<PAGE> 1
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED MARCH 31, 1998
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
KEMPER
CASH RESERVES FUND
"...As we move further away from the initial impact
the downturn in Southeast Asia had on all world
markets, it is becoming clear that its effect is
going to be less than originally expected. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
PERFORMANCE UPDATE
4
PORTFOLIO STATISTICS
5
VARIABLES AFFECTING PERFORMANCE
6
SHAREHOLDERS' MEETING
7
PORTFOLIO OF INVESTMENTS
9
FINANCIAL STATEMENTS
11
NOTES TO FINANCIAL STATEMENTS
14
FINANCIAL HIGHLIGHTS
At A GLANCE
- --------------------------------------------------------------------------------
YIELDS
- --------------------------------------------------------------------------------
7-DAY ANNUALIZED YIELD FOR THE PERIOD ENDED MARCH 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
KEMPER CASH RESERVES FUND CLASS A 4.32%
KEMPER CASH RESERVES FUND CLASS B 3.34%
KEMPER CASH RESERVES FUND CLASS C 3.66%
- --------------------------------------------------------------------------------
</TABLE>
Any 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 net asset value of $1.00 per share.
TERMS TO KNOW
YIELD The amount of net investment income (income minus expenses and management
fees) your investment is producing over a specific period, expressed as a
percentage of your investment. Capital gains and losses, which are infrequent in
a money market fund, are not included.
7-DAY AVERAGE YIELD Every money market fund calculates its yield according to a
standardized method prescribed by the Securities and Exchange Commission. Each
day, the yield is based on a 7-day period and is the net investment income per
share over the period, divided by 7 and multiplied by 365. Using an average over
7 days helps to minimize daily fluctuations in fund income.
MATURITY The time remaining before an issuer is scheduled to repay the principal
amount on a debt security. Money market instruments are debt securities.
YIELD CURVE Yields tend to vary directly with a security's length of time to
maturity. The longer the maturity, the higher the risk that interest rates could
change, which is why investors are typically rewarded with a higher yield. For
example, the yield on a 1-month Treasury bill is typically lower than the yield
on a 1-year Treasury note. When the relationship between yield and maturity is
plotted on a graph it is called the YIELD CURVE. If yields for long-term
investments drop, the YIELD CURVE will "flatten" since there will be less of a
difference in yield between shorter-term and longer-term investments. When this
happens, it also means longer-term securities are relatively less attractive.
When long-term yields increase and the curve steepens, longer-term securities
become relatively more desirable.
- --------------------------------------------------------------------------------
SAMPLE YIELD CURVE*
- --------------------------------------------------------------------------------
[MATURITY/QUALITY DIAGRAM]
*The yield curve shown is hypothetical and does not represent the past or future
performance of any security held by the Kemper Cash Reserves Fund.
<PAGE> 3
PERFORMANCE UPDATE
[RACHWALSKI PHOTO]
FRANK RACHWALSKI IS SENIOR VICE PRESIDENT OF SCUDDER KEMPER INVESTMENTS, INC.
AND LEAD PORTFOLIO MANAGER OF KEMPER CASH RESERVES FUND. RACHWALSKI HOLDS B.B.A.
AND M.B.A. DEGREES FROM LOYOLA UNIVERSITY.
JOHN W. STUEBE JOINED SCUDDER KEMPER INVESTMENTS IN 1979 AND IS A VICE
PRESIDENT. HE IS A PORTFOLIO MANAGER OF THE KEMPER CASH RESERVES FUND. STUEBE
RECEIVED A B.S. IN FINANCE FROM THE UNIVERSITY OF ILLINOIS AND AN M.A. IN
ECONOMICS FROM DEPAUL UNIVERSITY.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE
MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
DURING THE SIX-MONTH PERIOD ENDED MARCH 31, 1998, THE U.S. ECONOMY CONTINUED TO
SEE STEADY GROWTH. IN THE FOURTH QUARTER OF 1997 HOWEVER, U.S. INVESTORS
BECAME CONCERNED ABOUT THE MARKET TURMOIL TAKING PLACE IN SOUTHEAST ASIA. THE
FEDERAL RESERVE BOARD TOOK A "WAIT AND SEE" APPROACH WITH INTEREST RATES,
EXPECTING THIS CRISIS ABROAD TO COOL GROWTH HERE AT HOME. PORTFOLIO MANAGER
FRANK RACHWALSKI DISCUSSES THE MARKET AND KEMPER CASH RESERVES FUND'S
PERFORMANCE DURING THE PERIOD.
Q FRANK, HOW WOULD YOU CHARACTERIZE THE U.S. ECONOMY OVER THE LAST SIX
MONTHS AND WHAT IMPACT DID THE ASIAN CRISIS HAVE?
A The economy continued to show good momentum. We saw strong GDP (Gross
Domestic Product) numbers at the end of the fourth quarter of 1997 that exceeded
forecasts. And at the end of the first quarter of this year, we again expect
strong GDP numbers of around 3 percent. We also saw high levels of job creation
with low levels of unemployment which could lead to wage and inflation
increases. In other words, if we just looked at the domestic economy, the
Federal Reserve Board (the Fed) would have probably moved to increase rates. But
the events in October changed things. When the currencies in Thailand, Malaysia
and Indonesia came under speculative attack, followed by the stock market crash
in those countries, we anticipated a slowdown in U.S. exports while U.S. imports
were expected to be selling at much lower prices because of sales from Asian
countries needing U.S. dollars. This was expected to place a slight drag on the
U.S. economy and the Fed held off on making changes to monetary policy.
Q U.S. MARKETS WERE QUITE VOLATILE WHEN THE TROUBLES IN ASIA FIRST SURFACED.
DID THIS VOLATILITY HAVE ANY AFFECT ON KEMPER CASH RESERVES FUND OR ON THE
ISSUES THE FUND HOLDS?
A Our only direct exposure to the Asian crisis would have been through
holdings in banks that had outstanding loans in the affected countries. However,
our portfolio had no direct investments in institutions that were seriously
affected nor did we have any direct holdings in these countries.
Q CAN YOU DISCUSS YOUR MANAGEMENT APPROACH OVER THE SIX-MONTH PERIOD?
A We kept the average maturity of our investments on the shorter side. When
the Asian crisis hit, central banks in Southeast Asia liquidated their U.S.
Treasury holdings in order to generate more currency reserves. At the same time,
many investors were flocking to U.S. Treasuries because it is a safe investment.
This simultaneous movement to sell and buy U.S. Treasuries provided an offset to
the impact either movement alone would have had on short-term interest rates. We
also saw the yield curve flatten, which caused longer-maturity interest rates to
fall relative to short-term interest rates. Within this environment, there was
no incentive for us to extend. In general, the portfolio's average life ranged
from 20 to 35 days throughout the period.
3
<PAGE> 4
PERFORMANCE UPDATE
Q WHAT DO YOU EXPECT TO SEE HAPPEN WITH INTEREST RATES IN THE COMING MONTHS?
A As we move further away from the initial impact the downturn in Southeast
Asia had on all world markets, it is becoming clear that its effect is going to
be less than originally expected. In his Humphrey Hawkins testimony in early
March, Federal Reserve Board Chairman Alan Greenspan stated the crisis would
have a benign impact on the U.S. economy in 1998. Also, we see no reason why the
U.S. economy will not continue on a path of steady growth; consumer expectations
are high, job creation is strong and housing numbers are favorable. The question
of Asia dragging down the economy now seems to be sort of a non-issue and the
effects seem to be counter-balanced by strong growth in other regions. Against
this economic backdrop, we don't foresee the Fed taking any action before July
and believe the next change in monetary policy remains uncertain.
Q BASED ON THIS OUTLOOK, WHAT DO YOU EXPECT YOUR MANAGEMENT STRATEGY TO BE
IN THE COMING MONTHS?
A We still don't feel there is any incentive to extend maturities at this
point. As discussed, the Fed isn't positioned to increase rates and the yield
curve has flattened so there is no reward for holding issues with longer
maturities. We will continue to closely monitor economic developments and react
accordingly. We intend to stay in a somewhat neutral maturity range which will
allow us to take advantage of yield differences that occur because of
fluctuations in the market. And, as always, we will continue to look for value.
PORTFOLIO STATISTICS
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ON 3/31/98
- --------------------------------------------------------------------------------
<S> <C>
COMMERCIAL PAPER, FIRST TIER 82%
- --------------------------------------------------------------------------------
BANK OBLIGATIONS 16
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY NOTES 2
- --------------------------------------------------------------------------------
TOTAL 100%
</TABLE>
[PIE CHART]
* Portfolio Composition is subject to change.
4
<PAGE> 5
VARIABLES AFFECTING PERFORMANCE
KEMPER CASH RESERVES FUND'S PRIMARY GOAL IS TO ACHIEVE MAXIMUM CURRENT INCOME
WHILE PRESERVING THE PRINCIPAL INVESTMENT AND PROVIDING A HIGH DEGREE OF
LIQUIDITY. THE SPECIFIC SECURITIES PORTFOLIO MANAGERS SELECT HAVE A MAJOR IMPACT
ON REACHING THIS GOAL. HOWEVER, THEY MUST CONTINUOUSLY ANALYZE OTHER VARIABLES
WHICH AFFECT SHARE PRICE STABILITY AND FUND PERFORMANCE. TRADITIONALLY, THERE
ARE THREE IMPORTANT VARIABLES WHICH ARE FACTORED INTO THE DECISION-MAKING
PROCESS:
MONETARY POLICY
Monetary Policy is managed by the Federal Reserve Board (the Fed) and has a
direct impact on short-term interest rates. If the Fed determines that inflation
is climbing, it will enact a policy to decrease or "tighten" the money supply.
With less money available, money lenders can command higher interest rates on
the money market securities they sell. On the other hand, if the Fed determines
the economy is heading toward a recession, it will increase or "ease" the money
supply. With more money for borrowers to access, the interest rates for money
market securities decline.
INTEREST RATES
Interest Rates will affect money fund yields because as investments mature, the
cash received will be reinvested at current money market rates which could be
either higher or lower. Reinvesting at higher interest rates generally means
higher yields for money funds and reinvesting at lower rates generally means
lower yields.
AVERAGE LENGTH OF MATURITY
Average Length of Maturity affects the timing of reinvesting cash from maturing
investments. If interest rates are expected to rise, decreasing the portfolio's
average length of maturity would enable the fund to purchase higher-yielding
money market securities sooner. Conversely, if rates were expected to decrease,
the fund would invest in money market securities with a longer length of
maturity in order to maintain higher yields longer.
(Also see Terms to Know section)
5
<PAGE> 6
SHAREHOLDERS' MEETING
SPECIAL SHAREHOLDERS' MEETING
On December 3, 1997, a special shareholders' meeting was held and adjourned as
necessary. Kemper Cash Reserves Fund shareholders were asked to vote on five
separate issues: election of the nine members to the Board of Trustees,
ratification of Ernst & Young LLP as independent auditors, approval of new
investment management agreement with Scudder Kemper Investments, Inc., approval
of changes in the fund's fundamental investment policies to permit a
master/feeder fund structure and approval of a new rule 12b-1 distribution plan
with Zurich Kemper Distributors, Inc. for Class B shares and Class C shares. The
following are the results for each issue:
1) Election of Trustees
<TABLE>
<CAPTION>
For Withheld
<S> <C> <C>
David W. Belin 372,832,981 8,048,482
Lewis A. Burnham 373,128,591 7,752,872
Donald L. Dunaway 373,043,751 7,837,712
Robert B. Hoffman 373,123,371 7,758,092
Donald R. Jones 373,062,367 7,819,097
Shirley D. Peterson 372,956,252 7,925,211
Daniel Pierce 373,059,408 7,822,055
William P. Sommers 373,106,072 7,775,392
Edmond D. Villani 373,000,661 7,880,803
</TABLE>
2) Ratification of the selection of Ernst & Young LLP as independent auditors
for the current fiscal year.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
368,655,365 3,181,901 9,044,198
</TABLE>
3) Approval of new investment management agreement with Scudder Kemper
Investments, Inc.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
162,529,457 3,213,984 6,377,562
</TABLE>
4) Approval of changes in the fund's fundamental investment policies to permit a
master/feeder fund structure.
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
168,444,723 6,311,207 9,706,555 1,998,462
</TABLE>
5) To approve a new rule 12b-1 distribution plan with Zurich Kemper
Distributors, Inc.
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C> <C>
Class B 107,013,278 3,706,831 5,360,241 0
Class C 11,998,367 480,173 1,092,157 2,063,206
</TABLE>
6
<PAGE> 7
PORTFOLIO OF INVESTMENTS
KEMPER CASH RESERVES FUND
PORTFOLIO OF INVESTMENTS AT MARCH 31, 1998 (UNAUDITED)
(VALUE IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------
CORPORATE OBLIGATIONS VALUE
- -----------------------------------------------------------
<S> <C> <C>
BUSINESS LOANS--24.6%
Clipper Receivables Corp.
5.57%, 5/20/98 $ 4,962
Corporate Asset Funding
6.00%, 4/1/98 7,000
First Brands Commercial, Inc.
5.59%, 4/29/98 8,961
Gotham Capital Corp.
5.73%, 4/24/98 4,982
Jet Funding Corp.
5.89%, 4/20/98 4,985
Monte Rosa Capital Corp.
5.60%, 5/22/98 4,961
Ranger Funding Corp.
5.58%, 5/8/98 9,943
Receivables Capital Corp.
5.54%, 4/16/98 4,989
Sheffield Receivables Corp.
5.61%, 5/4/98 4,974
------------------------------------------------
55,757
CAPITAL AND EQUIPMENT LENDING--15.4%
American Honda Finance Corp.
5.61%, 5/1/98 4,977
Caterpillar Financial Services
Corp.
5.53%, 4/27/98 8,964
(a) Ford Motor Credit Co.
5.71%, 4/1/98 5,000
(a) IBM Credit Corp.
5.64%, 4/1/98 4,999
(a) John Deere Capital Corp.
5.50%, 5/11/98 4,998
(a) Sanwa Business Credit Corp.
5.71%, 4/16/98 6,000
------------------------------------------------
34,938
CAPTIVE BUSINESS LENDING--2.2%
(a) FINOVA Capital Corp.
5.74%, 4/13/98 5,000
CONSUMER LENDING--4.4%
American Express Credit Corp.
5.55%, 5/11/98 4,969
J.C. Penney Funding Corp.
5.58%, 5/29/98 4,956
------------------------------------------------
9,925
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------
VALUE
- -----------------------------------------------------------
<S> <C> <C>
DIVERSIFIED FINANCE--2.2%
APEX Funding Corp.
5.74%, 4/30/98 $ 4,977
FINANCIAL SERVICES--11.0%
(a) Bear Stearns Cos., Inc.
5.66%, 4/20/98 5,000
(a) Goldman Sachs Group, L.P.
5.60%, 4/10/98 5,000
(a) Lehman Brothers Holdings, Inc.
5.73%, 4/20/98 5,000
(a) Merrill Lynch & Co., Inc.
5.64%, 4/6/98 5,000
(a) Morgan Stanley, Dean Witter,
Discover & Co.
5.65%, 6/18/98 5,000
------------------------------------------------
25,000
HEALTH CARE AND PRODUCTS--4.4%
American Home Products Corp.
5.56%, 4/17/98 9,976
MANUFACTURING/INDUSTRIAL--6.6%
Cooper Industries, Inc.
6.05%, 4/1/98 10,000
Monsanto Co.
5.60%, 4/29/98 4,978
------------------------------------------------
14,978
UTILITIES--10.4%
AES Hawaii, Inc.
5.57%, 4/16/98 9,977
Brazos River Authority, Texas
5.85%, 4/7/98 5,000
GTE Corp.
5.77%, 4/17/98 8,478
------------------------------------------------
23,455
------------------------------------------------
TOTAL CORPORATE OBLIGATIONS--81.2%
(AVERAGE MATURITY: 24 DAYS) 184,006
------------------------------------------------
</TABLE>
7
<PAGE> 8
PORTFOLIO OF INVESTMENTS
(VALUE IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------
BANK OBLIGATIONS VALUE
- -----------------------------------------------------------
<S> <C> <C>
CERTIFICATES OF DEPOSIT--
U.S. BANKS -- 11.9%
(a) Bank One
5.57%, 4/7/98 $ 4,999
(a) Bankers Trust Co.
5.69%, 4/1/98 5,000
(a) Comerica Bank
5.55%, 6/22/98 4,998
(a) CoreStates Bank, N.A.
5.80%, 4/6/98 2,000
(a) Key Bank, N.A.
5.63%, 4/6/98 4,999
(a) Mellon Bank Corp.
5.54%, 5/7/98 4,999
------------------------------------------------
26,995
CERTIFICATES OF DEPOSIT--
CANADIAN BANKS--4.4%
(a) National Bank of Canada
5.63%, 4/6/98 4,999
Toronto Dominion Bank
5.56%, 4/9/98 5,000
------------------------------------------------
9,999
------------------------------------------------
TOTAL BANK OBLIGATIONS--16.3%
(AVERAGE MATURITY: 21 DAYS) 36,994
------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------
VALUE
- -----------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY NOTES--2.2%
(a) Student Loan Marketing Association
5.37%, 4/7/98 $ 4,996
------------------------------------------------
TOTAL INVESTMENTS--99.7%
(AVERAGE MATURITY: 23 DAYS) 225,996
------------------------------------------------
CASH AND OTHER ASSETS, LESS
LIABILITIES--.3% 679
------------------------------------------------
NET ASSETS--100% $226,675
------------------------------------------------
</TABLE>
NOTES TO PORTFOLIOS 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,
1998. The dates shown represent the demand date or next interest rate change
date.
See accompanying Notes to Financial Statements.
8
<PAGE> 9
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------
Investments, at amortized cost $225,996
- ------------------------------------------------------------------------
Cash 542
- ------------------------------------------------------------------------
Interest receivable 883
- ------------------------------------------------------------------------
TOTAL ASSETS 227,421
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ------------------------------------------------------------------------
Payable for:
Dividends 151
- ------------------------------------------------------------------------
Fund shares redeemed 60
- ------------------------------------------------------------------------
Management fee 75
- ------------------------------------------------------------------------
Distribution services fee 97
- ------------------------------------------------------------------------
Administrative services fee 47
- ------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 209
- ------------------------------------------------------------------------
Trustees' fees and other 107
- ------------------------------------------------------------------------
Total liabilities 746
- ------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $226,675
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
THE PRICING OF SHARES
- ------------------------------------------------------------------------
Net asset value and redemption price per share
- ------------------------------------------------------------------------
CLASS A SHARES
($81,274 / 81,274 shares outstanding) $1.00
- ------------------------------------------------------------------------
CLASS B SHARES
(subject to contingent deferred sales charge)
($117,223 / 117,223 shares outstanding) $1.00
- ------------------------------------------------------------------------
CLASS C SHARES
(subject to contingent deferred sales charge)
($28,178 / 28,178 shares outstanding) $1.00
- ------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
9
<PAGE> 10
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<S> <C>
- ----------------------------------------------------------------------
NET INVESTMENT INCOME
- ----------------------------------------------------------------------
Interest income $6,852
- ----------------------------------------------------------------------
Expenses:
Management fee 478
- ----------------------------------------------------------------------
Distribution services fee 658
- ----------------------------------------------------------------------
Administrative services fee 259
- ----------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 807
- ----------------------------------------------------------------------
Professional fees 18
- ----------------------------------------------------------------------
Reports to shareholders 82
- ----------------------------------------------------------------------
Trustees' fees and other 42
- ----------------------------------------------------------------------
Total expenses 2,344
- ----------------------------------------------------------------------
NET INVESTMENT INCOME $4,508
- ----------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31, 1998 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 1997
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- ----------------------------------------------------------------------------------------------------------
Net investment income $ 4,508 9,624
- ----------------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (4,508) (9,624)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital share transactions and
total increase (decrease) in net assets (112,980) 132,039
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------------------------------------------
Beginning of period 339,655 207,616
- ----------------------------------------------------------------------------------------------------------
END OF PERIOD $ 226,675 339,655
- ----------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE
FUND Kemper Cash Reserves Fund (the 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 for the six
months ended March 31, 1998.
11
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES INVESTMENT MANAGER COMBINATION. Effective December
31, 1997, Zurich Insurance Company, the parent of
Zurich Kemper Investments, Inc. (ZKI), acquired a
majority interest in Scudder, Stevens & Clark, Inc.
(Scudder), another major investment manager. As a
result of this transaction, the operations of ZKI
were combined with Scudder to form a new global
investment organization named Scudder Kemper
Investments, Inc. (Scudder Kemper). The transaction
resulted in the termination of the Fund's
investment management agreement with ZKI, however,
a new investment management agreement between the
Fund and Scudder Kemper was approved by the Fund's
Board of Trustees and by the Fund's Shareholders.
The new management agreement, which was effective
December 31, 1997, is the same in all material
respects as the previous management agreement,
except that Scudder Kemper is the new investment
adviser to the Fund. In addition, the names of the
Fund's principal underwriter and shareholder
service agent were changed to Kemper Distributors,
Inc. (KDI) and Kemper Service Company (KSvC),
respectively.
MANAGEMENT AGREEMENT. The Fund has a management
agreement with Scudder Kemper 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
$478,000 for the six months ended March 31, 1998.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
The Fund has an underwriting and distribution
services agreement with KDI. For services under the
distribution services agreement, the Fund pays KDI
a fee of .75% of average daily net assets of the
Class B and Class C shares. Pursuant to the
agreement, KDI enters into related selling group
agreements with various firms 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, CDSC and commissions
related to Class B and Class C shares are as
follows:
<TABLE>
<CAPTION>
DISTRIBUTION COMMISSIONS AND
FEES AND CDSC DISTRIBUTION FEES PAID BY
RECEIVED BY KDI KDI TO FIRMS
---------------- -------------------------
<S> <C> <C>
Six months ended March 31, 1998 $1,066,000 1,893,000
</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 that the firms service.
Administrative services fees (ASF) paid are as
follows:
<TABLE>
<CAPTION>
ASF PAID BY ASF PAID BY KDI
THE FUND TO KDI TO FIRMS
--------------- ---------------
<S> <C> <C>
Six months ended March 31, 1998 $259,000 399,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
KSvC is the shareholder service agent of the Fund.
Under the agreement, KSvC received shareholder
services fees of $643,000 for the six months ended
March 31, 1998.
12
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. For the six months ended March 31,
1998, the Fund made no payments to its officers and
incurred trustees' fees of $9,000 to independent
trustees.
- --------------------------------------------------------------------------------
4 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund (dollar amounts and
number of shares are the same).
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1998 SEPTEMBER 30, 1997
---------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
----------------------------------------------------------------------------
SHARES SOLD
Class A $ 502,806 287,087
----------------------------------------------------------------------------
Class B 224,435 761,916
----------------------------------------------------------------------------
Class C 240,191 162,655
----------------------------------------------------------------------------
----------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 1,109 1,966
----------------------------------------------------------------------------
Class B 2,330 6,813
----------------------------------------------------------------------------
Class C 293 619
----------------------------------------------------------------------------
----------------------------------------------------------------------------
SHARES REDEEMED
Class A (523,715) (247,433)
----------------------------------------------------------------------------
Class B (315,972) (700,563)
----------------------------------------------------------------------------
Class C (244,457) (141,021)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 10,550 13,097
----------------------------------------------------------------------------
Class B (10,550) (13,097)
----------------------------------------------------------------------------
NET INCREASE (DECREASE)
FROM CAPITAL SHARE
TRANSACTIONS AND TOTAL
INCREASE (DECREASE) IN NET ASSETS $(112,980) 132,039
----------------------------------------------------------------------------
</TABLE>
13
<PAGE> 14
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-------------------------------------------------------------
CLASS A SHARES
-------------------------------------------------------------
YEAR ENDED
SIX MONTHS SEPTEMBER TWO MONTHS YEAR ENDED
ENDED 30, ENDED JULY 31,
MARCH 31, ----------- SEPTEMBER 30, -----------
1998 1997 1996 1995 1995 1994
- ------------------------------------------------------------------------------------------------------------
<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 .02 .04 .05 .01 .05 .03
- ------------------------------------------------------------------------------------------------------------
Less dividends declared .02 .04 .05 .01 .05 .03
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 1.00 1.00 1.00 1.00 1.00
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 2.28% 4.57 4.67 .85 4.99 2.78
- ------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------------------------------
Expenses 1.21% 1.16 1.08 .92 .89 .92
- ------------------------------------------------------------------------------------------------------------
Net investment income 4.55% 4.45 4.53 5.11 4.75 2.86
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------
CLASS B SHARES
-------------------------------------------------------------
YEAR ENDED
SIX MONTHS SEPTEMBER TWO MONTHS YEAR ENDED
ENDED 30, ENDED JULY 31,
MARCH 31, ----------- SEPTEMBER 30, -----------
1998 1997 1996 1995 1995 1994
- ------------------------------------------------------------------------------------------------------------
<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 .02 .03 .04 .01 .04 .02
- ------------------------------------------------------------------------------------------------------------
Less dividends declared .02 .03 .04 .01 .04 .02
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 1.00 1.00 1.00 1.00 1.00
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 1.74% 3.49 3.73 .71 4.08 1.78
- ------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------------------------------
Expenses 2.30% 2.19 1.99 1.79 1.78 1.89
- ------------------------------------------------------------------------------------------------------------
Net investment income 3.46% 3.42 3.62 4.24 3.86 1.89
- ------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 15
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------------------------
CLASS C SHARES
----------------------------------------------------------
YEAR ENDED
SIX MONTHS SEPTEMBER TWO MONTHS
ENDED 30, ENDED YEAR ENDED
MARCH 31, ----------- SEPTEMBER 30, JULY 31,
1998 1997 1996 1995 1995
- --------------------------------------------------------------------------------------------------------
<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 .02 .04 .04 .01 .04
- --------------------------------------------------------------------------------------------------------
Less dividends declared .02 .04 .04 .01 .04
- --------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 1.00 1.00 1.00 1.00
- --------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 1.94% 3.85 3.93 .71 4.08
- --------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------------------------------
Expenses 1.87% 1.84 1.79 1.78 1.76
- --------------------------------------------------------------------------------------------------------
Net investment income 3.88% 3.77 3.82 4.25 3.88
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ---------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED TWO MONTHS
ENDED SEPTEMBER 30, ENDED YEAR ENDED JULY 31,
MARCH 31, ----------------- SEPTEMBER 30, -------------------
1998 1997 1996 1995 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net assets at end of period (in
thousands) $226,675 339,655 207,616 176,557 213,031 424,317
- ---------------------------------------------------------------------------------------------------------------
</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. Data for the period ended March 31, 1998 is unaudited.
Scudder Kemper temporarily agreed to absorb certain operating expenses of the
Fund during a portion of the fiscal year ended July 31, 1994. 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%); Class B shares
(2.12% and 1.66%).
15
<PAGE> 16
TRUSTEES & OFFICERS
TRUSTEES OFFICERS
DANIEL PIERCE MARK S. CASADY RICHARD L. VANDENBERG
Chairman and Trustee President Vice President
DAVID W. BELIN PHILIP J. COLLORA LINDA J. WONDRACK
Trustee Vice President, Vice President
Secretary and Treasurer
LEWIS A. BURNHAM JOHN R. HEBBLE
Trustee JERALD K. HARTMAN Assistant Treasurer
Vice President
DONALD L. DUNAWAY MAUREEN E. KANE
Trustee THOMAS W. LITTAUER Assistant Secretary
Vice President
ROBERT B. HOFFMAN CAROLINE PEARSON
Trustee ANN M. MCCREARY Assistant Secretary
Vice President
DONALD R. JONES ELIZABETH C. WERTH
Trustee ROBERT C. PECK, JR. Assistant Secretary
Vice President
SHIRLEY D. PETERSON
Trustee KATHRYN L. QUIRK
Vice President
WILLIAM P. SOMMERS
Trustee FRANK J. RACHWALSKI, JR.
Vice President
EDMOND D. VILLANI
Trustee
- --------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 419557
Kansas City, MO 64141
- --------------------------------------------------------------------------------
CUSTODIAN AND INVESTORS FIDUCIARY TRUST COMPANY
TRANSFER AGENT 801 Pennsylvania
Kansas City, MO 64105
- --------------------------------------------------------------------------------
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606
www.kemper.com
[KEMPER FUNDS LOGO]
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
Printed in the U.S.A. on recycled paper.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Cash Reserves Fund prospectus.
KCRF - 3 (4/98) 1047060
