<PAGE> 1
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED FEBRUARY 29, 2000
High current income consistent with preservation of capital.
KEMPER FLOATING RATE FUND
"As the Federal Reserve raised interest rates between August and February, the
fund's income potential grew while its net asset value remained stable."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
8
LARGEST SECTORS
9
PORTFOLIO OF INVESTMENTS
14
FINANCIAL STATEMENTS
18
FINANCIAL HIGHLIGHTS
19
NOTES TO FINANCIAL STATEMENTS
AT A GLANCE
TERMS TO KNOW
KEMPER FLOATING RATE FUND
CUMULATIVE TOTAL RETURNS
FOR THE SIX-MONTH PERIOD ENDING FEBRUARY 29, 2000 (UNADJUSTED FOR ANY SALES
CHARGE)
[BAR GRAPH]
<TABLE>
<CAPTION>
LIPPER
LOAN PARTICIPATION
FUNDS
CATEGORY
CLASS B AVERAGE*
- ------- ----------------------------------------
<S> <C>
3.54 3.05%
</TABLE>
NET ASSET VALUE
<TABLE>
<CAPTION>
AS OF AS OF
2/29/00 8/31/99
...........................................................
<S> <C> <C> <C> <C>
KEMPER FLOATING RATE $5.00 $5.00
(as of 11/1/99)
FUND CLASS A
...........................................................
KEMPER FLOATING RATE
FUND CLASS B $4.98 $4.99
...........................................................
KEMPER FLOATING RATE
FUND CLASS C
$5.00 $5.00
(as of 11/1/99)
...........................................................
</TABLE>
RETURNS ARE HISTORICAL AND DO NOT GUARANTEE FUTURE PERFORMANCE. INVESTMENT
RETURNS AND PRINCIPAL VALUES WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY
BE WORTH MORE OR LESS THAN ORIGINAL COST.
*LIPPER, INC. RETURNS ARE BASED UPON CHANGES IN NET ASSET VALUE WITH ALL
DIVIDENDS REINVESTED AND DO NOT INCLUDE THE EFFECT OF SALES CHARGES; IF SALES
CHARGES HAD BEEN INCLUDED, RESULTS MAY HAVE BEEN LESS FAVORABLE. THE FUND MAY
INVEST AN UNLIMITED AMOUNT OF ITS ASSETS IN LOWER-RATED AND NONRATED
INVESTMENTS, WHICH PRESENTS GREATER RISK TO PRINCIPAL AND INCOME THAN HIGHER-
QUALITY INVESTMENTS. THE LIMITED SECONDARY MARKET FOR SENIOR LOANS MEANS THE
FUND MAY HAVE MORE RISK THAN A FUND THAT INVESTS SECURITIES WITH A SECONDARY
MARKET.
THE FUND MAY BORROW TO SATISFY QUARTERLY REPURCHASE REQUIREMENTS AND TO MANAGE
CASH FLOWS. COLLATERAL MIGHT NOT ENTIRELY SATISFY THE BORROWER'S OBLIGATIONS IN
THE EVENT OF NONPAYMENT OF SCHEDULED INTEREST OR PRINCIPAL AND, IN SOME CASES,
MAY BE DIFFICULT TO LIQUIDATE ON A TIMELY BASIS. ADDITIONALLY, A DECLINE IN THE
VALUE OF THE COLLATERAL COULD CAUSE THE LOAN TO BECOME SUBSTANTIALLY UNSECURED,
AND CIRCUMSTANCES COULD ARISE, SUCH AS BANKRUPTCY OF THE BORROWER, THAT COULD
CAUSE THE FUND'S SECURITY IN THE LOANS' COLLATERAL TO BE INVALIDATED.
THE FUND MAY BE UNABLE TO COMPLETELY ACCOMMODATE ALL REDEMPTION REQUESTS.
DIVIDEND REVIEW
THE FOLLOWING TABLE SHOWS PER SHARE DIVIDEND INFORMATION FOR THE FUND AS OF
FEBRUARY 29, 2000.
<TABLE>
<S> <C> <C> <C> <C> <C>
DIVIDEND HISTORY
SINCE INCEPTION A SHARES B SHARES C SHARES
..............................................................
2/29/00 $0.0282 $0.0277 $0.0278
..............................................................
1/31/00 $0.0287 $0.0287 $0.0288
..............................................................
12/31/99 $0.0363 $0.0363 $0.0363
..............................................................
11/30/99 $0.0202 $0.0284 $0.0202
..............................................................
10/31/99 N/A $0.0266 N/A
..............................................................
9/30/99 N/A $0.0267 N/A
..............................................................
8/31/99 N/A $0.0285 N/A
..............................................................
7/31/99 N/A $0.0263 N/A
..............................................................
6/30/99 N/A $0.0158 N/A
..............................................................
INCOME SINCE
INCEPTION $0.1134 $0.2450 $0.1131
..............................................................
ANNUALIZED
DISTRIBUTION RATE: 7.10% 7.01% 7.0%
..............................................................
</TABLE>
CREDIT SPREADS The credit spread is the difference in yields between
higher-quality and lower-quality bonds, typically comparing the same types of
bonds. For example, if AAA-rated corporate bonds yield 5 percent, and BBB-rated
corporate bonds yield 6 percent, the credit spread is 1 percent. When the spread
becomes less because the higher yield drops or the lower yield rises, the spread
is said to "narrow." When the opposite occurs, the spread is said to "widen."
FEDERAL FUNDS RATE The interest rate that banks charge each other on overnight
loans. The Federal Reserve Board's Open Market Committee sets a target rate to
either make credit more easily available or tighten monetary policy in an
attempt to avoid economic imbalances such as high inflation.
MARK-TO-MARKET PRICING Mark-to-market pricing is a widely accepted and objective
way to establish the value of loans in a floating-rate fund's portfolio. In
using this method, a fund's management team relies on independent agents who
monitor and record daily fluctuations in the value of loans.
SENIOR BANK LOANS Senior bank loans are commercial loans that are typically high
yielding and made by groups of financial institutions to corporations. Usually,
these loans are secured by senior claims on assets, specific collateral and
strict loan covenants. Collateral that typically backs senior loans includes
buildings, equipment, inventory, accounts receivable, patents, trademarks, and
common and preferred stock in operating subsidiaries.
TOTAL RETURN An investment's total return figure measures both its net
investment income and any realized price appreciation or depreciation for a
given period. Total return assumes reinvestment of all dividends and represents
the aggregate percentage or dollar value change over the period.
<PAGE> 3
ECONOMIC OVERVIEW
SCUDDER KEMPER INVESTMENTS, THE INVESTMENT MANAGER FOR KEMPER FUNDS, IS ONE OF
THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS IN THE
WORLD, MANAGING MORE THAN $290 BILLION IN ASSETS FOR INSTITUTIONAL AND CORPORATE
CLIENTS, RETIREMENT AND PENSION PLANS, INSURANCE COMPANIES, MUTUAL FUND
INVESTORS AND INDIVIDUALS. SCUDDER KEMPER INVESTMENTS OFFERS A FULL RANGE OF
INVESTMENT COUNSEL AND ASSET MANAGEMENT CAPABILITIES BASED ON A COMBINATION OF
PROPRIETARY RESEARCH AND DISCIPLINED, LONG-TERM INVESTMENT STRATEGIES.
DEAR KEMPER FUNDS SHAREHOLDER:
As we enter the second quarter of the year, there isn't much to complain about.
For all the yammering about the "new" economy, the old economy is doing pretty
well. Consumers may hanker for a new GPS handset or a Palm Pilot, but they lust
after a suburban mansion with a garage big enough to hold their luxury car and
SUV -- and state and local governments are laying old-fashioned asphalt almost
as fast as businesses are building the information superhighway. Satisfying both
old and new desires got the economy off to a fast start in the new century. Even
with a modest slowdown possible in the second half, growth for the year 2000 is
likely to be close to 5 percent.
So everyone is happy, right? Well, almost everyone. Consumers seldom have felt
so confident; businesspeople seldom have behaved so expansively. But there's
still one grump: Federal Reserve Board Chairman Alan Greenspan, who's become
increasingly worried that rapid growth will bring on inflation.
Despite Greenspan's attempt to slow spending by raising interest rates,
consumers are still splurging, and they show no signs of stopping. We know this
because shoppers are buying the big-ticket items they usually purchase early in
a cycle -- items such as personal computers, mobile phones, jewelry, fancy
kitchen appliances, exercise equipment and big boats.
Why are consumers still buying despite Greenspan's attempts to slow their
splurging? There are three answers: deflation, wealth and easy credit.
Falling prices have made big-ticket items almost irresistible. Since 1997,
prices of kitchen appliances have fallen 4.5 percent, TVs and VCRs 16 percent
and sporting equipment 6.5 percent. Even auto showrooms no longer produce
sticker shock, and drivers have responded with gusto, buying a record 16.9
million cars and light trucks in 1999. 2000 is likely to be the first year in
which automotive sales top 17 million.
Some of that spending has been made possible by stock market gains: Wall
Street has handed out windfalls to almost anyone holding equities in the past
few years. But consumers who don't own stocks are also spending, thanks to a
decade of debt. Young, poor or new to America? In the 1990s, it didn't matter;
lenders still loved you. While high-income families have been borrowing less,
those lower on the income scale have been borrowing more.
But it's not just consumers that Greenspan is concerned about; businesses are
splurging as well. During 1999, businesses increased spending on computers and
peripherals by 35 percent and spending on communications equipment by 25 percent
(both after adjusting for price declines). Far from slowing down this year, we
expect investment in these two categories to accelerate -- to 40 percent growth
for computers and 30 percent growth for communications equipment. And just like
consumers, businesses are borrowing to buy. You may think that with booming
sales, entrepreneurs are cash-rich and can afford it. But while 1999 saw
economy-wide earnings jump 10 percent and profits of Standard and Poor's (S&P)
500 companies leap nearly 14 percent, internal cash covered less than 84 percent
of capital spending. With the exception of 1998, that's the lowest on record.
Last year alone, corporate debt shot up by more than 11 percent to $560 billion.
And new economy companies are no exception; they have more debt than most people
realize, issuing more than half of all convertible bonds.
All this debt could cause problems. Although we've increased our 2001
inflation outlook to nearly 3 percent -- an entire percentage point higher than
our prediction three months ago -- we're not particularly worried about
inflation. It's the heavy borrowing we're concerned about. Debt continues to
exceed income growth, and when Greenspan succeeds in slowing the economy with
higher interest rates (which he will succeed in doing), all of the debt American
consumers and businesses are taking on could be tricky to handle. Debt is a
medley of financial obligations that must be paid with personal income and
corporate profits. When the economy slows, personal income and corporate profits
stay the same or even fall -- which makes it harder to pay off those debts.
Consumers and businesses may have to sell their assets to pay off the debt, and
they may risk going into default.
That being the case, a gradual economic slowdown may be in everyone's best
interest. But "gradual" is the key. Both the old and new economy have a lot
riding on the Fed's ability to rein in growth softly and smoothly, because
abrupt slowdowns encourage consumers and businesses to sell assets -- and
perhaps risk bankruptcy -- to pay off debt, as described above.
A gradual slowdown seems to be what the Fed is seeking, but for all of
Greenspan's semi-tough talk, some
3
<PAGE> 4
ECONOMIC OVERVIEW
ECONOMIC GUIDEPOSTS
ECONOMIC ACTIVITY IS A KEY INFLUENCE ON INVESTMENT PERFORMANCE AND
SHAREHOLDER DECISION-MAKING. PERIODS OF RECESSION OR BOOM, INFLATION OR
DEFLATION, CREDIT EXPANSION OR CREDIT CRUNCH HAVE A SIGNIFICANT IMPACT ON
MUTUAL FUND PERFORMANCE.
THE FOLLOWING ARE SOME SIGNIFICANT ECONOMIC GUIDEPOSTS AND THEIR
INVESTMENT RATIONALE THAT MAY HELP YOUR INVESTMENT DECISION-MAKING. THE
10-YEAR TREASURY RATE AND THE PRIME RATE ARE PREVAILING INTEREST RATES.
THE OTHER DATA REPORT YEAR-TO-YEAR PERCENTAGE CHANGES.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (3/31/00) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 6.3 5.9 5.2 5.6
Prime rate (2) 9 8.25 7.75 8.5
Inflation rate (3)* 3.2 2.3 1.7 1.4
The U.S. dollar (4) 0.6 -3.3 -0.1 4.9
Capital goods orders (5)* 7.7 1.9 5.6 7.3
Industrial production (5)* 5.6 3.1 2.9 5.4
Employment growth (6) 2.3 2.1 2.3 2.6
</TABLE>
(1) FALLING INTEREST RATES IN RECENT YEARS HAVE BEEN A BIG PLUS FOR FINANCIAL
ASSETS.
(2) THE INTEREST RATE THAT COMMERCIAL LENDERS CHARGE THEIR BEST BORROWERS.
(3) INFLATION REDUCES AN INVESTOR'S REAL RETURN. IN THE LAST FIVE YEARS,
INFLATION HAS BEEN AS HIGH AS 6 PERCENT. THE LOW, MODERATE INFLATION OF THE
LAST FEW YEARS HAS MEANT HIGH REAL RETURNS.
(4) CHANGES IN THE EXCHANGE VALUE OF THE DOLLAR IMPACT U.S. EXPORTERS AND THE
VALUE OF U.S. FIRMS' FOREIGN PROFITS.
(5) THESE INFLUENCE CORPORATE PROFITS AND EQUITY PERFORMANCE.
(6) AN INFLUENCE ON FAMILY INCOME AND RETAIL SALES.
*DATA AS OF 2/29/00.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
indicators suggest that monetary policy has actually been lax. Broad money and
credit creation have vastly exceeded economic activity since 1995, and no
central bank can allow that to continue indefinitely without creating inflation.
If we begin to see higher core inflation, the Fed will have to deal with all
that money it's created in a less gradualist manner -- and that could get
tricky. Financial turmoil accompanied each of the Fed's last two efforts to slow
the economy down. In 1994, there was a bond market meltdown that resulted in a
Mexican debt crisis. After a more timid Fed tightening in 1997, crises in Asia
were followed by problems with Russian debt, Brazilian debt and a large American
hedge fund. We don't think this is a coincidence: The global debt market is so
vast and interconnected that it's highly vulnerable to a rise in the cost of its
basic raw material -- short-term funds.
Let's hope, then, that the Fed can slow the economy without upsetting the
financial applecart, because that could affect everyone. After all, the old
economy and the new economy are wedded in many ways. Much of the money that
flows to IPOs is available because mature industries have borrowed to carry out
mergers and share buybacks. Old economy companies are the biggest customers of
new economy products. And e-commerce sites are all about moving traditional
goods over old-fashioned highways. Despite a lot of talk about old and new,
we're all in this economy together.
Sincerely,
Scudder Kemper Investments Economics Group
THE INFORMATION CONTAINED IN THIS PIECE HAS BEEN TAKEN FROM SOURCES BELIEVED TO
BE RELIABLE, BUT THE ACCURACY OF THE INFORMATION IS NOT GUARANTEED. THE OPINIONS
AND FORECASTS EXPRESSED ARE THOSE OF THE ECONOMIC ADVISORS OF SCUDDER KEMPER
INVESTMENTS, INC. AS OF MARCH 29, 2000, AND MAY NOT ACTUALLY COME TO PASS. THIS
INFORMATION IS SUBJECT TO CHANGE. NO PART OF THIS MATERIAL IS INTENDED AS AN
INVESTMENT RECOMMENDATION.
TO OBTAIN A KEMPER FUNDS PROSPECTUS, DOWNLOAD ONE FROM WWW.KEMPER.COM, TALK TO
YOUR FINANCIAL REPRESENTATIVE OR CALL SHAREHOLDER SERVICES AT (800) 621-1048.
THE PROSPECTUS CONTAINS MORE COMPLETE INFORMATION, INCLUDING MANAGEMENT FEES AND
EXPENSES. PLEASE READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
4
<PAGE> 5
NOTE: THE FOLLOWING QUESTION AND ANSWER DISCUSSION
REFLECTS THE VIEWS OF JONATHAN TRUTTER, THE FUND'S
PORTFOLIO MANAGER FOR THE SEMI-ANNUAL PERIOD ENDED
MARCH 31, 2000. IT WAS COMPILED IN EARLY APRIL.
IN A RISING-INTEREST-RATE ENVIRONMENT, KEMPER
FLOATING RATE FUND ACHIEVED ITS INVESTMENT
OBJECTIVES. THE FUND DOUBLED THE SIZE OF ITS
PORTFOLIO AS IT ATTRACTED MANY NEW SHAREHOLDERS.
JONATHAN TRUTTER SHARES HIS VIEWS ON THE BANK LOAN
MARKET AND PROVIDES AN OUTLOOK FOR THE FUND FOR THE
COMING MONTHS.
Q WHAT WERE THE DYNAMICS OF THE BANK LOAN AND BOND MARKETS BETWEEN AUGUST
1999 AND FEBRUARY 2000?
A In the six months ended February 29, 2000, bank loans outperformed most
categories of fixed-income securities as interest rates rose sharply. For bonds,
it was the most volatile period since 1994. The nation's unemployment rate
reached 30-year lows. Oil prices soared past $30 a barrel, and consumer spending
was brisk. To head off higher inflation, the Federal Reserve raised its
short-term interest-rate target on November 16 and February 2 by a total of 50
basis points (0.50 percent to 5.75 percent). Unlike with fixed-income
securities, the principal value of most floating rate loans was relatively
stable during the period.
Q HOW DID KEMPER FLOATING RATE FUND DO RELATIVE TO THE BOND MARKET AND TO
ITS PEERS DURING THE FIRST HALF OF FISCAL YEAR 2000?
A As the Federal Reserve raised interest rates, the fund's income potential
grew while its net asset value remained stable. Kemper Floating Rate Fund's 3.54
percent total return for the period (Class B shares at net asset value) outpaced
the 1.92 percent total return of the Lehman Brothers Aggregate Bond
*THE LEHMAN BROTHERS AGGREGATE BOND INDEX IS A TOTAL RETURN INDEX THAT INCLUDES
FIXED RATE DEBT ISSUES RATED INVESTMENT GRADE OR BETTER. IT CONTAINS GOVERNMENT,
CORPORATE AND MORTGAGE SECURITIES CONSIDERED REPRESENTATIVE OF THE MARKET, FOR
INVESTMENT GRADE BONDS AS A WHOLE. THE LEHMAN BROTHERS HIGH YIELD COMPOSITE BOND
INDEX COVERS THE UNIVERSE OF FIXED RATE NONINVESTMENT GRADE DEBT. INVESTORS
CANNOT INVEST IN THE INDICES. SOURCE IS WIESENBERGER.
KEEPING UP WITH THE FED
Kemper Floating Rate Fund's Distribution Rate (Class B shares) vs. Federal Funds
Rate May 1999 to March 2000
[BAR GRAPH]
<TABLE>
<CAPTION>
KFRF DISTRIBUTION RATE FED FUNDS
---------------------- ---------
<S> <C> <C>
07/99 6.40 5.00
08/99 6.50 5.25
09/99 6.70 5.25
10/99 6.70 5.25
11/99 6.80 5.50
12/99 6.80 5.50
01/00 6.80 5.50
02/00 7.10 5.75
03/00 7.29 6.00
</TABLE>
SOURCE: BLOOMBERG BUSINESS NEWS
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. DISTRIBUTION RATE IS
CALCULATED BY TAKING THE SUM OF THE PREVIOUS 30 DAYS OF DISTRIBUTION FACTORS AND
DIVIDING THIS SUM BY THE FUND'S NET ASSET VALUE AS OF 3/31/00. THE VALUE IS THEN
ANNUALIZED. RATES CHANGE MONTHLY AND DEPEND ON THE FUND'S NET ASSET VALUE AND
CURRENT DISTRIBUTIONS. CLASS A AND CLASS C DISTRIBUTION RATES WERE 7.35%, 8%,
AND 7.28% RESPECTIVELY, AS OF 3/31/00. DISTRIBUTION RATES AND RETURNS WILL VARY
BY CLASS.
THE FEDERAL FUNDS RATE IS THE INTEREST RATE BANKS CHARGE EACH OTHER FOR
OVERNIGHT LOANS. THE FEDERAL RESERVE BOARD REGULARLY SETS A TARGET FEDERAL FUNDS
RATE TO INFLUENCE THE LEVEL OF U.S. ECONOMIC ACTIVITY. THIS RATE IS NOT
REPRESENTATIVE OF THE YIELD OR RETURN OF ANY KEMPER FUND AND CHANGES
PERIODICALLY.
[BABSON PHOTO]
ON 4/17/00, KELLY D. BABSON, A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS,
INC. ASSUMED PORTFOLIO MANAGEMENT RESPONSIBILITIES FOR KEMPER FLOATING RATE
FUND, REPLACING JONATHAN TRUTTER AND MARK WITTNEBEL. MS. BABSON HAS MORE THAN 19
YEARS OF FIXED-INCOME INVESTMENT EXPERIENCE, AND HAS SPECIALIZED IN HIGHER RISK,
HIGH YIELD SECURITIES FOR 15 YEARS. PRIOR TO JOINING SCUDDER KEMPER INVESTMENTS
SIX YEARS AGO, SHE WAS PRESIDENT OF CBO MANAGEMENT, INC., AN AFFILIATE OF
WILLIAM E. SIMON & SONS, INC.
ASSISTING MS. BABSON IN LOAN SELECTION AND DAY-TO-DAY MANAGEMENT OF THE FUND ARE
THREE LOAN ANALYSTS WHO TOGETHER HAVE 58 YEARS OF PRIVATE DEBT AND HIGH YIELD
INVESTMENT EXPERIENCE: FRED SABETTA, HUGH MCCAFFREY AND PATRICK GRAY. EACH IS A
CERTIFIED FINANCIAL ANALYST WHO, PRIOR TO 4/17/00, HELPED MANAGE INSTITUTIONAL
PRIVATE PLACEMENT PORTFOLIOS FOR SCUDDER KEMPER.
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.
PERFORMANCE UPDATE
5
<PAGE> 6
PERFORMANCE UPDATE
Index*, a broad, unmanaged cross section of government and corporate bonds of
all maturities. The fund's six-month returns were also higher than the 0.66
percent total return of the Lehman Brothers High Yield Composite Bond Index*, an
unmanaged group of higher-risk, lower-rated bonds. The average loan
participation fund rose 3.05 percent for the six months ended February 29, 2000.
Q
WHAT DOES THE PORTFOLIO LOOK LIKE CURRENTLY?
A
We've invested in 70 loans across many industries. Three of the fund's
largest industry positions were in wireless telecommunications, cable television
and leisure as of February 29, 2000 (see Portfolio Largest Sectors chart on page
9). Since the fund's last shareholder report in August 1999, we significantly
reduced the fund's cash position as new investment opportunities arose. We
focused exclusively on domestic loans and found a wide variety of loans with
favorable credit characteristics. For example, one of the fund's largest
holdings as of February 29 was AMFM, a nationwide radio station management
company. We believe it is a well-managed company whose cash flow stands to
benefit from increased advertising revenue.
In our view, the key to adding value to the portfolio is careful credit
selection through fundamental research. We've been investing in bank loans for
institutional investors since 1989 and have a strong, consistent record of
selecting loans.
Q
BRIEFLY, HOW DOES THE FUND'S INVESTMENT STRATEGY AND LOAN PRICING POLICY
DIFFER FROM SOME OF ITS PEERS?
A
We avoid distressed bank loans because we think they present an
unacceptable level of risk for investors who seek a relatively stable net asset
value. Also, some bank loan mutual funds invest in a mix of bank loans and high-
yield corporate bonds to increase income potential. We do not currently favor
this strategy because it adds interest-rate risk to the portfolio, and we
believe many of the fund's shareholders have included the fund in their asset
allocation mix specifically to reduce the effect that fluctuating interest rates
can have on their portfolios.
To place a value on loans in the portfolio, we use mark-to-market pricing (see
Terms To Know on page 2) for the portfolio. Some funds use this widely accepted
method for only a portion of their portfolios and instead rely on "fair-value
pricing," a more subjective way of pricing loans. We think mark-to-market
pricing helps us maintain a more current net asset value.
Q
AS INTEREST RATES FLUCTUATE, HOW DOES IT AFFECT THE INCOME POTENTIAL OF
LOANS IN THE PORTFOLIO?
A
Rates on floating-rate loans can be reset higher or lower, usually once
every few months, depending on the direction of interest rates. As of February
29, 2000, most loans in the fund's portfolio had reset provisions that have the
potential to change a borrower's payments every two to three months. In some
ways, a corporate borrower is in a position analogous to that of a home owner
with an adjustable-rate mortgage.
Q
HOW DOES THE HISTORICAL RISK PROFILE OF FLOATING-RATE LOAN FUNDS COMPARE
WITH THAT OF FIXED-INCOME MUTUAL FUNDS?
A
While we can't guarantee what the future holds, bank loans as an asset
class have performed well for the past several years, especially as other
fixed-income investments have grown more volatile. In fact, for the three-year
period ended December 31, 1999, floating-rate funds provided a higher level of
total return (an average annual return of 6.38 percent) with a lower level of
risk (as measured by standard deviation) than any other category of fixed-income
mutual funds.* It's important to remember, however, that unlike most fixed-
income mutual funds, floating-rate funds do not offer daily liquidity, making
them suitable for long-term investors who do not need immediate access to their
account balances.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. INFORMATION BASED ON TOTAL
RETURN AT NET ASSET VALUE FOR THE CATEGORY AVERAGE OF LOAN PARTICIPATION FUNDS,
SHORT-TERM, INTERMEDIATE-AND LONG-TERM U.S. GOVERNMENT BOND FUNDS, CORPORATE
INVESTMENT-GRADE AND HIGH-YIELD BOND FUNDS, SINGLE-STATE AND NATIONAL MUNICIPAL
BOND FUNDS, GLOBAL INCOME FUNDS AND EMERGING MARKET FUNDS. EACH CATEGORY HAS
DIFFERENT LEVELS OF RISK AND LIQUIDITY. U.S. TREASURIES ARE GUARANTEED AS TO
PRINCIPAL AND INTEREST. FUND SHARES ARE NOT. SOURCE IS WIESENBERGER.
Q
WHAT'S YOUR OUTLOOK FOR THE BANK LOAN MARKET FOR THE BALANCE OF FISCAL
YEAR 2000?
A
All indications are the Fed will do whatever it takes to keep inflation
restrained. We think that at least two more interest-rate increases before the
current fiscal year's end are possible. We also see the overall bond market
remaining volatile in the near term, especially given the Treasury's plans to
buy back long-term debt and the fact that 2000 is a national election year.
In our view, the fund is well-positioned to provide a growing stream of income
in a rising-rate environment. What's more, unlike with fixed-income securities,
the principal value of floating-rate loans has historically been relatively
stable when rates have moved up.
6
<PAGE> 7
PERFORMANCE UPDATE
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
LIFE OF
CLASS
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEMPER FLOATING RATE FUND CLASS A 2.29% (Since 11/1/99)
................................................................................................
KEMPER FLOATING RATE FUND CLASS B 4.80% (Since 5/25/99)
................................................................................................
KEMPER FLOATING RATE FUND CLASS C 2.28% (Since 11/1/99)
................................................................................................
</TABLE>
KEMPER FLOATING RATE FUND
GROWTH OF AN ASSUMED $10,000 INVESTMENT IN FLOATING RATE B
SHARES FROM 5/31/99 TO 2/29/00
[LINE GRAPH]
<TABLE>
<CAPTION>
LEHMAN BROTHERS US CONSUMER PRICE
KEMPER FLOATING RATE B(1) AGGREGATE BOND INDEX+ INDEX++
------------------------- --------------------- -----------------
<S> <C> <C> <C>
5/31/99 10000 10000 10000
10033 9968 10000
10086 9926 10030
8/31/99 10123 9921 10054
10177 10036 10102
10231 10073 10120
11/30/99 10289 10072 10126
10341 10024 10126
10422 9991 10150
2/29/00 10189 10112 10161
</TABLE>
MONTHS TO RESET
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
MONTHS TO RESET 1.6 years
...............................................................................
</TABLE>
(1)PERFORMANCE INCLUDES REINVESTMENT OF
DIVIDENDS AND ADJUSTMENT FOR THE
CONTINGENT DEFERRED SALES CHARGE IN
EFFECT AT THE END OF THE PERIOD FOR
CLASS B SHARES. IN COMPARING KEMPER
FLOATING RATE FUND CLASS B SHARES
PERFORMANCE WITH THE LEHMAN BROTHERS
AGGREGATE BOND INDEX AND U.S.
CONSUMER PRICE INDEX, YOU SHOULD
ALSO NOTE THAT THE FUND'S
PERFORMANCE REFLECTS THE APPLICABLE
SALES CHARGE, WHILE NO SUCH CHARGES
ARE REFLECTED IN THE PERFORMANCE OF
THE INDICES.
+THE LEHMAN BROTHERS AGGREGATE BOND
INDEX IS A TOTAL RETURN INDEX THAT
INCLUDES FIXED-RATE DEBT ISSUES RATED
INVESTMENT GRADE OR BETTER. IT
CONTAINS GOVERNMENT, CORPORATE AND
MORTGAGE SECURITIES CONSIDERED
REPRESENTATIVE OF THE MARKET FOR
INVESTMENT-GRADE BONDS AS A WHOLE.
SOURCE IS WIESENBERGER.
++THE US CONSUMER PRICE INDEX IS A
STATISTICAL MEASURE OF CHANGE, OVER
TIME, IN THE PRICES OF GOODS AND
SERVICES IN MAJOR EXPENDITURE GROUPS
FOR ALL URBAN CONSUMERS. SOURCE IS
WIESENBERGER.
7
<PAGE> 8
LARGEST SECTORS
PORTFOLIO LARGEST SECTORS*
Kemper Floating Rate Fund Largest Loan Holdings as of 2/29/00 Sector Weightings
<TABLE>
<CAPTION>
HOLDINGS PERCENT
<S> <C> <C>
- ---------------------------------------------------------------------------------------
1. MANUFACTURING 21.9%
- ---------------------------------------------------------------------------------------
2. COMMUNICATIONS 17.5%
- ---------------------------------------------------------------------------------------
3. MEDIA 12.0%
- ---------------------------------------------------------------------------------------
4. SERVICE INDUSTRIES 9.9%
- ---------------------------------------------------------------------------------------
5. CONSUMER DISCRETIONARY 9.0%
- ---------------------------------------------------------------------------------------
6. CASH EQUIVALENTS 8.9%
- ---------------------------------------------------------------------------------------
7. HEALTH 6.8%
- ---------------------------------------------------------------------------------------
8. CONSUMER STAPLES 3.2%
- ---------------------------------------------------------------------------------------
9. METALS & MINERALS 2.5%
- ---------------------------------------------------------------------------------------
10. TECHNOLOGY 2.2%
- ---------------------------------------------------------------------------------------
11. DURABLES 1.9%
- ---------------------------------------------------------------------------------------
12. TRANSPORTATION 1.9%
- ---------------------------------------------------------------------------------------
13. MISCELLANEOUS 0.7%
- ---------------------------------------------------------------------------------------
14. CONSTRUCTION 0.7%
- ---------------------------------------------------------------------------------------
15. OTHER 0.9%
- ---------------------------------------------------------------------------------------
</TABLE>
*Portfolio holdings are subject to change.
8
<PAGE> 9
PORTFOLIO OF INVESTMENTS
KEMPER FLOATING RATE FUND
Portfolio of Investments at February 29, 2000 (unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--8.9% PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REPURCHASE AGREEMENTS--1.9%
State Street Bank and Trust Company
dated 2/29/2000 at 5.74%, to be
repurchased at $2,514,401 on 3/1/2000
(Cost: $2,514,000)(b) $2,514,000 $ 2,514,000
-------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER--7.0% Bell South Corp, 5.70%, 3/6/2000 2,500,000 2,498,014
Merrill Lynch, 5.75%, 3/2/2000 4,500,000 4,499,281
Xerox Capital Corp., 5.75%, 3/1/2000 2,500,000 2,500,000
-------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost: $9,497,295) 9,497,295
-------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
VARIABLE RATE SENIOR LOAN INTERESTS*--90.2%
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMMUNICATIONS--17.5% American Cellular Corp., Term Loan B
(LIBOR plus 2.75%), 3/31/2008 1,400,000 1,409,625
American Cellular Corp., Term Loan C
(LIBOR plus 3.00%), 3/31/2009 1,600,000 1,611,000
American Towers, Term Loan B
(LIBOR plus 3.25%), 12/31/2007 3,000,000 3,027,189
Centennial Cellular, Term Loan B
(LIBOR plus 3.25%), 5/31/2007 1,496,222 1,509,313
Centennial Cellular, Term Loan C
(LIBOR plus 3.50%), 11/30/2007 1,496,222 1,509,313
Cincinnati Bell, Term Loan B
(LIBOR plus 2.25%), 12/30/2006 2,000,000 2,010,000
Dobson Operating Co., Term Loan B
(LIBOR plus 3.00%), 12/31/2007 1,000,000 1,005,000
Falcon Cable Communications, Term Loan C
(LIBOR plus 2.25%), 12/31/2007 1,917,595 1,913,999
Level 3 Communications, Term Loan B
(LIBOR plus 3.50%), 1/15/2008 1,000,000 1,006,250
Nextel Finance, Term Loan B
(LIBOR plus 3.38%), 6/30/2008 2,000,000 2,020,000
Nextel Finance, Term Loan C
(LIBOR plus 3.62%), 12/31/2008 2,000,000 2,020,000
Nextlink Communications, Term Loan B
(PRIME plus 2.25%), 6/30/2007 2,000,000 2,018,750
Pegasus Media & Communications, Term Loan B
(LIBOR plus 3.50%), 4/30/2005 1,000,000 1,003,750
Voicestream PCS Holdings, Term Loan B
(LIBOR plus 2.75%), 2/25/2009 1,500,000 1,505,625
-------------------------------------------------------------------------------------
23,569,814
- -----------------------------------------------------------------------------------------------------------------------------------
CONSTRUCTION--0.7% Juno Lighting, Inc., Term Loan B
(LIBOR plus 3.00%), 6/30/2006 937,794 934,864
--------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C> <C> <C> <C>
CONSUMER DISCRETIONARY--9.0% FelCor Lodging Trust, Inc., Term Loan
(LIBOR plus 2.50%), 4/30/2004 $2,000,000 $ 2,000,000
Meristar Hospitality, Term Loan B
(LIBOR plus 2.00%), 12/31/2004 1,437,702 1,435,905
Outsourcing Solution, Term Loan B
(LIBOR plus 4.00%), 6/30/2006 997,500 991,266
Pebble Beach Co., Term Loan B
(LIBOR plus 3.25%), 7/31/2006 2,196,000 2,209,725
SFX Entertainment, Term Loan B
(LIBOR plus 3.50%), 6/30/2006 1,000,000 1,001,875
Six Flags Theme Parks, Term Loan B
(LIBOR plus 3.25%), 11/30/2005 2,500,000 2,525,000
Washington Football Inc., Term Loan
(LIBOR plus 2.88%), 7/31/2004 1,920,000 1,924,800
Washington Football Inc., Term Loan A
(LIBOR plus 1.50%), 7/31/2004 80,000 80,200
-------------------------------------------------------------------------------------
12,168,771
- -----------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--3.2% American Safety Razor, Term Loan B
(LIBOR plus 3.75%), 4/30/2007 473,813 476,478
Aurora Foods, Term Loan B2
(LIBOR plus 2.50%), 6/30/2007 1,995,000 1,815,450
Spartan Stores, Inc., Term Loan B
(LIBOR plus 2.25%), 3/18/2007 1,996,667 1,996,667
-------------------------------------------------------------------------------------
4,288,595
- -----------------------------------------------------------------------------------------------------------------------------------
DURABLES--1.9% Decrane Finance, Term Loan C
(LIBOR plus 3.25%), 4/23/2006 1,488,750 1,483,167
Transportation Manufacturing Operations,
Term Loan (LIBOR plus 3.25%), 6/16/2006 995,000 996,244
-------------------------------------------------------------------------------------
2,479,411
- -----------------------------------------------------------------------------------------------------------------------------------
HEALTH--6.8% Charles River Labs, Term Loan B
(LIBOR plus 3.75%), 9/30/2007 1,496,250 1,496,250
Stryker Corp., Term Loan B
(LIBOR plus 2.50%), 12/31/2005 1,496,176 1,504,592
Stryker Corp., Term Loan C
(LIBOR plus 2.75%), 12/31/2006 1,116,242 1,122,521
Sybron International Corp., Term Loan B
(LIBOR plus 2.00%), 4/23/2006 2,997,500 3,001,247
Triad Hospitals, Term Loan B
(LIBOR plus 4.00%), 11/01/2005 1,984,940 1,999,827
--------------------------------------------------------------------------------------
9,124,437
</TABLE>
10 The accompanying notes are an integral part of the financial statements.
<PAGE> 11
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C> <C> <C> <C>
MANUFACTURING--21.9% Dura Operating Corp., Term Loan B
(LIBOR plus 2.50%), 3/31/2006 $5,000,000 $ 5,018,750
Huntsman ICI Chemicals, Term Loan B
(LIBOR plus 3.00%), 6/30/2007 1,500,000 1,513,125
Huntsman ICI Chemicals, Term Loan C
(LIBOR plus 3.25%), 6/30/2008 1,500,000 1,513,125
Kerr Group, Term Loan B
(LIBOR plus 3.25%), 3/31/2006 1,000,000 1,001,250
Kosa (Arteva), Term Loan B
(LIBOR plus 3.25%), 12/31/2006 1,686,290 1,698,938
Lyondell Chemical, Term Loan E
(LIBOR plus 3.88%), 5/31/2006 1,985,000 2,044,550
Mueller Group, Term Loan B
(LIBOR plus 3.25%), 8/31/2006 995,000 1,003,084
Mueller Group, Term Loan C
(LIBOR plus 3.50%), 8/31/2007 995,000 1,003,084
Packaging Corp. of America, Term Loan B
(LIBOR plus 3.25%), 4/12/2007 680,176 684,427
Packaging Corp. of America, Term Loan C
(LIBOR plus 3.50%), 4/12/2008 680,176 684,427
Riverwood Holding, Term Loan B
(LIBOR plus 3.00%), 2/28/2004 1,411,866 1,420,690
Riverwood Holding, Term Loan C
(LIBOR plus 3.50%), 2/28/2004 568,023 571,573
SPX Corp., Term Loan B
(LIBOR plus 2.25%), 9/30/2006 1,000,000 1,005,000
Stone Container, Term Loan D
(LIBOR plus 3.50%), 10/01/2003 2,995,683 3,006,917
Superior Telecom, Term Loan A
(LIBOR plus 3.00%), 11/27/2005 1,383,172 1,379,713
Synthetic Industries, Term Loan B
(LIBOR plus 3.50%), 12/01/2007 1,000,000 1,007,500
Tapco International Corp., Term Loan B
(LIBOR plus 3.25%), 7/31/2007 310,938 310,938
Tapco International Corp., Term Loan C
(LIBOR plus 3.50%), 7/31/2008 186,563 186,563
Tenneco Automotive, Term Loan B
(LIBOR plus 3.25%), 10/31/2007 1,250,000 1,260,938
Tenneco Automotive, Term Loan C
(LIBOR plus 3.50%), 4/30/2008 1,250,000 1,260,938
Terex Corp., Term Loan C
(LIBOR plus 3.25%), 3/06/2006 2,000,000 2,007,500
-------------------------------------------------------------------------------------
29,583,030
- -----------------------------------------------------------------------------------------------------------------------------------
MEDIA--12.0% AMFM Operating Inc., Term Loan A
(LIBOR plus 1.50%), 11/19/2001 5,000,000 4,981,250
CC 6 Operating Co., Term Loan B
(LIBOR plus 2.75%), 11/12/2008 2,500,000 2,510,938
Charter Communications, Term Loan B
(LIBOR plus 2.50%), 3/18/2008 2,000,000 2,005,000
Corus Entertainment, Term Loan B
(LIBOR plus 3.13%), 9/01/2007 1,000,000 1,004,375
Lamar Media Co., Term Loan B
(LIBOR plus 2.25%), 8/01/2006 2,000,000 2,007,500
RCN Corp., Term Loan B
(LIBOR plus 3.50%), 6/03/2007 2,700,000 2,720,250
Weekly Reader, Term Loan B
(LIBOR plus 4.00%), 12/31/2006 997,500 986,279
--------------------------------------------------------------------------------------
16,215,592
</TABLE>
The accompanying notes are an integral part of the financial statements. 11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C> <C> <C> <C>
METALS & MINERALS--2.5% Ispat Inland, L.P., Term Loan B
(LIBOR plus 2.25%), 7/16/2005 $ 843,577 $ 840,413
Ispat Inland, L.P., Term Loan C
(LIBOR plus 2.75%), 7/16/2005 843,577 840,413
P&L Coal Holdings Corp., Term Loan B
(LIBOR plus 2.13%), 6/30/2006 1,700,000 1,704,250
-------------------------------------------------------------------------------------
3,385,076
- -----------------------------------------------------------------------------------------------------------------------------------
SERVICE INDUSTRIES--9.9% Allied Waste Industries, Term Loan B
(LIBOR plus 2.75%), 7/31/2006 909,091 878,409
Allied Waste Industries, Term Loan C
(LIBOR plus 3.00%), 7/31/2007 1,090,909 1,054,091
Avis Rent-A-Car, Term Loan B
(LIBOR plus 3.50%), 6/01/2006 500,000 504,375
Avis Rent-A-Car, Term Loan C
(LIBOR plus 3.50%), 6/01/2006 500,000 504,375
Casella Waste Systems, Term Loan B
(LIBOR plus 3.50%), 12/31/2006 1,000,000 998,750
Rent-A-Center, Inc., Term Loan B
(LIBOR plus 2.25%), 8/01/2006 761,729 759,825
Rent-A-Center, Inc., Term Loan C
(LIBOR plus 2.50%), 2/01/2007 931,632 929,302
Rent-Way, Inc., Term Loan B
(LIBOR plus 3.50%), 12/31/2006 997,500 997,500
Rite Aid Funding, Revolver
(LIBOR plus 2.75%), 11/01/2000 1,887,933 1,969,512
Safety-Kleen Corp., Term Loan B
(LIBOR plus 2.75%), 4/03/2005 1,362,760 1,345,726
Safety-Kleen Corp., Term Loan C
(LIBOR plus 3.00%), 4/03/2006 1,362,760 1,345,726
Stericycle Inc., Term Loan B
(LIBOR plus 3.50%), 11/30/2006 1,000,000 1,007,500
URS Corporation, Term Loan B
(LIBOR plus 3.50%), 6/09/2006 497,500 500,609
URS Corporation, Term Loan C
(LIBOR plus 3.25%), 6/09/2006 497,500 500,609
-------------------------------------------------------------------------------------
13,296,309
- -----------------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--2.2% Semiconductors Components, Term Loan B
(LIBOR plus 3.50%), 8/04/2006 962,963 972,593
Semiconductors Components, Term Loan B
(LIBOR plus 3.75%), 8/04/2007 1,037,037 1,047,407
Viasystems, Inc., Term Loan C
(LIBOR plus 3.75%), 6/30/2005 999,141 979,158
-------------------------------------------------------------------------------------
2,999,158
- -----------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--1.9% Kansas City Southern Railway Co., Term Loan
B (LIBOR plus 3.00%), 1/31/2007 1,000,000 1,007,500
RailAmerica, Term Loan B
(LIBOR plus 3.25%), 2/28/2007 1,500,000 1,511,250
-------------------------------------------------------------------------------------
2,518,750
- -----------------------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS--0.7% Barjan Products, Term Loan B
(LIBOR plus 3.50%), 5/06/2005 992,500 996,244
-------------------------------------------------------------------------------------
TOTAL VARIABLE RATE SENIOR LOAN INTERESTS
(Cost: $121,477,593) 121,560,051
-------------------------------------------------------------------------------------
</TABLE>
12 The accompanying notes are an integral part of the financial statements.
<PAGE> 13
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
COMMON STOCKS--0.9% SHARES VALUE
<S> <C> <C> <C>
Pilgram Prime Rate Trust
(Cost: $1,426,485) 150,000 $ 1,237,500
----------------------------------------------------------------------------------
TOTAL INVESTMENTS PORTFOLIO--100%
(Cost: $134,915,373)(a) $134,808,846
----------------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
* Senior loans in the fund's portfolio generally are subject to mandatory and/or
optional prepayment. As a result, the actual remaining maturity of senior
loans in the fund's portfolio may be substantially less than the stated
maturities shown in this report
(a) The cost for federal income tax purposes was $134,915,373. At February 29,
2000, the net unrealized depreciation for all securities based on tax cost
was $106,527. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess market value over tax cost of
$483,598 and aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over market value of $590,125.
(b) Repurchase agreements are fully collateralized by U.S Treasury or Government
agency securities.
The accompanying notes are an integral part of the financial statements. 13
<PAGE> 14
FINANCIAL STATEMENTS
STATEMENT OF ASSETS & LIABILITIES
as of February 29, 2000
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value, (cost $134,915,373) $134,808,846
- ----------------------------------------------------------------------------
Cash 56,617
- ----------------------------------------------------------------------------
Interest receivable 996,475
- ----------------------------------------------------------------------------
Receivable for Fund shares sold 1,833,401
- ----------------------------------------------------------------------------
Prepaid registration fees 161,771
- ----------------------------------------------------------------------------
Due from adviser 333,187
- ----------------------------------------------------------------------------
TOTAL ASSETS 138,190,297
- ----------------------------------------------------------------------------
LIABILITIES
Dividends payable 723,055
- ----------------------------------------------------------------------------
Deferred facility fees 215,641
- ----------------------------------------------------------------------------
Other accrued expenses 506,777
- ----------------------------------------------------------------------------
Total liabilities 1,445,473
- ----------------------------------------------------------------------------
NET ASSETS, AT VALUE $136,744,824
- ----------------------------------------------------------------------------
NET ASSETS
Net assets consist of:
Undistributed net investment income $ 197,582
- ----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
securities (106,527)
- ----------------------------------------------------------------------------
Accumulated net realized gain (loss) (184,541)
- ----------------------------------------------------------------------------
Paid-in capital 136,838,310
- ----------------------------------------------------------------------------
NET ASSETS, AT VALUE $136,744,824
- ----------------------------------------------------------------------------
NET ASSET VALUE
CLASS A SHARES
NET ASSET VALUE, offering and redemption price per share
($4,089,312 / 817,263 shares of common stock issued and
outstanding, $.01 par value, unlimited shares authorized) $5.00
- ----------------------------------------------------------------------------
CLASS B SHARES
NET ASSET VALUE, offering and redemption price (subject to
early withdrawal charge) per share
($104,669,138 / 21,001,068 shares of common stock issued and
outstanding, $.01 par value, unlimited shares authorized) $4.98
- ----------------------------------------------------------------------------
CLASS C SHARES
NET ASSET VALUE, offering and redemption price (subject to
early withdrawal charge) per share ($27,986,374 / 5,593,371
shares of common stock issued and outstanding, $.01 par
value, unlimited shares authorized) $5.00
- ----------------------------------------------------------------------------
</TABLE>
14 The accompanying notes are an integral part of the financial statements.
<PAGE> 15
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Six months ended February 29, 2000
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 59,850
- --------------------------------------------------------------------------
Interest 4,194,365
- --------------------------------------------------------------------------
Facilities fees 19,577
- --------------------------------------------------------------------------
Total Income 4,273,792
- --------------------------------------------------------------------------
Expenses:
Management fee 252,590
- --------------------------------------------------------------------------
Services to shareholders 12,185
- --------------------------------------------------------------------------
Custodian and accounting fees 41,572
- --------------------------------------------------------------------------
Distribution services fees 299,461
- --------------------------------------------------------------------------
Administrative service fees 126,295
- --------------------------------------------------------------------------
Auditing 27,635
- --------------------------------------------------------------------------
Legal 60,067
- --------------------------------------------------------------------------
Trustees' fees and expenses 6,833
- --------------------------------------------------------------------------
Reports to shareholders 15,747
- --------------------------------------------------------------------------
Registration fees 322,102
- --------------------------------------------------------------------------
Other 19,613
- --------------------------------------------------------------------------
Total expenses, before expense reductions 1,184,100
- --------------------------------------------------------------------------
Expense reductions (333,187)
- --------------------------------------------------------------------------
Total expenses, after expense reductions 850,913
- --------------------------------------------------------------------------
NET INVESTMENT INCOME 3,422,879
- --------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from investments (184,885)
- --------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
on investments 41,081
- --------------------------------------------------------------------------
Net gain (loss) on investment transactions (143,804)
- --------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $3,279,075
- --------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 15
<PAGE> 16
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 25, 1999
SIX MONTHS ENDED (COMMENCEMENT
FEBRUARY 29, 2000 OF OPERATIONS)
(UNAUDITED) TO AUGUST 31, 1999
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 3,422,879 $ 791,642
- ----------------------------------------------------------------------------------------------------------
Net realized gain (loss) (184,885) 344
- ----------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
transactions during the period 41,081 (147,608)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 3,279,075 644,378
- ----------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net investment income
Class A (41,411) --
- ----------------------------------------------------------------------------------------------------------
Class B (3,023,189) (715,163)
- ----------------------------------------------------------------------------------------------------------
Class C (348,376) --
- ----------------------------------------------------------------------------------------------------------
Fund share transactions:
Proceeds from shares sold 72,306,736 67,131,493
- ----------------------------------------------------------------------------------------------------------
Reinvestment of distributions 1,626,985 356,446
- ----------------------------------------------------------------------------------------------------------
Cost of shares redeemed (4,572,150) --
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions 69,361,571 67,487,939
- ----------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 69,227,670 67,417,154
- ----------------------------------------------------------------------------------------------------------
Net assets at beginning of period 67,517,154 100,000
- ----------------------------------------------------------------------------------------------------------
Net assets at end of period (including undistributed net
investment income of $197,582 and $187,679, respectively) $136,744,824 $67,517,154
- ----------------------------------------------------------------------------------------------------------
</TABLE>
16 The accompanying notes are an integral part of the financial statements.
<PAGE> 17
FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS
For the six months ended February 29, 2000
(UNAUDITED)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Investment income received $ 3,405,501
- ----------------------------------------------------------------------------
Payment of expenses (576,142)
- ----------------------------------------------------------------------------
Proceeds from sales and maturities of investments 22,608,642
- ----------------------------------------------------------------------------
Purchases of investments (88,110,057)
- ----------------------------------------------------------------------------
Net purchases of short term investments (3,230,415)
- ----------------------------------------------------------------------------
Cash provided by operating activities (65,902,471)
- ----------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from Fund share activity 67,034,386
- ----------------------------------------------------------------------------
Distributions paid (net of reinvestment of dividends) (1,145,322)
- ----------------------------------------------------------------------------
Cash provided by financing activities 65,889,064
- ----------------------------------------------------------------------------
Increase (decrease) in cash (13,407)
- ----------------------------------------------------------------------------
Cash at beginning of period 70,024
- ----------------------------------------------------------------------------
Cash at end of period $ 56,617
- ----------------------------------------------------------------------------
RECONCILIATION OF NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS TO
CASH PROVIDED BY OPERATING ACTIVITIES:
Net increase (decrease) in net assets resulting from
operations 3,279,075
- ----------------------------------------------------------------------------
Net (increase) decrease in cost of investments (68,887,103)
- ----------------------------------------------------------------------------
Net increase (decrease) in unrealized appreciation
(depreciation) on investments (41,081)
- ----------------------------------------------------------------------------
(Increase) decrease in net investment income receivable (500,017)
- ----------------------------------------------------------------------------
(Increase) decrease in receivable for investments sold 10,055
- ----------------------------------------------------------------------------
Increase (decrease) in accrued expenses and payables 236,600
- ----------------------------------------------------------------------------
Cash provided by operating activities $(65,902,471)
- ----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 17
<PAGE> 18
FINANCIAL HIGHLIGHTS
The following tables include selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
CLASS A
FOR THE PERIOD FROM
NOVEMBER 1, 1999
(COMMENCEMENT OF
OPERATIONS) TO
FEBRUARY 29, 2000
(UNAUDITED)
<S> <C>
Net asset value, beginning of period $5.00
- -------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .11
- -------------------------------------------------------------------------
Net realized and unrealized gain(loss) on
investment transactions --
- -------------------------------------------------------------------------
Total from investment operations .11
- -------------------------------------------------------------------------
Less distribution from:
Net investment income (.11)
- -------------------------------------------------------------------------
Total distributions (.11)
- -------------------------------------------------------------------------
Net asset value, end of period $5.00
- -------------------------------------------------------------------------
TOTAL RETURN (%) (B) 2.29**
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 4,089
- -------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.80*
- -------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.70*
- -------------------------------------------------------------------------
Ratio of net investment income (loss) (%) 7.03*
- -------------------------------------------------------------------------
Portfolio turnover rate (%) 50*
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
FOR THE PERIOD FROM
FOR THE PERIOD NOVEMBER 1, 1999
FROM MAY 25, (COMMENCEMENT OF
SIX MONTHS ENDED (COMMENCEMENT OF OPERATIONS) TO
FEBRUARY 29, 2000 OPERATIONS) TO FEBRUARY 29, 2000
(UNAUDITED) AUGUST 31, 1999 (UNAUDITED)
<S> <C> <C> <C>
Net asset value, beginning of period $4.99 5.00 5.00
- ------------------------------------------------------------------------------------- -------------------
Income (loss) from investment operations:
Net investment income (loss) .17 .09(a) .11
- ------------------------------------------------------------------------------------- -------------------
Net realized and unrealized gain (loss) on
investment transactions (.01) (.03) --
- ------------------------------------------------------------------------------------- -------------------
Total from investment operations .16 .06 .11
- ------------------------------------------------------------------------------------- -------------------
Less distribution from:
Net investment income (.17) (.07) (.11)
- ------------------------------------------------------------------------------------- -------------------
Total distributions (.17) (.07) (.11)
- ------------------------------------------------------------------------------------- -------------------
Net asset value, end of period $4.98 4.99 $5.00
- ------------------------------------------------------------------------------------- ------------------
TOTAL RETURN (%) (B) 3.54** 1.23** 2.28**
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 104,669 67,517 27,986
- ------------------------------------------------------------------------------------- -------------------
Ratio of expenses before expense reductions (%) 2.34* 3.48* 2.36*
- ------------------------------------------------------------------------------------- -------------------
Ratio of expenses after expense reductions (%) 1.69* 0.38* 1.71*
- ------------------------------------------------------------------------------------- -------------------
Ratio of net investment income (loss) (%) 6.77* 6.53* 7.02*
- ------------------------------------------------------------------------------------- -------------------
Portfolio turnover rate (%) 50* 2* 50*
- ------------------------------------------------------------------------------------- -------------------
</TABLE>
NOTE: Total return does not reflect the effect of any sales charges. Scudder
Kemper Investments, Inc. has agreed to temporarily waive its management fee and
absorb certain operating expenses of the fund.
(a) Based on monthly average shares outstanding during the period
(b) Total return would have been lower had certain expenses not been waived
* Annualized
** Not annualized
18
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 SIGNIFICANT Kemper Floating Rate Fund (the "Fund") is
ACCOUNTING POLICIES registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as a closed-end,
non-diversified management investment company
organized as a Massachusetts business trust. The
Fund does not intend to list the shares for trading
on any national securities exchange.
The Fund currently offers multiple classes of
shares. Class A shares are offered to certain
investors without an initial sales charge. Class A
shares are available only to investors
participating in a fee based investment advisory or
agency commission program and upon conversion from
Class B and Class C shares. Class B shares are
offered without an initial sales charge, but are
subject to higher ongoing expenses than Class A
shares and a declining early withdrawal charge
("EWC") if the shares are repurchased by the Fund
within four years of purchase. The charge is 3.0%
for shares submitted and accepted for repurchase
during the first year after purchase, 2.5% during
the second year, 2.0% during the third year, and
1.0% during the fourth year. There is no EWC
thereafter. Class B shares automatically convert to
Class A shares six years after issuance. Class C
shares are offered without an initial sales charge,
are subject to higher ongoing expenses than Class A
shares and an EWC of 1.0% within one year of
purchase. Class C shares automatically convert to
Class A shares ten years after issuance. The Fund
intends to offer its shares continuously. The Fund
will make quarterly offers to repurchase a
percentage of its outstanding shares at net asset
value. Because the Fund is a closed-end investment
company, shareholders are not able to redeem their
shares on a daily basis.
Investment income, realized and unrealized gains
and losses, and certain fund-level expenses and
expense reductions, if any, are borne pro rata on
the basis of relative net assets by the holders of
all classes of shares except that each class bears
certain expenses unique to that class such as
distribution services, shareholder services,
administrative services and certain other class
specific expenses. Differences in class expenses
may result in payment of different per share
dividends by class. All shares of the Fund have
equal rights with respect to voting subject to
class specific arrangements.
The Fund's financial statements are prepared in
accordance with generally accepted accounting
principles which require the use of management
estimates. The policies described below are
followed consistently by the Fund in the
preparation of its financial statements.
SECURITY VALUATION. Investments are stated at
value. Securities which are traded on U.S. or
foreign stock exchanges are valued at the most
recent sale price reported on the exchange on which
the security is traded most extensively. If no sale
occurred, the security is then valued at the
calculated mean between the most recent bid and
asked quotations. If there are no such bid and
asked quotations, the most recent bid quotation is
used. Securities quoted on the Nasdaq Stock Market,
Inc. ("Nasdaq"), for which there have been sales,
are valued at the most recent sale price reported.
If there are no such sales, the value is the most
recent bid quotation. Securities which are not
quoted on Nasdaq but are traded in another
over-the-counter market are valued at the most
recent sale price on such market. If no sale
occurred, the security is then valued at the
calculated mean between the most recent bid and
asked quotations. If there are no such bid and
asked quotations the most recent bid quotation
shall be used.
19
<PAGE> 20
NOTES TO FINANCIAL Portfolio debt securities purchased with an
STATEMENTS original maturity greater than sixty days are
valued by pricing agents approved by the officers
of the Fund, whose quotations reflect
broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents
are unable to provide such quotations, the security
is then valued at the calculated mean between the
most recent bid and asked quotations supplied by a
bona fide market maker shall be used. Money market
instruments purchased with an original maturity of
sixty days or less are valued at amortized cost.
All other securities are valued at their fair value
as determined in good faith by the Valuation
Committee of the Board of Trustees.
REPURCHASE AGREEMENTS. The Fund may enter into
repurchase agreements with certain banks and
broker/dealers whereby the Fund, through its
custodian or sub-custodian bank, receives delivery
of the underlying securities, the amount of which
at the time of purchase and each subsequent
business day is required to be maintained at such a
level that the market value is equal to at least
the principal amount of the repurchase price plus
accrued interest.
FEDERAL INCOME TAXES. The Fund's policy is to
comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to
regulated investment companies and to distribute
all of its taxable income to its shareholders. The
Fund paid no federal income taxes and no federal
income tax provision was required.
DISTRIBUTION OF INCOME AND GAINS. Approximately all
of the net investment income of the Fund is
declared as a daily dividend to shareholders of
record and is distributed to shareholders monthly.
Net realized gains from investment transactions, in
excess of available capital loss carryforwards,
would be taxable to the Fund if not distributed,
and, therefore, will be distributed to shareholders
at least annually.
The timing and characterization of certain income
and capital gains distributions are determined
annually in accordance with federal tax regulations
which may differ from generally accepted accounting
principles. As a result, net investment income
(loss) and net realized gain (loss) on investment
transactions for a reporting period may differ
significantly from distributions during such
period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital
accounts without impacting the net asset value of
the Fund.
STATEMENT OF CASH FLOWS. Information on financials
transactions which have been settled through the
receipt and disbursement of cash is presented in
the Statement of Cash Flows. The cash amount shown
in the Statement of Cash Flows is the amount
reported as cash in the Fund's Statement of Assets
and Liabilities and represents the cash position in
its custodial bank account and does not include any
short-term investments at February 29, 2000.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date. Interest income is recorded on
the accrual basis. Dividend income is recorded on
the ex-dividend date. Realized gains and losses
from investment transactions are recorded on an
identified cost basis. Facilities fees received are
deferred and recognized on a straight-line basis as
income over the average life of the loans.
20
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2
PURCHASES & SALES For the six months ended February 29, 2000,
OF SECURITIES investment transactions (excluding short-term
instruments) are as follows:
Purchases $88,110,057
Proceeds from
sales 22,598,587
- --------------------------------------------------------------------------------
3
TRANSACTIONS WITH MANAGEMENT AGREEMENT. The Fund has a management
AFFILIATES agreement with Scudder Kemper Investments, Inc.
("Scudder Kemper") and pays a monthly investment
management fee of 0.50% of the first $1 billion of
average daily net assets, 0.49% of the next $2
billion, 0.48% of the next $2 billion, 0.47% of the
next $5 billion, and 0.45% of average daily net
assets over $10 billion. The Fund incurred a
management fee of $252,590 for the six months ended
February 29, 2000.
Scudder Kemper has temporarily agreed to absorb
certain operating expenses of the Fund. Under these
arrangements, Scudder Kemper waived and absorbed
expenses of $325,618 for the six months ended
February 29, 2000.
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 0.60% of average daily net assets of the
Class B and Class C shares pursuant to a
distribution plan for 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 early
withdrawal fees ("EWC") from repurchases of Class B
and Class C shares. Distribution fees paid by the
Fund to KDI for the six months ended February 29,
2000 are $25,063 after an expense waiver of
$274,398. EWC received by KDI for the six months
ended February 29, 2000 are $74,614.
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 0.25% of average daily net
assets of the Fund. KDI in turn has various
agreements 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 by the Fund to
KDI for the six months ended February 29, 2000 are
$75,075 after an expense waiver of $51,220, of
which $649 is unpaid at February 29, 2000.
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, the
Fund incurred a shareholder service fee of $1,471,
for the six months ended February 29, 2000.
FUND ACCOUNTING FEES. Scudder Fund Accounting
Corporation ("SFAC"), a subsidiary of Scudder
Kemper, is responsible for determining the daily
net asset value per share and maintaining the
portfolio and general accounting records of the
Fund. For the six months ended February 29, 2000,
the amount charged to the Fund by SFAC aggregated
$36,737, of which $36,737 is unpaid.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. During the six months ended
February 29, 2000, the Fund made no payments to is
officers and incurred trustees' fees of $6,833 to
independent trustees.
21
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4 CAPITAL SHARE
TRANSACTIONS
<TABLE>
<CAPTION>
FOR THE PERIOD MAY 25, 1999
FOR THE (COMMENCEMENT OF OPERATIONS)
SIX MONTHS ENDED TO
FEBRUARY 29, 2000 AUGUST 31, 1999
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 830,048 $ 4,153,890 -- --
-----------------------------------------------------------------------------------------
Class B 8,058,108 40,179,903 13,430,492 $67,131,493
-----------------------------------------------------------------------------------------
Class C 5,591,716 27,972,943 -- --
-----------------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 3,388 16,959 -- --
-----------------------------------------------------------------------------------------
Class B 291,444 1,453,533 71,360 356,446
-----------------------------------------------------------------------------------------
Class C 31,265 156,493 -- --
-----------------------------------------------------------------------------------------
SHARES REDEEMED
Class A (16,173) (81,031) -- --
-----------------------------------------------------------------------------------------
Class B (870,336) (4,342,774) -- --
-----------------------------------------------------------------------------------------
Class C (29,610) (148,345) -- --
-----------------------------------------------------------------------------------------
NET INCREASE FROM CAPITAL
SHARES TRANSACTIONS $69,361,571 $67,487,939
-----------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
5 EXPENSE OFF-SET
ARRANGEMENTS
The Fund has entered into arrangements with its
custodian and transfer agent whereby credits
realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's
expenses. During the period, the Fund's custodian
and transfer agent fees were reduced by $1,832 and
$5,737, respectively, under these arrangements.
- --------------------------------------------------------------------------------
6 INVESTING IN SENIOR
LOAN INTERESTS
Senior Loans are interests in adjustable rate loans
that have a senior right to payment, which, in many
circumstances, are fully collateralized by assets
of a corporation, partnership, limited liability
company, or other business entity. Senior Loans are
often issued in connection with recapitalizations,
acquisitions, leveraged buy-outs, and refinancings.
Because of a limited secondary market for Senior
Loans, the Fund may be limited in its ability to
sell portfolio holdings at the price at which they
are valued by the Fund to generate gains, avoid
losses, or to meet repurchase requests.
- --------------------------------------------------------------------------------
7 COMMITMENTS
The Fund can invest in certain Variable Rate Senior
Loan agreements that include the obligation to make
additional loans in certain circumstances. The Fund
reserves against such contingent obligations by
segregating cash, liquid securities and liquid
Senior Loans. For the six months ended February 29,
2000 the Fund had unfunded loan commitments of
approximately $39,067.
- --------------------------------------------------------------------------------
8 REPURCHASE OFFERS
As a matter of fundamental policy, the Fund will
offer to repurchase from 5% to 25% of its common
shares at net asset value at three month intervals.
The deadline for the repurchase offers will be a
business day in the months of February, May, August
and November. The price applicable to each
repurchase offer will be determined no later than
14 calendar days after each repurchase request
deadline (or, if not a business day, the next
business day). Fund shares, when submitted for
repurchase, may be worth more or less than their
original cost. For the six months ended February
29, 2000, 916,119 shares were repurchased.
22
<PAGE> 23
NOTES
23
<PAGE> 24
TRUSTEES&OFFICERS
<TABLE>
<S> <C> <C>
TRUSTEES OFFICERS
JAMES E. AKINS MARK S. CASADY
Trustee President
LINDA C. COUGHLIN PHILLIP J. COLLORA
Trustee Vice President and
Secretary
JAMES R. EDGAR
Trustee JOHN R. HEBBLE
Treasurer
ARTHUR R. GOTTSCHALK
Trustee ANN M. MCCREARY
Vice President
FREDERICK T. KELSEY
Trustee LINDA J. WONDRACK
Vice President
THOMAS W. LITTAUER
Trustee and Vice President MAUREEN E. KANE
Assistant Secretary
KATHRYN L. QUIRK
Trustee and Vice President CAROLINE PEARSON
Assistant Secretary
FRED B. RENWICK
Trustee BRENDA LYONS
Assistant Treasurer
JOHN G. WEITHERS
Trustee
</TABLE>
<TABLE>
<S> <C>
.............................................................................................
LEGAL COUNSEL DECHERT PRICE AND RHOADS
1775 Eye Street N.W.
Washington, D.C. 20006
.............................................................................................
TRANSFER AGENT KEMPER SERVICE COMPANY
AND SHAREHOLDER P.O. Box 219557
SERVICE AGENT Kansas City, MO 64121
.............................................................................................
CUSTODIAN STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, MA 02109
.............................................................................................
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
.............................................................................................
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606
www.kemper.com
</TABLE>
[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 Floating Rate Fund prospectus.
KFRF - 3(4/25/00) 1108460
