<PAGE> 1
KEMPER CASH RESERVES FUND
ANNUAL REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED JULY 31, 1995
"The rising interest rate environment allowed the Fund's yield to quickly
increase due to the reinvestment of its short maturity investments at current
higher rate levels."
[KEMPER MUTUAL FUNDS LOGO]
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Performance Update 3
Portfolio Statistics 4
Terms To Know 4
Portfolio Of Investments 5
Report From Independent Auditors 7
Financial Statements 8
Notes To Financial Statements 10
Financial Highlights 14
</TABLE>
AT A GLANCE
================================================================================
- --------------------------------------------------------------------------------
YIELDS
- --------------------------------------------------------------------------------
7-day Annualized Yield for the period ended July 31, 1995
<TABLE>
<CAPTION>
AS OF
7/31/95
- --------------------------------------------------------------------------------
<S> <C>
KEMPER CASH RESERVES FUND CLASS A 5.29%
- --------------------------------------------------------------------------------
KEMPER CASH RESERVES FUND CLASS B 4.44%
- --------------------------------------------------------------------------------
KEMPER CASH RESERVES FUND CLASS C 4.44%
- --------------------------------------------------------------------------------
</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.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
For periods ended July 31, 1995
(shares adjusted for the applicable sales charge)
<TABLE>
<CAPTION>
LIFE OF
1-YEAR 5-YEAR 10-YEAR CLASS
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEMPER CASH RESERVES CLASS A 4.99% N/A N/A 3.30% (Since 1/10/92)
- -------------------------------------------------------------------------------------------------------------
KEMPER CASH RESERVES CLASS B 1.08 2.89% 4.44% 4.80 (Since 2/6/84)
- -------------------------------------------------------------------------------------------------------------
KEMPER CASH RESERVES CLASS C 4.08 N/A N/A 3.85 (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 which are only available on
exchange or on conversion from B Shares. 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.
ABOUT YOUR REPORT
================================================================================
SHAREHOLDER REPORTS REVISED
Your Fund's annual report is one of your best sources for tracking the progress
of your investment. This report includes several changes that have been made in
an effort to provide additional information to you as well as explain
significant changes to the Fund over the last fiscal year. In addition, the
performance update includes commentary from your Fund's portfolio manager or
management team on what might be expected in the coming months. Specifically,
your report now includes:
- - The 7-day annualized yields of your Fund
- - A look at your Fund's portfolio composition
- - Terms you'd need to know related to your Fund
If you have any comments about the revised format or if you have
suggestions for additional changes, please write to:
Kemper Mutual Funds
Shareholder Communications
120 South LaSalle Street
Chicago, IL 60603
<PAGE> 3
PERFORMANCE UPDATE
================================================================================
[Photo]
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 HAS
ADJUSTED THE FUND'S MATURITY TO INCREASE ITS YIELDS DURING A RISING INTEREST
RATE ENVIRONMENT.
Q: FRANK, IT APPEARS THAT THE MOMENTUM OF 1994 CONTINUED INTO 1995, CAUSING THE
FEDERAL RESERVE BOARD TO RESPOND THROUGHOUT THE PERIOD. WOULD YOU AGREE?
A: Absolutely. We started this fiscal year, August 1, 1994, with an economy that
continued to grow at a pace that was exceptionally strong. Growth in
manufacturing and construction caused labor conditions to improve which in turn
meant an increase in personal income and consumer spending.
Concerned that the rate of growth might spark inflation, the Federal
Reserve (Fed) increased its federal funds rate - the most sensitive indicator of
the direction of interest rates - in August. This was only one in a series of
increases that totaled 1.75% during the fiscal year. Unlike other markets,
these interest rate increases had a positive impact on the short-term market,
namely, improving investor returns.
Q: HOW DID YOU MANAGE THE FUND IN THIS RISING RATE ENVIRONMENT? AND WITH WHAT
RESULT?
A: Generally, we positioned the Fund defensively by reducing the average
maturity of its holdings. This allowed the fund's yield to quickly increase due
to reinvestment of its short maturity investments in a rising interest rate
environment.
We continued this strategy until the early part of 1995 when the economy
began to show some signs of slowing. At that time, we repositioned the Fund and
began increasing average maturities. As always, we emphasized high quality
instruments throughout the period.
Q: AFTER A YEAR OF RISING RATES, WHAT'S AHEAD FOR THE FUND?
A: As previously mentioned, the economy softened toward the end of the fiscal
year. In fact, the Fed slightly decreased the federal funds rate in the
beginning of July. While this meant somewhat lower money market rates, we do not
anticipate the Fed's move as the start of an extended trend to lower rates.
Instead, we view this decrease as a mid-cycle adjustment.
However, we will emphasize longer portfolio average maturities until the
economy begins to show signs that it is growing at a slightly faster pace.
3
<PAGE> 4
PORTFOLIO STATISTICS
================================================================================
PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
- ---------------------------------------------------------
ON 7/31/95
- ---------------------------------------------------------
<S> <C>
COMMERCIAL PAPER FIRST TIER 97%
- -----------------------------------------------------
FOREIGN BANKS CDS 3
=====================================================
100%
</TABLE>
ON 7/31/95
/ / Commercial paper first tier
/ / Foreign 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 each security in
the portfolio matures. 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 July 31, 1995
(Value in thousands)
<TABLE>
<CAPTION>
CORPORATE OBLIGATIONS VALUE
<S> <C>
- -------------------------------------------------------
BANKING - 4.7%
- -------------------------------------------------------
Societe Generale North America Inc.
5.75%, 10/23/95 $4,934
UBS Finance, Inc.
5.72%, 8/14/95 4,990
=================================================
9,924
- -------------------------------------------------------
CAPTIVE BUSINESS FINANCE - 18.9%
- -------------------------------------------------------
Caterpillar Financial
Services Corporation
5.75%, 8/22/95 4,983
Chrysler Financial Corporation
6.04%, 8/30/95 4,976
CSW Credit, Inc.
5.78%, 8/25/95 4,981
Deere (John) Capital Corporation
5.91%, 9/1/95 4,975
(a)Finova Capital Corporation
6.16%, 9/15/95 5,000
Ford Motor Credit Company
6.00%, 8/29/95 4,977
Hanson Finance (UK) PLC
5.74%, 10/24/95 4,934
Orix America, Inc.
6.08%, 8/4/95 5,497
=================================================
40,323
- -------------------------------------------------------
CONSUMER FINANCING - 4.7%
- -------------------------------------------------------
Beneficial Corporation
5.96%, 9/15/95 4,963
Whirlpool Financial Corporation
6.11%, 8/1/95 5,000
=================================================
9,963
- -------------------------------------------------------
CONSUMER PRODUCTS AND SERVICES - 7.0%
- -------------------------------------------------------
American Home Products Corporation
6.03%, 8/10/95 4,993
Coca-Cola Enterprises Inc.
5.78%, 9/29/95 4,953
(a)PepsiCo, Inc.
5.76%, 8/16/95 4,999
=================================================
14,945
- -------------------------------------------------------
CORPORATE FINANCING - 17.7%
- -------------------------------------------------------
First Brands Commercial, Inc.
6.00%, 9/25/95 $ 4,955
GTE Finance Corporation
6.05%, 8/14/95 4,989
JTB Finance Americas
5.86%, 9/27/95 4,954
PHH Corporation
5.75%, 8/21/95 4,984
(a)Sanwa Business Credit Corporation
6.06%, 8/8/95 10,000
SFC (USA) Inc.
6.04%, 8/31/95 4,975
Windmill Funding Corporation
6.01%, 8/1/95 3,000
=================================================
37,857
- -------------------------------------------------------
FINANCIAL SERVICES - 16.7%
- -------------------------------------------------------
(a)Bear Stearns Companies Inc.
6.00%, 8/21/95 10,000
(a)CS First Boston, Inc.
5.94%, 8/9/95 4,500
Dean Witter, Discover & Co.
5.96%, 8/11/95 4,992
(a)Goldman, Sachs & Co.
5.95%, 8/25/95 3,000
(a)(b)Lehman Brothers Holdings Inc.
6.00%, 8/16/95 3,000
(a)Salomon Inc.
6.42%, 8/1/95 10,000
=================================================
35,492
- -------------------------------------------------------
INFORMATION SERVICES AND MEDIA - 9.4%
- -------------------------------------------------------
AT&T Corp.
5.89%, 9/5/95 4,972
CBS Inc.
5.78%, 8/25/95 4,981
Electronic Data Systems Corporation
5.95%, 8/15/95 4,989
Nynex Corporation
6.01%, 9/6/95 4,970
=================================================
19,912
- -------------------------------------------------------
MANUFACTURING AND INDUSTRIAL PRODUCTS - 7.0%
- -------------------------------------------------------
Bridgestone/Firestone, Inc.
5.81%, 8/24/95 4,982
Cargill, Incorporated
5.90%, 8/30/95 4,977
Xerox Corporation
5.75%, 8/21/95 4,984
=================================================
14,943
</TABLE>
5
<PAGE> 6
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
Value
<S> <C>
- -----------------------------------------------------------
MUNICIPAL OBLIGATION - 4.7%
- -----------------------------------------------------------
(a)(b)(c)Orange County, California
7.02%, 6/30/96 (maturity),
$10,000,000 (cost and par) $ 7,600
Letter of Credit from
The Bank of New York 2,400
==================================================
10,000
- -----------------------------------------------------------
RECEIVABLES FINANCING - 9.3%
- -----------------------------------------------------------
Barton Capital Corporation
5.77%, 9/6/95 4,971
Preferred Receivables
Funding Corporation
6.01%, 8/23/95 4,982
Sheffield Receivables Corp.
6.00%, 8/9/95 4,994
STRAIT Capital Corporation
5.75%, 10/31/95 4,927
==================================================
19,874
==================================================
TOTAL CORPORATE
OBLIGATIONS--100.1%
(AVERAGE MATURITY: 24 DAYS) 213,233
==================================================
BANK OBLIGATIONS--2.3%
Industrial Bank of Japan Limited
6.05%, 8/10/95
(average maturity: 9 days) 5,000
==================================================
TOTAL INVESTMENTS--102.4%
(AVERAGE MATURITY: 24 DAYS) 218,233
==================================================
LIABILITIES, LESS CASH AND
OTHER ASSETS--(2.4)% (5,202)
==================================================
NET ASSETS--100% $213,031
==================================================
</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 July 31,
1995. The dates shown represent the demand date or next interest rate
change date.
(b) Illiquid securities. At July 31, 1995, the aggregate value of the Fund's
illiquid securities was $13,000,000, which represented 6.1% of net assets.
(c) See Note (3) of the Notes to Financial Statements.
See accompanying Notes to Financial Statements.
6
<PAGE> 7
REPORT FROM INDEPENDENT AUDITORS
================================================================================
THE BOARD OF TRUSTEES AND SHAREHOLDERS KEMPER PORTFOLIOS
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 July 31, 1995, the related statements of operations
for the year then ended and changes in net assets for each of the two years in
the period then ended, 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 July
31, 1995 by correspondence with the custodian. 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 July 31, 1995, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the fiscal
periods since 1991 in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
September 15, 1995
7
<PAGE> 8
FINANCIAL STATEMENTS
================================================================================
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1995
(in thousands)
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------
Investments, at amortized cost $ 218,233
- -------------------------------------------------------------------------------
Cash 132
- -------------------------------------------------------------------------------
Receivable for:
Fund shares sold 1,032
- -------------------------------------------------------------------------------
Interest 294
- -------------------------------------------------------------------------------
TOTAL ASSETS 219,691
===============================================================================
- -------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- -------------------------------------------------------------------------------
Payable for:
Dividends 339
- -------------------------------------------------------------------------------
Securities purchased 4,927
- -------------------------------------------------------------------------------
Fund shares redeemed 783
- -------------------------------------------------------------------------------
Management fee 71
- -------------------------------------------------------------------------------
Distribution services fee 110
- -------------------------------------------------------------------------------
Administrative services fee 41
- -------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 248
- -------------------------------------------------------------------------------
Other 141
- -------------------------------------------------------------------------------
Total liabilities 6,660
- -------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $ 213,031
===============================================================================
- -------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -------------------------------------------------------------------------------
Paid in capital $ 215,864
- -------------------------------------------------------------------------------
Unrealized depreciation on investments (2,833)
- -------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $ 213,031
===============================================================================
- -------------------------------------------------------------------------------
THE PRICING OF SHARES
- -------------------------------------------------------------------------------
Net asset value and redemption price per share
- -------------------------------------------------------------------------------
CLASS A SHARES
($35,460 divided by 35,460 shares outstanding) $ 1.00
===============================================================================
CLASS B SHARES
($172,493 divided by 172,493 shares outstanding) $ 1.00
===============================================================================
CLASS C SHARES
($5,078 divided by 5,078 shares outstanding) $ 1.00
===============================================================================
</TABLE>
See accompanying Notes to Financial Statements.
8
<PAGE> 9
FINANCIAL STATEMENTS
================================================================================
STATEMENT OF OPERATIONS
Year ended July 31, 1995
(in thousands)
<TABLE>
- ------------------------------------------------------------------------
NET INVESTMENT INCOME
- ------------------------------------------------------------------------
<S> <C>
Interest income $17,306
- ------------------------------------------------------------------------
Expenses:
Management fee 1,216
- ------------------------------------------------------------------------
Distribution services fee 1,957
- ------------------------------------------------------------------------
Administrative services fee 710
- ------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 1,021
- ------------------------------------------------------------------------
Professional fees 41
- ------------------------------------------------------------------------
Reports to shareholders 81
- ------------------------------------------------------------------------
Trustees' fees and other 33
- ------------------------------------------------------------------------
Total expenses 5,059
- ------------------------------------------------------------------------
NET INVESTMENT INCOME 12,247
========================================================================
Change in unrealized depreciation on investments (2,833)
- ------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 9,414
========================================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
Years ended July 31, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
1995 1994
- ------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL ACTIVITY
- ------------------------------------------------------------------------
<S> <C> <C>
Net investment income $ 12,247 5,556
- ------------------------------------------------------------------------
Change in unrealized depreciation (2,833) -
- ------------------------------------------------------------------------
Capital contribution from investment manager 2,833 -
- ------------------------------------------------------------------------
Dividends to shareholders from net
investment income (12,247) (5,556)
- ------------------------------------------------------------------------
NET INCREASE (DECREASE) FROM CAPITAL
SHARE TRANSACTIONS TOTAL INCREASE
(DECREASE) IN NET ASSETS (211,286) 257,509
========================================================================
- ------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------
Beginning of year 424,317 166,808
END OF YEAR $ 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 currently
offers three classes of shares. Class A shares are
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. The Fund may offer,
to a limited group of investors, Class I shares
(none sold through July 31, 1995) which are not
subject to initial or contingent deferred sales
charges and have lower ongoing expenses than other
classes. Each share represents an identical
interest in the investments of the Fund and has the
same rights.
- --------------------------------------------------------------------------------
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.
10
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS
================================================================================
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.
- --------------------------------------------------------------------------------
3 TRANSACTIONS MANAGEMENT AGREEMENT. The Fund has a
WITH AFFILIATES management 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 $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 that provide
distribution services to investors. KDI
compensates these firms at various rates
for sales of Class B and Class C shares.
During the year ended July 31, 1995, the
Fund incurred a distribution services fee
for Class B and Class C shares of
$1,957,000, and KDI paid $2,460,000 for
commissions and distribution fees to firms,
including $78,000 to firms affiliated with
KDI. In addition, KDI received $1,465,000
of contingent deferred sales charges.
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.
For the year ended July 31, 1995, the Fund
incurred an administrative services fee of
$710,000 and KDI paid $765,000 to firms,
including $52,000 that was paid to firms
affiliated with KDI.
11
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
================================================================================
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 year ended July 31,
1995, the Fund incurred custodian and
transfer agent fees of $1,084,000
(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 year ended July 31, 1995,
IFTC remitted shareholder service fees of
$1,059,000 to KSvC.
OFFICERS AND TRUSTEES. Certain officers or
trustees of the Fund are also officers or
directors of KFS. For the year ended July
31, 1995, the Fund made no payments to its
officers and incurred trustees' fees of
$20,000 to independent trustees.
12
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
================================================================================
4 CAPITAL SHARE The following table summarizes the activity in capital
TRANSACTIONS shares of the Fund (dollar amounts and number of shares
are the same).
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-----------------------
1995 1994
---- ----
(IN THOUSANDS)
----------------------------------------------------------------------------
SHARES SOLD
----------------------------------------------------------------------------
<S> <C> <C>
Class A $ 39,705 62,747
----------------------------------------------------------------------------
Class B 521,185 892,199
----------------------------------------------------------------------------
Class C 18,754 801
----------------------------------------------------------------------------
----------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
----------------------------------------------------------------------------
Class A 1,945 878
----------------------------------------------------------------------------
Class B 8,701 3,643
----------------------------------------------------------------------------
Class C 133 1
----------------------------------------------------------------------------
----------------------------------------------------------------------------
SHARES REDEEMED
----------------------------------------------------------------------------
Class A (73,055) (56,628)
----------------------------------------------------------------------------
Class B (714,110) (646,065)
----------------------------------------------------------------------------
Class C (14,544) (67)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CONVERSION OF SHARES
----------------------------------------------------------------------------
Class A 14,213 23,904
----------------------------------------------------------------------------
Class B (14,213) (23,904)
----------------------------------------------------------------------------
NET INCREASE (DECREASE) FROM CAPITAL
SHARE TRANSACTIONS AND TOTAL
INCREASE (DECREASE) IN NET ASSETS $ (211,286) 257,509
============================================================================
</TABLE>
13
<PAGE> 14
FINANCIAL HIGHLIGHTS
================================================================================
<TABLE>
<CAPTION>
------------------------------------------------------
CLASS A SHARES
------------------------------------------------------
JANUARY 10,
1992 TO
YEAR ENDED JULY 31, JULY 31,
1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 1.00 1.00 1.00
- -----------------------------------------------------------------------------------------------------------
Net investment income and dividends declared .05 .03 .02 .01
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 1.00 1.00 1.00
===========================================================================================================
Total return 4.99% 2.78 2.42 1.57
- -----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------------------------------
Expenses .89% .92 .93 1.39
- -----------------------------------------------------------------------------------------------------------
Net investment income 4.75 2.86 2.42 2.75
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------
CLASS B SHARES
-------------------------------------------------------
YEAR ENDED JULY 31,
-------------------------------------------------------
1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 1.00 1.00 1.00 1.00
- -----------------------------------------------------------------------------------------------------------
Net investment income and dividends declared .04 .02 .02 .03 .05
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 1.00 1.00 1.00 1.00
===========================================================================================================
TOTAL RETURN 4.08% 1.78 1.56 2.65 5.35
- -----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------------------------------
Expenses 1.78% 1.89 1.82 2.22 2.18
- -----------------------------------------------------------------------------------------------------------
Net investment income 3.86 1.89 1.53 2.69 5.32
- -----------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
================================================================================
CLASS C SHARES
YEAR MAY 31,
ENDED TO
JULY 31, JULY 31,
1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.00 1.00
- --------------------------------------------------------------------------------------------------------
Net investment income and dividends declared .04 -
- --------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 1.00
========================================================================================================
TOTAL RETURN 4.08% .42
- --------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------------------
Expenses 1.76% 1.80
- --------------------------------------------------------------------------------------------------------
Net investment income 3.88 2.64
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL FUND DATA
- --------------------------------------------------------------------------------------------------------
Net assets at end of year (in thousands) $213,031 424,317 166,808 156,219 240,994
- --------------------------------------------------------------------------------------------------------
</TABLE>
Note: 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.
15
<PAGE> 16
<TABLE>
<CAPTION>
TRUSTEES AND OFFICERS
================================================================================
TRUSTEES OFFICERS
<S> <C>
STEPHEN B. TIMBERS J. PATRICK BEIMFORD, JR.
President and Vice President
Trustee
JOHN E. PETERS
DAVID W. BELIN Vice President
Trustee
MICHELLE M. KEELEY
LEWIS A. BURNHAM Vice President
Trustee
FRANK J. RACHWALSKI, JR.
DONALD L. DUNAWAY Vice President
Trustee
PAUL F. SLOAN
ROBERT B. HOFFMAN Vice President
Trustee
PHILIP J. COLLORA
DONALD R. JONES Vice President
Trustee and Secretary
DAVID B. MATHIS CHARLES F. CUSTER
Trustee Vice President and
Assistant Secretary
SHIRLEY D. PETERSON
Trustee JEROME L. DUFFY
Treasurer
WILLIAM P. SOMMERS
Trustee 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
1-800-621-1048
- ------------------------------------------------------------------
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 S. LaSalle Street
Chicago, IL 60603
- ------------------------------------------------------------------
</TABLE>
[KEMPER LOGO]
Printed on recycled paper.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Fixed Income Fund prospectus.
KCRF - 2 (9/95)
16
