MATURITY: 103 DAYS) 18,000
=======================================================================
TOTAL INVESTMENTS--102.6%
(AVERAGE MATURITY: 46 DAYS) 181,133
=======================================================================
LIABILITIES, LESS CASH AND
OTHER ASSETS--(2.6)% (4,576)
=======================================================================
NET ASSETS--100% $176,557
=======================================================================
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
Interest rates represent annualized yield to date of maturity, except for
variable rate securities described in Note (a). For each security, except as
described in Note (c), cost (for financial reporting and federal income tax
purposes) and carrying value are the same. Likewise, carrying value
approximates principal amount.
(a) Variable rate securities. The rates shown are the current rates at
September 30, 1995. The dates shown represent the demand date or next
interest rate change date.
(b) Illiquid securities. At September 30, 1995, the aggregate value of the
Fund's illiquid securities was $13,000,000, which represented 7.4%
of net assets.
(c) See Note (3) of the Notes to Financial Statements.
See accompanying Notes to Financial Statements.
6
<PAGE> 7
Report of Independent Auditors
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER CASH RESERVES FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper Cash Reserves Fund, a series
of Kemper Portfolios, as of September 30, 1995, the related statements of
operations for the two months then ended and the year ended July 31, 1995, and
changes in net assets for the two months ended September 30, 1995 and each of
the two years in the period ended July 31, 1995, and the financial highlights
for each of the fiscal periods since 1991. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
September 30, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Kemper Cash Reserves Fund at September 30, 1995, the results of its operations,
the changes in its net assets, and the financial highlights for the periods
referred to above, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
November 14, 1995
7
<PAGE> 8
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
(IN THOUSANDS)
<TABLE>
<S> <C>
- ---------------------------------------------------------------------
ASSETS
- ---------------------------------------------------------------------
Investments, at amortized cost $ 181,133
Cash 337
Receivable for:
Fund shares sold 1,383
Interest 315
TOTAL ASSETS 183,168
=====================================================================
- ---------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ---------------------------------------------------------------------
Payable for:
Dividends 246
Securities purchased 4,911
Fund shares redeemed 1,046
Management fee 60
Distribution services fee 92
Administrative services fee 35
Custodian and transfer agent fees and related expenses 102
Other 119
Total liabilities 6,611
NET ASSETS $ 176,557
=====================================================================
- ---------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- ---------------------------------------------------------------------
Paid-in capital $ 179,390
Unrealized depreciation on investments (2,833)
- ---------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $ 176,557
=====================================================================
- ---------------------------------------------------------------------
THE PRICING OF SHARES
- ---------------------------------------------------------------------
Net asset value and redemption price per share
CLASS A SHARES
($33,666 / 33,666 shares outstanding) $1.00
- ---------------------------------------------------------------------
CLASS B SHARES
(subject to contingent deferred sales charge)
($140,617 / 140,617 shares outstanding) $1.00
- ---------------------------------------------------------------------
CLASS C SHARES
($2,274 / 2,274 shares outstanding) $1.00
- ---------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
8
<PAGE> 9
Financial Statements
STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWO MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, JULY 31,
1995 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET INVESTMENT INCOME
- -------------------------------------------------------------------------------------------------------------
Interest income $1,964 17,306
Expenses:
Management fee 130 1,216
Distribution services fee 201 1,957
Administrative services fee 77 710
Custodian and transfer agent fees and related expenses 98 1,021
Professional fees 10 41
Reports to shareholders 12 81
Trustees' fees and other 5 33
Total expenses 533 5,059
- -------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,431 12,247
=============================================================================================================
Change in unrealized depreciation on investments -- (2,833)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,431 9,414
=============================================================================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWO MONTHS
ENDED YEAR ENDED JULY 31,
SEPTEMBER 30, -------------------
1995 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS, DIVIDENDS AND CAPITAL ACTIVITY
- -------------------------------------------------------------------------------------------------------------
Net investment income $ 1,431 12,247 5,556
Change in unrealized depreciation -- (2,833) --
Capital contribution from investment manager -- 2,833 --
Dividends to shareholders from net investment income (1,431) (12,247) (5,556)
NET INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS AND
TOTAL INCREASE (DECREASE) IN NET ASSETS (36,474) (211,286) 257,509
=============================================================================================================
- -------------------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------------------
Beginning of period 213,031 424,317 166,808
END OF PERIOD $176,557 213,031 424,317
=============================================================================================================
</TABLE>
9
<PAGE> 10
Notes to Financial Statements
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE FUND Kemper Cash Reserves Fund is a separate series
of Kemper Portfolios, an open-end management
investment company organized as a business trust
under the laws of Massachusetts. The Fund offers
three classes of shares. Class A shares are currently
available only upon exchange or upon conversion of
Class B shares. 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 or contingent
deferred sales charge but are subject to higher
ongoing expenses than Class A shares and do not
convert into another class. Each share represents an
identical interest in the investments of the Fund and
has the same rights. In 1995, the Fund changed its
fiscal year end for financial reporting purposes and
federal income tax purposes from July 31 to September
30.
- --------------------------------------------------------------------------------
2 SIGNIFICANT INVESTMENT VALUATION. Investments are stated at
ACCOUNTING POLICIES amortized cost, which approximates market value. In
the event that a deviation of 1/2 of 1% or more
exists between the Fund's $1.00 per share net asset
value, calculated at amortized cost, and the net
asset value calculated by reference to market-based
values, or if there is any other deviation that the
Board of Trustees believes would result in a material
dilution to shareholders or purchasers, the Board of
Trustees will promptly consider what action should be
initiated.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on
the trade date (date the order to buy or sell is
executed). Interest income is recorded on the accrual
basis and includes amortization of premium and
discount on investments.
FUND SHARE VALUATION AND DIVIDENDS TO SHAREHOLDERS.
Fund shares are sold and redeemed on a continuous
basis at net asset value. Proceeds payable on
redemption of Class B shares will be reduced by the
amount of any applicable contingent deferred sales
charge. On each day the New York Stock Exchange is
open for trading, the net asset value per share is
determined as of the earlier of 3:00 p.m. Chicago
time or the close of the Exchange. The net
asset value per share is determined separately for
each class by dividing the Fund's net assets
attributable to that class by the number of shares of
the class outstanding. The Fund declares a daily
dividend, equal to its net investment income for that
day, payable monthly. Differences in dividends per
share are due to different class expenses.
FEDERAL INCOME TAXES. The Fund has complied with the
special provisions of the Internal Revenue Code
available to investment companies and therefore no
federal income tax provision is required.
10
<PAGE> 11
Notes to Financial Statements
3 TRANSACTIONS MANAGEMENT AGREEMENT. The Fund has a management
WITH AFFILIATES agreement with Kemper Financial Services, Inc. (KFS)
and pays a management fee at an annual rate of .40% of
the first $250 million of average daily net assets
declining gradually to .25% of average daily net
assets in excess of $12.5 billion. The Fund incurred a
management fee of $130,000 for the two month period
ended September 30, 1995 and $1,216,000 for the year
ended July 31, 1995.
Kemper Asset Holdings, Inc. (KAHI), a subsidiary of
Kemper Corporation, the parent company of Kemper
Financial Services, Inc., arranged for the issuance of
a $10,706,000 irrevocable letter of credit from The
Bank of New York for the benefit of the Fund. The
letter of credit supports the payment of principal and
interest on the Orange County, California obligation
held in the Fund. The Fund and KAHI are parties to an
agreement related to the letter of credit which
provides, among other things, that, in connection with
a payment of principal or interest under the letter of
credit, the Fund will transfer to KAHI any proceeds
received under the Orange County obligation.
UNDERWRITING AND DISTRIBUTION SERVICES
AGREEMENT. The Fund has an underwriting and
distribution services agreement with Kemper
Distributors, Inc. (KDI). 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 from redemptions of
Class B shares. Distribution fees and commissions paid
in connection with the sale of Class B and Class C
shares, and the contingent deferred sales charges
received in connection with the redemption of Class B
shares are as follows:
<TABLE>
<CAPTION>
Commissions
and
Distribution Distribution Fees Amounts Contingent
Fees Paid Paid by KDI Paid to Deferred Sales
by the Fund to Firms Affiliates Charges
to KDI (including affiliates) of KDI Received by KDI
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Two months ended
September 30, 1995 $ 201,000 380,000 10,000 164,000
Year ended
July 31, 1995 $1,957,000 2,460,000 78,000 1,465,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has
an administrative services agreement with KDI. For
providing information and administrative services to
shareholders, the Fund pays KDI a fee at an annual rate
of up to .25% of average daily net assets. KDI in turn
has various arrangements 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 are as follows:
<TABLE>
<CAPTION>
Administrative
Administrative Services Fees Paid Administrative
Services Fees Paid by KDI to Firms Services Fees Paid
by the Fund to KDI (including affiliates) to Affiliates of KDI
----------------------------------------------------------------
<S> <C> <C> <C>
Two months ended
September 30, 1995 $ 77,000 89,000 7,000
Year ended
July 31, 1995 $710,000 765,000 52,000
</TABLE>
11
<PAGE> 12
Notes to Financial Statements
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. For the two month period ended
September 30, 1995 and the year ended July 31, 1995,
the transfer agent remitted shareholder services fees
to KSvC of $182,000 and $1,059,000, respectively.
OFFICERS AND TRUSTEES. Certain officers or trustees of
the Fund are also officers or directors of KFS. For
the two month period ended September 30, 1995 and the
year ended July 31, 1995, the Fund made no payments to
its officers and incurred trustees' fees of $3,000 and
$20,000, respectively, to independent trustees.
- --------------------------------------------------------------------------------
4 CAPITAL SHARE TRANSACTIONS
The following table summarizes the activity in
capital shares of the Fund (dollar amounts and
number of shares are the same).
<TABLE>
<CAPTION>
TWO MONTHS YEAR ENDED JULY 31,
ENDED -------------------
SEPTEMBER 30, 1995 1995 1994
(IN THOUSANDS)
--------------------------------------------------------------------
SHARES SOLD
--------------------------------------------------------------------
<S> <C> <C> <C>
Class A $ 1,168 39,705 62,747
Class B 32,163 521,185 892,199
Class C 1,970 18,754 801
<CAPTION>
--------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
--------------------------------------------------------------------
<S> <C> <C> <C>
Class A 276 1,945 878
Class B 1,009 8,701 3,643
Class C 29 133 1
<CAPTION>
--------------------------------------------------------------------
SHARES REDEEMED
--------------------------------------------------------------------
<S> <C> <C> <C>
Class A (4,166) (73,055) (56,628)
Class B (64,120) (714,110) (646,065)
Class C (4,803) (14,544) (67)
<CAPTION>
--------------------------------------------------------------------
CONVERSION OF SHARES
--------------------------------------------------------------------
<S> <C> <C> <C>
Class A 928 14,213 23,904
Class B (928) (14,213) (23,904)
NET INCREASE (DECREASE)
FROM CAPITAL SHARE
TRANSACTIONS AND TOTAL
INCREASE (DECREASE)
IN NET ASSETS $(36,474) (211,286) 257,509
====================================================================
</TABLE>
12
<PAGE> 13
Financial Highlights
<TABLE>
<CAPTION>
-------------------------------------------------------------------
CLASS A SHARES
-------------------------------------------------------------------
TWO MONTHS JANUARY 10,
ENDED YEAR ENDED JULY 31, 1992 TO
SEPTEMBER 30, ------------------------------- JULY 31,
1995 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $1.00 1.00 1.00 1.00 1.00
Net investment income and dividends declared .01 .05 .03 .02 .01
Net asset value, end of period $1.00 1.00 1.00 1.00 1.00
- -------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) .85% 4.99 2.78 2.42 1.57
- -------------------------------------------------------------------------------------------------------------
ANNUALIZED RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------------------------
Expenses .92% .89 .92 .93 1.39
Net investment income 5.11 4.75 2.86 2.42 2.75
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
----------------------------------------------------------------
CLASS B SHARES
----------------------------------------------------------------
TWO MONTHS
ENDED YEAR ENDED JULY 31,
SEPTEMBER 30, --------------------------------------------
1995 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $1.00 1.00 1.00 1.00 1.00 1.00
Net investment income and dividends declared .01 .04 .02 .02 .03 .05
Net asset value, end of period $1.00 1.00 1.00 1.00 1.00 1.00
- -------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) .71% 4.08 1.78 1.56 2.65 5.35
- -------------------------------------------------------------------------------------------------------------
ANNUALIZED RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------------------------
Expenses 1.79% 1.78 1.89 1.82 2.22 2.18
Net investment income 4.24 3.86 1.89 1.53 2.69 5.32
- -------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 14
Financial Highlights
<TABLE>
<CAPTION>
---------------------------------------------
CLASS C SHARES
---------------------------------------------
TWO MONTHS YEAR MAY 31,
ENDED ENDED TO
SEPTEMBER 30, JULY 31, JULY 31,
1995 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------
Net asset value, beginning of period $1.00 1.00 1.00
Net investment income and dividends declared .01 .04 --
Net asset value, end of period $1.00 1.00 1.00
- ------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) .71% 4.08 .42
- ------------------------------------------------------------------------------------------
ANNUALIZED RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------------------
Expenses 1.78% 1.76 1.80
Net investment income 4.25 3.88 2.64
- ------------------------------------------------------------------------------------------
Supplemental data for all classes
- ------------------------------------------------------------------------------------------
<CAPTION>
TWO MONTHS
ENDED YEAR ENDED JULY 31,
SEPTEMBER 30, ----------------------------------------------------
1995 1995 1994 1993 1992 1991
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net assets at end of period (in thousands) $176,557 213,031 424,317 166,808 156,219 240,994
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES: The total returns for July 31, 1995 include the effect of a capital
contribution from the investment manager. Without the capital contribution, the
total returns would have been 4.07% in Class A, 3.16% in Class B and 3.16% in
Class C.
KFS temporarily agreed to absorb certain operating expenses of the Fund during a
portion of the fiscal years ended July 31, 1994 and 1993. Absent this
agreement, ratios of expenses and net investment income to average net assets
for the Class A shares would have been 1.15% and 2.63%, respectively, for 1994
and 1.18% and 2.17%, respectively, for 1993. Ratios of expenses and net
investment income to average net assets for the Class B shares would have been
2.12% and 1.66%, respectively, for 1994 and 2.07% and 1.28%, respectively, for
1993.
14
<PAGE> 15
Shareholders' Meeting
SPECIAL SHAREHOLDERS' MEETING
On September 19, 1995 a special shareholders' meeting was held. Fund
shareholders were asked to vote on four separate issues: election of nine
Trustees to the Board of Trustees, ratification of Ernst & Young LLP as
independent auditors, approval of a new investment management agreement with
Kemper Financial Services, Inc. or its successor on the same terms as the
current agreement and, for Class B and Class C shareholders only, approval of a
new 12b-1 distribution plan with Kemper Distributors, Inc. or its successor on
the same terms as the current plan. The fund voted together with the other two
series of Kemper Portfolios on items one and two which is why the numbers are
so much higher. We are pleased to report that all nominees were elected and
other items were approved. Following are the results for each issue:
1)Election of Trustees
<TABLE>
<CAPTION>
For Withheld
<S> <C> <C>
David W. Belin 424,455,432 12,676,836
Lewis A. Burnham 424,717,712 12,414,556
Donald L. Dunaway 424,630,285 12,501,983
Robert B. Hoffman 424,761,425 12,370,843
Donald R. Jones 424,586,572 12,545,696
David B. Mathis 424,368,006 12,764,262
Shirley D. Peterson 424,193,153 12,939,115
William P. Sommers 424,499,145 12,633,123
Stephen B. Timbers 424,673,998 12,458,270
</TABLE>
2)Ratification of the selection of Ernst & Young LLP as independent auditors
for the fund
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
412,345,882 6,901,993 18,462,629
</TABLE>
3)Approval of new investment management agreement
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
105,975,148 4,090,252 6,441,805
</TABLE>
4)Approval of new 12b-1 distribution plan
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C> <C>
Class B
Shares 81,387,109 4,174,087 5,192,332
Class C
Shares 1,183,859 60,843 44,981
</TABLE>
15
<PAGE> 16
Trustees and Officers
TRUSTEES
STEPHEN B. TIMBERS
President and Trustee
DAVID W. BELIN
Trustee
LEWIS A. BURNHAM
Trustee
DONALD L. DUNAWAY
Trustee
ROBERT B. HOFFMAN
Trustee
DONALD R. JONES
Trustee
DAVID B. MATHIS
Trustee
SHIRLEY D. PETERSON
Trustee
WILLIAM P. SOMMERS
Trustee
OFFICERS
J. PATRICK BEIMFORD, JR.
Vice President
JOHN E. PETERS
Vice President
MICHELLE M. KEELEY
Vice President
FRANK J. RACHWALSKI, JR.
Vice President
PHILIP J. COLLORA
Vice President and
Secretary
CHARLES F. CUSTER
Vice President and
Assistant Secretary
JEROME L. DUFFY
Treasurer
ELIZABETH C. WERTH
Assistant Secretary
- --------------------------------------------------------------------------
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
800-621-1048
- --------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
127 West 10th Street
Kansas City, MO 64105
- --------------------------------------------------------------------------
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
- --------------------------------------------------------------------------
INVESTMENT MANAGER KEMPER FINANCIAL SERVICES,INC.
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
120 South LaSalle Street
Chicago, IL 60603
[KEMPER MUTUAL FUNDS LOGO] [RECYCLE PAPER BUG]
1005600 This report is not to be
Printed in the U.S.A. distributed unless preceded or
accompanied by a
Kemper Fixed Income prospectus.
KCRF-2(11/95)
16
