<PAGE> 1
Kemper Short-Intermediate
Government Fund
Semiannual Report to Shareholders
For the Period Ended
January 31, 1995
Offering investors the opportunity for
high current income and
preservation of capital
(LOGO)
<PAGE> 2
DEAR SHAREHOLDER:
We are pleased to provide you with an economic overview and performance for your
fund, Kemper Short-Intermediate Government Fund, for the six-month period ended
January 31, 1995. In addition, following the economic overview is a question and
answer interview with your fund's Portfolio Managers.
- ----------------------------
PERFORMANCE REVIEW
- ------------------------------------------------------------
<TABLE>
<S> <C>
TOTAL RETURNS*
For the Six-month Period Ended January 31, 1995
(unadjusted for any sales charge)
KEMPER SHORT-INTERMEDIATE GOVERNMENT A 0.79%
KEMPER SHORT-INTERMEDIATE GOVERNMENT B 0.35%
KEMPER SHORT-INTERMEDIATE GOVERNMENT C 0.37%
LIPPER SHORT U.S. GOVERNMENT FUNDS
CATEGORY AVERAGE** 0.89%
</TABLE>
- ------------------------------------------------------------
Returns are historical and do not represent future performance. Returns and net
asset value fluctuate. Shares are redeemable at current net asset value, which
may be more or less than original cost.
When comparing Kemper Short-Intermediate U.S. Government Fund B to all other
Short U.S. Government funds in its Lipper** category for the following time
periods ended January 31, 1995, this fund ranked: 1-year, 67 of 111 and 5-year
27 of 33.
- ----------------------
DIVIDEND REVIEW
The following table shows dividend and yield information for the fund as of
January 31, 1995.
- ------------------------------------------------------------
<TABLE>
A SHARES B SHARES C SHARES
-------- -------- --------
<S> <C> <C> <C>
JANUARY DIVIDEND: $0.0440 $0.0381 $0.0387
NET ASSET VALUE: $7.91 $7.88 $7.88
ANNUALIZED
DISTRIBUTION RATE+: 6.68% 5.80% 5.89%
SEC YIELD+: 6.32% 5.54% 5.57%
</TABLE>
- ------------------------------------------------------------
- ---------------------------------------
GENERAL ECONOMIC OVERVIEW
The momentum of the 1994 economic expansion produced some of the most positive
economic reports we've seen in years. Income, consumer spending, construction
spending and hiring all were at high levels as we closed the pages on 1994 and
progressed through the first two months of 1995.
It was a year ago that the Federal Reserve Board initiated its series of rate
hikes intended to cool down the economy. As you'll note in the accompanying
graphs, the high 6.3 percent increase in gross domestic product (GDP) in the
fourth quarter of 1993 provoked the Fed's first rate increase in February of
1994. The government raised rates five additional times in 1994, yet the economy
continued to expand at relatively high rates. The economy's ability to produce a
fourth quarter 1994 GDP of 4.6% one year after steadily rising rates virtually
assured that the Fed would raise rates again in February--and it did. Later in
the month, though, Chairman Alan Greenspan indicated that the tightening might
be over.
Several measures indicate the strength and stability of today's economy compared
to the early 1990s: consumers are not in as much debt as they were just three or
four years ago, nonfinancial corporations have a much lower level of debt
relative to their cash flow, and the federal budget deficit relative to its
gross domestic product (GDP) is lower than it was earlier in the decade.
As the new year unfolds, a slowdown in housing starts and auto sales suggests
the economy will slow in 1995. Slower retail sales signal consumer caution and
retailer cutbacks in inventories. Two sectors are providing new strength:
Exports are up as many economies overseas are in the early phase of economic
recovery, and nonresidential construction is also starting to pick up.
1
<PAGE> 3
STRONG ECONOMIC GROWTH...
Data show the annual rate of increase in the U.S. gross domestic product by
quarter
<TABLE>
<CAPTION>
4Q1993 1Q1994 2Q1994 3Q1994 4Q1994
- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
6.30 3.30 4.10 4.00 4.50
</TABLE>
Source: Commerce Department
PROVOKED A SERIES OF INTEREST RATE HIKES
The Federal Reserve Board started raising the Federal Funds (short-term)
interest rates in February 1994 and raised rates six times since.
<TABLE>
<CAPTION>
Before
Rate
Hikes 2/4/94 3/22/94 4/18/94 5/17/94 8/16/94 11/15/94 2/1/95
- ------ ------ ------- ------ ------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
3.00 3.25 3.50 3.75 4.25 4.75 5.50 6.00
</TABLE>
OUR OUTLOOK
While we believe that higher interest rates are slowing economic growth, the
Federal Reserve will remain focused on the inflation outlook as well as the
dollar. As a consequence, we expect the Fed to raise rates if inflation starts
to rise, for example. Long-term rates may rise but not to the same extent as
short-term rates as bond markets view as positive the Fed's attempt to head off
the inflation threat.
We expect the economy to slow this year--but we do not expect a recession.
Inflation will likely increase gradually, ranging between 3.0 percent and 3.5
percent in the next six months. The Federal Reserve's commitment to fighting
inflation should be a long-term positive for financial assets.
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
Steven Timbers
Chief Investment and Executive Officer
March 8, 1995
- ---------------- Stephen Timbers is Chief Executive Officer and
is also Chief Investment Officer of Kemper
Photo Financial Services, Inc. (KFS). KFS and its
Here affiliates manage approximately $60 billion in
- ---------------- assets, including $42 billion in retail mutual
funds. Timbers is a graduate of Yale
University and holds a M.B.A. from Harvard
University.
* Total return measures net investment income and capital gain or loss from
portfolio investments, assuming reinvestment of all dividends. During the
periods noted, securities prices fluctuated. For additional information, see
the Prospectus and Statement of Additional Information and the Financial
Highlights at the end of this report.
** Lipper Analytical Services, Inc. performance 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. Performance and rankings are historical and do not reflect future
performance.
+ Current annualized distribution rate is the latest monthly dividend shown as
an annualized percentage of net asset value on January 31, 1995. Distribution
rate simply measures the level of dividends and is not a complete measure of
performance. The SEC yield is net investment income per share earned over the
month ended January 31, 1995 shown as an annualized percentage of the maximum
offering price on that date.
2
<PAGE> 4
Q & A
A PERFORMANCE REVIEW AND
AN INTERVIEW
WITH PORTFOLIO
MANAGERS
J. Patrick Beimford
& Michelle KeelEy
[PHOTO]
J. Patrick Beimford joined Kemper Financial Services, Inc., in 1976 and is now
Vice President and Co-Portfolio Manager of the Kemper Short-Intermediate
Government Fund. Mr. Beimford received a B.S.I.M. degree from Purdue University
and went on to receive his M.B.A. from the University of Chicago.
[PHOTO]
Michelle Keeley joined Kemper Financial Services, Inc. in 1990 and is now
Co-Portfolio Manager of Kemper Short-Intermediate Government Fund. Ms. Keeley
received her Bachelor of Arts degree from James Madison College and went on to
receive her M.B.A. from Northwestern University.
Q: The Federal Reserve raised short-term interest rates an additional 1.75%
during the six-month period covered by this report, as part of its goal of
slowing the economy and keeping inflation low. What effect did the Fed's
actions have on the bond market?
A: Interest rates were higher at the end of the period, leaving bond prices
lower. However, most sectors of the Treasury market had positive performance
as bond income exceeded losses to bond prices. This was a big improvement over
the first six months of 1994 when the Treasury market fell by 4.04% as measured
by the Salomon Brothers Treasury Bond Index.+
In the first three months of the period, short-term interest rates climbed with
investors' expectations of further Fed tightening. Long-term interest rates
rose due to their concern of imminent inflation. Immediately following the
Federal Reserve's sixth hike to short-term interest rates in November,
short-term interest rates increased significantly more than long-term rates
and, as a result, short-term bond prices declined more than long-term bond
prices. Short-term rates receded in January as market participants predicted
that the Fed tightening was nearly complete following a 0.50% boost to
short-term rates on January 31.
Q: Since rising interest rates tend to cause bond prices to decline, how did
you manage the fund in response to these events?
A: The fund, by objective, is focused on bonds with short and intermediate
maturities. For most of the period we kept the fund's average maturity
conservatively positioned, even within these guidelines. Our outlook was for
short-term interest rates to move higher, and so we kept the fund's duration at
approximately 1.5 years for most of the period. Duration is a measurement of a
portfolio's sensitivity to interest rates and is based, in part, on the average
maturity of bonds within a portfolio. The shorter a fund's duration the lower
its sensitivity to interest rate changes. And so, by maintaining a relatively
short duration, we were able to limit the decline in prices that resulted when
interest rates moved higher. This was the case for most of the period. In
January, however, we modestly lengthened duration. This allowed the fund to
benefit from the price gains as the market improved after the start of the new
year.
Q: What effect did higher short-term rates have on the income earning
potential of the fund?
A: Remember that because shorter-term bonds mature more quickly than longer
term bonds, shorter-term bond funds can more quickly take advantage of the
higher level of income offered by rising rates. This was the case for the fund
in September when it raised its dividend by approximately 5%.
Q: How did the fund's performance compare to its competitors?
A: The fund's B shares returned 0.35% for the period and underperformed the
average return of 0.89% for its Lipper category. A high allocation of
short-duration Treasuries caused the fund to lag its peers in December, when
short-term rates rose dramatically. The fund performed well in January when its
duration was modestly extended. For the period on the whole, the fund
underperformed short government funds that favored mortgage-backed securities
over Treasuries.
3
<PAGE> 5
Q: Do you think rates will continue to rise, and if so, how is the fund
positioned to buffer the effects?
A: While the Fed's recent statements and actions show that it has taken a tough
stance on inflation, it is also true that the Fed must avoid raising rates so
high that the economy goes back into recession. The Fed has shown that it will
seek to stabilize rates when it is satisfied that the economy is growing at a
steady rate of approximately 2.5% and that inflation is under control. We
expect the Fed to tighten at least one more time during the first part of 1995.
Yet, we believe that another year of rate hikes as severe as 1994 is unlikely.
We are also optimistic because of what has already transpired in 1994. As
reflected in the fund's dividend rate increase in September, the fund has been
generating more income as money was reinvested at higher rates versus those
that prevailed eight months ago.
Q: Given the Fed's actions so far, what is your outlook for inflation and the
bond market in 1995?
A: We think that 1995 will continue to be another challenging year for the bond
market as both the Fed and investors continue to be on guard for an increase in
inflation. Nevertheless, our outlook for 1995 is positive. The Fed's tightening
throughout 1994 should moderate growth in 1995 to a level well below that of
1994. In the past, the Fed has waited for signs of inflation to emerge before
it has moved to raise interest rates. In this case the Fed has raised rates in
anticipation of a rise in inflation. Because of this vigilant, preemptive
strategy, few people expect that the rise in inflation will be significant.
This should benefit bond holders in the long run.
+ The Salomon Brothers Treasury Bond Index is an unmanaged list of U.S.
Treasury securities.
4
<PAGE> 6
PORTFOLIO OF INVESTMENTS January 31, 1995
(dollars in thousands)
<TABLE>
<CAPTION>
Coupon Principal
Type Rate Maturity Amount Value
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS
U.S. TREASURY SECURITIES-100.3%
(Cost: $253,496)
- ---------------------------------------------------------------------------------------------------------------------------------
Notes 8.625% 1995 $10,000 $ 10,130
3.875 1995 2,000 1,960
9.25 1996 18,075 18,391
8.875 1996 18,000 18,352
8.00 1996 10,000 10,127
7.50 1996 15,000 15,070
7.25 1996 60,000 60,019
8.625 1997 20,000 20,581
8.50 1997 15,000 15,356
8.00 1997 15,000 15,218
7.50 1997 5,000 5,024
7.375 1997 35,000 35,005
6.75 1997 20,000 19,797
7.75 1999 8,000 8,063
- ---------------------------------------------------------------------------------------------------------------------------------
253,093
FEDERAL HOME LOAN MORTGAGE CORPORATION OBLIGATIONS-.2%
(Cost: $584) 11.25 2010 518 556
- ---------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION-2.1%
(Cost: $5,265)
- ---------------------------------------------------------------------------------------------------------------------------------
Pass-through Certificates 8.00 2025 5,000 5,100
- ---------------------------------------------------------------------------------------------------------------------------------
Notes 9.00-9.50 2016-2020 196 202
- ---------------------------------------------------------------------------------------------------------------------------------
5,302
TOTAL U.S. GOVERNMENT OBLIGATIONS-102.6%
(Cost: $259,345) 258,951
- ---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES, LESS OTHER ASSETS-(2.6)% (6,635)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS-100% $252,316
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE TO PORTFOLIO OF INVESTMENTS
Based on the cost of investments of $259,345,000 for federal income tax purposes
at January 31, 1995, the aggregate gross unrealized appreciation was $698,000,
the aggregate gross unrealized depreciation was $1,092,000 and the net
unrealized depreciation of investments was $394,000.
See accompanying Notes to Financial Statements.
5
<PAGE> 7
STATEMENT OF ASSETS AND LIABILITIES
January 31, 1995
(in thousands)
<TABLE>
<S> <C>
ASSETS
- -------------------------------------------------------------
Investments, at value
(Cost: $259,345) $258,951
- -------------------------------------------------------------
Receivable for:
Fund shares sold 705
- -------------------------------------------------------------
Investments sold 11
- -------------------------------------------------------------
Interest 4,501
- -------------------------------------------------------------
Total assets 264,168
- -------------------------------------------------------------
LIABILITIES AND NET ASSETS
- -------------------------------------------------------------
Cash overdraft 702
- -------------------------------------------------------------
Payable for:
Fund shares redeemed 636
- -------------------------------------------------------------
Investments purchased 10,115
- -------------------------------------------------------------
Management fee 115
- -------------------------------------------------------------
Distribution services fee 142
- -------------------------------------------------------------
Administrative services fee 50
- -------------------------------------------------------------
Custodian and transfer agent
fees and related expenses 83
- -------------------------------------------------------------
Other 9
- -------------------------------------------------------------
Total liabilities 11,852
- -------------------------------------------------------------
Net assets $252,316
- -------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -------------------------------------------------------------
Excess of amounts received from
issuance of shares over amounts paid
on redemptions of shares on account
of capital $271,377
- -------------------------------------------------------------
Accumulated net realized loss
on sales of investments (21,533)
- -------------------------------------------------------------
Unrealized depreciation of investments (394)
- -------------------------------------------------------------
Undistributed net investment income 2,866
- -------------------------------------------------------------
Net assets applicable to shares
outstanding $252,316
- -------------------------------------------------------------
THE PRICING OF SHARES
- -------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price
per share ($24,951 / 3,154
shares outstanding) $7.91
- -------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 3.63% of net
asset value or 3.50% of offering price) $8.20
- -------------------------------------------------------------
CLASS B SHARES
Net asset value, offering price and redemption
price
(subject to contingent deferred sales charge)
per
share ($224,495 / 28,495 shares outstanding) $7.88
- -------------------------------------------------------------
CLASS C SHARES
Net asset value, offering price and redemption
price per share ($2,870 / 364 shares
outstanding) $7.88
- -------------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
Six months ended January 31, 1995
(in thousands)
<TABLE>
<S> <C>
INTEREST INCOME $ 10,146
- -------------------------------------------------------------
EXPENSES
- -------------------------------------------------------------
Management fee 717
- -------------------------------------------------------------
Distribution services fee 897
- -------------------------------------------------------------
Administrative services fee 314
- -------------------------------------------------------------
Custodian and transfer agent fees and related
expenses 336
- -------------------------------------------------------------
Professional fees 34
- -------------------------------------------------------------
Reports to shareholders 29
- -------------------------------------------------------------
Trustees' fees and other 12
- -------------------------------------------------------------
Total expenses 2,339
- -------------------------------------------------------------
Net investment income 7,807
- -------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
- -------------------------------------------------------------
Net realized loss on sales of investments (8,272)
- -------------------------------------------------------------
Net realized loss from futures transactions (321)
- -------------------------------------------------------------
Net realized loss (8,593)
- -------------------------------------------------------------
Net change in balance of unrealized
depreciation of investments 1,622
- -------------------------------------------------------------
Net loss on investments (6,971)
- -------------------------------------------------------------
Net increase in net assets resulting from
operations $ 836
- -------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
6
<PAGE> 8
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
<TABLE>
<CAPTION>
Six months Year
ended ended
January 31, July 31,
OPERATIONS 1995 1994
----------- --------
<S> <C> <C>
- ---------------------------------------------------------------
Net investment income $ 7,807 14,144
- ---------------------------------------------------------------
Net realized loss on investments (8,593) (12,024)
- ---------------------------------------------------------------
Net change in unrealized depreciation 1,622 (3,439)
- ---------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 836 (1,319)
- ---------------------------------------------------------------
Net equalization charges (104) (68)
- ---------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS
- ---------------------------------------------------------------
Distribution from net investment
income (7,543) (12,992)
- ---------------------------------------------------------------
Distribution in excess of realized
gains -- (3,792)
- ---------------------------------------------------------------
Total dividends to shareholders (7,543) (16,784)
- ---------------------------------------------------------------
Net (decrease) increase from capital
share transactions (7,513) 1,562
- ---------------------------------------------------------------
Total decrease in net assets (14,324) (16,609)
- ---------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------
Beginning of period 266,640 283,249
- ---------------------------------------------------------------
End of period (including undistributed
net investment income of $2,866 for
1995 and $2,706 for 1994) $ 252,316 266,640
- ---------------------------------------------------------------
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE FUND
Kemper Short-Intermediate Government 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 currently offers three 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 or a contingent deferred sales charge but are subject to higher ongoing
expenses than Class A shares and do not convert into another class. The Fund may
offer Class I shares and no such shares are outstanding as of January 31, 1995.
Each share represents an identical interest in the investments of the Fund and
has the same rights.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION
Investments are stated at value. Fixed income securities are valued by using
market quotations, or independent pricing services that use prices provided by
market makers or estimates of market values obtained from yield data relating to
instruments or securities with similar characteristics. Exchange traded fixed
income options are valued at the last sale price unless there is no sale price,
in which event prices provided by market makers are used. Over-the-counter
traded fixed income options are valued based upon prices provided by market
makers. Financial futures and options thereon are valued at the settlement price
established each day by the board of trade or exchange on which they are traded.
Other securities and assets are valued at fair value as determined in good faith
by the Board of Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date (date the order to
buy or sell is executed). Interest income is recorded on the accrual basis and
includes premium and discount amortization on money market instruments and
mortgage-backed securities; it also includes original issue and market discount
amortization on long-term fixed income securities. Realized gains and losses
from investment transactions are reported on an identified cost basis. Realized
and unrealized gains and losses on financial futures and options are included in
net realized and unrealized gain (loss) on investments, as appropriate.
The Fund may purchase securities with delivery or payments to occur at a later
date. At the time the Fund enters into a commitment to purchase a security, the
transaction is recorded and the value of the security is reflected in the net
asset value. The value of the security may vary with market fluctuations. No
interest accrues to the Fund until payment takes place. At the time the Fund
enters into this type of transaction it is required to
7
<PAGE> 9
designate cash or other liquid assets equal to the value of the securities
purchased. At January 31, 1995 the Fund had $5,082,000 in purchase commitments
outstanding (2% of net assets) with a corresponding amount of assets designated.
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 shares will be reduced by the amount of any applicable
contingent deferred sales charge. On each day the New York Stock Exchange is
open for trading, the net asset value per share is determined as of the earlier
of 3:00 p.m. Chicago time or the close of the Exchange. The net asset value per
share is determined separately for each class by dividing the Fund's net assets
attributable to that class by the number of shares of the class outstanding.
FEDERAL INCOME TAXES AND DIVIDENDS TO SHAREHOLDERS
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. The accumulated net realized loss on sales of investments
for federal income tax purposes at January 31, 1995, amounting to approximately
$21,098,000, is available to offset future taxable gains. If not applied, the
loss carryover expires in the year 2003.
Differences in dividends per share are due to different class expenses.
Dividends payable to its shareholders are recorded by the Fund on the
ex-dividend date.
On February 14, 1995, the following per share dividends were declared, payable
February 28, 1995 to shareholders of record on February 15, 1995.
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
- ---------------------------------------------------------------
Income $.044 $.0381 $.0388
- ---------------------------------------------------------------
</TABLE>
Distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments for certain transactions.
EQUALIZATION ACCOUNTING
A portion of proceeds from sales and cost of redemptions of Fund shares is
credited or charged to undistributed net investment income so that income per
share available for distribution is not affected by sales or redemptions of
shares.
3. TRANSACTIONS WITH AFFILIATES
MANAGEMENT AGREEMENT
The Fund has a management agreement with Kemper Financial Services, Inc. (KFS)
and pays a management fee at an annual rate of .55% of the first $250 million of
average daily net assets declining gradually to .40% of average daily net
assets in excess of $12.5 billion. The Fund incurred a management fee of
$717,000 for the six months ended January 31, 1995.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT
The Fund has an underwriting and distribution services agreement with Kemper
Distributors, Inc. (KDI). Before February 1, 1995, KFS was the Fund's principal
underwriter. As principal underwriter for the Fund, KDI (as successor to KFS)
retained commissions of $14,000 for the six months ended January 31, 1995, for
sales of Class A shares, after allowing $99,000 as commissions to retail firms,
of which $41,000 was paid to firms affiliated with 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 that provide
distribution services to investors. KDI compensates these firms at various rates
for sales of Class B and Class C shares. During the six months ended January 31,
1995, the Fund incurred a distribution services fee for Class B and Class C
shares of $897,000, and KDI paid $425,000 for commissions and distribution fees
to firms, including $38,000 to firms affiliated with KDI. In addition, KDI
received $542,000 of contingent deferred sales charges.
ADMINISTRATIVE SERVICES AGREEMENT
The Fund has an administrative services agreement with KDI. Before February 1,
1995, KFS was the Fund's administrator. 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. For the six
months ended January 31, 1995, the Fund incurred an administrative services fee
of $314,000 and KDI (as successor to KFS) paid $308,000 to firms, including
$28,000 that was paid to firms affiliated with KDI.
CUSTODIAN AND TRANSFER AGENT AGREEMENTS
The Fund has a custodian agreement and a transfer agent agreement with Investors
Fiduciary Trust Company (IFTC), which was 50% owned by KFS until January 31,
1995, when KFS completed the sale of IFTC to a third party. For the six months
ended January 31, 1995, the Fund incurred custodian and transfer agent fees of
$295,000 (excluding related expenses). Pursuant to a services' agreement with
IFTC, Kemper Service Company (KSvC), an affiliate of KFS, is the shareholder
service agent of the Fund. For the six months ended January 31, 1995, IFTC
remitted shareholder service fees of $362,000 to KSvC.
8
<PAGE> 10
OFFICERS AND TRUSTEES
Certain officers or trustees of the Fund are also officers or directors of KFS.
For the six months ended January 31, 1995, the Fund made no payments to its
officers and incurred trustees' fees of $7,000 to independent trustees.
4. INVESTMENT TRANSACTIONS
For the six months ended January 31, 1995, investment transactions (excluding
short term instruments) are as follows (in thousands):
<TABLE>
<S> <C>
Purchases $889,915
- ------------------------------------------------------------
Proceeds from sales 884,805
- ------------------------------------------------------------
</TABLE>
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
January 31, July 31,
1995 1994
------------------- --------------------
Shares Amount Shares Amount
------ --------- ------- ---------
<S> <C> <C> <C> <C>
Shares sold:
Class A 1,618 $ 12,653 553 $ 4,703
- -------------------------------------------------------------------
Class B 2,622 19,755 10,856 90,855
- -------------------------------------------------------------------
- ------------------------------
Class C 358 2,842 76 611
- -------------------------------------------------------------------
- ------------------------------
Shares issued in
reinvestment of
dividends:
Class A 74 690 64 534
- -------------------------------------------------------------------
Class B 632 5,808 1,457 11,729
- -------------------------------------------------------------------
Class C 6 60 -- --
- -------------------------------------------------------------------
Shares redeemed:
Class A (692) (5,437) (522) (4,281)
- -------------------------------------------------------------------
Class B (5,521) (43,277) (12,389) (102,589)
- -------------------------------------------------------------------
Class C (76) (607) -- --
- -------------------------------------------------------------------
Conversion of shares:
Class A 252 2,015 999 8,133
- -------------------------------------------------------------------
Class B (253) (2,015) (1,001) (8,133)
- -------------------------------------------------------------------
Net (decrease) increase
from capital share
transactions $ (7,513) $ 1,562
- -------------------------------------------------------------------
</TABLE>
6. FINANCIAL FUTURES CONTRACTS
In order to protect itself against future changes in market conditions which
otherwise might affect adversely the value of securities the Fund holds, the
Fund has entered into exchange traded financial futures contracts as described
below. The Fund bears the market risk that arises from changes in the value of
these financial instruments.
At the time the Fund enters into a futures contract, it is required to make a
margin deposit with its custodian of a specified amount of cash or eligible
securities. Subsequently, gain or loss is recognized and payments are made on a
daily basis between the Fund and the broker as the market price of the futures
contract fluctuates. At January 31, 1995, $240,000 of cash was pledged to cover
margin requirements for open futures positions. At January 31, 1995, the Fund
had outstanding financial futures contracts as follows:
<TABLE>
<CAPTION>
Notional Expiration Loss at
Type Amount Position Month 1/31/95
- --------------------- ---------- -------- ---------- -------
<S> <C> <C> <C> <C>
U.S. Treasury
Securities $4,500,000 Short March $4,000
- --------------------------------------------------------------------
</TABLE>
9
<PAGE> 11
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six months January 10,
ended Year ended July 1992 to July
January 31, 31, 31,
CLASS A SHARES 1995 1994 1993 1992
------------ ---- ---- ------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $8.11 8.63 8.65 8.59
- -----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .27 .48 .53 .29
- -----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (.21) (.44) (.03) .11
- -----------------------------------------------------------------------------------------------------------------
Total from investment operations .06 .04 .50 .40
- -----------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .26 .45 .52 .34
- -----------------------------------------------------------------------------------------------------------------
Distribution in excess of realized gain on investments -- .11 -- --
- -----------------------------------------------------------------------------------------------------------------
Total dividends .26 .56 .52 .34
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $7.91 8.11 8.63 8.65
- -----------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%): .79 .41 6.01 4.87
- -----------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 1.04 1.06 1.04 .95
- -----------------------------------------------------------------------------------------------------------------
Net investment income 6.74 5.85 6.06 7.48
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Six months
ended
January 31, Year ended July 31,
CLASS B SHARES 1995 1994 1993 1992 1991 1990
----------- ---- ---- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $8.08 8.61 8.64 8.27 8.42 8.70
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .23 .40 .45 .58 .69 .72
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments (.21) (.44) (.02) .36 (.14) (.27)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .02 (.04) .43 .94 .55 .45
- ---------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .22 .38 .46 .57 .70 .72
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain on investments -- -- -- -- -- .01
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution in excess of realized gain on
investments -- .11 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends .22 .49 .46 .57 .70 .73
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $7.88 8.08 8.61 8.64 8.27 8.42
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%): .35 (.48) 5.13 11.76 6.85 5.52
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 1.86 1.93 1.87 1.89 2.07 2.10
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 5.91 4.95 5.23 6.84 8.19 8.60
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 12
<TABLE>
<CAPTION>
Six months
ended
January 31, May 31, 1994
CLASS C SHARES 1995 to July 31, 1994
----------- ----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $8.08 8.09
- --------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .23 .07
- --------------------------------------------------------------------------------------------
Net realized and unrealized (loss) on investments (.21) (.01)
- --------------------------------------------------------------------------------------------
Total from investment operations .02 .06
- --------------------------------------------------------------------------------------------
Less distribution from net investment income .22 .07
- --------------------------------------------------------------------------------------------
Net asset value, end of period $7.88 8.08
- --------------------------------------------------------------------------------------------
TOTAL RETURN (%): .37 .77
- --------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 1.85 1.83
- --------------------------------------------------------------------------------------------
Net investment income 5.92 5.54
- --------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Six months
ended
January 31, Year ended July 31,
SUPPLEMENTAL DATA FOR ALL CLASSES: 1995 1994 1993 1992 1991
----------- ---------------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net assets at end of period (in thousands) $ 252,316 266,640 283,249 191,716 104,279
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 728 916 339 120 180
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE FOR ALL CLASSES: Ratios have been determined on an annualized basis. Total
return is not annualized and does not reflect the effect of any sale charges.
11
<PAGE> 13
IJKLM(LOGO)
KEMPER FINANCIAL SERVICES, INC.
120 South LaSalle Street
Chicago, IL 60603
KEMPER PORTFOLIOS
KEMPER SHORT-INTERMEDIATE GOVERNMENT FUND
<TABLE>
<S> <C> <C>
Trustees Officers
STEPHEN B. TIMBERS J. PATRICK BEIMFORD, JR. JEROME L. DUFFY
President and Trustee Vice President Treasurer
DAVID W. BELIN MICHELLE M. KEELEY ELIZABETH C. WERTH
Trustee Vice President Assistant Secretary
LEWIS A. BURNHAM JOHN E. PETERS
Trustee Vice President
DONALD L. DUNAWAY FRANK J. RACHWALSKI, JR.
Trustee Vice President
ROBERT B. HOFFMAN PHILIP J. COLLORA
Trustee Vice President and
DONALD R. JONES Secretary
Trustee CHARLES F. CUSTER
Vice President and
DAVID B. MATHIS Assistant Secretary
Trustee
WILLIAM P. SOMMERS
Trustee
- -----------------------------------------------------------
Legal Counsel Custodian and Transfer Agent
VEDDER, PRICE, KAUFMAN INVESTORS FIDUCIARY
& KAMMHOLZ TRUST COMPANY
222 North LaSalle Street 127 West 10th Street
Chicago, IL 60601 Kansas City, MO 64105
Shareholder Service Agent
KEMPER SERVICE COMPANY
P.O. Box 419557
Kansas City, MO 64141
</TABLE>
Investment Manager
KEMPER FINANCIAL SERVICES, INC.
Principal Underwriter
KEMPER DISTRIBUTORS, INC.
120 South LaSalle Street
Chicago, IL 60603
(LOGO)Printed on recycled paper.
This report is not to be distributed unless preceded 236730
KSIGF-3 (3/95) Printed in the U.S.A.
or accompanied by a Kemper Fixed Income Funds prospectus.
