<PAGE> 1
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED NOVEMBER 30, 1997
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
KEMPER
MULTI-MARKET INCOME TRUST
"... During the fiscal year, the market enjoyed an
unprecedented period of robust economic growth with
relatively no inflationary pressures. We positioned the fund
to take advantage of this environment by increasing its
position in high yield bonds, Treasuries and to a lesser
degree, emerging market investments. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
MANAGEMENT TEAM
6
PERFORMANCE UPDATE
8
PORTFOLIO STATISTICS
9
PORTFOLIO OF
INVESTMENTS
17
REPORT OF
INDEPENDENT AUDITORS
18
FINANCIAL STATEMENTS
20
NOTES TO
FINANCIAL STATEMENTS
22
FINANCIAL HIGHLIGHTS
23
DESCRIPTION OF DIVIDEND
REINVESTMENT PLAN
AT A GLANCE
- --------------------------------------------------------------------------------
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
BASED ON BASED ON
NET ASSET MARKET
VALUE PRICE
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER MULI-MARKET INCOME
TRUST 7.20% 8.72%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE AND MARKET PRICE
- --------------------------------------------------------------------------------
AS OF AS OF
11/30/97 11/30/96
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE $10.83 $10.97
- --------------------------------------------------------------------------------
MARKET PRICE $10.63 $10.63
- --------------------------------------------------------------------------------
</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
differing degrees of liquidity.
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
THE FOLLOWING TABLE SHOWS PER SHARE DIVIDEND AND YIELD INFORMATION FOR THE FUND
AS OF NOVEMBER 30, 1997.
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
ONE-YEAR INCOME: $0.8900
- --------------------------------------------------------------------------------
NOVEMBER DIVIDEND: $0.0725
- --------------------------------------------------------------------------------
ANNUALIZED DISTRIBUTION RATE:
(BASED ON NET ASSET VALUE) 8.03%
- --------------------------------------------------------------------------------
ANNUALIZED DISTRIBUTION RATE:
(BASED ON MARKET PRICE) 8.18%
- --------------------------------------------------------------------------------
</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 section 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.
DURATION Duration is a measure of the interest rate sensitivity of a fixed-
income portfolio incorporating time-to-maturity and coupon size. The longer the
duration, the greater the interest rate risk.
<PAGE> 3
ECONOMIC Overview
[ALLYN PHOTO]
MAUREEN F. ALLYN, A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.,
SERVES AS THE FIRM'S CHIEF ECONOMIST. ALLYN GRADUATED SUMMA CUM LAUDE FROM
OAKLAND UNIVERSITY NEAR DETROIT, WITH A BACHELOR'S DEGREE IN PSYCHOLOGY. SHE
RECEIVED HER MASTER'S IN ECONOMICS, WITH A SPECIALIZATION IN INTERNATIONAL TRADE
AND FINANCE, FROM THE NEW SCHOOL FOR SOCIAL RESEARCH IN NEW YORK.
SCUDDER KEMPER INVESTMENTS, INC. IS THE INVESTMENT ADVISOR FOR KEMPER FUNDS. IT
IS ONE OF THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS
WORLDWIDE, MANAGING MORE THAN $200 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 COMPANIES IN THE UNITED STATES.
DEAR SHAREHOLDERS,
We start 1998 optimistic about the long-term prospects of the U.S. economy and
financial markets but cautious about the next several months. The Asian
financial crisis that dominated the global investment environment in the second
half of 1997 promises to continue, posing significant risks to the economy and
investors. We look for the strength of the American consumer -- currently
enjoying rising real incomes, better employment opportunities, lower mortgage
rates and easy access to credit -- and the secular strength of the trend toward
capital spending on high technology to be sufficient to override the influence
of Asia on the U.S. In short, our best case scenario calls for the U.S. to
muddle through an unsettling period. As it has for several years, the country
should continue to enjoy relatively low interest rates and low inflation. But
the new year will be different in at least two ways, both of which can be
expected to have direct bearing on investment opportunities.
First, the economy should grow at a much slower pace. A slowdown in Asia will
depress capital goods spending and heighten import pricing pressure, putting a
damper on American corporations' pricing and profit growth at least through
1999. While the U.S. economy grew at an almost 4 percent rate in 1997, we look
for no better than 2 percent growth for the next two years -- with more than
half of the change attributable to the effect of the Asian fallout.
Disappointing corporate profits is another given for 1998. Profits had begun
to slow last year even before the height of the Asian crisis. High current
valuations, however, seem to suggest that Wall Street has yet to recognize this.
The clash between Wall Street profit expectations and actual reported earnings
is part of the risk likely to be associated with equity investing in 1998.
Volatility, such as we experienced in 1997, should continue. In fact, the
overall market volatility is not likely to reflect the turmoil that individual
equities may experience. There will be a narrowing of the number of companies
able to meet analysts' expectations and this market will be absolutely
unforgiving to those companies that fall far short.
Having stated this, however, we look for the Standard & Poor's 500 to return
about 9.5 percent, including the effect of reinvested dividends. This would be
an average return and in line with the historical long-term 10 percent return of
the stock market. On the heels of the last three 20 percent-plus return years,
an investor in 1998 may weigh the 10 percent prospect against a projected 7
percent total return on bonds and consider the difference insufficient
compensation for the inherent added risk. Adopting a more conservative posture
for the new year may be an appropriate step that you'll want to discuss with
your financial representative in the context of your long-term investing
objectives.
To achieve a 9.5 percent return in 1998, the market's already high valuations
need to move even higher. We expect this to occur for a few reasons: the market
has so far demonstrated a certain complacency about the valuation levels;
American investors don't perceive there's anywhere better to go than the U.S.
equity market; and foreigners think of the U.S. market as a safe haven. All
should help support the market.
Where, then, are the opportunities likely to be in 1998? Expect to see
disparate performance within industry sectors. For example, while the financial
services sector in 1997 tended to provide across-the-board strong performance,
in 1998 we expect the sector to include its share of winners and losers. Stock
selection will be key, too, to benefiting from the technology sector. Over the
long term, we are optimistic about technology and corporate America's continuing
commitment to it. It will be difficult to participate in a market return in 1998
without having some exposure to technology-based companies. One caution: Not all
technology companies will survive the year, which raises the risk of investing
in the sector.
Conventional wisdom might argue in favor of remaining in the U.S. with your
investment dollars in 1998 and, more specifically, invested in small
capitalization companies with domestic lines of business. We'd challenge such
thinking as slower growth, slower inflation and even
<PAGE> 4
ECONOMIC OVERVIEW
[BAR GRAPH]
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.
<TABLE>
<CAPTION>
NOW (12/31/97) 6 MONTHS AGO 1 YEAR AGO 2 YEAR AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1) 5.81 6.22 6.58 5.65
PRIME RATE(2) 8.5 8.5 8.25 8.5
INFLATION RATE(3) 1.7 2.23 3.04 2.72
THE U.S. DOLLAR(4) 10.43 7.32 4.59 -0.57
CAPITAL GOODS ORDERS(5)* 11.61 8.58 2.23 9.56
INDUSTRIAL PRODUCTION(5)* 5.59 3.91 4.7 2.34
EMPLOYMENT GROWTH(6) 2.66 2.3 2.41 1.57
</TABLE>
(1) Falling interest rates in recent years have been a big plus for financial
assets.
(2) The interest rate that commercial lenders charge their best borrowers.
(3) Inflation reduces an investor's real return. In the last five years,
inflation has been as high as 6 percent. The low, moderate inflation of
the last few years has meant high real returns.
(4) Changes in the exchange value of the dollar impact U.S. exporters and the
value of U.S. firms' foreign profits.
(5) These influence corporate profits and equity performance.
(6) An influence on family income and retail sales.
* Data as of November 30, 1997.
Source: Economics Department, Scudder Kemper Investment, Inc.
deflation and pricing pressures change the U.S. economic climate. The only real
antidote is growth, and from now on growth is more likely to be found outside
the United States. Today to participate in the growth from global business you'd
need to be exposed to large capitalization companies.
International investing is a promising proposition in 1998, the Asian fallout
notwithstanding. In established markets, there are attractive opportunities to
be found in Europe and in Japan. Several Japanese companies have real cash flows
and even relatively attractive valuations. In addition, the effect of the Asian
problems has not been to discourage all investment into emerging markets; rather
investors have tended to divert investment dollars and business to other
increasingly attractive emerging markets in eastern Europe, the Middle East,
Africa and Latin America.
With that as an economic backdrop, we encourage you to read the following
detailed report of your fund, including an interview with your fund's portfolio
management. Thank you for your continued support. We appreciate the opportunity
to serve your investment needs.
Sincerely,
/s/ Maureen Allyn
MAUREEN ALLYN
Chief Economist, Scudder Kemper Investments, Inc.
January 9, 1998
4
<PAGE> 5
MANAGEMENT TEAM
KEMPER MULTI-MARKET INCOME TRUST
PORTFOLIO MANAGEMENT TEAM
[BEIMFORD PHOTO]
J. Patrick Beimford, Jr. joined what is now Scudder Kemper Investments, Inc. in
1976, and is a managing director of Scudder Kemper Investments and a portfolio
co-manager of Kemper Multi-Market Income Trust. 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
portfolio co-manager of Kemper Multi-Market Income Trust. He joined the company
in 1993. Cessine received both a B.S. and M.S. from the University of Wisconsin.
[JOHNS PHOTO]
Gordon Johns joined Scudder Kemper Investments in 1988 and is the chief
investment officer of Global Bonds for Scudder Kemper Investments, and a
portfolio co-manager of Kemper Multi-Market Income Trust. Johns graduated from
Balliol College, Oxford, with a B.A. in law.
[MCNAMARA PHOTO]
Mike McNamara has been with Scudder Kemper Investments since 1972 and is a
managing director of Scudder Kemper Investments and portfolio co-manager of
Kemper Multi-Market Income Trust. McNamara graduated with a B.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 with Scudder Kemper Investments. He joined
the company in 1988 and is a portfolio co-manager of Kemper Multi-Market Income
Trust. Resis received a B.A. in finance from Michigan State University.
[TRUTTER PHOTO]
Jonathan Trutter has been with Scudder Kemper Investments since 1989. He is a
senior vice president of Scudder Kemper Investments and a portfolio co-manager
of Kemper Multi-Market Income Trust. Trutter received a bachelor's degree with
dual majors in East Asian languages and international relations from the
University of Southern California. He earned a master's of management degree
from Kellogg Graduate School of Business at Northwestern University.
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
BONDS ENJOYED STRONG PERFORMANCE DURING THE YEAR ENDED NOVEMBER 30, 1997,
DESPITE SOME TUMULTUOUS EVENTS THAT TOOK PLACE. BELOW, THE PORTFOLIO MANAGERS
DISCUSS HOW THEY SHIFTED ASSETS IN THE PORTFOLIO TO PREPARE FOR RISING AND THEN
FALLING MARKET YIELDS.
Q DURING THE FUND'S FISCAL YEAR THE FEDERAL RESERVE BOARD (THE FED) RAISED
SHORT-TERM INTEREST RATES. NEAR THE END OF THE YEAR, EVENTS IN SOUTHEAST ASIA
CAUSED A MAJOR SELL-OFF IN GLOBAL MARKETS. HOW DID THESE EVENTS IMPACT THE
PERFORMANCE OF THE FIXED-INCOME MARKETS?
A Despite these events, fixed-income securities performed relatively well
during the 12-month period. The Fed did raise interest rates but the impact of
the tightening on the market was brief and relatively minimal. In addition, the
crisis in Southeast Asia hurt some corporate and emerging market bonds but
caused U.S. government bonds to rally. Specifically, here's what happened.
At the start of the fiscal year, Federal Reserve Board Chairman Alan
Greenspan implied in passing that financial assets might be overvalued.
This shook the market and caused yields to rise and securities prices to fall.
Early in 1997, strong economic reports surfaced and Greenspan reiterated his
concern about the values of securities and about the potential for a rise in
wage inflation. In what was considered to be a preemptive move at keeping
inflation in check, the Fed tightened short-term rates by 0.25 percent in late
March.
While economic growth remained somewhat strong, even after the Fed
tightening, inflation remained uncharacteristically low. Fixed-income
markets began recouping losses experienced with the Fed's interest rate
increase as inflation fears remained unconfirmed. Market yields fluctuated with
the release of varying economic data but remained relatively range-bound until
October.
On October 8, Greenspan once again expressed his concern about whether the
current low level of inflation could continue with such a strong U.S. economy.
The market believed his comments to be a warning that he might tighten interest
rates again soon. That prospect was discounted on October 27, Gray Monday as it
was later named, when there was a global equity market sell-off spawned by
economic events in Southeast Asia. The sell-off was dramatic but short-lived.
Gray Monday ushered in steep declines in emerging market bonds and less
significant declines in high yield and investment grade corporate bonds.
Investors flocked to higher quality issues and as a result the U.S. Treasury
market rallied through the end of the fund's year. Corporate and emerging
markets began recovering in November, as investors began to regain confidence in
these markets.
Q HOW DID KEMPER MULTI-MARKET INCOME TRUST PERFORM DURING THE YEAR?
A The fund's net asset value total return was 7.20 percent. In market price,
the fund gained 8.72 percent and on November 30, the fund was trading at $10.625
per share. We were pleased with the fund's performance given some of the major
economic and market events that occurred during the year.
Q HOW DID YOU MANAGE THE FUND GIVEN THE INTEREST RATE UNCERTAINTY IN THE
FIRST PART OF THE YEAR?
A We managed the fund fairly defensively by shortening its duration.
Duration is a measurement of a fund's sensitivity to interest rates. The shorter
the duration, the less sensitive it is to interest rate changes. This means
that, because of the shorter duration, the fund's performance was less impacted
by the spike in interest rates than it would have been with a longer duration.
We made the adjustment by increasing the level of cash and cash
equivalents in the fund. Typically, we try to keep the fund's cash
position relatively low, because it limits the amount of interest income that
the fund can generate.
However, our larger cash position helped us greatly in March and into
April as rates were rising. In mid-April as inflation remained
unthreatening and yields began to fall, we looked for opportunities to
reallocate the cash back into sectors that appeared attractive -- sectors such
as high yield bonds, emerging market investments and mortgages.
Q WHAT OTHER TYPES OF ADJUSTMENTS DID YOU MAKE TO THE FUND?
A During the fiscal year, the market enjoyed an unprecedented period of
robust economic growth with relatively no inflationary pressures. We positioned
the fund to take advantage of this environment by increasing its position in
high yield bonds, Treasuries
6
<PAGE> 7
PERFORMANCE UPDATE
and to a lesser degree, emerging market investments.
Ever-increasing demand for high yield bonds fueled gains in the market as
corporate earnings continued to be strong. Supply kept pace with demand and a
great deal of new, lower quality issues were gobbled up by the market. We stayed
away from many of these riskier issues, favoring higher quality (B-rated or
higher) bonds, from fundamentally strong companies. Although these issues didn't
necessarily offer the highest returns in the short run, we felt they would
withstand economic or market uncertainty and provide strong returns in the long
run. Our assumption was proven correct during the October decline when riskier
high yield assets suffered deeper losses than their higher-quality high yield
counter parts.
Interest rates for the most part trended lower from April through the
end of the fiscal year. We increased the level of Treasuries in the
fund. This made sense because Treasuries tend to perform strongest when rates
decline. On October 31, Treasury notes and bonds represented 27 percent of the
fund -- up from 12 percent in late March after the Fed's interest rate
tightening. This sector also enjoyed a dramatic rally at the end of the year as
investors sold other investments and rushed into Treasuries.
Emerging market investments gained during much of the period and we
increased our exposure to a high of 8 percent. However, as events in
Southeast Asia and other foreign markets began to escalate, we cut exposure to
5 percent. We reduced our exposure to this sector further in November as we
believed there was the potential for more global reverberations.
Q IN THE FUND'S SEMIANNUAL SHAREHOLDER REPORT YOU DISCUSSED REDUCING THE
FUND'S EXPOSURE TO FOREIGN CURRENCY BONDS. HOW DID YOU MANAGE THAT ALLOCATION
DURING THE LAST HALF OF THE FISCAL YEAR?
A We continued to reduce the fund's position in foreign currency bonds
because we believed that the U.S. bond market had more potential to outperform
foreign bonds on an absolute level and because of concerns about the European
Monetary Union. Also, yields in many foreign markets were well below yields
achievable through U.S. investments. At the start of the fiscal year foreign
currency bonds represented 25 percent of the fund's investments. By July 30 we
had cut our exposure to just 8 percent and by November 30, that sector
represented just 5 percent of assets. This reduction in foreign currency bonds
was redirected to high yield bonds and Treasuries, which both enjoyed strong
performance throughout most of the fiscal year.
Q IN NOVEMBER, THE FUND DECLARED A REDUCTION IN ITS DECEMBER DIVIDEND. WHAT
LED TO THIS REDUCTION?
A As we mentioned earlier in this report, interest rates have been
declining. In fact, rates have been on this downward trend for several years.
Yield spreads in the market have also tightened. This means that the income
offered on lower quality issues is declining and moving closer to levels of
income paid by higher quality issues. As rates have moved lower and spreads have
tightened the amount of income the fund can earn on its investments has been
reduced. The fund's December 31, 1997 distribution of $0.0675 per share will
reflect a reduction of $0.005 per share.
Q WHAT'S YOUR OUTLOOK FOR THE FIXED-INCOME MARKETS?
A We are optimistic about the fixed-income markets. We believe that the
fundamentals of most sectors, especially high yield and government bonds, remain
positive. However, we look for the possibility of more volatility in the global
marketplace and will manage our foreign investments with caution in the new
year.
7
<PAGE> 8
PORTFOLIO STATISTICS
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ON 11/30/97 ON 11/30/96
- --------------------------------------------------------------------------------
<S> <C> <C>
HIGH YIELD CORPORATE BONDS 47% 35%
- --------------------------------------------------------------------------------
EMERGING MARKETS
(U.S.DOLLAR-DENOMINATED) 4 7
- --------------------------------------------------------------------------------
FOREIGN CURRENCY BONDS 5 25
- --------------------------------------------------------------------------------
HIGH GRADE CORPORATE BONDS 5 1
- --------------------------------------------------------------------------------
MORTGAGES 8 12
- --------------------------------------------------------------------------------
TREASURY NOTES AND BONDS 26 13
- --------------------------------------------------------------------------------
CASH AND EQUIVALENTS 5 7
- --------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 11/30/97 ON 11/30/96
LONG-TERM FIXED INCOME SECURITIES RATINGS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ON 11/30/97 ON 11/30/96
- --------------------------------------------------------------------------------
<S> <C> <C>
AAA 41% 54%
- --------------------------------------------------------------------------------
AA -- 2
- --------------------------------------------------------------------------------
A 2 4
- --------------------------------------------------------------------------------
BBB 4 --
- --------------------------------------------------------------------------------
BB 9 14
- --------------------------------------------------------------------------------
B 41 24
- --------------------------------------------------------------------------------
OTHER 3 2
- --------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 11/30/97 ON 11/30/96
The ratings of Standard and Poor's Corporation (S&P) and Moody's Investors
Services, Inc. (Moody's) represent their opinions as to the quality of
securities that they undertake to rate. The percentage shown reflects the higher
of Moody's or S&P ratings. Portfolio composition will change over time. Ratings
are relative and subjective and not absolute standards of quality.
AVERAGE MATURITY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ON 11/30/97 ON 11/30/96
- --------------------------------------------------------------------------------
<S> <C> <C>
AVERAGE MATURITY 10.4 years 9.4 years
- --------------------------------------------------------------------------------
</TABLE>
* Portfolio composition is subject to change.
8
<PAGE> 9
PORTFOLIO OF INVESTMENTS
KEMPER MULTI-MARKET TRUST
PORTFOLIO OF INVESTMENTS AT NOVEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. GOVERNMENT
OBLIGATIONS--34.7%
U.S. Treasury Bonds
10.75%, 2005 $ 5,270 $ 6,824
9.125%, 2009 6,400 7,454
13.875%, 2011 1,500 2,275
12.00%, 2013 3,500 5,125
13.25%, 2014 3,900 6,194
10.625%, 2015 7,615 11,321
6.50%, 2026 725 763
6.625%, 2027 6,865 7,345
6.375%, 2027 375 390
U.S. Treasury Notes
8.875%, 1999 1,000 1,036
6.625%, 2007 4,425 4,654
6.125%, 2007 1,775 1,809
U.S. Treasury Strip, zero coupon, 2019 10,000 2,737
Federal Home Loan Mortgage Corp.,
6.50%, 2023 7,038 6,931
Government National Mortgage Association,
6.50%, 2023-2027 10,756 10,597
--------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost: $73,338) 75,455
--------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT
OBLIGATIONS--9.1%
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(PRINCIPAL AMOUNT IN LOCAL (a)Republic of Argentina,
CURRENCY, UNLESS OTHERWISE (principal amount in U.S. dollars)
INDICATED) 11.375%, 2017 2,000 2,120
Commonwealth of Australia,
9.50%, 2003 286 229
Republic of Austria,
5.875%, 2000 2,600 216
Kingdom of Belgium,
9.00%, 2003 18,065 583
(a)Federal Republic of Brazil,
(principal amount in U.S. dollars)
6.687%, 2006 25 26
Government of Canada,
7.50%, 2003 1,026 797
Kingdom of Denmark,
7.00%, 2004 2,300 369
Republic of Finland,
10.00%, 2001 1,000 219
French Treasury
5.50%, 2001 5,370 932
8.50%, 2008 3,650 770
German Bundesrepublic,
8.25%, 2001 3,385 2,144
Government of Ireland,
9.25%, 2003 51 89
Italian Treasury,
10.50%, 2000 2,370,000 1,540
Government of the Netherlands,
7.00%, 2003 1,376 752
Commonwealth of New Zealand,
8.00%, 2001 68 43
Republic of Portugal,
11.875%, 2005 13,420 101
</TABLE>
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Kingdom of Spain,
8.00%, 2004 $ 91,320 $ 696
Kingdom of Sweden,
10.25%, 2003 2,300 356
United Kingdom
7.00%, 2002 339 576
7.25%, 2007 520 924
United Mexican States,
(principal amount in U.S. dollars)
11.375%, 2016 4,000 4,520
Republic of Venezuela,
(principal amount in U.S. dollars)
9.25%, 2027 2,000 1,758
--------------------------------------------------------------------------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost: $20,609) 19,760
--------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS--51.7%
- -------------------------------------------------------------------------------------------------------------------
AEROSPACE--.8% Airlines Pass Through Trust, 10.875%, 2019 $ 220 $ 248
Fairchild Corp., 12.00%, 2001 565 568
Howmet, Inc., 10.00%, 2003 440 486
RHI Holdings, 11.875%, 1999 51 51
Tracor, 8.50%, 2007 300 300
--------------------------------------------------------------------------
1,653
- -------------------------------------------------------------------------------------------------------------------
BROADCASTING, Affinity Group, Inc., 11.50%, 2003 315 335
CABLESYSTEMS AND Busse Broadcasting, 11.625%, 2000 120 129
PUBLISHING--5.8% Cablevision Systems Corp.
8.125%, 2009 440 449
10.50%, 2016 340 389
Capstar Broadcasting
9.25%, 2007 320 327
(b) 12.75%, 2009 320 227
(b)Charter Communications, 14.00%, 2007 440 334
Comcast Cablevision, 8.50%, 2027 150 173
(b)Comcast UK Cable Partners, Ltd.,
11.20%, 2007 1,080 861
(b)Diamond Cable Communications, PLC
13.25%, 2004 525 465
11.75%, 2005 320 242
10.75%, 2007 720 475
Foxkids Worldwide
(b) 10.25%, 2007 500 286
9.25%, 2007 300 286
Frontiervision
11.00%, 2006 290 314
(b) 11.875%, 2007 250 173
Granite Broadcasting Corp., 10.375%, 2005 590 614
Intermedia Capital Partners, 11.25%, 2006 380 422
(b)International Cabletel, Inc., 12.75%, 2005 850 695
NTL, 10.00%, 2007 100 105
News America Holdings, Inc.
9.25%, 2013 75 88
8.25%, 2018 400 429
Newsquest Capital, PLC, 11.00%, 2006 50 56
Salem Communications Corp., 9.50%, 2007 260 265
Sinclair Broadcasting Group, Inc.,
10.00%, 2003 480 521
Sullivan Broadcasting, 10.25%, 2005 310 331
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tele-Communications, Inc., 9.80%, 2012 $ 250 $ 306
(b)TeleWest Communications, PLC,
11.00%, 2007 685 517
Time Warner Entertainment, 8.375%, 2023 250 279
Time Warner, Inc., 9.15%, 2023 400 482
(b)Transwestern Holdings, 11.875%, 2008 1,130 650
Transwestern Publishing, 9.625%, 2007 670 680
U.S. West Cap Funding
7.90%, 2027 375 408
7.95%, 2097 250 273
--------------------------------------------------------------------------
12,586
- -------------------------------------------------------------------------------------------------------------------
BUSINESS Allied Waste Industries
SERVICES--1.1% 10.25%, 2006 180 197
(b) 11.30%, 2007 650 447
Outdoor Systems
9.375%, 2006 460 485
8.875%, 2007 390 404
Universal Outdoor, 9.75%, 2006 700 784
--------------------------------------------------------------------------
2,317
- -------------------------------------------------------------------------------------------------------------------
CHEMICALS AND Agriculture, Mining and Chemicals, Inc.,
AGRICULTURE--1.7% 10.75%, 2003 200 214
Atlantis Group, Inc., 11.00%, 2003 350 353
Hines Horticulture, 11.75%, 2005 680 746
Huntsman Corp., 9.50%, 2007 440 460
Huntsman Polymer Corp., 11.75%, 2004 555 622
(b)NL Industries, Inc., 13.00%, 2005 70 70
Terra Industries, Inc., 10.50%, 2005 190 203
Texas Petrochemicals, 11.125%, 2006 500 548
UCC Investors Holdings, Inc., 10.50%, 2002 410 461
--------------------------------------------------------------------------
3,677
- -------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS--7.1% (b)Call-Net Enterprise, Inc.
13.25%, 2004 120 109
9.27%, 2007 300 201
(b)Cellular, Inc., 11.75%, 2003 150 148
CommNet Cellular, 11.25%, 2005 100 114
Dobson Communication, 11.75%, 2007 500 519
Econophone, 13.50%, 2007 370 414
GCI General Communication, 9.75%, 2007 445 457
Highwaymaster, with warrants, 13.75%, 2005 240 242
(b)ICG Holdings, 13.50%, 2005 695 551
Interamerica, 14.00%, 2007 100 101
Intermedia Communications of Florida, Inc.,
with warrants expiring 2000
(b) 12.50%, 2006 170 154
(b) 11.25%, 2007 730 502
8.875%, 2007 170 170
(b)Knology Corp., 11.875%, 2007 250 131
MGC Communications, 13.00%, 2004 400 399
McLeod USA
(b) 10.50%, 2007 1,115 765
9.25%, 2007 250 252
Metronet Communication
12.00%, 2007 150 170
(b) 10.75%, 2007 120 70
(b)Millicom International Cellular, S.A.,
13.50%, 2006 770 562
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Netia Holdings
(b) 11.25%, 2007 $ 70 $ 39
10.25%, 2007 70 66
(b)Nextel Communication, 9.75%, 2007 1,120 633
Nextlink Communications, 12.50%, 2006 320 363
(b)PTC International Finance, 10.75%, 2007 1,670 1,069
(b)PanAmSat, L.P., 11.375%, 2003 450 450
Primus Telecom Group, 11.75%, with
warrants, 2004 250 269
RCN Corp., 10.00%, 2007 1,180 1,180
(b)Telegroup, 10.50%, 2004 100 74
Telex Communications, 10.50%, 2007 240 236
Teligent, 11.50%, 2007 1,250 1,252
USA Mobile Communications, Inc. II
14.00%, 2004 370 411
9.50%, 2004 260 253
Vanguard Cellular Systems, 9.375%, 2006 400 419
Viasystems, Inc., 9.75%, 2007 500 516
Western Wireless, 10.50%, 2006 and 2007 850 910
Winstar Equipment, 12.50%, 2004 630 688
Worldcom, Inc., 7.75%, 2007 and 2027 525 563
---------------------------------------------------------------------------
15,422
- --------------------------------------------------------------------------------------------------------------------
CONSTRUCTION (b)American Standard, Inc., 10.50%, 2005 540 543
MATERIALS--2.0% (b)Building Materials Corporation of America,
11.75%, 2004 770 720
Desa International, 9.875%, 2007 1,250 1,258
Falcon Building, 9.50%, 2007 555 569
Nortek, Inc., 9.125%, 2007 950 955
Waxman Industries, Inc.
(b) 12.75%, 2004 100 90
(c) 12,154 warrants expiring 2004 28
Werner Holdings, 10.00%, 2007 220 224
---------------------------------------------------------------------------
4,387
- --------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS AEP Industries, 9.875%, 2007 170 172
AND SERVICES--5.5% AFC Enterprises, 10.25%, 2007 780 817
AMF Group
(b) 12.25%, 2006 160 124
10.875%, 2006 860 940
Ameriserve Food, 8.875%, 2006 160 160
Cinemark USA, Inc., 9.625%, 2008 570 587
Coinmach Corp., 11.75%, 2005 780 866
(b)Crown Castle, 10.625%, 2007 1,000 610
Dimon, Inc., 8.875%, 2006 500 531
Doskocil Manufacturing Co., 10.125%, 2007 260 268
(b)Dr. Pepper Bottling Holdings, Inc.,
11.625%, 2003 370 384
Dyersburg Corp., 9.75%, 2007 825 854
FWT, 9.875%, 2007 170 170
Hedstrom Corp., 10.00%, 2007 700 702
Herff Jones, Inc., 11.00%, 2005 290 315
Hollywood Entertainment, 10.625%, 2004 300 297
Kinder-Care Learning Centers, 9.50%, 2009 730 719
NBTY, Inc., 8.625%, 2007 340 333
Park Ohio Industries, 9.25%, 2007 300 301
Premier Parks, Inc., 12.00%, 2003 260 290
Royal Caribbean, 8.25%, 2005 250 269
(b)Six Flags Theme Park, 12.25%, 2005 1,000 1,055
</TABLE>
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sparkling Spring Water, 11.50%, 2007 $ 100 $ 101
Van De Kamps, Inc., 12.00%, 2005 500 556
Windy Hill Pet Food, 9.75%, 2007 500 515
---------------------------------------------------------------------------
11,936
- --------------------------------------------------------------------------------------------------------------------
DRUGS AND DVI, Inc., 9.875%, 2004 100 103
HEALTH CARE--2.5% Dade International, Inc., 11.125%, 2006 400 443
Genesis Eldercare, 9.00%, 2007 440 427
Graham-Field Health, 9.75%, 2007 150 157
Integrated Health Services, 9.50%, 2007 860 873
MedPartners, Inc., 7.375%, 2006 615 597
Packard Bioscience, 9.375%, 2007 110 109
(b)Paragon Health, 10.50%, 2007 2,750 1,671
Tenet Healthcare, 8.625%, 2003 500 524
Vencor, 8.625%, 2007 610 601
---------------------------------------------------------------------------
5,505
- --------------------------------------------------------------------------------------------------------------------
ENERGY AND RELATED AEI Holdings, 10.00%, 2007 180 182
SERVICES--3.5% Bellweather Exploration, 10.875%, 2007 500 541
Benton Oil & Gas Co.
11.625%, 2003 525 577
9.375%, 2007 260 263
Clark USA, 8.875%, 2007 180 180
Coda Energy, 10.50%, 2006 290 314
Commonwealth Edison, 7.375%, 2004 300 309
Dailey Petro Service, 9.75%, 2007 250 260
Espirito Santo, 10.00%, 2007 520 468
Forcenergy, 9.50%, 2006 700 738
Forman Petro, 13.50%, 2004 120 121
National Energy, 10.75%, 2006 250 260
Pacalta Resources, 10.75%, 2004 840 827
Pacific Gas & Electric Co., 6.42%, 2008 200 200
Plains Resources, 10.25%, 2006 500 537
Rutherford Moran, 10.75%, 2004 190 192
Southwest Royal, 10.50%, 2004 145 144
Stone Energy Corp., 8.75%, 2007 190 190
Transamerica Energy Corp., 11.50%, 2002 500 495
United Meridian Corp., 10.375%, 2005 450 493
Wiser Oil Co., 9.50%, 2007 430 421
---------------------------------------------------------------------------
7,712
- --------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES, BCH Cayman Islands, 7.70%, 2006 250 263
HOMEBUILDERS AND Corporation Andina de Fomento,
REAL ESTATE--3.4% 7.79%, 2017 500 510
Del Webb Corp., 9.75%, 2008 880 911
Emergent Group, 10.75%, 2004 170 167
Felcor Suites, 7.625%, 2007 125 124
Forecast Group, L.P., 11.375%, 2000 80 75
Fortress Group, 13.75%, 2003 640 715
Hovnanian Enterprises, 11.25%, 2002 226 236
Intertek Finance, 10.25%, 2006 200 210
Kevco, Inc., 10.375%, 2007 1,170 1,182
Lehman Brothers Holdings, 7.375%, 2007 500 515
New Millen Home Building, 12.00%, 2004 60 60
Peoples Bank Bridgeport, 7.20%, 2006 250 251
Presley Companies, 12.50%, 2001 20 19
Scotland International, 8.80%, 2004 200 223
Simon DeBartolo, 7.125%, 2007 200 203
Southern Pacific Funding, 11.50%, 2004 225 223
</TABLE>
13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Svenska Handelsbanken, 7.125%, 2049 $ 175 $ 175
TriNet Corporation Realty Trust, 7.70%, 2017 500 511
UDC Homes, 12.50%, 2000 160 162
Williams Scotsman, 9.875%, 2007 700 728
---------------------------------------------------------------------------
7,463
- --------------------------------------------------------------------------------------------------------------------
HOTELS AND Eldorado Resorts, 10.50%, 2006 540 590
GAMING--1.6% Empress River Casino, 10.75%, 2002 230 247
HMH Properties
9.50%, 2005 90 94
8.875%, 2007 510 525
Harvey's Casino Resorts, 10.625%, 2006 630 687
Hilton Hotels, 7.375%, 2002 250 256
Players International, 10.875%, 2005 220 238
Trump Atlantic City, 11.25%, 2006 800 788
---------------------------------------------------------------------------
3,425
- --------------------------------------------------------------------------------------------------------------------
MANUFACTURING, METALS Aftermarket Technology, 12.00%, 2004 240 266
AND MINING--7.0% Airxcel, 11.00%, 2007 330 337
Alvey Systems, 11.375%, 2003 170 180
Bar Technologies, 13.50%, 2001 550 597
Centaur Mining & Exploration, Ltd.,
11.00%, 2007 1,250 1,264
Collins & Aikman Corp., 11.50%, 2006 590 667
Crain Industries, Inc., 13.50%, 2005 270 306
Day International Group, Inc., 11.125%, 2005 860 929
EV International, 11.00%, 2007 485 489
Euramax International, PLC, 11.25%, 2006 465 503
Foamex, L.P., 9.875%, 2007 665 687
GS Technologies
12.00%, 2004 90 99
12.25%, 2005 180 202
Hayes Wheels International, 9.125%, 2007 800 824
IMO Industries, 11.75%, 2006 555 609
JPS Automotive Products Corp.,
11.125%, 2001 150 166
Johnstown America, 11.75%, 2005 210 228
Knoll, Inc., 10.875%, 2006 504 562
Koppers Industries, 9.875%, 2007 170 172
MMI Products, 11.25%, 2007 480 516
Motors and Gears, Inc., 10.75%, 2006 430 456
Neenah Corp., 11.125%, 2007 730 796
Oxford Auto, 10.125%, 2007 500 522
Scovil Fastners, 11.25%, 2007 200 201
Thermadyne Industries, Inc.
10.25%, 2002 185 192
10.75%, 2003 230 248
Venture Holdings, 9.50%, 2005 390 390
WCI Steel, Inc., 10.00%, 2004 500 517
Weirton Steel Corp., 11.375%, 2004 210 222
Wells Aluminum Corp., 10.125%, 2005 700 740
Wheeling-Pitt Corp., 9.25%, 2007 1,400 1,386
---------------------------------------------------------------------------
15,273
</TABLE>
14
<PAGE> 15
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PAPER, FOREST BPC Holding Corp., 12.50%, 2006 $ 230 $ 252
PRODUCTS AND Berry Plastics Corp., 12.25%, 2004 150 165
CONTAINERS--3.6% Doman Industries, Ltd., 9.25%, 2007 1,220 1,214
Fonda Group, 9.50%, 2007 935 893
Gaylord Container Corp.
12.75%, 2005 580 628
9.75%, 2007 130 131
Maxxam Group, Inc.
(b) 12.25%, 2003 90 89
11.25%, 2003 500 530
National Fiberstock Corp., 11.625%, 2002 420 443
Pindo Finance, 10.75%, 2007 200 185
Printpack, Inc.
9.875%, 2004 50 53
10.625%, 2006 270 286
Riverwood International
10.25%, 2006 140 143
10.625%, 2007 120 124
10.875%, 2008 1,285 1,256
Spinnaker Industries, 10.75%, 2006 380 388
Stone Container Corp.
9.875%, 2001 385 390
12.25%, 2002 40 42
11.50%, 2006 315 335
TJIWI Kimia Finance, 10.00%, 2004 250 229
U.S. Can Corp., 10.125%, 2006 120 127
---------------------------------------------------------------------------
7,903
- --------------------------------------------------------------------------------------------------------------------
RETAILING--3.8% Ameriking, 10.75%, 2006 490 510
Cole National Group, 9.875%, 2006 120 128
J. Crew
10.375%, 2007 400 394
(b) 13.12%, 2008 2,120 1,177
Federated Department Stores, Inc.,
10.00%, 2001 500 550
Finlay Fine Jewelry Corp., 10.625%, 2003 630 662
Flagstar Corp.
10.75%, 2001 615 632
10.875%, 2002 150 155
Guitar Center Management, 11.00%, 2006 87 97
Krystal Co., 10.25%, 2007 140 141
Nine West Group, 9.00%, 2007 210 204
Pathmark Stores
12.625%, 2002 80 81
9.625%, 2003 400 390
Petro Stopping Centers, 10.50%, 2007 720 758
Riddell Sports, 10.50%, 2007 815 840
Specialty Retailers
8.50%, 2005 60 61
9.00%, 2007 120 122
Staples, Inc., 7.125%, 2007 250 251
Travelcenters America, 10.25%, 2007 970 1,014
---------------------------------------------------------------------------
8,167
</TABLE>
15
<PAGE> 16
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
OR SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TRANSPORTATION--1.7% Continental Airlines
7.75%, 2014 $ 292 $ 312
6.90%, 2018 250 253
Delta Air Lines, 9.875%, 2008 449 507
TFM, S.A. de CV, 10.25%, 2007 1,330 1,337
(b)Transtar Holdings, L.P., 13.375%, 2003 200 176
United Airlines, 9.56%, 2018 750 906
Valujet, Inc., 10.25%, 2001 300 274
---------------------------------------------------------------------------
3,765
- --------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS--.6% Climachem, 10.75%, 2007 150 153
Communication and Power Industry, Inc.,
12.00%, 2005 140 157
Corporate Express, Inc., 9.125%, 2004 220 224
Harman International, 7.32%, 2007 400 412
USA Waste Services, 7.00%, 2004 250 255
---------------------------------------------------------------------------
1,201
---------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost: $109,175) 112,392
---------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
COMMON AND (c)Capital Pacifics Holdings 1,185shs. 1
PREFERRED STOCKS--.3% Clark USA, PIK, preferred 1,000 105
Crown American Realty, preferred 4,200 222
(c)Empire Gas Corp., warrants 552 3
(c)Intelcom Group, Inc. 1,056 15
Sinclair Capital, preferred 3,600 398
---------------------------------------------------------------------------
TOTAL COMMON AND PREFERRED STOCKS
(Cost: $675) 744
---------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
MONEY MARKET Yield--5.67%
INSTRUMENT--4.1% Due--December 1997
(Cost: $9,000) $ 9,000 8,997
---------------------------------------------------------------------------
TOTAL INVESTMENTS--99.9%
(Cost: $212,797) 217,348
---------------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES--.1% 160
---------------------------------------------------------------------------
NET ASSETS--100% $217,508
---------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Variable rate security. Rate shown is the effective rate on November 30,
1997 and date shown represents the final maturity of the obligation.
(b) Deferred interest obligation; currently zero coupon under the terms of the
initial offering.
(c) Non-income producing security.
Based on the cost of investments of $212,797,000 for federal income tax purposes
at November 30, 1997, the gross unrealized appreciation was $6,249,000, the
gross unrealized depreciation was $1,698,000 and the net unrealized appreciation
on investments was $4,551,000.
See accompanying Notes to Financial Statements.
16
<PAGE> 17
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER MULTI-MARKET INCOME TRUST
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper Multi-Market Income Trust as
of November 30, 1997, the related statements of operations for the year then
ended and changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the fiscal periods since 1993.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
November 30, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Kemper
Multi-Market Income Trust at November 30, 1997, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each of the fiscal
periods since 1993, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
January 20, 1998
17
<PAGE> 18
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------
Investments, at value
(Cost: $212,797) $217,348
- ------------------------------------------------------------------------
Cash 20,964
- ------------------------------------------------------------------------
Receivable for:
Investments sold 873
- ------------------------------------------------------------------------
Interest 3,802
- ------------------------------------------------------------------------
TOTAL ASSETS 242,987
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ------------------------------------------------------------------------
Payable for:
Investments purchased 23,835
- ------------------------------------------------------------------------
Dividends 1,457
- ------------------------------------------------------------------------
Management fee 140
- ------------------------------------------------------------------------
Trustees' fees and other 47
- ------------------------------------------------------------------------
Total liabilities 25,479
- ------------------------------------------------------------------------
NET ASSETS $217,508
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- ------------------------------------------------------------------------
Paid-in capital $220,433
- ------------------------------------------------------------------------
Accumulated net realized loss on sales of investments and
foreign currency transactions (7,615)
- ------------------------------------------------------------------------
Net unrealized appreciation on investments and assets and
liabilities in foreign currencies 4,690
- ------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $217,508
- ------------------------------------------------------------------------
NET ASSET VALUE PER SHARE, $.01 PAR VALUE
($217,508 / 20,090 shares outstanding) $10.83
- ------------------------------------------------------------------------
</TABLE>
18
<PAGE> 19
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- -----------------------------------------------------------------------
NET INVESTMENT INCOME
- -----------------------------------------------------------------------
Interest $18,604
- -----------------------------------------------------------------------
Dividends 38
- -----------------------------------------------------------------------
Total investment income 18,642
- -----------------------------------------------------------------------
Expenses:
Management fee 1,840
- -----------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 189
- -----------------------------------------------------------------------
Professional fees 44
- -----------------------------------------------------------------------
Reports to shareholders 39
- -----------------------------------------------------------------------
Trustees' fees and other 64
- -----------------------------------------------------------------------
Total expenses 2,176
- -----------------------------------------------------------------------
NET INVESTMENT INCOME 16,466
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- -----------------------------------------------------------------------
Net realized gain on sales of investments and foreign
currency transactions 3,459
- -----------------------------------------------------------------------
Net realized loss from futures transactions (2,162)
- -----------------------------------------------------------------------
Net realized gain 1,297
- -----------------------------------------------------------------------
Change in net unrealized appreciation on investments and
assets and liabilities in foreign currencies (2,739)
- -----------------------------------------------------------------------
Net loss on investments (1,442)
- -----------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $15,024
- -----------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1997 1996
- -------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income $ 16,466 17,341
- -------------------------------------------------------------------------------------------
Net realized gain 1,297 2,564
- -------------------------------------------------------------------------------------------
Change in net unrealized appreciation (2,739) 2,929
- -------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 15,024 22,834
- -------------------------------------------------------------------------------------------
Distribution from net investment income (17,871) (21,361)
- -------------------------------------------------------------------------------------------
Proceeds from shares issued in reinvestment of dividends
(38 shares in 1997 and 119 shares in 1996) 416 1,283
- -------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (2,431) 2,756
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------
Beginning of year 219,939 217,183
- -------------------------------------------------------------------------------------------
END OF YEAR
(including undistributed net investment income of $231 in
1996) $217,508 219,939
- -------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
19
<PAGE> 20
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. Portfolio securities that are
traded on a domestic securities exchange are valued
at the last sale price on the exchange where
primarily traded or, if there is no recent sale, at
the last current bid quotation. Portfolio
securities that are primarily traded on foreign
securities exchanges are generally valued at the
preceding closing values of such securities on
their respective exchanges where primarily traded.
Securities not so traded are valued at the last
current bid quotation if market quotations are
available. Exchange traded financial futures and
options are valued at the settlement price
established each day by the board of trade or
exchange on which they are traded. Over-the-counter
traded options are valued based upon prices
provided by market makers. Forward foreign currency
contracts are valued at the forward rates
prevailing on the day of valuation. Other
securities and assets are valued at fair value as
determined in good faith by the Board of Trustees.
CURRENCY TRANSLATION. The books and records of the
Fund are maintained in U.S. dollars. All assets and
liabilities initially expressed in foreign currency
values are converted into U.S. dollar values at the
mean between the bid and offered quotations of such
currencies against U.S. dollars as last quoted by a
recognized dealer. If such quotations are not
readily available, the rates of exchange are
determined in good faith by the Board of Trustees.
Income and expenses and purchases and sales of
investments are translated into U.S. dollars at the
rates of exchange prevailing on the respective
dates of such transactions. The Fund includes that
portion of the results of operations resulting from
changes in foreign exchange rates with net realized
and unrealized gain (loss) on investments, as
appropriate.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date (date the order to buy or sell is
executed). Dividend income is recorded on the
ex-dividend date, and interest income is recorded
on the accrual basis. Interest income includes
discount amortization on all fixed income
securities and premium amortization on
mortgage-backed securities. Realized gains and
losses from investment transactions are reported on
an identified cost basis.
The Fund may purchase securities with delivery or
payment to occur at a later date. At the time the
Fund enters into a commitment to purchase a
security, the transaction is recorded and the value
of the security is reflected in the net asset
value. The value of the security may vary with
market fluctuations. No interest accrues to the
Fund until payment takes place. At the time the
Fund enters into this type of transaction it is
required to segregate cash or other liquid assets
equal to the value of the securities purchased. At
November 30, 1997, the Fund had $3,954,000 in
purchase commitments outstanding (1.8% of net
assets) with a corresponding amount of assets
segregated.
20
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
FEDERAL INCOME TAXES. The Fund has complied with
the special provisions of the Internal Revenue Code
available to investment companies and therefore no
federal income tax provision is required. The
accumulated net realized loss on sales of
investments for federal income tax purposes at
November 30, 1997, amounting to approximately
$7,241,000, is available to offset future taxable
gains. If not applied, the loss carryover expires
during the period 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 INVESTMENT MANAGER COMBINATION. Zurich Insurance
Company, the parent of Zurich Kemper Investments,
Inc. (ZKI), has acquired a majority interest in
Scudder, Stevens & Clark, Inc. (Scudder), another
major investment manager. At completion of this
transaction on December 31, 1997, Scudder changed
its name to Scudder Kemper Investments, Inc.
(Scudder Kemper) and the operations of ZKI were
combined with Scudder Kemper. In addition, the name
of the Fund's shareholder service agent was changed
to Kemper Service Company (KSvC).
MANAGEMENT AGREEMENT. The Fund has a management
agreement with 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 $1,840,000 for the year ended November 30,
1997.
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
KSvC is the shareholder service agent of the Fund.
Under the agreement, KSvC received shareholder
services fees of $27,000 for the year ended
November 30, 1997.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. During the year ended November 30,
1997, the Fund made no direct payments to its
officers and incurred trustees' fees of $22,000 to
independent trustees.
- --------------------------------------------------------------------------------
3 INVESTMENT
TRANSACTIONS For the year ended November 30, 1997, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $734,454
Proceeds from sales 760,679
- --------------------------------------------------------------------------------
4 FORWARD FOREIGN
CURRENCY CONTRACTS In order to help protect itself against a decline
in the value of particular foreign currencies
against the U.S. Dollar, the Fund has entered into
forward contracts to deliver foreign currency in
exchange for U.S. Dollars. The Fund bears the
market risk that arises from changes in foreign
exchange rates, and accordingly, the unrealized
gain or loss on these contracts is reflected in the
accompanying financial statements. The Fund also
bears the credit risk (which is limited to the
unrealized gain, if any) if the counterparty fails
to perform under the contract. At November 30,
1997, the Fund had entered into forward contracts
for the foreign currencies corresponding to the
foreign government bonds in its portfolio. The
settlement dates on the contracts occur during
December, 1997, and the aggregate unrealized gain
on the contracts amounted to $139,000 at November
30, 1997.
21
<PAGE> 22
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------------------------------
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------------------------------
Net asset value, beginning of year $10.97 10.90 10.35 11.29 10.88
- --------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .82 .87 .96 .96 1.04
- --------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.07) .27 .60 (.97) .45
- --------------------------------------------------------------------------------------------------------
Total from investment operations .75 1.14 1.56 (.01) 1.49
- --------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .89 1.07 1.01 .76 1.08
- --------------------------------------------------------------------------------------------------------
Distribution from net realized gain -- -- -- .17 --
- --------------------------------------------------------------------------------------------------------
Total dividends .89 1.07 1.01 .93 1.08
- --------------------------------------------------------------------------------------------------------
Net asset value per share, end of year $10.83 10.97 10.90 10.35 11.29
- --------------------------------------------------------------------------------------------------------
Market value per share, end of year $10.63 10.63 10.75 9.38 11.00
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
TOTAL RETURN
- --------------------------------------------------------------------------------------------------------
Based on net asset value 7.20% 11.12 15.90 (.07) 14.29
- --------------------------------------------------------------------------------------------------------
Based on market value 8.72% 9.14 26.92 (6.48) 16.83
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------------------
Expenses 1.01% .99 1.02 1.03 .97
- --------------------------------------------------------------------------------------------------------
Net investment income 7.61% 8.06 9.13 8.80 9.43
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------
Net assets at end of year (in thousands) $217,508 219,939 217,183 206,220 225,055
- --------------------------------------------------------------------------------------------------------
Portfolio turnover rate 304% 310 271 253 240
- --------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Total return based on net asset value reflects changes in the Fund's net
asset value during the period. Total return based on market value reflects
changes in market value. Each figure includes reinvestment of dividends. These
figures will differ depending upon the level of any discount from or premium to
net asset value at which the Fund's shares trade during the period.
22
<PAGE> 23
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN
- --------------------------------------------------------------------------------
1 PARTICIPATION We invite you to review the description of the
Dividend Reinvestment Plan (the "Plan") which is
available to you as a shareholder of KEMPER
MULTI-MARKET INCOME TRUST (the "Fund"). If you wish
to participate and your shares are held in your own
name, simply contact Kemper Service Company, whose
address and phone number are provided in Paragraph
4 for the appropriate form. If your shares are held
in the name of a brokerage firm, bank, or other
nominee, you must instruct that nominee to
re-register your shares in your name so that you
may participate in the Plan, unless your nominee
has made the Plan available on shares held by them.
Shareholders who so elect will be deemed to have
appointed United Missouri Bank, n.a. ("UMB") as
their agent and as agent for the Fund under the
Plan.
- --------------------------------------------------------------------------------
2 DIVIDEND INVESTMENT
ACCOUNT The Fund's transfer agent and dividend disbursing
agent or its delegate ("Agent") will establish a
Dividend Investment Account (the "Account") for
each shareholder participating in the Plan. Agent
will credit to the Account of each participant
funds it receives from the following sources: (a)
cash dividends and capital gains distributions paid
on shares of beneficial interest (the "Shares") of
the Fund registered in the participant's name on
the books of the Fund; (b) cash dividends and
capital gains distributions paid on Shares
registered in the name of Agent but credited to the
participant's Account. Sources described in clauses
(a) and (b) of the preceding sentence are
hereinafter called "Distribution."
- --------------------------------------------------------------------------------
3 INVESTMENT OF
DISTRIBUTION FUNDS
HELD IN EACH ACCOUNT If on the record date for a Distribution (the
"Record Date"), Shares are trading at a discount
from net asset value per Share (according to the
evaluation most recently made on Shares of the
Fund), funds credited to a participant's Account
will be used to purchase Shares (the "Purchase").
UMB will attempt, commencing five days prior to the
Payment Date and ending at the close of business on
the Payment Date ("Payment Date" as used herein
shall mean the last business day of the month in
which such Record Date occurs), to acquire Shares
in the open market. If and to the extent that UMB
is unable to acquire sufficient Shares to satisfy
the Distribution by the close of business on the
Payment Date, the Fund will issue to UMB Shares
valued at net asset value per Share (according to
the evaluation most recently made on Shares of the
Fund) in the aggregate amount of the remaining
value of the Distribution. If, on the Record Date,
Shares are trading at a premium over net asset
value per Share, the Fund will issue on the Payment
Date, Shares valued at net asset value per Share on
the Record Date to Agent in the aggregate amount of
the funds credited to the participants' accounts.
- --------------------------------------------------------------------------------
4 ADDITIONAL
INFORMATION Address all notices, correspondence, questions, or
other communication regarding the Plan to:
KEMPER SERVICE COMPANY
P.O. Box 419066
Kansas City, Missouri 64141-6066
1-800-294-4366
23
<PAGE> 24
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN
- --------------------------------------------------------------------------------
5 ADJUSTMENT OF
PURCHASE PRICE The Fund will increase the price at which Shares
may be issued under the Plan to 95% of the fair
market value of the shares on the Record Date if
the net asset value per Share of the Shares on the
Record Date is less than 95% of the fair market
value of the Shares on the Record Date.
- --------------------------------------------------------------------------------
6 DETERMINATION OF
PURCHASE PRICE The cost of Shares and fractional Shares acquired
for each participant's Account in connection with a
Purchase shall be determined by the average cost
per Share, including brokerage commissions as
described in Paragraph 7 hereof, of the Shares
acquired by UMB in connection with that Purchase.
Shareholders will receive a confirmation showing
the average cost and number of Shares acquired as
soon as practicable after Agent has received or UMB
has purchased Shares. Agent may mingle the cash in
a participant's account with similar funds of other
participants of the Fund for whom UMB acts as agent
under the Plan.
- --------------------------------------------------------------------------------
7 BROKERAGE CHARGES There will be no brokerage charges with respect to
Shares issued directly by the Fund as a result of
Distributions. However, each participant will pay a
pro rata share of brokerage commissions incurred
with respect to UMB's open market purchases in
connection with the reinvestment of Distributions.
Brokerage charges for purchasing small amounts of
Shares for individual Accounts through the Plan can
be expected to be less than the usual brokerage
charges for such transactions, as UMB will be
purchasing Shares for all participants in blocks
and prorating the lower commission thus attainable.
- --------------------------------------------------------------------------------
8 SERVICE CHARGES There is no service charge by Agent or UMB to
shareholders who participate in the Plan other than
service charges specified in Paragraph 12 hereof.
However, the Fund reserves the right to amend the
Plan in the future to include a service charge.
- --------------------------------------------------------------------------------
9 TRANSFER OF SHARES
HELD BY AGENT Agent will maintain the participants Account, hold
the additional Shares acquired through the Plan in
safekeeping and furnish the participant with
written confirmation of all transactions in the
Account. Shares in the Account are transferable
upon proper written instructions to Agent. Upon
request to Agent, a certificate for any or all full
Shares in a participant's Account will be sent to
the participant.
- --------------------------------------------------------------------------------
10 SHARES NOT HELD IN
SHAREHOLDER'S
NAME Beneficial owners of Shares which are held in the
name of a broker or nominee will not be
automatically included in the Plan and will receive
all distributions in cash. Such shareholders should
contact the broker or nominee in whose name their
Shares are held to determine whether and how they
may participate in the Plan.
- --------------------------------------------------------------------------------
11 AMENDMENTS Experience under the Plan may indicate that changes
are desirable. Accordingly, the Fund reserves the
right to amend or terminate the Plan, including
provisions with respect to any Distribution paid
subsequent to notice thereof sent to participants
in the Plan at least ninety days before the record
date for such Distribution.
24
<PAGE> 25
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN
- --------------------------------------------------------------------------------
12 WITHDRAWAL FROM
PLAN Shareholders may withdraw from the Plan at any time
by giving Agent a written notice. If the proceeds
are $25,000 or less and the proceeds are to be
payable to the shareholder of record and mailed to
the address of record, a signature guarantee
normally will not be required for notices by
individual account owners (including joint account
owners), otherwise a signature guarantee will be
required. In addition, if the certificate is to be
sent to anyone other than the registered owner(s)
at the address of record, a signature guarantee
will be required on the notice. A notice of
withdrawal will be effective for the next
Distribution following receipt of the notice by the
Agent provided the notice is received by the Agent
at least ten days prior to the Record Date for the
Distribution. When a participant withdraws from the
Plan, or when the Plan is terminated in accordance
with Paragraph 11 hereof, the participant will
receive a certificate for full Shares in the
Account, plus a check for any fractional Shares
based on market price; or if a Participant so
desires, Agent will notify UMB to sell his Shares
in the Plan and send the proceeds to the
participant, less brokerage commissions and a $2.50
service fee.
- --------------------------------------------------------------------------------
13 TAX IMPLICATIONS Shareholders will receive tax information annually
for personal records and to assist in preparation
of Federal income tax returns. If shares are
purchased at a discount, the amount of the discount
is considered taxable income and is added to the
cost basis of the purchased shares.
25
<PAGE> 26
NOTES
26
<PAGE> 27
NOTES
27
<PAGE> 28
TRUSTEES AND OFFICERS
TRUSTEES OFFICERS
JAMES E. AKINS DANIEL PIERCE ROBERT C. PECK, JR.
Trustee Chairman of the Board Vice President
ARTHUR R. GOTTSCHALK MARK S. CASADY KATHRYN L. QUIRK
Trustee President Vice President
FREDERICK T. KELSEY PHILIP J. COLLORA HARRY E. RESIS, JR.
Trustee Vice President, Vice President
Secretary and Treasurer
DANIEL PIERCE JONATHAN W. TRUTTER
Trustee J. PATRICK BEIMFORD, JR. Vice President
Vice President
FRED B. RENWICK RICHARD L. VANDENBERG
Trustee ROBERT S. CESSINE Vice President
Vice President
JOHN B. TINGLEFF LINDA J. WONDRACK
Trustee JERARD K. HARTMAN Vice President
Vice President
EDMOND D. VILLANI JOHN R. HEBBLE
Trustee THOMAS W. LITTAUER Assistant Treasurer
Vice President
JOHN G. WEITHERS MAUREEN E. KANE
Trustee ANN M. MCCREARY Assistant Secretary
Vice President
CAROLINE PEARSON
MICHAEL A. MCNAMARA Assistant Secretary
Vice President
ELIZABETH C. WERTH
Assistant Secretary
- --------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICE AGENT KEMPER SERVICE COMPANY
P.O. Box 419066
Kansas City, MO 64141-6066
- --------------------------------------------------------------------------------
CUSTODIAN AND INVESTORS FIDUCIARY TRUST COMPANY
TRANSFER AGENT 801 Pennsylvania
Kansas City, MO 64105
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
[KEMPER FUNDS LOGO]
Long-term investing in a short-term world(SM)
Printed on recycled paper.
KMMIT - 2 (1/98) 1042020
Printed in the U.S.A.
