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SIGNATURE JEROME L. DUFFY
TITLE TREASURER
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PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
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FINANCIAL INFORMATION EXTRACTED FROM THE 1997 ANNUAL REPORT TO SHAREHOLDERS AND
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</TABLE>
REPORT OF INDEPENDENT AUDITORS
Board of Trustees
Kemper Funds
In planning and performing our audit of the financial statements of
each of the Kemper Funds listed in Exhibit A attached hereto (the
"Funds") for the period ended as of the date listed in Exhibit A
attached hereto ("Report Date"), we considered their internal
control, including control activities for safeguarding securities, in
order to determine our auditing procedures for the purpose of
expressing our opinion on the financial statements and to comply with
the requirements of Form N-SAR, not to provide assurance on the
internal control.
The management of the Funds is responsible for establishing and
maintaining internal control. In fulfilling this responsibility,
estimates and judgments by management are required to assess the
expected benefits and related costs of controls. Generally, controls
that are relevant to an audit pertain to the entity's objective of
preparing financial statements for external purposes that are fairly
presented in conformity with generally accepted accounting
principles. Those controls include the safeguarding of assets
against unauthorized acquisition, use or disposition.
Because of inherent limitations in internal control, errors or
irregularities may occur and not be detected. Also, projection of
any evaluation of internal control to future periods is subject to
the risk that it may become inadequate because of changes in
conditions or that the effectiveness of the design and operation may
deteriorate.
Our consideration of the internal control would not necessarily
disclose all matters in the internal control that might be material
weaknesses under standards established by the American Institute of
Certified Public Accountants. A material weakness is a condition in
which the design or operation of one or more of the internal control
components does not reduce to a relatively low level the risk that
errors or irregularities in amounts that would be material in
relation to the financial statements being audited may occur and not
be detected within a timely period by employees in the normal course
of performing their assigned functions. However, we noted no matters
involving the internal control and its operation, including controls
for safeguarding securities, that we consider to be material
weaknesses as defined above as of Report Date.
This report is intended solely for the information and use of
management and the Securities and Exchange Commission.
ERNST & YOUNG LLP
Chicago, Illinois
November 18, 1997
Kemper Funds Exhibit A
September 30, 1997
Kemper Portfolios:
Kemper Cash Reserves Fund
Kemper U.S. Mortgage Fund
Kemper Short-Intermediate Government Fund
Kemper Growth Fund
Kemper Small Capitalization Equity Fund
Kemper Aggressive Growth Fund
Kemper High Yield Fund
Kemper National Tax-Free Income Series:
Kemper Municipal Bond Fund
Kemper Intermediate Municipal Bond Fund
Tax-Exempt California Money Market Fund
Exhibit 770
Kemper Small Capitalization Equity Fund
Form N-SAR for the period ended 9/30/97
File No. 811-1702
Offering Date: 10/2/96
Description of Security: Advanced Health Corporation
Total Amount of Underwriting: 2,300,000 Shares
Name of Fund: Kemper Small Capitalization Equity Fund
Amount Purchased: 32,800 Shares
Affiliate That Participated in Underwriting: Gruntal and Co.
Amount Purchased 4% Limit (1): 1.5%
Amount Purchased 3% Limit (2): Less than 0.1%
Purchased From: Cowen & Co.
Underwriting syndicates members: Cowen & Co., Volpe, Welty &
Co., Bear, Stearns & Co. Inc., Deutsche Morgan Grenfell
Inc., Donaldson, Lufkin & Jenrette Securities Corp.,
Hambrecht & Quist LLC, Montgomery Securities, Morgan Stanley
& Co. Inc., Oppenheimer & Co., Inc., Prudential Securities
Inc., UBS Securities LLC, Wasserstein Perella Securities,
Inc., Advest, Inc., The Chicago Corporation, Dominick &
Dominick, Inc., Gerard Klauer Mattison & Co., LLC, McDonald
& Company Securities, Inc., Pennsylvania Merchant Group
Ltd., Piper Jaffray Inc., Punk, Ziegel & Knoell, Raymond
James & Associates, Inc., Roney & Co., Scott & Stringfellow,
Inc., Southcoast Capital Corp., Unterberg Harris, Wheat
First Butcher Singer.
Offering Date: 10/29/96
Description of Security: Aurum Software, Inc.
Total Amount of Underwriting: 2,650,000 Shares
Name of Fund: Kemper Small Capitalization Equity Fund
Amount Purchased: 11,100 Shares
Affiliate That Participated in Underwriting: Gruntal and Co.
Amount Purchased 4% Limit (1): 0.9%
Amount Purchased 3% Limit (2): Less than 0.1%
Purchased from: Alex. Brown & Sons Inc.
Underwriting syndicates members: Alex. Brown & Sons Inc.,
Cowen & Co., Wessels, Arnold & Henderson, L.L.C., Deutsche
Morgan Grenfell Inc., Hambrecht & Quist LLC, Lehman Brothers
Inc., Merrill Lynch, Pierce, Fenner & Smith Inc., Montgomery
Securities, Oppenheimer & Co., Inc., PaineWebber Inc.,
Robertson, Stephens & Co., LLC, Smith Barney Inc., UBS
Securities LLC, Dakin Securities Corp., Punk, Ziegel &
Knoell, The Robinson-Humphrey Co., Inc., Soundview Financial
Group, Inc., Sterne, Agee & Leach, Inc., Sutro & Co., Inc.
Offering Date: 8/6/97
Description of Security: OCWEN Financial Corp.
Total Amount of Underwriting: 3,000,000 Shares
Name of Fund: Kemper Small Capitalization Equity Fund
Amount Purchased: 84,300 Shares
Affiliate That Participated in Underwriting: Gruntal and Co.
Amount Purchased 4% Limit (1): 2.8%
Amount Purchased 3% Limit (2): 0.4%
Purchased From: Lehman Brothers Inc.
Underwriting syndicates members: Lehman Brothers Inc.,
Friedman, Billings, Ramsey & Co., Inc., Morgan Stanley &
Co., Inc., Bear Stearns & Co., Inc., Credit Suisse First
Boston Corp., Dillon Read & Co., Inc., Donaldson, Lufkin &
Jenrette Securities Corp., A.G. Edwards & Sons, Inc., EVEREN
Securities Inc., Merrill Lynch & Co., Montgomery Securities,
Oppenheimer & Co., Inc., Prudential Securities, Inc.,
Salomon Brothers, Inc., J.C. Bradford & Co., Allen C. Ewing
& Co., Piper Jaffray Inc., Raymond James & Associates Inc.,
Robinson-Humphrey Co., Inc., Sandler, O'Neill & Partners,
L.P., Southeast Research Partners, Inc.
Offering Date: 10/25/96
Description of Security: Triumph Group, Inc.
Total Amount of Underwriting: 2,500,000 Shares
Name of Fund: Kemper Small Capitalization Equity Fund
Amount Purchased: 46,800 Shares
Affiliate That Participated in Underwriting: Gruntal and Co.
Amount Purchased 4% Limit (1): 2.0%
Amount Purchased 3% Limit (2): 0.1%
Purchased From: Alex. Brown & Sons Inc.
Underwriting syndicates members: Alex. Brown & Sons Inc.,
Dillon, Read & Co. Inc., Goldman, Sachs & Co., Lazard Freres
& Co. LLC, Morgan Stanley & Co., Inc., Oppenheimer & Co.,
Inc., Smith Barney Inc., Dominick & Dominick, Inc.,
Fahnestock & Co., Inc., Freimark Blair & Co., Inc., Janney
Montgomery Scott Inc., C.L. King & Associates, Inc.,
Pennsylvania Merchant Group Ltd., The Robinson-Humphrey Co.,
Inc., Stephans Inc., Sterne, Agee & Leach, Inc.
(1) The amount purchased may not be greater than 4% of the
total principal amount of an issue. Percentage applies
to all Funds purchasing shares.
(2) The amount purchased may not be greater than 3% of the
Funds total assets.
