<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement / / Confidential, for Use of the
Commision Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Kemper High Income Trust
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ No Fee Required.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
<PAGE> 2
KEMPER CLOSED-END FUNDS
222 South Riverside Plaza Chicago, Illinois 60606
Telephone (800) 294-4366
NOTICE OF JOINT ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 22, 1998 AND PROXY STATEMENT
August 19, 1998
To the Shareholders:
You are invited to attend a joint annual meeting of the shareholders of Kemper
High Income Trust ("KHI"), Kemper Intermediate Government Trust ("KGT"), Kemper
Multi-Market Income Trust ("KMM"), Kemper Municipal Income Trust ("KTF"), Kemper
Strategic Municipal Income Trust ("KSM") and Kemper Strategic Income Fund
("KST") (individually, a "Fund" and collectively, the "Funds"). The meeting will
be held in the Presentation Room on the 32nd Floor at the offices of the Funds,
222 South Riverside Plaza, Chicago, Illinois, on Thursday, October 22, 1998 at
2:00 P.M. Chicago time, for the following purposes and to transact such other
business, if any, as may properly come before the meeting:
1. To elect Members to the Board of each Fund as outlined below:
a. For KHI, KGT, KMM, KSM and KST only, to elect eight Board Members to
constitute the Board of each Fund; and
b. For KTF only, to elect eight Board Members to constitute the Board of the
Fund with six Board Members to be elected by the holders of Preferred and
Common Shares voting together and two Board Members to be elected by
holders of the Preferred Shares only.
2. To ratify or reject the selection of Ernst & Young LLP as independent
auditors of each Fund for the current fiscal year.
3. For KHI and KMM only, to approve expansion of each Fund's borrowing authority
and a related change in each Fund's investment restrictions.
4. For KHI and KMM only, to approve the elimination of each Fund's investment
restrictions and policies related to illiquid and restricted securities.
<PAGE> 3
The Board of each Fund has fixed the close of business on August 7, 1998 as the
record date for determining the shareholders of each Fund entitled to notice of
and to vote at the meeting. Shareholders are entitled to one vote for each share
held.
THE BOARD OF EACH FUND RECOMMENDS THAT YOU VOTE FOR ALL ITEMS.
- ------------------------------------------------------------------------------
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD. SIGN, DATE
AND RETURN YOUR PROXY CARD IN THE ENVELOPE PROVIDED. TO SAVE YOUR FUND THE COST
OF ADDITIONAL SOLICITATIONS, PLEASE MAIL YOUR PROXY CARD PROMPTLY.
- ------------------------------------------------------------------------------
<PAGE> 4
The accompanying proxy is solicited by the Board of each Fund for voting at the
joint annual meeting of shareholders to be held on Thursday, October 22, 1998,
and at any and all adjournments thereof (the "Meeting"). The shareholders of
each Fund will vote separately on the items presented at the Meeting. This proxy
statement was first mailed to shareholders on or about August 19, 1998.
The Board of each Fund recommends that shareholders vote FOR ITEMS 1, 2, AND FOR
KHI AND KMM ONLY, 3 AND 4. The vote required to approve each item is described
under "Miscellaneous."
The following table indicates which shareholders are solicited with respect to
each Item:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
ITEM KHI KGT KTF KMM KSM KST
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------
1. Election of Board members X X X X X X
- ---------------------------------------------------------------------------
2. Ratification of selection of X X X X X X
auditors
- ---------------------------------------------------------------------------
3. Approval of expansion of X X
borrowing authority
- ---------------------------------------------------------------------------
4. Elimination of investment X X
restrictions and policies
related to illiquid and
restricted securities
- ---------------------------------------------------------------------------
</TABLE>
The Board of each Fund has fixed the close of business on August 7, 1998 as the
record date for the determination of shareholders entitled to notice of and to
vote at the Meeting. As of July 28, 1998, shares of the Funds were issued and
outstanding as follows:
<TABLE>
<CAPTION>
FUND SHARES
---- ----------
<S> <C>
KHI................................. 23,775,865
KGT................................. 33,996,171
KTF
Common............................ 38,407,734
Preferred......................... 43,000
KMM................................. 20,090,612
KSM................................. 10,677,030
KST................................. 3,456,421
</TABLE>
KTF ONLY. Pursuant to the Agreement and Declaration of Trust of KTF, the Board
may authorize separate classes of shares of beneficial interest. The Board has
authorized, and KTF has issued, common shares of beneficial interest (the
"Common Shares") and preferred shares of beneficial interest, Series A through D
(the "Preferred Shares"). The
2
<PAGE> 5
Common Shares and the Preferred Shares have different powers, rights,
preferences and privileges, qualifications, limitations and restrictions with
respect to, among other things, dividends, liquidation, redemption and voting as
more fully set forth in the Certificate of Designation for Preferred Shares that
established the Preferred Shares. The Common Shares were first issued on October
20, 1988 and the Preferred Shares were first issued on July 24, 1989. At the
Meeting, the holders of the Preferred Shares, voting as a separate class, are
entitled to elect two members of KTF's Board and the holders of the Common
Shares and the Preferred Shares, voting together as a single class, are entitled
to elect the six remaining members of the KTF Board. On all other items, the
holders of the Common Shares and the Preferred Shares will vote together as a
single class.
ITEM 1. ELECTION OF MEMBERS TO THE BOARDS
THE BOARD OF EACH FUND RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE NOMINEES
NAMED BELOW.
It is intended that the proxies will be voted for the election as Board Members
of the nominees described below. Each Board Member so elected will serve as a
Board Member of the respective Fund until the next meeting of shareholders, if
any, called for the purpose of electing Board Members and until the election and
qualification of a successor or until such Board Member sooner dies, resigns or
is removed as provided in the organizational documents of each Fund. All the
nominees were last elected to each Board at the 1997 annual joint meeting of
shareholders except Messrs. Pierce and Littauer. Mr. Pierce was first elected at
a December 3, 1997 special meeting of shareholders. Mr. Littauer is standing for
election to each Board for the first time at the 1998 annual joint meeting of
shareholders.
KTF ONLY. As indicated above, holders of the Preferred Shares are entitled to
elect two Board Members. Messrs. Pierce and Kelsey are nominees for election by
holders of the Preferred Shares. The six remaining Board Members are to be
elected by holders of the Common Shares and the Preferred Shares, voting
together as a single class. Messrs. Akins, Gottschalk, Littauer, Renwick,
Tingleff and Weithers are nominees for election by all shareholders.
All the nominees listed below have consented to serve as Board Members of the
respective Funds, if elected. In case any nominee shall be unable or shall fail
to act as a Board Member by virtue of an unexpected occurrence,
3
<PAGE> 6
the proxies may be voted for such other person(s) as shall be determined by the
persons acting under the proxies in their discretion.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
NAME (DATE OF BIRTH), PRINCIPAL YEAR FIRST BECAME OWNED AS OF
OCCUPATION AND AFFILIATIONS A BOARD MEMBER JUNE 30, 1998**
------------------------------- ----------------- -------------------
<S> <C> <C>
*Daniel Pierce (03/18/34) 1997 -- All 0
Managing Director, Scudder Kemper
Investments, Inc., Director,
Fiduciary Trust Company; Director,
Fiduciary Company Incorporated.
James E. Akins (10/15/26) 1995 -- All 0
Consultant on International,
Political, and Economic Affairs;
formerly a career United States
Foreign Service Officer; Energy
Adviser for the White House; United
States Ambassador to Saudi Arabia.
Arthur R. Gottschalk (2/13/25) 1988 -- KGT, KTF KHI -- 1,000
Retired; formerly, President, 1989 -- KHI, KMM, KGT -- 1,000
Illinois Manufacturers Association; KSM KMM -- 800
Trustee, Illinois Masonic Medical 1994 -- KST KTF -- 800
Center; formerly, Illinois State KSM -- 1,000
Senator; formerly, Vice President, KST -- 800
The Reuben H. Donnelley Corp.;
formerly, attorney.
Frederick T. Kelsey (4/25/27) 1988 -- KTF KHI -- 500
Retired; formerly, consultant to 1989 -- KHI, KGT, KGT -- 2,500
Goldman, Sachs & Co.; formerly, KMM, KSM KMM -- 1,000
President, Treasurer and Trustee of 1994 -- KST KTF -- 500
Institutional Liquid Assets and its
affiliated mutual funds; Trustee of
the Northern Institutional Funds;
formerly, Trustee of the Pilot Funds.
*Thomas W. Littauer (4/26/55) Nominee 0
Managing Director, Scudder Kemper
Investments, Inc., formerly, Head of
Broker Dealer Division of Putnam
Investment Management; formerly,
President of Client Management
Services for Fidelity Investments.
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
NAME (DATE OF BIRTH), PRINCIPAL YEAR FIRST BECAME OWNED AS OF
OCCUPATION AND AFFILIATIONS A BOARD MEMBER JUNE 30, 1998**
------------------------------- ----------------- -------------------
<S> <C> <C>
Fred B. Renwick (2/1/30) 1995 -- All 0
Professor of Finance, New York
University, Stern School of Business;
Director, the Wartburg Home
Foundation; Chairman, Investment
Committee of Morehouse College Board
of Trustees; Director, American Bible
Society Investment Committee;
previously member of the Investment
Committee of Atlanta University Board
of Trustees; formerly Director of
Board of Pensions Evangelical
Lutheran Church in America.
John B. Tingleff (5/4/35) 1991 -- All Funds KHI -- 1,788
Retired; formerly, President, except KST KGT -- 533
Tingleff & Associates (management 1994 -- KST KMM -- 1,019
consulting firm); formerly, Senior KTF -- 500
Vice President, Continental Illinois KSM -- 500
National Bank & Trust Company. KST -- 330
John G. Weithers (8/8/33) 1993 -- All Funds KHI -- 1,600
Retired; formerly, Chairman of the except KST KGT -- 1,200
Board and Chief Executive Officer, 1994 -- KST KMM -- 1,000
Chicago Stock Exchange; Director, KTF -- 400
Federal Life Insurance Company; KSM -- 300
President of the Members of the KST -- 900
Corporation and Trustee, DePaul
University.
</TABLE>
- ---------------
* Interested persons of the Funds as defined in the Investment Company Act of
1940 ("1940 Act").
** From time to time, the Board Members have been, and may in the future be,
restricted from buying and/or selling shares of certain Funds.
All the nominees, except Messrs. Pierce and Littauer, serve as board members of
15 investments companies, with 50 portfolios managed by Scudder Kemper
Investments, Inc. (the "Adviser"). Mr. Pierce serves as a board member of
various investment companies managed by the Adviser.
5
<PAGE> 8
Mr. Littauer is standing for election to boards managed by the Adviser for the
first time.
Each Board has an audit and governance committee that is composed of Messrs.
Akins, Gottschalk, Kelsey, Renwick, Tingleff and Weithers. The committee to each
Fund met four times during its 1997 fiscal year (November 30, 1997 for KHI, KTF,
KMM, KSM and KST and December 31, 1997 for KGT). The committee makes
recommendations regarding the selection of independent auditors for each Fund,
confers with the independent auditors regarding each Fund's financial
statements, the results of audits and related matters, seeks and reviews
nominees for Board membership and performs such other tasks as the respective
Board assigns. The committee also proposes the nominees for election by the
shareholders. Shareholders wishing to submit the name of a candidate for
consideration by the committee should submit their recommendations to the
secretary of the applicable Fund.
Each Fund pays Board Members who are not "interested persons" of such Fund an
annual retainer plus expenses, and an attendance fee for each Board meeting and
committee meeting attended. As reflected above, the Board Members currently
serve as board members of various investment companies for which the Adviser
serves as investment manager. Board Members or officers of a Fund who are
"interested persons" receive no compensation from such Fund. The Board of each
Fund met eight times during its 1997 fiscal year. Each then current Board Member
attended 75% or more of the respective meetings of the Board and the audit and
governance committee (if then a member thereof) held during its 1997 fiscal
year.
The table below shows, for each Board Member entitled to receive compensation
from the Funds, the aggregate compensation paid or accrued during each Fund's
1997 fiscal year and the total compensation that the Kemper funds paid or
accrued during calendar year 1997.
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION FROM FUND AGGREGATE COMPENSATION
---------------------------------------------- FROM FUNDS AND OTHER
NAME OF BOARD MEMBER KHI KGT KTF KMM KSM KST KEMPER FUNDS(2)
-------------------- ------ ----- ----- ----- ----- ----- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
James E. Akins............. $3,400 3,800 7,100 3,400 2,600 2,000 $106,300
Arthur R. Gottschalk(1).... $3,900 4,500 7,800 3,900 3,200 2,300 $121,100
Frederick T. Kelsey(1)..... $4,000 4,100 7,500 4,000 3,300 2,500 $111,300
Fred B. Renwick............ $3,400 3,800 7,100 3,400 2,600 2,000 $106,300
John B. Tingleff........... $3,400 3,800 7,100 3,400 2,600 2,000 $106,300
John G. Weithers........... $3,400 3,800 7,100 3,400 2,600 2,000 $106,300
</TABLE>
- ---------------
(1) Includes deferred fees and interest thereon pursuant to deferred
compensation agreements with certain Kemper funds. Deferred amounts accrue
interest monthly at a rate equal to the yield of Zurich Money Funds--Zurich
Money Market Fund. Total deferred fees and interest accrued at the fiscal
period ended November 30,
6
<PAGE> 9
1997 (or for KGT only, December 31, 1997) are $12,500, $13,400, $16,700,
$12,400, $11,500 and $6,300 for Mr. Gottschalk from KHI, KGT, KTF, KMM, KSM
and KST, respectively.
(2) Includes compensation for service on the boards of 13 Kemper Funds with 39
fund portfolios. Each Board Member currently serves as a board member of 15
Kemper Funds with 50 fund portfolios. Total compensation does not reflect
amounts paid by Scudder Kemper Investments, Inc. to the board members
regarding the combination of Scudder, Stevens & Clark, Inc. and Zurich
Kemper Investments, Inc. Such amounts totaled $42,800, $40,100, $39,000,
$42,900, $42,900 and $42,900 for Messrs. Akins, Gottschalk, Kelsey, Renwick,
Tingleff, and Weithers, respectively.
FUND OFFICERS. Information about the executive officers of the Fund, with their
respective dates of birth, terms as Fund officers indicated and principal
occupation for the past five years, is set forth below.
J. Patrick Beimford, Jr. (5/25/50), vice president of KMM since 2/17/93 and KST
since 4/14/94, is managing director of the Adviser.
Dale R. Burrow (10/16/56), vice president of KSM since 5/5/93, is senior vice
president of the Adviser.
Mark S. Casady (9/21/60), president of each Fund since 1/21/98, is managing
director of the Adviser.
Robert S. Cessine (1/5/50), vice president of KMM since 5/4/95, is managing
director of the Adviser.
Philip J. Collora (11/15/45), vice president of each Fund except KST since
2/1/90 and KST since 3/2/90, and secretary of each Fund since 3/2/95. Mr.
Collora is senior vice president of the Adviser.
John R. Hebble (6/27/58), treasurer of each Fund since 5/20/98, is senior vice
president of the Adviser.
Thomas W. Littauer (4/26/55), vice president of each Fund since 1/21/98, is
managing director of the Adviser; formerly, Head of Broker Dealer Division of
Putnam Investment Management during 1996-1997; prior thereto, President of
Client Management Services for Fidelity Investments from 1990 to 1996.
Ann M. McCreary (11/6/56), vice president of each Fund since 1/21/98, is
managing director of the Adviser.
Michael A. McNamara (12/28/44), vice president of KHI since 2/21/91 and KMM and
KST since 5/4/95, is managing director of the Adviser.
Christopher J. Mier (8/11/56), vice president of KTF and KSM since 2/21/91, is
managing director of the Adviser.
7
<PAGE> 10
Robert C. Peck, Jr. (10/1/46), vice president of each Fund since 1/21/98, is
managing director of the Adviser; prior to 8/2/97, he was executive vice
president and chief investment officer with an unaffiliated investment
management firm.
Kathryn L. Quirk (12/3/52), vice president of each Fund since 1/21/98, is
managing director of the Adviser.
Harry E. Resis, Jr. (11/24/45), vice president of KHI since 2/17/93 and KMM and
KST since 5/4/95, is managing director of the Adviser.
Richard L. Vandenberg (11/16/49), vice president of KGT, KMM and KST since
3/6/96, is managing director of the Adviser; prior to March 1996, senior vice
president and portfolio manager of an unaffiliated investment management firm.
The officers of each Fund are elected by the Board of the Fund on an annual
basis to serve until their successors are elected and qualified.
SHAREHOLDINGS. As of June 30, 1998, the Board Members and officers of the Funds
as a group owned beneficially 4,888 shares of KHI, 5,233 shares of KGT, 13,819
shares of KMM, 2,200 shares of KTF, 1,800 shares of KSM, and 2,030 shares of
KST, which, in each case, is less than 1% of the outstanding shares of each
Fund. As of June 30, 1998, no person is known to any Fund to have owned
beneficially more than five percent of the shares of such Fund.
SECTION 16 REPORTING COMPLIANCE. Section 30(f) of the 1940 Act and Section 16(a)
of the Securities Exchange Act of 1934 require each Fund's officers and Board
Members, the Adviser, affiliated persons of the Adviser and persons who own more
than ten percent of a registered class of the Fund's equity securities to file
forms reporting their affiliation with that Fund and reports of ownership and
changes in ownership of that Fund's shares with the Securities and Exchange
Commission (the "SEC") and the New York Stock Exchange (the "NYSE"). These
persons and entities are required by SEC regulation to furnish the Funds with
copies of all Section 16(a) forms they file. Based upon a review of these forms
as furnished to each Fund, each Fund believes that, during its 1997 fiscal year,
there was compliance with all Section 16(a) filing requirements applicable to
that Fund's officers and Board Members, the Adviser and affiliated persons of
the Adviser.
INVESTMENT MANAGER. Scudder Kemper Investments, Inc. (the "Adviser"), 345 Park
Avenue, New York, NY 10154, serves as each Fund's investment adviser and manager
pursuant to an investment management agreement. Since October 31, 1996, no
nominee for election as a board member of a Fund purchased or sold securities
more than 1% of the outstanding shares of the Adviser, except that in connection
with a
8
<PAGE> 11
transaction effective December 31, 1997, pursuant to which Zurich Insurance
Company ("Zurich") acquired a two-thirds interest in Scudder, Stevens & Clark,
Inc. ("Scudder") for $866.7 million in cash and the businesses of Scudder and
Zurich's subsidiary, Zurich Kemper Investments, Inc., were combined to form the
Adviser, Mr. Pierce sold 85.1% of his holdings in Scudder to Zurich for cash.
ITEM 2. SELECTION OF INDEPENDENT AUDITORS
THE BOARD OF EACH FUND RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF ERNST &
YOUNG LLP AS INDEPENDENT AUDITORS FOR EACH FUND.
A majority of the Members of each Fund's Board who are "non-interested" persons
of the Fund has selected Ernst & Young LLP, independent auditors, to audit the
books and records of the Fund for the current fiscal year. This firm has served
each Fund in this capacity since the Fund was organized and has no direct or
indirect financial interest in any Fund except as independent auditors. The
selection of Ernst & Young LLP as independent auditors of each Fund is being
submitted to the shareholders for ratification. A representative of Ernst &
Young LLP is expected to be present at the Meeting and will be available to
respond to any appropriate questions raised at the Meeting and may make a
statement.
ITEM 3. KHI AND KMM ONLY -- BORROWING AUTHORITY
THE BOARD OF EACH FUND RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE PROPOSAL
CONCERNING BORROWING AUTHORITY.
SUMMARY. The respective Boards of KHI and KMM have adopted, subject to
shareholder approval, the recommendation of the Adviser that the Fund's
borrowing authority be expanded to increase the ability of the Fund to borrow.
Presently, KHI is permitted to borrow for investment purposes up to 10% of the
value of the Fund's total assets at the time of the borrowing upon terms and
conditions approved by the Board. KMM may borrow money only for temporary or
emergency purposes or for share repurchases, all in amount not to exceed
one-third of the value of the total assets of the Fund. If the proposal is
approved, KHI and KMM would each have the authority to borrow money to the
extent permitted by applicable law, which currently permits borrowing up to a
maximum amount in the aggregate of one-third the value of its assets (including
the amount borrowed). Currently, this would enable the Funds to borrow money,
for any purpose, including leverage, share repurchase, temporary or emergency
purposes.
9
<PAGE> 12
1940 ACT RESTRICTIONS. Under the 1940 Act, a closed-end investment company, such
as KHI and KMM, may borrow money subject to certain conditions and provided the
company has 300% asset coverage. Asset coverage is the ratio of the value of the
total assets of the company (including amount borrowed) less all its liabilities
divided by the amount of such borrowings.
EFFECTS OF PROPOSAL. The primary purpose of the proposed change is to increase
the ability of KHI and KMM to borrow money for purposes of leverage although the
proposal would extend the borrowing authority to the full extent permitted by
applicable law. Each Fund currently intends to borrow up to an aggregate amount
of 33 1/3% of its total assets (including amount borrowed). Leverage is
typically described as borrowings or debt incurred to purchase securities.
Leverage is a speculative technique which involves the opportunity for enhanced
income and greater total return but also involves special risks. Use of leverage
may increase the volatility of changes in the net asset value and the market
price of, and distributions paid on, shares in the Fund. So long as the Fund is
able to realize a higher return after expenses on its investment of the proceeds
of any borrowing (i.e., investment gains derived from the securities purchased
with borrowed funds) than the then current interest rate on the borrowing, the
effect of the leverage will be to cause shares in the Fund to realize a higher
current rate of return than if the Fund were not so leveraged (with a
corresponding rise in net income per share and net asset value per share). On
the other hand, to the extent that the then current interest rate on the
borrowing approaches the return on such proceeds after expenses, the benefit of
leverage will be reduced, and if the then current interest rate on the borrowing
were to exceed the return on such investment after expenses, the Fund's
leveraged capital structure would result in a lower rate of return to shares in
the Fund than if the Fund were not so structured. Similarly, since any decline
in the net asset value of the Fund's investments will be borne entirely by Fund
shareholders, the effect of leverage in a declining market would result in a
greater decrease in net asset value of the Fund shares than if the Fund were not
so leveraged. Any such decrease would likely be reflected in a decline in the
market price for Fund shares. The Adviser may seek to manage certain of the
risks of financial leverage in anticipation of changes in interest rates in a
number of ways, including extending the length of the interest rate period on
any borrowing so as to fix an interest rate for a period of time, "deleveraging"
the Fund by repaying all or a portion of any outstanding borrowing, entering
into certain transactions in an effort to hedge against changes in interest
rates and purchasing securities the terms of which have elements of, or are
similar in effect to, certain hedging transactions in which the Fund may engage.
There can be no assurance that the Adviser can successfully manage the risks of
leverage.
10
<PAGE> 13
Borrowing by the Fund will entail certain initial costs and expenses and certain
ongoing administrative and accounting expenses. These costs and expenses will be
borne by the Fund and will reduce the income or net assets available to Fund
shareholders. If the Fund's current investment income were not sufficient to
meet interest expenses on any borrowing, the Fund might have to liquidate
certain of its investments in order to meet required dividend or interest
payments, thereby reducing the net asset value attributable to the shares in the
Fund.
Assuming the utilization of leverage in the amount of approximately 33 1/3% of
the Fund's total assets, and an annual interest rate on borrowings of 6.2%
payable on such leverage based upon current market rates, the annual return that
the Fund's portfolio must experience (net of expenses) in order to cover such
interest payments would be 2.07%. The Fund's actual cost of leverage will be
based on market rates at the time the Fund undertakes a leveraging strategy, and
such actual cost of leverage may be higher or lower than that assumed in the
previous example.
The following table is designed to illustrate the effect on the return to a
shareholder of leverage in the amount of approximately 33 1/3% of the Fund's
total assets, assuming hypothetical annual returns of the Fund's portfolio of
plus 10% and minus 10%. As the table shows, leverage generally increases the
return to shareholders when portfolio return is positive and greater than the
cost of leverage and decreases the return when the portfolio return is negative
or less than the cost of leverage. The figures appearing in the table are
hypothetical and actual returns may be greater or less than those appearing in
the table.
<TABLE>
<S> <C> <C>
Assumed Portfolio Return (without leverage,
net of expenses)......................... 10.00% (10.00)%
Portfolio Return (assuming 33 1/3% leverage
and an assumed interest rate of 6.2%).... 11.27% (15.40)%
</TABLE>
The terms of a particular borrowing may entitle the lenders to elect a majority
of the Board of a Fund in certain specified circumstances.
INVESTMENT RESTRICTIONS. In connection with the proposed change in the borrowing
authority of KHI and KMM, the respective Boards of the Funds approved an
amendment to such Fund's investment restrictions. The current investment
restriction for KHI is as follows:
The Fund may not:
(1) borrow money, except (a) the Fund, may, from time to time, borrow from
a bank or other entity in a privately arranged transaction in an amount not
exceeding 10% of the Fund's total assets (including the amount borrowed) at
the time of the borrowing and (b) the Fund may borrow in amounts necessary
to repurchase shares of the Fund; if after each such borrowing the ratio
which the value of the total assets of the Fund less all liabilities and
indebtedness not
11
<PAGE> 14
represented by senior securities bears to an aggregate amount of senior
securities indebtedness of the Fund is at least 300%.
The current investment restriction for KMM is as follows:
The Fund may not:
(12) borrow money, except for (i) temporary or emergency purposes or for
repurchase of its shares, and then only in an amount not exceeding
one-third of the value of the Fund's total assets including the amount
borrowed; however, the Fund will not purchase any securities for its
portfolio at any time when such borrowings exceed 5% of its total assets
(taken at value) and (ii) the issuance of short or intermediate term notes.
If this proposal is approved, the investment restriction for both Funds will be
amended as follows:
The Fund may not:
borrow money, except to the extent permitted by applicable law.
ITEM 4. KHI AND KMM ONLY -- ILLIQUID AND RESTRICTED SECURITIES
THE BOARD OF EACH FUND RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE PROPOSAL
CONCERNING ILLIQUID AND RESTRICTED SECURITIES.
SUMMARY. Both KHI and KMM each have fundamental investment restrictions and
policies that limit investments in illiquid securities and restricted
securities. The respective Boards of KHI and KMM have adopted, subject to
shareholder approval, the recommendation of the Adviser that these investment
restrictions and policies be eliminated for each Fund. The Adviser believes that
the elimination of these restrictions and policies will increase investment
flexibility and allow the Funds to adapt more effectively to changes in the
fixed income markets.
INVESTMENT RESTRICTIONS. The current investment restriction for KHI is as
follows:
The Fund will not:
(4) invest in illiquid investments, including securities which are subject
to legal or contractual restrictions on resale or for which there is no
readily available market (e.g., trading in the securities is suspended or,
in the case of unlisted securities, market makers do not exist or will not
entertain bids or offers) and loan participations, if more than 20% of the
Fund's assets (taken at market value) would be invested in such securities.
For purposes of this restriction
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<PAGE> 15
repurchase agreements not terminable within seven days will be deemed
illiquid.
The Fund has related investment restrictions and policies that address similar
investment issues, including a 20% limit upon fixed income securities purchased
in direct placements and limits on over-the-counter traded options arising from
illiquid securities limitations.
If approved, the proposal would eliminate all of the Fund's related investment
restrictions and policies that restrict the ability of the Fund to invest in
illiquid and restricted securities.
The current investment restriction for KMM is as follows:
The Fund will not:
(9) invest more than 10% of its total assets in repurchase agreements
maturing in more than seven days.
(10) invest in illiquid investments, including securities which are subject
to legal or contractual restrictions on resale or for which there is no
readily available market (e.g., trading in the securities is suspended or,
in the case of unlisted securities, market makers do not exist or will not
entertain bids or offers) and loan participations, if more than 20% of the
Fund's assets (taken at market value) would be so invested, or with respect
to loan participations more than 5% of the Fund's assets. For purposes of
this restriction repurchase agreements not terminable within seven days
will be deemed illiquid. The Fund will consider as illiquid securities OTC
options and the assets used as "cover" for written OTC options as explained
in Appendix B [to the Fund's prospectus dated January 23, 1989].
The Fund has related investment restrictions and policies that address similar
investment issues, including a 20% limit upon fixed income securities purchased
in direct placements (including loan participations which are limited to 5%) and
limits on over-the-counter traded options arising from illiquid securities
limitations.
If approved, the proposal would eliminate all of the Fund's related investment
restrictions and policies that restrict the ability of the Fund to invest in
illiquid and restricted securities.
EFFECTS OF PROPOSAL. The primary purpose of the proposal is to increase the
Fund's investment flexibility to allow the Funds to adapt more effectively to
changes in fixed income markets. The proposal would allow the Funds to gain
greater access to burgeoning securities markets, such as the "Rule 144A
securities" market. Rule 144A securities are securities issued in a private
placement, the resale of which is exempt from registration pursuant to Rule 144A
under the Securities Act of 1933. As the high yield marketplace matures, a
growing percentage of new issues
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<PAGE> 16
are being offered as restricted securities, such as Rule 144A securities.
Eliminating the Fund's investment restrictions and policies that limit
investments in illiquid securities and restricted securities would give the
Funds the flexibility to invest in broadening segments of the market and to
adapt more readily to changes in the fast growing high yield marketplace.
If approved, the Funds would not be restricted as to the amount of illiquid
securities they may hold and would be permitted to hold an unlimited amount of
restricted securities, such as Rule 144A securities, whether liquid or illiquid.
Generally, an "illiquid security" is any security that cannot be disposed of
promptly and in the ordinary course of business at approximately the amount at
which the Funds have valued the instrument. Restricted securities are subject to
legal restrictions on trading. The absence of a trading market in illiquid
securities can make it difficult to ascertain a market value for illiquid or
restricted securities. Disposing of illiquid or restricted securities may
involve time-consuming negotiations and legal expenses, and it may be difficult
or impossible for a Fund to sell them promptly at an acceptable price. As
closed-end funds, however, the Funds do not issue redeemable securities and,
therefore, portfolio liquidity is less of a concern than for an open-end fund.
In addition, the Adviser has advised the Board that it has no current intention
to significantly increase the level of illiquid securities in the portfolios of
the Funds, but rather, is currently primarily interested in expanding the access
of the Funds to the growing market for Rule 144A securities. However, if
approved, the Funds would not be restricted as to the amount of illiquid
securities they may hold and would be permitted to hold an unlimited amount of
restricted securities, both liquid and illiquid.
MISCELLANEOUS
GENERAL. The cost of preparing, printing and mailing the enclosed proxy,
accompanying notice and proxy statement and all other costs in connection with
solicitation of proxies will be paid by the Funds, including any additional
solicitation made by letter, telephone or facsimile. In addition to solicitation
by mail, certain officers and representatives of the Funds, officers and
employees of the Adviser and certain financial services firms and their
representatives, who will receive no extra compensation for their services, may
solicit proxies by telephone, telegram or personally. The Funds have engaged
Shareholder Communications Corporation to assist in the solicitation of proxies
at a total estimated cost (plus expenses) of $3,500 per Fund. Failure of a
quorum to be present at the Meeting for a Fund will necessitate adjournment for
that Fund and will subject that Fund to additional expense. A COPY OF A FUND'S
ANNUAL REPORT IS AVAILABLE WITHOUT CHARGE UPON REQUEST BY WRITING TO SUCH FUND,
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<PAGE> 17
222 SOUTH RIVERSIDE PLAZA, CHICAGO, ILLINOIS 60606 OR BY CALLING 1-800-294-4366.
PROPOSALS OF SHAREHOLDERS. Each of the Funds delayed its 1998 annual meeting of
shareholders from May to October. It is currently anticipated that the 1999
annual meeting of shareholders will be held in May. A shareholder wishing to
submit a proposal for inclusion in a Fund's proxy statement for the 1999 annual
meeting of shareholders pursuant to Rule 14a-8 under the Securities Exchange Act
of 1934 should send such written proposal to the Secretary of the Fund within a
reasonable time before the solicitation of proxies for such meeting. A Fund will
treat any such proposal received no later than December 12, 1998 as timely. The
timely submission of a proposal, however, does not guarantee its inclusion. A
shareholder wishing to provide notice in the manner prescribed by Rule
14a-4(c)(1) to a Fund of a proposal submitted outside of the process of Rule
14a-8 must submit such written notice to the Secretary of the Fund within a
reasonable time before the solicitation of proxies for such meeting. A Fund will
treat any such notice received no later than February 25, 1999 as timely.
OTHER MATTERS TO COME BEFORE THE MEETING. The Boards are not aware of any
matters that will be presented for action at the Meeting other than those set
forth herein. Should any other matters requiring a vote of shareholders arise,
the proxy in the accompanying form will confer upon the person or persons
entitled to vote the shares represented by such proxy the discretionary
authority to vote the shares with respect to any such other matters in
accordance with their best judgment in the interest of the Fund.
VOTING, QUORUM. Each valid proxy will be voted in accordance with the
instructions on the proxy and as the persons named in the proxy determine on
such other business as may come before the Meeting. If no instructions are
given, the proxy will be voted for the election as Board members of the persons
who have been nominated for such Fund and as recommended by the Board on each
other item. Shareholders who execute proxies may revoke them at any time before
they are voted, either by writing to the Fund or in person at the time of the
Meeting. Proxies given by telephone or electronically transmitted instruments
may be counted if obtained pursuant to procedures designed to verify that such
instructions have been authorized. Item 1, election of Board Members for a Fund,
requires a plurality vote of the shares of such Fund. Item 2, ratification of
the selection of independent auditors for a Fund, requires the affirmative vote
of a majority of the shares of the Fund voting on the matter. Items 3 and 4,
approval for KHI and KMM of expanded borrowing authority and the elimination of
each Fund's investment restrictions and polices related to illiquid and
restricted securities, respectively, requires the affirmative vote of a
"majority of the outstanding
15
<PAGE> 18
voting securities" of the Fund. The term "majority of the outstanding voting
securities" (as defined in the 1940 Act) of a Fund means the affirmative vote of
the lesser of (1) 67% of the voting securities of the Fund present at the
meeting if more than 50% of the outstanding shares of the Fund are present in
person or by proxy; or (2) more than 50% of the outstanding voting securities of
the Fund. In tallying shareholder votes, abstentions and broker non-votes (i.e.,
shares held by brokers or nominees as to which (i) instructions have not been
received from the beneficial owners or persons entitled to vote and (ii) the
broker or nominee does not have discretionary voting power on a particular
matter) will be counted for determining whether a quorum is present for purposes
of convening the Meeting and will be considered present at the Meeting. On Item
1, abstentions and broker non-votes will have no effect; the persons receiving
the largest number of votes will be elected. On Item 2, abstentions and broker
non-votes will not be counted as votes cast and will have no effect on the
result of the vote. On Items 3 and 4, abstentions and broker non-votes will be
considered both present at the Meeting and issued and outstanding and, as a
result, will have the effect of being counted as voted against the Item. As
noted previously, the holders of the Preferred Shares of KTF, voting as a
separate class, are entitled to elect two Members of KTF's Board and the holders
of the Common Shares and the Preferred Shares, voting together as a single
class, are entitled to elect the six remaining Members of KTF's Board. With
regard to all other items, the holders of the Common Shares and the Preferred
Shares of KTF will vote together as a single class.
At least 50% of the shares of a Fund must be present, in person or by proxy, in
order to constitute a quorum for that Fund. Thus, the meeting for a particular
Fund could not take place on its scheduled date if less than 50% of the shares
of that Fund were represented.
THE BOARD OF EACH FUND RECOMMENDS AN AFFIRMATIVE VOTE ON ALL ITEMS APPLICABLE TO
THAT FUND.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
By order of the Boards,
Philip J. Collora
Secretary
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<PAGE> 19
PROXY PROXY
KEMPER HIGH INCOME TRUST
FOR THE ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 22, 1998
PLEASE VOTE PROMPTLY!
Your vote is needed! Please vote below and sign in the space provided and
return it in the envelope provided. You may receive additional proxies for
your other accounts with Kemper. These are not duplicates; you should sign and
return each proxy card in order for your votes to be counted. Please return
them as soon as possible to help save the cost of additional mailings.
The signers of this proxy hereby appoint Arthur R. Gottschalk and Daniel
Pierce, and each of them, attorneys and proxies, with power of substitution in
each, to vote all shares for the signers at the Annual Meeting of Shareholders
to be held October 22, 1998, and at any adjournments thereof, as specified
herein, and in accordance with their best judgment, on any other business that
may properly come before this meeting. If no specification is made herein, all
shares will be voted as recommended by the Board on each item set forth on this
proxy.
THE PROXY IS SOLICITED BY THE BOARD OF THE FUND WHICH RECOMMENDS A VOTE "FOR"
ALL ITEMS.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: [X]
<TABLE>
<S> <C> <C> <C> <C>
For Withhold For All To withhold authority to vote,
All All Except mark the "For All Except" box
1. Election of Trustees: and write the nominee's number
01) James E. Akins, 02) Arthur R. Gottschalk, 03) Frederick [ ] [ ] [ ] on the line provided below.
T. Kelsey, 04) Thomas W. Littauer, 05) Daniel Pierce,
06) Fred B. Renwick, 07) John B. Tingleff, 08) John G. ------------------------------
Weithers
2. Ratification of the selection of Ernst & Young LLP as the For Against Abstain
Fund's independent auditors for the current fiscal year.
[ ] [ ] [ ]
3. Approval of expansion of borrowing authority. For Against Abstain
[ ] [ ] [ ]
4. Elimination of investment restrictions and policies related For Against Abstain
to illiquid and restricted securities.
[ ] [ ] [ ]
Note: All registered owners of accounts shown above must sign. Please sign exactly as your name appears on this Proxy. If signing
for a corporation, estate or trust, please indicate your capacity or title.
- ---------------------- ---------------- ---------------------- --------------------
Signature Date Signature (Joint) Date
</TABLE>
