<PAGE> 1
KEMPER
CASH RESERVES FUND
SEMIANNUAL REPORT TO SHAREHOLDERS FOR THE PERIOD ENDED MARCH 31, 1997
" . . . the money markets could play
an increasing and integral role as investors look for
a vehicle that will help protect value. "
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
Performance Update
4
Portfolio
Statistics
5
Portfolio of Investments
7
Financial Statements
9
Notes to
Financial Statements
12
Financial Highlights
AT A GLANCE
- -------------------------------------------------------------------
YIELDS
- -------------------------------------------------------------------
ANNUALIZED YIELD FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 1997
<TABLE>
<S> <C>
- -------------------------------------------------------------------
KEMPER CASH RESERVES FUND CLASS A 4.36%
- -------------------------------------------------------------------
KEMPER CASH RESERVES FUND CLASS B 3.40%
- -------------------------------------------------------------------
KEMPER CASH RESERVES FUND CLASS C 3.69%
- -------------------------------------------------------------------
</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
value of $1.00 per share.
TERMS TO KNOW
AVERAGE MATURITY The weighted average number of days in which each security in
the portfolio matures.
BASIS POINT A measure used in quoting yields on interest bearing obligations.
One basis point is 0.01% of yield.
EASE A short-hand term indicating the Federal Reserve Board of Governors has
adjusted monetary conditions to help stimulate the economy.
TIGHTEN The opposite of ease or a move by the Federal Reserve Board of Governors
to adjust monetary conditions to slow the rate of economic growth.
2
<PAGE> 3
PERFORMANCE UPDATE
[RACHWALSKI PHOTO]
FRANK RACHWALSKI IS SENIOR VICE PRESIDENT OF ZURICH KEMPER INVESTMENTS, INC. AND
VICE PRESIDENT AND PORTFOLIO MANAGER OF KEMPER CASH RESERVES FUND. RACHWALSKI
HOLDS B.B.A. AND M.B.A. DEGREES 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.
THE COURSE OF INTEREST RATES REMAINED AN ISSUE DURING THE FINAL QUARTER OF 1996
AND INTO THE FIRST QUARTER OF 1997. AFTER MONTHS OF SPECULATION THE
FEDERAL RESERVE BOARD MOVED TO INCREASE RATES ON MARCH 25. PORTFOLIO MANAGER
FRANK RACHWALSKI DISCUSSES THE MARKET AND KEMPER CASH RESERVES FUND'S
PERFORMANCE.
Q FRANK, WHAT SORT OF ECONOMIC ENVIRONMENT DID YOU CONFRONT DURING THE LAST
SIX MONTHS?
A In the mid-months of 1996, we saw a shift in expectations from strong
economic growth to slower growth. With that came expectations that the Federal
Reserve Board (the Fed) would not tighten (See Terms To Know on page 2) monetary
conditions. Based on this scenario, we saw a flattening of the yield curve and
slightly lower yield levels. As the months progressed however, the opposite
seemed to occur. The economy showed renewed signs of vigor, economic data was
stronger and concerns of the Fed easing, or reducing, rates dissipated. At that
point expectations again turned toward the Fed embarking on a tightening phase.
At the end of the period, the Fed did move to increase rates by 25 basis points
despite the lack of strong inflationary pressures. We believe this was an
appropriate decision although it broke historical patterns. In the past,
inflation had truly increased before any moves were made. But, we viewed this
decision as one to instill caution in financial markets and perhaps guard
against any "wealth effect" or the temptation among investors to extend
themselves financially more than they normally would.
Q HOW DID KEMPER CASH RESERVES FUND PERFORM IN THIS MARKET?
A We achieved the fund's objective of preserving value. Kemper Cash Reserves
Fund is an excellent vehicle for temporarily "parking" monies shareholders are
waiting to move into longer term investments or during periods of uncertainties
and volatility in the stock and bond markets. This fund is designed to maintain
investment value.
Q WHAT PROCESS DID YOU AND YOUR TEAM USE IN MANAGING THE FUND?
A With moderate economic growth and modest inflationary pressures, we
remained somewhat defensive with maturities. We did see the market get richer
and cheaper based on market expectations so we lengthened and shortened
maturities to take advantage of any opportunities the market provided. During
the fourth quarter of 1996, the yield curve flattened as the market expectation
of a Fed tightening diminished, so there was no reward in maintaining longer
maturities. At that point we reverted to an overall defensive bias and shortened
maturities. In
3
<PAGE> 4
PERFORMANCE UPDATE
the first three months of the new year market expectations of more robust
economic growth and interest rate pressures unfolded.
Q WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS?
A The economic recovery is continuing and based on recent statistics, its
momentum appears to remain strong. Labor markets have firmed as measured by
employment statistics, consumer confidence is high and quarterly measures of the
Gross Domestic Product are above trend for a non-inflationary expansion. Looking
forward, we anticipate uninterrupted, moderate economic growth coupled with
subdued but rising inflationary pressures. With this in mind, we do expect the
Fed to consider increasing rates again as the year progresses. 1997 will
continue to be a year of both challenges and opportunities. Our new Congress
will have to tackle some major problems, such as balancing the budget and
addressing transfer payments, and their actions and decisions will have
lasting implications. These considerations should lead investors to be a little
more cautious in their investment plans. For these reasons the money markets
could play an increasing and integral role as investors look for a vehicle that
will help protect value.
PORTFOLIO STATISTICS
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
ON 3/31/97
- ------------------------------------------------------------------------------------
<S> <C>
COMMERCIAL PAPER, FIRST TIER 82%
- ------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT 10
- ------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS 7
- ------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY NOTES 1
- ------------------------------------------------------------------------------------
TOTAL 100%
</TABLE>
[PIE CHART]
ON 3/31/97
* Portfolio composition is subject to change.
4
<PAGE> 5
PORTFOLIO OF INVESTMENTS
KEMPER CASH RESERVES FUND
Portfolio of investments at March 31, 1997
(VALUE IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
BANKING--3.6%
(a) Bankers Trust New York Corp.
5.70%, 4/1/97 $ 4,999
Credit Lyonnais N.A. Inc.
5.54%, 4/22/97 4,984
Sumitomo Bank Capital Markets, Inc.
5.54%, 5/12/97 4,969
------------------------------------------------
14,952
- --------------------------------------------------------------------------------
BUSINESS LOANS--20.6%
Astro Capital Corp.
5.54%, 4/30/97 7,965
B I Funding Inc.
5.41%, 5/14/97 4,968
Broadway Capital Corp.
5.47%, 4/7/97 2,617
Corporate Receivables Corp.
5.42%, 6/2/97 4,954
Madison Funding Corp.
5.47%, 4/28/97 4,980
National Fleet Funding Corp.
5.42%, 5/13/97 9,937
Preferred Receivables Funding
Corporation
5.45%, 5/14/97 4,968
Ranger Funding Corporation
5.45%, 4/22/97 9,968
Sigma Finance, Inc.
5.47% - 5.63%, 4/14/97 - 4/28/97 9,969
Strategic Asset Funding Corp.
5.83%, 6/30/97 9,856
WCP Funding Inc.
5.49%, 5/5/97 4,974
Windmill Funding Corp.
5.53%, 4/25/97 4,982
Working Capital Management Co., L.P.
5.52%, 4/14/97 4,990
------------------------------------------------
85,128
- --------------------------------------------------------------------------------
CAPITAL AND EQUIPMENT
LENDING--10.1%
(a) American Honda Finance Corporation
5.44%, 4/1/97 5,000
BTM Capital Corp.
5.50%, 4/15/97 4,990
(a) Caterpillar Financial Services Corp.
5.71%, 4/4/97 5,000
Ford Motor Credit Company
5.53%, 4/2/97 9,998
IBM Credit Corp.
6.03%, 4/3/97 2,049
Mitsubishi Motors Credit
of America, Inc.
5.47%, 4/10/97 4,993
Xerox Credit Corp.
5.38%, 4/23/97 9,967
------------------------------------------------
41,997
- --------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------
VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
CAPTIVE BUSINESS
LENDING--5.0%
BAT Capital Corp.
5.67%, 5/19/97 $ 4,963
CSW Credit, Inc.
5.61% - 5.77%, 4/17/97 - 5/2/97 10,550
(a) FINOVA Capital Corporation
5.52%, 4/15/97 5,000
------------------------------------------------
20,513
- --------------------------------------------------------------------------------
CONSUMER LENDING--6.0%
Barton Capital Corporation
5.40% - 5.44%, 5/2/97 - 5/13/97 9,946
Countrywide Home Loans
5.44%, 5/14/97 4,968
Household International, Inc.
5.45%, 4/2/97 4,999
Transamerica Finance Group
5.67%, 5/20/97 4,962
------------------------------------------------
24,875
- --------------------------------------------------------------------------------
CONSUMER PRODUCTS AND
SERVICES--5.6%
Philip Morris Cos., Inc.
6.09%, 4/2/97 23,196
------------------------------------------------
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCE--6.0%
APEX Funding Corp.
5.58%, 5/30/97 4,955
(a) CIT Group Holdings, Inc.
5.63%, 4/1/97 4,998
Dynamic Funding Corporation
5.49%, 4/30/97 4,978
Old Line Funding Corp.
5.43%, 4/25/97 9,964
------------------------------------------------
24,895
- --------------------------------------------------------------------------------
FINANCIAL SERVICES--12.1%
(a) Bear Stearns Companies Inc.
5.50%, 4/21/97 5,000
CS First Boston, Inc.
5.78%, 4/1/97 5,000
Dean Witter, Discover & Co.
5.68%, 5/27/97 9,912
(a) Goldman Sachs Group, L.P.
5.51%, 4/16/97 5,000
(a)(b) Lehman Brothers Holdings Inc.
5.60%, 4/16/97 5,000
Merrill Lynch & Co., Inc.
5.71%, 4/3/97 9,997
Nomura Holding America Inc.
5.48%, 4/17/97 4,988
Salomon Inc.
6.42%, 4/21/97 4,983
------------------------------------------------
49,880
- --------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 6
PORTFOLIO OF INVESTMENTS
(Value in thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
MANUFACTURING AND
INDUSTRIAL--5.6%
Bridgestone/Firestone, Inc.
5.50%, 4/17/97 $ 4,988
Cooper Industries Inc.
6.50%, 4/1/97 8,000
Kobe Steel International (USA), Inc.
5.78%, 4/7/97 9,990
--------------------------------------------------------
22,978
- --------------------------------------------------------------------------------
UTILITIES--7.2%
Frontier Corporation
5.41%, 4/25/97 4,982
GTE Corporation
5.38%, 4/11/97 9,985
Gulf Coast Waste Authority, Texas
5.43%, 5/7/97 5,000
NYNEX Corporation
5.38%, 4/4/97 9,996
--------------------------------------------------------
29,963
- --------------------------------------------------------------------------------
TOTAL CORPORATE
OBLIGATIONS--81.8%
(average maturity: 22 days) 338,377
- --------------------------------------------------------------------------------
BANK OBLIGATIONS
- --------------------------------------------------------------------------------
CERTIFICATES OF
DEPOSIT
(a) AmSouth Bank of Alabama
5.34%, 4/7/97 4,998
Dai-Ichi Kangyo Bank
5.60%, 4/7/97 5,000
Industrial Bank of Japan Ltd.
5.54%, 4/7/97 5,000
(a) Key Bank, N.A.
5.64%, 4/1/97 4,999
(a) Morgan Guaranty Trust
5.63%, 4/1/97 4,998
(a) Old Kent Bank
5.70%, 4/1/97 5,000
Sanwa Bank Ltd.
5.52%, 5/27/97 5,000
Sumitomo Bank, Ltd.
5.60%, 4/8/97 5,000
--------------------------------------------------------
TOTAL BANK OBLIGATIONS--9.7%
(average maturity: 10 days) 39,995
--------------------------------------------------------
- --------------------------------------------------------------------------------
(C) REPURCHASE
AGREEMENT--7.4%
(Dated 3/97, collateralized by U.S.
Treasury securities)
State Street Bank and Trust Company
4.75%, 4/1/97 30,437
--------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. GOVERNMENT
AGENCY
NOTES--1.2%
(a) Student Loan Marketing Association
5.62%, 4/1/97 4,992
--------------------------------------------------------
TOTAL INVESTMENTS--100.1%
(average maturity: 19 days) 413,801
--------------------------------------------------------
LIABILITIES, LESS OTHER
ASSETS--(.1)% (200)
--------------------------------------------------------
NET ASSETS--100% $413,601
--------------------------------------------------------
</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, 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,
1997. The dates shown represent the demand date or next interest rate change
date.
(b) Illiquid security representing 1.2% of net assets at March 31, 1997.
(c) 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.
6
<PAGE> 7
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------
Investments, at amortized cost:
Short-term securities $383,364
- ------------------------------------------------------------------------
Repurchase agreements 30,437
- ------------------------------------------------------------------------
Receivable for:
Fund shares sold 88
- ------------------------------------------------------------------------
Interest 555
- ------------------------------------------------------------------------
TOTAL ASSETS 414,444
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ------------------------------------------------------------------------
Payable for:
Dividends 353
- ------------------------------------------------------------------------
Fund shares redeemed 140
- ------------------------------------------------------------------------
Management fee 87
- ------------------------------------------------------------------------
Distribution services fee 135
- ------------------------------------------------------------------------
Administrative services fee 53
- ------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 45
- ------------------------------------------------------------------------
Trustees' fees and other 30
- ------------------------------------------------------------------------
Total liabilities 843
- ------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $413,601
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
THE PRICING OF SHARES
- ------------------------------------------------------------------------
Net asset value and redemption price per share
- ------------------------------------------------------------------------
CLASS A SHARES
($61,213 divided by 61,213 shares outstanding) $1.00
- ------------------------------------------------------------------------
CLASS B SHARES
(subject to contingent deferred sales charge)
($325,606 divided by 325,606 shares outstanding) $1.00
- ------------------------------------------------------------------------
CLASS C SHARES
(subject to contingent deferred sales charge)
($26,782 divided by 26,782 shares outstanding) $1.00
- ------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
7
<PAGE> 8
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCh 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------
NET INVESTMENT INCOME
- --------------------------------------------------------------------------------------------
Interest income $6,399
- --------------------------------------------------------------------------------------------
Expenses:
Management fee 470
- --------------------------------------------------------------------------------------------
Distribution services fee 725
- --------------------------------------------------------------------------------------------
Administrative services fee 290
- --------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 706
- --------------------------------------------------------------------------------------------
Professional fees 18
- --------------------------------------------------------------------------------------------
Reports to shareholders 38
- --------------------------------------------------------------------------------------------
Trustees' fees and other 11
- --------------------------------------------------------------------------------------------
Total expenses 2,258
- --------------------------------------------------------------------------------------------
NET INVESTMENT INCOME $4,141
- --------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
MARCH 31, SEPTEMBER 30,
1997 1996
- --------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income $ 4,141 8,717
- --------------------------------------------------------------------------------------------
Net realized loss -- (2,833)
- --------------------------------------------------------------------------------------------
Change in unrealized depreciation -- 2,833
- --------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (4,141) (8,717)
- --------------------------------------------------------------------------------------------
Net increase from capital share transactions and
total increase in net assets 205,985 31,059
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------------------------
Beginning of period 207,616 176,557
- --------------------------------------------------------------------------------------------
END OF PERIOD $413,601 207,616
- --------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 9
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 a
contingent deferred sales charge payable upon
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. All shares of the Fund have equal rights
with respect to voting, dividends and assets,
subject to class specific preferences.
- --------------------------------------------------------------------------------
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 during the six
months ended March 31, 1997.
9
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The Fund has a management
agreement with Zurich Kemper Investments, Inc.
(ZKI) and pays a management fee at an annual rate
of .40% of the first $250 million of average daily
net assets declining to .25% of average daily net
assets in excess of $12.5 billion. The Fund
incurred a management fee of $470,000 for the six
months ended March 31, 1997.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
The Fund has an underwriting and distribution
services agreement with Zurich Kemper Distributors,
Inc. (ZKDI) (formerly known as Kemper Distributors,
Inc.). For services under the distribution services
agreement, the Fund pays ZKDI a fee of .75% of
average daily net assets of the Class B and Class C
shares. Pursuant to the agreement, ZKDI enters into
related selling group agreements with various firms
at various rates for sales of Class B and Class C
shares. In addition, ZKDI 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 such shares
are as follows:
<TABLE>
<CAPTION>
DISTRIBUTION COMMISSIONS AND
FEES AND CDSC DISTRIBUTION FEES PAID BY
RECEIVED BY ZKDI ZKDI TO FIRMS
---------------- --------------------------
<S> <C> <C>
Six months ended
March 31, 1997 $1,070,000 1,929,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with ZKDI. For
providing information and administrative services
to shareholders, the Fund pays ZKDI a fee at an
annual rate of up to .25% of average daily net
assets. ZKDI in turn has various arrangements with
financial services firms that provide these
services and pays these firms based on assets of
Fund accounts that the firms service.
Administrative services fees (ASF) paid are as
follows:
<TABLE>
<CAPTION>
ASF PAID BY ASF PAID BY ZKDI
THE FUND TO ZKDI TO FIRMS
---------------- ----------------
<S> <C> <C>
Six months ended
March 31, 1997 $290,000 374,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
Zurich Kemper Service Company (ZKSvC) (formerly
known as Kemper Service Company) is the shareholder
service agent of the Fund. Under the agreement,
ZKSvC received shareholder services fees of
$614,000 for the six months ended March 31, 1997.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of ZKI.
For the six months ended March 31, 1997, the Fund
made no payments to its officers and incurred
trustees' fees of $9,000 to independent trustees.
10
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund (dollar amounts and
number of shares are the same).
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
MARCH 31, SEPTEMBER 30,
1997 1996
--------------------------------
(IN THOUSANDS)
<S> <C> <C>
SHARES SOLD
Class A $ 85,566 83,271
----------------------------------------------------------------------------
Class B 387,889 578,233
----------------------------------------------------------------------------
Class C 37,134 48,599
----------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 754 1,673
----------------------------------------------------------------------------
Class B 2,674 6,108
----------------------------------------------------------------------------
Class C 137 205
----------------------------------------------------------------------------
SHARES REDEEMED
Class A (64,878) (91,408)
----------------------------------------------------------------------------
Class B (222,904) (554,442)
----------------------------------------------------------------------------
Class C (20,387) (41,180)
----------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 3,964 8,605
----------------------------------------------------------------------------
Class B (3,964) (8,605)
----------------------------------------------------------------------------
NET INCREASE
FROM CAPITAL SHARE
TRANSACTIONS AND TOTAL
INCREASE IN NET ASSETS $205,985 31,059
----------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------------------------------
CLASS A SHARES
---------------------------------------------------------------
SIX MONTHS TWO MONTHS
ENDED YEAR ENDED ENDED
MARCH 31, SEPTEMBER 30, SEPTEMBER 30, YEAR ENDED JULY 31,
1997 1996 1995 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $1.00 1.00 1.00 1.00 1.00 1.00
- -------------------------------------------------------------------------------------------------------------
Net investment income and dividends declared .02 .05 .01 .05 .03 .02
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 1.00 1.00 1.00 1.00 1.00
- -------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 2.20% 4.67 .85 4.99 2.78 2.42
- -------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------------------------------
Expenses 1.15% 1.08 .92 .89 .92 .93
- -------------------------------------------------------------------------------------------------------------
Net investment income 4.34% 4.53 5.11 4.75 2.86 2.42
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------
CLASS B SHARES
---------------------------------------------------------------
SIX MONTHS TWO MONTHS
ENDED YEAR ENDED ENDED
MARCH 31, SEPTEMBER 30, SEPTEMBER 30, YEAR ENDED JULY 31,
1997 1996 1995 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $1.00 1.00 1.00 1.00 1.00 1.00
- -------------------------------------------------------------------------------------------------------------
Net investment income and dividends declared .02 .04 .01 .04 .02 .02
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 1.00 1.00 1.00 1.00 1.00
- -------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 1.71% 3.73 .71 4.08 1.78 1.56
- -------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------------------------------
Expenses 2.11% 1.99 1.79 1.78 1.89 1.82
- -------------------------------------------------------------------------------------------------------------
Net investment income 3.38% 3.62 4.24 3.86 1.89 1.53
- -------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES: The total returns for the year ended 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.
12
<PAGE> 13
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-----------------------------------------------------------------
CLASS C SHARES
-----------------------------------------------------------------
MAY 31
SIX MONTHS TWO MONTHS TO
ENDED YEAR ENDED ENDED YEAR ENDED JULY
MARCH 31, SEPTEMBER 30, SEPTEMBER 30, JULY 31, 31,
1997 1996 1995 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<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 .04 .01 .04 --
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 1.00 1.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 1.85% 3.93 .71 4.08 .42
- ---------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------------
Expenses 1.81% 1.79 1.78 1.76 1.80
- ---------------------------------------------------------------------------------------------------------------
Net investment income 3.68% 3.82 4.25 3.88 2.64
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- -----------------------------------------------------------------------------------------------------------------------
SIX MONTHS TWO MONTHS
ENDED YEAR ENDED ENDED
MARCH 31, SEPTEMBER 30, SEPTEMBER 30, YEAR ENDED JULY 31,
1997 1996 1995 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $413,601 207,616 176,557 213,031 424,317 166,808
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 14
NOTES
14
<PAGE> 15
NOTES
15
<PAGE> 16
TRUSTEES AND OFFICERS
TRUSTEES OFFICERS
STEPHEN B. TIMBERS J. PATRICK BEIMFORD, JR.
President and Trustee Vice President
DAVID W. BELIN CHARLES R. MANZONI, JR.
Trustee Vice President
LEWIS A. BURNHAM JOHN E. NEAL
Trustee Vice President
DONALD L. DUNAWAY FRANK J. RACHWALSKI, JR.
Trustee Vice President
ROBERT B. HOFFMAN RICHARD L. VANDENBERG
Trustee Vice President
DONALD R. JONES PHILIP J. COLLORA
Trustee Vice President
and Secretary
DOMINIQUE P. MORAX JEROME L. DUFFY
Trustee Treasurer
SHIRLEY D. PETERSON ELIZABETH C. WERTH
Trustee Assistant Secretary
WILLIAM P. SOMMERS
Trustee
- --------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICE AGENT ZURICH KEMPER SERVICE COMPANY
P.O. Box 419557
Kansas City, MO 64141
- --------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
127 West 10th Street
Kansas City, MO 64105
- --------------------------------------------------------------------------------
INVESTMENT MANAGER ZURICH KEMPER INVESTMENTS, INC.
PRINCIPAL UNDERWRITER ZURICH KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606
www.kemper.com
[RECYCLED 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 (5/97) 1031790
Printed in the U.S.A. [KEMPER FUNDS LOGO]
