<PAGE> 1
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED MAY 31, 1999
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
KEMPER MULTI-MARKET
INCOME TRUST
"... Despite giving back a portion of its gains in May,
the fund outperformed its peer group average during the
first half of the fiscal year. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
Contents
3
Economic Overview
5
Management Team
6
Performance Update
8
Portfolio Statistics
9
Portfolio Of Investments
18
Financial Statements
20
Notes To Financial Statements
22
Financial Highlights
23
Shareholders' Meeting
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER MULTI-MARKET INCOME TRUST
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED MAY 31, 1999
<TABLE>
<CAPTION>
BASED ON BASED ON
NET ASSET MARKET
VALUE PRICE
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER MULTI-MARKET
INCOME TRUST 0.64% 4.47%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE AND MARKET PRICE
- --------------------------------------------------------------------------------
AS OF AS OF
5/31/99 11/30/98
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE $10.07 $10.42
- --------------------------------------------------------------------------------
MARKET PRICE $ 9.25 $ 9.25
- --------------------------------------------------------------------------------
</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 INFORMATION FOR THE FUND AS OF MAY
31, 1999
<TABLE>
<CAPTION>
KEMPER
MULTI-MARKET
INCOME TRUST
- --------------------------------------------------------------------------------
<S> <C>
SIX-MONTHS INCOME $0.4075
- --------------------------------------------------------------------------------
MAY DIVIDEND $0.0700
- --------------------------------------------------------------------------------
ANNUALIZED DISTRIBUTION RATE (BASED
ON NET ASSET VALUE) 8.34%
- --------------------------------------------------------------------------------
ANNUALIZED DISTRIBUTION RATE (BASED
ON MARKET PRICE) 9.08%
- --------------------------------------------------------------------------------
</TABLE>
STATISTICAL NOTE: CURRENT ANNUALIZED DISTRIBUTION RATE IS THE LATEST MONTHLY
DIVIDEND SHOWN AS AN ANNUALIZED PERCENTAGE OF NET ASSET VALUE/MARKET PRICE ON
THE DATE SHOWN. DISTRIBUTION RATE SIMPLY MEASURES THE LEVEL OF DIVIDENDS AND IS
NOT A COMPLETE MEASURE OF PERFORMANCE. TOTAL RETURN MEASURES AGGREGATE CHANGE IN
NET ASSET VALUE/MARKET PRICE ASSUMING REINVESTMENT OF DIVIDENDS. MARKET PRICE,
DISTRIBUTION RATES, NET ASSET VALUE AND RETURNS ARE HISTORICAL AND WILL
FLUCTUATE AND DO NOT GUARANTEE FUTURE RESULTS. ADDITIONAL INFORMATION CONCERNING
PERFORMANCE IS CONTAINED IN THE FINANCIAL HIGHLIGHTS APPEARING AT THE END OF
THIS REPORT.
TERMS TO KNOW
EASE Occurs when the Federal Reserve Board of Governors changes monetary policy
by decreasing the federal funds rate.
FEDERAL FUNDS (Fed funds) Commercial banks are required to keep these funds on
deposit at the Federal Reserve Bank in their district. In order to meet these
reserve requirements, occasionally commercial banks need to borrow funds. These
funds are borrowed from banks that have an excess of the required amount on hand
in what is called the "Fed funds market." The interest rate on these loans is
called the "Fed funds rate" and is the key money market rate that influences all
other short-term rates.
FEDERAL FUNDS RATE The interest rate banks charge each other for overnight loans
that are needed to meet reserve requirements. Often considered the most
sensitive indicator of the direction of interest rates.
FLIGHT-TO-QUALITY BUYING A term describing investors who increase their
allocation to U.S. Treasuries and other high quality securities from riskier
securities in time of global economic uncertainty.
HEDGING A strategy used to help protect an investment. Financial managers can
use any number of technical and nontechnical procedures to hedge or help guard
against the possibility of a loss on an investment.
HIGH-YIELD BONDS Issued by companies, often without long track records of sales
and earnings, or by those with questionable credit strength and pay a higher
yield to investors to help compensate for their greater risk of loss to
principal and interest than higher quality bonds. High-yield bonds carry a
credit rating of BB or lower from either Moody's or Standard & Poor's bond
rating services and are considered to be "below investment grade" by these
rating agencies. Such bonds may also be unrated.
U.S. TREASURIES These debt securities are issued by the U.S. Treasury and
include Treasury bills, Treasury bonds and Treasury notes. They are considered
the safest of all securities. Their safety rests in the power of the U.S.
government to obtain tax revenues to repay its obligations, and in its
historical record of always having done so.
<PAGE> 3
ECONOMIC OVERVIEW
[SILVIA PHOTO]
DR. JOHN E. SILVIA IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.
HIS PRIMARY RESPONSIBILITIES INCLUDE ANALYSIS, MODELING AND FORECASTING OF
ECONOMIC DEVELOPMENTS AND FEDERAL RESERVE ACTIVITY THAT AFFECT FINANCIAL
MARKETS, ESPECIALLY INTEREST RATE TRENDS. THIS EFFORT INCLUDES CLOSE
COLLABORATION WITH BOTH INCOME AND EQUITY MUTUAL FUND MANAGERS AND PENSION FUND
MANAGERS.
SILVIA HOLDS A PH.D. IN ECONOMICS FROM NORTHEASTERN UNIVERSITY IN BOSTON, MASS.
HE IS A MEMBER OF BOTH THE BLUE CHIP ECONOMIC AND FINANCIAL SURVEYS, AND SERVES
ON THE POLICY ADVISORY COMMITTEES OF THE FEDERAL RESERVE BOARDS OF CHICAGO AND
CLEVELAND.
SCUDDER KEMPER INVESTMENTS, THE INVESTMENT MANAGER FOR KEMPER FUNDS, IS ONE OF
THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS IN THE
WORLD, MANAGING MORE THAN $280 BILLION IN ASSETS FOR INSTITUTIONAL AND CORPORATE
CLIENTS, RETIREMENT AND PENSION PLANS, INSURANCE COMPANIES, MUTUAL FUND
INVESTORS AND INDIVIDUALS. SCUDDER KEMPER INVESTMENTS OFFERS A FULL RANGE OF
INVESTMENT COUNSEL AND ASSET MANAGEMENT CAPABILITIES BASED ON A COMBINATION OF
PROPRIETARY RESEARCH AND DISCIPLINED, LONG-TERM INVESTMENT STRATEGIES.
DEAR KEMPER FUNDS SHAREHOLDER:
As expected, the Federal Reserve Board raised its federal funds interest rate
(the rate at which banks lend to each other overnight) by one-fourth of a
percentage point in June. Although higher interest rates tend to have a
dampening effect on the market, investors rallied in response to this move. The
Dow Jones Industrial Average, which was down 50 points before the Fed's
statement on June 30, reversed course and ended the day at its highest closing
level in six weeks. The Dow went on to close at a record-setting high of 11,187
on July 7.
What led to the interest rate hike, and why does the market reaction suggest
that investors are happy about it?
It is generally recognized that a modest rate hike by the Fed may be effective
in slowing the economy sufficiently to suppress any simmering inflationary
pressures. Although the economy has been strong, there are concerns that it will
be unable to maintain its current rate of growth without prompting inflationary
pressures -- which is at the heart of the Fed's decision to raise interest
rates. The Fed is acting now to be proactive. In the past, Fed policy has been
reactive, which meant that the Fed tended to respond to inflation only when it
picked up. A rate hike now is intended to halt any future buildup in inflation.
Moreover, by hinting at an increase well in advance -- then by limiting the
increase to 25 basis points -- the Fed relieved worried investors and gave a
boost to the financial markets.
Despite the minor rate increase, the long-term economic situation appears to
be positive. The federal budget surplus continues to benefit from good revenue
gains (which are based on good income gains, especially for households), good
capital gains and continued restraint in federal spending. The surplus this year
is expected to approach $100 billion.
This positive environment is exactly what sometimes poses risk for investors,
and is key to understanding recent volatility in the market. A strong economy
has the potential to feed inflation fears and drive up interest rates. Indeed,
recent market events illustrate the domino effect of investors reacting to
positive economic news, which they consider troubling at this point, more than
eight years into the economic expansion. Prior to its strong close in the second
quarter, the steady stream of positive economic news led to a sell-off in the
financial markets based on fears that the strong pace of economic growth would
eventually lead to higher inflation. The benchmark 30-year Treasury bond yield
rose, which pulled stocks lower.
Where can we expect to go from here? The fundamentals by which we judge the
health of the economy suggest continued growth as we move into the second half
of 1999. For example, the gross domestic product (GDP), the value of all goods
and services produced in the U.S., is expected to rise at an annual rate of 4
percent in the first half of 1999, following a tremendous fourth-quarter surge
of 6 percent. This is very much in line with what we've grown accustomed to over
the past year -- over the four quarters of 1998, the U.S. economy expanded by
4.3 percent. Some people aren't surprised at all by strong GDP growth that once
would have alarmed them. That's partially because we've grown accustomed to a
strong economy. But it's also because we've been able to absorb growth without
driving up inflation. That's important for investors. If prices had been rising
as the economy was growing, the Fed would have most likely raised short-term
interest rates earlier and more drastically, and that would have changed the
financial market outlook.
However, we do see some vulnerability on the economic front. Trade is a weak
spot in the economy right now. Exports of U.S. goods and services dropped in the
first half of 1999, while imports soared. This reflects the fact that the U.S.
is one of the few countries financially fit enough to buy goods produced
elsewhere in the world. But for as long as less vibrant international economies
are unable to buy U.S. goods, the profitability of U.S. companies trying to
export will be challenged.
When you think about it, vulnerability in regard to the international economy
is nothing new. Globally, the outlook is slightly more positive than it was a
few months ago. For example, the European markets are slowing down, which has
already led to the European Central Bank lowering interest rates in order to
boost domestic spending. In many countries in Europe there are no fixed-rate
mortgages, only adjustable-rate mortgages. When interest rates go down, mortgage
payments are reduced and homeowners can spend money elsewhere. This has a huge
impact on consumer spending, and will help European equities over time.
Additionally, the situation in Japan remains unchanged. And, problems in the
emerging markets haven't had the negative impact many people expected -- both
the Mexican and Brazilian stock markets have actually risen in the past two
months.
But don't forget that international crises have the potential to affect the
U.S. markets dramatically. Although the Kosovo crisis seems to be waning, past
increases in military spending on Kosovo by the 11 European Monetary Union (EMU)
countries could force them to spend less in other areas, which could have
economic implications, including higher interest rates. That's because many
European countries (especially Italy) have small economies and
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 (6/30/99) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Ten Year Treasury Rate 5.90 4.81 5.65 6.69
Prime Rate 7.75 8.49 8.50 8.30
Inflation* 2.03 1.62 1.44 3.03
The U.S. Dollar* -2.4 4.31 4.88 8.58
Capital goods orders* 7.73 11.44 8.10 5.52
Industrial production * 1.72 3.58 5.05 5.86
Employment growth* 2.15 2.48 2.61 2.51
</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, 1999.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
little leeway in their budgets. Consequently, those countries financed unplanned
military expenditures by selling government bonds -- which, in Europe's small
bond market, typically raises interest rates. As an example, consider Italy,
which recently asked for more leeway on its deficit targets. When leeway was
granted, this led to a further sell-off in the eurodollar.
The international situation alone, however, is by no means an indicator of a
U.S. slowdown -- and without any such indications, complacency may be our
greatest concern. It's easy to look at the current U.S. economic situation and
behave as if no risk exists. But when you see the market soaring and are tempted
to jump in, note that the bull market grew to records on the strength of just a
few dozen stocks, while most other stock prices were flat or actually declined.
In summary, there are concerns that the current economy is unsustainable and
we soon could see an abrupt end. In many cases, however, people are looking for
a slowdown because they are fearful growth will drive up inflation these are
particularly older investors who are accustomed to inflation accompanying
growth. But again, sustained inflation seems unlikely, so a sharp slowdown is
not necessary. In the short term, we expect a modest economic slowdown but no
recession. The best approach now, as in any market, is to diversify and invest
for the long term.
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
/s/ JOHN E. SILVIA
John E. Silvia
THE INFORMATION CONTAINED IN THIS PIECE HAS BEEN TAKEN FROM SOURCES BELIEVED TO
BE RELIABLE, BUT THE ACCURACY OF THE INFORMATION IS NOT GUARANTEED. THE OPINIONS
AND FORECASTS EXPRESSED ARE THOSE OF DR. JOHN SILVIA AS OF JUNE 9, 1999, AND MAY
NOT ACTUALLY COME TO PASS. THIS INFORMATION IS SUBJECT TO CHANGE. NO PART OF
THIS MATERIAL IS INTENDED AS AN INVESTMENT RECOMMENDATION.
TO OBTAIN A KEMPER FUNDS PROSPECTUS, DOWNLOAD ONE FROM WWW.KEMPER.COM, TALK TO
YOUR FINANCIAL REPRESENTATIVE OR CALL SHAREHOLDER SERVICES AT (800) 621-1048.
THE PROSPECTUS CONTAINS MORE COMPLETE INFORMATION, INCLUDING MANAGEMENT FEES AND
EXPENSES. PLEASE READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
4
<PAGE> 5
MANAGEMENT TEAM
KEMPER MULTI-MARKET INCOME TRUST
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 MULTI-MARKET INCOME
TRUST. HE IS A CHARTERED FINANCIAL ANALYST.
[CESSINE PHOTO]
ROBERT CESSINE IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS AND
PORTFOLIO MANAGER OF KEMPER MULTI-MARKET INCOME TRUST. HE JOINED THE COMPANY IN
1993 AND IS A CHARTERED FINANCIAL ANALYST.
[DOYLE PHOTO]
DAN DOYLE IS A FIRST VICE PRESIDENT OF SCUDDER KEMPER INVESTMENTS AND A
PORTFOLIO MANAGER OF KEMPER MULTI-MARKET INCOME TRUST. HE IS ALSO A CHARTERED
FINANCIAL ANALYST.
[SALTZMAN PHOTO]
M. ISABEL SALTZMAN, A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS AND A
PORTFOLIO MANAGER OF KEMPER MULTI-MARKET INCOME TRUST, IS ALSO THE SENIOR
PORTFOLIO MANAGER FOR THE FIRM'S EMERGING MARKETS BOND GROUP. SHE JOINED THE
ORGANIZATION IN 1990.
[VANDENBERG PHOTO]
RICHARD VANDENBERG, WITH MORE THAN 25 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE,
IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS AND IS LEAD PORTFOLIO
MANAGER OF SCUDDER KEMPER'S FIXED-INCOME GOVERNMENT AND MORTGAGE FUNDS.
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
KEMPER MULTI-MARKET INCOME TRUST ENJOYED STRONG PERFORMANCE VERSUS ITS PEERS
DURING THE FIRST SIX MONTHS OF THE FISCAL YEAR. HIGH YIELD CORPORATE BONDS AND
EMERGING MARKET BONDS, TWO AREAS THE FUND HAD OVERWEIGHTED, RALLIED STRONGLY
DURING THE MAJORITY OF THE PERIOD. BELOW, LEAD PORTFOLIO MANAGER PAT BEIMFORD
DISCUSSES THE MARKET'S BEHAVIOR AND THE FUND'S PERFORMANCE.
Q PAT, FOR THE SIX-MONTH PERIOD, THE FUND'S TOTAL RETURN WAS 0.64 PERCENT
(BASED ON NET ASSET VALUE) VERSUS -0.48 PERCENT FOR ITS PEER GROUP AVERAGE AS
MEASURED BY THE LIPPER CLOSED-END GENERAL BOND FUND INDEX. BEFORE WE DISCUSS THE
FUND'S PERFORMANCE, COULD YOU DESCRIBE WHAT HAPPENED IN WORLDWIDE FIXED INCOME
MARKETS?
A Certainly. In a nutshell, the beginning of the fiscal year marked a
startling reversal of investor expectations. Last fall, we saw a worldwide
"flight-to-quality" (see Terms To Know on page 2) as turbulent overseas markets
prompted investors to seek a safe, liquid haven for their assets. U.S.
government bonds were the instruments of choice, and the powerful demand for
Treasuries pushed yields down substantially. This was at a time when the U.S.
economy appeared to be growing well without a hint of inflation.
All that began to change last fall. The Federal Reserve cut the Federal
funds rate three times to show support for international markets and to signal
its commitment to worldwide economic growth. As the ensuing months indicate, the
Fed's strategy worked well, perhaps TOO well. Asian economies began to show
signs of renewed life and Latin America managed to avoid the catastrophe that
many economists predicted. However, the U.S. economy continued to gain strength,
prompting investors to wonder if inflation might again become a threat. In the
early months of 1999, investors' fears began to intensify as U.S. GDP growth
topped 6 percent, the labor market became even tighter and oil prices began
trending up.
The result of all this was a "flight FROM quality" as investors, confident
that global economies were back on track, began to seek income rather than
stability. Emerging market bonds skyrocketed and high yield corporate bonds
staged a powerful rally. Meanwhile interest rates in the U.S. moved up steadily,
depressing Treasury bond prices. By May 27, 1999, 30-year Treasury bond yields
had risen to 5.84 percent from 5.18 percent six months earlier.
In May, all fixed income markets suffered a setback as inflation fears
caused the Federal Reserve to change its bias from neutral to one predisposed to
tightening. With higher rates now more likely, high yield bonds and emerging
market bonds retraced some of their gains, but remained in positive territory
year-to-date. For example, for the six-month period ended May 31, 1999, high
yield bonds were up 2.53 percent according to the Lehman Brothers High Yield
Bond Index.* Emerging market bonds were up 3.19 percent as measured by the JP
Morgan Emerging Markets Composite Index.** In contrast, 10-year Treasuries+ were
down 4.66 percent and the Lehman Brothers Long Government Bond Index++ tumbled
5.76 percent for the six-month period ended May 31, 1999.
* LEHMAN BROTHERS HIGH YIELD BOND INDEX IS GENERALLY REPRESENTATIVE OF THE
PERFORMANCE OF CORPORATE BOND RATES BELOW INVESTMENT GRADE. THIS INDEX IS
CALCULATED MONTHLY AND INCLUDES THE EFFECT OF REINVESTMENT OF DIVIDENDS.
SOURCE IS LIPPER ANALYTICAL SERVICES, INC.
** JP MORGAN EMERGING MARKETS COMPOSITE INDEX IS GENERALLY REPRESENTATIVE OF THE
PERFORMANCE OF EXTERNAL DEBT INSTRUMENTS IN THE EMERGING MARKETS. IT INCLUDES
THE EFFECT OF REINVESTMENT OF DIVIDENDS. SOURCE IS J.P. MORGAN AND CO., INC.
+ 10-YEAR TREASURIES GENERALLY REPRESENTATIVE OF THE RETURN FOR 10-YEAR
TREASURIES AND INCLUDES THE EFFECTS OF REINVESTMENT OF DIVIDENDS AND REFLECT
CUMULATIVE MONTHLY RETURNS. SOURCE IS TOWERSDATA SYSTEMS.
++ LEHMAN BROTHERS LONG GOVERNMENT BOND INDEX IS GENERALLY REPRESENTATIVE OF THE
PERFORMANCE OF GOVERNMENT AND AGENCY BONDS WITH A MATURITY OF TEN YEARS AND
GREATER. THE INDEX IS CALCULATED MONTHLY AND INCLUDES THE EFFECT OF
REINVESTMENT OF DIVIDENDS. SOURCE IS LIPPER ANALYTICAL SERVICES, INC.
6
<PAGE> 7
PERFORMANCE UPDATE
Q HOW DID YOU POSITION THE FUND TO RESPOND?
A The first six months of the fiscal year was one of those rare times when
exactly what you think will happen does happen. The result was strong relative
performance for the fund.
Late last year we determined interest rates on high quality U.S. bonds
(i.e., Treasuries and mortgages) would likely remain unchanged, or would
possibly move higher. As interest rates rise, prices fall on bonds. When you're
looking at flat or rising interest rates, you want to look for income. So we
asked ourselves what investment vehicles, of those in which the fund can invest,
were most likely to provide the most income. Our answer was to exit U.S.
Treasuries and move into other income-enhancing sectors, mostly high-yield bonds
and emerging market bonds.
The high-yield market rallied following the Fed's rate cuts last fall as
did foreign currency bonds. Treasury bonds, as we mentioned above,
underperformed dramatically. So our asset allocation decisions were right on
target. In May, during the downturn that affected all fixed income investments
both domestic and global, the fund's income-oriented positioning hurt it a bit
more than its competitors. Despite giving back a portion of its gains in May,
the fund outperformed its peer group average during the first half of the fiscal
year.
Q WHAT IS YOUR OUTLOOK FOR THE MULTI-MARKET BOND FUND MARKET?
A We anticipate the domestic economy will remain on solid footing. Interest
rates may continue to rise somewhat further. The market needs proof the economy
is going to slow down, although there is a natural stopping point to how high
rates can go when inflation is so low. For the time being, we feel the fund is
well positioned for this outlook. With the fund's flexibility to move in and out
of sectors, we believe it is in a good position to benefit from fluctuations in
different markets during various economic cycles.
7
<PAGE> 8
PORTFOLIO STATISTICS
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ON 5/31/99 ON 11/30/98
- --------------------------------------------------------------------------------
<S> <C> <C>
HIGH YIELD CORPORATE BONDS 65% 58%
- --------------------------------------------------------------------------------
EMERGING MARKETS
(U.S. DOLLAR-DENOMINATED) 22 13
- --------------------------------------------------------------------------------
FOREIGN CURRENCY BONDS 4 5
- --------------------------------------------------------------------------------
MORTGAGES 5 8
- --------------------------------------------------------------------------------
TREASURY NOTES AND BONDS 2 13
- --------------------------------------------------------------------------------
CASH AND EQUIVALENTS 2 3
- --------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 5/31/99 ON 11/30/98
LONG-TERM FIXED INCOME SECURITIES RATINGS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ON 5/31/99 ON 11/30/98
- --------------------------------------------------------------------------------
<S> <C> <C>
AAA 12% 27%
- --------------------------------------------------------------------------------
BBB 4 --
- --------------------------------------------------------------------------------
BB 20 17
- --------------------------------------------------------------------------------
B 56 50
- --------------------------------------------------------------------------------
BELOW B 6 6
- --------------------------------------------------------------------------------
NOT RATED 2 --
- --------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 5/31/99 ON 11/30/98
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 5/31/99 ON 11/30/98
- --------------------------------------------------------------------------------
<S> <C> <C>
AVERAGE MATURITY 9.3 years 9.6 years
- --------------------------------------------------------------------------------
</TABLE>
* PORTFOLIO COMPOSITION IS SUBJECT TO CHANGE.
8
<PAGE> 9
PORTFOLIO OF INVESTMENTS
KEMPER MULTI-MARKET INCOME TRUST
Portfolio of Investments at May 31, 1999 (unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Bond, 13.25%, 2014 $ 3,900 $ 5,989
Federal Home Loan Mortgage Corp., 6.50%,
2023 5,413 5,313
Government National Mortgage Association
6.50%, 2024 5,786 5,664
8.00%, 2024 806 838
------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS--7.8%
(Cost: $17,367) 17,804
------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS
(PRINCIPAL AMOUNT IN
U.S. DOLLARS EXCEPT AS NOTED)
Argentine Republic
11.375%, 2017 6,750 5,898
9.75%, 2027 1,000 771
Federative Republic of Brazil
11.625%, 2004 2,625 2,395
(c) 6.125%, 2006 2,612 1,917
(c) 6.188%, 2009 3,250 2,084
10.125%, 2027 2,500 1,825
German Bundesrepublic, 6.00%, 2007 DEM 7,158 8,449
Government of Jamaica, 10.875%, 2005 1,000 900
(c) Kingdom of Morocco, 6.063%, 2009 1,000 786
(c) Republic of Bulgaria, 6.688%, 2011 5,500 3,520
Republic of Panama, 8.875%, 2027 3,750 3,281
Republic of Peru, 4.00%, 2017 2,500 1,519
Republic of Philippines, 8.875%, 2008 7,750 7,498
Republic of Turkey, 12.00%, 2008 1,900 1,891
(c) Republic of Venezuela, 5.938%, 2007 6,214 4,567
United Mexican States
9.875%, 2007 2,430 2,382
10.375%, 2009 1,550 1,538
11.375%, 2016 4,700 4,959
11.50%, 2026 1,750 1,932
------------------------------------------------------------------------------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS--25.5%
(Cost: $63,128) 58,112
------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS
BASIC INDUSTRIES--8.6%
Allied Waste Industries, 7.625%, 2006 100 94
Atlantis Group, Inc., 11.00%, 2003 350 357
Bar Technologies, 13.50%, 2001 550 566
Dimac Corp., 12.50%, 2008 1,030 721
Doman Industries, Ltd.
8.75%, 2004 360 252
9.25%, 2007 620 409
Euramax International, PLC, 11.25%, 2006 1,195 1,243
Gaylord Container Corp.
9.75%, 2007 780 757
9.875%, 2008 625 550
Golden Northeast Aluminum, Inc., 12.00%,
2006 1,340 1,380
GS Technologies
12.00%, 2004 250 225
12.25%, 2005 1,610 1,449
Hines Horticulture, Inc., 11.75%, 2005 1,442 1,539
Huntsman Polymer Corp., 11.75%, 2004 655 694
</TABLE>
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Metal Management, Inc., 10.00%, 2008 $ 260 $ 205
Metals USA, Inc., 8.625%, 2008 175 166
Millar Western Forest Products, Ltd.,
9.875%, 2008 495 470
MMI Products, Inc., 11.25%, 2007 570 593
Neenah Corp., 11.125%, 2007 220 218
Norampac, Inc., 9.50%, 2008 420 437
Pen Holdings, Inc., 9.875%, 2008 330 338
Plainwell, Inc., 11.00%, 2008 335 268
Renco Steel Holdings Co., 10.875%, 2005 340 308
Riverwood International Corp.
10.25%, 2006 140 141
10.625%, 2007 160 165
10.875%, 2008 1,515 1,477
Spinnaker Industries, 10.75%, 2006 1,880 1,391
Stone Container Corp.
12.25%, 2002 40 40
11.50%, 2006 275 296
Tembec Industries, Inc., 8.625%, 2009 170 170
Terra Industries, Inc.
10.75%, 2003 630 630
10.50%, 2005 200 199
Texas Petrochemicals Corp., 11.125%, 2006 470 428
UCC Investors Holdings, Inc., 10.50%, 2002 410 443
United Rentals, Inc., 9.25%, 2009 500 502
Wells Aluminum Corp., 10.125%, 2005 490 483
------------------------------------------------------------------------------
19,604
- --------------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--6.4%
AEP Industries, Inc., 9.875%, 2007 170 171
Axiohm Transaction Solutions, Inc., 9.75%,
2007 180 159
BE Aerospace, Inc., 9.50%, 2008 510 528
Berry Plastics Corp., 12.25%, 2004 150 158
BPC Holdings Corp., 12.50%, 2006 230 241
Building Materials Corp., 8.00%, 2008 500 475
Congoleum Corp., 8.625%, 2008 270 259
Consumers International, 10.25%, 2005 760 783
Day International Group, Inc., 11.125%,
2005 750 799
DeCrane Aircraft Holdings, Inc., 12.00%,
2008 350 357
Desa International, 9.875%, 2007 1,150 897
Fairchild Corp., 10.75%, 2009 310 308
Falcon Building Products, Inc.
9.50%, 2007 485 461
(b) 10.50%, 2007 30 19
Eagle-Picher Holdings, Inc., 9.375%, 2008 1,070 1,030
Foamex, L.P., 13.50%, with warrants, 2005 270 257
Fonda Group, 9.50%, 2007 985 857
Graham Packaging Co.
8.75%, 2008 180 178
(b) 10.75%, 2009 160 112
(b) Grove Holdings, L.L.C., 11.625%, 2009 100 38
Grove Investors, PIK, 14.50%, 2010 173 114
IMPAC Group, Inc., 10.125%, 2008 600 585
Integrated Electrical Services, Inc.,
9.375%, 2009 610 613
Kevco, Inc., 10.375%, 2007 860 585
Knoll, Inc., 10.875%, 2006 504 554
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nortek, Inc.
9.875%, 2004 $ 50 $ 51
9.125%, 2007 680 687
8.875%, 2008 130 130
Printpack, Inc.
9.875%, 2004 30 30
10.625%, 2006 290 281
(b) SF Holdings Group, Inc., 12.75%,
with warrants, 2008 550 202
Terex Corp., 8.875%, 2008 550 533
Transdigm, Inc., 10.375%, 2008 1,210 1,198
U.S. Can Corp., 10.125%, 2006 260 273
Werner Holdings, Inc., 10.00%, 2007 600 604
------------------------------------------------------------------------------
14,527
- --------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS--14.4%
Allegiance Telecom, Inc.
(b) 11.75%, 2008 635 387
12.875%, 2008 500 540
American Cellular Corp., 10.50%, 2008 1,010 1,045
Call-Net Enterprises
(b) 9.27%, 2007 300 186
(b) 8.94%, 2008 330 182
9.375%, 2009 150 143
(b) 10.80%, 2009 200 110
Centennial Cellular, 10.75%, 2008 250 260
ComCast Cellular, 9.50%, 2007 60 67
(b) Communications Cellular, zero coupon, 2005 100 66
(b) Crown Castle International Corp.,
10.625%, 2007 1,470 1,007
Dobson Communication Corp., 11.75%, 2007 920 966
(b) Dolphin Telecom, Inc., PLC, 14.00%, 2009 500 245
(b) Econophone, Inc.,
11.00%, with warrants, 2008 160 117
Esprit Telecom Group, PLC
11.50%, 2007 550 589
10.875%, 2008 200 210
Global Crossing Holdings, Ltd., 9.625%,
2008 830 909
Global Telesystems Group, 9.875%, 2005 360 348
(b) ICG Holdings, Inc., 13.50%,
with warrants, 2005 1,775 1,597
Impsat Corp., 12.375%, 2008 440 383
Intermedia Communications of Florida, Inc.
11.25%, 2006 380 424
(b) 12.50%, 2006 290 241
8.875%, with warrants, 2007 170 191
(b) 11.25%, 2007 700 504
KMC Telecom Holdings, Inc.
(b) 12.50%, with warrants, 2008 930 501
13.50%, 2009 200 200
Level 3 Communications, Inc.
9.125%, 2008 1,120 1,092
(b) 10.50%, 2008 2,530 1,505
Long Distance International, Inc.,
12.25%, with warrants, 2008 300 166
McLeod USA, Inc.
9.25%, 2007 360 358
(b) 10.50%, 2007 1,045 799
9.50%, 2008 110 111
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Metronet Communications
(b) 10.75%, 2007 $ 220 $ 176
12.00%, with warrants, 2007 150 179
(b) 9.95%, 2008 570 423
10.625%, 2008 350 400
MGC Communications, 13.00%, 2004 1,420 1,278
(b) Millicom International Cellular, S.A.,
13.50%, 2006 870 653
Netia Holdings
10.25%, 2007 830 747
(b) 11.25%, 2007 880 563
(b) Nextel Communications, Inc.
9.75%, 2004 810 828
9.75%, 2007 295 198
10.65%, 2007 495 347
9.95%, 2008 440 290
Nextlink Communications, Inc.
(b) 12.25%, 2004 500 276
12.50%, 2006 640 685
(b) 9.45%, 2008 240 139
10.75%, 2008 470 470
(b) Pinnacle Holdings, Inc., 10.00%, 2008 460 274
Price Communications Wireless, Inc.,
9.125%, 2006 540 558
Primus Telecommunications Group, Inc.
11.75%, with warrants, 2004 370 382
9.875%, 2008 50 48
11.25%, 2009 170 174
(b) PTC International Finance, 10.75%, 2007 2,530 1,872
RCN Corp.
10.00%, 2007 780 780
(b) 11.00%, 2008 220 133
Rogers Cantel Mobile Communications, Inc.
9.375%, 2008 40 42
9.75%, 2016 100 112
(b) SBA Communications Corp., 12.00%, 2008 980 583
(b) Spectrasite Holdings, Inc.
12.00%, 2008 530 334
11.25%, 2009 260 152
Tele1 Europe, PLC, 13.00%, 2009 500 500
(b) Telecorp, Inc., 11.625%, 2009 250 129
Teligent, Inc., 11.50%, 2007 480 466
(b) Tritel PCS, Inc., 12.75%, 2009 220 112
Triton Communications, L.L.C., 11.00%,
(b) 2008 1,810 1,086
U.S. Xchange, L.L.C., 15.00%, 2008 260 268
USA Mobile Communications Holdings, Inc.,
14.00%, 2004 410 410
Versatel Telecom, 13.25%, with warrants,
2008 350 389
Viatel, Inc.
11.25%, 2008 230 230
(b) 12.50%, 2008 480 293
Winstar Equipment II, 12.50%, 2004 410 414
------------------------------------------------------------------------------
32,842
- --------------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--9.9%
(b) American Lawyer Media, Inc., 12.25%, 2008 70 46
AMF Bowling Worlwide, Inc.
10.875%, 2006 550 457
(b) 12.25%, 2006 288 184
Avondale Mills, Inc., 10.25%, 2006 110 111
</TABLE>
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Budget Group, 9.125%, 2006 $ 1,000 $ 960
Cinemark USA, Inc., 9.625%, 2008 570 573
Circus Circus Enterprises, Inc., 9.25%,
2005 260 265
Coinmach Corp., 11.75%, 2005 1,035 1,138
Cole National Group, Inc.
9.875%, 2006 240 240
8.625%, 2007 50 48
Corporate Express, Inc., 4.50%, 2000 650 585
Del Webb Corp., 9.75%, 2009 610 592
Dyersburg Corp., 9.75%, 2007 1,085 532
Eldorado Resorts, 10.50%, 2006 540 560
Finlay Enterprises, Inc., 9.00%, 2008 160 153
Finlay Fine Jewelry Corp., 8.375%, 2008 40 39
Florida Panthers Holdings, 9.90%, 2009 150 146
Forecast Group, L.P., 11.375%, 2000 150 148
Fortress Group, 13.75%, 2003 640 541
Galey & Lord, Inc., 9.125%, 2008 230 147
Guitar Center Management, 11.00%, 2006 87 91
Harvey's Casino Resorts, 10.625%, 2006 690 721
Hovnanian Enterprises
11.25%, 2002 46 47
9.75%, 2005 130 127
9.125%, 2009 100 97
Imax Corp., 7.875%, 2005 100 96
Imperial Home Decor Group, Inc., 11.00%,
2008 170 138
Iron Age Corp.
9.875%, 2008 160 117
(b) 12.125%, 2009 140 39
J. Crew Group, Inc.
10.375%, 2007 990 983
(b) 13.125%, 2008 910 546
Kindercare Learning Centers, Inc., 9.50%,
2009 610 624
La Petite Academy, Inc., 10.00%, 2008 1,010 990
Mohegan Tribal Gaming Authority, 8.75%,
2009 320 320
Motors and Gears, Inc., 10.75%, 2006 230 232
National Vision Association, Ltd., 12.75%,
2005 2,100 2,184
Nine West Group, Inc., 9.00%, 2007 520 577
Pamida Holdings Corp., 11.75%, 2003 1,970 2,049
Phillips-Van Heusen Corp., 9.50%, 2008 350 350
Pillowtex Corp., 9.00%, 2007 150 144
Players International, Inc., 10.875%, 2005 250 264
Premier Parks, Inc., 12.00%, 2003 260 279
Regal Cinemas, Inc.
9.50%, 2008 410 390
8.625%, 2010 100 92
Six Flags Entertainment Corp., 12.25%,
2005 950 1,062
Specialty Retailers, Inc.
8.50%, 2005 140 95
9.00%, 2007 550 319
(b) Spincycle, Inc., 12.75%, 2005 530 191
Station Casinos, Inc.
10.125%, 2006 1,230 1,267
9.75%, 2007 190 194
Toll Corp., 8.125%, 2009 110 107
</TABLE>
13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
United Artists Theatre Circuit, Inc.,
9.75%, 2008 $ 410 $ 328
Venture Holdings Corp., 11.00%, 2007 80 81
------------------------------------------------------------------------------
22,606
- --------------------------------------------------------------------------------------------------------------------------
CONSUMER
NON-CYCLICALS--4.5%
Abbey Healthcare Group, Inc., 9.50%, 2002 450 450
Advantica Restaurant Group, Inc., 11.25%,
2008 1,194 1,182
AFC Enterprises, Inc., 10.25%, 2007 820 840
Agrilink Foods, Inc., 11.875%, 2008 1,000 1,035
ALARIS Medical Systems, Inc., 11.125%,
(b) 2008 280 162
Ameriking, Inc., 10.75%, 2006 590 608
Carrols Corp., 9.50%, 2008 330 324
Dade International, Inc., 11.125%, 2006 400 416
Doskocil Manufacturing Co., 10.125%, 2007 220 121
Hedstrom Corp., 10.00%, 2007 670 600
Herff Jones, Inc., 11.00%, 2005 290 313
Jafra Cosmetics International, Inc.,
11.75%, 2008 360 310
Krystal, Inc., 10.25%, 2007 1,230 1,288
Magellan Health Services, Inc., 9.00%,
2008 670 563
(b) Mariner Post-Acute Network, Inc.,
10.50%, 2007 2,950 561
Mastellone Hermanos, S.A., 11.75%, 2008 170 128
MEDIQ, Inc., 11.00%, 2008 190 163
Pathmark Stores, Inc., 9.625%, 2003 250 257
Perkins Family Restaurants, L.P., 10.125%,
2007 340 357
(b) Restaurant Co., 11.25%, 2008 350 224
Sealy Matress Co.
9.875%, 2007 160 156
(b) 10.875%, 2007 320 208
(a) Vencor, Inc., 9.875%, 2005 260 37
------------------------------------------------------------------------------
10,303
- --------------------------------------------------------------------------------------------------------------------------
ENERGY--2.1%
Benton Oil & Gas Co., 11.625%, 2003 445 307
Clark Refining and Manufacturing, Inc.,
8.875%, 2007 60 53
Continental Resources, Inc., 10.25%, 2008 400 298
Gulfmark Offshore, Inc., 8.75%, 2008 210 196
Key Energy Group, Inc., 14.00%, 2009 150 151
Mariner Energy, Inc., 10.50%, 2006 440 383
Ocean Energy, Inc., 10.375%, 2005 180 190
Pacalta Resources, Ltd., 10.75%, 2004 1,390 1,626
Pride International, Inc., 10.00%, 2009 170 171
R&B Falcon Finance Corp.
11.00%, 2006 750 754
9.50%, 2008 250 222
RAM Energy, Inc., 11.50%, 2008 150 78
Stone Energy Corp., 8.75%, 2007 390 382
------------------------------------------------------------------------------
4,811
</TABLE>
14
<PAGE> 15
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCIAL--6.3%
Banco Nacional de Desenvolvi, 10.30%, 2008 $ 4,250 $ 3,528
HMH Properties, Inc., 7.875%, 2008 500 462
Intertek Finance, PLC, 10.25%, 2006 680 660
Riverside Loan Trust, 7.437%, 2008 10,000 9,690
------------------------------------------------------------------------------
14,340
- --------------------------------------------------------------------------------------------------------------------------
MEDIA--8.7%
Adelphia Communications Corp., 7.875%, 2009 120 114
Avalon Cable Holdings, Inc.
9.375%, 2008 120 122
(b) 11.875%, 2008 440 295
Bresnan Communications Co., L.P.
8.00%, 2009 100 99
(b) 9.50%, 2009 1,170 766
(b) Capstar Broadcasting Corp., 12.75%, 2009 670 563
Century Communications Corp., 8.375%, 2007 200 200
Chancellor Media Corp.
8.125%, 2007 240 235
9.00%, 2008 130 134
Charter Communication Holdings, L.L.C.
8.25%, 2007 840 819
(b) 9.92%, 2011 1,100 679
(b) Comcast UK Cable Partners, Ltd., 11.20%, 2007 1,080 969
CSC Holdings, Inc.
9.25%, 2005 40 42
8.125%, 2009 340 354
10.50%, 2016 340 394
(b) Diamond Cable Communications, PLC,
13.25%, 2004 525 546
(b) Diva Systems Corp., 12.625%, with warrants, 2008 810 272
EchoStar DBS Corp.
9.25%, 2006 350 353
9.375%, 2009 530 534
Falcon Holding Group, L.P.
8.375%, 2010 910 908
(b) 9.285%, 2010 300 209
Frontiervision Capital Corp.
11.00%, 2006 330 366
(b) 11.875%, 2007 420 364
Interep National Radio Sales, Inc., 10.00%, 2008 270 277
Mediacom, L.L.C., 8.50%, 2008 410 397
Metromedia Fiber Network, Inc., 10.00%, 2008 880 909
NTL, Inc.
11.50%, 2008 940 1,034
(b) 12.375%, 2008 1,230 824
Ono Financial, PLC, 13.00%, 2009 140 139
Outdoor Systems, Inc.
9.375%, 2006 600 652
8.875%, 2007 250 266
(b) PX Escrow, Corp., 9.625%, 2006 465 284
(b) Radio Unica Corp., 11.75%, 2006 360 209
Salem Communications Corp., 9.50%, 2007 260 269
SFX Entertainment, Inc., 9.125%, 2008 840 817
Sinclair Broadcasting Group, Inc., 8.75%, 2007 240 235
</TABLE>
15
<PAGE> 16
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
OR NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Star Choice, 13.00%, with warrants, 2005 $ 275 $ 298
TeleWest Communications, PLC
(b) 11.00%, 2007 515 456
11.25%, 2008 360 408
(b) 9.25%, 2009 60 39
Transwestern Publishing Co., L.L.C.
9.625%, 2007 1,540 1,578
(b) 11.875%, 2008 1,160 835
(b) 21st Century Telecommunications, Inc.,
12.25%, with warrants, 2008 310 144
(b) United International Holdings, Inc.,
10.75%, 2008 800 520
------------------------------------------------------------------------------
19,927
- --------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--1.6%
Cherokee International Corp., 10.50%, 2009 1,140 1,140
(b) IPC Information Systems, 10.875%, 2008 1,610 1,179
PSINet, Inc.
10.00%, 2005 310 310
11.50%, 2008 460 483
Viasystems, Inc., 9.75%, 2007 650 569
------------------------------------------------------------------------------
3,681
- --------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--1.6%
Accuride Corp., 9.25%, 2008 190 186
Airxcel, 11.00%, 2007 540 525
Petro Stopping Centers, 10.50%, 2007 820 873
TFM, S.A. de C.V., 10.25%, 2007 940 837
Trans World Airlines, Inc., 11.375%, 2006 220 111
(b) Transtar Holdings, Inc., 13.375%, 2003 200 198
Travelcenters America, 10.25%, 2007 900 918
------------------------------------------------------------------------------
3,648
------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS--64.1%
(Cost: $152,865) 146,289
------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
COMMON AND PREFERRED
STOCK
(a) Capital Pacific Holdings, warrants 1,185shs. 1
Clark USA, PIK, preferred 1,173 76
Crown American Realty Trust, preferred 6,240 300
Dobson Communications, PIK, preferred 228 205
(a) Eagle-Picher Holdings, Inc., preferred 40 204
(a) MGC Communications, Inc. 2,156 59
Nextel Communications, PIK, preferred 211 211
(a) SF Holdings Group, Inc. 1 3
(a) SF Holdings Group, Inc., PIK, preferred 10 25
Sinclair Capital, preferred 3,600 382
21st Century Telecommunications Group, Inc.,
preferred 70 36
Viatel, Inc., preferred 2,886 129
(a) Waxman Industries, Inc., warrants 12,154 1
------------------------------------------------------------------------------
TOTAL COMMON AND PREFERRED STOCK--.7%
(Cost: $1,874) 1,632
------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET
INSTRUMENTS
(d) Repurchase agreement
State Street Bank and Trust Co.
dated 5/28/99, 4.80%, due 6/1/99 $ 1,143 $ 1,143
------------------------------------------------------------------------------
Other
Yield--4.72% to 5.00%
Due--June 1999 3,100 3,096
------------------------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--1.9%
(Cost: $4,239) 4,239
------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $239,473) $228,076
------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security. In the case of a bond, generally denotes that
the issuer has defaulted on the payment of principal or interest or has
filed for bankruptcy.
(b) Deferred interest obligation; currently zero coupon under terms of the
initial offering.
(c) Variable rate security. Rate shown is the effective rate on May 31, 1999 and
the date shown represents the final maturity of the obligation.
(d) Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities. The collateral is monitored daily by the fund
so that its market value exceeds the carrying value of the repurchase
agreement.
PIK denotes that interest or dividend is paid in kind.
Based on the cost of investments of $239,473,000 for federal income tax purposes
at May 31, 1999, the gross unrealized appreciation was $3,321,000, the gross
unrealized depreciation was $14,718,000 and the net unrealized depreciation on
investments was $11,397,000.
See accompanying Notes to Financial Statements.
17
<PAGE> 18
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1999 (unaudited)
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------
Investments, at value
(Cost: $239,473) $228,076
- ------------------------------------------------------------------------
Cash 13
- ------------------------------------------------------------------------
Receivable for:
Investments sold 181
- ------------------------------------------------------------------------
Interest 4,647
- ------------------------------------------------------------------------
TOTAL ASSETS 232,917
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ------------------------------------------------------------------------
Notes payable 30,000
- ------------------------------------------------------------------------
Payable for:
Investments purchased 276
- ------------------------------------------------------------------------
Management fee 154
- ------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 6
- ------------------------------------------------------------------------
Trustees' fees 130
- ------------------------------------------------------------------------
Total liabilities 30,566
- ------------------------------------------------------------------------
NET ASSETS $202,351
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- ------------------------------------------------------------------------
Paid-in capital $220,433
- ------------------------------------------------------------------------
Accumulated net realized loss on sales of investments and
foreign currency transactions (8,678)
- ------------------------------------------------------------------------
Net unrealized depreciation on:
Investments (11,397)
- ------------------------------------------------------------------------
Foreign currency related transactions (6)
- ------------------------------------------------------------------------
Undistributed net investment income 1,999
- ------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $202,351
- ------------------------------------------------------------------------
NET ASSET VALUE PER SHARE, $.01 PAR VALUE
($202,351 / 20,090 shares outstanding) $10.07
- ------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
18
<PAGE> 19
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Six months ended May 31, 1999 (unaudited)
(IN THOUSANDS)
<TABLE>
<S> <C>
- -----------------------------------------------------------------------
NET INVESTMENT INCOME
- -----------------------------------------------------------------------
Interest $10,803
- -----------------------------------------------------------------------
Dividends 66
- -----------------------------------------------------------------------
Total investment income 10,869
- -----------------------------------------------------------------------
Expenses:
Management fee 885
- -----------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 62
- -----------------------------------------------------------------------
Interest expense 213
- -----------------------------------------------------------------------
Professional fees 52
- -----------------------------------------------------------------------
Reports to shareholders 107
- -----------------------------------------------------------------------
Trustees' fees and other 107
- -----------------------------------------------------------------------
Total expenses 1,426
- -----------------------------------------------------------------------
NET INVESTMENT INCOME 9,443
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
- -----------------------------------------------------------------------
Net realized loss on:
Investments (302)
- -----------------------------------------------------------------------
Foreign currency transactions (3)
- -----------------------------------------------------------------------
(305)
- -----------------------------------------------------------------------
Change in net unrealized depreciation on:
- -----------------------------------------------------------------------
Investments (8,083)
- -----------------------------------------------------------------------
Foreign currency transactions (6)
- -----------------------------------------------------------------------
(8,089)
- -----------------------------------------------------------------------
Net loss on investments (8,394)
- -----------------------------------------------------------------------
Net increase in net assets resulting from operations $ 1,049
- -----------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
Six months ended May 31, 1999 (unaudited) and for the year ended November
30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
- -------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income $ 9,443 17,759
- -------------------------------------------------------------------------------------------
Net realized loss (305) (1,501)
- -------------------------------------------------------------------------------------------
Change in net unrealized depreciation (8,089) (8,004)
- -------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,049 8,254
- -------------------------------------------------------------------------------------------
Distribution from net investment income (8,187) (16,273)
- -------------------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS (7,138) (8,019)
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------
Beginning of period 209,489 217,508
- -------------------------------------------------------------------------------------------
END OF PERIOD $202,351 209,489
- -------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 SIGNIFICANT
ACCOUNTING POLICIES DESCRIPTION OF FUND. Kemper Multi-Market Income
Trust, a Massachusetts business trust, is
registered under the Investment Company Act of 1940
as a diversified, closed-end management investment
company.
SECURITY VALUATION. Investments are stated at
value. Portfolio debt securities are valued by
pricing agents approved by the officers of the
fund, which quotations reflect broker/dealer
supplied valuations and electronic data processing
techniques. If the pricing agents are unable to
provide such quotations, the most recent bid
quotation supplied by a bona fide market maker
shall be used. Forward foreign currency contracts
are valued at the prevailing forward exchange rate
of the underlying currencies on that day. Money
market instruments purchased with an original
maturity of sixty days or less are valued at
amortized cost. All other securities are valued at
their fair market value as determined in good faith
by the Valuation Committee of the Board of
Trustees.
FOREIGN CURRENCY TRANSLATION. The books and records
of the fund are maintained in U.S. dollars.
Investment securities and other assets and
liabilities denominated in a foreign currency are
translated into U.S. dollars at the prevailing
rates of exchange. Purchases and sales of
investment securities, income and expenses are
translated into U.S. dollars at the prevailing
exchange rates on the respective dates of the
transactions.
Net realized and unrealized gains and losses on
foreign currency transactions represent net gains
and losses from sales and maturities of forward
foreign currency exchange contracts, disposition of
foreign currencies, and the difference between the
amount of net investment income accrued and the
U.S. dollar amount actually received. That portion
of both realized and unrealized gains and losses on
investments that results from fluctuations in
foreign currency exchange grates is not separately
disclosed.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date. Dividend income is recorded on
the ex-dividend date, and interest income is
recorded on the accrual basis. Interest income
includes discount amortization on fixed income
securities. Realized gains and losses from
investment transactions are reported on an
identified cost basis.
FEDERAL INCOME TAXES. The fund's policy is to
comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to
regulated investment companies, and to distribute
all of its taxable income to its shareholders.
Accordingly, the fund paid no federal income taxes
and no federal income tax provision was required.
At November 30, 1998, the fund had a tax basis net
loss carryforward of approximately $7,987,000,
which may be applied against any realized net
taxable gains of each succeeding year until fully
utilized or it will expire during the period 2002
through 2006.
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.
20
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The fund has a management
agreement with Scudder Kemper Investments, Inc.
(Scudder Kemper) and pays a monthly investment
management fee of 1/12 of the annual rate of .85%
of average weekly net assets. The fund incurred a
management fee of $885,000 for the six months ended
May 31, 1999.
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, 1999.
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,
1999, the fund made no payments to its officers and
incurred trustees' fees of $9,000 to independent
trustees.
- --------------------------------------------------------------------------------
3 INVESTMENT
TRANSACTIONS For the six months ended May 31, 1999, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $95,324
Proceeds from sales 64,969
- --------------------------------------------------------------------------------
4 NOTE PAYABLE The Multi-Market Income Trust may borrow money for
leverage purposes up to a maximum of 5% of the
total assets of the fund, including the amount
borrowed. The note payable represents a $30,000,000
loan from Bank of America at May 31, 1999. The note
bears interest at the Eurodollar Rate plus .45%
(5.45% at May 31, 1999) which is payable quarterly.
The loan amount and rate are reset periodically
under a credit facility which is available until
April 1, 2002.
21
<PAGE> 22
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MAY 31, YEAR ENDED NOVEMBER 30,
----------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.42 10.83 10.97 10.90 10.35
- ----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .47 .88 .82 .87 .96
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.41) (.48) (.07) .27 .60
- ----------------------------------------------------------------------------------------------------------
Total from investment operations .06 .40 .75 1.14 1.56
- ----------------------------------------------------------------------------------------------------------
Less distribution from net investment income .41 .81 .89 1.07 1.01
- ----------------------------------------------------------------------------------------------------------
Net asset value per share, end of period $10.07 10.42 10.83 10.97 10.90
- ----------------------------------------------------------------------------------------------------------
Market value per share, end of period $ 9.25 9.25 10.63 10.63 10.75
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED)
- ----------------------------------------------------------------------------------------------------------
Based on net asset value .64% 3.77 7.20 11.12 15.90
- ----------------------------------------------------------------------------------------------------------
Based on market value 4.47% (5.46) 8.72 9.14 26.92
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ----------------------------------------------------------------------------------------------------------
Expenses 1.38% .98 1.01 .99 1.02
- ----------------------------------------------------------------------------------------------------------
Net investment income 9.14% 8.25 7.61 8.06 9.13
- ----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $202,351 209,489 217,508 219,939 217,183
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 67% 118 304 310 271
- ----------------------------------------------------------------------------------------------------------
</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, 1999 is unaudited.
22
<PAGE> 23
SHAREHOLDERS' MEETING
SPECIAL SHAREHOLDERS' MEETING
On December 17, 1998, a special shareholders' meeting was held. Kemper
Multi-Market Income Trust shareholders were asked to vote on a new investment
management agreement with Scudder Kemper Investments, Inc. This item was
approved. Below are the results:
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
17,008,777 456,928 347,025
</TABLE>
23
<PAGE> 24
TRUSTEES & OFFICERS
TRUSTEES OFFICERS
JAMES E. AKINS
Trustee MARK S. CASADY KATHRYN L. QUIRK
President Vice President
JAMES R. EDGAR
Trustee PHILIP J. COLLORA LINDA J. WONDRACK
Vice President and Vice President
ARTHUR R. GOTTSCHALK Secretary
Trustee MAUREEN E. KANE
JOHN R. HEBBLE Assistant Secretary
FREDERICK T. KELSEY Treasurer
Trustee CAROLINE PEARSON
J. PATRICK BEIMFORD, JR. Assistant Secretary
THOMAS W. LITTAUER Vice President
Trustee and ELIZABETH C. WERTH
Vice President ANN M. MCCREARY Assistant Secretary
Vice President
FRED B. RENWICK BRENDA LYONS
Trustee ROBERT C. PECK, JR. Assistant Treasurer
Vice President
JOHN G. WEITHERS
Trustee
-------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
-------------------------------------------------------------------------------
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 419066
Kansas City, MO 64141-6066
-------------------------------------------------------------------------------
CUSTODIAN STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, MA 02110
-------------------------------------------------------------------------------
TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
801 Pennsylvania Avenue
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.
KMMIT - 3(7/23/99) 1080060
