<PAGE> 1
KEMPER CASH RESERVES FUND
SEMIANNUAL REPORT TO SHAREHOLDERS
FOR THE PERIOD ENDED MARCH 31, 1996
"...Because of the softness in the economy, we had
anticipated easier monetary conditions... By extending,
we were able to benefit from the previously higher
interest rates..."
<PAGE> 2
Table of
Contents
2
Portfolio Statistics
2
Terms to Know
3
Performance Update
4
Portfolio of
Investments
6
Financial Statements
8
Notes to
Financial Statements
11
Financial Highlights
AT A GLANCE
- -------------------------------------------------------------------------------
YIELDS
- -------------------------------------------------------------------------------
ANNUALIZED YIELD FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 1996*
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
KEMPER CASH RESERVES FUND CLASS A 4.79%
KEMPER CASH RESERVES FUND CLASS B 3.91%
KEMPER CASH RESERVES FUND CLASS C 4.02%
- -------------------------------------------------------------------------------
</TABLE>
Money market funds are 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
$1.00 share value.
Past performance is not predictive of future performance. Returns fluctuate.
Performance of share classes will differ. Consult the prospectus for details.
* Net annualized yield for the six months ended March 31, 1996 is the annualized
sum of the daily dividend rates for the period.
PORTFOLIO STATISTICS
PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
ON 3/31/96
- -------------------------------------------------------------------------------
<S> <C>
COMMERCIAL PAPER, FIRST TIER 94%
REPURCHASE AGREEMENTS 4
U.S. TREASURIES 2
- -------------------------------------------------------------------------------
TOTAL 100%
</TABLE>
[PIE CHART]
TERMS TO KNOW
AVERAGE MATURITY The weighted average number of days in which each security in
the portfolio matures.
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.
EASE When the Federal Reserve Board of Governors changes monetary policy by
decreasing the federal funds rate.
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.
<PAGE> 3
PERFORMANCE UPDATE
[RACHWALSKI PHOTO]
FRANK RACHWALSKI IS SENIOR VICE PRESIDENT OF ZURICH KEMPER INVESTMENTS, 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.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
KEMPER CASH RESERVES FUND PORTFOLIO MANAGER FRANK RACHWALSKI DISCUSSES
THE DEVELOPMENTS IN THE ECONOMY OVER THE PAST SIX MONTHS AND HOW HE HAS MANAGED
THE FUND DURING THE CHANGING ENVIRONMENT.
Q. FRANK, WHAT HAPPENED IN THE MARKET SINCE SEPTEMBER -- THE LAST REPORTING
PERIOD?
A. Three significant events occurred in the past six months. First,
government indecision in adopting a budget package caused its temporary
shutdown. Second, the East coast was hit by some devastating weather closing
major businesses. And third, the Federal Reserve (Fed) lowered the federal
funds rate in both December and January.
All three of these events impacted the economy. The government shutdown
and the brutal weather distorted economic data and left a murky picture. But
the Fed still chose to modestly decrease rates in January, responding to
economic softness and a low rate of inflation.
But by March, the expectations of additional ease in rates vanished.
This can be attributed to the lack of a reasonable budget resolution
package, the bottoming of inflation measures, stronger economic data and the
expectations of continuing moderate economic growth during the second half of
the year.
Q. HOW DID YOU MANAGE KEMPER CASH RESERVES FUND DURING THIS TIME?
A. Because of the softness in the economy, we had anticipated easier
monetary conditions (i.e., lower interest rates) and we had been extending the
fund's average maturity. By extending, we were able to benefit from previously
higher interest rates.
However, now that the economy has been showing some strength, we are
holding the fund's average maturity within a neutral range of 35 to 45 days.
Q. FRANK, THE FED HASN'T CHANGED THE FEDERAL FUNDS RATE SINCE JANUARY. DO
YOU EXPECT THEM TO INCREASE OR DECREASE RATES IN THE NEAR FUTURE?
A. Economic growth is progressing at a pace below the threshold that would
cause the Federal Reserve to be concerned, and the pace of inflation remains
subdued; therefore, monetary policy should remain unchanged. I believe we
are facing a period of stable rates for the next several months.
3
<PAGE> 4
PORTFOLIO OF INVESTMENTS
KEMPER CASH RESERVES FUND
PORTFOLIO OF INVESTMENTS AT MARCH 31, 1996
(VALUE IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CORPORATE OBLIGATIONS VALUE
- -------------------------------------------------------------------------------
<S> <C>
BANKING--2.8%
- -------------------------------------------------------------------------------
Postipankki U.S. Inc.
5.46%, 7/8/96 $ 4,925
Sumitomo Bank Capital Markets, Inc.
5.63%, 4/16/96 4,987
--------------------------------------------------------------------
9,912
- -------------------------------------------------------------------------------
CAPITAL AND MORTGAGE LENDING--7.2%
- -------------------------------------------------------------------------------
Countrywide Funding Corporation
5.18%-5.30%, 4/18/96-5/23/96 9,948
PHH Corporation
5.22%, 4/10/96 4,992
SRD Finance, Inc.
5.53%, 4/18/96 9,971
--------------------------------------------------------------------
24,911
- -------------------------------------------------------------------------------
CAPTIVE BUSINESS FINANCE--13.5%
- -------------------------------------------------------------------------------
CSW Credit, Inc.
5.43%, 4/3/96 4,997
(a) Finova Capital Corporation
5.51%, 6/14/96 5,000
Ford Motor Credit Company
5.21%, 4/4/96 4,996
Golden Managers Acceptance
Corporation
5.28%, 4/17/96 2,493
Mitsubishi Motors Credit of
America, Inc.
5.30%, 5/6/96 4,973
Orix America Inc.
5.32%, 6/5/96 4,456
Philip Morris Capital Corporation
5.40%, 4/1/96 4,999
Sony Capital Corporation
5.42%, 4/4/96 9,993
(a) USL Capital Corporation
5.38%, 5/29/96 5,004
--------------------------------------------------------------------
46,911
- -------------------------------------------------------------------------------
CONSUMER FINANCING--4.3%
- -------------------------------------------------------------------------------
Barton Capital Corporation
5.23%, 4/4/96 4,996
Transamerica Finance Corporation
5.21%, 4/17/96 4,987
Whirlpool Financial Corporation
5.26%, 4/29/96 4,978
--------------------------------------------------------------------
14,961
- -------------------------------------------------------------------------------
CONSUMER PRODUCTS AND
SERVICES--7.2%
- -------------------------------------------------------------------------------
American Home Products Corporation
5.23%, 4/19/96 4,986
Bridgestone/Firestone, Inc.
5.38%, 4/15/96 4,988
PepsiCo, Inc.
5.27%, 4/9/96 9,986
Quaker Oats Company
5.32%, 4/8/96 4,993
--------------------------------------------------------------------
24,953
- -------------------------------------------------------------------------------
VALUE
- -------------------------------------------------------------------------------
CORPORATE FINANCING--11.3%
B I Funding Inc.
5.18%, 5/3/96 $ 4,976
Corporate Asset Funding Co., Inc.
5.29%, 4/9/96 9,985
Ranger Funding Corporation
5.30%, 4/12/96 4,491
Showa Leasing (USA) Inc.
5.26%, 4/22/96 4,983
Stellar Capital Corporation
5.49%, 4/24/96 4,981
Windmill Funding Corporation
5.38%, 5/28/96 9,913
--------------------------------------------------------------------
39,329
- -------------------------------------------------------------------------------
FINANCIAL SERVICES--6.5%
- -------------------------------------------------------------------------------
(a) Bear Stearns Companies Inc.
5.43%, 4/19/96 5,000
(a) CS First Boston, Inc.
5.44%, 4/10/96 4,500
(a) Goldman, Sachs & Co.
5.53%, 4/25/96 5,000
(a)(b) Lehman Brothers Holdings Inc.
5.55%, 5/15/96 3,000
Salomon Inc.
5.58%, 5/22/96 5,001
--------------------------------------------------------------------
22,501
- -------------------------------------------------------------------------------
INFORMATION SERVICES--15.7%
- -------------------------------------------------------------------------------
(a) AT&T Capital Corporation
5.42%, 4/23/96 4,999
Electronic Data Systems Corporation
5.23%, 5/8/96 9,944
GTE Corporation
5.43%, 4/12/96 9,980
International Business Machines
Corporation
5.26%, 2/28/97 4,989
Lucent Technologies Inc.
5.38%, 6/11/96 4,946
MCI Communications Corporation
5.27%, 4/11/96 9,982
U S West Communications, Inc.
5.29%, 4/8/96 9,987
--------------------------------------------------------------------
54,827
- -------------------------------------------------------------------------------
MUNICIPAL OBLIGATION--2.9%
- -------------------------------------------------------------------------------
(a)(b)(c) Orange County, California
6.43%, 6/30/96
$10,000,000 (cost and par) 9,750
(b) Letter of Credit from
The Bank of New York 250
--------------------------------------------------------------------
10,000
</TABLE>
4
<PAGE> 5
PORTFOLIO OF INVESTMENTS
(VALUE IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
VALUE
- -------------------------------------------------------------------------------
RECEIVABLES FINANCING--18.6%
<S> <C>
Astro Capital Corp.
5.32%, 5/31/96 $ 4,955
First Brands Commercial, Inc.
5.19%, 5/9/96 4,972
(a) Heller Financial, Inc.
5.66%, 4/1/96 5,006
Jet Funding Corporation
5.47%, 5/31/96 4,954
JV Receivables Corporation
5.27%-5.48%, 4/11/96-4/25/96 9,972
Madison Funding Corp.
5.27%, 5/30/96 4,956
Receivables Capital Corp.
5.31%-5.34%, 4/12/96-5/6/96 14,936
Sierra Funding Corporation
5.50%, 4/30/96 4,977
STRAIT Capital Corporation
5.32%, 5/31/96 4,955
WCP Funding Inc.
5.21%, 4/24/96 4,982
--------------------------------------------------------------------
64,665
- -------------------------------------------------------------------------------
UTILITIES--4.0%
- -------------------------------------------------------------------------------
AES Shady Point, Inc.
5.28%-5.35%, 4/4/96-4/17/96 9,983
Gulf Coast Waste Authority, Texas
5.23%, 5/2/96 4,000
--------------------------------------------------------------------
13,983
--------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS--94.0%
(average maturity: 30 days) 326,953
====================================================================
VALUE
- -------------------------------------------------------------------------------
(d) REPURCHASE AGREEMENT--4.3%
- -------------------------------------------------------------------------------
(Dated 1/96, collateralized by
Federal National Mortgage
Association securities)
Morgan Stanley & Co. Incorporated
(average maturity: 17 days)
5.41%, 4/18/96 $ 15,000
- -------------------------------------------------------------------------------
U.S. TREASURY NOTE--1.5%
- -------------------------------------------------------------------------------
(average maturity: 305 days)
5.04%, 1/31/97 5,098
--------------------------------------------------------------------
TOTAL INVESTMENTS--99.8%
(average maturity: 33 days) 347,051
--------------------------------------------------------------------
CASH AND OTHER ASSETS,
LESS LIABILITIES--.2% 860
--------------------------------------------------------------------
NET ASSETS--100% $347,911
--------------------------------------------------------------------
</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 March 31,
1996. The dates shown represent the demand date or next interest rate change
date.
(b) Illiquid securities. At March 31, 1996, the aggregate value of the Fund's
illiquid securities was $13,000,000, which represented 3.7% of net assets.
(c) See Note (3) of the Notes to Financial Statements.
(d) Repurchase agreements are fully collateralized by U.S. Government
securities. All collateral is held at the Fund's custodian bank, Investors
Fiduciary Trust Company. The collateral is monitored daily by the Fund so
that its market value exceeds the carrying value of the repurchase
agreement.
See accompanying Notes to Financial Statements.
5
<PAGE> 6
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
- -------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------
Investments, at amortized cost $347,051
- -------------------------------------------------------------------------
Cash 1,180
- -------------------------------------------------------------------------
Receivable for:
Fund shares sold 60
- -------------------------------------------------------------------------
Interest 652
- -------------------------------------------------------------------------
TOTAL ASSETS 348,943
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- -------------------------------------------------------------------------
Payable for:
Dividends 554
- -------------------------------------------------------------------------
Fund shares redeemed 30
- -------------------------------------------------------------------------
Management fee 113
- -------------------------------------------------------------------------
Distribution services fee 174
- -------------------------------------------------------------------------
Administrative services fee 66
- -------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 25
- -------------------------------------------------------------------------
Other 70
- -------------------------------------------------------------------------
Total liabilities 1,032
- -------------------------------------------------------------------------
NET ASSETS $347,911
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -------------------------------------------------------------------------
Paid-in capital $350,744
- -------------------------------------------------------------------------
Unrealized depreciation on investments (2,833)
- -------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $347,911
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
THE PRICING OF SHARES
- -------------------------------------------------------------------------
Net asset value and redemption price per share
- -------------------------------------------------------------------------
CLASS A SHARES
($52,935 / 52,935 shares outstanding) $1.00
- -------------------------------------------------------------------------
CLASS B SHARES
(subject to contingent deferred sales charge)
($283,989 / 283,989 shares outstanding) $1.00
- -------------------------------------------------------------------------
CLASS C SHARES
($10,987 / 10,987 shares outstanding) $1.00
- -------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
6
<PAGE> 7
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Six months ended March 31, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME
- --------------------------------------------------------------------------------------------------------
Interest income $6,227
- --------------------------------------------------------------------------------------------------------
Expenses:
Management fee 433
- --------------------------------------------------------------------------------------------------------
Distribution services fee 663
- --------------------------------------------------------------------------------------------------------
Administrative services fee 257
- --------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 454
- --------------------------------------------------------------------------------------------------------
Professional fees 18
- --------------------------------------------------------------------------------------------------------
Reports to shareholders 47
- --------------------------------------------------------------------------------------------------------
Trustees' fees and other 15
- --------------------------------------------------------------------------------------------------------
Total expenses 1,887
- --------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME $4,340
- --------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS TWO MONTHS
ENDED ENDED YEAR ENDED
MARCH 31, SEPTEMBER 30, JULY 31,
1996 1995 1995
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- -----------------------------------------------------------------------------------------------------------
Net investment income $ 4,340 1,431 12,247
- -----------------------------------------------------------------------------------------------------------
Change in unrealized depreciation -- -- (2,833)
- -----------------------------------------------------------------------------------------------------------
Capital contribution from investment manager -- -- 2,833
- -----------------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (4,340) (1,431) (12,247)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital share transactions
and total increase (decrease) in net assets 171,354 (36,474) (211,286)
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------------
Beginning of period 176,557 213,031 424,317
- -----------------------------------------------------------------------------------------------------------
END OF PERIOD $347,911 176,557 213,031
- -----------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 8
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 sold without an initial sales
charge but are subject to the applicable sales
charge if exchanged into Class A shares of another
Kemper Mutual Fund. Class B shares are sold without
an initial sales charge but are subject to higher
ongoing expenses than Class A shares and a
contingent deferred sales charge payable upon
certain redemptions. Class B shares automatically
convert to Class A shares six years after issuance.
Class C shares are sold without an initial sales
charge but are subject to higher ongoing expenses
than Class A shares and, for shares sold on or
after April 1, 1996, a contingent deferred sales
charge payable on certain redemptions within one
year of purchase. Class C shares do not convert
into another class. Differences in class expenses
will result in the payment of different per share
income dividends by 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 and
federal income tax purposes from July 31 to
September 30.
- --------------------------------------------------------------------------------
2 SIGNIFICANT ACCOUNTING
POLICIES INVESTMENT VALUATION. Investments are stated at
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 and Class C shares will be
reduced by the amount of any applicable contingent
deferred sales charge. On each day the New York
Stock Exchange is open for trading, the net asset
value per share is determined as of the earlier of
3:00 p.m. Chicago time or the close of the
Exchange. The net asset value per share is
determined separately for each class 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.
FEDERAL INCOME TAXES. The Fund has complied with
the special provisions of the Internal Revenue Code
available to investment companies for the six
months ended March 31, 1996.
8
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The Fund has a management
agreement with Zurich Kemper Investments, Inc.
(ZKI) (formerly known as Kemper Financial Services,
Inc.) 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 $433,000 for the
six months ended March 31, 1996.
Kemper Asset Holdings, Inc. (KAHI), a subsidiary of
Kemper Corporation, the former parent company of
ZKI, has 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 (CDSC) from redemptions of
Class B and Class C shares. Distribution fees and
commissions paid in connection with the sale of
Class B and Class C shares, and the CDSC received
in connection with the redemption of Class B shares
are as follows:
<TABLE>
<CAPTION>
COMMISSIONS AND DISTRIBUTION
FEES
DISTRIBUTION PAID BY KDI
FEES AND CDSC ------------------------------
RECEIVED BY KDI TO ALL FIRMS TO AFFILIATES
--------------- ------------ -------------
<S> <C> <C> <C>
Six months ended March 31, 1996 $ 1,012,000 1,198,000 22,000
</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>
ASF PAID BY KDI
ASF PAID BY ------------------------------
THE FUND TO KDI TO ALL FIRMS TO AFFILIATES
--------------- ------------ -------------
<S> <C> <C> <C>
Six months ended March 31, 1996 $ 257,000 315,000 5,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
Kemper Service Company (KSvC) is the shareholder
service agent of the Fund. Under the agreement,
KSvC received shareholder services fees of $543,000
for the six months ended March 31, 1996.
9
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of ZKI.
For the six months ended March 31, 1996, the Fund
made no payments to its officers and incurred
trustees' fees of $11,000 to independent trustees.
- --------------------------------------------------------------------------------
4
CAPITAL SHARE The following table summarizes the activity in
TRANSACTIONS capital shares of the Fund (dollar amounts and
number of shares are the same).
<TABLE>
<CAPTION>
SIX MONTHS TWO MONTHS
ENDED ENDED YEAR ENDED
MARCH 31, SEPTEMBER 30, JULY 31,
1996 1995 1995
-----------------------------------------------
(IN THOUSANDS)
----------------------------------------------------------------------------
<S> <C> <C> <C>
SHARES SOLD
----------------------------------------------------------------------------
Class A $ 42,410 1,168 39,705
----------------------------------------------------------------------------
Class B 316,064 32,163 521,185
----------------------------------------------------------------------------
Class C 20,532 1,970 18,754
----------------------------------------------------------------------------
----------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
----------------------------------------------------------------------------
Class A 830 276 1,945
----------------------------------------------------------------------------
Class B 3,061 1,009 8,701
----------------------------------------------------------------------------
Class C 68 29 133
----------------------------------------------------------------------------
----------------------------------------------------------------------------
SHARES REDEEMED
----------------------------------------------------------------------------
Class A (27,951) (4,166) (73,055)
----------------------------------------------------------------------------
Class B (171,773) (64,120) (714,110)
----------------------------------------------------------------------------
Class C (11,887) (4,803) (14,544)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CONVERSION OF SHARES
----------------------------------------------------------------------------
Class A 3,980 928 14,213
----------------------------------------------------------------------------
Class B (3,980) (928) (14,213)
----------------------------------------------------------------------------
Net increase (decrease)
from capital share
transactions and total
increase (decrease)
in net assets $171,354 (36,474) (211,286)
----------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------------------------------
CLASS A SHARES
---------------------------------------------------------------
TWO MONTHS
SIX MONTHS ENDED YEAR ENDED JULY 31,
ENDED SEPTEMBER 30, ------------------------
MARCH 31, 1996 1995 1995 1994 1993
<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 .02 .01 .05 .03 .02
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 1.00 1.00 1.00 1.00
- ------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 2.42% .85 4.99 2.78 2.42
- ------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------------------------------------
Expenses 1.02% .92 .89 .92 .93
- ------------------------------------------------------------------------------------------------------------------
Net investment income 4.63% 5.11 4.75 2.86 2.42
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------
CLASS B SHARES
---------------------------------------------------------------
TWO MONTHS
SIX MONTHS ENDED YEAR ENDED JULY 31,
ENDED SEPTEMBER 30, ------------------------
MARCH 31, 1996 1995 1995 1994 1993
<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 .02 .01 .04 .02 .02
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 1.00 1.00 1.00 1.00
- ------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 1.98% .71 4.08 1.78 1.56
- ------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------------------------------------
Expenses 1.87% 1.79 1.78 1.89 1.82
- ------------------------------------------------------------------------------------------------------------------
Net investment income 3.78% 4.24 3.86 1.89 1.53
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------
CLASS C SHARES
-----------------------------------------------------------------
SIX MONTHS TWO MONTHS YEAR MAY 31,
ENDED ENDED ENDED TO
MARCH 31, SEPTEMBER 30, JULY 31, JULY 31
1996 1995 1995 1994
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $1.00 1.00 1.00 1.00
- --------------------------------------------------------------------------------------------------------------------
Net investment income and dividends declared .02 .01 .04 --
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 1.00 1.00 1.00
- --------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 2.03% .71 4.08 .42
- --------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------------------------------------------
Expenses 1.73% 1.78 1.76 1.80
- --------------------------------------------------------------------------------------------------------------------
Net investment income 3.92% 4.25 3.88 2.64
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- --------------------------------------------------------------------------------------------------------------------
SIX MONTHS TWO MONTHS
ENDED ENDED
MARCH 31, SEPTEMBER 30, YEAR ENDED JULY 31,
1996 1995 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets at end of period (in thousands) $347,911 176,557 213,031 424,317 166,808
- --------------------------------------------------------------------------------------------------------------------
</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.
ZKI 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 would have been as follows: Class A shares (1.15% and 2.63%
for 1994 and 1.18% and 2.17% for 1993), Class B shares (2.12% and 1.66%
for 1994 and 2.07% and 1.28% for 1993).
11
<PAGE> 12
TRUSTEES AND OFFICERS
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. NEAL
Trustee Vice President
DONALD L. DUNAWAY JOHN E. PETERS
Trustee Vice President
ROBERT B. HOFFMAN FRANK J. RACHWALSKI, JR.
Trustee Vice President
DONALD R. JONES RICHARD L. VANDENBERG
Trustee Vice President
DOMINIQUE P. MORAX PHILIP J. COLLORA
Trustee Vice President and
Secretary
SHIRLEY D. PETERSON
Trustee CHARLES F. CUSTER
Vice President and
WILLIAM P. SOMMERS Assistant Secretary
Trustee
- --------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICE AGENT KEMPER SERVICE COMPANY
P.O. Box 419557
Kansas City, MO 64141
800-621-1048
- --------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
127 West 10th Street
Kansas City, MO 64105
- --------------------------------------------------------------------------------
INVESTMENT MANAGER ZURICH KEMPER INVESTMENTS, INC.
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
120 South LaSalle Street Chicago, IL 60603
http://www.kemper.com
(RECYCLE LOGO)
Printed on recycled paper.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Fixed Income Fund prospectus.
KCRF - 3 (5/96) KEMPER LOGO
1014680
Printed in the U.S.A.
