<PAGE> 1
KEMPER
STATE TAX-FREE
INCOME SERIES
SEMIANNUAL REPORT TO SHAREHOLDERS FOR THE PERIOD ENDED FEBRUARY
28, 1997
FLORIDA TAX-FREE
INCOME FUND
NEW JERSEY TAX-FREE
INCOME FUND
NEW YORK TAX-FREE
INCOME FUND
PENNSYLVANIA TAX-FREE
INCOME FUND
" . . . At the end of February, yields
were somewhat lower than they had
been at the start of the period. This
had a modestly positive effect on
municipal securities."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
4
Economic Overview
6
Performance Update
7
Terms To Know
8
Florida's
Portfolio Statistics and
Portfolio of Investments
11
New Jersey's
Portfolio Statistics and
Portfolio of Investments
14
New York's
Portfolio Statistics and
Portfolio of Investments
18
Pennsylvania's
Portfolio Statistics and
Portfolio of Investments
21
Financial Statements
24
Notes To
Financial Statements
30
Financial Highlights
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER STATE TAX-FREE INCOME FUNDS' TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED FEBRUARY 28, 1997 (UNADJUSTED FOR ANY SALES
CHARGE)
[BAR GRAPH]
- --------------------------------------------------------------------------------
FLORIDA
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 4.42%
CLASS B 3.99%
CLASS C 3.89%
LIPPER FLORIDA 4.56%
TAX-FREE INCOME
FUNDS CATEGORY
AVERAGE
</TABLE>
- --------------------------------------------------------------------------------
NEW JERSEY
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 4.05%
CLASS B 3.65%
CLASS C 3.70%
LIPPER NEW YORK 4.45%
TAX-FREE INCOME
FUNDS CATEGORY
AVERAGE
</TABLE>
- --------------------------------------------------------------------------------
NEW YORK
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 4.46%
CLASS B 4.12%
CLASS C 4.01%
LIPPER NEW JERSEY 4.76%
TAX-FREE INCOME
FUNDS CATEGORY
AVERAGE
</TABLE>
- --------------------------------------------------------------------------------
PENNSYLVANIA
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 4.77%
CLASS B 4.38%
CLASS C 4.38%
LIPPER PENNSYLVANIA 4.62%
TAX-FREE INCOME
FUNDS CATEGORY
AVERAGE
</TABLE>
Returns are historical and do not represent future performance. Returns and net
asset value fluctuate. Shares are redeemable at current net asset value, which
may be more or less than original cost.
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLORIDA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AS OF AS OF
2/28/97 8/31/96
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER FLORIDA TAX-FREE INCOME
FUND CLASS A $10.29 $10.21
- --------------------------------------------------------------------------------
KEMPER FLORIDA TAX-FREE INCOME
FUND CLASS B $10.27 $10.19
- --------------------------------------------------------------------------------
KEMPER FLORIDA TAX-FREE INCOME
FUND CLASS C $10.27 $10.20
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NEW JERSEY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AS OF AS OF
2/28/97 8/31/96
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER NEW JERSEY TAX-FREE
INCOME FUND CLASS A $ 9.98 $9.85
- --------------------------------------------------------------------------------
KEMPER NEW JERSEY TAX-FREE
INCOME FUND CLASS B $10.01 $9.88
- --------------------------------------------------------------------------------
KEMPER NEW JERSEY TAX-FREE
INCOME FUND CLASS C $10.01 $9.88
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NEW YORK
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AS OF AS OF
2/28/97 8/31/96
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER NEW YORK TAX-FREE INCOME
FUND CLASS A $10.77 $10.66
- --------------------------------------------------------------------------------
KEMPER NEW YORK TAX-FREE INCOME
FUND CLASS B $10.78 $10.66
- --------------------------------------------------------------------------------
KEMPER NEW YORK TAX-FREE INCOME
FUND CLASS C $10.76 $10.65
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
PENNSYLVANIA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AS OF AS OF
2/28/97 8/31/96
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER PENNSYLVANIA TAX-FREE
INCOME FUND CLASS A $10.20 $9.95
- --------------------------------------------------------------------------------
KEMPER PENNSYLVANIA TAX-FREE
INCOME FUND CLASS B $10.20 $9.95
- --------------------------------------------------------------------------------
KEMPER PENNSYLVANIA TAX-FREE
INCOME FUND CLASS C $10.20 $9.95
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER TAX-FREE INCOME FUND LIPPER RANKINGS
- --------------------------------------------------------------------------------
COMPARED TO ALL OTHER FUNDS IN THEIR RESPECTIVE LIPPER CATEGORIES*
- --------------------------------------------------------------------------------
FLORIDA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1-YEAR #27 OF 78 FUNDS #61 OF 78 FUNDS #61 OF 78 FUNDS
- --------------------------------------------------------------------------------
5-YEAR #3 OF 19 FUNDS N/A N/A
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NEW JERSEY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1-YEAR #45 OF 55 FUNDS #52 OF 55 FUNDS #50 OF 55 FUNDS
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NEW YORK
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1-YEAR #70 OF 94 FUNDS #90 OF 94 FUNDS #89 OF 94 FUNDS
- --------------------------------------------------------------------------------
5-YEAR #11 OF 43 FUNDS N/A N/A
- --------------------------------------------------------------------------------
10-YEAR #7 OF 24 FUNDS N/A N/A
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
PENNSYLVANIA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1-YEAR #34 OF 63 FUNDS #58 OF 63 FUNDS #57 OF 63 FUNDS
- --------------------------------------------------------------------------------
</TABLE>
*Lipper Analytical Services, Inc. returns and rankings are based upon changes in
net asset value with all dividends reinvested and do not include the effect of
sales charges and, if they had, results may have been less favorable. Returns
and rankings are historical and do not reflect future performance. The funds are
compared to their respective Lipper categories as follows: Florida Municipal
Debt, New Jersey Municipal Debt, New York Municipal Debt and Pennsylvania
Municipal Debt.
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
THE FOLLOWING TABLES SHOW PER SHARE DIVIDEND AND YIELD INFORMATION FOR THE FUNDS
AS OF FEBRUARY 28, 1997.
- --------------------------------------------------------------------------------
FLORIDA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SIX-MONTHS INCOME: $0.2534 $0.2104 $0.2104
- --------------------------------------------------------------------------------
FEBRUARY DIVIDEND: $0.0404 $0.0348 $0.0336
- --------------------------------------------------------------------------------
ANNUALIZED DISTRIBUTION RATE+: 5.23% 4.51% 4.36%
- --------------------------------------------------------------------------------
SEC YIELD+: 4.30% 3.68% 3.68%
- --------------------------------------------------------------------------------
TAX EQUIVALENT YIELD: 6.84% 5.85% 5.85%
BASED ON A 37.1% MARGINAL FEDERAL INCOME TAX RATE
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NEW JERSEY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SIX-MONTHS INCOME: $0.2087 $0.1705 $0.1684
- --------------------------------------------------------------------------------
FEBRUARY DIVIDEND: $0.0331 $0.0272 $0.0272
- --------------------------------------------------------------------------------
ANNUALIZED DISTRIBUTION RATE+: 4.42% 3.62% 3.62%
- --------------------------------------------------------------------------------
SEC YIELD+: 4.11% 3.49% 3.52%
- --------------------------------------------------------------------------------
TAX EQUIVALENT YIELD: 6.92% 5.88% 5.93%
BASED ON A MARGINAL TAX RATE OF 40.6% (COMBINED NEW JERSEY STATE AND
FEDERAL INCOME TAX RATE)
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NEW YORK
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SIX-MONTHS INCOME: $0.2785 $0.2326 $0.2318
- --------------------------------------------------------------------------------
FEBRUARY DIVIDEND: $0.0417 $0.0350 $0.0353
- --------------------------------------------------------------------------------
ANNUALIZED DISTRIBUTION RATE+: 5.16% 4.33% 4.38%
- --------------------------------------------------------------------------------
SEC YIELD+: 4.41% 3.75% 3.78%
- --------------------------------------------------------------------------------
TAX EQUIVALENT YIELD: 7.88% 6.70% 6.75%
BASED ON A MARGINAL INCOME TAX RATE OF 44.0% (COMBINED NEW YORK
STATE, NEW YORK CITY AND FEDERAL INCOME TAX RATE)
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
PENNSYLVANIA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SIX-MONTHS INCOME: $0.2241 $0.1857 $0.1863
- --------------------------------------------------------------------------------
FEBRUARY DIVIDEND: $0.0342 $0.0283 $0.0286
- --------------------------------------------------------------------------------
ANNUALIZED DISTRIBUTION RATE+: 4.46% 3.70% 3.74%
- --------------------------------------------------------------------------------
SEC YIELD+: 4.17% 3.57% 3.60%
- --------------------------------------------------------------------------------
TAX EQUIVALENT YIELD: 6.82% 5.84% 5.89%
BASED ON A MARGINAL TAX RATE OF 38.9% (COMBINED PENNSYLVANIA
STATE AND FEDERAL INCOME TAX RATE)
- --------------------------------------------------------------------------------
</TABLE>
+Current annualized distribution rate is the latest monthly dividend shown as an
annualized percentage of net asset value on February 28, 1997. Distribution rate
simply measures the level of dividends and is not a complete measure of
performance. The SEC yield is net investment income per share earned over the
month ended February 28, 1997 shown as an annualized percentage of the maximum
offering price on that date. The SEC yield is computed in accordance with the
standardized method prescribed by the Securities and Exchange Commission. Tax
equivalent yield is based on the fund's yield and the applicable 1996 federal
and state marginal tax rate. Income may be subject to state and local taxes and,
for some investors, a portion may be subject to the alternative minimum tax.
3
<PAGE> 4
ECONOMIC OVERVIEW
[TIMBERS PHOTO]
STEPHEN B. TIMBERS IS PRESIDENT, CHIEF INVESTMENT AND EXECUTIVE OFFICER OF
ZURICH KEMPER INVESTMENTS, INC. (ZKI). ZKI AND ITS AFFILIATES MANAGE
APPROXIMATELY $79 BILLION IN ASSETS, INCLUDING $42 BILLION IN RETAIL MUTUAL
FUNDS. TIMBERS IS A GRADUATE OF YALE UNIVERSITY AND HOLDS AN M.B.A. FROM
HARVARD UNIVERSITY.
DEAR SHAREHOLDER:
The Federal Reserve Board's recent decision to raise short-term interest rates
as a pre-emptive strike against inflation has changed the course that the
markets have been on for several months. In fact, we had not seen a change in
the federal funds target rate since January 1996, when the Fed reduced interest
rates. The raising of rates now -- coupled with the general expectation of at
least one and probably two more hikes -- requires a modest adjustment in our
views for 1997.
A review of the standard measures of the economy shows little to be concerned
about. As has been the pattern for more than five years, alternately strong and
weak quarters have produced an overall 2 percent to 3 percent rate of growth in
gross domestic product (GDP). Job creation and the unemployment rate are
consistent with a moderately expanding economy. Corporate profits continue to
grow at an expected 4 to 5 percent rate in 1997. The Consumer Price Index
continues to track at a 2.5 percent to 3.0 percent rate. However, the Fed has
become nervous about the recent modest increases in unit labor costs. To avert
the possibility of more severe later actions to control inflation, the Fed
decided to act now. Ironically, now that rates have been raised, we may never
know whether the economy was in fact in danger of overheating.
Investors' immediate reaction to the higher rates was negative, as evidenced
by the stock market's first sizable correction in years. Yet, as uncomfortable
as it is to participate in a market decline, a correction is a natural event in
a market cycle. A market correction is generally defined as a loss in value of 8
to 10 percent. Historically, corrections take place over a period of four to six
months, the current one has already fallen the average amount in a very short
amount of time. It is likely that the stock market will require many weeks of
retrenchment before a new sustainable upward movement begins.
A correction should be distinguished from a bear market, which involves a
decline of at least 20 percent and typically occurs over six to eight months. We
see no reason to believe that we are entering a classic bear market. The economy
is stable and the interest rate increases are likely to be gradual and modest.
Inflation is the greatest threat to the securities markets, and if higher rates
are what is required to control inflation, investors will be better off over the
longer term.
Just as we see a limited downside to today's rising interest rate environment,
so is there a limited upside in the near future. The effect of higher rates will
have to work itself through the economy. Higher rates have significant
implications for corporate profitability, debt issuance, credit extension and
international trade. Post-correction cash flows into the financial markets will
be a subject of great scrutiny. One of the factors driving the stock market to
its all-time high early in 1997 was the unprecedented high level of investment
through mutual funds, 401(k)s and qualified contribution plans. It is realistic
to expect that, on the margin, some of that cash will find a home in short-term,
liquid investments while the stock market sorts itself out.
One of the most interesting aspects of today's environment is the role of the
technology stocks. They seem to be demonstrating the same market leadership
characteristics that we have seen before. In the early 1970s, consumer
nondurable stocks led the market up and down. More recently, in the 1980s, oil
stocks led, followed by financial services stocks. Today, we look at technology
stocks as a strong indicator of market direction. When they finally find a
bottom and then turn upward, we would expect the general market to follow.
Higher interest rates are, of course, anathema to the fixed-income market. The
market has fallen, discounting a more restricting monetary policy. However, in
the era of instant adjustment, most of the damage is likely done. We expect now
that the bond market is likely to trade in a very narrow range -- with long-term
interest rates no lower than 6.75 percent and no higher than 7.25 percent. One
positive effect of the stock market correction was the widening of spreads
available on high yield bonds. As a consequence, high yield bonds today are more
reasonably priced.
4
<PAGE> 5
ECONOMIC OVERVIEW
- --------------------------------------------------------------------------------
ECONOMIC GUIDEPOSTS
- --------------------------------------------------------------------------------
Economic activity is a key influence on investment performance and sharholder
decision-making. Periods of recession or boom, inflation or deflation, credit
expansion or credit crunch has 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 (3/31/97) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1) 6.69 6.53 6.51 7.06
PRIME RATE(2) 8.50 8.25 8.25 9.00
INFLATION RATE(3)* 2.72 2.62 2.86 2.57
THE U.S. DOLLAR(4) 8.58 4.74 8.94 -11.46
CAPITAL GOODS ORDERS(5)* 5.25 1.96 3.98 15.52
INDUSTRIAL PRODUCTION(5)* 3.79 3.13 1.36 3.38
EMPLOYMENT GROWTH(6) 2.27 2.18 1.76 3.12
</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%. The low, moderate inflation of the last
few years has meant hight 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 February 28, 1997.
SOURCE: ECONOMICS DEPARTMENT, ZURICH KEMPER INVESTMENTS, INC.
A natural response to a troubled U.S. equity market is to look abroad.
In fact, the valuations of many international markets are more attractive than
the U.S. There too, though, weak German and Japanese economies make it
difficult to identify exciting near-term opportunities.
Our recommendation to shareholders is to stay the course and to fight
the temptation to try to time when and where you should be invested. Financial
assets react much quicker today to events. Volatility has returned to the
market and with it heightened uncertainty. Now is the time to rely on your
financial representative for the expertise and the long-term investing
discipline that he or she can provide.
With that as an economic backdrop, we encourage you to read the
following detailed report of your fund, including an interview with your fund's
portfolio management. Thank you for your continued support. We appreciate the
opportunity to serve your investment needs.
Sincerely,
/s/ Stephen B. Timbers
STEPHEN B. TIMBERS
President, Chief Investment and Executive Officer
Zurich Kemper Investments, Inc.
April 10, 1997
5
<PAGE> 6
PERFORMANCE UPDATE
[MIER PHOTO]
CHRIS MIER JOINED ZURICH KEMPER INVESTMENTS, INC. IN 1986 AND IS NOW SENIOR VICE
PRESIDENT AND PORTFOLIO MANAGER OF THE KEMPER STATE TAX-FREE INCOME SERIES. MIER
RECEIVED A B.A. DEGREE IN ECONOMICS FROM THE UNIVERSITY OF MICHIGAN AND WENT ON
TO RECEIVE A M.M. IN FINANCE FROM THE KELLOGG GRADUATE SCHOOL OF MANAGEMENT AT
NORTHWESTERN UNIVERSITY. HE IS A CHARTERED FINANCIAL ANALYST.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
FOR THE SIX-MONTH REPORTING PERIOD, THE MUNICIPAL MARKET FOCUSED
PRIMARILY ON THE POTENTIAL OF AN INTEREST RATE INCREASE BY THE FEDERAL RESERVE
BOARD. PORTFOLIO MANAGER CHRIS MIER EXPLAINS HOW THE FUNDS IN KEMPER STATE
TAX-FREE INCOME SERIES PERFORMED IN AN ENVIRONMENT CHARACTERIZED BY QUICK
CHANGING EXPECTATIONS.
Q HOW DID THE FUNDS PERFORM DURING THE FIRST SIX MONTHS OF THE FISCAL YEAR?
A The funds (Class A shares, unadjusted for sales charge) performed
relatively well, all returning 4 percent or more for the six-month period ended
February 28, 1997. Most of the return reflected income from the bonds in the
portfolios with some level of price appreciation.
Q MUNICIPAL BOND YIELDS HAVE FLUCTUATED QUITE A BIT DURING THE LAST SIX
MONTHS. WHAT IMPACT DID THIS HAVE ON THE MARKET?
A Yields in the municipal market fluctuated during the period, but tended to
be range-bound, trading within about a half of a percentage point. At the end of
February, yields were somewhat lower than they had been at the start of the
period. This had a modestly positive effect on prices of municipal securities.
The up and down movement of yields seemed to be based on the market's changing
expectations about whether or not the Federal Reserve Board (The Fed) would move
to raise short-term interest rates. It was assumed that the Fed would raise
short-term rates if there was an indication of the economy growing too quickly
and a possible emergence of inflation. We witnessed swings in the market
throughout the period on the heels of sometimes conflicting economic reports.
The Fed took no action during the six-month period and the municipal bond market
performed relatively well, slightly outperforming the Treasury bond market.
Q WHAT TYPES OF ADJUSTMENTS DID YOU MAKE TO THE FUNDS OVER THE SIX MONTHS?
A We shortened the durations of the funds somewhat during the period. The
shorter a fund's duration, the less sensitive it is to interest rate changes. We
shortened duration because we believed that growth in the economy would exceed
market expectations. We also saw signs of potential wage inflation and combined
with our outlook on economic growth, saw a bias for higher market interest
rates.
In addition to duration adjustments, we also added A-rated and BBB-rated bonds
on a selective basis. These bonds offered higher coupon rates than some of the
funds' higher quality and insured issues. We also continued to focus on
maintaining or improving call protection on issues within the portfolios.
We didn't make any significant shifts in the sectors in which the funds were
invested. However, we continued to favor essential service revenue bonds, or
bonds used to finance basic governmental services such as water and sewers,
transportation and education among other things.
6
<PAGE> 7
PERFORMANCE UPDATE
Q WERE THERE ANY SIGNIFICANT TRENDS THAT AFFECTED INDIVIDUAL STATES WITHIN
KEMPER'S STATE TAX-FREE INCOME SERIES?
A New Jersey's diversified economic base, with an emphasis in the retail and
service sectors, helped the state to exhibit signs of stronger economic growth
during the period. However, unemployment remained somewhat higher than the
national average at about 6.2 percent. New issuance volume increased in 1996 by
24 percent to $5.7 billion.
Unemployment in Florida was 5.2 percent at the end of 1996, and per capita
income has risen faster than the nation's average for the past five years. New
issuance volume in Florida increased in 1996.
New York completed its last fiscal year within its budget and income tax
receipts in the state came in higher than anticipated. New municipal issuance
increased 15 percent to $21.8 billion by the end of 1996. New York City still
faces numerous fiscal challenges.
Q ARE MUNICIPAL BOND FUNDS A GOOD INVESTMENT IN THE CURRENT ECONOMIC
ENVIRONMENT?
A Municipal bonds can play an important role in rounding out a
well-diversified portfolio of investments. The tax-exempt income that municipal
bond funds provide may be especially helpful now as many investors may be
under-invested in tax-exempt assets. Municipal bonds and equities are both
important components of a balanced portfolio. If your exposure to municipals
has declined on a relative basis, now may be the right time to review your
long-term goals and rebalance your portfolio of investments.
Q WHAT'S YOUR OUTLOOK FOR THE MUNICIPAL MARKET?
A We expect moderate growth in the economy to continue, with a bias for a
slight pick-up in inflation and an increase in short-term interest rates.
Municipal supply should come in close to 1996 levels.
TERMS TO KNOW
DURATION Duration is a measure of the interest rate sensitivity of a
fixed-income investment or portfolio. The longer the duration, the greater the
interest rate risk.
REVENUE BOND INDEX (RBI) RBI is the average yield on 25 revenue bonds with
30-year maturities compiled by THE BOND BUYER, a newspaper that reports on the
municipal bond market.
TOTAL RETURN A fund's total return figure measures both the net investment
income generated by, and the effect of, any realized and unrealized appreciation
or depreciation of the underlying investments in its portfolio for the period.
Total return assumes the reinvestment of all dividends and it represents the
aggregate percentage or dollar value change over the period.
YIELD A fund's yield is a measure of the net investment income per share earned
over a specific one month or 30-day period expressed as a percentage of the
maximum offering price of the fund's shares at the end of the period.
7
<PAGE> 8
PORTFOLIO STATISTICS
KEMPER FLORIDA TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION* ON 2/28/97 ON 8/31/96
- --------------------------------------------------------------------------------
<S> <C> <C>
REVENUE BONDS 78% 86%
- --------------------------------------------------------------------------------
GENERAL OBLIGATION BONDS 10 11
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURED 7 --
- --------------------------------------------------------------------------------
CASH AND EQUIVALENTS 5 3
- --------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 2/28/97 ON 8/31/96
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
QUALITY ON 2/28/97 ON 8/31/96
- -------------------------------------------------------------------------------
<S> <C> <C>
AAA 56% 56%
- -------------------------------------------------------------------------------
AA 18 17
- -------------------------------------------------------------------------------
A 4 8
- -------------------------------------------------------------------------------
BBB 11 11
- -------------------------------------------------------------------------------
NOT RATED 11 8
- -------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 2/28/97 ON 8/31/96
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
YEARS TO MATURITY ON 2/28/97 ON 8/31/96
- -------------------------------------------------------------------------------
<S> <C> <C>
1-10 YEARS 16% 7%
- ------------------------------------------------------------------------------
11-20 YEARS 41 44
- ------------------------------------------------------------------------------
21 + YEARS 43 49
- ------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 2/28/97 ON 8/31/96
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
AVERAGE MATURITY ON 2/28/97 ON 8/31/96
- ------------------------------------------------------------------------------
<S> <C> <C>
16.9 YEARS 16.0 YEARS
- ------------------------------------------------------------------------------
</TABLE>
*Portfolio composition is subject to change.
8
<PAGE> 9
PORTFOLIO OF INVESTMENTS
FLORIDA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS AT FEBRUARY 28, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
PRINCIPAL
ISSUER AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ADVANCE REFUNDED OBLIGATIONS SECURED AS TO PRINCIPAL
AND INTEREST BY UNITED STATES GOVERNMENT SECURITIES
- -----------------------------------------------------------------------------------------------------------
Charlotte County, Utility System, Rev., 6.75%, to be called
10-1-03 @ 102 $ 250 $ 285
--------------------------------------------------------------------------------------
Dunedin, Mease Health Care, Hospital Rev., 6.75%, to be
called 11-15-01 @ 102 750 837
--------------------------------------------------------------------------------------
Halifax Hospital Medical Center, Rev., 6.75%, to be called
10-1-01 @ 102 2,000 2,227
--------------------------------------------------------------------------------------
Jacksonville Health Facilities Auth., Memorial Medical
Center Proj., Rev., 6.75%, to be called 5-1-01 @ 102 2,000 2,211
--------------------------------------------------------------------------------------
Volusia County Health Facilities Auth., Memorial Health
Systems, Hospital Facilities Rev., 8.25%, to be called
6-1-00 @ 102 1,940 2,197
--------------------------------------------------------------------------------------
TOTAL ADVANCE REFUNDED OBLIGATIONS--7.1% 7,757
--------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
OTHER MUNICIPAL OBLIGATIONS
- -----------------------------------------------------------------------------------------------------------
Board of Education, Public Education Capital Outlay, Gen.
Oblg., 4.75% and 7.25%, 2018 and 2023 2,140 1,985
--------------------------------------------------------------------------------------
Department of Natural Resources, Preservation 2000, Rev.,
4.90% and 6.75%, 2013 2,000 2,039
--------------------------------------------------------------------------------------
Housing Finance Agcy.:
GNMA Collateralized Home Ownership, Rev., 7.90%, 2022 1,260 1,329
Landings at Sea Forest, Rev., 6.05%, 2036 700 698
--------------------------------------------------------------------------------------
Alachua County, Public Improvement Rev., 5.125%, 2021 1,000 936
--------------------------------------------------------------------------------------
Broward County:
North Site Proj., Resource Recovery Rev., 7.95%, 2008 850 933
School District, Gen. Oblg., 6.00%, 2007 4,000 4,268
South Site Proj., Resource Recovery Rev., 7.95%, 2008 905 993
--------------------------------------------------------------------------------------
Charlotte County, Utility System, Rev., 5.50%, 2010 1,150 1,178
--------------------------------------------------------------------------------------
Citrus County:
Capital Improvement Rev., 5.00%, 2016 2,000 1,878
Pollution Control Rev., 6.35%, 2022 1,000 1,050
--------------------------------------------------------------------------------------
Dade City Governmental Leasing Corp., Department of Health
and Rehabilitation Services, Rev., 9.00%, 2020 1,025 1,061
--------------------------------------------------------------------------------------
Dade County:
Educational Facilities Auth., University of Miami, Rev.,
6.00%, 2008 2,000 2,173
Housing Finance Auth., Single Family Mortgage Rev., 7.25%,
2023 370 388
Miami International Airport, Aviation Facilities Rev.,
6.55%, 2013 2,000 2,164
School District, Gen. Oblg., 6.00%, 2004 2,000 2,171
Seaport, Gen. Oblg., 5.125%, 2016 1,000 954
Special Oblg., 5.00%, 2035 1,000 902
Water and Sewer System, Rev., 6.25%, 2010 1,000 1,110
--------------------------------------------------------------------------------------
Duval County Housing Finance Auth., Single Family Mortgage
Rev., 7.25%, 2019 550 585
--------------------------------------------------------------------------------------
Escambia County:
Housing Finance Auth., Single Family Mortgage Rev., 6.90%,
2020 805 838
Pollution Control Rev., 6.40%, 2030 2,500 2,565
--------------------------------------------------------------------------------------
Gainesville, Utilities System Rev., 6.50%, 2010 1,370 1,560
--------------------------------------------------------------------------------------
Hillsborough County:
Aviation Auth., Tampa International Airport, Rev., 6.90%,
2011 1,250 1,345
Housing Finance Auth., Single Family Mortgage Rev., 6.50%
and 7.30%, 2019 and 2022 1,345 1,491
Utility Rev., 7.00%, 2014 1,325 1,433
--------------------------------------------------------------------------------------
Jacksonville:
District Water and Sewer, Rev., 5.00%, 2020 3,000 2,771
Health Facilities Auth., Hospital Rev., 5.00%, 2015 1,700 1,595
Sewer and Solid Waste Disposal Facility, Rev., 5.875%, 2036 3,000 3,000
St. John's River, Rev., 6.00%, 2005 2,000 2,177
--------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
PRINCIPAL
ISSUER AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Manatee County:
Gen. Oblg., 4.75%, 2013 $ 1,000 $ 919
Meditrust Proj., First Mortgage, Rev., 7.35%, 2015 1,660 1,783
--------------------------------------------------------------------------------------
Martin County, Industrial Dev. Auth., Indiantown
Cogeneration, L.P. Proj., Rev., 7.875%, 2025 2,325 2,667
--------------------------------------------------------------------------------------
Nassau County, GF/Amelia Island Properties, Inc. Proj.,
Rev., 9.75%, 2023 990 1,106
--------------------------------------------------------------------------------------
North Miami, Johnson and Wales University Proj., Educational
Facilities Rev., 6.10% and 6.125%, 2013 and 2020 4,785 4,812
--------------------------------------------------------------------------------------
Orange County:
Health Facilities Auth., Rev., 6.25%, 2016 and 2018 3,500 3,832
Housing Finance Auth., Single Family Mortgage, Rev., 5.95%,
2028 3,250 3,236
Tourist Dev. Tax Rev., 5.90%, 2010 1,000 1,076
--------------------------------------------------------------------------------------
Orlando -- Orange County Expressway Auth., Junior Lien,
Rev., 6.50%, 2012 1,000 1,136
--------------------------------------------------------------------------------------
Orlando Utilities Commission, Water and Electric, Rev.,
6.75%, 2017 3,000 3,518
--------------------------------------------------------------------------------------
Palm Beach County:
Criminal Justice Facilities, Rev., 7.20%, 2015 110 133
Solid Waste Auth., Rev., 8.75%, 2010 245 256
--------------------------------------------------------------------------------------
Pasco County Solid Waste Disposal and Resource Recovery
System, Rev., 7.80%, 2011 345 366
--------------------------------------------------------------------------------------
Pensacola, Health Facilities Auth., Rev., 5.25%, 2011 2,200 2,153
--------------------------------------------------------------------------------------
Pinellas County:
Housing Finance Auth., Single Family Mortgage Rev., 6.10%,
2029 1,500 1,515
Pollution Control Rev., 7.20%, 2014 2,000 2,161
--------------------------------------------------------------------------------------
St. Petersburg Health Facilities Auth., Allegheny Health
System, Rev., 7.00% and 6.75%, 2015 and 2021 1,500 1,654
--------------------------------------------------------------------------------------
Tampa Sports Auth., Special Purpose, Rev., 5.75%, 2020 2,075 2,156
--------------------------------------------------------------------------------------
Village Center Community Dev. District, Utility Rev., 6.00%,
2018 1,250 1,334
--------------------------------------------------------------------------------------
Westchase Community Dev. District, Rev., 5.80%, 2012 3,000 3,127
--------------------------------------------------------------------------------------
Puerto Rico Commonwealth:
Facilities Financing Auth., Mennonite Gen. Hospital Proj.,
Rev., 6.50%, 2018 2,000 2,072
Gen. Oblg., 6.25%, 2013 850 948
Highway and Transportation Auth., Rev., 5.50% and 6.00%,
2013 and 2018 2,750 2,888
Ports Auth., American Airlines, Inc. Proj., Rev., 6.25%,
2026 1,030 1,061
--------------------------------------------------------------------------------------
Virgin Islands Public Finance Auth., Matching Fund Loan,
Rev., 7.25%, 2018 2,125 2,302
--------------------------------------------------------------------------------------
TOTAL OTHER MUNICIPAL OBLIGATIONS--87.9% 95,781
--------------------------------------------------------------------------------------
TOTAL MUNICIPAL OBLIGATIONS--95.0%
(Cost: $98,370) 103,538
--------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS
Yield--3.40% to 3.55%
Due--March 1997
--------------------------------------------------------------------------------------
Hillsborough County, Industrial Dev. Auth., Rev. 5,100 5,100
--------------------------------------------------------------------------------------
St. Lucie County, Pollution Control Rev. 1,300 1,300
--------------------------------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--5.9%
(Cost: $6,400) 6,400
--------------------------------------------------------------------------------------
TOTAL INVESTMENTS--100.9%
(Cost: $104,770) 109,938
--------------------------------------------------------------------------------------
LIABILITIES, LESS CASH AND OTHER ASSETS--(.9)% (940)
--------------------------------------------------------------------------------------
NET ASSETS--100% $ 108,998
--------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTE TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Based on the cost of investments of $104,770,000 for federal income tax purposes
at February 28, 1997, the gross unrealized appreciation was $5,225,000, the
gross unrealized depreciation was $57,000 and the net unrealized appreciation on
investments was $5,168,000.
See accompanying Notes to Financial Statements.
10
<PAGE> 11
PORTFOLIO STATISTICS
KEMPER NEW JERSEY TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION* ON 2/28/97 ON 8/31/96
- --------------------------------------------------------------------------------
<S> <C> <C>
REVENUE BONDS 59% 62%
- --------------------------------------------------------------------------------
GENERAL OBLIGATION BONDS 31 31
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURED 2 --
- --------------------------------------------------------------------------------
CASH AND EQUIVALENTS 8 7
- --------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 2/28/97 ON 8/31/96
QUALITY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
ON 2/28/97 ON 8/31/96
- -------------------------------------------------------------------------------
<S> <C> <C>
AAA 79% 76%
- -------------------------------------------------------------------------------
AA 8 6
- -------------------------------------------------------------------------------
A 3 7
- -------------------------------------------------------------------------------
BBB 6 7
- -------------------------------------------------------------------------------
B 1 --
- -------------------------------------------------------------------------------
NOT RATED 3 4
- -------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 2/28/97 ON 8/31/96
YEARS TO MATURITY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
ON 2/28/97 ON 8/31/96
- -----------------------------------------------------------------------------
<S> <C> <C>
1-10 YEARS 7% 1%
- -----------------------------------------------------------------------------
10-20 YEARS 70 74
- -----------------------------------------------------------------------------
20 + YEARS 23 25
- -----------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 2/28/97 ON 8/31/96
AVERAGE MATURITY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
ON 2/28/97 ON 8/31/96
- -----------------------------------------------------------------------------
<S> <C> <C>
15.0 YEARS 15.4 YEARS
- ----------------------------------------------------------------------------
</TABLE>
*Portfolio composition is subject to change.
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
NEW JERSEY TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS AT FEBRUARY 28, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
PRINCIPAL
ISSUER AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
ADVANCE REFUNDED OBLIGATIONS SECURED AS TO PRINCIPAL
AND INTEREST BY UNITED STATES GOVERNMENT SECURITIES
- ------------------------------------------------------------------------------------------------------
Essex County, Improvement Auth., College Proj., Rev., 7.00%,
to be called 12-1-04 @ 102 $ 15 $ 18
---------------------------------------------------------------------------------
Gen. Oblg., 6.75%, to be called 9-15-01 @ 101.50 45 50
---------------------------------------------------------------------------------
Jersey City, Gen. Oblg., 6.60%, to be called 5-15-01 @ 102 40 44
---------------------------------------------------------------------------------
TOTAL ADVANCE REFUNDED OBLIGATIONS--2.5% 112
---------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
OTHER MUNICIPAL OBLIGATIONS
- ------------------------------------------------------------------------------------------------------
Economic Dev. Auth.:
Educational Testing Service, Rev., 6.125%, 2015 100 105
Market Transition Facility, Rev., 5.875%, 2011 90 94
Pollution Control, Public Service Electric and Gas Company
Proj., Rev., 6.40%, 2032 90 96
Water Facility, Elizabethtown Water Company Proj., Rev.,
5.60%, 2025 25 24
---------------------------------------------------------------------------------
Educational Facilities Auth.:
Caldwell College, Rev., 7.25%, 2025 50 53
Rider College, Rev., 6.20%, 2017 115 121
Rowan College, Rev., 5.875%, 2013 100 105
University of Medicine and Dentistry, Rev., 5.25%, 2021 75 72
---------------------------------------------------------------------------------
Health Care Facilities Financing Auth.:
Atlantic City Medical Center, Rev., 6.80%, 2011 75 81
Dover Gen. Hospital and Medical Center, Rev., 5.875%, 2012 75 78
Hackensack Medical Center, Rev., 6.625%, 2017 15 16
Jersey Shore Medical Center, Rev., 6.25%, 2016 100 106
Southern Ocean County Hospital, Rev., 6.125%, 2013 120 121
---------------------------------------------------------------------------------
Highway Auth., Garden State Parkway, Rev., 6.25%, 2014 50 53
---------------------------------------------------------------------------------
Housing and Mortgage Finance Agcy., Home Buyer Rev., 5.875%
and 6.05%, 2017 and 2028 175 176
---------------------------------------------------------------------------------
Sports and Exposition Auth., Rev., 6.00%, 2013 100 104
---------------------------------------------------------------------------------
Transportation Auth., Rev., 6.50%, 2005 75 84
---------------------------------------------------------------------------------
Turnpike Auth., Rev., 6.50%, 2016 125 140
---------------------------------------------------------------------------------
Wastewater Treatment Trust, Rev., 7.00%, 2007 100 117
---------------------------------------------------------------------------------
Atlantic City Board of Education, Gen. Oblg., 6.15%, 2015 150 157
---------------------------------------------------------------------------------
Bayshore Regional Sewerage Auth., Rev., 5.50%, 2012 100 101
---------------------------------------------------------------------------------
Bergen County, Utilities Auth., Rev., 5.125%, 2012 50 49
---------------------------------------------------------------------------------
Brick Township, Municipal Utilities Auth., Rev., 5.00%, 2016 75 71
---------------------------------------------------------------------------------
Camden County, Gen. Oblg., 5.05%, 2014 75 72
---------------------------------------------------------------------------------
Cape May County, Municipal Utilities Auth., Rev., 6.00%,
2011 15 16
---------------------------------------------------------------------------------
Chatham Borough, Gen. Oblg., 5.80%, 2015 32 33
---------------------------------------------------------------------------------
Essex County, Improvement Auth., County Jail and Youth House
Proj., Rev., 5.35%, 2024 75 73
---------------------------------------------------------------------------------
Hainesport Township, Board of Education, Gen. Oblg., 5.375%,
2017 75 74
---------------------------------------------------------------------------------
Jackson Township, Gen. Oblg., 6.60%, 2012 135 155
---------------------------------------------------------------------------------
Jersey City, Gen. Oblg., 6.25%, 2012 50 55
---------------------------------------------------------------------------------
Manchester Township, Gen. Oblg., 5.00%, 2011 50 49
---------------------------------------------------------------------------------
Merchantville Board of Education, Gen. Oblg., 5.80%, 2014 100 103
---------------------------------------------------------------------------------
Monmouth County, Improvement Auth., Rev., 5.125%, 2016 75 72
---------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
PRINCIPAL
ISSUER AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Monroe Township, Gen. Oblg., 5.20%, 2015 $ 75 $ 73
---------------------------------------------------------------------------------
Morristown, Gen. Oblg., 5.05%, 2011 100 99
---------------------------------------------------------------------------------
Newark Board of Education, Gen. Oblg., 6.00%, 2010 15 16
---------------------------------------------------------------------------------
North Brunswick Township, Gen. Oblg., 6.10% and 6.30%, 2010
and 2015 135 143
---------------------------------------------------------------------------------
North Hudson Sewerage Auth., Rev., 5.125%, 2022 50 47
---------------------------------------------------------------------------------
Ocean County Board of Education, Southern Regional High
School, Gen. Oblg., 5.50%, 2010 75 77
---------------------------------------------------------------------------------
Paulsboro Borough, Gen. Oblg., 5.80%, 2014 15 15
---------------------------------------------------------------------------------
Port Auth. of New York and New Jersey: Gen. Oblg., 9.125%,
2015 25 29
LaGuardia Airport Passenger Terminal, Rev., 6.00%, 2014 75 78
---------------------------------------------------------------------------------
Readington Township Board of Education, Gen. Oblg., 5.60%,
2018 75 75
---------------------------------------------------------------------------------
Sparta Township Board of Education, Gen. Oblg., 5.75%, 2013 75 77
---------------------------------------------------------------------------------
Summit, Gen. Oblg., 5.00%, 2010 45 45
---------------------------------------------------------------------------------
Puerto Rico Commonwealth:
Electric Power Auth., Rev., 6.50%, 2006 75 85
Facilities Financing Auth., Mennonite Gen. Hospital Proj.,
Rev., 6.50%, 2026 100 103
Highway and Transportation Auth., Rev., 6.25%, 2016 120 133
Ports Auth., American Airlines, Inc. Proj., Rev., 6.25%,
2026 40 41
---------------------------------------------------------------------------------
Virgin Islands Public Finance Auth., Matching Fund Loan,
Rev., 7.25%, 2018 75 81
---------------------------------------------------------------------------------
TOTAL OTHER MUNICIPAL OBLIGATIONS--89.6% 4,043
---------------------------------------------------------------------------------
TOTAL MUNICIPAL OBLIGATIONS--92.1%
(Cost: $4,028) 4,155
---------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS
Yield--3.10% to 3.40%
Due--March 1997
---------------------------------------------------------------------------------
Economic Dev. Auth.:
Natural Gas Facilities, Natural Gas Company Proj., Rev. 300 300
Gas Facilities, NUI Corporation Proj., Rev. 100 100
---------------------------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--8.9%
(Cost: $400) 400
---------------------------------------------------------------------------------
TOTAL INVESTMENTS--101.0%
(Cost: $4,428) 4,555
---------------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS--(1.0)% (45)
---------------------------------------------------------------------------------
NET ASSETS--100% $4,510
---------------------------------------------------------------------------------
</TABLE>
- -----------------------------------------------------------------------
NOTE TO PORTFOLIO OF INVESTMENTS
- -----------------------------------------------------------------------
Based on the cost of investments of $4,428,000 for federal income tax purposes
at February 28, 1997, the gross unrealized appreciation was $130,000, the gross
unrealized depreciation was $3,000 and the net unrealized appreciation on
investments was $127,000.
See accompanying Notes to Financial Statements.
13
<PAGE> 14
PORTFOLIO STATISTICS
KEMPER NEW YORK TAX-FREE INCOME FUND
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
ON 2/28/97 ON 8/31/96
- -------------------------------------------------------------------------------
<S> <C> <C>
REVENUE BONDS 83% 94%
- -------------------------------------------------------------------------------
GENERAL OBLIGATION BONDS 6 4
- -------------------------------------------------------------------------------
U.S. GOVERNMENT SECURED 7 --
- -------------------------------------------------------------------------------
CASH AND EQUIVALENTS 4 2
- -------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 2/28/97 ON 8/31/96
QUALITY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
ON 2/28/97 ON 8/31/96
- -------------------------------------------------------------------------------
<S> <C> <C>
AAA 43% 43%
- -------------------------------------------------------------------------------
AA 28 25
- -------------------------------------------------------------------------------
A 3 8
- -------------------------------------------------------------------------------
BBB 22 21
- -------------------------------------------------------------------------------
B 1 --
- -------------------------------------------------------------------------------
NOT RATED 3 3
- -------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 2/28/97 ON 8/31/96
YEARS TO MATURITY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
ON 2/28/97 ON 8/31/96
- -------------------------------------------------------------------------------
<S> <C> <C>
1-10 YEARS 9% 7%
- -------------------------------------------------------------------------------
11-20 YEARS 50 51
- -------------------------------------------------------------------------------
21 + YEARS 41 42
- -------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 2/28/97 ON 8/31/96
AVERAGE MATURITY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
ON 2/28/97 ON 8/31/96
- -------------------------------------------------------------------------------
<S> <C> <C>
16.6 YEARS 17.6 YEARS
- -------------------------------------------------------------------------------
</TABLE>
*Portfolio composition is subject to change.
14
<PAGE> 15
PORTFOLIO OF INVESTMENTS
NEW YORK TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS AT FEBRUARY 28, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
PRINCIPAL
ISSUER AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
ADVANCE REFUNDED OBLIGATIONS SECURED AS TO PRINCIPAL
AND INTEREST BY UNITED STATES GOVERNMENT SECURITIES
- ---------------------------------------------------------------------------------------------------------
Battery Park City Auth., Rev., 8.625%, to be called 6-1-05 @
100 $ 10 $ 13
------------------------------------------------------------------------------------
Dormitory Auth.:
Ideal Senior Living Center, Rev., 7.625%, to be called
2-1-99 @ 102 400 434
State University Educational Facilities, Rev., 7.25%, to
be called 5-15-02 @ 102 155 178
------------------------------------------------------------------------------------
Medical Care Facilities Finance Agcy.:
Albany Medical Center Hospital, Rev., 8.00%, to be called
8-15-98 @ 102 1,085 1,165
Long Beach Memorial Hospital Proj., Rev., 7.80%, to be
called 8-15-98 @ 102 1,000 1,075
Mental Health Service Facilities Improvement, Rev., 7.40%
to 7.875%, to be called 2-15-02 @ 102 1,330 1,513
Montefiore Medical Center, Rev., 7.25%, to be called
2-15-99 @ 102 2,000 2,158
Presbyterian Hospital Proj., Rev., 7.70%, to be called
8-15-00 @ 102 4,000 4,511
------------------------------------------------------------------------------------
New York City, Gen. Oblg., 7.75%, to be called 3-15-00 @
101.50 1,105 1,230
------------------------------------------------------------------------------------
Power Auth. Electrical, Gen. Purpose, Rev., 8.00%, to be
called 1-1-98 @ 102 5,320 5,616
------------------------------------------------------------------------------------
Thruway Auth., Local Highway and Bridge Service Contract,
Rev., 7.25%, to be called 1-1-01 @ 102 1,890 2,111
------------------------------------------------------------------------------------
Urban Dev. Corp., Syracuse University Center for Science and
Technology, Rev., 7.75%, to be called 1-1-98 @ 102 200 211
------------------------------------------------------------------------------------
Virgin Islands Housing Finance Auth., GNMA Collateralized
Home Morgage Rev., 8.10%, to be called 12-1-98 @ 102 70 76
------------------------------------------------------------------------------------
TOTAL ADVANCE REFUNDED OBLIGATIONS--6.9% 20,291
------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
OTHER MUNICIPAL OBLIGATIONS
- ---------------------------------------------------------------------------------------------------------
Dormitory Auth.:
Bishop Henry B. Hucles Nursing Home, Inc., Rev., 5.625%,
2018 5,000 4,975
City University System, Rev., 5.75% and 7.00%, 2009
through 2018 14,780 15,370
Colgate University, Rev., 6.00%, 2016 and 2021 1,300 1,385
Cornell University, Rev., 7.375%, 2020 2,000 2,212
Fordham University, Rev., 7.20%, 2015 790 867
Ithaca College, Rev., 5.25%, 2026 2,250 2,129
Judicial Lease Facility, Rev., 7.375%, 2016 120 145
Menorah Campus Inc., Rev., 7.30% and 7.40%, 2016 and 2031 3,860 4,264
Mental Health Services Facilities Improvement, Rev.,
5.125%, 2021 6,280 5,889
Special Art School Districts Program, Rev., 7.00%, 2013 1,300 1,419
State University Educational Facilities, Rev., 5.50% to
7.50%, 2010 through 2017 12,425 12,694
St. Joseph's Hospital Health Center, Rev., 5.25% and
6.00%, 2008 through 2018 5,450 5,484
St. Vincent's Hospital and Medical Center, Rev., 7.375%,
2011 2,500 2,787
------------------------------------------------------------------------------------
Energy Research and Dev. Auth., Consolidated Edison Company
of New York, Inc. Proj., Rev., 6.10% to 7.75%, 2020
through 2025 13,400 14,038
------------------------------------------------------------------------------------
Environmental Facilities Corp.:
Huntington Resource Recovery Proj., Rev., 7.50%, 2012 3,745 4,122
Riverbank State Park Rev., 5.125% and 6.25%, 2012 and 2022 6,695 6,890
State Water Pollution Control, Revolving Fund Rev., 5.75%
and 7.25%, 2010 through 2014 8,500 9,039
------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 16
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
PRINCIPAL
ISSUER AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Housing Finance Agcy.:
Multi-Family Mortgage Rev., 6.95% and 6.00%, 2012 and 2027 $ 3,195 $ 3,289
Service Contract Oblg., Rev., 7.30% and 7.25%, 2012 4,000 4,406
State University Construction, Rev., 8.00%, 2011 200 251
West-H.E.L.P. Housing, Rev., 7.55%, 2002 3,245 3,389
------------------------------------------------------------------------------------
Local Government Assistance Corp., Rev., 6.00%, 2024 3,000 3,060
------------------------------------------------------------------------------------
Medical Care Facilities Finance Agcy.:
Columbian Presbyterian Hospital, Rev., 7.875%, 2007 500 518
Good Samaritan Hospital, Rev., 7.625%, 2023 1,000 1,048
Hospital and Nursing Home Rev., 7.60%, 2029 2,000 2,146
Mental Health Service Facilities Improvement, Rev., 7.40%
to 7.875%, 2015 through 2020 3,070 3,346
------------------------------------------------------------------------------------
Metropolitan Transportation Auth.:
Commuter Facilities Rev., 6.00%, 2016 and 2021 11,750 12,191
Dedicated Tax Fund, Rev., 5.25%, 2021 1,350 1,289
------------------------------------------------------------------------------------
Mortgage Agcy.:
Homeowner Mortgage, Rev., 6.45% to 7.95%, 2009 through
2022 9,500 9,941
Single Family Housing, Rev., 8.30%, 2017 680 697
------------------------------------------------------------------------------------
Port Auth. of New York and New Jersey:
Gen. Oblg., 9.125%, 2015 2,550 2,907
LaGuardia Airport Passenger Terminal, Rev., 6.00%, 2014 4,265 4,439
------------------------------------------------------------------------------------
Urban Dev. Corp.:
Correctional Capital Facilities, Rev., 5.625%, 2017 3,255 3,145
Grants University Facilities, Rev., 5.50%, 2015 2,000 1,943
Senior Lien, Rev., 5.75%, 2009 9,045 9,486
State Facilities, Rev., 5.60% and 5.75%, 2012 and 2015 3,760 3,729
Syracuse University Center for Science and Technology
Loan, Rev., 5.50%, 2015 and 2017 9,390 9,105
------------------------------------------------------------------------------------
Buffalo Municipal Water Finance Auth., Rev., 5.00%, 2025 2,000 1,824
------------------------------------------------------------------------------------
Dutchess County Resource Recovery Agcy., Solid Waste
Management System, Rev., 7.50%, 2009 2,000 2,174
------------------------------------------------------------------------------------
Monroe County, Gen Oblg., 6.00%, 2018 and 2019 2,330 2,494
------------------------------------------------------------------------------------
Nassau County, Gen. Oblg., 5.20%, 2015 2,675 2,583
------------------------------------------------------------------------------------
New York City:
Gen. Oblg., 5.875% to 8.00%, 1998 through 2025 10,435 10,449
Housing Dev. Corp., Multi-Unit Mortgage Rev., 7.30%, 2010 8,800 9,387
Industrial Dev. Agcy., Japan Airlines Company, Ltd. Proj.,
Rev., 6.00%, 2015 5,250 5,385
Municipal Assistance Corp., Rev., 7.625% and 6.00%, 2008 9,160 9,944
Municipal Water Finance Auth., Water and Sewer System,
Rev., 6.00%, 2025 2,750 2,840
Transit Auth., Livingston Plaza Proj., Rev., 5.40%, 2018 6,680 6,545
------------------------------------------------------------------------------------
Niagara County, Water Treatment Plant, Gen. Oblg., 7.25% and
7.00%, 2011 and 2012 1,215 1,384
------------------------------------------------------------------------------------
Niagara Frontier Transportation Auth., Airport Rev., 6.125%,
2014 3,000 3,124
------------------------------------------------------------------------------------
Suffolk County Water Auth., Rev., 7.375%, 2012 170 181
------------------------------------------------------------------------------------
Syracuse, Onondaga County Airport Improvement, Gen. Oblg.,
6.125%, 2014 710 739
------------------------------------------------------------------------------------
Triborough Bridge and Tunnel Auth., Gen. Purpose Rev.,
6.125%, 2021 7,205 7,834
------------------------------------------------------------------------------------
Troy, Municipal Assistance Corp., Rev., 5.00%, 2022 1,200 1,103
------------------------------------------------------------------------------------
Ulster County, Resource Recovery Agcy., Solid Waste System,
Rev., 6.00%, 2014 3,000 2,930
------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
PRINCIPAL
ISSUER AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Puerto Rico Commonwealth:
Facilities Financing Auth., Mennonite Gen. Hospital Proj.,
Rev., 6.50%, 2018 $ 5,985 $ 6,201
Highway and Transportation Auth., Rev., 6.00%, 2018 2,750 2,963
------------------------------------------------------------------------------------
Virgin Islands, Public Finance Auth., Matching Fund Loan,
Rev., 7.25%, 2018 7,100 7,690
------------------------------------------------------------------------------------
TOTAL OTHER MUNICIPAL OBLIGATIONS--88.9% 261,808
------------------------------------------------------------------------------------
TOTAL MUNICIPAL OBLIGATIONS--95.8%
(Cost: $269,112) 282,099
------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS--1.8%
Yield--3.55% to 3.60%
Due--March 1997
(Cost: $5,200) 5,200 5,200
------------------------------------------------------------------------------------
TOTAL INVESTMENTS--97.6%
(Cost: $274,312) 287,299
------------------------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES--2.4% 7,172
------------------------------------------------------------------------------------
NET ASSETS--100% $294,471
------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTE TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Based on the cost of investments of $274,312,000 for federal income tax purposes
at February 28, 1997, the gross unrealized appreciation was $13,122,000, the
gross unrealized depreciation was $135,000 and the net unrealized appreciation
on investments was $12,987,000.
See accompanying Notes to Financial Statements.
17
<PAGE> 18
PORTFOLIO STATISTICS
KEMPER PENNSYLVANIA TAX-FREE INCOME FUND
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
ON 2/28/97 ON 8/31/96
- -------------------------------------------------------------------------------
<S> <C> <C>
REVENUE BONDS 70% 68%
- ----------------------------------------------------------------------------
GENERAL OBLIGATION BONDS 23 28
- ----------------------------------------------------------------------------
U.S. GOVERNMENT SECURED 1 --
- ----------------------------------------------------------------------------
CASH AND EQUIVALENTS 6 4
- ----------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 2/28/97 ON 8/31/96
QUALITY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
ON 2/28/97 ON 8/31/96
- -------------------------------------------------------------------------------
<S> <C> <C>
AAA 58% 75%
- ----------------------------------------------------------------------------
AA 15 9
- ----------------------------------------------------------------------------
A 3 --
- ----------------------------------------------------------------------------
BBB 20 13
- ----------------------------------------------------------------------------
NOT RATED 4 3
- ----------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 2/28/97 ON 8/31/96
YEARS TO MATURITY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
ON 2/28/97 ON 8/31/96
- -------------------------------------------------------------------------------
<S> <C> <C>
1-10 YEARS 9% 1%
- ----------------------------------------------------------------------------
11-20 YEARS 64 82
- ----------------------------------------------------------------------------
21 + YEARS 27 17
- ----------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 2/28/97 ON 8/31/96
AVERAGE MATURITY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
ON 2/28/97 ON 8/31/96
- -------------------------------------------------------------------------------
<S> <C> <C>
14.9 YEARS 14.9 YEARS
- -------------------------------------------------------------------------------
</TABLE>
*Portfolio composition is subject to change.
18
<PAGE> 19
PORTFOLIO OF INVESTMENTS
PENNSYLVANIA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS AT FEBRUARY 28, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
PRINCIPAL
ISSUER AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
ADVANCE REFUNDED OBLIGATIONS SECURED AS TO PRINCIPAL
AND INTEREST BY UNITED STATES GOVERNMENT SECURITIES
- ------------------------------------------------------------------------------------------------------
Allegheny County, Gen. Oblg., 6.50%, to be called 9-1-01 @
100 $ 10 $ 11
---------------------------------------------------------------------------------
Lower Salford Township, Sewer Auth., Rev., 7.375%, to be
called 7-15-00 @ 100 45 49
---------------------------------------------------------------------------------
University Area Joint Auth., Sewer Rev., 7.10%, to be called
9-1-00 @ 101 10 11
---------------------------------------------------------------------------------
TOTAL ADVANCE REFUNDED OBLIGATIONS--1.4% 71
---------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
OTHER MUNICIPAL OBLIGATIONS
- ------------------------------------------------------------------------------------------------------
Convention Center Auth., Rev., 6.70% and 6.75%, 2016 and
2019 160 180
---------------------------------------------------------------------------------
Gen. Oblg., 6.50% and 6.25%, 2009 and 2011 75 82
---------------------------------------------------------------------------------
Higher Educational Facilities Auth.:
Allegheny Gen. Hospital, Rev., 7.00%, 2011 100 111
Bryn Mawr College, Rev., 6.00%, 2015 100 104
Muhlenberg College, Temple University and Thomas Jefferson
University, Rev., 7.20%, 2007 40 47
Philadelphia College of Textiles & Science, Rev., 6.70%,
2014 70 73
University of Pennsylvania, Rev., 5.35% and 5.55%, 2008 and
2009 150 153
Ursinus College, Rev., 5.90%, 2027 100 98
---------------------------------------------------------------------------------
Housing Finance Agcy., Rev., 6.30% and 6.15%, 2015 and 2022 150 153
---------------------------------------------------------------------------------
Industrial Dev. Auth., Economic Dev., Rev., 5.50% to 7.00%,
2007 through 2014 120 127
---------------------------------------------------------------------------------
Intergovernmental Cooperation Auth., Rev., 5.25%, 2006 25 26
---------------------------------------------------------------------------------
Turnpike Commission, Rev., 6.00% and 6.25%, 2009 and 2011 75 80
---------------------------------------------------------------------------------
Abington Heights School District, Gen. Oblg., 5.00%, 2014 25 24
---------------------------------------------------------------------------------
Allegheny County:
Gen. Oblg., 5.15%, 2007 100 102
Higher Education Building Auth., Duquesne University Proj.,
Rev., 6.50%, 2011 160 181
Industrial Dev. Auth., USX Proj., Rev., 6.10%, 2018 75 76
---------------------------------------------------------------------------------
Beaver County, Industrial Dev. Auth., Beaver Valley Proj.,
Rev., 6.00%, 2028 50 51
---------------------------------------------------------------------------------
Bensalem Township, Gen. Oblg., 5.75%, 2011 100 103
---------------------------------------------------------------------------------
Bethlehem Area School District, Gen. Oblg., 6.00%, 2016 150 155
---------------------------------------------------------------------------------
Blair County, Gen. Oblg., 5.75%, 2006 100 107
---------------------------------------------------------------------------------
Bucks County, Community College Auth., Rev., 5.50%, 2017 100 99
---------------------------------------------------------------------------------
Cambria County, Gen. Oblg., 5.875%, 2008 15 16
---------------------------------------------------------------------------------
Columbia County, Industrial Dev. Auth., First Street
Association Proj., Rev., 9.00%, 2014 65 69
---------------------------------------------------------------------------------
Delaware County, Gen. Oblg., 5.80%, 2016 125 127
---------------------------------------------------------------------------------
Erie County, Industrial Dev. Auth., International Paper Co.
Proj., Rev., 5.85%, 2020 50 50
---------------------------------------------------------------------------------
Exeter Township, Berks County Auth., Rev., 6.20%, 2022 75 78
---------------------------------------------------------------------------------
Hazleton, Health Services Auth., St. Joseph Medical Center
Proj., Rev., 6.20%, 2026 75 75
---------------------------------------------------------------------------------
Jeannette, Health Service Auth., District Memorial Hospital
Proj., Rev., 6.00%, 2018 95 95
---------------------------------------------------------------------------------
Lackawanna County, Gen. Oblg., 6.00%, 2011 15 16
---------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
PRINCIPAL
ISSUER AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Luzerne County, Gen. Oblg., 5.60%, 2016 $ 90 $ 90
---------------------------------------------------------------------------------
McKean County Hospital Auth., Bradford Hospital Proj., Rev.,
5.375% and 6.10%, 2003 and 2020 115 114
---------------------------------------------------------------------------------
Media Boro, Gen. Oblg., 6.45%, 2012 40 45
---------------------------------------------------------------------------------
Monroeville Hospital Auth., Forbes Health System, Rev.,
6.25%, 2015 125 127
---------------------------------------------------------------------------------
North Fayette County Municipal Auth., Rev., zero coupon,
2013 100 40
---------------------------------------------------------------------------------
Northampton County, Industrial Dev. Auth., Metropolitan
Edison Proj., Rev., 6.10%, 2021 125 130
---------------------------------------------------------------------------------
Northeastern Hospital and Education Auth., Wyoming Valley
Healthcare System, Rev., 5.25%, 2026 50 47
---------------------------------------------------------------------------------
Philadelphia:
Airport System Rev., 5.75%, 2008 100 104
Gas Works Rev., 6.375%, 2014 90 94
Municipal Auth., Rev., 6.80% and 6.125%, 2002 and 2008 110 113
School District, Gen. Oblg., 5.45% to 6.25%, 2004 through
2009 180 195
Water and Wastewater Rev., 6.25%, 2012 50 55
---------------------------------------------------------------------------------
Southeastern Transportation Auth., Rev., 5.90% and 6.00%,
2010 and 2012 125 131
---------------------------------------------------------------------------------
Suburban Lancaster Sewer Auth., Rev., 5.80%, 2010 100 104
---------------------------------------------------------------------------------
Unionville-Chadds Ford School District, Gen. Oblg., 5.50%,
2008 75 76
---------------------------------------------------------------------------------
University Area Joint Auth., Sewer Rev., 5.25%, 2014 50 49
---------------------------------------------------------------------------------
Upper Merion Area School District, Gen. Oblg., 5.50%, 2016 20 20
---------------------------------------------------------------------------------
Washington County Hospital Auth., Hospital Proj., Rev.,
5.50%, 2012 75 75
---------------------------------------------------------------------------------
Westmoreland County Industrial Dev. Auth., Health System
Proj., Rev., 6.00%, 2011 15 16
---------------------------------------------------------------------------------
York County Industrial Dev. Auth., Public Service Electric
and Gas Company, Rev., 6.45%, 2019 20 22
---------------------------------------------------------------------------------
Puerto Rico:
Facilities Financing Auth., Mennonite Gen. Hospital Proj.,
Rev., 6.50%, 2018 100 104
Highway and Transportation Auth., Rev., 6.25%, 2016 115 127
Ports Auth., American Airlines, Inc. Proj., Rev., 6.25%,
2026 40 41
---------------------------------------------------------------------------------
Virgin Islands Public Finance Auth., Matching Fund Loan,
Rev., 7.25%, 2018 100 108
---------------------------------------------------------------------------------
TOTAL OTHER MUNICIPAL OBLIGATIONS--92.5% 4,685
---------------------------------------------------------------------------------
TOTAL MUNICIPAL OBLIGATIONS--93.9%
(Cost: $4,630) 4,756
---------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS--4.0%
Yield--3.45%
Due--March 1997
(Cost: $200) 200 200
---------------------------------------------------------------------------------
TOTAL INVESTMENTS--97.9%
(Cost: $4,830) 4,956
---------------------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES--2.1% 104
---------------------------------------------------------------------------------
NET ASSETS--100% $5,060
---------------------------------------------------------------------------------
</TABLE>
- ------------------------------------------------------------------------------
NOTE TO PORTFOLIO OF INVESTMENTS
- ------------------------------------------------------------------------------
Based on the cost of investments of $4,830,000 for federal income tax purposes
at February 28, 1997, the gross unrealized appreciation on investments was
$126,000 and there was no gross unrealized depreciation.
See accompanying Notes to Financial Statements.
20
<PAGE> 21
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
FLORIDA NEW JERSEY NEW YORK PENNSYLVANIA
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------------------------------------
Investments, at value (Cost: $104,770, $4,428,
$274,312 and $4,830, respectively) $109,938 4,555 287,299 4,956
- ------------------------------------------------------------------------------------------------------
Cash 1,168 -- 222 12
- ------------------------------------------------------------------------------------------------------
Receivable for:
Fund shares sold 1,087 -- 308 50
- ------------------------------------------------------------------------------------------------------
Investments sold 1,921 -- 5,831 1
- ------------------------------------------------------------------------------------------------------
Interest 1,750 58 3,785 83
- ------------------------------------------------------------------------------------------------------
TOTAL ASSETS 115,864 4,613 297,445 5,102
- ------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ------------------------------------------------------------------------------------------------------
Cash overdraft -- 11 -- --
- ------------------------------------------------------------------------------------------------------
Payable for:
Dividends 129 4 381 6
- ------------------------------------------------------------------------------------------------------
Fund shares redeemed 39 25 91 --
- ------------------------------------------------------------------------------------------------------
Investments purchased 6,563 49 2,146 25
- ------------------------------------------------------------------------------------------------------
Management fee 50 2 134 2
- ------------------------------------------------------------------------------------------------------
Administrative services fee 16 1 44 1
- ------------------------------------------------------------------------------------------------------
Distribution services fee 2 2 7 1
- ------------------------------------------------------------------------------------------------------
Trustees' fees and other 67 9 171 7
- ------------------------------------------------------------------------------------------------------
Total liabilities 6,866 103 2,974 42
- ------------------------------------------------------------------------------------------------------
NET ASSETS $108,998 4,510 294,471 5,060
- ------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- ------------------------------------------------------------------------------------------------------
Paid-in capital $104,152 4,397 282,420 4,942
- ------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (322) (14) (936) (8)
- ------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 5,168 127 12,987 126
- ------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $108,998 4,510 294,471 5,060
- ------------------------------------------------------------------------------------------------------
THE PRICING OF SHARES
- ------------------------------------------------------------------------------------------------------
CLASS A SHARES
Net assets applicable to shares outstanding $104,877 1,663 282,906 2,365
- ------------------------------------------------------------------------------------------------------
Shares outstanding 10,196 167 26,265 232
- ------------------------------------------------------------------------------------------------------
Net asset value and redemption price per share
(net assets / shares outstanding) $ 10.29 9.98 10.77 10.20
- ------------------------------------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 4.71% of net asset value or
4.50% of offering price) $ 10.77 10.45 11.28 10.68
- ------------------------------------------------------------------------------------------------------
CLASS B SHARES
Net assets applicable to shares outstanding $ 3,750 2,712 9,245 2,174
- ------------------------------------------------------------------------------------------------------
Shares outstanding 365 271 858 213
- ------------------------------------------------------------------------------------------------------
Net asset value and redemption price
(subject to contingent deferred sales charge) per
share (net assets / shares outstanding) $ 10.27 10.01 10.78 10.20
- ------------------------------------------------------------------------------------------------------
CLASS C SHARES
Net assets applicable to shares outstanding $ 371 135 2,320 521
- ------------------------------------------------------------------------------------------------------
Shares outstanding 36 13 215 51
- ------------------------------------------------------------------------------------------------------
Net asset value and redemption price
(subject to contingent deferred sales charge) per
share (net assets / shares outstanding) $ 10.27 10.01 10.76 10.20
- ------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
21
<PAGE> 22
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
FLORIDA NEW JERSEY NEW YORK PENNSYLVANIA
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET INVESTMENT INCOME
- -----------------------------------------------------------------------------------------------------------
Interest income $3,134 114 9,021 133
- -----------------------------------------------------------------------------------------------------------
Expenses:
Management fee 299 11 818 13
- -----------------------------------------------------------------------------------------------------------
Administrative services fee 94 5 260 6
- -----------------------------------------------------------------------------------------------------------
Distribution services fee 13 10 37 9
- -----------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related
expenses 46 3 129 2
- -----------------------------------------------------------------------------------------------------------
Professional fees 8 -- 21 --
- -----------------------------------------------------------------------------------------------------------
Reports to shareholders 11 1 39 1
- -----------------------------------------------------------------------------------------------------------
Trustees' fees and other 9 6 15 7
- -----------------------------------------------------------------------------------------------------------
Total expenses before expense waiver 480 36 1,319 38
- -----------------------------------------------------------------------------------------------------------
Less expenses waived and absorbed by investment
manager -- -- -- 2
- -----------------------------------------------------------------------------------------------------------
Total expenses after expense waiver 480 36 1,319 36
- -----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 2,654 78 7,702 97
- -----------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- -----------------------------------------------------------------------------------------------------------
Net realized gain on sales of investments
(including options purchased) 1,151 20 3,227 40
- -----------------------------------------------------------------------------------------------------------
Net realized loss from futures transactions (316) (20) (473) (16)
- -----------------------------------------------------------------------------------------------------------
Net realized gain 835 -- 2,754 24
- -----------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation on
investments 1,174 78 2,760 91
- -----------------------------------------------------------------------------------------------------------
Net gain on investments 2,009 78 5,514 115
- -----------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $4,663 156 13,216 212
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
22
<PAGE> 23
FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED FEBRUARY 28, 1997 AND YEAR ENDED AUGUST 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
FLORIDA NEW JERSEY
------------------------ -----------------------
1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 2,654 5,821 78 174
- ---------------------------------------------------------------------------------------------------------------
Net realized gain 835 1,023 -- 22
- ---------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation 1,174 (198) 78 (5)
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 4,663 6,646 156 191
- ---------------------------------------------------------------------------------------------------------------
Distribution from net investment income (2,654) (5,821) (78) (174)
- ---------------------------------------------------------------------------------------------------------------
Distribution from net realized gain on investments (1,208) (1,557) (25) --
- ---------------------------------------------------------------------------------------------------------------
Total dividends to shareholders (3,862) (7,378) (103) (174)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital share
transactions 92 (8,455) 475 (344)
- ---------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 893 (9,187) 528 (327)
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 108,105 117,292 3,982 4,309
- ---------------------------------------------------------------------------------------------------------------
END OF PERIOD $108,998 108,105 4,510 3,982
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NEW YORK PENNSYLVANIA
------------------------- -----------------------
1997 1996 1997 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- --------------------------------------------------------------------------------------------------------------
Net investment income $ 7,702 16,197 97 156
- --------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 2,754 2,811 24 (29)
- --------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation 2,760 (2,528) 91 2
- --------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 13,216 16,480 212 129
- --------------------------------------------------------------------------------------------------------------
Distribution from net investment income (7,702) (16,197) (97) (156)
- --------------------------------------------------------------------------------------------------------------
Distribution from net realized gain on
investments (2,349) (4,194) -- --
- --------------------------------------------------------------------------------------------------------------
Total dividends to shareholders (10,051) (20,391) (97) (156)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital share
transactions (11,040) (13,220) 496 2,358
- --------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (7,875) (17,131) 611 2,331
- --------------------------------------------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------------------------------------------
Beginning of period 302,346 319,477 4,449 2,118
- --------------------------------------------------------------------------------------------------------------
END OF PERIOD $294,471 302,346 5,060 4,449
- --------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE
FUNDS Kemper Florida Tax-Free Income Fund, Kemper New
Jersey Tax-Free Income Fund, Kemper New York
Tax-Free Income Fund and Kemper Pennsylvania
Tax-Free Income Fund (collectively the Funds) are
four of eight investment portfolios comprising the
Kemper State Tax-Free Income Series (the Trust).
The remaining portfolios are Kemper California,
Kemper Michigan, Kemper Ohio and Kemper Texas
Tax-Free Income Funds. The Trust is an open-end
management investment company organized as a
business trust under the laws of Massachusetts.
Each Fund offers three classes of shares. Class A
shares are sold to investors subject to an initial
sales charge. 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
value. Fixed income securities are valued by using
market quotations, or independent pricing services
that use prices provided by market makers or
estimates of market values obtained from yield data
relating to instruments or securities with similar
characteristics. Exchange traded financial futures
and options are valued at the settlement price
established each day by the board of trade or
exchange on which they are traded. Over-the-counter
traded options are valued based upon prices
provided by market makers. Other securities and
assets are valued at fair value as determined in
good faith by the Board of Trustees.
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 premium and original
discount amortization on fixed income securities.
Realized gains and losses from investment
transactions are reported on an identified cost
basis.
EXPENSES. Expenses arising in connection with a
specific Fund are allocated to that Fund. Other
Trust expenses are allocated among the Funds in
proportion to their relative net assets.
FUND SHARE VALUATION. Fund shares are sold and
redeemed on a continuous basis at net asset value
(plus an initial sales charge on most sales of
Class A shares). 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.
24
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS
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.
FEDERAL INCOME TAXES. Each Fund has complied with
the special provisions of the Internal Revenue Code
available to investment companies for the six
months ended February 28, 1997.
DIVIDENDS TO SHAREHOLDERS. Each Fund declares and
records a daily dividend equal to its net
investment income for that day, to holders of
shares for which payment has been received. Income
dividends are distributed monthly. Net realized
capital gains, if any, will be distributed at least
annually. Dividends are determined in accordance
with income tax principles which may treat certain
transactions differently than generally accepted
accounting principles.
- --------------------------------------------------------------------------------
3 TRANSACTIONS
WITH AFFILIATES MANAGEMENT AGREEMENT. The Trust has a management
agreement with Zurich Kemper Investments, Inc.
(ZKI), and each Fund pays a management fee at an
annual rate of .55% of the first $250 million of
average daily net assets declining to .40% of
average daily net assets in excess of $12.5
billion. Management fees paid for the six months
ended February 28, 1997 are as follows:
<TABLE>
<S> <C>
Florida $299,000
New Jersey 11,000
New York 818,000
Pennsylvania 13,000
</TABLE>
UNDERWRITING AND DISTRIBUTION SERVICES
AGREEMENT. The Trust has an underwriting and
distribution services agreement with Kemper
Distributors, Inc. (KDI). Underwriting commissions
paid in connection with the distribution of each
Fund's Class A shares for the six months ended
February 28, 1997 are as follows:
<TABLE>
<CAPTION>
COMMISSIONS
ALLOWED BY KDI
COMMISSIONS -------------------------------
RETAINED BY KDI TO ALL FIRMS TO AFFILIATES
--------------- ------------ -------------
<S> <C> <C> <C>
Florida $ 9,000 53,000 --
New Jersey 1,000 -- --
New York 20,000 112,000 1,000
Pennsylvania 1,000 6,000 --
</TABLE>
For services under the distribution services
agreement, each Fund pays KDI a fee of .75% of
average daily net assets of 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 of each Fund. In addition, KDI receives any
contingent deferred sales charges (CDSC) from
redemptions of Class B and Class C shares.
Distribution fees and commissions paid in
connection with the sale of each Fund's Class B and
Class C shares and the CDSC received in
25
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS
connection with the redemption of such shares for
the six months ended February 28, 1997 are as
follows:
<TABLE>
<CAPTION>
DISTRIBUTION FEES COMMISSIONS AND
AND CDSC DISTRIBUTION FEES
RECEIVED BY KDI PAID BY KDI TO FIRMS
----------------- --------------------
<S> <C> <C>
Florida $14,000 21,000
New Jersey 11,000 16,000
New York 40,000 83,000
Pennsylvania 15,000 23,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The Trust has an
administrative services agreement with KDI. For
providing information and administrative services
to shareholders, each Fund pays KDI a fee at an
annual rate of up to .25% of average daily net
assets of each class. KDI in turn has various
arrangements with financial services firms that
provide these services and pays these firms based
on assets of Fund accounts the firms service.
Administrative services fees (ASF) paid for the six
months ended February 28, 1997 are as follows:
<TABLE>
<CAPTION>
ASF PAID BY KDI
ASF PAID BY THE ----------------------------
FUND TO KDI TO ALL FIRMS TO AFFILIATES
---------------------- ------------ -------------
<S> <C> <C> <C>
Florida $ 94,000 95,000 1,000
New Jersey 5,000 5,000 --
New York 260,000 265,000 10,000
Pennsylvania 6,000 7,000 --
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Funds' transfer agent,
Kemper Service Company (KSvC) is the shareholder
service agent of the Trust. Under the agreement,
for the six months ended February 28, 1997, KSvC
received shareholder services fees as follows:
<TABLE>
<CAPTION>
SHAREHOLDER SERVICES FEES
REMITTED TO KSVC
-------------------------
<S> <C>
Florida $23,000
New Jersey 1,000
New York 75,000
Pennsylvania 1,000
</TABLE>
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Trust are also officers or directors of ZKI.
For the six months ended February 28, 1997, the
Funds made no payments to its officers and incurred
trustees' fees aggregating $9,000 to independent
trustees.
OPERATING EXPENSE WAIVER. ZKI agreed to waive
certain operating expenses of the Pennsylvania Fund
beginning in December 1996. Under this arrangement,
ZKI waived expenses of $2,000 during the six months
ended February 28, 1997.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the six months ended February 28, 1997,
investment transactions (excluding short-term
instruments) are as follows (in thousands):
<TABLE>
<CAPTION>
FLORIDA NEW JERSEY NEW YORK PENNSYLVANIA
------- ---------- -------- ------------
<S> <C> <C> <C> <C>
Purchases $56,618 1,841 128,749 3,518
Proceeds from sales 60,487 1,500 148,393 3,143
</TABLE>
26
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following tables summarize the activity in
capital shares of the Funds (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1997 AUGUST 31, 1996
--------------------- ----------------------
FLORIDA SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------
SHARES SOLD
------------------------------------------------------------------------------
Class A 614 $ 6,353 876 $ 9,149
------------------------------------------------------------------------------
Class B 125 1,283 345 3,629
------------------------------------------------------------------------------
Class C 6 69 38 398
------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 228 2,345 380 3,948
------------------------------------------------------------------------------
Class B 5 48 7 73
------------------------------------------------------------------------------
Class C 1 4 1 4
------------------------------------------------------------------------------
SHARES REDEEMED
Class A (934) (9,628) (2,195) (22,721)
------------------------------------------------------------------------------
Class B (35) (353) (270) (2,825)
------------------------------------------------------------------------------
Class C (3) (29) (11) (110)
------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A -- -- 1 12
------------------------------------------------------------------------------
Class B -- -- (1) (12)
------------------------------------------------------------------------------
NET INCREASE
(DECREASE)
FROM CAPITAL
SHARE TRANSACTIONS $ 92 $ (8,455)
------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1997 AUGUST 31, 1996
--------------------- -------------------------
NEW JERSEY SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
--------------------------------------------------------------------------------
Class A 16 $ 157 76 $ 766
---------------------------------------------------------------------------------
Class B 31 307 127 1,271
---------------------------------------------------------------------------------
Class C 11 113 2 21
---------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 3 30 5 47
---------------------------------------------------------------------------------
Class B 4 44 5 52
---------------------------------------------------------------------------------
Class C -- -- -- 3
---------------------------------------------------------------------------------
SHARES REDEEMED
Class A (11) (110) (164) (1,625)
---------------------------------------------------------------------------------
Class B (7) (66) (75) (743)
---------------------------------------------------------------------------------
Class C -- -- (14) (136)
---------------------------------------------------------------------------------
NET INCREASE
(DECREASE)
FROM CAPITAL
SHARE TRANSACTIONS $ 475 $ (344)
--------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1997 AUGUST 31, 1996
--------------------- -------------------------
NEW YORK SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 655 $ 7,078 1,200 $ 13,047
---------------------------------------------------------------------------------
Class B 220 2,371 391 4,260
---------------------------------------------------------------------------------
Class C 105 1,133 90 978
---------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 578 6,230 1,202 13,096
---------------------------------------------------------------------------------
Class B 15 165 19 210
---------------------------------------------------------------------------------
Class C 4 45 4 42
---------------------------------------------------------------------------------
SHARES REDEEMED
Class A (2,559) (27,608) (4,027) (43,719)
---------------------------------------------------------------------------------
Class B (34) (372) (83) (893)
---------------------------------------------------------------------------------
Class C (8) (82) (22) (241)
---------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A -- -- 7 73
---------------------------------------------------------------------------------
Class B -- -- (7) (73)
---------------------------------------------------------------------------------
NET DECREASE
FROM CAPITAL
SHARE TRANSACTIONS $(11,040) $(13,220)
---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1997 AUGUST 31, 1996
--------------------- -------------------------
PENNSYLVANIA SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------
SHARES SOLD
Class A 32 $ 319 154 $ 1,568
---------------------------------------------------------------------------------
Class B 70 707 100 1,009
---------------------------------------------------------------------------------
Class C -- -- 52 520
---------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 3 35 5 53
---------------------------------------------------------------------------------
Class B 2 23 3 34
---------------------------------------------------------------------------------
Class C 1 10 2 17
---------------------------------------------------------------------------------
SHARES REDEEMED
Class A (24) (242) (39) (386)
---------------------------------------------------------------------------------
Class B (32) (324) (32) (322)
---------------------------------------------------------------------------------
Class C (3) (32) (14) (135)
---------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 1 7 -- --
---------------------------------------------------------------------------------
Class B (1) (7) -- --
---------------------------------------------------------------------------------
NET INCREASE
FROM CAPITAL
SHARE TRANSACTIONS $ 496 $ 2,358
---------------------------------------------------------------------------------
</TABLE>
28
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6 FINANCIAL FUTURES
CONTRACTS The Funds have entered into exchange traded
financial futures contracts on U.S. Treasury
securities in order to help protect themselves from
anticipated market conditions and, as such, bear
the risk that arises from entering into these
contracts.
At the time a Fund enters into a futures contract,
it is required to make a margin deposit with its
custodian. Subsequently, gain or loss is recognized
and payments are made on a daily basis between the
Fund and its broker as the market value of the
futures contract fluctuates. At February 28, 1997,
the market values of assets pledged by the Funds to
cover margin requirements for open futures
positions were $1,616,000, $15,000, $1,116,000 and
$17,000 for the Florida, New Jersey, New York and
Pennsylvania Funds, respectively. The Funds also
had liquid securities in their portfolios in excess
of the face amount of the following short Treasury
Bond futures open at February 28, 1997:
<TABLE>
<CAPTION>
EXPIRATION GAIN AT
FUND FACE AMOUNT MONTH 2/28/97
-------------------------------------------------
<S> <C> <C> <C>
Florida $3,736,000 Mar. '97 $ 77,000
995,000 June '97 --
-------------------------------------------------
New Jersey 226,000 Mar. '97 5,000
221,000 June '97 --
-------------------------------------------------
New York 9,284,000 Mar. '97 190,000
4,308,000 June '97 --
-------------------------------------------------
Pennsylvania 226,000 Mar. '97 5,000
221,000 June '97 --
-------------------------------------------------
</TABLE>
29
<PAGE> 30
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-------------------------------------------------
CLASS A
-------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, ----------------------------------
FLORIDA 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.21 10.27 10.11 10.98 10.22
- -----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .25 .52 .53 .52 .58
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .20 .08 .30 (.52) .81
- -----------------------------------------------------------------------------------------------------
Total from investment operations .45 .60 .83 -- 1.39
- -----------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .25 .52 .53 .52 .58
- -----------------------------------------------------------------------------------------------------
Distribution from net realized gain .12 .14 .14 .35 .05
- -----------------------------------------------------------------------------------------------------
Total dividends .37 .66 .67 .87 .63
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period $10.29 10.21 10.27 10.11 10.98
- -----------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 4.42% 5.83 8.62 (.11) 13.96
- -----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------------------
Expenses .86% .84 .80 .79 .63
- -----------------------------------------------------------------------------------------------------
Net investment income 4.90% 5.00 5.30 5.04 5.48
- -----------------------------------------------------------------------------------------------------
<CAPTION>
----------------------------------------- -------------------------------------------
CLASS B CLASS C
----------------------------------------- ------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED MAY 31 TO ENDED YEAR ENDED MAY 31 TO
FEBRUARY 28, AUGUST 31, AUGUST 31, FEBRUARY 28, AUGUST 31, AUGUST 31,
1997 1996 1995 1994 1997 1996 1995 1994
- --------------------------------------------------------------------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------- -------------------------------------------
Net asset value, beginning of period $10.19 10.26 10.10 10.13 10.20 10.26 10.10 10.13
- --------------------------------------------------------------------------------- -------------------------------------------
Income from investment operations:
Net investment income .21 .43 .44 .11 .21 .43 .45 .11
- --------------------------------------------------------------------------------- -------------------------------------------
Net realized and unrealized gain
(loss) .20 .07 .30 (.03) .19 .08 .30 (.03)
- --------------------------------------------------------------------------------- -------------------------------------------
Total from investment operations .41 .50 .74 .08 .40 .51 .75 .08
- --------------------------------------------------------------------------------- -------------------------------------------
Less dividends:
Distribution from net investment
income .21 .43 .44 .11 .21 .43 .45 .11
- --------------------------------------------------------------------------------- -------------------------------------------
Distribution from net realized gain .12 .14 .14 -- .12 .14 .14 --
- --------------------------------------------------------------------------------- -------------------------------------------
Total dividends .33 .57 .58 .11 .33 .57 .59 .11
- --------------------------------------------------------------------------------- -------------------------------------------
Net asset value, end of period $10.27 10.19 10.26 10.10 10.27 10.20 10.26 10.10
- --------------------------------------------------------------------------------- -------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 3.99% 4.84 7.67 .74 3.89 4.97 7.84 .75
- --------------------------------------------------------------------------------- -------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------- -------------------------------------------
Expenses 1.68% 1.68 1.65 1.70 1.68 1.64 1.52 1.54
- --------------------------------------------------------------------------------- -------------------------------------------
Net investment income 4.08% 4.16 4.45 4.28 4.08 4.20 4.58 4.52
- --------------------------------------------------------------------------------- -------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- --------------------------------------------------------------------------------- -------------------------------------------
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, -----------------------------------------
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets at end of period (in thousands) $108,998 108,105 117,292 124,721 129,702
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 111% 119 96 53 35
- --------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE FOR FLORIDA FUND:
Certain expenses of the Florida Fund were waived or absorbed by ZKI during the
year ended August 31, 1993. If no waiver had been in place during the year, the
expense ratio would have increased by .01% of average net assets, with a
corresponding decrease in the net investment income ratio during the period.
NOTE FOR ALL FUNDS:
Total return does not reflect the effect of sales charges.
30
<PAGE> 31
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------
CLASS A
---------------------------------------
SIX MONTHS
ENDED YEAR ENDED MARCH 15 TO
FEBRUARY 28, AUGUST 31, AUGUST 31,
NEW JERSEY 1997 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------
Net asset value, beginning of period $9.85 9.75 9.50
- -------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .21 .43 .22
- -------------------------------------------------------------------------------------------
Net realized and unrealized gain .19 .10 .25
- -------------------------------------------------------------------------------------------
Total from investment operations .40 .53 .47
- -------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .21 .43 .22
- -------------------------------------------------------------------------------------------
Distribution from net realized gain .06 -- --
- -------------------------------------------------------------------------------------------
Total dividends .27 .43 .22
- -------------------------------------------------------------------------------------------
Net asset value, end of period $9.98 9.85 9.75
- -------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 4.05% 5.50 4.89
- -------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------------
Expenses absorbed by the Fund 1.25% 1.13 .39
- -------------------------------------------------------------------------------------------
Net investment income 4.18% 4.41 4.99
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 1.25% 1.45 .94
- -------------------------------------------------------------------------------------------
Net investment income 4.18% 4.09 4.44
- -------------------------------------------------------------------------------------------
<CAPTION>
--------------------------------------- ---------------------------------------
CLASS B CLASS C
--------------------------------------- ---------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED MARCH 15 TO ENDED ENDED MARCH 15 TO
FEBRUARY 28, AUGUST 31, AUGUST 31, FEBRUARY 28, AUGUST 31, AUGUST 31,
1997 1996 1995 1997 1996 1995
- ------------------------------------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 9.88 9.77 9.50 9.88 9.77 9.50
- ------------------------------------------------------------------------------- ---------------------------------------
Income from investment operations:
Net investment income .17 .36 .18 .17 .36 .18
- ------------------------------------------------------------------------------- ---------------------------------------
Net realized and unrealized gain .19 .11 .27 .19 .11 .27
- ------------------------------------------------------------------------------- ---------------------------------------
Total from investment operations .36 .47 .45 .36 .47 .45
- ------------------------------------------------------------------------------- ---------------------------------------
Less dividends:
Distribution from net investment
income .17 .36 .18 .17 .36 .18
- ------------------------------------------------------------------------------- ---------------------------------------
Distribution from net realized gain .06 -- -- .06 -- --
- ------------------------------------------------------------------------------- ---------------------------------------
Total dividends .23 .36 .18 .23 .36 .18
- ------------------------------------------------------------------------------- ---------------------------------------
Net asset value, end of period $10.01 9.88 9.77 10.01 9.88 9.77
- ------------------------------------------------------------------------------ --------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 3.65% 4.80 4.69 3.70 4.89 4.75
- ------------------------------------------------------------------------------- ---------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------- ---------------------------------------
Expenses absorbed by the Fund 2.01% 2.00 1.18 1.90 1.70 1.18
- ------------------------------------------------------------------------------- ---------------------------------------
Net investment income 3.42% 3.54 4.20 3.53 3.84 4.20
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 2.01% 2.32 1.73 1.90 2.02 1.73
- ------------------------------------------------------------------------------- ---------------------------------------
Net investment income 3.42% 3.22 3.65 3.53 3.52 3.65
- ------------------------------------------------------------------------------- ---------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- -------------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED MARCH 15 TO
FEBRUARY 28, AUGUST 31, AUGUST 31,
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net assets at end of period (in thousands) $4,510 3,982 4,309
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 77% 128 68
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE FOR NEW JERSEY FUND:
ZKI agreed to waive the management fee of the New Jersey Fund from its
inception, March 15, 1995, through September 15, 1995. Thereafter, the
management fee was gradually reinstated through September 15, 1996. "Other
ratios to average net assets" are computed without expense waiver or absorption.
31
<PAGE> 32
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
------------------------------------------------
CLASS A
------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, ---------------------------------
NEW YORK 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.66 10.80 10.73 11.59 10.97
- ----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .28 .56 .58 .58 .63
- ----------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .20 -- .20 (.60) .72
- ----------------------------------------------------------------------------------------------------
Total from investment operations .48 .56 .78 (.02) 1.35
- ----------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .28 .56 .58 .58 .63
- ----------------------------------------------------------------------------------------------------
Distribution from net realized gain .09 .14 .13 .26 .10
- ----------------------------------------------------------------------------------------------------
Total dividends .37 .70 .71 .84 .73
- ----------------------------------------------------------------------------------------------------
Net asset value, end of period $10.77 10.66 10.80 10.73 11.59
- ----------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 4.46% 5.26 7.62 (.19) 12.82
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses .85% .83 .81 .76 .67
- ----------------------------------------------------------------------------------------------------
Net investment income 5.16% 5.15 5.47 5.29 5.69
- ----------------------------------------------------------------------------------------------------
<CAPTION>
------------------------------------------ ----------------------------------------
CLASS B CLASS C
------------------------------------------ ----------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED MAY 31 TO ENDED YEAR ENDED MAY 31 TO
FEBRUARY 28, AUGUST 31, AUGUST 31, FEBRUARY 28, AUGUST 31, AUGUST 31,
1997 1996 1995 1994 1997 1996 1995 1994
- ------------------------------------------------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------- -----------------------------------------
Net asset value, beginning of period $10.66 10.80 10.73 10.77 10.65 10.79 10.73 10.77
- ------------------------------------------------------------------------------------- -----------------------------------------
Income from investment operations:
Net investment income .23 .47 .48 .12 .23 .47 .48 .12
- ------------------------------------------------------------------------------------- -----------------------------------------
Net realized and unrealized gain (loss) .21 -- .20 (.04) .20 -- .19 (.04)
- ------------------------------------------------------------------------------------- -----------------------------------------
Total from investment operations .44 .47 .68 .08 .43 .47 .67 .08
- ------------------------------------------------------------------------------------- -----------------------------------------
Less dividends:
Distribution from net investment income .23 .47 .48 .12 .23 .47 .48 .12
- ------------------------------------------------------------------------------------- -----------------------------------------
Distribution from net realized gain .09 .14 .13 -- .09 .14 .13 --
- ------------------------------------------------------------------------------------- -----------------------------------------
Total dividends .32 .61 .61 .12 .32 .61 .61 .12
- ------------------------------------------------------------------------------------- -----------------------------------------
Net asset value, end of period $10.78 10.66 10.80 10.73 10.76 10.65 10.79 10.73
- ------------------------------------------------------------------------------------- -----------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 4.12% 4.36 6.69 .75 4.01 4.38 6.64 .70
- ------------------------------------------------------------------------------------ -----------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------- -----------------------------------------
Expenses 1.70% 1.69 1.67 1.68 1.68 1.67 1.62 1.63
- ------------------------------------------------------------------------------------- -----------------------------------------
Net investment income 4.31% 4.29 4.61 4.36 4.33 4.31 4.66 4.68
- ------------------------------------------------------------------------------------- -----------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ---------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, -----------------------------------------
1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets at end of period (in thousands) $294,471 302,346 319,477 342,839 354,461
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 87% 104 112 43 36
- ---------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE> 33
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-------------------------------------
CLASS A
-------------------------------------
SIX MONTHS YEAR
ENDED ENDED MARCH 15 TO
FEBRUARY 28, AUGUST 31, AUGUST 31,
PENNSYLVANIA 1997 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.95 9.81 9.50
- -----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .22 .44 .22
- -----------------------------------------------------------------------------------------
Net realized and unrealized gain .25 .14 .31
- -----------------------------------------------------------------------------------------
Total from investment operations .47 .58 .53
- -----------------------------------------------------------------------------------------
Less distribution from net investment income (.22) .44 .22
- -----------------------------------------------------------------------------------------
Net asset value, end of period $10.20 9.95 9.81
- -----------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 4.77% 6.01 5.54
- -----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------
Expenses absorbed by the Fund 1.09% 1.06 .46
- -----------------------------------------------------------------------------------------
Net investment income 4.42% 4.33 4.93
- -----------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 1.19% 1.39 1.01
- -----------------------------------------------------------------------------------------
Net investment income 4.32% 4.00 4.38
- -----------------------------------------------------------------------------------------
<CAPTION>
------------------------------------- -------------------------------------
CLASS B CLASS C
------------------------------------- -------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED MARCH 15 TO ENDED ENDED MARCH 15 TO
FEBRUARY 28, AUGUST 31, AUGUST 31, FEBRUARY 28, AUGUST 31, AUGUST 31,
1997 1996 1995 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------- -------------------------------------
Net asset value, beginning of period $ 9.95 9.80 9.50 9.95 9.81 9.50
- ----------------------------------------------------------------------------- -------------------------------------
Income from investment operations:
Net investment income .19 .37 .18 .19 .37 .19
- ----------------------------------------------------------------------------- -------------------------------------
Net realized and unrealized gain .25 .15 .30 .25 .14 .31
- ----------------------------------------------------------------------------- -------------------------------------
Total from investment operations .44 .52 .48 .44 .51 .50
- ----------------------------------------------------------------------------- -------------------------------------
Less distribution from net investment
income (.19) .37 .18 (.19) .37 .19
- ----------------------------------------------------------------------------- -------------------------------------
Net asset value, end of period $10.20 9.95 9.80 10.20 9.95 9.81
- ----------------------------------------------------------------------------- ------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 4.38% 5.29 5.05 4.38 5.19 5.18
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses absorbed by the Fund 1.84% 1.83 1.24 1.84 1.80 1.21
- ----------------------------------------------------------------------------- -------------------------------------
Net investment income 3.67% 3.56 4.15 3.67 3.59 4.18
- ----------------------------------------------------------------------------- -------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 1.92% 2.16 1.79 1.93 2.13 1.76
- ----------------------------------------------------------------------------- -------------------------------------
Net investment income 3.59% 3.23 3.60 3.58 3.26 3.63
- ----------------------------------------------------------------------------- -------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- --------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED MARCH 15 TO
FEBRUARY 28, AUGUST 31, AUGUST 31,
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net assets at end of period (in thousands) $5,060 4,449 2,118
- -------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 140% 158 85
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE FOR PENNSYLVANIA FUND:
ZKI agreed to waive the management fee of the Pennsylvania Fund from its
inception, March 15, 1995, through September 15, 1995. Thereafter, the
management fee was gradually reinstated through September 15, 1996.
Additionally, beginning in December 1996, ZKI agreed to waive certain operating
expenses of the Fund. "Other ratios to average net assets" are computed without
expense waiver or absorption.
33
<PAGE> 34
NOTES
34
<PAGE> 35
NOTES
35
<PAGE> 36
TRUSTEES AND OFFICERS
TRUSTEES OFFICERS
STEPHEN B. TIMBERS J. PATRICK BEIMFORD, JR.
President and Trustee Vice President
DAVID W. BELIN CHARLES R. MANZONI, JR.
Trustee Vice President
LEWIS A. BURNHAM CHRISTOPHER J. MIER
Trustee Vice President
DONALD L. DUNAWAY JOHN E. NEAL
Trustee Vice President
ROBERT B. HOFFMAN PHILIP J. COLLORA
Trustee Vice President and
Secretary
DONALD R. JONES JEROME L. DUFFY
Trustee Treasurer
DOMINIQUE P. MORAX ELIZABETH C. WERTH
Trustee Assistant Secretary
SHIRLEY D. PETERSON
Trustee
WILLIAM P. SOMMERS
Trustee
- --------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICE AGENT ZURICH KEMPER SERVICE COMPANY
P.O. Box 419557
Kansas City, MO 64141
(800) 621-1048
- --------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
127 West 10th Street
Kansas City, MO 64105
- --------------------------------------------------------------------------------
INVESTMENT MANAGER ZURICH KEMPER INVESTMENTS, INC.
PRINCIPAL UNDERWRITER ZURICH KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606
www.kemper.com
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This report is not to be distributed
unless preceded or accompanied by a
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KSTIS - 3 (4/97) 1030750
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