<PAGE> 1
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED MAY 31, 2000
KEMPER MUNICIPAL
INCOME TRUST
"... The changing shape of the municipal yield curve provided some interesting
investment opportunities over the fiscal period. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
8
PORTFOLIO STATISTICS
10
PORTFOLIO OF INVESTMENTS
19
FINANCIAL STATEMENTS
23
NOTES TO FINANCIAL STATEMENTS
25
SHAREHOLDERS' MEETING
AT A GLANCE
KEMPER MUNICIPAL INCOME TRUST TOTAL RETURNS
FOR THE SIX-MONTH PERIOD ENDED MAY 31, 2000.
<TABLE>
<S> <C> <C> <C>
BASED ON NET ASSET VALUE 0.70%
........................................................
BASED ON MARKET PRICE 9.02%
........................................................
</TABLE>
NET ASSET VALUE AND MARKET PRICE
<TABLE>
<CAPTION>
AS OF AS OF
5/31/00 11/30/99
.........................................................
<S> <C> <C> <C> <C>
NET ASSET VALUE $10.68 $11.03
.........................................................
MARKET PRICE $10.81 $10.31
.........................................................
</TABLE>
RETURNS ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS. 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.
DIVIDEND REVIEW
THE FOLLOWING TABLE SHOWS PER SHARE DIVIDEND AND YIELD INFORMATION FOR THE FUND
AS OF MAY 31, 2000.
<TABLE>
<CAPTION>
KEMPER MUNICIPAL
INCOME TRUST
...........................................................
<S> <C> <C> <C>
SIX-MONTHS INCOME $ 0.411
...........................................................
MAY DIVIDEND $0.0685
...........................................................
ANNUALIZED DISTRIBUTION RATE
(BASED ON NET ASSET VALUE) 7.69%
...........................................................
ANNUALIZED DISTRIBUTION RATE
(BASED ON MARKET PRICE) 7.60%
...........................................................
TAX-EQUIVALENT DISTRIBUTION RATE
(BASED ON NET ASSET VALUE AND A
37.1% FEDERAL INCOME TAX RATE) 12.23%
...........................................................
TAX-EQUIVALENT DISTRIBUTION RATE
(BASED ON MARKET PRICE AND A
37.1% FEDERAL INCOME TAX RATE) 12.08%
...........................................................
</TABLE>
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.
INCOME MAY BE SUBJECT TO STATE AND LOCAL TAXES AND A PORTION OF THE INCOME MAY
BE SUBJECT TO THE ALTERNATIVE MINIMUM TAX FOR CERTAIN INVESTORS.
TERMS TO KNOW
DISCOUNTS AND PREMIUMS Par value is the principal value that an investor may
receive when a bond matures. If a bond's price is lower than par, it is selling
at a discount. If a bond's price is higher than par, it is said to be trading at
a premium.
DURATION A measure of the interest-rate
sensitivity of a portfolio, incorporating time to maturity and coupon size. The
longer a portfolio's duration, the greater its sensitivity to interest-rate
changes.
INVERTED YIELD CURVE A market phenomenon in which shorter maturity bonds
(securities with two- to 10-year maturities) have higher current yields than
long-term bonds (securities with 10- to 30-year maturities). Historically it has
occurred during a period of rising short-term interest rates and been viewed as
an indicator of a future economic slowdown.
REVENUE BOND INDEX (RBI) RBI is the average yield on 25 revenue bonds with
30-year maturities rated A1 and compiled by THE BOND BUYER, a newspaper that
reports on the municipal bond market.
<PAGE> 3
ECONOMIC OVERVIEW
SCUDDER KEMPER INVESTMENTS, THE INVESTMENT MANAGER FOR KEMPER FUNDS, IS ONE OF
THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS IN THE
WORLD, MANAGING MORE THAN $290 BILLION IN ASSETS FOR INSTITUTIONAL AND CORPORATE
CLIENTS, RETIREMENT AND PENSION PLANS, INSURANCE COMPANIES, MUTUAL FUND
INVESTORS AND INDIVIDUALS. SCUDDER KEMPER INVESTMENTS OFFERS A FULL RANGE OF
INVESTMENT COUNSEL AND ASSET MANAGEMENT CAPABILITIES BASED ON A COMBINATION OF
PROPRIETARY RESEARCH AND DISCIPLINED, LONG-TERM INVESTMENT STRATEGIES.
DEAR KEMPER FUNDS SHAREHOLDER,
When an irresistible force such as the ebullient U.S. economy meets an immovable
object, such as a determined Federal Reserve Board, the old song is right:
Something's gotta give. One possibility -- the economy could slow down as the
Fed has ordered. Or, if market volatility becomes true distress, the Fed could
back off, as it has in the past. A third possibility is that neither the Fed nor
the economy will give way until it's too late, which could lead to a recession.
Recent evidence suggests, however, that the economy probably will slow down as
ordered.
Before explaining why, perhaps it's best to start with a review of how
monetary policy works. Central bankers often sound like witch doctors reading
animal entrails, so it's understandable that many people are confused about
monetary policy. But monetary policy still works in the same way it always has.
First, it changes the price and availability of money. More subtly, it alters
people's perceptions about and confidence in the future, thereby adjusting their
willingness to take risks.
It's a bit early to tell how the Fed's monetary policy is working so far. The
policymakers only started raising interest rates about a year ago, and it takes
at least that long for higher rates to impact borrowers. There are two reasons.
First, interest rates on many existing loans are fixed. And, a family who has
just selected a dream house isn't going to walk away if mortgage rates rise a
notch. Similarly, a company that has just approved an expansion program won't
stop cold because the prime rate is higher. So it's foolish to think that
America's economy has become less interest-sensitive because the economy roared
through the first several months of this year. Americans are more in hock than
ever, so higher interest rates will hurt more than ever. The May dip in housing
starts and auto sales -- especially the higher priced, gas guzzling sport
utility vehicles -- is probably the first sign that higher rates are biting.
They will bite harder in coming months. We look for both housing starts and
vehicle sales to drop about 10 percent in 2001.
Confidence is harder to measure, but there are some early flutters of
weakness. It's true that consumers remain cheerily upbeat. But corporate bond
markets, the most sensitive barometer of business confidence and a vital source
of corporate funds, have been nervous. Investors are demanding a big premium
before they'll buy lower quality bonds, which means there's less new money for
companies to spend. Corporate bond issuance through mid-June was 35 percent
below the first five and a half months of 1999.
So far, companies have been able to get around the bond market stinginess by
turning to their bankers. Banks lent businesses 8 percent more from January
through May of this year than they did during the first five months of 1999. But
some banks are beginning to worry, too. Bank examiners have been questioning the
quality of loans and the level of reserves. In response, more bankers are
tightening lending standards and raising rates. This is a textbook case of how
tighter monetary policy eventually slows an economy.
Aren't bond market and banker concerns overdone? As long as the economy keeps
growing at 3 percent or so, won't that guarantee such good profits that paying
the bills will be a cinch? Not necessarily. Profits are far more cyclical than
economic growth. Earnings actually fell during 1998, even though the economy
continued to roll. That was a global crisis, when foreign earnings fell sharply.
But take a look at the last "soft landing" during 1995. Revenue growth dipped
and pricing power fell, squeezing profits. The same thing is likely to happen
again in the coming slowdown -- and this time, tight labor markets could make it
even tougher for companies to control costs quickly. Assuming growth is between
2.5 percent and 3 percent by the end of 2001, we believe year-over-year profit
comparisons will have turned slightly negative.
A profit slowdown when new lines of credit are hard to come by will take its
toll on capital spending. We expect growth in business outlays for buildings and
equipment to slip from over 12 percent this year to around 8 percent in 2001.
That's still quite robust, and the "high-tech imperative" is the reason why.
Executives believe that they have no option but to keep up with the
technological revolution that is transforming the world. The fact that high-tech
gear keeps getting cheaper year after year and also helps save on expensive
labor makes the decision to buy it easy. Indeed, unit sales of computers and
peripherals to businesses have sustained growth rates in excess of 40 percent
since 1995. And the rush is on to lay down the infrastructure for the next
generation of wireless communications. We estimate that the sector will see unit
growth of about 50 percent this year, double the growth in 1999. It's hard even
for superstars to sustain these stratospheric
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 (5/31/00) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 6.40 6.00 5.50 5.60
Prime rate (2) 9.50 8.50 7.75 8.50
Inflation rate (3)* 3.00 2.60 2.30 1.50
The U.S. dollar (4) 4.30 -0.70 -0.90 6.40
Capital goods orders (5)* 17.00 12.30 2.50 14.50
Industrial production (5)* 6.10 3.70 2.90 5.20
Employment growth (6) 2.60 2.20 2.30 2.60
</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 4/30/00.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
compound growth rates forever, and we do expect some moderation next year.
However, high-tech orders continue to ratchet upwards, and the shortage in
semiconductors and other components has persisted long enough to cause major
players to announce huge capacity additions.
Another battle the Fed must win before it succeeds in slowing the economy is
bringing consumers to heel. Most families still feel better off than they were
last year and much richer than they were five years ago. That's a powerful
incentive to spend and enjoy. Indeed, total real consumption has been galloping
at a 5 percent rate or better since early 1998. But consumers are so important
to the economy that if they don't start spending less freely, there won't be a
slowdown. We expect the Fed to be successful and slow down shoppers in the
months ahead -- but the victory won't be an easy one. We expect at least one
more rate hike and a few more financial fireworks before consumers and the
economy hoist the white flag.
So what will the slowdown look like? During the spring, retail sales, housing
starts and job creation slowed, but strength in high tech orders and capital
equipment production probably will help keep the slowdown from becoming too
abrupt. We expect about 3.5 percent growth in the second half. That would still
produce a hearty 5 percent growth for full year 2000. During 2001, the full
impact of the Fed's recent tightening will probably rein growth in to just 3
percent.
Sincerely,
Scudder Kemper Investments Economics Group
THE INFORMATION CONTAINED IN THIS PIECE HAS BEEN TAKEN FROM SOURCES BELIEVED TO
BE RELIABLE, BUT THE ACCURACY OF THE INFORMATION IS NOT GUARANTEED. THE OPINIONS
AND FORECASTS EXPRESSED ARE THOSE OF THE ECONOMIC ADVISORS OF SCUDDER KEMPER
INVESTMENTS, INC. AS OF JUNE 29, 2000, AND MAY NOT ACTUALLY COME TO PASS. THIS
INFORMATION IS SUBJECT TO CHANGE. NO PART OF THIS MATERIAL IS INTENDED AS AN
INVESTMENT RECOMMENDATION.
TO OBTAIN A KEMPER FUNDS PROSPECTUS, DOWNLOAD ONE FROM WWW.KEMPER.COM, TALK TO
YOUR FINANCIAL REPRESENTATIVE OR CALL SHAREHOLDER SERVICES AT (800) 621-1048.
THE PROSPECTUS CONTAINS MORE COMPLETE INFORMATION, INCLUDING MANAGEMENT FEES AND
EXPENSES. PLEASE READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
4
<PAGE> 5
PERFORMANCE UPDATE
[CONDON PHOTO]
PHILIP G. CONDON JOINED THE FIRM IN 1983 AND IS LEAD PORTFOLIO MANAGER OF THE
TRUST AND MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS' MUNICIPAL BOND GROUP.
HE HAS ALSO SERVED AS DIRECTOR OF THE MUNICIPAL BOND RESEARCH DEPARTMENT.
[BRENNAN PHOTO]
ELEANOR R. BRENNAN JOINED THE ORGANIZATION IN 1995 AND IS PORTFOLIO MANAGER OF
THE FUND. SHE IS A SENIOR VICE PRESIDENT OF SCUDDER KEMPER INVESTMENTS, INC. AND
A CHARTERED FINANCIAL ANALYST.
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.
MUNICIPAL BONDS HAVE FACED A TOUGH ENVIRONMENT
SINCE NOVEMBER 1999. THE FEDERAL RESERVE BOARD OPEN
MARKET COMMITTEE RAISED SHORT-TERM INTEREST RATES
THREE TIMES, WHILE THE TREASURY DEPARTMENT
ANNOUNCED A DEBT BUYBACK PLAN, PROMPTING AN
INVERSION OF THE U.S. TREASURY YIELD CURVE. BELOW,
THE MANAGEMENT TEAM DISCUSSES THE MARKET'S
PERFORMANCE AND HOW THE TRUST IS POSITIONED FOR THE
COMING MONTHS.
Q HOW DID THE MUNICIPAL BOND MARKET PERFORM DURING THE FIRST SIX MONTHS OF
FISCAL YEAR 2000?
A It was a challenging period for all fixed-income markets, and particularly
so for tax-exempt debt. Long-term Treasury interest rates fell 28 basis points
(0.28 percent) between November 30, 1999, and May 31, 2000. Two- and 10-year
rates rose 66 and 9 basis points (0.66 and 0.09 percent, respectively). During
the period, the Federal Reserve expressed a resolve to head off inflationary
pressures as commodity prices rebounded, the nation's unemployment rate reached
30-year lows and consumer spending was brisk. These factors along with strong
U.S. economic growth prompted the Federal Reserve Board Open Market Committee to
raise its short-term interest-rate target three times by an additional 100 basis
points (1 percent) to 6.50 percent.
In the municipal bond market, the overriding challenge was to preserve capital
as investor demand fell. During the beginning of the fiscal period, the
municipal market came under intense selling pressure. Many investors sold the
asset class in order to realize tax losses they could use to offset realized
capital gains on equity securities. Liquidity in the market was difficult and
bid offered spreads widened. During the fiscal period municipal yields as
measured by the Bond Buyer Revenue Bond index increased 13 basis points from
6.14 percent to 6.27 percent.
As we entered the new calendar year, tax-related selling pressures abated and
were replaced by increased demand as equity price volatility picked up towards
the latter part of the fiscal period. Additionally, a decline in the supply of
tax-exempt debt helped bring stability to the municipal market. As of the end of
May, new issuance in calendar year 2000 was down 26.8 percent from year-earlier
levels, according to THE BOND BUYER.
Q HOW DID YOU POSITION KEMPER MUNICIPAL INCOME TRUST BETWEEN NOVEMBER 1999
AND MAY 2000?
A The trust's market and net asset returns compared favorably with the -0.17
percent total return of the average fund in the Lipper general municipal debt
fund category (closed-end leveraged funds). The trust's average unleveraged
duration target ranged from neutral to slightly less than most of the trust's
peers during the period. This, along with curve positioning and security
structure selection, helped the Kemper Municipal Income Trust preserve capital
to a greater extent than its peers in a climate of rapidly rising interest
rates. (See At a Glance on page 2.) The trust's 9.02 percent total return, based
on market price, substantially outpaced the 1.02 percent return of
5
<PAGE> 6
PERFORMANCE UPDATE
the Lehman Brothers Municipal Bond index* for the six months ended May 31, 2000.
The trust's return on a net asset value basis was 0.70 percent.
To increase income and total return potential, we focused on issue selection
and curve placement. We added some lower-quality bonds as the income
differential (spreads) between high-quality and lower-quality securities grew
more attractive for most of the period. This strategy helped Kemper Municipal
Income Trust outperform the average of its peers for the six-month period. As of
May 31, 2000, municipal bonds rated BBB -- the lowest level of investment-grade
bonds -- generally yielded approximately 100 basis points more than
comparable-sector AAAs.
The changing shape of the municipal yield curve provided some interesting
investment opportunities over the fiscal period. As the fiscal year started, the
two-year to 30-year yield curve was historically steep. We used this opportunity
to concentrate new purchases towards the longer end of the maturity spectrum. As
the fiscal year ended, the 2-year to 30-year curve was flat, so the investment
focus was shifted towards shorter maturities where the risk-return profile was
more attractive.
* THE LEHMAN BROTHERS MUNICIPAL BOND INDEX CONTAINS APPROXIMATELY 15,000 BONDS.
TO BE IN THE INDEX, A MUNICIPAL BOND MUST MEET THE FOLLOWING CRITERIA: A
MINIMUM CREDIT RATING OF BBB, ISSUED AS A PART OF AN ISSUE OF AT LEAST $50
MILLION, ISSUED WITHIN THE LAST FIVE YEARS, AND A MATURITY OF AT LEAST TWO
YEARS. BONDS SUBJECT TO ALTERNATIVE MINIMUM TAX, VARIABLE-RATE BONDS AND
ZERO-COUPON BONDS ARE EXCLUDED FROM THE INDEX. INVESTORS CANNOT INVEST IN THE
INDEX.
Q WHY DID THE TRUST'S MARKET PRICE RISE SO MUCH MORE THAN ITS NET ASSET
VALUE BETWEEN NOVEMBER AND MAY?
A At the start of fiscal year 2000, we believe many municipal bond investors
decided to reduce their exposure to federal capital gains taxes on their equity
portfolios by selling municipal bonds and/or municipal bond funds at a loss.
This tax-loss related selling persisted through the end of December and
depressed the municipal bond market. Early in the fiscal period, the trust's
shares were selling at as much as a 11.7 percent discount to net asset value.
This discount narrowed in the spring as more investors perceived trust shares to
be selling at bargain prices.
Q THIS PAST WINTER, THE TREASURY ANNOUNCED PLANS TO BUY BACK SOME LONG-TERM
DEBT AND HOLD FEWER AUCTIONS. WHAT WERE THE CONSEQUENCES OF THIS ACTION ON
MUNICIPAL BONDS?
A At the start of the fiscal period, the municipal bond yield curve -- the
difference in income potential between short-term and long-term
securities -- was steep compared with Treasuries. We used this development to
reposition the portfolios with more longer-term bonds. We believe this helped
the trust capture additional income and total return potential. In our view,
long-term municipal securities offered compelling value on a tax-adjusted basis.
Long-term municipal bond yields reached a historically attractive
ratio -- providing as much yield as comparable-maturity Treasuries.
Long-maturity municipal bonds typically yield about 85 to 90 percent of a
similar-maturity Treasury.
As the new calendar year began, the Treasury yield curve inverted, so that by
May 31, 2000, one-year Treasury bills had higher yields than 30-year bonds. This
happened in part because the Treasury began buying back 30-year government bonds
and reducing auctions all along the maturity spectrum. The Treasury buybacks
helped generate a welcome bond market rally in February after five straight
months of depressed prices. While the municipal yield curve flattened during
this past winter, it did not invert, increasing the relative attractiveness of
long-term municipal bonds.
Q IS A STRONG U.S. ECONOMY BAD NEWS FOR MUNICIPAL BONDS?
A Not necessarily. In fact, to the extent that the Federal Reserve Board
Open Market Committee can contain inflation, and investors believe that consumer
prices will not accelerate, strong economic growth is positive because it
enhances the ability of municipal debt issuers to meet their obligations. The
first calendar quarter of 2000 was the 18th consecutive quarter in which bond
rating upgrades exceeded downgrades, according to Standard & Poor's.
The trust's portfolios contained bonds from many states and U.S. territories
as of May 31, providing an element of diversification. As of May 31, 2000, Texas
was the largest state allocation for Kemper Municipal Income Trust (15.05
percent of net assets). Texas bond issuers have historically had to offer higher
yields to attract investors in part because the state has no personal income
tax, so demand from state residents is normally lower than a state such as
California, which has high income tax rates.
6
<PAGE> 7
PERFORMANCE UPDATE
Q WHAT'S YOUR OUTLOOK FOR THE MUNICIPAL BOND MARKET FOR THE BALANCE OF
FISCAL YEAR 2000?
A Given recent government statistics that suggest U.S. economic growth has
begun to moderate and the fact that the Federal Reserve raised its short-term
interest rate target in May by 50 basis points, we think municipal bonds face a
more stable environment than the prior six months. We believe the municipal bond
market provides excellent value, with yields of longer-maturity municipals still
near those of Treasuries, and tax-equivalent yields near double-digit levels for
investors in the highest brackets. In January, in fact, municipal bond yields,
as measured by THE BOND BUYER'S Revenue Bond Index, reached 6.35 percent, the
highest level since August 1995. In our view, a robust U.S. economy enhances
municipal finances, and that should continue to help bolster municipal credit
ratings. Finally, if the equity and taxable bond markets remain as volatile as
they have been this past spring, we think it could provide a catalyst for
renewed enthusiasm for tax-exempt debt as a way to diversify a portfolio.
7
<PAGE> 8
PORTFOLIO STATISTICS
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
ON 5/31/00 ON 11/30/99
<S> <C> <C> <C> <C>
REVENUE BONDS 67% 73%
................................................................................
GENERAL OBLIGATION BONDS 11 7
................................................................................
LEASE OBLIGATIONS 5 0
................................................................................
U.S. GOVERNMENT SECURED 16 18
................................................................................
CASH AND EQUIVALENTS 1 2
--------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
QUALITY
<TABLE>
<CAPTION>
ON 5/31/00 ON 11/30/99
<S> <C> <C> <C> <C>
AAA 76% 72%
................................................................................
AA 9 10
................................................................................
A 5 7
................................................................................
BBB 9 9
................................................................................
BB 1 1
................................................................................
NOT RATED 0 1
--------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
THE RATINGS OF STANDARD & POOR'S CORPORATION (S&P)
AND MOODY'S INVESTORS SERVICE, 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.
AVERAGE MATURITY
<TABLE>
<CAPTION>
ON 5/31/00 ON 11/30/99
<S> <C> <C> <C> <C>
AVERAGE MATURITY 13.2 years 16.2 years
--------------------------------------------------------------------------------
</TABLE>
*PORTFOLIO HOLDINGS AND COMPOSITION ARE SUBJECT TO CHANGE.
8
<PAGE> 9
PORTFOLIO STATISTICS
TOP FIVE STATE ALLOCATIONS*
Representing 45.21 percent of the fund's portfolio on May 31, 2000
<TABLE>
<CAPTION>
ON 5/31/00
<S> <C> <C>
----------------------------------------------------------------------------------
1. TEXAS 15.05%
----------------------------------------------------------------------------------
2. NEW YORK 10.93%
----------------------------------------------------------------------------------
3. ILLINOIS 9.76%
----------------------------------------------------------------------------------
4. MICHIGAN 4.96%
----------------------------------------------------------------------------------
5. MARYLAND 4.51%
----------------------------------------------------------------------------------
</TABLE>
*PORTFOLIO HOLDINGS AND COMPOSITION SUBJECT TO CHANGE.
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
KEMPER MUNICIPAL INCOME TRUST
Portfolio of Investments at May 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
SHORT-TERM MUNICIPAL INVESTMENTS--1.1% PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
NEW YORK
Long Island, NY, Power Authority New York
Electricity, Revenue, Series 6 Monthly
Demand Note, 4.000%, 05/01/2033* $ 1,000,000 $ 1,000,000
---------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
TEXAS
Brazos River Authority, Texas Utilities
Electric Company Project, Pollution
Control Revenue, Series 1996 B, Daily
Demand Note, 4.150%, 06/01/2030* 6,500,000 6,500,000
---------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $7,500,000) 7,500,000
---------------------------------------------------------------------------------
LONG-TERM MUNICIPAL INVESTMENTS--98.9%
ALABAMA
Alabama Docks Department, Facilities
Revenue, Series 1996, AMT, 6.300%,
10/01/2021 (c) 8,250,000 8,315,505
---------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
ALASKA
Alaska Industrial Development and Export
Authority, Revolving Fund, Series 1998 A,
5.250%, 04/01/2023 (c) 2,105,000 1,837,938
---------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
ARIZONA
Arizona Health Facilities Authority,
Catholic Healthcare West, Revenue, Series
1999 A, 6.625%, 07/01/2020 7,000,000 6,777,120
---------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
CALIFORNIA
California General Obligation, Prerefunded,
03/01/2005, Series 1995, 5.900%,
03/01/2025 (b)(c) 7,410,000 7,809,473
Foothill Eastern Transportation Corridor
Agency, CA, Toll Road Revenue, Series
1999, zero coupon, 01/15/2030 16,650,000 2,380,783
Sacramento County, CA, Airport System,
Revenue, 5.900%, 07/01/2024 (c) 5,000,000 4,886,050
---------------------------------------------------------------------------------
15,076,306
------------------------------------------------------------------------------------------------------------------------
COLORADO
Adams County, CO, Multifamily Housing, Oasis
Park Apartments Project, Series 1995 A,
6.150%, 01/01/2026 6,000,000 5,923,500
Colorado Housing Finance Authority, Single
Family Mortgage, AMT, Series 2000 B,
7.250%, 10/01/2031 1,750,000 1,888,897
Colorado Department of Transportation
Revenue, Series 2000, 6.000%, 06/15/2011 10,000,000 10,430,100
Colorado Health Facilities Authority, Poudre
Valley Health, Revenue, Series 1999 A,
5.500%, 12/01/2017 6,145,000 5,869,335
6.000%, 12/01/2015 5,705,000 5,796,052
6.000%, 12/01/2016 2,000,000 2,024,080
Denver, CO, City and County Airport
Improvement Revenue, Series 1992 C,
Prerefunded 11/15/2002, 6.750%, 11/15/2013 2,780,000 2,832,329
Denver, CO, City and County Airport Revenue,
Series 1992 C, 6.750%, 11/15/2022 2,610,000 2,612,845
Series 1992 C, Prerefunded 11/15/2002,
6.750%, 11/15/2022 (b) 690,000 729,537
</TABLE>
10 The accompanying notes are an integral part of the financial statements.
<PAGE> 11
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
Series 1992 A, 8.500%, 11/15/2023 $ 4,110,000 $ 4,246,288
Series 1990 A, Prerefunded 11/15/2000,
8.500%, 11/15/2023 (b) 390,000 404,375
---------------------------------------------------------------------------------
42,757,338
------------------------------------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA
District of Columbia, General Obligation,
Series 1999 B, 5.500%, 06/01/2011 (c) 25,000,000 24,806,750
Series 1999 A, 5.500%, 06/01/2014 (c) 2,500,000 2,432,275
Series 1998 A, 5.250%, 06/01/2027 15,000,000 13,092,450
District of Columbia Airport Authority,
General Airport Revenue, 5.750%,
10/01/2020 (c) 13,100,000 12,620,278
---------------------------------------------------------------------------------
52,951,753
------------------------------------------------------------------------------------------------------------------------
FLORIDA
Volusia County, FL, Health Facilities
Authority, Memorial Health Systems
Project, Revenue Series 1990, Prerefunded
06/01/2000, 8.250%, 06/01/2020 (b) 7,000,000 7,140,000
Broward County, FL, Resource Recovery Waste
Energy Company, Revenue Series 1984,
7.950%, 12/01/2008 3,560,000 3,673,244
Dade County, FL, Special Obligation, Capital
Appreciation, Revenue Series 1996 B,
Prerefunded 10/01/2008, Zero Coupon,
10/01/2022 (b)(c) 7,735,000 2,101,986
Prerefunded 10/01/2008, Zero Coupon,
10/01/2024 (b)(c) 16,955,000 4,058,010
Dade County, FL, Aviation Revenue Series
1996 A, 5.750%, 10/01/2026 (c) 18,000,000 17,189,100
Hillsborough County, FL, Industrial
Development Authority Revenue, University
Community Hospital Project Series 1999 A,
5.625%, 08/15/2023 1,000,000 812,930
Miami-Dade County, FL, Expressway Authority
Toll System Revenue Series 2000, 6.000%,
07/01/2013 (c) 1,665,000 1,728,403
6.000%, 07/01/2014 (c) 1,000,000 1,034,730
Palm Beach County, FL, School Board, Series
2000 A, 5.750%, 08/01/2017 (c) 2,850,000 2,845,127
---------------------------------------------------------------------------------
40,583,530
------------------------------------------------------------------------------------------------------------------------
HAWAII
Hawaii Harbor Systems Revenue, Series 2000
A, 6.000%, 07/01/2011 (c) 2,950,000 3,018,145
6.000%, 07/01/2012 (c) 3,135,000 3,186,821
Hawaii Department of Budget and Finance,
Special Purpose, Hawaiian Electric
Company, Inc. Project, Revenue Series 1996
A, 6.200%, 05/01/2026 (c) 13,200,000 13,190,628
Hawaii State Airport Systems Revenue Series
2000 B, 6.500%, 07/01/2013 (c) 8,800,000 9,323,776
Hawaii State Department Budget and Finance,
Electric Revenue, Series 1996 D, 6.150%,
01/01/2020 (c) 2,195,000 2,191,137
State of Hawaii, General Obligation, Series
1999 C, 5.750%, 09/01/2014 (c) 2,310,000 2,308,660
---------------------------------------------------------------------------------
33,219,167
</TABLE>
The accompanying notes are an integral part of the financial statements. 11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
IDAHO
Idaho Housing Agency, Single Family Mortgage
Revenue, 6.900%, 07/01/2025 $ 1,745,000 $ 1,766,446
Revenue, 7.875%, 07/01/2021 835,000 845,471
---------------------------------------------------------------------------------
2,611,917
------------------------------------------------------------------------------------------------------------------------
ILLINOIS
Chicago, IL, General Obligation, Series 2000
A, 6.125%, 01/01/2016 (c) 2,000,000 2,048,380
6.000%, 01/01/2014 (c) 2,085,000 2,133,164
6.125%, 01/01/2015 (c) 2,000,000 2,059,900
Chicago, IL, O'Hare International Airport
Revenue Series 2000 A, 5.500%, 01/01/2014
(c) 10,000,000 9,642,800
Chicago, IL, General Obligation,
Neighborhoods
Alive 21 Program, Series 2000 A,
6.000%, 01/01/2015 1,000,000 1,019,810
6.000%, 01/01/2017 1,000,000 1,009,210
Chicago, IL, Skyway Toll Bridge, Revenue
Series 1994, Prerefunded 01/01/2004,
6.750%, 01/01/2014 (b) 2,775,000 2,970,832
Chicago, IL, O'Hare International Airport,
International Terminal, Special Revenue,
Series 1994, 8.200%, 12/01/2024 4,775,000 5,157,048
Special Facilities Revenue, United Airlines
Project, Series 1999 A, 5.350%, 09/01/2016 3,000,000 2,508,330
Illinois Development Finance Authority,
Catholic Health Partners Services,
Revenue, Series 1995 A, 5.300%, 02/15/2018 3,500,000 3,171,980
Illinois Development Finance Authority,
Hospital Revenue, Adventist Health System,
Series 1999,
5.500%, 11/15/2020 2,500,000 2,012,150
5.650%, 11/15/2024 (c) 7,500,000 6,018,900
Illinois Development Finance Authority,
Pollution Control Revenue, Commonwealth
Edison Company Project, Series 1994 D,
6.750%, 03/01/2015 (c) 4,220,000 4,461,300
Illinois Educational Facilities Authority,
Revenue, Series 1999 D, 5.450%, 09/01/2014
(c) 8,000,000 7,605,920
Illinois Regional Transportation Authority,
Cook, DuPage, Kane, Lake, McHenry and Will
Counties, Revenue, 6.125%, 06/01/2022 (c) 4,000,000 4,089,080
Will County, IL, Exempt Facilities, Mobil
Oil Refining Corp. Project, Revenue,
6.000%, 02/01/2027 2,000,000 1,929,020
---------------------------------------------------------------------------------
57,837,824
------------------------------------------------------------------------------------------------------------------------
INDIANA
Indiana Health Facility Financing Authority,
Charity Obligation, Series 1999 D, 5.250%,
11/15/2015 5,200,000 4,639,492
5.500%, 11/15/2011 2,420,000 2,335,252
Hospital Revenue, Riverview Hospital
Project, Series 1999, 5.500%, 08/01/2019 1,300,000 1,074,957
Hospital Revenue, Series 1999, Riverview
Hospital Project, 5.500%, 08/01/2024 1,000,000 799,290
Indianapolis, IN, Gas Utility System,
Revenue Series 1994 A, Prerefunded
06/01/2004, 5.875%, 06/01/2024 (b) 14,000,000 14,621,180
---------------------------------------------------------------------------------
23,470,171
</TABLE>
12 The accompanying notes are an integral part of the financial statements.
<PAGE> 13
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
IOWA
Iowa Financial Authority, Single Family
Revenue, 7.900%, 11/01/2022 $ 3,395,000 $ 3,467,212
---------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
LOUISIANA
Louisiana Public Facilities Authority,
Lafayette General Medical Center Project,
Revenue, Series 1992, Prerefunded
10/01/2002, 6.500%, 10/01/2022 (b) 7,350,000 7,722,865
---------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
MAINE
Maine Health and Higher Educational
Facilities Authority, Revenue, 5.700%,
07/01/2013 5,000,000 4,972,850
Authority, Revenue Series 1994 B,
Prerefunded 07/01/2004, 7.000%, 07/01/2024
(b) 4,320,000 4,691,736
Maine Housing Authority, Mortgage Purchase
Bonds, Revenue 8.300%, 11/15/2028 30,000 30,000
Maine Turnpike Authority Revenue, Series
1998, 5.000%, 07/01/2017 (c) 6,165,000 5,538,821
---------------------------------------------------------------------------------
15,233,407
------------------------------------------------------------------------------------------------------------------------
MARYLAND
Howard County, MD, Multifamily Housing
Braeland Commons Project, Revenue Series
1993 B, 6.200%, 06/15/2023 2,500,000 2,382,325
Howard County, MD, Multifamily Housing,
Edens Commons Project, Revenue Series 1993
A, 6.200%, 06/15/2023 4,250,000 4,049,952
Maryland Health and Higher Educational
Facilities Authority, Doctors Community
Hospital Series 1993, 5.500%, 07/01/2024 1,000,000 760,080
Maryland Health & Educational Facilities
Authority, University of Maryland Medical
School Series 2000, 6.750%, 07/01/2030 2,500,000 2,474,400
---------------------------------------------------------------------------------
9,666,757
------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS
Massachusetts State Port Authority Revenue,
Series B, 5.500%, 07/01/2009 8,000,000 7,996,720
Massachusetts Port Authority, Special
Facilities, US Air Project, Revenue,
5.875%, 09/01/2023 (c) 5,000,000 4,833,550
Massachusetts State Port Authority Revenue,
Series 1999 B, 5.500%, 07/01/2015 3,000,000 2,885,400
---------------------------------------------------------------------------------
15,715,670
------------------------------------------------------------------------------------------------------------------------
MICHIGAN
Chippewa County, MI, Warren Memorial
Hospital, Revenue Series 1997 B, 5.625%,
11/01/2014 1,500,000 1,287,105
---------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
MINNESOTA
Minneapolis and St Paul MN Metropolitan
Community Airport Revenue Series 2000,
6.000%, 01/01/2012 (c) 4,395,000 4,486,196
Community Airport, Revenue, Series 1999 B
AMT, 5.625%, 01/01/2015 (c) 2,500,000 2,422,550
Community Airport, Revenue, Series 1999 B
AMT, 5.500%, 01/01/2010 (c) 3,035,000 3,009,233
---------------------------------------------------------------------------------
9,917,979
</TABLE>
The accompanying notes are an integral part of the financial statements. 13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
MISSOURI
Missouri Health and Educational Facilities
Authority, Lake of the Ozarks General
Hospital, Inc. Project, Revenue Series
1996, Prerefunded 02/15/2006, 6.500%,
02/15/2021 (b) $ 1,125,000 $ 1,149,846
St Louis County, MO, Regional Convention,
Revenue, Series C, 7.900%, 08/15/2021 155,000 162,528
Revenue, Series 1991 C, Prerefunded
8/15/2003, 7.900%, 08/15/2021 (b) 3,445,000 3,733,002
West Plains, MO, Industrial Development
Authority, Ozarks Medical Center Project,
Revenue Series 1990 A, Prerefunded
9/15/2000, 8.625%, 09/15/2020 (b) 3,485,000 3,593,174
---------------------------------------------------------------------------------
8,638,550
------------------------------------------------------------------------------------------------------------------------
NEBRASKA
Nebraska Investment Finance Authority Single
Family Mortgage Housing, Revenue, Series
A, 6.700%, 09/01/2026 7,500,000 7,575,825
---------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
NEVADA
Clark County NV, Industrial Development
Revenue, Nevada Power Company Project
Series 1992, 6.700%, 06/01/2022 (c) 1,750,000 1,791,632
---------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
NEW HAMPSHIRE
New Hampshire Higher Educational and Health
Facilities Authority Nashua Memorial
Hospital, Revenue 6.000%, 10/01/2023 3,000,000 2,706,330
---------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
NEW JERSEY
New Jersey Economic Development Authority,
Water Facilities, New Jersey American
Water Co., Inc. Project, Revenue, 6.875%,
11/01/2034 10,775,000 11,458,889
Revenue, Series 1999 A, 5.750%, 05/01/2013
(c) 6,000,000 6,076,860
Revenue, Harrogate Inc., Series 1997 A,
5.875% 12/01/2026 1,400,000 1,165,458
New Jersey Health Care Facilities Financing
Authority General Hospital Center at
Passaic, Revenue Series 1994, ETM, 6.750%,
07/01/2019** 5,000,000 5,492,850
New Jersey Highway Authority, Garden State
Parkway General Revenue Series 1999,
5.600%, 01/01/2017 (c) 8,000,000 7,859,840
New Jersey State Transportation Trust Fund
Authority, Series 2000 A, 5.750%,
06/15/2017 10,000,000 9,930,000
---------------------------------------------------------------------------------
41,983,897
------------------------------------------------------------------------------------------------------------------------
NEW MEXICO
New Mexico Mortgage Finance Authority Single
Family Mortgage Revenue, 8.300%,
03/01/2020 1,575,000 1,625,006
---------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
NEW YORK
Nassau County, NY, Health Facilities,
Revenue Series 1999, 6.000%, 08/01/2015
(c) 3,390,000 3,463,021
New York City, NY, Transitional Finance
Authority Revenue, Series 2000 B, 6.125%,
11/15/2015 3,000,000 3,114,630
New York City, NY, General Obligation
Unrefunded Balance, 7.500%, 08/01/2003 355,000 359,143
</TABLE>
14 The accompanying notes are an integral part of the financial statements.
<PAGE> 15
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
New York City, NY, General Obligation,
7.500%, 08/01/2004 $ 755,000 $ 763,811
New York City, NY, Transitional Finance
Authority Revenue Series 2000 B, 6.125%,
11/15/2014 2,000,000 2,081,700
New York State Dormitory Authority, City
University, Series 1998 2, 5.250%,
07/01/2015 5,000,000 4,728,150
New York State Dormitory Authority, State
University Educational Facilities, Revenue
Series 1991 A, Prerefunded 05/15/2002,
7.250%, 05/15/2018 (b) 5,000,000 5,311,750
New York State Dormitory Authority, Bronx-
Lebanon Hospital Center, Revenue, 5.200%,
02/15/2016 1,770,000 1,603,178
New York State Dormitory Authority, Jamaica
Hospital, Revenue, 5.200%, 02/15/2016 1,000,000 905,750
New York State Dormitory Authority, City
University NC, Revenue, 5.625%, 07/01/2016 1,500,000 1,475,010
New York State Housing Finance Agency,
Service Contract, Revenue Series 1992 A,
Prerefunded 03/15/2002, 7.375%, 09/15/2021
(b) 3,000,000 3,180,870
New York State Medical Care Facilities
Finance Agency, Mental Health Services
Facilities Improvement, Revenue Series
1988, 7.700%, 02/15/2018 1,500,000 1,502,985
New York State Thruway Authority Revenue,
Series 1999, 5.750%, 04/01/2014 (c) 2,000,000 2,010,220
New York State Thruway Authority Service
Contract, Local Highway & Bridge Revenue
Series 1999, 5.625%, 04/01/2013 (c) 5,000,000 5,007,600
New York State Urban Development
Corporation, State Facilities, Revenue,
Series 1991, Prerefunded 04/01/2001,
7.500%, 04/01/2011 (b) 6,695,000 6,981,077
New York and New Jersey Port Authority, JFK
International Air Terminal 6, Revenue,
5.750%, 12/01/2025 (c) 3,250,000 3,109,893
Niagara Falls, NY, School District Revenue
General Obligation, Series 1999, 5.600%,
06/15/2014 (c) 1,180,000 1,172,613
Niagara Frontier Transportation, NY, Greater
Buffalo International Airport, Revenue,
6.250%, 04/01/2024 (c) 5,750,000 5,784,213
---------------------------------------------------------------------------------
52,555,614
------------------------------------------------------------------------------------------------------------------------
NORTH CAROLINA
Charlotte, NC, Airport, Revenue, Series 1999
B, 5.750%, 07/01/2013 2,480,000 2,478,735
5.875%, 07/01/2014 1,140,000 1,145,461
North Carolina Municipal Power Agency,
Electric Revenue, Series 1999 B, 6.375%,
01/01/2013 3,000,000 2,992,080
---------------------------------------------------------------------------------
6,616,276
</TABLE>
The accompanying notes are an integral part of the financial statements. 15
<PAGE> 16
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
NORTH DAKOTA
Grand Forks Health Care Systems, Revenue,
7.125%, 08/15/2024 $ 3,400,000 $ 3,324,792
North Dakota Housing Finance Agency, Single
Family Mortgage, Revenue, 8.375%,
07/01/2021 310,000 315,245
---------------------------------------------------------------------------------
3,640,037
------------------------------------------------------------------------------------------------------------------------
OHIO
Cuyahoga County, OH, Meridia Health System,
Hospital Revenue Series 1995, Prerefunded
08/15/2005, 6.250%, 08/15/2024 (b) 2,350,000 2,503,126
Green Springs, OH, Health Care, Revenue, St
Francis Health Care Center Project, Series
1994 A, 7.125%, 05/15/2025 6,000,000 4,933,620
Ohio Building Authority, Administrative
Building Fund Project, Revenue, 5.000%,
10/01/2015 5,110,000 4,681,067
Ohio Higher Education Facility Commission,
University of Findlay Project, Revenue,
6.125%, 09/01/2016 2,000,000 1,969,480
6.150%, 09/01/2011 1,635,000 1,622,656
---------------------------------------------------------------------------------
15,709,949
------------------------------------------------------------------------------------------------------------------------
OKLAHOMA
Oklahoma Turnpike Authority Turnpike System,
Revenue, 7.875%, 01/01/2021 355,000 361,120
Tulsa, OK, Airport Improvement Trust,
Revenue, Series 1989, Prerefunded
06/01/2002, 7.700%, 06/01/2013 (b) 3,315,000 3,479,623
---------------------------------------------------------------------------------
3,840,743
------------------------------------------------------------------------------------------------------------------------
OREGON
Oregon State Department Administrative
Services Series 1997 A, 5.500%, 05/01/2010
(c) 2,245,000 2,255,596
5.600%, 05/01/2011 (c) 2,120,000 2,132,678
Services Series 2000 A, 6.250%, 05/01/2017
(c) 1,000,000 1,037,190
6.250%, 05/01/2018 (c) 1,000,000 1,033,100
---------------------------------------------------------------------------------
6,458,564
------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA
Greene County, PA, General Obligation,
Series 1990 B, Prerefunded 12/01/2000,
8.750%, 12/01/2010 (b) 2,675,000 2,729,276
Hazelton Health Services Authority, Hospital
Revenue, 5.625%, 07/01/2017 1,980,000 1,603,523
Philadelphia, PA, Gas Works, Revenue Series
1993, Prerefunded 07/01/2003, 6.375%,
07/01/2026 (b), 2,565,000 2,692,378
Philadelphia, PA, Gas Works, Revenue,
6.375%, 07/01/2026 (b) 5,385,000 5,310,579
---------------------------------------------------------------------------------
12,335,756
------------------------------------------------------------------------------------------------------------------------
SOUTH CAROLINA
South Carolina Jobs and Economic Development
Authority, Hospital Facilities Revenue,
7.375%, 12/15/2021 2,000,000 1,921,940
---------------------------------------------------------------------------------
</TABLE>
16 The accompanying notes are an integral part of the financial statements.
<PAGE> 17
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
TENNESSEE
Chattanooga, TN, General Obligation Series
1998, 5.000%, 09/01/2018 (c) $ 4,350,000 $ 3,882,157
Memphis-Shelby County, TN, Airport
Authority,Revenue, Series 1999 D, 6.250%,
03/01/2017 (c) 4,690,000 4,794,399
---------------------------------------------------------------------------------
8,676,556
------------------------------------------------------------------------------------------------------------------------
TEXAS
Austin, TX, Hotel Occupancy Tax, Revenue
Series 1999, 6.000%, 11/15/2015 (c) 3,480,000 3,543,928
Series 1999, 6.000%, 11/15/2016 (c) 3,625,000 3,673,140
Series 1999, 6.000%, 11/15/2013 (c) 3,190,000 3,267,294
Dallas-Fort Worth, TX, Airport Revenue
Series 1990, American Airlines, AMT,
7.500%, 11/01/2025 1,500,000 1,519,260
Dallas-Fort Worth, TX, International Airport
Facility, American Airlines, Revenue
Series 1999, 6.375%, 05/01/2035 3,000,000 2,734,500
EL Paso, TX General Obligation Series 2000,
5.875%, 08/15/2012 1,000,000 1,015,140
5.875%, 08/15/2013 1,570,000 1,587,286
5.875%, 08/15/2014 1,665,000 1,678,436
Harris County, TX, Health Facility
Development Corp., Hospital Revenue, Texas
Childrens Hospital Project, Series 1999 A,
5.250%, 10/01/2029 3,500,000 2,988,230
Harris County, TX, Port Houston Authority,
General Obligation, Series 1998, 5.000%,
10/01/2017 (c) 2,500,000 2,175,425
Houston, TX, Airport System Revenue, 8.000%,
07/01/2009 3,300,000 3,106,191
Lower Neches Valley, TX, Lower Neches Valley
Authority, Industrial Development Corp.,
Mobil Oil Refining Corp. Project, Revenue,
Series 1999 A, 6.400%, 03/01/2030 17,000,000 17,115,260
Red River, TX, Educational Finance Revenue,
Series 2000, 6.000%, 08/15/2019 5,390,000 5,380,298
Richardson, TX, Hospital Authority, Hospital
Revenue, 5.625%, 12/01/2028 5,000,000 3,839,250
State of Texas, Turnpike Authority Revenue,
Series 1996, 5.500%, 01/01/2015 14,605,000 14,197,959
State of Texas College Student Loans,
General Obligation, 5.000%, 08/01/2021 4,015,000 3,402,833
Texas Water Development Board, Revenue,
Series 1996 B, 5.125%, 07/15/2018 8,100,000 7,344,432
---------------------------------------------------------------------------------
78,568,862
------------------------------------------------------------------------------------------------------------------------
UTAH
Utah Housing Finance Agency, Single Family
Mortgage Revenue, 6.650%, 07/01/2026 410,000 415,146
---------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
WASHINGTON
Port Seattle, WA, Special Facilities,
Revenue, Series 1999 B, 5.500%, 09/01/2011
(c) 1,085,000 1,065,730
Series 1999 B, 5.750%, 09/01/2013 (c) 1,045,000 1,036,776
Snohomish County, WA, Public Utility
Revenue, 5.375%, 12/01/2024 (c) 7,500,000 6,756,075
Washington Health Care Facilities Authority,
Providence Services, Revenue, Series 1999,
5.375%, 12/01/2019 (c) 11,120,000 10,154,673
Washington Public Power Supply System,
Nuclear Project #2 Revenue, Series 1998 A,
5.000%, 07/01/2012 (c) 10,200,000 9,352,176
</TABLE>
The accompanying notes are an integral part of the financial statements. 17
<PAGE> 18
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
Nuclear Project #1 Revenue, Series 1993 B,
5.600%, 07/01/2015 (c) $ 2,000,000 $ 1,950,820
Nuclear Project #3 Revenue, Series 1993 B,
5.600%, 07/01/2015 (c) 1,000,000 975,410
Nuclear Project, Revenue, Series 1990 B,
Prerefunded 07/01/2000, 7.000%, 07/01/2012
(b) 15,500,000 15,839,295
Washington State, General Obligation, Series
2000 A, 5.500%, 07/01/2016 4,835,000 4,672,109
---------------------------------------------------------------------------------
51,803,064
------------------------------------------------------------------------------------------------------------------------
WISCONSIN
Wisconsin State Health & Educational
Facilities Authority, Revenue Aurora
Health Care Inc., Series 1999 B, 5.625%,
02/15/2029 8,000,000 6,288,640
Wisconsin State Health & Educational
Facilities Authority, Revenue, Aurora
Health Care Inc., Series 1999 A, 5.600%,
02/15/2029 6,000,000 4,696,500
---------------------------------------------------------------------------------
10,985,140
---------------------------------------------------------------------------------
TOTAL LONG TERM MUNICIPAL
INVESTMENTS 666,298,451
---------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100.0%
(Cost $675,713,210) (a) $673,798,451
---------------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost for federal income tax purposes was $675,713,210. At May 31, 2000,
net unrealized depreciation for all securities based on tax cost was
$1,914,759. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost of
$13,581,759 and an aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$15,496,518.
(b) Prerefunded: Bonds which are prerefunded are collateralized by U.S. Treasury
securities which are held in escrow and are used to pay principal and
interest on tax-exempt issues and to retire the bonds in full at the
earliest refunding date.
(c) Bond is insured by one of these companies: AMBAC, FGIC, or MBIA/BIG.
* Variable rate demand notes are securities whose yields are periodically reset
at levels that are generally comparable to tax-exempt commercial paper. These
securities are payable on demand within seven calendar days and normally
incorporate an irrevocable letter of credit from a major bank. These notes
are carried, for purposes of calculating average weighted maturity, at the
longer of the period remaining until the next rate change or to the extent of
the demand period.
** ETM: Bonds bearing the description ETM (escrowed to maturity) are
collateralized by U.S. Treasury securities which are held in escrow by a
trustee and used to pay principal and interest on bonds so designated.
18 The accompanying notes are an integral part of the financial statements.
<PAGE> 19
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
As of May 31, 2000 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $675,713,210) $673,798,451
----------------------------------------------------------------------------
Cash 4,058,722
----------------------------------------------------------------------------
Receivable for investments sold 40,000
----------------------------------------------------------------------------
Interest receivable 12,623,538
----------------------------------------------------------------------------
Other assets 84,000
----------------------------------------------------------------------------
TOTAL ASSETS 690,604,711
----------------------------------------------------------------------------
LIABILITIES
----------------------------------------------------------------------------
Payable for investments purchased 10,350,700
----------------------------------------------------------------------------
Dividends payable 507,018
----------------------------------------------------------------------------
Accrued management fee 269,060
----------------------------------------------------------------------------
Other accrued expenses 154,297
----------------------------------------------------------------------------
Total liabilities 11,281,075
----------------------------------------------------------------------------
NET ASSETS, AT VALUE $679,323,636
----------------------------------------------------------------------------
NET ASSETS
Net assets consist of:
Undistributed net investment income $ 2,969,791
----------------------------------------------------------------------------
Remarketed preferred shares, par value $.01 per share,
unlimited number of shares authorized, 53,000 shares
outstanding at $5 thousand liquidation value per share 265,000,000
----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
securities (1,914,759)
----------------------------------------------------------------------------
Accumulated net realized gain (loss) (17,842,914)
----------------------------------------------------------------------------
Paid-in capital 431,111,518
----------------------------------------------------------------------------
NET ASSETS, AT VALUE $679,323,636
----------------------------------------------------------------------------
NET ASSET VALUE
NET ASSET VALUE PER SHARE COMMON SHARES
($414,323,636 / 38,808,200 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares
authorized) (Net assets less remarketed preferred shares at
liquidation value divided by common shares outstanding) $10.68
----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 19
<PAGE> 20
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Six months ended May 31, 2000 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $ 20,903,139
----------------------------------------------------------------------------
Expenses:
Management fee 1,880,835
----------------------------------------------------------------------------
Services to shareholders 100,028
----------------------------------------------------------------------------
Custodian fees 12,078
----------------------------------------------------------------------------
Auditing 69,200
----------------------------------------------------------------------------
Legal 100,905
----------------------------------------------------------------------------
Trustees' fees and expenses 11,680
----------------------------------------------------------------------------
Reports to shareholders 34,195
----------------------------------------------------------------------------
Other 283,696
----------------------------------------------------------------------------
Total expenses, before expense reductions 2,492,617
----------------------------------------------------------------------------
Expense reductions (9,046)
----------------------------------------------------------------------------
Total expenses after expense reductions 2,483,571
----------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 18,419,568
----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from investments (2,976,197)
----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
on investments (7,667,595)
----------------------------------------------------------------------------
Net gain (loss) on investment transactions (10,643,792)
----------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $ 7,775,776
----------------------------------------------------------------------------
</TABLE>
20 The accompanying notes are an integral part of the financial statements.
<PAGE> 21
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MAY 31, YEAR ENDED
2000 NOVEMBER 30,
(UNAUDITED) 1999
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $ 18,419,568 36,497,444
----------------------------------------------------------------------------------------------------
Net realized gain (loss) (2,976,197) (3,223,827)
----------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
transactions during the period (7,667,595) (46,314,127)
----------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 7,775,776 (14,040,510)
----------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net investment income (21,362,351) (39,211,283)
----------------------------------------------------------------------------------------------------
Fund share transactions:
Proceeds from shares sold -- 100,000,000
----------------------------------------------------------------------------------------------------
Reinvestment of distributions -- 3,217,093
----------------------------------------------------------------------------------------------------
Cost of shares redeemed -- (50,500,000)
----------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions -- 52,717,093
----------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (13,586,575) (534,700)
----------------------------------------------------------------------------------------------------
Net assets at beginning of period 692,910,211 693,444,911
----------------------------------------------------------------------------------------------------
Net assets at end of period (including undistributed net
investment income of $2,969,791 and $5,912,574,
respectively) $679,323,636 692,910,211
----------------------------------------------------------------------------------------------------
OTHER INFORMATION
Shares outstanding at beginning of period 38,808,200 38,542,023
----------------------------------------------------------------------------------------------------
Shares issued to shareholders in reinvestment of
distributions -- 266,177
----------------------------------------------------------------------------------------------------
Net increase in Fund shares -- 266,177
----------------------------------------------------------------------------------------------------
Shares outstanding at end of period 38,808,200 38,808,200
----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 21
<PAGE> 22
FINANCIAL STATEMENTS
THE FOLLOWING TABLES INCLUDE SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS AND MARKET PRICE DATA.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MAY 31, YEARS ENDED NOVEMBER 30,
2000 ----------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $11.03 12.41 12.33 12.31 12.41 11.12
-------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .47(a) .92(a) .99 1.04 1.07 1.10
-------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions (.27) (1.28) .16 .05 (.10) 1.29
-------------------------------------------------------------------------------------------------------------------
Total from investment operations .20 (.36) 1.15 1.09 .97 2.39
-------------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income to common shareholders (.41) (.83) (.87) (.87) (.87) (.87)
-------------------------------------------------------------------------------------------------------------------
Net investment income to preferred shareholders
(common share equivalent) (.14) (.18) (.20) (.20) (.20) (.23)
-------------------------------------------------------------------------------------------------------------------
Total distributions (.55) (1.01) (1.07) (1.07) (1.07) (1.10)
-------------------------------------------------------------------------------------------------------------------
Dilution resulting from remarketed preferred
shares (b) -- (.01) -- -- -- --
-------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.68 11.03 12.41 12.23 12.31 12.41
-------------------------------------------------------------------------------------------------------------------
MARKET VALUE, END OF YEAR $10.81 10.31 14.63 14.13 13.13 12.63
TOTAL RETURN PER COMMON SHARE
BASED ON NET ASSET VALUE (%) .70** (4.69) 7.96 7.57 6.56 20.00
-------------------------------------------------------------------------------------------------------------------
BASED ON MARKET VALUE (%) 9.02** (24.40) 10.60 15.16 11.57 23.55
-------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets at end of year, net of remarketed
preferred shares ($ thousands) 414,324 427,910 478,445 471,179 466,243 464,684
-------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions
(excluding preferred shares) 1.18* 1.13 1.02 1.02 1.06 1.01
-------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%)
(excluding preferred shares) 1.18* 1.12 1.02 1.02 1.06 1.01
-------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions
(including preferred shares) .72* .77 .70 .69 .72 .69
-------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%)
(including preferred shares) .72* .76 .70 .69 .72 .69
-------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (%)
(excluding preferred shares) 8.78* 7.76 8.04 8.66 8.87 9.22
-------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (%)
(including preferred shares) 5.38* 5.27 5.54 5.92 6.03 6.23
-------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 50* 38 17 7 26 19
-------------------------------------------------------------------------------------------------------------------
Remarketed preferred shares information
at end of period:
Aggregate amount outstanding ($ thousands) 265,000 265,000 215,000 215,000 215,000 215,000
-------------------------------------------------------------------------------------------------------------------
Asset coverage per share $12,800 13,100 16,100 16,000 15,800 15,800
-------------------------------------------------------------------------------------------------------------------
Liquidation and market value per share $5,000 5,000 5,000 5,000 5,000 5,000
-------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Total return based on net asset value reflects changes in the Fund's net
asset value during the year. 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 year.
* Annualized
** Not annualized
(a) Based on monthly average shares outstanding during the period.
(b) Effective November 24, 1999, the Fund issued 10,000 remarked preferred
shares.
22
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1 SIGNIFICANT
ACCOUNTING POLICIES Kemper Municipal Income Trust (the "Fund") is
registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as a closed-end,
diversified management investment company organized
as a Massachusetts business trust.
The Fund's financial statements are prepared in
accordance with accounting principles generally
accepted in the United States which require the use
of management estimates. The policies described
below are followed consistently by the Fund in the
preparation of its financial statements.
SECURITY VALUATION. Investments are stated at
value. Portfolio debt securities purchased with an
original maturity greater than sixty days are
valued by pricing agents approved by the officers
of the Trust, whose quotations reflect
broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents
are unable to provide such quotations, the
calculated mean between the most recent bid and
asked quotation supplied by a bona fide market
maker shall be used. Money market instruments
purchased with an original maturity of sixty days
or less are valued at amortized cost.
All other securities are valued at their fair value
as determined in good faith by the Valuation
Committee of the Board of Trustees.
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 and tax-exempt income to its
shareholders. Accordingly, the Fund paid no federal
income taxes and no federal income tax provision
was required. At November 30, 1999, the Fund had a
tax basis net loss carryforward of approximately
$13,145,000 which may be applied against any
realized net taxable gains of each succeeding year
until fully utilized or until November 30, 2003
($7,649,000) and November 30, 2007 ($5,496,000),
the respective expiration dates, or whichever
occurs first.
DISTRIBUTION OF INCOME AND GAINS. Distributions of
net investment income to common shareholders, if
any, are made monthly. Net realized gains from
investment transactions, in excess of available
capital loss carryforwards, would be taxable to the
Fund if not distributed, and, therefore, will be
distributed to shareholders at least annually.
The timing and characterization of certain income
and gains distributions are determined annually in
accordance with federal tax regulations which may
differ from generally accepted accounting
principles. As a result, net investment income
(loss) and net realized gain (loss) on investment
transactions for a reporting period may differ
significantly from distributions during such
period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital
accounts without impacting the net asset value of
the Fund.
REMARKETED PREFERRED SHARES. Effective November 24,
1999, the Fund issued 10,000 Series E remarketed
preferred shares. The Fund has issued and
outstanding 10,800 Series A, 10,700 Series B,
10,800 Series C, 10,700 Series D and 10,000 Series
E remarketed preferred shares, each at a
liquidation value of $5,000 per share. The dividend
rate on each series is set by the remarketing
agent, and the dividends are paid every 28 days.
Preferred shareholders will vote together with
common shareholders as a single class and have the
same voting rights, subject to certain class
specific preferences.
23
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date. Interest income is recorded on
the accrual basis. Realized gains and losses from
investment transactions are recorded on an
identified cost basis. All discounts are accreted
for both tax and financial reporting purposes.
--------------------------------------------------------------------------------
2 PURCHASE AND SALES
OF SECURITIES For the six months ended May 31, 2000, investment
transactions (excluding short-term instruments) are
as follows:
Purchases $179,914,445
Proceeds from sales 171,364,770
--------------------------------------------------------------------------------
3 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 .55%
of average weekly net assets. The Fund incurred a
management fee of $1,880,835 for the six months
ended May 31, 2000.
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
Kemper Service Company (KSvC) is the shareholder
service agent of the Fund. Under the agreement,
KSvC received shareholder services fees of $23,710
for the six months ended May 31, 2000 of which
$27,147 is unpaid.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. For the six months ended May 31,
2000, the Fund made no payments to its officers and
incurred trustees' fees of $11,680 to independent
trustees.
--------------------------------------------------------------------------------
4 EXPENSE OFF-SET
ARRANGEMENTS The Fund has entered into arrangements with its
custodian and transfer agent whereby credits
realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's
expenses. During the six months ended May 31, 2000,
the Fund's custodian and transfer agent fees were
reduced by $6,657 and $2,389, respectively, under
these arrangements.
--------------------------------------------------------------------------------
5 LINE OF CREDIT The Fund and several Kemper funds (the
"Participants") share in a $750 million revolving
credit facility for temporary or emergency
purposes. The Participants are charged an annual
commitment fee which is allocated pro rata among
each of the Participants. Interest is calculated
based on the market rate at the date of the
borrowing. The Fund may borrow up to a maximum of
33 percent of its net assets under the agreement.
24
<PAGE> 25
SHAREHOLDERS' MEETING
SHAREHOLDERS' MEETING
An annual shareholders' meeting was held on May 25, 2000, for Kemper Municipal
Income Trust. Shareholders were asked to vote on two separate issues: election
of members to the Board of Trustees and ratification of Ernst & Young LLP as
independent auditors. The following are the results for each issue:
1) Election of Trustees
<TABLE>
<CAPTION>
For Withheld
<S> <C> <C>
James E. Akins 34,188,915 1,336,604
Linda C. Coughlin 34,235,567 1,289,952
James R. Edgar 34,252,140 1,273,379
Arthur R. Gottschalk 34,234,161 1,291,358
Fred B. Renwick 34,224,079 1,301,445
John G. Weithers 34,290,948 1,234,571
</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>
34,263,372 379,292 926,770
</TABLE>
25
<PAGE> 26
NOTES
26
<PAGE> 27
NOTES
27
<PAGE> 28
TRUSTEES&OFFICERS
<TABLE>
<S> <C> <C>
TRUSTEES OFFICERS
JAMES E. AKINS MARK S. CASADY LINDA J. WONDRACK
Trustee President Vice President
LINDA C. COUGHLIN PHILIP J. COLLORA MAUREEN E. KANE
Trustee Vice President and Assistant Secretary
Secretary
JAMES R. EDGAR CAROLINE PEARSON
Trustee JOHN R. HEBBLE Assistant Secretary
Treasurer
ARTHUR R. GOTTSCHALK BRENDA LYONS
Trustee ELEANOR R. BRENNAN Assistant Treasurer
Vice President
FREDERICK T. KELSEY
Trustee PHILIP G. CONDON
Vice President
THOMAS W. LITTAUER
Trustee and Vice President ANN M. MCCREARY
Vice President
FRED B. RENWICK
Trustee KATHRYN L. QUIRK
Vice President
JOHN G. WEITHERS
Trustee
</TABLE>
<TABLE>
<S> <C>
.............................................................................................
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
.............................................................................................
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 219006
Kansas City, MO 64121
.............................................................................................
CUSTODIAN STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, MA 02110
.............................................................................................
INDEPENDENT AUDITOR ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
.............................................................................................
TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
801 Pennsylvania Avenue
Kansas City, MO 64105
</TABLE>
KEMPER FUNDS LOGO
Long-term investing in a short-term world(SM)
Printed on recycled paper in the U.S.A.
KMIT - 3(7/25/00) 1116510
