<PAGE> 1
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED NOVEMBER 30, 1998
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
KEMPER
HIGH INCOME TRUST
"... As we maintained throughout the period,
the fundamentals of the high yield market
continued to be strong. The past few months
have been extremely good for the fund. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
Economic Overview
5
Performance Update
7
Portfolio Statistics
8
Largest Holdings Year 2000
9
Portfolio of Investments
17
Report of Independent Auditors
18
Financial Statements
20
Notes to Financial Statements
22
Financial Highlights
23
Description of Dividend Reinvestment Plan
26
Shareholders' Meeting
AT A GLANCE
- --------------------------------------------------------------------------------
TOTAL RETURNS
OR THE YEAR ENDED NOVEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BASED ON BASED ON
NET ASSET MARKET
VALUE PRICE
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER HIGH
INCOME TRUST 4.38% 6.50%
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NET ASSET VALUE AND MARKET PRICE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AS OF AS OF
11/30/98 11/30/97
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE $8.94 $9.44
- --------------------------------------------------------------------------------
MARKET PRICE $9.88 $10.19
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
THE FOLLOWING TABLE SHOWS PER SHARE DIVIDEND INFORMATION FOR THE FUND AS OF
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
KEMPER HIGH
INCOME TRUST
- --------------------------------------------------------------------------------
<S> <C>
ONE-YEAR INCOME: $.9000
- --------------------------------------------------------------------------------
NOVEMBER DIVIDEND: $.0750
- --------------------------------------------------------------------------------
ANNUALIZED DISTRIBUTION RATE:
(BASED ON NET ASSET VALUE) 10.07%
- --------------------------------------------------------------------------------
ANNUALIZED DISTRIBUTION RATE:
(BASED ON MARKET PRICE) 9.11%
- --------------------------------------------------------------------------------
</TABLE>
Investments by the fund in lower quality bonds present greater risk to principal
and interest than investments in higher quality bonds.
Statistical Note: Current annualized distribution rate is the latest monthly
dividend shown as an annualized percentage of net asset value/market price on
the date shown. Distribution rate simply measures the level of dividends and is
not a complete measure of performance. Total return measures aggregate change in
net asset value/market price assuming reinvestment of dividends. Returns are
historical and do not represent future performance. Market price, distribution
rates, net asset value and returns fluctuate. Additional information concerning
performance is contained in the Financial Highlights appearing at the end of
this report.
TERMS TO KNOW
EASE Occurs when the Federal Reserve Board of Governors changes monetary policy
by decreasing the federal funds rate.
FEDERAL FUNDS RATE The interest rate banks charge each other for overnight loans
that are needed to meet reserve requirements. Often considered the most
sensitive indicator of the direction of interest rates.
GRAY MONDAY The name used to identify Monday, October 27, 1997. On that day the
Dow Jones Industrial Average lost 554 points or 7 percent of its total value.
Gray Monday is a comparison to Black Monday, October 19, 1987, when the market
lost almost 23 percent of its total value.
HIGH-YIELD BONDS High yield bonds are issued by companies, often without long
track records of sales and earnings, or by those with questionable credit
strength and pay a higher yield to investors to help compensate for their
greater risk of loss to principal and interest. High-yield bonds carry a credit
rating of BB or lower from either Moody's or Standard & Poor's bond rating
services and are considered to be "below investment grade" by these rating
agencies. Such bonds may also be unrated.
MARKET CAPITALIZATION A measure of the size of a publicly traded company, as
determined by multiplying the current price by the number of shares outstanding.
The market capitalization of a company has bearing on its perceived earnings
potential and risk. Small cap companies (less than $1 billion) may present the
potential for greater growth than larger, more established companies. On the
other hand, the stock of small cap companies may be expected to be more volatile
and therefore greater risk to capital.
RECESSION A downturn in economic activity, defined by many economists as at
least two consecutive quarters of decline in a country's Gross Domestic Product
(GDP).
TOTAL RETURN A fund's total return figure measures both the net investment
income and any realized and unrealized appreciation or depreciation of the
underlying investments in its portfolio for a specified period, assuming the
reinvestment of all dividends. It represents the aggregate percentage change in
the value of an investment in the fund over the period. Total return may be
based upon net asset value or market price.
<PAGE> 3
ECONOMIC OVERVIEW
[SILVIA PHOTO]
DR. JOHN E. SILVIA IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.
HIS PRIMARY RESPONSIBILITIES INCLUDE ANALYSIS, MODELING AND FORECASTING OF
ECONOMIC DEVELOPMENTS AND FEDERAL RESERVE ACTIVITY THAT AFFECT FINANCIAL
MARKETS, ESPECIALLY INTEREST RATE TRENDS. THIS EFFORT INCLUDES CLOSE
COLLABORATION WITH BOTH INCOME AND EQUITY MUTUAL FUND MANAGERS AND PENSION FUND
MANAGERS.
SILVIA HOLDS A BACHELOR'S DEGREE AND PH.D. IN ECONOMICS FROM NORTHEASTERN
UNIVERSITY IN BOSTON AND A MASTER'S DEGREE IN ECONOMICS FROM BROWN UNIVERSITY IN
PROVIDENCE, R.I. PRIOR TO HIS CAREER AT SCUDDER KEMPER, HE WAS WITH THE HARRIS
BANK AND ALSO TAUGHT AT INDIANA UNIVERSITY.
SCUDDER KEMPER INVESTMENTS, INC. IS THE INVESTMENT MANAGER FOR KEMPER FUNDS. IT
IS ONE OF THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS
WORLDWIDE, MANAGING MORE THAN $245 BILLION IN ASSETS GLOBALLY FOR MUTUAL FUND
INVESTORS, RETIREMENT AND PENSION PLANS, INSTITUTIONAL AND CORPORATE CLIENTS,
INSURANCE COMPANIES, AND PRIVATE, FAMILY AND INDIVIDUAL ACCOUNTS.
DEAR SHAREHOLDERS,
If you're like most investors, you may be wondering if you should allow yourself
to breathe a sigh of relief as 1999 begins. After several months of generally
declining stock prices and extreme volatility, the U.S. stock market seems to
have rediscovered its resiliency. In the fourth quarter, the Standard & Poor's
500, an unmanaged index generally representative of the U.S. stock market,
bounced back into the 1200-point range, up approximately 20 percent from its
third-quarter low of 957. The blue chip Dow Jones Industrial Average enjoyed a
comparable rise. Investor confidence suddenly overtook the investor uncertainty
that had plagued the markets at summer's end. While financial volatility appears
to be continuing, the mood for investors definitely has improved.
To what can we attribute the change? Simply this -- the cumulative effect of
some good news, not the least of which was a long-awaited series of interest
rate reductions by the Federal Reserve Board. In September, the Fed reduced the
federal funds rate a modest quarter of a percentage point, however, this first
cut disappointed some investors who were expecting a more dramatic gesture. Two
weeks later, the Fed came back with an additional quarter of a percentage point
reduction. This was an unexpected cut that seemed to have a positive effect on
Wall Street. In November, a third rate cut of a quarter of a percentage point
also boosted investor confidence. Investors were further surprised by
better-than-expected corporate earnings reports early in the fourth quarter.
Finally, economic data regarding retail sales, employment and home sales
suggested continued economic growth and very little prospect of recession.
In many ways, 1998's market activity provides a study in how investor
perceptions can upstage economic realities. Certainly, the tumultuous lessons of
Russia and Southeast Asia renewed investors' awareness of risk in 1998, which
was an important wake-up call. At all times, investors must understand and
consider risk. But over the course of 1998, U.S. economic fundamentals have
essentially remained strong. In fact, inflation has remained low for the entire
year. Economic growth has been solid. Our consumer confidence remained fairly
high, although not quite as high as in 1997. The nation's budget surplus for
1998 came in at $60 billion, with another budget surplus expected for fiscal
1999.
Growth in the nation's gross domestic product (GDP), which represents the
total value of all goods and services produced within the U.S. economy, has
remained remarkably steady. GDP is expected to have grown at an annualized rate
of 3 percent for the second half of 1998 and is anticipated to hover around 2
percent to 2.5 percent for the first half of 1999. The consumer price index
(CPI) remains in a range of 1.5 percent to 2 percent.
While employment growth has slowed a bit, the slowdown in wage gains may
provide the Fed with an incentive to reduce interest rates even further. U.S.
corporate profits have generally been flat, so we may see a decrease in capital
spending. Banks appear to be only a little less willing to lend, so the threat
of a general credit crunch is minimal.
Investors may take comfort in the fact that the U.S. markets and economy have
withstood the test of 1998's tumultuous third quarter. Similarly, while certain
countries, such as Malaysia, Indonesia, Brazil and Russia, are still suffering
from economic crises, others, including the Philippines, South Korea, Thailand
and China, appear to have survived. As long as the Fed and the Group of Seven
leading industrial nations (G7) are committed to avoiding recession on national
and global levels respectively, investors have a good chance of experiencing a
more stable economic environment.
At home, there has been somewhat of a slowdown in manufacturing, as reduced
U.S. exports reflect foreign economic turmoil. But the global impact of the
Asian crisis still has not hit the U.S. as hard as was expected. Indeed, Asian
turmoil has not affected U.S. trade as much as it has lowered import prices and
helped reduce global interest rates.
In Europe, the much anticipated Economic and Monetary Union (EMU) is on the
move, with a focus on more flexibility and growth potential for the region.
European equities may be the beneficiaries of increased spending, as governments
seek to foster growth and reduce unemployment.
3
<PAGE> 4
ECONOMIC OVERVIEW
- --------------------------------------------------------------------------------
ECONOMIC GUIDEPOSTS
- --------------------------------------------------------------------------------
ECONOMIC ACTIVITY IS A KEY INFLUENCE ON INVESTMENT PERFORMANCE AND SHAREHOLDER
DECISION-MAKING. PERIODS OF RECESSION OR BOOM, INFLATION OR DEFLATION, CREDIT
EXPANSION OR CREDIT CRUNCH HAVE A SIGNIFICANT IMPACT ON MUTUAL FUND PERFORMANCE.
THE FOLLOWING ARE SOME SIGNIFICANT ECONOMIC GUIDEPOSTS AND THEIR
INVESTMENT RATIONALE THAT MAY HELP YOUR INVESTMENT DECISION-MAKING. THE 10-YEAR
TREASURY RATE AND THE PRIME RATE ARE PREVAILING INTEREST RATES. THE OTHER DATA
REPORT YEAR-TO-YEAR PERCENTAGE CHANGES.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (12/31/98) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-year Treasury rate(1) 4.65 5.50 5.81 6.30
Prime rate(2) 7.75 8.50 8.50 8.25
Inflation rate(3)* 1.55 1.75 1.89 3.18
The U.S. dollar(4) -2.45 9.54 10.26 4.36
Capital goods orders(5)* 7.82 9.52 8.53 4.82
Industrial production(5)* 1.47 5.10 6.56 5.32
Employment growth(6)* 2.28 2.65 2.70 2.33
</TABLE>
(1) Falling interest rates in recent years have been a big plus for
financial assets.
(2) The interest rate that commercial lenders charge their best borrowers.
(3) Inflation reduces an investor's real return. In the last five years,
inflation has been as high as 6 percent. The low, moderate inflation of the
last few years has meant high real returns.
(4) Changes in the exchange value of the dollar impact U.S. exporters and the
value of U.S. firms' foreign profits.
(5) These influence corporate profits and equity performance.
(6) An influence on family income and retail sales.
* Data as of November 30, 1998.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
If you're a long-term investor in today's short-term world, go ahead and
breathe that sigh of relief -- but be on your toes in 1999. It's going to be an
interesting year as the EMU emerges, the race for the next presidency heats up
and the year 2000 approaches. And, remember: Investors don't like uncertainty,
be it economic or political. More trauma in the White House, continuing disputes
with Iraq or any other hints of crisis could prompt a downward spike in our
markets in the short run. In the long run, the keys to investment performance
remain moderate growth, low inflation and limited taxation and regulation.
Thank you for choosing to invest with Kemper Funds. We appreciate the
opportunity to serve your investment needs.
Sincerely,
/s/ John E. Silvia
JOHN E. SILVIA
The information contained in this piece has been taken from sources believed to
be reliable, but the accuracy of the information is not guaranteed. The opinions
and forecasts expressed are those of Dr. John E. Silvia as of January 4, 1999,
and may not actually come to pass. This information is subject to change. No
part of this material is intended as an investment recommendation.
4
<PAGE> 5
PERFORMANCE UPDATE
[MCNAMARA PHOTO]
MICHAEL MCNAMARA JOINED THE ORGANIZATION IN 1972 AND IS A MANAGING DIRECTOR. HE
IS CO-MANAGER OF KEMPER HIGH INCOME TRUST, KEMPER HIGH YIELD FUND, KEMPER HIGH
YIELD FUND II AND KEMPER HIGH YIELD OPPORTUNITY FUND AND DIRECTS ALL FIXED-
INCOME RESEARCH AT SCUDDER KEMPER INVESTMENTS. HE EARNED AN M.B.A. FROM LOYOLA
UNIVERSITY.
[RESIS PHOTO]
HARRY RESIS JOINED SCUDDER KEMPER INVESTMENTS IN 1988 AND IS A MANAGING
DIRECTOR. HE IS PORTFOLIO CO-MANAGER OF KEMPER HIGH INCOME TRUST, KEMPER HIGH
YIELD FUND, KEMPER HIGH YIELD FUND II AND KEMPER HIGH YIELD OPPORTUNITY FUND AND
HANDLES ALL OF THE TRADING ACTIVITY FOR THE FUNDS. RESIS HOLDS A BACHELOR'S
DEGREE IN FINANCE FROM MICHIGAN STATE UNIVERSITY.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE
MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
THE HIGH-YIELD MARKET BENEFITED FROM A BENIGN ECONOMIC ENVIRONMENT FOR THE
FIRST HALF OF KEMPER HIGH INCOME TRUST'S FISCAL YEAR, DECEMBER 1, 1997 THROUGH
NOVEMBER 30, 1998. THE MARKET EXPERIENCED A TOUGH LATE SUMMER AND EARLY FALL,
BUT KEMPER HIGH INCOME TRUST FINISHED THE YEAR ON SOLID FOOTING. CO-LEAD
PORTFOLIO MANAGERS HARRY RESIS AND MICHAEL MCNAMARA DISCUSS CIRCUMSTANCES
AFFECTING THE PERFORMANCE OF HIGH YIELD BONDS AND EXPLAIN THE DECISIONS THEY
MADE IN STRIVING TO MEET SHAREHOLDERS' EXPECTATIONS FOR KEMPER HIGH INCOME
TRUST.
Q HARRY AND MICHAEL, KEMPER HIGH INCOME TRUST HAD GAINED 2.80 PERCENT FOR
THE FIRST HALF OF THE FISCAL YEAR, BUT ACTUALLY DID BETTER IN THE SECOND HALF OF
THE YEAR, WHEN THE HIGH YIELD MARKET EXPERIENCED SOME TURBULENCE. HOW DO YOU
EXPLAIN THE FUND'S PERFORMANCE THROUGHOUT THE YEAR?
A Kemper High Income Trust gained 4.38 percent based on net asset value, for
the year, slightly below the Salomon Extended High-Yield Market Index's return
of 4.6 percent. The fund as of November 30, 1998, was trading at a 10.4 percent
premium, with a market price per share of $9.88 and the net asset value per
share of $8.94.
Yes, there was trouble in the markets during the second half of the fund's
fiscal year, but as we maintained throughout the period, the fundamentals of the
high yield market continued to be strong.
Q WOULD YOU PLEASE DESCRIBE THE MARKET ENVIRONMENT DURING THE YEAR?
A The first part of the fund's fiscal year was a continuation of the past
three years' healthy economic environment. With stable economic growth, benign
inflation, rising corporate earnings and a strong equity market and low interest
rates, it was an ideal environment for high-yield bonds. There was even the
feeling that the Asian problems that surfaced in October 1997 would be
short-lived.
That all changed in July. It became clear the Asian situation was not
getting any better. On top of the Asian situation, financial problems in Russia
put pressure on the dealer and banking communities in the United States,
creating a serious liquidity problem in the market.
Q THE HIGH-YIELD MARKET EXPERIENCED ONE OF ITS WORST MONTHS EVER IN AUGUST
1998. WAS THAT BECAUSE OF THESE FACTORS YOU JUST MENTIONED, OR SOMETHING ELSE?
A The problems that were an issue in July led to a liquidity crisis in the
high-yield market in August. This problem was exacerbated by Russia defaulting
on its debts and causing Wall Street and banks to take losses on their
investments in Russia. Of course, there was also the fallout of the Long-Term
Capital Hedge Fund debacle in August.
We've been stressing during this period that the problems that led to the
market's poor performance were technical, not fundamental. That means the
fundamentals of the high yield market -- default rates, for instance, continue
to be tame. The Federal Reserve Board's (the Fed) decision to ease rates in
September, October and November and the
5
<PAGE> 6
PERFORMANCE UPDATE
thought that further easing is in the works, is likely to keep us out of a
recession. This should help cure the liquidity crisis and get the high yield
market back on track.
Q WHAT WAS YOUR INVESTMENT STRATEGY DURING THE YEAR?
A We became a bit more aggressive in the first half of the fund's fiscal
year, which helped support the fund's income-earning potential. The continuing
strength of the economy, and the Fed's support of its growth by easing rates, is
a positive for the high-yield market and gives these lower-tiered investments a
better chance of
performing well.
We've also increased our level of deferred-interest bonds to be more in
line with other high-yield funds. Deferred-interest bonds have low
credit-quality ratings. They are purchased at a discount to their par value and
do not start paying interest until later in the life of the loan. They tend to
have a longer duration, making them sensitive to interest rate changes and price
volatility. We believe that the economic environment and interest rates will
remain stable, making deferred-interest bonds a good investment for the fund.
The market reached its peak in mid-July and quickly reversed itself in
August as a result of the Russian government's default and the Long-Term Capital
crisis we already mentioned. It bottomed on October 15, 1998, with the second
Fed ease reversing investor psychology. We became very bullish at that point and
were fully invested.
Q WHAT IS YOUR OUTLOOK FOR THE HIGH-YIELD MARKET?
A As we've mentioned, the recent downturn was largely a technical reaction
to events external to the high-yield market. The fundamentals of the high yield
market remain relatively strong. Pessimism and fear regarding the future, rather
than the fundamentals of high-yield companies, are behind this correction.
Defaults, while increased from last year, are still below the historical
average. While a recession is a possibility and some firms are already calling
for one in 1999, at its current level, the high-yield market seems to have
already factored in a recession and a resulting increase in defaults. The
Federal Reserve Board's recent rate cut, November 17, 1998, and the possibility
of further cuts, could help stave off any possible recession.
Recession or not, historically the high-yield market has bounced back
smartly from terrible months such as August 1998. Data has shown that of the
five individually worst performing months in the high-yield market, the average
return for the following 12 months is 21.2 percent. (Of course past performance
does not guarantee future results.)
CUMULATIVE ONE-YEAR RETURNS
FIVE WORST PERFORMING MONTHS FOR THE HIGH YIELD MARKET*
<TABLE>
<CAPTION>
1-YEAR RETURN,
FOLLOWING
THE WORST
1-MONTH PERFORMING
MONTH RETURN MONTHS
- --------------------------------------------------------------------------------
<S> <C> <C>
OCTOBER 1979 -8.39% 8.15%
- --------------------------------------------------------------------------------
FEBRUARY 1980 -8.25 12.67
- --------------------------------------------------------------------------------
SEPTEMBER 1990 -7.62 36.93
- --------------------------------------------------------------------------------
MAY 1984 -5.32 24.56
- --------------------------------------------------------------------------------
AUGUST 1990 -4.62 23.68
- --------------------------------------------------------------------------------
AVERAGE -6.84 21.20
- --------------------------------------------------------------------------------
</TABLE>
Source: DLJ, Ibbotson Associates
* High yield market represented by DLJ High Yield Index
The high-yield market has been driven down to a point where we see good
values in many of the companies on which we do extensive fundamental research.
As a result, we are carrying a very low cash position in Kemper High Income
Trust and anticipate staying fully invested in order to fully participate in a
turnaround.
Q WHAT OTHER FACTORS DO YOU LOOK AT WHEN FORMULATING YOUR OUTLOOK ON THE
HIGH-YIELD MARKET?
A The high-yield market is really a small and mid-cap bond market. High
yield bonds are issued by companies with modest market capitalizations (see
Terms to Know). The small and mid-cap equity markets were the hardest hit during
this recent period, but we're seeing a rally already. And bonds of small and
mid-cap issuers are generally safer than the equities of those same companies,
since bondholders are always senior in the right of payment to stockholders. So
a small and mid-cap bond market rebound is likely after the stock rebound.
Q SO, IS THIS A GOOD TIME TO BE IN HIGH-YIELD FUNDS?
A The market's already showing signs of a bounce back. As the liquidity in
the market improves, we'll have more and more opportunities to take advantage of
good values in the market. Whether an investor is total return-oriented or
looking for income, high-yield
investing may make sense.
6
<PAGE> 7
PORTFOLIO STATISTICS
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ON 11/30/98 ON 11/30/97
- --------------------------------------------------------------------------------
<S> <C> <C>
HIGH YIELD BONDS 96% 94%
- --------------------------------------------------------------------------------
CASH AND EQUIVALENTS 2 3
- --------------------------------------------------------------------------------
PREFERRED AND COMMON STOCK 2 2
- --------------------------------------------------------------------------------
SHORT-TERM TREASURIES -- 1
- --------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 11/30/98 ON 11/30/97
CORPORATE LONG-TERM FIXED INCOME
SECURITIES RATINGS+
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ON 11/30/98 ON 11/30/97
- --------------------------------------------------------------------------------
<S> <C> <C>
AAA --% 2%
- --------------------------------------------------------------------------------
BBB 1 1
- --------------------------------------------------------------------------------
BB 11 15
- --------------------------------------------------------------------------------
B 77 75
- --------------------------------------------------------------------------------
BELOW B 10 --
- --------------------------------------------------------------------------------
NOT RATED 1 --
- --------------------------------------------------------------------------------
OTHER -- 7
- --------------------------------------------------------------------------------
100% 100%
</TABLE>
+ The ratings of Standard and Poor's Corporation (S&P) and Moody's Investors
Services, Inc. (Moody's) represent their opinions as to the quality of
securities that they undertake to rate. The percentage shown reflects the
higher of Moody's or S&P ratings. Portfolio composition will change over time.
Ratings are relative and subjective and not absolute standards of quality.
[PIE CHART] [PIE CHART]
ON 11/30/98 ON 11/30/97
AVERAGE MATURITY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ON 11/30/98 ON 11/30/97
- --------------------------------------------------------------------------------
<S> <C> <C>
AVERAGE MATURITY 7.9 years 7.6 years
- --------------------------------------------------------------------------------
</TABLE>
* Portfolio composition and holdings are subject to change.
7
<PAGE> 8
LARGEST HOLDINGS
THE FUND'S FIVE LARGEST HOLDINGS*
REPRESENTING 8.8 PERCENT OF THE FUND'S TOTAL NET ASSETS ON NOVEMBER 30, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
HOLDING PERCENT
- -------------------------------------------------------------------------------
<S> <C> <C>
1. TELEWEST COMMUNICATIONS 2.5%
2. SIX FLAGS 1.7%
3. ICG HOLDINGS 1.6%
4. RIVERWOOD INTERNATIONAL 1.5%
5. NEXTEL COMMUNICATIONS 1.5%
</TABLE>
* The fund's holdings are subject to change.
YEAR 2000
YEAR 2000 ISSUE
Like other registered investment companies and financial and business
organizations worldwide, the fund could be adversely affected if computer
systems on which the fund relies, which primarily include those used by the
investment manager, its affiliates or other service providers, are unable to
correctly process date-related information on and after January 1, 2000. This
risk is commonly called the Year 2000 Issue. Failure to successfully address the
Year 2000 Issue could result in interruptions to and other material adverse
effects on the fund's business and operations, such as problems with calculating
net asset value. The investment manager has commenced a review of the Year 2000
Issue as it may affect the fund and is taking steps it believes are reasonably
designed to address the Year 2000 Issue, although there can be no assurances
that these steps will be sufficient. In addition, there can be no assurances
that the Year 2000 Issue will not have an adverse effect on the companies whose
securities are held by the fund or on global markets or economies generally.
8
<PAGE> 9
PORTFOLIO OF INVESTMENTS
KEMPER HIGH INCOME TRUST
PORTFOLIO OF INVESTMENTS AT NOVEMBER 30, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
CORPORATE OBLIGATIONS--105.2% AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AEROSPACE--1.2% BE Aerospace, Inc., 9.50%, 2008 $ 410 $ 433
DeCrane Aircraft Holdings, Inc., 12.00%, 2008 1,470 1,485
L-3 Communication Corp., 10.375%, 2007 330 363
Transdigm, Inc., 10.375%, 2008 310 316
--------------------------------------------------------------------------------------
2,597
- -----------------------------------------------------------------------------------------------------------------------------------
BROADCASTING, Affinity Group, Inc., 11.50%, 2003 1,420 1,484
CABLESYSTEMS AND American Banknote Corp., 11.25%, with
PUBLISHING--18.4% warrants, 2007 720 468
(b)American Lawyer Media Holdings, 12.25%,
2008 90 57
American Radio Systems, 9.00%, 2006 680 733
(a)(b)Australis Holdings, 15.00%, with
warrants, 2002 2,750 83
Australis Media, Ltd., 14.00%, 2000 116 89
Big Flower Press, Inc., 8.875%, 2007 1,400 1,428
CSC Holdings, Inc.
9.25%, 2005 180 192
7.875%, 2007 100 104
8.125%, 2009 450 479
9.875%, 2013 840 932
10.50%, 2016 1,140 1,334
(b)Capstar Broadcasting Corp., 12.75%, 2009 1,880 1,551
Century Communications Corp., 8.375%, 2007 350 368
Chancellor Media Corp.
8.125%, 2007 810 811
8.00%, 2008 940 959
9.00%, 2008 280 294
(b)Charter Communications, Inc., 14.00%, 2007 1,470 1,308
Charter Communications, L.P., 11.25%, 2006 400 436
Comcast Corp., 9.125%, 2006 820 871
(b)Comcast UK Cable Partners, Ltd., 11.20%, 2007 3,510 3,036
(b)DIVA Systems Corp., 12.625%, 2008 430 129
(b)Diamond Cable Communications, PLC, 13.25%,
2004 1,115 1,076
EZ Communications, 9.75%, 2005 380 413
Falcon Holding Group, L.P.
8.375%, 2010 300 314
(b) 9.285%, 2010 500 348
Frontiervision
11.00%, 2006 840 941
(b) 11.875%, 2007 880 737
Interep National Radio Sales, Inc., 10.00%,
2008 520 529
Intermedia Capital Partners, 11.25%, 2006 1,040 1,160
Mediacom LLC, 8.50%, 2008 380 389
NTL, Inc.
11.50%, 2008 1,740 1,914
(b) 12.375%, 2008 1,430 915
Newsquest Capital, PLC, 11.00%, 2006 438 481
(b)PX Escrow Corp., 9.625%, 2006 880 484
Price Communications, Corp., 9.125%, 2006 790 820
(b)Radio Unica Corp., 11.75%, 2006 770 408
SFX Entertainment, Inc., 9.125%, 2008 1,780 1,786
Salem Communications Corp., 9.50%, 2007 500 523
Sinclair Broadcasting Group, Inc., 8.75%, 2007 1,620 1,628
Star Choice, 13.00%, with warrants, 2005 400 409
TeleWest Communications, PLC
(b) 11.00%, 2007 4,290 3,593
11.25%, 2008 1,570 1,782
</TABLE>
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(b)Transwestern Holdings, L.P., 11.875%, 2008 $ 250 $ 166
(b)21st Century Telecom Group, Inc., 12.25%,
with warrants, 2008 600 256
(b)UIH Australia Pacific, Inc., 14.00%, with
warrants, 2006 710 366
(b)United International Holdings, Inc.,
10.75%, 2008 1,500 863
--------------------------------------------------------------------------------------
39,447
- -----------------------------------------------------------------------------------------------------------------------------------
BUSINESS SERVICES--2.2% Allied Waste Industries
10.25%, 2006 460 529
(b) 11.30%, 2007 1,100 913
DIMAC Corp., 12.50%, 2008 1,420 1,420
Intertek Finance, 10.25%, 2006 520 520
Outdoor Systems, Inc.
9.375%, 2006 760 821
8.875%, 2007 530 562
--------------------------------------------------------------------------------------
4,765
- -----------------------------------------------------------------------------------------------------------------------------------
CHEMICALS AND Agriculture, Mining and Chemicals, Inc.,
AGRICULTURE--4.2% 10.75%, 2003 150 152
Atlantis Group, Inc., 11.00%, 2003 1,605 1,629
Hines Horticulture, Inc., 11.75%, 2005 332 350
Huntsman Polymers Corp., 11.75%, 2004 1,930 2,055
NL Industries, Inc., 11.75%, 2003 1,380 1,477
Terra Industries, Inc., 10.50%, 2005 1,610 1,650
Texas Petrochemicals Corp., 11.125%, 2006 900 909
UCC Investors Holdings, Inc., 10.50%, 2002 720 792
--------------------------------------------------------------------------------------
9,014
- -----------------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS--22.8% Allegiance Telecom, Inc.
(b) 11.75%, 2008 700 343
12.875%, 2008 960 960
American Cellular Corp., 10.50%, 2008 440 440
Birch Telecom, 14.00%, 2008 340 316
(b)Call-Net Enterprises, Inc.
13.25%, 2004 1,550 1,504
9.27%, 2007 490 326
8.94%, 2008 700 417
Comcast Cellular Holdings, Inc., 9.50%, 2007 590 634
(b)Communications Cellular, 13.125%, with
warrants, 2003 2,100 1,627
(b)Crown Castle International Corp., 10.625%,
2007 1,500 1,042
Dobson Communication Corp., 11.75%, 2007 1,200 1,248
Econophone, Inc.
13.50%, with warrants, 2007 390 425
(b) 11.00%, 2008 350 170
Esprit Telecom
11.50%, 2007 1,020 1,043
10.875%, 2008 430 428
(b)Focal Communication Corp., 12.125%, 2008 200 109
GCI General Communication, 9.75%, 2007 640 621
(b)ICG Holdings, 13.50%, 2005 4,160 3,515
(b)IPC Information Systems, 10.875%, 2008 1,610 1,006
Impsat, S.A., 12.375%, 2008 1,045 873
(b)Intermedia Communications of Florida, Inc.
12.50%, 2006 520 411
8.875%, with warrants, 2007 300 365
(b) 11.25%, 2007 1,800 1,264
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(b)KMC Telecom Holdings, Inc., 12.50%, with
warrants, 2008 $ 1,240 $ 605
Level 3 Communications
9.125%, 2008 1,410 1,406
10.50%, 2008 750 449
Long Distance International, 12.25%, 2008 700 577
MGC Communications, 13.00%, with warrants,
2004 830 562
McLeod, Inc.
9.25%, 2007 710 747
(b) 10.50%, 2007 1,535 1,178
9.50%, 2008 230 246
Metromedia Fiber Network Inc., 10.00%, 2008 800 826
Metronet Communications
(b) 10.75%, 2007 350 231
12.00%, with warrants, 2007 360 412
(b) 9.95%, 2008 910 562
10.625%, 2008 700 749
(b)Millicom International Cellular, S.A.,
13.50%, 2006 1,540 1,082
Netia Holdings
10.25%, 2007 135 117
(b) 11.25%, 2007 440 264
(b)Nextel Communications
9.75%, 2004 1,330 1,303
9.75%, 2007 550 344
10.65%, 2007 1,050 690
9.95%, 2008 1,445 889
Nextlink Communications
12.50%, 2006 1,100 1,210
(b) 9.45%, 2008 530 313
10.75%, 2008 1,000 1,035
(b)PTC International Finance, B.V., 10.75%,
2007 1,170 790
(b)Pinnacle Holdings, 10.00%, 2008 1,000 600
Primus Telecommunications Group
11.75%, with warrants, 2004 810 850
9.875%, 2008 100 94
PSINet, Inc.
10.00%, 2005 810 810
11.50%, 2008 790 837
RCN Corp.
10.00%, 2007 550 521
(b) 11.00%, 2008 470 250
Rogers Cantel
9.375%, 2008 520 549
9.75%, 2016 1,305 1,364
(b)SBA Communication, 12.00%, 2008 1,160 708
Satelites Mexicanos, S.A. de C.V., 10.125%,
2004 360 302
(b)Spectrasite Holdings, Inc., 12.00%, 2008 1,200 636
Teligent, Inc.
11.50%, 2007 550 525
(b) 11.50%, 2008 550 282
(b)Triton Communications, 11.00%, 2008 1,180 549
USA Mobile Communications, Inc. II, 14.00%,
2004 770 770
US Xchange, LLC, 15.00%, 2008 600 627
Versatel Telecom, 13.25%, with warrants, 2008 760 768
Viatel, Inc.
11.25%, 2008 500 498
(b) 12.50%, 2008 1,020 581
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Winstar Communication, 15.00%, 2007 $ 90 $ 89
Winstar Equipment, 12.50%, 2004 110 114
Winstar Equipment II Corp., 12.50%, 2004 810 842
--------------------------------------------------------------------------------------
48,840
- -----------------------------------------------------------------------------------------------------------------------------------
CONSTRUCTION Airxcel, 11.00%, 2007 590 584
MATERIALS--4.0% American Standard, Inc., 9.25%, 2016 270 278
(b)Building Materials Corporation of America,
11.75%, 2004 750 761
Congoleum Corp., 8.625%, 2008 600 594
Desa International, 9.875%, 2007 770 616
Falcon Building Products, Inc.
9.50%, 2007 1,595 1,404
(b) 10.50%, 2007 70 39
Kevco, 10.375%, 2007 860 804
Nortek, Inc.
9.875%, 2004 930 963
9.125%, 2007 640 662
8.875%, 2008 280 286
Terex Corp., 8.875%, 2008 1,000 1,000
(b)Waxman Industries, Inc.,
12.75%, with warrants, 2004 300 134
Werner Holdings, 10.00%, 2007 450 446
--------------------------------------------------------------------------------------
8,571
- -----------------------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS AMF Bowling World
AND SERVICES--10.8% 10.875%, 2006 960 826
(b) 12.25%, 2006 792 483
Avondale Mills, 10.25%, 2006 930 979
CEX Holdings, Inc., 9.625%, 2008 390 374
Cinemark USA, Inc.
8.50%, 2008 230 231
9.625%, 2008 820 859
Clearview Cinema Group, Inc., 10.875%, 2008 520 616
Coinmach Corp., 11.75%, 2005 2,840 3,103
Doskocil Manufacturing Co., 10.125%, 2007 610 573
Dyersburg Corp., 9.75%, 2007 790 731
Grupa Azucarero Mexico, S.A. de C.V., 11.50%,
2005 400 160
HMH Properties, 7.875%, 2008 1,520 1,482
Hedstrom Corp., 10.00%, 2007 530 456
Herff Jones, Inc., 11.00%, 2005 740 799
Imperial Home Decor Group, Inc., 11.00%, 2008 1,020 928
Kinder-Care Learning Centers, 9.50%, 2009 1,470 1,470
La Petite Academy, Inc., 10.00%, 2008 500 503
Mastellone Hermonos, 11.75%, 2008 700 595
Nine West Group, 9.00%, 2007 280 267
Perkins Finance, L.P., 10.125%, 2007 380 405
Premier Parks, Inc., 12.00%, 2003 690 750
Purina Mills, Inc., 9.00%, 2010 500 515
Regal Cinemas, 9.50%, 2008 950 993
(b)Restaurant Co., 11.25%, 2008 770 385
Sealy Mattress
9.875%, 2007 110 102
(b) 10.875%, 2007 610 366
</TABLE>
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Six Flags Theme Park, 12.25%, 2005 $ 3,245 $ 3,602
(b)Spin Cycle, 12.75%, 2005 1,110 522
United Artists Theatre Co., 9.75%, 2008 70 69
--------------------------------------------------------------------------------------
23,144
- -----------------------------------------------------------------------------------------------------------------------------------
DRUGS AND Abbey Healthcare Group, Inc., 9.50%, 2002 2,300 2,139
HEALTH CARE--3.4% (b)ALARIS Medical Systems, Inc., 11.25%, 2008 590 320
Dade International, Inc., 11.125%, 2006 770 847
Magellan Health Services, 9.00%, 2008 1,000 930
(b)Mariner Post-Acute Network, Inc., 10.50%,
2007 2,520 1,210
Mediq, Inc., 11.00%, 2008 540 508
Paracelsus Healthcare, 10.00%, 2006 550 501
Vencor, 9.875%, 2005 880 783
--------------------------------------------------------------------------------------
7,238
- -----------------------------------------------------------------------------------------------------------------------------------
ENERGY AND RELATED Bellweather Exploration Co., 10.875%, 2007 735 728
SERVICES--4.6% Benton Oil & Gas Co.
11.625%, 2003 995 567
9.375%, 2007 230 103
Chesapeake Energy Corp., 9.125%, 2006 100 88
Continental Resources, Inc., 10.25%, 2008 840 718
Flores & Rucks, Inc., 9.75%, 2006 370 388
Forcenergy Gas Exploration
9.50%, 2006 430 387
8.50%, 2007 370 315
GulfMark Offshore, Inc., 8.75%, 2008 390 380
Mariner Energy, 10.50%, 2006 1,100 1,028
Ocean Energy, 10.375%, 2005 575 621
Pacalta Resources, Ltd., 10.75%, 2004 1,230 1,046
Parker Drilling Corp., 9.75%, 2006 1,230 1,181
Pen Holdings, Inc., 9.875%, 2008 180 171
Prestolite Electric, 9.625%, 2008 535 524
RAM Energy, 11.50%, 2008 300 219
Rutherford-Moran Oil Corp., 10.75%, 2004 380 300
Seven Seas Petroleum, Inc., 12.50%, 2005 350 245
Stone Energy Corp., 8.75%, 2007 810 818
--------------------------------------------------------------------------------------
9,827
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES, Beazer Homes, 8.875%, 2008 120 116
HOME BUILDERS AND Corporate Express, Inc., 4.50%, 2000 260 233
REAL ESTATE--1.9% Del Webb Corp.
9.75%, 2008 560 556
9.375%, 2009 620 601
Forecast Group, L.P., 11.375%, 2000 820 779
Fortress Group, 13.75%, 2003 710 753
Hovnanian Enterprises
11.25%, 2002 288 292
9.75%, 2005 140 136
Ryland Group, Inc., 8.25%, 2008 720 691
--------------------------------------------------------------------------------------
4,157
- -----------------------------------------------------------------------------------------------------------------------------------
HOTELS AND Eldorado Resorts, 10.50%, 2006 770 801
GAMING--2.2% Empress River Casino, 10.75%, 2002 1,175 1,257
Hard Rock Hotel, 9.25%, 2005 125 124
Harvey's Casino Resorts, 10.625%, 2006 680 739
Players International, 10.875%, 2005 795 853
</TABLE>
13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Station Casinos, Inc.
10.125%, 2006 $ 400 $ 423
9.75%, 2007 380 398
--------------------------------------------------------------------------------------
4,595
- -----------------------------------------------------------------------------------------------------------------------------------
MANUFACTURING, Accuride Corp., 9.25%, 2008 690 706
METALS AND MINING--10.5% Aftermarket Technology, 12.00%, 2004 682 716
Alvey Systems, 11.375%, 2003 292 292
Bar Technologies, 13.50%, with warrants, 2001 1,160 1,289
Day International Group, Inc., 11.125%, 2005 2,020 2,161
Delco Remy International, 10.625%, 2006 930 990
Eagle-Pitcher Holdings Inc., 9.375%, 2008 650 614
Earle M. Jorgensen Co., 9.50%, 2005 180 167
Euramax International, PLC, 11.25%, 2006 1,165 1,159
Foamex, L.P.
13.50%, with warrants, 2005 1,000 1,160
9.875%, 2007 310 335
GS Technologies
12.00%, 2004 310 220
12.25%, 2005 510 357
(b)Grove Holdings LLC, 11.625%, 2009 200 94
Grove Investors, PIK, 14.50%, 2010 376 316
Grove Worldwide LLC, 9.25%, 2008 170 161
Hayes Wheels International, Inc., 11.00%, 2006 1,340 1,481
JPS Automotive Products Corp., 11.125%, 2001 1,330 1,396
Jackson Products, Inc., 9.50%, 2005 450 445
Knoll, Inc., 10.875%, 2006 945 1,044
MMI Products, Inc., 11.25%, 2007 805 881
Metal Management, Inc., 10.00%, 2008 520 234
Motors and Gears, Inc., 10.75%, 2006 900 927
Neenah Corp., 11.125%, 2007 1,070 1,113
Renco Metals, 11.50%, 2003 305 317
Renco Steel Holdings, 10.875%, 2005 1,310 1,205
Scovill Fastners, 11.25%, 2007 450 401
Spinnaker Industries, Inc., 10.75%, 2006 1,060 901
Venture Holdings, 9.50%, 2005 530 527
Wells Aluminum Corp., 10.125%, 2005 800 756
-------------------------------------------------------------------------------------
22,365
- ----------------------------------------------------------------------------------------------------------------------------------
PAPER, FOREST PRODUCTS AEP Industries, Inc., 9.875%, 2007 350 350
AND CONTAINERS--7.6% BPC Holding Corp., 12.50%, 2006 620 635
Berry Plastics Corp., 12.25%, 2004 1,000 1,040
Doman Industries, Ltd.
8.75%, 2004 270 230
9.25%, 2007 380 319
Fonda Group, 9.50%, 2007 590 493
Gaylord Container Corp.
9.75%, 2007 340 320
9.875%, 2008 1,590 1,193
Graham Packaging Co.
8.75%, 2008 30 30
(b) 10.75%, 2009 2,050 1,394
IMPAC Group, Inc., 10.125%, 2008 840 832
Millar Western Forest Products, Ltd., 9.875%,
2008 485 398
Pindo Deli Finance Mauritius, Ltd., 10.75%,
2007 40 24
Plainwell, Inc., 11.00%, 2008 570 479
Printpack, Inc.
9.875%, 2004 270 281
10.625%, 2006 1,020 1,061
</TABLE>
14
<PAGE> 15
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Repap Enterprises, Inc., 9.00%, 2004 $ 340 $ 334
Riverwood International
10.25%, 2006 370 376
10.625%, 2007 715 726
10.875%, 2008 2,335 2,207
(b)SF Holdings Group, Inc., 12.75%, 2008 550 193
Stone Container Corp.
12.25%, 2002 550 554
11.50%, 2006 1,300 1,430
Tjiwi Kimia Finance Mauritius, Ltd., 10.00%,
2004 40 25
U.S. Can Corp., 10.125%, 2006 1,250 1,306
--------------------------------------------------------------------------------------
16,230
- -----------------------------------------------------------------------------------------------------------------------------------
RETAILING--7.6% AFC Enterprises, Inc., 10.25%, 2007 1,200 1,248
Advantica Restaurant Co., 11.25%, 2008 1,616 1,648
Agrilink Food, 11.875%, 2008 260 270
Ameriking, 10.75%, 2006 510 533
Carrols Corp., 9.50%, 2008 690 700
Cole National Group, 9.875%, 2006 390 410
(a)Color Tile, Inc., 10.75%, 2001 1,260 13
Finlay Enterprises, Inc., 9.00%, 2008 300 264
Finlay Fine Jewelry Corp., 8.375%, 2008 550 517
Galey & Lord, 9.125%, 2008 1,570 1,448
Guitar Center Management, 11.00%, 2006 280 297
Iron Age Holdings, Corp.
9.875%, 2008 350 322
(b) 12.125%, 2009 310 158
(b)J. Crew Group, Inc., 13.125%, 2008 1,490 700
J. Crew Operating Corp., 10.375%, 2007 855 761
Jafra Cosmetics International, Inc., 11.75%, 2008 650 591
Krystal Co., 10.25%, 2007 220 225
NE Restaurant Co., Inc., 10.75%, 2008 320 330
National Vision Association Ltd., 12.75%, 2005 1,210 1,277
Pamida Holdings, 11.75%, 2003 830 813
Pathmark Stores, 9.625%, 2003 305 305
Petro Stopping Centers, 10.50%, 2007 1,490 1,557
Phillips-Van Heusen Corp., 9.50%, 2008 220 221
Specialty Retailers
8.50%, 2005 880 792
9.00%, 2007 340 299
Riddell Sports, Inc., 10.50%, 2007 550 523
--------------------------------------------------------------------------------------
16,222
- -----------------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--1.3% Axiohm Transaction Solutions, Inc., 9.75%,
2007 570 539
Communication and Power Industry, Inc.,
12.00%, 2005 600 632
MTS Systems Corp., 9.375%, 2005 390 380
Viasystems, Inc., 9.75%, 2007 1,200 1,164
--------------------------------------------------------------------------------------
2,715
- -----------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--2.5% Canadian Airlines Corp., 10.00%, 2005 500 425
TFM, S.A. de C.V., 10.25%, 2007 1,010 909
Trans World Airlines, Inc., 11.375%, 2006 520 369
</TABLE>
15
<PAGE> 16
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT OR
NUMBER OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(b)Transtar Holdings, L.P., 13.375%, 2003 $ 2,580 $ 2,399
TravelCenters America, Inc., 10.25%, 2007 1,150 1,156
--------------------------------------------------------------------------------------
5,258
--------------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost: $230,652) 224,985
--------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON AND Benedek Communication Corp., warrants 5,000shs. 10
PREFERRED STOCK--1.8% (a)Capital Pacific Holdings 3,634 4
Clark USA Inc., PIK, preferred 1,670 143
Crown American Realty Trust, preferred 15,500 760
Dobson Communication, PIK, preferred 190 177
(a)EchoStar Communications Corp. 5,825 226
(a)Empire Gas Corp., warrants 1,794 1
Foamex International 950 19
(a)Gaylord Container Corp. 13,125 69
Global Crossing, PIK, preferred 7,000 700
(a)Intelcom Group, Inc. 4,950 59
Nextel, PIK, preferred 506 465
(a)SF Holdings Group, Inc. 1,100 2
Sinclair Capital, preferred 9,500 1,026
21st Century Telecom Group, Inc., preferred 124 85
Viatel, Inc., PIK, preferred 761 46
--------------------------------------------------------------------------------------
TOTAL COMMON AND PREFERRED STOCK--1.8%
(Cost: $3,702) 3,792
--------------------------------------------------------------------------------------
TOTAL INVESTMENTS--107.0%
(Cost: $234,354) 228,777
--------------------------------------------------------------------------------------
LIABILITIES, AND OTHER ASSETS--(7.0)% (14,882)
--------------------------------------------------------------------------------------
NET ASSETS--100% $213,895
--------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security. In the case of a bond, generally denotes that
issuer has defaulted on the payment of principal or interest or has filed for
bankruptcy.
(b) Deferred interest obligation; currently zero coupon under terms of the
initial offering.
PIK denotes that interest or dividend is paid in kind.
Based on the cost of investments of $234,354,000 for federal income tax purposes
at November 30, 1998, the gross unrealized appreciation was $7,931,000, the
gross unrealized depreciation was $13,508,000 and the net unrealized
depreciation on investments was $5,577,000.
See accompanying Notes to Financial Statements.
16
<PAGE> 17
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER HIGH INCOME TRUST
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper High Income Trust as of
November 30, 1998, the related statements of operations for the year then ended
and changes in net assets for each of the two years in the period then ended,
and the financial highlights for each of the fiscal years since 1994. These
financial statements and financial highlights are the responsibility of the
fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
November 30, 1998, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Kemper
High Income Trust at November 30, 1998, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the fiscal years
since 1994, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
January 19, 1999
17
<PAGE> 18
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------
Investments, at value
(Cost: $234,354) $228,777
- ------------------------------------------------------------------------
Receivable for:
Interest 4,720
- ------------------------------------------------------------------------
Investments sold 5,623
- ------------------------------------------------------------------------
TOTAL ASSETS 239,120
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ------------------------------------------------------------------------
Cash overdraft 506
- ------------------------------------------------------------------------
Note payable 20,000
- ------------------------------------------------------------------------
Payable for:
Investments purchased 4,472
- ------------------------------------------------------------------------
Management fee 148
- ------------------------------------------------------------------------
Interest 44
- ------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 40
- ------------------------------------------------------------------------
Trustees' fees 15
- ------------------------------------------------------------------------
Total liabilities 25,225
- ------------------------------------------------------------------------
NET ASSETS $213,895
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- ------------------------------------------------------------------------
Paid-in capital $257,767
- ------------------------------------------------------------------------
Accumulated net realized loss on investments (39,816)
- ------------------------------------------------------------------------
Net unrealized depreciation on investments (5,577)
- ------------------------------------------------------------------------
Undistributed net investment income 1,521
- ------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $213,895
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
NET ASSET VALUE PER SHARE, $.01 PAR VALUE
($213,895 / 23,919 shares outstanding) $ 8.94
- ------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
18
<PAGE> 19
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
NET INVESTMENT INCOME
- ------------------------------------------------------------------------
Interest $ 25,180
- ------------------------------------------------------------------------
Dividends 293
- ------------------------------------------------------------------------
Total investment income 25,473
- ------------------------------------------------------------------------
Expenses:
Management fee 1,876
- ------------------------------------------------------------------------
Interest expense 1,242
- ------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 149
- ------------------------------------------------------------------------
Professional fees 36
- ------------------------------------------------------------------------
Reports to shareholders 63
- ------------------------------------------------------------------------
Trustees' fees and other 55
- ------------------------------------------------------------------------
Total expenses 3,421
- ------------------------------------------------------------------------
NET INVESTMENT INCOME 22,052
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------------------------
Net realized gain on sales of investments 3,322
- ------------------------------------------------------------------------
Net realized loss from futures transactions (32)
- ------------------------------------------------------------------------
Net realized gain 3,290
- ------------------------------------------------------------------------
Change in net unrealized depreciation on investments (15,902)
- ------------------------------------------------------------------------
Net loss on investments (12,612)
- ------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 9,440
- ------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
- -------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income $ 22,052 21,553
- -------------------------------------------------------------------------------------------
Net realized gain (loss) 3,290 (169)
- -------------------------------------------------------------------------------------------
Change in net unrealized appreciation (15,902) 5,298
- -------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 9,440 26,682
- -------------------------------------------------------------------------------------------
Distribution from net investment income (21,509) (21,255)
- -------------------------------------------------------------------------------------------
Proceeds from shares issued in reinvestment of dividends
(306 shares and 285 shares, respectively) 3,045 2,843
- -------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (9,024) 8,270
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------
Beginning of year 222,919 214,649
- -------------------------------------------------------------------------------------------
END OF YEAR (including undistributed
net investment income of
$1,521 and $3,222, respectively) $213,895 222,919
- -------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 SIGNIFICANT
ACCOUNTING POLICIES DESCRIPTION OF FUND. Kemper High Income Trust is
registered under the Investment Company Act of 1940
as a diversified, closed-end management investment
company.
SECURITY VALUATION. Investments are stated at
value. Portfolio debt securities are valued by
pricing agents approved by the officers of the
fund, which quotations reflect
broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents
are unable to provide such quotations, the most
recent bid quotation supplied by a bona fide market
maker shall be used. Financial futures are valued
at the most recent settlement price. All other
securities are valued at their fair market value as
determined in good faith by the Valuation Committee
of the Board of Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date. Dividend income is recorded on
the ex-dividend date, and interest income is
recorded on the accrual basis. Interest income
includes discount amortization on fixed income
securities. Realized gains and losses from
investment transactions are reported on an
identified cost basis.
FEDERAL INCOME TAXES. The fund's policy is to
comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to
regulated investment companies, and to distribute
all of its taxable income to its shareholders.
Accordingly, the fund paid no federal income taxes
and no federal income tax provision was required.
At November 30, 1998, the fund had a tax basis net
loss carryforward of approximately $32,646,000,
which may be applied against any realized net
taxable gains of each succeeding year until fully
utilized or it will expire during the period 1999
through 2005.
DIVIDENDS TO SHAREHOLDERS. The fund declares and
pays dividends of net investment income monthly and
any net realized capital gains annually, which are
recorded on the ex-dividend date. Dividends are
determined in accordance with income tax principles
which may treat certain transactions differently
from generally accepted accounting principles.
OTHER CONSIDERATIONS. The fund invests a
substantial portion of its assets in high yield
bonds. These bonds ordinarily are in the lower
rating categories of recognized rating agencies or
are non-rated, and thus involve more risk than
higher rated bonds.
- --------------------------------------------------------------------------------
2 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The fund has a management
agreement with Scudder Kemper Investments, Inc.
(Scudder Kemper) and pays a monthly investment
management fee of 1/12 of the annual rate of .85%
of average weekly net assets. The fund incurred a
management fee of $1,876,000 for the year ended
November 30, 1998.
ZURICH/B.A.T MERGER. On September 7, 1998, Zurich
Insurance Company (Zurich), majority owner of
Scudder Kemper, entered into an agreement with
B.A.T Industries p.l.c. (B.A.T) pursuant to which
the financial services businesses of B.A.T were
combined with Zurich's businesses to form a new
global insurance and financial services company
known as Zurich Financial Services. Upon
consummation of the transaction, the fund's
investment management
20
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
agreement with Scudder Kemper was deemed to have
been assigned and, therefore, terminated. The Board
of Trustees of the fund has approved a new
investment management agreement with Scudder
Kemper, which is substantially identical to the
former investment management agreement, except for
the dates of execution and termination.
Shareholders approved the new investment management
agreement through a proxy solicitation that
concluded in mid-December.
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the fund's transfer agent,
Kemper Service Company (KSvC) is the shareholder
service agent of the fund. Under the agreement,
KSvC received shareholder services fees of $39,000
for the year ended November 30, 1998.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the fund are also officers or directors of
Scudder Kemper. For the year ended November 30,
1998, the fund made no payments to its officers and
incurred trustees' fees of $19,000 to independent
trustees.
- --------------------------------------------------------------------------------
3 INVESTMENT
TRANSACTIONS For the year ended November 30, 1998, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $290,052
Proceeds from sales 283,986
- --------------------------------------------------------------------------------
4 NOTE PAYABLE The note payable represents a $20,000,000 loan from
Bank of America which was outstanding throughout
the year. The note bears interest at the London
Interbank Offered Rate plus .275% (5.34% at
November 30, 1998) which is payable quarterly. The
loan amount and rate are reset periodically under a
credit facility which is available until June 30,
1999.
21
<PAGE> 22
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------------------
YEAR ENDED NOVEMBER 30,
----------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $9.44 9.20 8.73 8.33 9.45
- ------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .92 .91 .91 .91 .88
- ------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.52) .23 .46 .39 (1.10)
- ------------------------------------------------------------------------------------------------------------
Total from investment operations .40 1.14 1.37 1.30 (.22)
- ------------------------------------------------------------------------------------------------------------
Distribution from net investment income .90 .90 .90 .90 .90
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of year $8.94 9.44 9.20 8.73 8.33
- ------------------------------------------------------------------------------------------------------------
MARKET VALUE, END OF YEAR $9.88 10.19 10.00 9.50 8.38
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN
Based on net asset value 4.38% 12.99 16.56 16.30 (2.55)
- ------------------------------------------------------------------------------------------------------------
Based on market value 6.50% 11.98 16.12 25.81 1.47
- ------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.55% 1.56 1.59 1.52 1.64
- ------------------------------------------------------------------------------------------------------------
Net investment income 10.01% 9.84 10.33 10.64 9.91
- ------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets at end of year (in thousands) $213,895 222,919 214,649 200,502 188,294
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 83% 79 74 85 83
- ------------------------------------------------------------------------------------------------------------
Total debt outstanding at end of year (in thousands) $ 20,000 20,000 20,000 20,000 20,000
- ------------------------------------------------------------------------------------------------------------
Asset coverage per $1,000 of debt $ 11,700 12,100 11,700 11,000 10,400
- ------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Total return based on net asset value reflects changes in the fund's net
asset value during the period. Total return based on market value reflects
changes in market value. Each figure includes reinvestment of dividends. These
figures will differ depending upon the level of any discount from or premium to
net asset value at which the fund's shares trade during the period.
22
<PAGE> 23
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN
- --------------------------------------------------------------------------------
1 PARTICIPATION We invite you to review the description of the
Dividend Reinvestment and Cash Purchase Plan (the
"Plan") which is available to you as a shareholder
of KEMPER HIGH INCOME TRUST (the "fund"). If you
wish to participate and your shares are held in
your own name, simply contact Kemper Service
Company, whose address and phone number are
provided in Paragraph 4 for the appropriate form.
If your shares are held in the name of a brokerage
firm, bank, or other nominee, you must instruct
that nominee to re-register your shares in your
name so that you may participate in the Plan,
unless your nominee has made the Plan available on
shares held by them. Shareholders who so elect will
be deemed to have appointed United Missouri Bank,
n.a. ("UMB") as their agent and as agent for the
fund under the Plan.
- --------------------------------------------------------------------------------
2 DIVIDEND INVESTMENT
ACCOUNT The fund's transfer agent and dividend disbursing
agent or its delegate ("Agent") will establish a
Dividend Investment Account (the "Account") for
each shareholder participating in the Plan. Agent
will credit to the Account of each participant
funds it receives from the following sources: (a)
cash dividends and capital gains distributions paid
on shares of beneficial interest (the "Shares") of
the fund registered in the participant's name on
the books of the fund; (b) cash dividends and
capital gains distributions paid on Shares
registered in the name of Agent but credited to the
participant's Account; and (c) voluntary cash
contributions made pursuant to Paragraph 5 hereof.
Sources described in clauses (a) and (b) of the
preceding sentence are hereinafter called
"Distributions."
- --------------------------------------------------------------------------------
3 INVESTMENT OF
DISTRIBUTION FUNDS
HELD IN EACH ACCOUNT If on the record date for a Distribution (the
"Record Date"), Shares are trading at a discount
from net asset value per Share (according to the
evaluation most recently made on Shares of the
fund), funds credited to a participant's Account
will be used to purchase Shares (the "Purchase").
UMB will attempt, commencing five days prior to the
Payment Date and ending at the close of business on
the Payment Date ("Payment Date" as used herein
shall mean the last business day of the month in
which such Record Date occurs), to acquire Shares
in the open market. If and to the extent that UMB
is unable to acquire sufficient Shares to satisfy
the Distribution by the close of business on the
Payment Date, the fund will issue to UMB Shares
valued at net asset value per Share (according to
the evaluation most recently made on Shares of the
fund) in the aggregate amount of the remaining
value of the Distribution. If, on the Record Date,
Shares are trading at a premium over net asset
value per Share, the fund will issue on the Payment
Date, Shares valued at net asset value per Share on
the Record Date to Agent in the aggregate amount of
the funds credited to the participants' accounts.
All cash contributions to a participant's Account
made pursuant to Paragraph 5 hereof will be
invested in Shares purchased in the open market.
- --------------------------------------------------------------------------------
4 ADDITIONAL
INFORMATION Address all notices, correspondence, questions, or
other communication regarding the Plan to:
KEMPER SERVICE COMPANY
P.O. Box 419066
Kansas City, Missouri 64141-6066
1-800-294-4366
23
<PAGE> 24
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN
- --------------------------------------------------------------------------------
5 VOLUNTARY CASH
CONTRIBUTIONS A participant may from time to time make voluntary
cash contributions to his Account by sending to
Agent a check or money order, payable to Agent, in
a minimum amount of $100 with appropriate
accompanying instructions. (No more than $500 may
be contributed per month.) Agent will inform UMB of
the total funds available for the purchase of
Shares and UMB will use the funds to purchase
additional Shares for the participant's account the
earlier of: (a) when it next purchases Shares as a
result of a Distribution or (b) on or shortly after
the first day of each month and in no event more
than thirty days after such date except when
temporary curtailment or suspension of purchases is
necessary to comply with applicable provisions of
Federal securities laws. Cash contributions
received more than fifteen calendar days or less
than five calendar days prior to a Payment Date
will be returned uninvested. Interest will not be
paid on any uninvested cash contributions.
Participants making voluntary cash investments will
be charged a $.75 service fee for each such
investment and will be responsible for their pro
rata brokerage commissions.
- --------------------------------------------------------------------------------
6 ADJUSTMENT OF
PURCHASE PRICE The fund will increase the price at which Shares
may be issued under the Plan to 95% of the fair
market value of the shares on the Record Date if
the net asset value per Share of the Shares on the
Record Date is less than 95% of the fair market
value of the Shares on the Record Date.
- --------------------------------------------------------------------------------
7 DETERMINATION OF
PURCHASE PRICE The cost of Shares and fractional Shares acquired
for each participant's Account in connection with a
Purchase shall be determined by the average cost
per Share, including brokerage commissions as
described in Paragraph 8 hereof, of the Shares
acquired by UMB in connection with that Purchase.
Shareholders will receive a confirmation showing
the average cost and number of Shares acquired as
soon as practicable after Agent has received or UMB
has purchased Shares. Agent may mingle the cash in
a participant's account with similar funds of other
participants of the fund for whom UMB acts as agent
under the Plan.
- --------------------------------------------------------------------------------
8 BROKERAGE CHARGES There will be no brokerage charges with respect to
Shares issued directly by the fund as a result of
Distributions. However, each participant will pay a
pro rata share of brokerage commissions incurred
with respect to UMB's open market purchases in
connection with the reinvestment of Distributions
as well as from voluntary cash contributions. With
respect to purchases from voluntary cash
contributions, UMB will charge a pro rata share of
the brokerage commissions. Brokerage charges for
purchasing small amounts of Shares for individual
Accounts through the Plan can be expected to be
less than the usual brokerage charges for such
transactions, as UMB will be purchasing Shares for
all participants in blocks and prorating the lower
commission thus attainable.
- --------------------------------------------------------------------------------
9 SERVICE CHARGES There is no service charge by Agent or UMB to
shareholders who participate in the Plan other than
service charges specified in Paragraphs 5 and 13
hereof. However, the fund reserves the right to
amend the Plan in the future to include a service
charge.
24
<PAGE> 25
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN
- --------------------------------------------------------------------------------
10 TRANSFER OF SHARES
HELD BY AGENT Agent will maintain the participant's Account, hold
the additional Shares acquired through the Plan in
safekeeping and furnish the participant with
written confirmation of all transactions in the
Account. Shares in the account are transferable
upon proper written instructions to Agent. Upon
request to Agent, a certificate for any or all full
Shares in a participant's Account will be sent to
the participant.
- --------------------------------------------------------------------------------
11 SHARES NOT HELD IN
SHAREHOLDER'S
NAME Beneficial owners of Shares which are held in the
name of a broker or nominee will not be
automatically included in the Plan and will receive
all distributions in cash. Such shareholders should
contact the broker or nominee in whose name their
Shares are held to determine whether and how they
may participate in the Plan.
- --------------------------------------------------------------------------------
12 AMENDMENTS Experience under the Plan may indicate that changes
are desirable. Accordingly, the fund reserves the
right to amend or terminate the Plan, including
provisions with respect to any Distribution paid
subsequent to notice thereof sent to participants
in the Plan at least ninety days before the record
date for such Distribution.
- --------------------------------------------------------------------------------
13 WITHDRAWAL FROM
PLAN Shareholders may withdraw from the Plan at any time
by giving Agent a written notice. If the proceeds
are $25,000 or less and the proceeds are to be
payable to the shareholder of record and mailed to
the address of record, a signature guarantee
normally will not be required for notices by
individual account owners (including joint account
owners), otherwise a signature guarantee will be
required. In addition, if the certificate is to be
sent to anyone other than the registered owner(s)
at the address of record, a signature guarantee
will be required on the notice. A notice of
withdrawal will be effective for the next
Distribution following receipt of the notice by the
Agent provided the notice is received by the Agent
at least ten days prior to the Record Date for the
Distribution. When a participant withdraws from the
Plan, or when the Plan is terminated in accordance
with Paragraph 12 hereof, the participant will
receive a certificate for full Shares in the
Account, plus a check for any fractional Shares
based on market price; or if a Participant so
desires, Agent will modify UMB to sell his Shares
in the Plan and send the proceeds to the
participant, less brokerage commissions and a $2.50
service fee.
- --------------------------------------------------------------------------------
14 TAX IMPLICATIONS Shareholders will receive tax information annually,
for personal records and to assist in preparation
of Federal income tax returns. If shares are
purchased at a discount, the amount of the discount
is considered taxable income and is added to the
cost basis of the purchased shares.
25
<PAGE> 26
SHAREHOLDERS' MEETING
ANNUAL SHAREHOLDERS' MEETING
An annual shareholders' meeting was held on October 22, 1998, for Kemper High
Income Trust. Shareholders were asked to vote on four separate issues: election
of members to the Board of Trustees, ratification of Ernst & Young LLP as
independent auditors, approval of expansion of borrowing authority, and
elimination of investment restrictions and policies related to illiquid and
restricted securities. The following are the results for each issue:
1) Election of Trustees
<TABLE>
<CAPTION>
For Withheld
<S> <C> <C>
James E. Atkins 16,107,687 609,860
Arthur R. Gottschalk 16,206,209 511,338
Frederick T. Kelsey 16,207,662 509,885
Thomas W. Littauer 16,148,543 569,004
Daniel Pierce 16,148,177 569,370
Fred B. Renwick 16,131,793 585,754
John B. Tingleff 16,222,432 495,115
John G. Weithers 16,212,432 505,115
</TABLE>
2) Ratification of the selection of Ernst & Young LLP as independent auditors
for the fund. This item was approved.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
16,199,720 132,939 384,877
</TABLE>
3) Approval of the expansion of borrowing authority. This item was approved.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
11,757,190 1,414,864 877,315
</TABLE>
4) Elimination of investment restrictions and policies related to illiquid and
restricted securities. This item was approved.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
11,414,855 1,654,484 980,032
</TABLE>
26
<PAGE> 27
NOTES
27
<PAGE> 28
TRUSTEES & OFFICERS
TRUSTEES OFFICERS
DANIEL PIERCE MARK S. CASADY HARRY E. RESIS, JR.
Chairman and Trustee President Vice President
JAMES E. AKINS PHILIP J. COLLORA LINDA J. WONDRACK
Trustee Vice President and Vice President
Secretary
ARTHUR R. GOTTSCHALK MAUREEN E. KANE
Trustee JOHN R. HEBBLE Assistant Secretary
Treasurer
FREDERICK T. KELSEY CAROLINE PEARSON
Trustee ANN M. MCCREARY Assistant Secretary
Vice President
THOMAS W. LITTAUER ELIZABETH C. WERTH
Trustee and Vice President MICHAEL A. MCNAMARA Assistant Secretary
Vice President
FRED B. RENWICK BRENDA LYONS
Trustee ROBERT C. PECK, JR. Assistant Treasurer
Vice President
JOHN B. TINGLEFF
Trustee KATHRYN L. QUIRK
Vice President
JOHN G. WEITHERS
Trustee
- --------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 419066
Kansas City, MO 64141
- --------------------------------------------------------------------------------
CUSTODIAN AND INVESTORS FIDUCIARY TRUST COMPANY
TRANSFER AGENT 801 Pennsylvania Avenue
Kansas City, MO 64105
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
- --------------------------------------------------------------------------------
[KEMPER FUNDS LOGO]
Long-term investing in a short-term world(SM)
Printed on recycled paper in the U.S.A.
KHIT - 2 (1/27/99) 1064360
