<PAGE> 1
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED MAY 31, 1998
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
KEMPER STRATEGIC
INCOME FUND
STRATEGIC INCOME
"...During the period, we continued to find
a great deal of potential in the emerging markets
sector, and continued to increase our investment in
that sector ... This increased level of income potential
may prove beneficial for the fund, and we believe that
the trade-off in risk vs. return is appropriate. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
MANAGEMENT TEAM
6
PERFORMANCE UPDATE
8
PORTFOLIO STATISTICS
9
PORTFOLIO OF INVESTMENTS
12
FINANCIAL STATEMENTS
14
NOTES TO FINANCIAL STATEMENTS
16
FINANCIAL HIGHLIGHTS
17
SHAREHOLDERS' MEETING
AT A GLANCE
- --------------------------------------------------------------------------------
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED MAY 31, 1998
<TABLE>
<CAPTION>
BASED ON BASED ON
NET ASSET MARKET
VALUE PRICE
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER STRATEGIC
INCOME FUND 5.73% 1.60%
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NET ASSET VALUE AND MARKET PRICE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AS OF AS OF
5/31/98 11/30/97
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE $15.36 $15.39
- --------------------------------------------------------------------------------
MARKET PRICE $19.19 $19.81
- --------------------------------------------------------------------------------
</TABLE>
The fund may invest in lower-rated and non-rated securities, which present
greater risk of loss to principal and interest than higher rated securities, and
in foreign securities which present special risk considerations including
fluctuating foreign exchange rates, foreign government regulations and
differences in liquidity that may affect the volatility of your investment.
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
THE FOLLOWING TABLE SHOWS PER SHARE DIVIDEND AND YIELD INFORMATION FOR THE FUND
AS OF MAY 31, 1998.
<TABLE>
<CAPTION>
KEMPER
STRATEGIC
INCOME FUND
- --------------------------------------------------------------------------------
<S> <C>
SIX-MONTHS INCOME: $ 0.9000
- --------------------------------------------------------------------------------
MAY DIVIDEND: $ 0.1500
- --------------------------------------------------------------------------------
ANNUALIZED DISTRIBUTION RATE:
(BASED ON NET ASSET VALUE) 11.72%
- --------------------------------------------------------------------------------
ANNUALIZED DISTRIBUTION RATE:
(BASED ON MARKET VALUE) 9.38%
- --------------------------------------------------------------------------------
</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. Returns are
historical and do not represent future performance. Market price, 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
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.
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 the period, assuming the
reinvestment of all dividends. It represents the aggregate percentage or dollar
value change over the period.
VOLATILITY The characteristic of an investment that causes it to rise or fall
sharply in price in a relatively short time period.
<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. HE IS ALSO A MEMBER OF THE INVESTMENT POLICY AND STRATEGY COMMITTEE
FOR KEMPER FUNDS.
SILVIA HOLDS BACHELOR OF ARTS AND PH.D. DEGREES IN ECONOMICS FROM NORTHEASTERN
UNIVERSITY IN BOSTON AND HAS 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 $218 BILLION IN ASSETS GLOBALLY FOR MUTUAL FUND
INVESTORS, RETIREMENT AND PENSION PLANS, INSTITUTIONAL AND CORPORATE CLIENTS,
INSURANCE COMPANIES AND PRIVATE, FAMILY AND INDIVIDUAL ACCOUNTS. IT IS ONE OF
THE 10 LARGEST MUTUAL FUND COMPLEXES IN THE UNITED STATES.
DEAR SHAREHOLDERS,
Stable economic growth, low interest rates and sustained low inflation continued
to produce a beneficial market environment for investors in the second quarter
of 1998. Despite heightened sensitivity to earnings estimates and announcements,
the economy continued to support financial assets. We expect this favorable
climate to continue -- in spite of the sensitivity -- at least over the shorter
term.
As always, expectations have been at the heart of the actions and reactions
that move the markets. Expectations appear to be high, as demonstrated by a
record flow of new cash into mutual funds. As of April 30, 1998, a record $5
trillion in mutual fund assets surpassed total assets of the nation's banks,
according to the Investment Company Institute, a trade organization that
monitors the mutual fund industry, and the Federal Reserve Bank in Washington.
Unfortunately, high expectations often combine with high anxiety -- today's
investors are attuned to even the smallest hint of economic change. The result
is volatility. Many who believe that our long-running bull market is too good to
be true or that stock prices are too high are wondering when the market will
reverse.
While a reversal may not be on the immediate horizon, investors are wise to
watch for several signs that change is underway: rising prices, indicating
higher inflation; repercussions of the Asian economic crisis on American
business, which could appear in the form of reduced earnings; and a continued
widening of our trade deficit, a serious imbalance caused by heightened American
demand for foreign goods and services.
But at its monetary policy meeting at the end of the second quarter, the
Federal Reserve Board (the Fed) again chose to leave interest rates alone. In
the coming months, the Fed could raise interest rates if inflation accelerates
or if growth appears to be too rapid compared to the Fed's expectations.
Our positive outlook for the short term is based primarily on the current
resiliency of our marketplace. The United States appears to be firmly planted in
the middle of an economic cycle, with no evidence of detrimental pressures that
might be associated with the market's phenomenal growth. We are not seeing
widespread price increases for goods and services or a downturn in the housing
market, both of which we might expect late in an economic cycle.
Equities have continued to reward investors. The U.S. stock market, as
measured by the Standard & Poor's 500, gained nearly 18 percent in the first
half of 1998 but just 3.5 percent in the second quarter as profit concerns moved
front and center. Bonds in 1998 have also rewarded investors in terms of real
return, which is total return less the rate of inflation. The Treasury and high
yield debt markets have performed particularly well.
U.S. economic growth, as measured by the gross domestic product (GDP) growth
rate, was slightly above 5 percent for the first quarter. Our general
expectation for the year is that growth in all of 1998 will increase between 2.5
and 3 percent over last year. In other words, the economy will remain strong,
but will continue to slow down as the year progresses.
Consumer spending and corporate fixed investment have fueled the economy's
solid growth. Spending on both capital goods and high technology has been
strong. Corporate profit growth has continued to slow, which appears to be
acceptable to investors in an environment of stable interest rates. U.S.
employment growth has ranged from 2 to 2.25 percent, continuing to exceed
expectations. Consumer confidence has remained at all-time highs. The increase
in output prices, an indicator of inflation measured by the Consumer Price Index
(CPI), has stayed at 1.5 to 2 percent.
Adding to the good news, all seems to be quiet on the domestic policy front.
At the end of February, the U.S. federal budget deficit essentially vanished.
Recent efforts to reduce the deficit, combined with higher federal revenues due
to the robust economy, have left us with an expected budget surplus of $60
billion to $80 billion for fiscal 1998. To date, our Democratic president and
Republican Congress have not agreed on any significant legislation regarding tax
credits, spending cuts or health care that could threaten the newfound federal
budget surplus.
Can we expect a little more excitement from overseas? A full-scale global
recession from last year's Asian economic crisis seems unlikely at this point.
Although the crisis has impacted exporters in particular, it has yet to hurt
most U.S. businesses and investors. Quite the
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 (6/30/98) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <S> <C>
10-YEAR TREASURY RATE(1) 5.5 5.54 6.22 6.87
PRIME RATE(2) 8.5 8.5 8.5 8.25
INFLATION RATE(3)* 1.75 1.7 2.3 2.82
THE U.S. DOLLAR(4) 9.54 9.32 7.32 8.35
CAPITAL GOODS ORDERS(5)* 10.51 14.37 8.58 2.44
INDUSTRIAL PRODUCTION(5)* 4.42 5.74 3.91 3.99
EMPLOYMENT GROWTH(6) 2.62 2.88 2.56 2.23
</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 May 31, 1998.
contrary. While the mere threat of repercussions from the Asian crisis added to
the anxiety mentioned earlier, it has also had the effect of keeping U.S.
interest rates and prices in check, making the U.S. economy all the more
attractive to investors around the world.
In the global economy, the U.S. dollar continues to appreciate in value
compared to other currencies. In fact, more capital is flowing into U.S.
markets as investors generally avoid Asia. Europe also has been benefiting from
the crisis. Canada, which is a commodity-producing exporter, has been somewhat
negatively affected as commodity prices have fallen. Political unrest in
Indonesia, nuclear tests in India and Pakistan and economic turmoil in Russia
have been keeping international investors on the edges of their seats.
Other major developments abroad include the final selection of
countries to participate in Europe's single currency next year. Many European
countries are adopting more restrictive fiscal policy and reducing inflation in
anticipation of their momentous entry into the European Economic and Monetary
Union (EMU). But after the EMU is established in 1999, tensions may indeed
mount as countries work to adapt to the new structure.
As we approach the turn of the century, one caveat remains: Don't
underestimate the potential of the Year 2000 computer code problem. It appears
that a significant number of federal government agencies will not meet the
criteria necessary to avoid the problem. Many businesses are revealing that
billions of dollars are being spent on the situation. Some experts say a global
recession is in store. Others adamantly disagree. In any event, we may indeed
see a reduction in capital spending toward the of 1998 and the first half of
next year as companies focus on fixing existing computers rather than on
purchasing new equipment. We'll keep you posted!
Thank you for your continued support. We appreciate the opportunity to
serve your investment needs.
Sincerely,
/s/ John E. Silvia
JOHN E. SILVIA
July 10, 1998
4
<PAGE> 5
MANAGEMENT TEAM
KEMPER STRATEGIC INCOME FUND
PORTFOLIO MANAGEMENT TEAM
[BEIMFORD PHOTO]
J. PATRICK BEIMFORD, JR., JOINED SCUDDER KEMPER INVESTMENTS, INC. IN 1976 AND IS
A MANAGING DIRECTOR AND LEAD PORTFOLIO MANAGER OF KEMPER STRATEGIC INCOME FUND.
BEIMFORD RECEIVED A BACHELOR OF SCIENCE AND INDUSTRIAL MANAGEMENT DEGREE FROM
PURDUE UNIVERSITY AND EARNED AN M.B.A. FROM THE UNIVERSITY OF CHICAGO.
[CESSINE PHOTO]
ROBERT CESSINE IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS AND A
PORTFOLIO MANAGER OF KEMPER STRATEGIC INCOME FUND. HE JOINED THE COMPANY IN
1993. CESSINE RECEIVED BOTH A BACHELOR'S AND M.S. FROM THE UNIVERSITY OF
WISCONSIN.
[MCNAMARA PHOTO]
MIKE MCNAMARA HAS BEEN WITH THE ORGANIZATION SINCE 1972 AND IS A MANAGING
DIRECTOR. HE IS A PORTFOLIO MANAGER OF THE KEMPER STRATEGIC INCOME FUND.
MCNAMARA GRADUATED WITH A BACHELOR'S IN BUSINESS ADMINISTRATION FROM THE
UNIVERSITY OF MISSOURI AND EARNED AN M.B.A. FROM LOYOLA UNIVERSITY.
[RESIS PHOTO]
HARRY RESIS IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS. HE JOINED THE
COMPANY IN 1988 AND IS A PORTFOLIO MANAGER OF KEMPER STRATEGIC INCOME FUND.
RESIS RECEIVED A BACHELOR'S IN FINANCE FROM MICHIGAN STATE UNIVERSITY.
[VANDENBERG PHOTO]
RICHARD VANDENBERG JOINED SCUDDER KEMPER INVESTMENTS IN MARCH 1996 AND IS A
MANAGING DIRECTOR. HE IS A PORTFOLIO MANAGER OF KEMPER STRATEGIC INCOME FUND.
VANDENBERG HAS 25 YEARS OF FIXED-INCOME PORTFOLIO MANAGEMENT EXPERIENCE. HE
RECEIVED A BACHELOR'S DEGREE AND M.B.A. FROM THE UNIVERSITY OF WISCONSIN.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGEMENT
TEAM 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.
5
<PAGE> 6
PERFORMANCE UPDATE
THE SIX-MONTH REPORTING PERIOD--DECEMBER 1, 1997 THROUGH MAY 31, 1998--WAS A
RELATIVELY CALM PERIOD AFTER A TUMULTUOUS MARKET DOWNTURN IN LATE OCTOBER 1997.
THE PORTFOLIO MANAGEMENT TEAM OF THE KEMPER STRATEGIC INCOME FUND CONCENTRATED
ITS EFFORTS ON ADJUSTING THE PORTFOLIO COMPOSITION TO ENHANCE THE FUND'S INCOME-
EARNING POTENTIAL.
Q HOW DID KEMPER STRATEGIC INCOME FUND PERFORM OVER THE LAST SIX MONTHS?
A The total return of the fund based on net asset value was 5.73 percent. In
market value, the fund gained 1.60 percent. Kemper Strategic Income Fund
continued to trade at a premium to net asset value during the period. On May 31,
1998, the market price per share was $19.19, while the net asset value per share
was $15.36.
Q WHAT CAN YOU TELL US ABOUT THE GLOBAL ECONOMY AND HOW IT AFFECTED THE
MARKETS IN WHICH THE FUND INVESTS?
A As you probably recall, right before the start of the fiscal period there
was a severe economic crisis in Southeast Asia that triggered steep, but
temporary declines in world markets. Much of what occurred from December through
May was in some way linked to that dramatic, but brief downturn on October 27,
1997, now referred to as Gray Monday.
The theme during much of the six-month period was "flight-to-quality"
buying. We saw investors, still worried about the Asia crisis, favoring those
investments with high credit quality ratings, such as U.S. Treasuries and
mortgages. Even high yield investors tended to favor the most highly-rated high
yield bonds at some points. This quality-driven buying was especially prevalent
immediately after the market decline in November and December.
Despite the trouble in Asia, the U.S. stock market continued to soar to
new highs. This, in turn, reinforced confidence in the high yield market, where
record levels of new issues were brought to market and gobbled up by investors.
Performance in the high yield market was positive throughout the period.
Emerging market investments also gained momentum after suffering
through some of the steepest declines in October. These securities performed
well through most of the six-month period and, along with high yield bonds,
were the two top-performing income asset classes during the period, according
to Salomon Brothers Total Rate-of-Return Indexes.
Political events, such as problems with Iraq and ongoing scandals in
Washington involving the President, stalled the markets at times but never had
a profound impact on investment performance. The Federal Reserve Board met to
discuss interest rates and decided to leave them unchanged. All in all, it was
a fairly stable six-month period, with relatively strong economic growth but no
real signs of a pick up in inflation. It was a good period for fixed-income
investments.
Q WHAT TYPES OF ADJUSTMENTS DID YOU MAKE TO THE FUND?
A As you should know, our focus in managing the fund is to maximize income
for shareholders, while managing risk. This focus gives us the flexibility to
take strong positions in the investments that we believe have the most
income-earning potential. During the period, we continued to find a great deal
of potential in the emerging markets sector, and continued to increase our
investment in that sector. Since there is more risk associated with emerging
market investments, they pay a higher rate of income. This increased level of
income potential may prove beneficial for the fund, and we believe that the
trade-off in risk vs. return is appropriate. Additionally, we are now able to
benefit from a larger pool of emerging market investment talent, made possible
through the recent alliance of Zurich Kemper Investments, Inc. with Scudder
Stevens & Clark, Inc. These enhanced resources will help us identify a wider
variety of investment options in the emerging markets sector, which should be
beneficial for the fund.
We began the period with about 42 percent of the fund invested in
emerging markets. We increased that allocation even more and on May 31, 1998,
emerging market investments represented 46 percent of the portfolio. This
strong position in emerging markets was beneficial, as the sector was the best
performing fixed-income asset class for the period.
Q HOW WERE THE FUND'S OTHER INVESTMENTS POSITIONED?
A We didn't make any sweeping changes to the portfolio. We maintained a 21
percent allocation to high yield bonds and reduced our mortgage holdings
slightly to 33 percent from 34 percent at the start of the period.
We try to maintain our allocation to mortgages at about one-third of
the fund's assets. The primary reason for this is their high credit
6
<PAGE> 7
PERFORMANCE UPDATE
quality (AAA-rated). This large position in high quality securities not only
boosts the fund's overall credit quality, but acts as a good portfolio
diversification tool. Generally, mortgage investments do not perform in tandem
with other sectors in which the fund invests -- emerging market investments and
corporate high yield bonds. This lack of direct correlation helps limit the
volatility of the fund somewhat.
Mortgages also play a role in our use of leverage for the fund. We
borrow to increase our investment in bonds, thus increasing income. We are
generally able to borrow almost the full value of the fund's mortgage
investments. This use of leverage enabled us to invest more heavily in emerging
markets, thus boosting the income earned by the fund. The increased investment
in emerging markets as well as the use of leverage does expose the fund to more
risks.
Because of the fund's substantial positions in mortgages and emerging
market investments, high yield bonds represented just over 20 percent of the
fund's investments during most of the period. We chose to limit the fund's high
yield investments not because of any fundamental weakness in that market, but
because we believed that the incremental performance of emerging market
investments outweighed performance potential of high yield corporate bonds.
Q WHAT'S YOUR OUTLOOK FOR FIXED-INCOME MARKETS AND KEMPER STRATEGIC INCOME
FUND IN PARTICULAR?
A Our outlook is optimistic. Domestically, we look for economic growth to
continue at a moderate pace without much inflationary pressure, which is
positive for fixed-income investments, especially mortgages. High yield bonds
should also keep performing well as corporate earnings remain strong and the
economy continues to expand. We expect also to see continued growth in the
emerging markets sector as investors turn to such securities in search of high
levels of income.
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
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. The 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.
7
<PAGE> 8
PORTFOLIO STATISTICS
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ON 5/31/98 ON 11/30/97
- --------------------------------------------------------------------------------
<S> <C> <C>
MORTGAGE PASS-THROUGHS 33% 34%
- --------------------------------------------------------------------------------
HIGH YIELD CORPORATE BONDS 21 21
- --------------------------------------------------------------------------------
EMERGING MARKETS 46 42
- --------------------------------------------------------------------------------
OTHER -- 3
- --------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 5/31/98 ON 11/30/97
LONG-TERM FIXED INCOME SECURITIES RATINGS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ON 5/31/98 ON 11/30/97
- --------------------------------------------------------------------------------
<S> <C> <C>
AAA 35% 37%
- --------------------------------------------------------------------------------
A 6 6
- --------------------------------------------------------------------------------
BB 28 26
- --------------------------------------------------------------------------------
B 29 31
- --------------------------------------------------------------------------------
OTHER 2 --
- --------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 5/31/98 ON 11/30/97
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 S&P or Moody's ratings. Portfolio composition will change over time.
Ratings are relative and subjective and not absolute standards of quality.
AVERAGE MATURITY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ON 5/31/98 ON 11/30/97
- --------------------------------------------------------------------------------
<S> <C> <C>
AVERAGE MATURITY 11.2 years 11.2 years
- --------------------------------------------------------------------------------
</TABLE>
* Portfolio composition is subject to change.
8
<PAGE> 9
PORTFOLIO OF INVESTMENTS
KEMPER STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS AT MAY 31, 1998 (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
PRINCIPAL
GOVERNMENT OBLIGATIONS AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. GOVERNMENT--47.5% Federal National Mortgage Association
7.00%, 2027 $ 928 $ 941
7.50%, 2027 918 943
Government National Mortgage Association
7.50%, 2023-2028 13,266 13,671
8.00%, 2022-2026 9,295 9,682
---------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost: $23,956) 25,237
---------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENTS--65.8% (b)Republic of Argentina
5.927%, 2002 8,900 10,903
5.666%, 2007 6,006 5,164
(b)Federal Republic of Brazil,
7.31%, 2014 16,020 12,365
Republic of Panama,
6.75%, 2002 1,739 1,704
Russia Ministry of Finance - Global Bond,
10.00%, 2007 200 178
United Mexican States
6.25%, 2019 2,500 2,088
11.50%, 2026 910 1,059
Republic of Venezuela
6.812%, 2007 714 621
9.25%, 2027 1,000 839
---------------------------------------------------------------------------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost: $27,265) 34,921
---------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
BROADCASTING, Affinity Group, Inc., 11.50%, 2003 500 528
CABLESYSTEMS AND
PUBLISHING--5.8%
(a)(c)Australis Holdings
14.00%, 2000 49 32
15.00%, with warrants, 2002 500 100
Frontiervision, 11.00%, 2006 400 444
Intermedia Capital Partners, 11.25%, 2006 250 279
(a)International Cabletel, Inc., 12.75%, 2005 1,130 992
Newsquest Capital, PLC, 11.00%, 2006 240 269
Sinclair Broadcasting Group, Inc.,
8.75%, 2007 250 254
(a)UIH Australia Pacific, Inc.,
14.00%, with warrants, 2006 280 181
---------------------------------------------------------------------------
3,079
- --------------------------------------------------------------------------------------------------------------------
CHEMICALS--1.4% Hines Horticulture, 11.75%, 2005 500 550
Huntsman Polymer Corp., 11.75%, 2004 170 187
---------------------------------------------------------------------------
737
</TABLE>
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMUNICATIONS--6.5% American Cellular Corp., 10.50%, 2008 $ 320 $ 318
CSC Holdings, Inc., 9.875%, 2013 450 497
(a)Call-Net Enterprises, Inc.,
13.25%, 2004 350 313
Communication and Power Industry, Inc.,
12.00%, 2005 150 168
Interamerica Communication, 14.00%, 2007 200 200
(a)Intermedia Communications of Florida, Inc.,
11.25%, with warrants, 2007 520 407
Metronet Communication,
12.00%, with warrants, 2007 100 122
(a)Millicom International Cellular, S.A.,
13.50%, 2006 500 391
Nextlink Communications, 9.00%, 2008 70 70
(a)PTC International Finance, 10.75%, 2007 500 346
USA Mobile Communications, Inc. II,
14.00%, 2004 120 133
Western Wireless Corp., 10.50%, 2007 440 472
---------------------------------------------------------------------------
3,437
- --------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS Coinmach Corp., 11.75%, 2005 500 557
AND SERVICES--3.2% Mastellone Hermanos, 11.75%, 2008 500 510
(a)Six Flags Theme Park, 12.25%, 2005 550 624
---------------------------------------------------------------------------
1,691
- --------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES, (a)Building Materials Corporation of America,
HOMEBUILDERS AND 11.75%, 2004 1,100 1,072
REAL ESTATE--3.0% Hovnanian Enterprises, 11.25%, 2002 500 519
---------------------------------------------------------------------------
1,591
- --------------------------------------------------------------------------------------------------------------------
LODGING AND Empress River Casino, 10.75%, 2002 200 215
GAMING--1.3% Players International, 10.875%, 2005 470 512
---------------------------------------------------------------------------
727
- --------------------------------------------------------------------------------------------------------------------
MANUFACTURING, METALS AND Aftermarket Technology, 12.00%, 2004 375 414
MINING--5.8% Alvey Systems, 11.375%, 2003 500 536
Bar Technologies, 13.50%,
with warrants, 2001 500 565
Day International Group, Inc.,
11.125%, 2005 35 38
Doe Run Co.
12.00%, 2003 250 255
11.25%, 2005 250 254
Euramax International, PLC, 11.25%, 2006 400 434
GS Technologies, 12.25%, 2005 100 112
NSM Steel
12.00%, 2006 110 99
12.25%, 2008 105 97
Nortek, Inc., 9.875%, 2004 270 278
---------------------------------------------------------------------------
3,082
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PAPER, FOREST PRODUCTS Maxxam Group, Inc., 11.25%, 2003 $ 500 $ 528
AND CONTAINERS--2.7% National Fiberstock Corp., 11.625%, 2002 500 532
Riverwood International, 10.875%, 2008 290 295
Stone Container Corp., 11.50%, 2006 70 78
---------------------------------------------------------------------------
1,433
- --------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS--.2% (c)Color Tile, Inc., 10.75%, 2001 330 3
Pathmark Stores, 9.625%, 2003 20 20
Trans World Airlines, Inc., 11.375%, 2006 100 100
---------------------------------------------------------------------------
123
---------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS--29.9%
(Cost: $15,256) 15,900
---------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
NUMBER OF
COMMON STOCK SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(c)EchoStar Communications Corp. 1,150shs. 29
(c)Empire Gas Corp., warrants 359 2
(c)Foamex International, warrants 160 3
(c)Gulf States Steel, warrants 150 1
---------------------------------------------------------------------------
TOTAL COMMON STOCK--.1%
(Cost: $14) 35
---------------------------------------------------------------------------
TOTAL INVESTMENTS--143.3%
(Cost: $66,491) 76,093
---------------------------------------------------------------------------
LIABILITIES, LESS OTHER ASSETS--(43.3)% (23,011)
---------------------------------------------------------------------------
NET ASSETS--100% $ 53,082
---------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Deferred interest obligation; currently zero coupon under the terms of the
initial offering.
(b) Variable rate security. Rate shown is the effective rate on May 31, 1998 and
date shown represents the final maturity of the obligation.
(c) Non-income producing security. In the case of a bond, generally denotes that
issuer has defaulted on payment of principal or interest or has filed for
bankruptcy.
Based on the cost of investments of $66,491,000 for federal income tax purposes
at May 31, 1998, the gross unrealized appreciation was $10,237,000, the gross
unrealized depreciation was $635,000 and the net unrealized appreciation on
investments was $9,602,000.
See accompanying Notes to Financial Statements.
11
<PAGE> 12
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<S> <C>
- -----------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------
Investments, at value
(Cost: $66,491) $76,093
- -----------------------------------------------------------------------
Interest rate swap agreements, at value 142
- -----------------------------------------------------------------------
Receivable for:
Investments sold 370
- -----------------------------------------------------------------------
Interest 754
- -----------------------------------------------------------------------
Deferred organization costs 10
- -----------------------------------------------------------------------
TOTAL ASSETS 77,369
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- -----------------------------------------------------------------------
Cash overdraft 2,313
- -----------------------------------------------------------------------
Liability under reverse repurchase agreements 21,584
- -----------------------------------------------------------------------
Payable for:
Investments purchased 320
- -----------------------------------------------------------------------
Management fee 38
- -----------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 24
- -----------------------------------------------------------------------
Trustees' fees and other 8
- -----------------------------------------------------------------------
Total liabilities 24,287
- -----------------------------------------------------------------------
NET ASSETS $53,082
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -----------------------------------------------------------------------
Paid-in capital $48,372
- -----------------------------------------------------------------------
Accumulated net realized loss on sales of investments (5,588)
- -----------------------------------------------------------------------
Net unrealized appreciation on investments 9,744
- -----------------------------------------------------------------------
Undistributed net investment income 554
- -----------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $53,082
- -----------------------------------------------------------------------
NET ASSET VALUE PER SHARE, $.01 PAR VALUE
($53,082 / 3,456 shares outstanding) $ 15.36
- -----------------------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<S> <C>
- ----------------------------------------------------------------------
NET INVESTMENT INCOME
- ----------------------------------------------------------------------
Interest income $4,131
- ----------------------------------------------------------------------
Expenses:
Management fee 230
- ----------------------------------------------------------------------
Interest expense 730
- ----------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 48
- ----------------------------------------------------------------------
Professional fees 29
- ----------------------------------------------------------------------
Trustees' fees and other 34
- ----------------------------------------------------------------------
Total expenses 1,071
- ----------------------------------------------------------------------
NET INVESTMENT INCOME 3,060
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ----------------------------------------------------------------------
Net realized gain on sales of investments 190
- ----------------------------------------------------------------------
Change in net unrealized appreciation on investments (245)
- ----------------------------------------------------------------------
Net loss on investments (55)
- ----------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,005
- ----------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
12
<PAGE> 13
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS AND CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR
MAY 31, ENDED
1998 NOVEMBER 30,
(UNAUDITED) 1997
- --------------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income $ 3,060 6,185
- --------------------------------------------------------------------------------------------------------
Net realized gain 190 100
- --------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (245) 46
- --------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 3,005 6,331
- --------------------------------------------------------------------------------------------------------
Distribution from net investment income (3,111) (6,211)
- --------------------------------------------------------------------------------------------------------
Proceeds from shares issued in reinvestment of dividends
(3 shares and 3 shares, respectively) 59 65
- --------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (47) 185
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------------------------------------
Beginning of period 53,129 52,944
- --------------------------------------------------------------------------------------------------------
END OF PERIOD
(including undistributed net investment
income of $554 and $605, respectively) $53,082 53,129
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES
- --------------------------------------------------------------------------------------------------------
Increase in net assets from operations $ 3,005 6,331
- --------------------------------------------------------------------------------------------------------
Non-cash items (1,161) (2,903)
- --------------------------------------------------------------------------------------------------------
Sale of investments 3,609 250
- --------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 5,453 3,678
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES
- --------------------------------------------------------------------------------------------------------
Proceeds from (payments for) reverse repurchase agreements (4,271) 1,630
- --------------------------------------------------------------------------------------------------------
Distributions to shareholders (3,053) (6,146)
- --------------------------------------------------------------------------------------------------------
Net cash used in financing activities (7,324) (4,516)
- --------------------------------------------------------------------------------------------------------
Net decrease in cash (1,871) (838)
- --------------------------------------------------------------------------------------------------------
CASH (OVERDRAFT) AT BEGINNING OF PERIOD (442) 396
- --------------------------------------------------------------------------------------------------------
CASH OVERDRAFT AT END OF PERIOD $(2,313) (442)
- --------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 SIGNIFICANT
ACCOUNTING POLICIES DESCRIPTION OF FUND. The Fund is registered under
the Investment Company Act of 1940 as a
diversified, closed-end management investment
company.
INVESTMENT VALUATION. Investments are stated at
value. Fixed income securities are valued by using
market quotations, or independent pricing services
that use prices provided by market makers or
estimates of market values obtained from yield data
relating to instruments or securities with similar
characteristics. Exchange traded financial futures
and options are valued at the settlement price
established each day by the board of trade or
exchange on which they are traded. Over-the-counter
traded options and interest rate swap agreements
are valued based upon prices provided by market
makers. Other securities and assets are valued at
fair value as determined in good faith by the Board
of Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date (date the order to buy or sell is
executed). Interest income is recorded on the
accrual basis and includes discount amortization on
fixed income securities. Payments received or made
under interest rate swap agreements are recorded as
adjustments to interest income. Realized gains and
losses from investment transactions are reported on
an identified cost basis.
FEDERAL INCOME TAXES. The Fund has complied with
the special provisions of the Internal Revenue Code
available to investment companies for the six
months ended May 31, 1998. The accumulated net
realized loss on sales of investments for federal
income tax purposes at May 31, 1998, amounting to
approximately $5,582,000, is available to offset
future taxable gains. If not applied, the loss
carryover expires during the periods 2002 through
2003.
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.
- --------------------------------------------------------------------------------
2 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The Fund has a management
agreement with Scudder Kemper Investments, Inc.
(Scudder Kemper), and pays a management fee at an
annual rate of .85% of average weekly net assets.
The Fund incurred a management fee of $230,000 for
the six months ended May 31, 1998.
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 $12,000
for the six months ended May 31, 1998.
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,
1998, the Fund made no direct payments to its
officers and incurred trustees fees of $8,000 to
independent trustees.
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3 INVESTMENT
TRANSACTIONS For the six months ended May 31, 1998, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $7,755
Proceeds from sales 7,598
- --------------------------------------------------------------------------------
4 REVERSE REPURCHASE
AGREEMENTS The Fund has entered into reverse repurchase
agreements with third parties involving its
holdings in U.S. Government Agency securities. At
May 31, 1998, the Fund had outstanding reverse
repurchase agreements as follows:
<TABLE>
<CAPTION>
VALUE OF ASSETS SOLD WEIGHTED
UNDER AGREEMENT REPURCHASE AVERAGE
MATURITY TO REPURCHASE LIABILITY INTEREST RATE
-------- -------------------- ----------- -------------
<S> <C> <C> <C>
Up to 30 days $12,500,000 $10,690,000 5.86%
30-90 days 7,555,000 6,462,000 5.63
Over 90 days 5,182,000 4,432,000 5.64
</TABLE>
- --------------------------------------------------------------------------------
5 INTEREST RATE SWAP
AGREEMENTS In order to reduce the uncertainty of future
interest rates for a portion of the portfolio, the
Fund has entered into interest rate swap agreements
with counterparties to effectively convert
investments in floating rate obligations into fixed
rate obligations. At May 31, 1998, the Fund had
outstanding interest rate swap agreements as
follows:
<TABLE>
<CAPTION>
FLOATING RATE FIXED RATE
PAYMENTS MADE PAYMENTS
NOTIONAL TERMINATION BY THE FUND RECEIVED
COUNTERPARTY AMOUNT DATE BASED ON BY THE FUND
------------ ---------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
GS Financial
Products
U.S., L.P. $5,000,000 5/31/99 LIBOR 6.97 %
Lehman Brothers
Special Financing Inc. 5,000,000 5/31/99 LIBOR 6.875%
</TABLE>
The Fund bears the market risk from changes in
interest rates and accordingly the unrealized gain
or loss on the swap agreements is included in the
financial statements. The unrealized gain on
outstanding interest rate swap agreements at May
31, 1998 amounted to $142,000. The Fund also bears
the credit risk that the counterparty will not
perform under the contract.
15
<PAGE> 16
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS APRIL 29
ENDED YEAR ENDED NOVEMBER 30, TO
MAY 31, ------------------------ NOVEMBER 30,
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $15.39 15.34 13.12 12.60 13.97
- -------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .89 1.79 1.75 1.68 .87
- -------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.02) .06 2.25 .54 (1.60)
- -------------------------------------------------------------------------------------------------------------------
Total from investment operations .87 1.85 4.00 2.22 (.73)
- -------------------------------------------------------------------------------------------------------------------
Less distribution from net investment income .90 1.80 1.78 1.70 .64
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.36 15.39 15.34 13.12 12.60
- -------------------------------------------------------------------------------------------------------------------
Market value, end of period $19.19 19.81 17.75 14.25 13.50
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED)
- -------------------------------------------------------------------------------------------------------------------
Based on net asset value 5.73% 12.55 32.63 19.29 (5.43)
- -------------------------------------------------------------------------------------------------------------------
Based on market value 1.60% 23.53 39.99 20.70 (5.61)
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------------------------------------
Expenses before interest expense 1.20% 1.24 1.23 1.26 1.13
- -------------------------------------------------------------------------------------------------------------------
Expenses after interest expense 3.89% 3.99 3.89 4.35 3.41
- -------------------------------------------------------------------------------------------------------------------
Net investment income 11.35% 11.45 12.43 13.56 10.95
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $53,082 53,129 52,944 44,776 42,390
- -------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 13% 16 19 49 55
- -------------------------------------------------------------------------------------------------------------------
</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. Data for the
period ended May 31, 1998 is unaudited.
16
<PAGE> 17
SHAREHOLDERS' MEETING
SPECIAL SHAREHOLDERS' MEETING
On December 3, 1997, a special shareholders' meeting was held and adjourned as
necessary. Kemper Strategic Income Fund shareholders were asked to vote on three
separate issues: election of the two members to the Board of Trustees,
ratification of Ernst & Young LLP as independent auditors, and approval of a new
investment management agreement with Scudder Kemper Investments, Inc. The
following are the results for each issue:
1) Election of Trustees
<TABLE>
<CAPTION>
For Withheld
<S> <C> <C>
Daniel Pierce 2,580,956 11,792
Edmond D. Villani 2,580,849 11,899
</TABLE>
2) Ratification of the selection of Ernst & Young LLP as independent auditors
for the current fiscal year.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
2,563,799 13,619 15,330
</TABLE>
3) Approval of a new investment management agreement with Scudder Kemper
Investments, Inc.
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
2,471,239 23,053 40,269 58,187
</TABLE>
17
<PAGE> 18
NOTES
18
<PAGE> 19
NOTES
19
<PAGE> 20
TRUSTEES AND OFFICERS
TRUSTEES OFFICERS
DANIEL PIERCE MARK S. CASADY ROBERT C. PECK, JR.
Chairman and Trustee President Vice President
JAMES E. AKINS PHILIP J. COLLORA KATHRYN L. QUIRK
Trustee Vice President and Vice President
Secretary
ARTHUR R. GOTTSCHALK HARRY E. RESIS, JR.
Trustee JOHN R. HEBBLE Vice President
Treasurer
FREDERICK T. KELSEY RICHARD L. VANDENBERG
Trustee J. PATRICK BEIMFORD, JR. Vice President
Vice President
FRED B. RENWICK LINDA J. WONDRACK
Trustee JERARD K. HARTMAN Vice President
Vice President
JOHN B. TINGLEFF MAUREEN E. KANE
Trustee THOMAS W. LITTAUER Assistant Secretary
Vice President
EDMOND D. VILLANI CAROLINE PEARSON
Trustee ANN M. MCCREARY Assistant Secretary
Vice President
JOHN G. WEITHERS ELIZABETH C. WERTH
Trustee MICHAEL A. MCNAMARA Assistant Secretary
Vice President
- --------------------------------------------------------------------------------
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 64141-6066
- --------------------------------------------------------------------------------
CUSTODIAN AND INVESTORS FIDUCIARY TRUST COMPANY
TRANSFER AGENT 127 West 10th Street
Kansas City, MO 64105
[KEMPER FUNDS LOGO]
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
Printed on recycled paper in the U.S.A.
KSIF - 3 (7/98) 1050180
