<PAGE> 1
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED NOVEMBER 30, 1999
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
KEMPER MULTI-MARKET
INCOME TRUST
"... Our decision to move from Treasuries and
mortgages into high-yield bonds and emerging-market
securities was definitely the right one. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
MANAGEMENT TEAM
6
PERFORMANCE UPDATE
8
PORTFOLIO STATISTICS
9
PORTFOLIO OF INVESTMENTS
20
FINANCIAL STATEMENTS
24
FINANCIAL HIGHLIGHTS
25
NOTES TO FINANCIAL STATEMENTS
29
REPORT OF INDEPENDENT AUDITORS
30
SHAREHOLDERS' MEETING
31
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN
AT A GLANCE
KEMPER MULTI-MARKET INCOME TRUST
TOTAL RETURNS
FOR THE YEAR ENDED NOVEMBER 30, 1999
<TABLE>
<S> <C>
.......................................................
BASED ON NET ASSET VALUE 2.48%
.......................................................
BASED ON MARKET PRICE -1.27%
.......................................................
</TABLE>
KEMPER MULTI-MARKET INCOME TRUST
CHANGE IN NET ASSET VALUE AND
MARKET PRICE
<TABLE>
<CAPTION>
AS OF AS OF
11/30/99 11/30/98
.........................................................
<S> <C> <C>
NET ASSET VALUE $9.720 $10.42
.........................................................
MARKET PRICE $8.313 $9.25
.........................................................
</TABLE>
DIVIDEND REVIEW
THE FOLLOWING TABLE SHOWS PER-SHARE DIVIDEND INFORMATION FOR THE FUND AS OF
NOVEMBER 30, 1999.
<TABLE>
<CAPTION>
KEMPER
MULTI-MARKET
INCOME TRUST
........................................................
<S> <C>
ONE-YEAR INCOME: $0.8575
........................................................
NOVEMBER DIVIDEND: $0.0775
........................................................
ANNUALIZED DISTRIBUTION RATE:
(BASED ON NET ASSET VALUE) 9.57%
........................................................
ANNUALIZED DISTRIBUTION RATE:
(BASED ON MARKET PRICE) 11.19%
........................................................
</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 VALUE 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. DISTRIBUTION RATES ARE HISTORICAL AND WILL FLUCTUATE.
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.
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) The funds that commercial banks are required to keep
on deposit at the Federal Reserve Bank in their district. In order to meet these
reserve requirements, occasionally 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 that 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 general increase by investors in their allocation to
U.S. Treasuries and other high-quality securities from riskier securities in
time of global economic uncertainty.
HIGH-YIELD BOND A bond issued by a company, often without a long track record of
sales and earnings or with questionable credit strength, that pays 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. TREASURY A debt security issued by the U.S. Treasury, such as a Treasury
bill, Treasury bond or Treasury note. Treasuries 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
SCUDDER KEMPER INVESTMENTS, THE INVESTMENT MANAGER FOR KEMPER FUNDS, IS ONE OF
THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS IN THE
WORLD, MANAGING MORE THAN $290 BILLION IN ASSETS FOR INSTITUTIONAL AND CORPORATE
CLIENTS, RETIREMENT AND PENSION PLANS, INSURANCE COMPANIES, MUTUAL FUND
INVESTORS AND INDIVIDUALS. SCUDDER KEMPER INVESTMENTS OFFERS A FULL RANGE OF
INVESTMENT COUNSEL AND ASSET MANAGEMENT CAPABILITIES BASED ON A COMBINATION OF
PROPRIETARY RESEARCH AND DISCIPLINED, LONG-TERM INVESTMENT STRATEGIES.
ECONOMIC OVERVIEW
DEAR KEMPER FUNDS SHAREHOLDER:
The end of the metaphorical millennium, it turns out, was not a disaster.
Instead, it was an excuse to party. And why not? As our technological revolution
gained critical mass, its vast potential came into better focus. Capital
spending on information technology didn't slow down; it accelerated. Inflation
remained dormant. The budget surplus nearly doubled, with the promise of oceans
of black ink yet to come. Even the government delivered good news: Its
statisticians toyed with the national accounts to reveal a more productive
economy. It's no wonder the prevailing sentiment could be summed up with the
quintessentially American yelp of glee: Yahoo!
Now, with the potential Y2K crisis seemingly averted, the question hanging
over the economy is whether the Federal Reserve Board will boost interest rates
to soak up extra liquidity caused by its pre-Y2K infusion of cash into the
economy. And unfortunately, all parties end. This one will, too. The questions
are when and how.
The "when" should be before the second half of the year. The Fed has already
raised interest rates three times, and is likely to raise them again on Feb. 2.
Fed officials said they left the rate at 5.5 percent in December mainly because
of "market uncertainties associated with the century-date change." But the Fed
expressed concern that "increases in demand" will foster "inflationary
imbalances" that could spark rate increases once the Y2K issue has been handled.
Although some investors have expressed fear that the Fed's sucking cash out of
banks will jolt the financial system (causing some stock indexes, as well as the
bond markets, to drop sharply in early January), the "how" is likely to be a
slow winding down, thanks to persistent low inflation.
Yes, some prices are higher: Filling up the SUV's gas tank definitely costs
more. But the rate of inflation for non-energy goods and services has actually
slowed during the past year. Although most analysts are worried that the
reprieve won't last -- assuming that higher commodity prices, a softer dollar
and the scarcity of skilled workers will show up as higher prices at the
checkout counter -- we'd turn that worry on its head. If inflation hasn't
accelerated after three years of over 4-percent gross domestic product (GDP)
growth and an unprecedented credit explosion, prices aren't likely to increase
if growth slows and lenders get stingier.
More good news stems from the technological investment boom. While executives
have pared capital budgets in traditional areas such as industrial machinery and
buildings, they've boosted outlays on computers and software. Thanks to the
sheer force of technology spending, overall business investment has grown two to
four times as fast as GDP in every year since 1993. And that expansion should
continue, with more than 20 percent growth likely in high-tech through 2000 and
even beyond. And technology hurts inflation. It saves on labor and inventory,
increases capacity, creates new competitors, cuts out middlemen, gives shoppers
comparative price information and enables global auctions.
Our outlook is for inflation to stay centered around 2 percent, and we expect
the Fed to raise the federal funds rate and the discount rate by one quarter of
a point (0.25%) each on Feb. 2. (More extreme possibilities bandied about by
bearish investors -- including a half-point rise or an emergency move before the
Fed's February meeting -- are unlikely.) We project that the result will be a
gentle slowing of growth from 4 percent in 1999 to around 3.5 percent in 2000
and just under 2.5 percent in 2001.
Despite this positive outlook, the rowdiness of Y2K preparations and
celebration should be sufficient to show us that risks exist in today's markets
and remind us that we could be in for a serious hangover.
The prospect of sparkling growth with no inflation has excited equity
investors, but there's a catch: declining corporate pricing power. If companies
don't have the ability to increase prices, profit growth will decline -- and
it's already happening. For the five years ending in June 1999, S&P 500
operating earnings averaged 9 percent, two and a half percentage points per year
slower than analysts had predicted. Profits did recover strongly in the second
half of 1999, but we suspect that they will soon sputter again. And the
economy's newfound productivity won't change the rules and allow companies to
make money even if they can't raise prices. Productivity gains do produce a
windfall, but historically customers and employees have grabbed the lion's
share. Web sites and dot.coms haven't changed this
3
<PAGE> 4
ECONOMIC OVERVIEW
ECONOMIC GUIDEPOSTS
ECONOMIC ACTIVITY IS A KEY INFLUENCE ON INVESTMENT PERFORMANCE AND
SHAREHOLDER DECISION-MAKING. PERIODS OF RECESSION OR BOOM, INFLATION OR
DEFLATION, CREDIT EXPANSION OR CREDIT CRUNCH HAVE A SIGNIFICANT IMPACT ON
MUTUAL FUND PERFORMANCE.
THE FOLLOWING ARE SOME SIGNIFICANT ECONOMIC GUIDEPOSTS AND THEIR
INVESTMENT RATIONALE THAT MAY HELP YOUR INVESTMENT DECISION-MAKING. THE
10-YEAR TREASURY RATE AND THE PRIME RATE ARE PREVAILING INTEREST RATES.
THE OTHER DATA REPORT YEAR-TO-YEAR PERCENTAGE CHANGES.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (12/31/99) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
-------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 6.00 5.50 4.80 5.90
Prime rate (2) 8.50 7.75 8.00 8.50
Inflation rate (3)* 2.60 2.30 1.50 2.00
The U.S. dollar (4) -0.7 -0.9 1.20 9.40
Capital goods orders (5)* 12.60 2.50 -0.6 6.40
Industrial production (5)* 3.30 2.90 3.50 6.90
Employment growth (6) 2.10 2.10 2.30 2.70
</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 11/30/99.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
one iota. As a result, we expect profits to be virtually flat in all of 2000 and
to decline as the economy slows in 2001.
Debt is another drink that could bring on future headaches. America has been
swigging it in prodigious amounts. Companies have borrowed heavily to fund
mergers, share buybacks and new investments. Homeowners have increased their
debt with new home equity loans and bigger mortgages. Financial institutions
have issued record amounts of new paper to fund aggressive growth. There's no
hard and fast rule for determining if the debt America is taking on is too much,
but warning bells should sound when debt grows by orders of magnitude faster
than necessary to fund economic activity. That happened in 1985 and 1986, when
excess credit created a commercial real estate bubble and funded dubious
leveraged buyouts with suspect junk bonds, and it's happening again now. Both
the commercial real estate and the high yield markets took years to recover.
Today, the sheer size of the excesses could make the "morning after" even more
painful.
The end result: Given the continuing thrust of growth from the technological
revolution, an improving world economy and the Fed's experience and skill, 2000
could turn out to be a good year. But it's highly unlikely to be as good a year
as 1999.
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
Scudder Kemper Investments Economics Group
THE INFORMATION CONTAINED IN THIS PIECE HAS BEEN TAKEN FROM SOURCES BELIEVED TO
BE RELIABLE, BUT THE ACCURACY OF THE INFORMATION IS NOT GUARANTEED. THE OPINIONS
AND FORECASTS EXPRESSED ARE THOSE OF THE ECONOMIC ADVISORS OF SCUDDER KEMPER
INVESTMENTS, INC. AS OF JANUARY 6, 2000, AND MAY NOT ACTUALLY COME TO PASS. THIS
INFORMATION IS SUBJECT TO CHANGE. NO PART OF THIS MATERIAL IS INTENDED AS AN
INVESTMENT RECOMMENDATION.
TO OBTAIN A KEMPER FUNDS PROSPECTUS, DOWNLOAD ONE FROM WWW.KEMPER.COM, TALK TO
YOUR FINANCIAL REPRESENTATIVE OR CALL SHAREHOLDER SERVICES AT (800) 621-1048.
THE PROSPECTUS CONTAINS MORE COMPLETE INFORMATION, INCLUDING MANAGEMENT FEES AND
EXPENSES. PLEASE READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
4
<PAGE> 5
MANAGEMENT TEAM
KEMPER MULTI-MARKET INCOME TRUST
PORTFOLIO MANAGEMENT TEAM
[J. PATRICK BEIMFORD, JR. 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.
[ROBERT CESSINE PHOTO]
ROBERT CESSINE IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC. AND
PORTFOLIO MANAGER OF KEMPER MULTI-MARKET INCOME TRUST. HE JOINED THE COMPANY IN
1993 AND IS A CHARTERED FINANCIAL ANALYST.
[DAN DOYLE PHOTO]
DAN DOYLE IS A SENIOR VICE PRESIDENT OF SCUDDER KEMPER INVESTMENTS AND A
PORTFOLIO MANAGER ON KEMPER'S HIGH-YIELD BOND FUNDS. HE HAS BEEN INVOLVED WITH
THE FUNDS IN BOTH RESEARCH AND TRADING SINCE 1986.
[M. ISABEL SALTZMAN PHOTO]
M. ISABEL SALTZMAN, A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC., IS
THE SENIOR PORTFOLIO MANAGER FOR THE FIRM'S EMERGING MARKETS BOND GROUP.
SALTZMAN JOINED THE ORGANIZATION IN 1990.
[RICHARD VANDENBERG PHOTO]
RICHARD VANDENBERG, WITH MORE THAN 25 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE,
IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC. 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
DURING THE 12-MONTH PERIOD ENDED NOVEMBER 30, 1999, INVESTORS WITNESSED A NEARLY
UNABATED RISE IN INTEREST RATES. IN THIS SECTION, PAT BEIMFORD, LEAD PORTFOLIO
MANAGER OF KEMPER MULTI-MARKET INCOME TRUST, DISCUSSES THE FORCES BEHIND THE
RISE IN RATES, THE EFFECT IT HAD ON BOND MARKETS, AND HOW THE FUND WAS
POSITIONED TO RESPOND.
Q PAT, KEMPER MULTI-MARKET INCOME TRUST'S TOTAL RETURN FOR THE FISCAL YEAR
WAS 2.48 PERCENT BASED ON NAV. THAT WAS BETTER THAN THE FUND'S PEER GROUP, WHICH
WAS DOWN 0.74 PERCENT, AS MEASURED BY THE LIPPER CLOSED-END FLEXIBLE GENERAL
BOND FUND AVERAGE. WHAT WAS BEHIND THE DIFFICULT CONDITIONS IN THE BOND MARKET?
A The actions of the Federal Reserve Board provide a clear framework for
what was going on in the bond markets during the year.
As the fiscal year began, the Fed instituted its third interest-rate cut of
the last quarter of 1998. At that time, the global investment community was in
the grip of a "flight to quality" brought on by turbulence in international
markets. Russia had defaulted on part of its debt, Asian economies and currency
markets were battered by uncertainty, and the stability of Latin American
markets was coming into question. In addition, European bonds were not as stable
an option as usual, because much of Europe was converting to the euro at
year-end. For nervous investors, about the only safe bet in town was U.S.
Treasury bonds. As a result, money poured into the U.S. Treasury market, and the
demand pushed yields down to historically low levels. On November 30, 1998 the
yield on 30-year U.S. Treasury bonds was hovering near 5.01 percent.
To help combat the uncertainty and ward off a worsening of the situation, the
Federal Reserve instituted three rate cuts in the last quarter of 1998. The
Fed's plan, in part, was to inject liquidity into the global financial system by
stimulating the U.S. economy -- and thereby other economies -- and make the
yields on foreign bonds look more attractive in comparison with U.S. securities.
Q DID THE FED'S PLAN WORK?
A Yes, it did. Investors gained confidence that foreign economies could
bring their problems under control, and assets shifted from the United States to
other markets. At the same time, some investors feared that the Fed's stimulus,
which was uncharacteristically applied during a time of strong U.S. economic
growth, would ignite inflation. Both these factors acted to push 30-year T-bond
yields up from 5.01 percent at the end of November 1998 to 6.20 percent at the
end of November 1999. That's a substantial move for such a low-risk security.
As the fiscal year came to a close, the Federal Reserve was compelled to put
the brakes on the U.S. economy. In essence, the Fed began rescinding its rate
cuts of last fall by raising rates on August 24, September 30 and again on
November 15.
Q WHAT EFFECT DID RISING RATES HAVE ON THE BOND MARKETS?
A Because bond prices fall when interest rates rise, these last 12 months
have been a challenging period for bond investors. This difficulty is reflected
in the returns of bond indices. Bond returns varied widely by asset class.
Treasuries and high-quality corporate bonds, which offer relatively low income,
couldn't offset falling prices and thereby fared the worst. For example, the
Lehman Long Government Bond index's* total return for the 12-month period ended
November 30, 1999, was -7.52 percent. Mortgages and high-yield bonds fared
somewhat better: the Lipper U.S. Mortgage Fund* Category Average was up 1.39
percent, and the Lehman High Yield Bond index* gained 1.36 percent for the
period. Emerging-market bonds, which offer relatively high income and were best
able to offset falling prices, performed best. In addition, emerging-market debt
at the beginning of the fiscal year was recovering from a terrible beating in
1998 and responded spectacularly to the turnaround in sentiment. The Lipper
Emerging Market Debt* Category Average returned 15.30 percent for the year.
As you can see, bond investors had their work cut out for them this year.
Unless you were willing to go 100 percent into risky emerging-market debt, you
struggled to break even.
* THE LEHMAN BROTHERS LONG-TERM GOVERNMENT BOND INDEX IS A TOTAL RETURN INDEX
GENERALLY CONSIDERED REPRESENTATIVE OF THE MARKET FOR TREASURIES AND
GOVERNMENT AGENCY SECURITIES WITH MATURITIES GREATER THAN TEN YEARS. THE
LIPPER U.S. MORTGAGE CATEGORY IS A TOTAL RETURN INDEX CONSIDERED GENERALLY
REPRESENTATIVE OF THE MARKET FOR MORTGAGE-BACKED SECURITIES. THE LEHMAN HIGH
YIELD INDEX IS A TOTAL RETURN INDEX CONSIDERED GENERALLY REPRESENTATIVE OF THE
MARKET FOR BONDS RATED BELOW INVESTMENT GRADE. THE LIPPER EMERGING MARKET DEBT
CATEGORY INDEX IS AN EQUALLY-WEIGHTED TOTAL RETURN INDEX OF THE LARGEST FUNDS
IN LIPPER ANALYTICAL SERVICES' EMERGING MARKET DEBT FUNDS CATEGORY. INVESTORS
CANNOT INVEST IN THE INDICES.
6
<PAGE> 7
PERFORMANCE UPDATE
Q HOW DID YOU POSITION KEMPER MULTI-MARKET INCOME TRUST GIVEN THESE
DIFFICULT CONDITIONS?
A Despite the uncertainty in the markets as the fiscal year began, we were
reasonably sure of one thing: interest rates weren't going to go much lower. So,
we positioned the fund for a flat-to-rising interest-rate environment.
Generally, that means you look for income. We reduced our exposure to Treasuries
and mortgages, and put those assets to work in higher-income-producing segments
of the market: high-yield bonds and foreign-market bonds, primarily in emerging
markets. That's basically how the fund has been positioned throughout the fiscal
year.
Q HOW DID THAT STRATEGY WORK?
A The results were somewhat mixed. Our decision to move from Treasuries and
mortgages into high-yield bonds and emerging-market securities was definitely
the right one. As you can see from the index figures cited, high-yield and
emerging-market debt substantially outperformed Treasuries. Our high-yield picks
were fairly successful as well. Even though the market was choppy, our
high-yield issues held their value for the year overall.
This allocation was primarily responsible for our outperformance of our Lipper
category for the year.
Our foreign-market position didn't perform as well as we would have liked.
However, this was a small part of the portfolio.
Q WHAT'S YOUR OUTLOOK FOR 2000?
A We believe Kemper Multi-Market Income Trust is very well positioned for
the new year. We are maintaining our present configuration, with assets deployed
in two major areas: high-yield bonds and emerging-market bonds.
The high-yield market has struggled recently because of a malaise created by
rising rates and an uptick in default rates. However, there are reasons for
optimism. The market's default rate in the third quarter was the lowest this
year. We believe that defaults will drop off significantly in the future, since
most subpar deals have already fallen by the wayside and because the deals done
this year are of substantively higher quality. In addition, if economic growth
in the United States continues at a good pace, it should enable high-yield
issuers to comfortably meet their debt payment obligations. If interest rates
continue to be steady or to rise, the income offered by these bonds -- and the
good value they represent after a year of flat returns -- should make them very
attractive to investors.
We expect that emerging markets will continue their recovery. Asia has led the
rebound, and Latin American markets appear ready to follow, so barring a major
negative event, we plan to maintain our emerging-market position.
Longer-term, it's also important to keep in mind that the Federal Reserve has
shown its desire to proactively curb inflation at the earliest opportunity. The
rate hikes may be painful near-term, but longer-term, they should serve to slow
the economy, stabilize rates, and create a good environment for the domestic
bond market.
In short, while 1999 has been a difficult year for bond investors, we believe
it has laid the foundation for sharply better performance in the year ahead.
7
<PAGE> 8
PORTFOLIO STATISTICS
PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
.................................................................................
ON 11/30/99 ON 11/30/98
.................................................................................
<S> <C> <C>
HIGH-YIELD CORPORATE BONDS 58% 58%
.................................................................................
EMERGING MARKETS 27
.................................................................................
(U.S. DOLLAR-DENOMINATED) -- 13
.................................................................................
FOREIGN CURRENCY BONDS 3 5
.................................................................................
MORTGAGES 3 8
.................................................................................
TREASURY NOTES AND BONDS 3 13
.................................................................................
PREFERRED STOCK 1 --
.................................................................................
LONG-TERM MUNICIPAL 4
.................................................................................
CASH AND EQUIVALENTS 1 3
- ---------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
LONG-TERM FIXED INCOME SECURITIES RATINGS
<TABLE>
<CAPTION>
.................................................................................
ON 11/30/99 ON 11/30/98
.................................................................................
<S> <C> <C>
AAA 9% 27%
.................................................................................
BBB 5 --
.................................................................................
BB 20 17
.................................................................................
B 57 50
.................................................................................
OTHER 9 6
- ---------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
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 11/30/99 ON 11/30/98
<S> <C> <C>
AVERAGE MATURITY 9.8 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 November 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT(B) VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--5.6% U.S. Treasury Bond, 13.25%, 05/15/2004 $ 1,000 $ 1,467
Government National Mortgage Association
Pass-thru 6.50% with various maturities
to 05/15/2024 5,358 5,136
Government National Mortgage Association
Pass-thru 8.00% with various maturities
to 11/15/2024 727 741
Federal Home Loan Mortgage Corp. 6.50% with
various maturities to 08/01/2023 5,042 4,849
-------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost: $12,133) 12,193
-------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS--30.7%
- --------------------------------------------------------------------------------------------------------------------------
Argentine Republic, 9.75%, 09/19/2027 1,000 830
Argentine Republic Global, 11.375%,
01/30/2017 6,750 6,311
Deutschland Republic, 6.0%, 01/04/2007 DEM 7,158 7,619
Federative Republic of Brazil, Eligible
Interest, Floating Rate Bond, LIBOR plus
.8125%, 6.9375%, 04/15/2006 2,585 2,128
Federative Republic of Brazil, "New" Money
Bond, Floating Rate Bond, LIBOR plus
.875%, 7.00%, 04/15/2009 3,250 2,462
Federative Republic of Brazil Global Bond,
10.125%, 05/15/2027 2,500 2,012
Government of Jamaica, 10.875%, 06/10/2005 1,000 940
Kingdom of Morocco, Restructuring and
Consolidation Agreement, Tranche A,
Floating Rate Bond, Libor plus .8125%,
6.84375%, 01/01/2009 3,200 2,832
Petroleos Mexicanos S.A., 9.50%, 09/15/2027 2,500 2,356
Republic of Argentina, 11.00%, 12/04/2005 1,200 1,137
Republic of Brazil, 11.625%, 04/15/2004 2,625 2,520
Republic of Bulgaria, Collateralized
Floating Rate Interest Reduction Bond,
"A", Step-up Coupon, 2.75%, 07/28/2012 1,650 1,151
Republic of Bulgaria, Interest Arrears
Bond, LIBOR plus .8125%, 6.50%,
07/28/2011 8,000 6,260
Republic of Columbia, 8.625%, 04/01/2008 4,000 3,300
Republic of Panama, 8.875%, 09/30/2027 3,750 3,122
Republic of Peru, Past Due Interest Bond,
4.50%, 03/07/2017 4,100 2,696
Republic of South Africa, 9.125%,
05/19/2009 750 772
Republic of Turkey, 12.00%, 12/15/2008 1,900 1,981
Republic of Turkey, 12.375%, 06/15/2009 3,800 3,966
Republic of Venezuela, Debt Conversion
Bond, Floating Rate Bond Series DL, LIBOR
plus .875%, 6.313%, 12/18/2007 3,036 2,360
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT(B) VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
United Mexican States, 9.875%, 01/15/2007 $ 1,930 $ 1,964
United Mexican States, 10.375%, 02/17/2009 1,550 1,612
United Mexican States Global Bond, 11.375%,
09/15/2016 4,700 5,166
United Mexican States, 11.50%, 05/15/2026 1,750 2,030
-------------------------------------------------------------------------------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost: $69,759) 67,527
-------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS--62.5%
- --------------------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--9.8%
AFC Enterprises, 10.250%, 05/15/2007 820 812
AMF Bowling Worldwide, Inc., Step-up
Coupon, 0% to 03/15/2001, 12.250% to
03/15/2006 288 127
AMF Bowling, Inc, 10.875%, 03/15/2006 1,150 609
Advantica Restaurant Co., 11.250%,
01/15/2008 1,074 832
Avis Rent A Car, 11.00%, 05/01/2009 970 1,016
Avondale Mills, 10.25%, 05/01/2006 130 110
Boca Resorts Inc., 9.88%, 04/15/2009 820 783
Cinemark USA, Inc., Series D, 9.625%,
08/01/2008 300 282
Circus Circus Enterprises, Inc., 9.25%,
12/01/2005 260 263
Cole National Group Inc., 8.625%,
08/15/2007 50 37
Cole National Group Inc., 9.875%,
12/31/2006 820 631
Corporate Express, Inc., 4.50%, 7/01/2000 690 695
Eldorado Resorts, 10.50%, 08/15/2006 540 551
Finlay Enterprises, Inc., 9.00%, 05/01/2008 160 140
Finlay Fine Jewelry Co., 8.375%, 05/01/2008 40 36
Galey & Lord, Inc., 9.125%, 03/01/2008 300 69
Guitar Center Management, 11.00%,
07/01/2006 2,090 2,048
Harvey's Casino Resorts, 10.625%,
06/01/2006 690 709
Hedstrom Corp., 10.00%, 06/01/2007 560 84
Herff Jones, Inc., 11.00%, 08/15/2005 290 308
Hines Horticulture, Inc., 11.75%,
10/15/2005 1,442 1,467
Hollywood Entertainment Corp., 10.625%,
08/15/2004 250 227
Hollywood Entertainment Corp., Series B,
10.625%, 08/15/2004 250 228
Horseshoe Gaming Holdings, 8.625%,
05/15/2009 110 106
Horseshoe Gaming Holdings, 9.375%,
06/15/2007 210 208
Imax Corp., Senior Note, 7.875%, 12/01/2005 100 94
Imperial Home Decor Group, Inc., 11.00%,
03/15/2008* 150 15
International Game Technology, 8.375%,
05/15/2009 90 87
Iron Age Holdings Corp., Step-up Coupon, 0%
to 05/01/2003, 12.125% to 05/01/2009 140 41
Iron Age Holdings Corp., 9.875%, 05/01/2008 190 142
J. Crew Group, Step-up Coupon, 0% to
10/15/2002, 13.125% to 10/15/2008 970 446
J. Crew Group, 10.375%, 10/15/2007 750 630
Krystal, Inc., 10.25%, 10/01/2007 1,230 1,218
Mohegan Tribal Gaming Authority, 8.125%,
01/01/2006 40 39
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT(B) VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mohegan Tribal Gaming Authority, 8.75%,
01/01/2009 $ 330 $ 325
National Vision Association, Ltd., 12.75%,
10/15/2005 2,380 904
Park Place Entertainment, Inc., 7.875%,
12/15/2005 150 143
Perkins Finance, L.P., 10.125%, 12/15/2007 340 345
Phillips-Van Heusen Corp., 9.50%,
05/01/2008 10 9
Pillowtex Corp., 9.00%, 12/15/2007 250 90
Pillowtex Corp., 10.00%, 11/15/2006 50 18
Players International, 10.875%, 04/15/2005 250 262
Regal Cinemas Inc., 9.50%, 06/01/2008 1,900 1,544
Regal Cinemas, Inc., 8.875%, 12/15/2010 700 539
Restaurant Co., Step-up Coupon, 0% to
05/15/2003, 11.25% to 05/15/2008 370 218
Sealy Mattress Co., Step-up Coupon, 0% to
12/15/2002, 10.875% to 12/15/2007 320 224
Specialty Retailers, Inc., 8.50%, 7/15/2005 140 101
Specialty Retailers, Inc., 9.00%,
07/15/2007 610 348
Station Casinos, Inc., 9.75%, 04/15/2007 190 194
Station Casinos, Inc., 10.125%, 03/15/2006 1,230 1,267
-------------------------------------------------------------------------------
21,621
- --------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--.5%
Dyersburg Corp., 9.75%, 09/01/2007 1,085 434
Jafra Cosmetics International, Inc.,
11.75%, 05/01/2008 510 469
Pathmark Stores, Inc., 9.625%, 05/01/2003 250 237
-------------------------------------------------------------------------------
1,140
- --------------------------------------------------------------------------------------------------------------------------
HEALTH--.9%
ALARIS Medical Systems, Inc., Step-up
Coupon, 0% to 08/01/2003, 11.125% to
08/01/2008 280 116
Abbey Healthcare Group, Inc., 9.50%,
11/01/2002 450 440
Dade International, Inc., 11.125%,
05/01/2006 400 406
MEDIQ Inc., 11.00%, 06/01/2008 190 63
Magellan Health Services, Inc., 9.00%,
02/15/2008 670 529
Mariner Post-Acute Network, Inc., Step-up
Coupon, 0% to 11/07/2002, 10.50% to
11/01/2007 2,950 44
Mariner Post-Acute Network, Inc., 10.50%,
08/01/2006 440 414
Vencor, Inc., 9.875%, 05/01/2005* 260 49
-------------------------------------------------------------------------------
2,061
- --------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS--15.6%
21st Century Telecom Group, Inc., Step-up
Coupon, 0% to 02/15/2003, 12.25% to
02/15/2008 310 143
Allegiance Telecom, Inc., Step-up Coupon,
0% to 02/15/2003, 11.75% to 02/15/2008 635 444
Allegiance Telecom, Inc., 12.875%,
05/15/2008 550 613
American Cellular Corp., 10.50%, 05/15/2008 1,010 1,111
Bresnan Communications Co., Step-up Coupon,
0% to 02/01/2004, 9.25% to 02/01/2009 1,170 799
Bresnan Communications Co., 8.00%,
02/01/2009 100 100
Call-Net Enterprises, Inc., Step-up Coupon,
0% to 08/15/2002, 9.27% to 08/15/2007 300 174
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT(B) VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Call-Net Enterprises, Inc., Step-up Coupon,
0% to 05/15/2004, 10.800% to 05/15/2009 $ 200 $ 98
Call-Net Enterprises, Inc., Step-up Coupon,
0% to 8/15/2003, 8.94% to 08/15/2008 330 168
Call-Net Enterprises, Inc., 9.375%,
05/15/2009 150 127
Century Communications Corp., 8.375%,
12/15/2007 200 186
Comunicacion Cellular, S.A., Step-up
Coupon, 0% to 09/29/2000, 14.125% to
03/01/2005 100 55
Crown Castle International Corp., Step-up
Coupon, 0% to 11/15/2002, 10.625% to
11/15/2007 1,470 1,088
Dobson Communication Corp., 11.75%,
04/15/2007 920 1,021
Dolphin Telecom, PLC, Step-up Coupon, 0% to
05/15/2004, 14.00% to 05/15/2009 500 225
Econophone Inc., Step-up Coupon, 0% to
02/01/2003, 11.00% to 02/15/2008 160 109
Esprit Telecom Group, PLC, 10.875%,
06/15/2008 200 199
Esprit Telecom Group, PLC, 11.50%,
12/15/2007 550 554
Global Telesystems Group, 9.875%,
02/15/2005 360 331
ICG Holdings, Inc., Step-up Coupon, 0% to
09/15/2000, 13.500% to 09/15/2005 1,555 1,337
IPC Communications Inc., Step-up Coupon, 0%
to 11/01/2001, 10.875% to 05/01/2008 1,610 1,191
Impsat Corp., 12.375%, 06/15/2008 440 370
Intermedia Communications of Florida, Inc.,
Step-up Coupon, 0% to 05/15/2001, 12.500%
to 05/15/2006 290 250
Intermedia Communications of Florida, Inc.,
Step-up Coupon, 0% to 07/15/2002, 11.250%
to 07/15/2007 700 513
KMC Telecom Holdings, Inc., Step-up Coupon,
0% to 02/15/2003, 12.500% to 02/15/2008 970 504
KMC Telecom Holdings, Inc., 13.50%,
05/15/2009 810 786
Leval 3 Communications, Inc., Step-up
Coupon, 0% to 12/01/2003, 10.500% to
12/01/2008 2,530 1,537
Level 3 Communications, Inc., 9.125%,
05/01/2008 1,120 1,057
Long Distance Direct Holdings, Inc.,
12.25%, 04/15/2008 300 159
MGC Communications, 13.00%, 10/01/2004 1,420 1,392
McLeodUSA, Inc., Step-up Coupon, 0% to
03/01/2002, 10.500% to 03/01/2007 1,045 841
McLeodUSA Inc., 9.25%, 07/15/2007 360 361
McLeodUSA Inc., 9.50%, 11/01/2008 110 111
MetroNet Communications Corp., Step-up
Coupon, 0% to 06/15/2003, 9.950% to
06/15/2008 490 385
MetroNet Communications Corp., Step-up
Coupon, 0% to 11/01/2002, 10.750% to
11/01/2007 220 182
MetroNet Communications Corp., 10.625%,
11/01/2008 350 399
MetroNet Communications Corp., 12.00%,
08/15/2007 150 173
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT(B) VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Metromedia Fiber Network, Inc., 10.00%,
12/15/2009 $ 260 $ 263
Millicom International Cellular, S.A.,
Step-up Coupon, 0% to 06/01/2001, 13.50%
to 06/01/2006 870 692
Netia Holdings, Step-up Coupon, 0% to
11/01/2001, 11.25% to 11/01/2007 880 550
Netia Holdings, 10.25%, 11/01/2007 830 706
Nextel Communications Inc., Step-up Coupon,
0% to 02/15/2003, 9.75% to 02/15/2008 440 311
Nextel Communications, Inc., Step-up
Coupon, 0% to 09/15/2002, 10.65% to
09/15/2007 495 372
Nextel Communications, Inc., Step-up
Coupon, 0% to 10/31/2002, 9.75% to
10/31/2007 295 212
Nextel Communications, Inc., Step-up
Coupon, 0% to 2/15/99, 9.75% to
08/15/2004 810 838
Nextlink Communications, Inc., Step-up
Coupon, 0% to 04/15/2003, 9.45% to
04/15/2008 240 150
Nextlink Communications, Inc., Step-up
Coupon, 0% to 06/01/2004, 12.25% to
06/01/2009 500 301
Nextlink Communications, Inc., 10.75%,
11/15/2008 470 479
Nextlink Communications, Inc., 12.50%,
04/15/2006 640 680
PTC International Finance, Step-up Coupon,
0% to 07/01/2002, 10.750% to 07/01/2007 2,010 1,327
PTC International Finance, 11.250%,
12/01/2009 100 99
Pinnacle Holdings, Inc., Step-up Coupon, 0%
to 03/15/2003, 10.00% to 03/15/2008 460 285
Price Communications Wireless, 9.125%,
12/15/2006 440 449
Primus Telecommunications Group, 11.25%,
01/15/2009 120 113
Primus Telecommunications Group, 11.75%,
08/01/2004 420 414
Primus Telecommunications Group, 12.75%,
10/15/2009 950 950
RCN Corp., Step-up Coupon, 0% to
07/01/2003, 11.00% to 07/01/2008 220 142
RCN Corp., 10.00%, 10/15/2007 70 70
Rogers Cantel, 9.75%, 06/01/2016 100 113
SBA Communications Corp., Step-up Coupon,
0% to 03/01/2003, 12.00% to 03/01/2008 980 564
Telecorp PCS, Inc., Step-up Coupon, 0% to
04/01/2004, 11.625% to 04/15/2009 300 194
Teligent, Inc., 11.50%, 12/01/2007 560 538
TriTel Pcs, Inc., Step-up Coupon, 0% to
05/15/2004, 12.75% to 05/15/2009 440 283
Triton Communications, L.L.C., Step-up
Coupon, 0% to 05/01/2003, 11.00% to
05/01/2008 1,810 1,290
U.S. Xchange, L.L.C., 15.00%, 07/01/2008 260 242
USA Mobile Communications Holdings, Inc.,
14.00%, 11/01/2004 370 329
United Pan-Europe Communications, 10.875%,
11/01/2007 200 208
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT(B) VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
United Pan-Europe Communications, 13.375%,
11/01/2009 $ 340 $ 192
Versatel Telecom, 11.875%, 07/15/2009 100 100
Versatel Telecom, 13.25%, 05/15/2008 230 242
Versatel Telecom, 13.25%, 05/15/2008 120 126
Viatel, Inc., Step-up Coupon, 0% to
04/15/2003, 12.50% to 04/15/2008 480 299
Viatel, Inc., 11.25%, 04/15/2008 100 99
Voicestream Wireless Corp., 10.375%,
11/15/2009 540 559
Winstar Equipment II, 12.50%, 03/15/2004 410 426
-------------------------------------------------------------------------------
34,300
- --------------------------------------------------------------------------------------------------------------------------
FINANCIAL--3.9%
Banco Nacional de Desenvolvimiento
Economico e Social, 13.64%, 06/16/2008 4,250 3,772
HMH Properties, 7.875%, 08/01/2008 500 450
Intertek Finance, PLC, 10.25%, 11/01/2006 1,280 1,213
Kappa Beheer BV, 10.625%, 07/15/2009 30 31
Kappa Beheer BV, 10.625%, 07/15/2009 EUR 2,500 2,628
Spectrasite Holdings, Inc., Step-up Coupon,
0% to 07/15/2003, 12.00% to 07/15/2008 530 307
Spectrasite Holdings, Inc., Step-up Coupon,
0% to 4/15/2004, 11.25% to 04/15/2009 290 151
Spectrasite Holdings, Inc., Step-up Coupon,
0% to 7/15/2003, 12.00% to 07/15/2008 50 29
-------------------------------------------------------------------------------
8,581
- --------------------------------------------------------------------------------------------------------------------------
MEDIA--8.0%
AMFM, Inc., Step-up Coupon, 0% to
02/01/2002, 12.75% to 02/01/2009 670 590
AMFM, Inc., 9.00%, 10/01/2008 130 136
Adelphia Communications Corp., 7.875%,
05/01/2009 60 55
Adelphia Communications Corp., 9.375%,
11/15/2009 450 449
American Lawyer Media, Inc., Step-up
Coupon, 0% to 12/15/2002, 12.25% to
12/15/2008 350 224
Avalon Cable Holdings LLC, Step-up Coupon,
0% to 12/01/2003, 11.875% to 12/01/2008 440 288
Avalon Cable of Michigan, 9.375%,
12/01/2008 120 121
CSC Holdings, Inc., 8.125%, 08/15/2009 340 342
CSC Holdings, Inc., 9.25%, 11/01/2005 40 41
CSC Holdings, Inc., 10.50%, 05/15/2016 340 369
Chancellor Media Corp., 8.125%, 12/15/2007 240 241
Charter Communication Holdings LLC, Step-up
Coupon, 0% to 04/01/2004, 9.92% to
04/01/2011 560 337
Charter Communication Holdings LLC, 8.25%,
04/01/2007 1,120 1,057
Comcast UK Cable Partners, Ltd., Step-up
Coupon, 0% to 11/15/2000, 11.20% to
11/15/2007 1,080 999
Diamond Cable Communications, PLC, 13.25%,
09/30/2004 525 563
Diva Systems Corp., Step-up Coupon, 0% to
03/01/2003, 12.625% to 03/01/2008 440 117
Echostar DBS Corp., 9.25%, 02/01/2006 350 350
Echostar DBS Corp., 9.375%, 02/01/2009 530 530
Falcon Holding Group, Step-up Coupon, 0% to
04/15/2003, 9.285% to 04/15/2010 300 221
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE> 15
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT(B) VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Falcon Holding Group LP, 8.375%, 04/15/2010 $ 620 $ 625
Frontiervision, 11.00%, 10/15/2006 330 353
Frontiervision Holdings, LP, Step-up
Coupon, 0% to 09/15/2001, 11.875% to
09/15/2007 420 364
Interep National Radio Sales, Inc., 10.00%,
07/01/2008 340 332
Metromedia Fiber Network, Inc., 10.00%,
11/15/2008 880 889
NTL Communications Corp., Step-up Coupon,
0% to 10/01/2003, 12.375% to 10/01/2008 1,230 843
NTL, Inc., Step-up Coupon, 0% to
02/01/2001, 10.50% to 02/01/2006 120 108
NTL, Inc., 11.500%, 10/01/2008 820 886
Outdoor Systems, Inc., 8.875%, 06/15/2007 250 258
Outdoor Systems, Inc., 9.375%, 10/15/2006 600 627
Radio Unica Corp., Step-up Coupon, 0% to
08/01/2002, 11.750% to 08/01/2006 360 235
Renaissance Media Group, Step-up Coupon, 0%
to 04/15/2003, 10.000% to 04/15/2008 320 221
SFX Entertainment, Inc., 9.125%, 02/01/2008 440 415
SFX Entertainment, Inc., 9.125%, 12/01/2008 400 377
Sinclair Broadcasting Group, Inc., 8.75%,
12/15/2007 220 204
Star Choice Communications, Inc., 13.00%,
12/15/2005 275 274
TeleWest Communications, PLC, Step-up
Coupon, 0% to 04/15/2004, 9.250% to
04/15/2009 60 38
TeleWest Communications, PLC, Step-up
Coupon, 0% to 10/01/2000, 11.00% to
10/01/2007 515 475
TeleWest Communications, PLC, 11.25%,
11/01/2008 360 392
Transwestern Publishing, Step-up Coupon, 0%
to 11/15/2002, 11.875% to 11/15/2008 1,160 829
Transwestern Publishing, 9.625%, 11/15/2007 1,540 1,494
United International Holdings, Step-up
Coupon, 0% to 02/15/2003, 10.750% to
02/15/2008 460 288
-------------------------------------------------------------------------------
17,557
- --------------------------------------------------------------------------------------------------------------------------
SERVICE INDUSTRIES--2.4%
Allied Waste Industries, 7.625%, 01/01/2006 100 91
Buhrmann US, Inc., 12.250%, 11/01/2009 420 428
Coinmach Corp., 11.75%, 11/15/2005 1,115 1,148
ImPac Group, Inc., 10.125%, 03/15/2008 600 546
Integrated Electrical Services, Inc.,
9.375%, 02/01/2009 610 598
Kindercare Learning Centers Inc., 9.50%,
02/15/2009 1,100 1,053
La Petite Academy, Inc., 10.00%, 05/15/2008 970 718
Spincycle, Inc., Step-up Coupon, 0% to
05/01/2001, 12.75% to 05/01/2005 530 80
Verio, Inc., 11.25%, 12/01/2008 180 187
Verior, Inc., 10.625%, 11/15/2009 390 396
-------------------------------------------------------------------------------
5,245
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE> 16
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT(B) VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DURABLES--1.5%
Accuride Corp., 9.25%, 02/01/2008 $ 190 $ 172
Airxcel, 11.00%, 11/15/2007 960 941
DeCrane Aircraft Holdings, Inc., 12.00%,
09/30/2008 310 285
Fairchild Corp., 10.75%, 04/15/2009 280 238
Transdigm, Inc., 10.375%, 12/01/2008 1,210 1,086
United Rentals, Inc., 9.25%, 01/15/2009 500 469
-------------------------------------------------------------------------------
3,191
- --------------------------------------------------------------------------------------------------------------------------
MANUFACTURING--7.6%
Agriculture, Mining and Chemicals, Inc.,
10.75%, 09/30/2003 660 409
Atlantis Group, Inc., 11.00%, 02/15/2003 350 350
BPC Holdings Corp., 12.50%, 06/15/2006 230 212
Berry Plastics Corp., 12.25%, 04/15/2004 150 152
Consolidated Container Capital, Inc.,
10.125%, 07/15/2009 120 122
Consumers International, 10.25%, 04/01/2005 760 600
Day International Group, Inc., 11.125%,
06/01/2005 750 765
Eagle-Picher Holdings, Inc., 9.375%,
03/01/2008 1,070 928
Foamex, L.P., 13.50%, 08/15/2005 250 237
Fonda Group, 9.50%, 03/01/2007 1,380 1,152
GS Technologies, 12.00%, 09/01/2004 250 145
GS Technologies, 12.25%, 10/01/2005 1,610 885
Gaylord Container Corp., 9.75%, 06/15/2007 500 476
Gaylord Container Corp., 9.875%, 02/15/2008 1,795 1,566
Graham Packaging Co., Step-up Coupon, 0% to
01/15/2003, 10.75% to 01/15/2009 160 107
Graham Packaging Co., 8.75%, 01/15/2008 180 171
Grove Holdings LLC, Step-up Coupon, 0% to
05/01/2003, 11.625% to 05/01/2009 90 9
Grove Investors, PIK, 14.50%, 05/01/2010 186 15
Huntsman Package, 11.75%, 12/01/2004 655 665
Knoll Inc., 10.875%, 03/15/2006 504 504
Millar Western Forest Products, Ltd.,
9.875%, 05/15/2008 295 294
Motors and Gears, Inc., 10.75%, 11/15/2006 230 222
Neenah Corp., 11.125%, 05/01/2007 220 204
Plainwell, Inc., 11.00%, 03/01/2008 335 194
Printpack, Inc., 9.875%, 08/15/2004 40 40
Printpack, Inc., 10.625%, 08/15/2006 290 270
Riverwood International Corp., 10.25%,
04/01/2006 150 153
Riverwood International Corp., 10.625%,
08/01/2007 140 146
Riverwood International Corp., 10.875%,
04/01/2008 2,325 2,325
SF Holdings Group, Inc., Step-up Coupon, 0%
to 03/15/2003, 12.75% to 03/15/2008 720 320
Spinnaker Industries, 10.75%, 10/15/2006 1,960 1,504
Stone Container Corp., 11.50%, 08/15/2006 195 208
Stone Container Corp., 12.25%, 04/01/2002 40 40
Terex Corp., 8.875%, 04/01/2008 350 331
Terex Corp., Series D, 8.875%, 04/01/2008 200 189
Terra Industries, Inc., 10.50%, 06/15/2005 130 81
Texas Petrochemicals, 11.125%, 07/01/2006 470 409
U.S. Can Corp., 10.125%, 10/15/2006 260 265
Venture Holdings, 11.00%, 06/01/2007 40 38
-------------------------------------------------------------------------------
16,703
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE> 17
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT(B) VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TECHNOLOGY--.8%
Cherokee International Corp., 10.50%,
05/01/2009 $ 160 $ 141
PSINet, Inc., 10.00%, 02/15/2005 120 119
PSINet, Inc., 11.00%, 08/01/2009 590 602
PSINet, Inc., 11.50%, 11/01/2008 370 385
Panavision Inc., Step-up Coupon, 0% to
02/01/2002, 9.625% to 02/01/2006 465 228
Viasystems, Inc., 9.75%, 06/01/2007 650 364
-------------------------------------------------------------------------------
1,839
- --------------------------------------------------------------------------------------------------------------------------
ENERGY--1.7%
Benton Oil & Gas Co., 11.625%, 05/01/2003 315 224
Continental Resources, Inc., 10.25%,
08/01/2008 890 743
Gulfmark Offshore, Inc., 8.75%, 06/01/2008 210 191
Key Energy Services, Inc., 14.00%,
01/15/2009 150 163
Ocean Energy, Inc., 9.75%, 10/01/2006 300 327
Ocean Energy, Inc., 10.375%, 10/15/2005 490 529
Pen Holdings, Inc., 9.875%, 06/15/2008 200 189
Pride International, Inc., 10.00%,
06/01/2009 170 173
R&B Falcon Corp., 9.50%, 12/15/2008 180 179
R&B Falcon Corp., 11.00%, 03/15/2006 590 634
RAM Energy, 11.50%, 02/15/2008 150 67
Stone Energy Corp., 8.75%, 09/15/2007 260 257
-------------------------------------------------------------------------------
3,676
- --------------------------------------------------------------------------------------------------------------------------
METALS & MINERALS--1.8%
Euramax International, PLC, 11.25%,
10/01/2006 1,195 1,207
MMI Products, Inc., 11.25%, 04/15/2007 800 824
Metal Management, Inc., 10.00%, 05/15/2008 460 336
Metals USA Inc., 8.625%, 02/15/2008 375 345
Renco Steel Holdings Co., Series B,
10.875%, 02/01/2005 340 282
Republic Tech International, 13.75%,
07/15/2009 730 511
Wells Aluminum Corp., 10.125%, 06/01/2005 490 472
-------------------------------------------------------------------------------
3,977
- --------------------------------------------------------------------------------------------------------------------------
CONSTRUCTION--2.5%
Building Materials Corp., 8.00%, 12/01/2008 500 456
Congoleum Corp., 8.625%, 08/01/2008 1,580 1,386
Del Webb Corp., 9.75%, 01/15/2008 610 561
Dimac Corp., 12.50%, 10/01/2008 1,030 463
Forecast Group, L.P., 11.375%, 12/15/2000 150 149
Fortress Group, 13.75%, 05/15/2003 640 318
Hovnanian Enterprises, Inc., 9.125%,
05/01/2009 100 94
Hovnanian Enterprises, Inc., 9.75%,
06/01/2005 130 124
Kevco, Inc., 10.375%, 12/01/2007 860 232
Nortek Inc., Series A, 8.875%, 08/01/2008 130 124
Nortek, Inc., 9.125%, 09/01/2007 680 663
Nortek, Inc., 9.875%, 03/01/2004 250 247
Standard Pacific Corp., 8.00%, 02/15/2008 100 89
Standard Pacific Corp., 8.50%, 04/01/2009 200 184
Toll Corp., 7.75%, 09/15/2007 80 72
Toll Corp., 8.75%, 11/15/2006 50 49
Toll Corp., 8.00%, 05/01/2009 40 37
US Home Corp., 8.875%, 02/15/2009 320 283
-------------------------------------------------------------------------------
5,531
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE> 18
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT(B) VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TRANSPORTATION--1.3%
Petro Stopping Centers, 10.50%, 02/01/2007 $ 820 $ 759
TFM, S.A. de C.V., 10.25%, 06/15/2007 940 860
Trans World Airlines, Inc., 11.375%,
03/01/2006 220 95
Transtar Holdings, Inc., Step-up Coupon, 0%
to 12/15/99, 13.375% to 12/15/2003 200 202
Travelcenters America, 10.25%, 04/01/2007 900 882
-------------------------------------------------------------------------------
2,798
- --------------------------------------------------------------------------------------------------------------------------
OTHER--4.2%
Riverside Loan Trust II, 7.4375%,
07/16/2008 10,000 9,149
-------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost: $153,481) 137,369
-------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--.6% SHARES
- --------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS--.2%
Dobson Communications, PIK, preferred 242 250
21st Century Telecom Group, Inc., preferred 74 37
Nextel Communications, Inc., PIK, preferred 222 222
-------------------------------------------------------------------------------
509
- --------------------------------------------------------------------------------------------------------------------------
FINANCIAL--.1%
Crown American Realty Trust, preferred 6,240 243
-------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
MEDIA--.2%
Sinclair Capital, preferred 3,600 358
-------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
MANUFACTURING--0%
SF Holdings Group, Inc., PIK, preferred* 1 6
SF Holdings Group, Inc., PIK, preferred* 10 40
-------------------------------------------------------------------------------
46
- --------------------------------------------------------------------------------------------------------------------------
MACHINERY/
COMPONENTS--.1%
Eagle-Picher Holdings, Inc., preferred* 40 186
-------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
ENERGY--0%
Clark USA, PIK, preferred 1,240 43
-------------------------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost: $1,641) 1,385
-------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
OTHER--.2%
--------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS--.2%
21st Century Telecom Group, Inc., Warrants* 60 6
Econophone, Inc., Warrants* 370 56
Intelcom Group, Inc., Warrants* 1,056 19
Intermedia Communications of Florida, Inc.,
Warrants* 300 30
KMC Telecom Holdings, Inc., Warrants* 650 3
Long Distance Direct Holdings, Inc.,
Warrants* 300 1
MGC Communications* 2,156 85
MetroNet Communications Corp., Warrants* 150 13
Primus Telecommunications Group, Warrants* 250 8
Tele1 Europe BV, Warrants* 500 43
Versatel Telecom, Warrants* 350 102
-------------------------------------------------------------------------------
366
- --------------------------------------------------------------------------------------------------------------------------
FINANCIAL--0%
Ono Finance PLC, Warrants, 05/31/2009* 140 8
-------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE> 19
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MEDIA--0%
Diva Systems Corp., Warrants* 1,320 11
Star Choice Communications, Inc., Warrants* 6,369 16
-------------------------------------------------------------------------------
27
- ----------------------------------------------------------------------------------------------------------------------------
SERVICE INDUSTRIES--0%
Key Energy Services, Inc., Warrants* 150 4
-------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
HOMEBUILDING--0%
Capital Pacific Holdings, Warrants* 1,185 1
-------------------------------------------------------------------------------
TOTAL OTHER
(Cost: $106) 406
-------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--.4% PRINCIPAL AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
Repurchase agreement with State Street Bank
and Trust Company dated 11/30/99,
5.63%, to be repurchased at $811 on
12/01/1999**
(Cost: $811) $ 811 811
-------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100.0%
(Cost: $237,931)(a) $219,691
-------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
* Non-income producing security. In the case of a bond, generally denotes the
issuer has defaulted on the payment of principal or interest or has filed
for bankruptcy.
** Repurchase agreement is fully collateralized by U.S. Treasury or Government
agency securities.
(a) The cost for federal income tax purposes was $238,118. At November 30,
1999, the net unrealized depreciation for all securities based on tax cost
was $18,427. This consists of aggregate gross unrealized appreciation for
all securities in which there was an excess of value over tax cost of
$3,854 and aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over value of $22,281.
(b) Principal amount stated in U.S. dollars unless otherwise noted.
CURRENCY ABBREVIATION
EUR Euro
DEM Deutsche Mark
The accompanying notes are an integral part of the financial statements.
19
<PAGE> 20
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
as of November 30, 1999
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------
Investments in securities, at value (Cost: $237,931) $219,691
- ------------------------------------------------------------------------
Unrealized appreciation on forward currency exchange
contracts 110
- ------------------------------------------------------------------------
Receivable for investments sold 573
- ------------------------------------------------------------------------
Dividends receivable 10
- ------------------------------------------------------------------------
Interest receivable 5,228
- ------------------------------------------------------------------------
TOTAL ASSETS 225,612
- ------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------
Notes payable 30,000
- ------------------------------------------------------------------------
Interest payable 87
- ------------------------------------------------------------------------
Accrued management fee 149
- ------------------------------------------------------------------------
Other accrued expenses and payables 51
- ------------------------------------------------------------------------
Total liabilities 30,287
- ------------------------------------------------------------------------
NET ASSETS, AT VALUE $195,325
- ------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income (loss) $ 4,688
- ------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on:
Investment securities (18,240)
- ------------------------------------------------------------------------
Foreign currency related transactions 84
- ------------------------------------------------------------------------
Accumulated net realized gain (loss) (9,875)
- ------------------------------------------------------------------------
Paid-in capital 218,668
- ------------------------------------------------------------------------
NET ASSETS, AT VALUE $195,325
- ------------------------------------------------------------------------
NET ASSET VALUE
- ------------------------------------------------------------------------
Net asset value per share
($195,325 / 20,090 shares of beneficial interest, $.01 par
value, unlimited number of shares authorized) $9.72
- ------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE> 21
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Year ended November 30, 1999
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
INVESTMENT INCOME
- ------------------------------------------------------------------------
Dividends $ 146
- ------------------------------------------------------------------------
Interest 23,686
- ------------------------------------------------------------------------
TOTAL INCOME 23,832
- ------------------------------------------------------------------------
Expenses:
Management fee 1,725
- ------------------------------------------------------------------------
Services to shareholders 54
- ------------------------------------------------------------------------
Custodian fees 41
- ------------------------------------------------------------------------
Auditing 35
- ------------------------------------------------------------------------
Legal 85
- ------------------------------------------------------------------------
Trustees' fees and expenses 15
- ------------------------------------------------------------------------
Reports to shareholders 140
- ------------------------------------------------------------------------
Interest expense 1,124
- ------------------------------------------------------------------------
Other 119
- ------------------------------------------------------------------------
Total expenses, before expense reductions 3,338
- ------------------------------------------------------------------------
Expense reductions (9)
- ------------------------------------------------------------------------
Total expenses, after expense reductions 3,329
- ------------------------------------------------------------------------
NET INVESTMENT INCOME 20,503
- ------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTION
- ------------------------------------------------------------------------
Net realized gain (loss) from:
Investments (2,546)
- ------------------------------------------------------------------------
Foreign currency related transactions (51)
- ------------------------------------------------------------------------
(2,597)
- ------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
on:
Investments (14,926)
- ------------------------------------------------------------------------
Foreign currency related transactions 84
- ------------------------------------------------------------------------
(14,842)
- ------------------------------------------------------------------------
Net gain (loss) on investment transactions (17,439)
- ------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $ 3,064
- ------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE> 22
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-------------------------
1999 1998
<S> <C> <C>
- -----------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
- -----------------------------------------------------------------------------------------
Operations:
Net investment income $ 20,503 $ 17,759
- -----------------------------------------------------------------------------------------
Net realized gain (loss) from investment transactions (2,597) (1,501)
- -----------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
transactions during the period (14,842) (8,004)
- -----------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS 3,064 8,254
- -----------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (17,228) (16,273)
- -----------------------------------------------------------------------------------------
Fund share transactions:
Net asset value of shares issued to shareholders in
reinvestment of distributions -- --
- -----------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions -- --
- -----------------------------------------------------------------------------------------
Increase (decrease) in net assets (14,164) (8,019)
- -----------------------------------------------------------------------------------------
Net assets at beginning of period 209,489 217,508
- -----------------------------------------------------------------------------------------
NET ASSETS AT END OF PERIOD (including undistributed net
investment income of $4,688 and $743, respectively) $195,325 $209,489
- -----------------------------------------------------------------------------------------
OTHER INFORMATION
- -----------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
- -----------------------------------------------------------------------------------------
Shares outstanding at beginning of period 20,090 20,090
- -----------------------------------------------------------------------------------------
Shares issued to shareholders in reinvestment of
distributions -- --
- -----------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares -- --
- -----------------------------------------------------------------------------------------
SHARES OUTSTANDING AT END OF PERIOD 20,090 20,090
- -----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE> 23
FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS
Year ended November 30, 1999
(IN THOUSANDS)
<TABLE>
<S> <C>
- -------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
- -------------------------------------------------------------------------
Investment income received $ 18,004
- -------------------------------------------------------------------------
Payment of operating expenses (3,324)
- -------------------------------------------------------------------------
Payment of interest expense 87
- -------------------------------------------------------------------------
Proceeds from sales and maturities of investments 110,032
- -------------------------------------------------------------------------
Purchases of investments (148,499)
- -------------------------------------------------------------------------
Net proceeds from sales and maturities of short-term
investments 6,181
- -------------------------------------------------------------------------
CASH USED IN OPERATING ACTIVITIES (17,519)
- -------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
- -------------------------------------------------------------------------
Distributions paid (18,584)
- -------------------------------------------------------------------------
Net increase of loan principal 30,000
- -------------------------------------------------------------------------
Cash provided by financing activities 11,416
- -------------------------------------------------------------------------
Decrease in cash (6,103)
- -------------------------------------------------------------------------
Cash at beginning of period 6,103
- -------------------------------------------------------------------------
CASH AT END OF PERIOD $ 0
- -------------------------------------------------------------------------
RECONCILIATION OF NET DECREASE IN NET ASSETS FROM OPERATIONS TO CASH
USED IN OPERATING ACTIVITIES
- -------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 3,064
- -------------------------------------------------------------------------
Net increase in investments (10,833)
- -------------------------------------------------------------------------
Net increase in unrealized appreciation (depreciation) on
currency contracts (110)
- -------------------------------------------------------------------------
Increase in dividends and interest receivable (1,398)
- -------------------------------------------------------------------------
Decrease in receivable for investments sold 1,196
- -------------------------------------------------------------------------
Increase in interest payable 87
- -------------------------------------------------------------------------
Decrease in payable for investments purchased (9,530)
- -------------------------------------------------------------------------
Increase in accrued expenses and payables 5
- -------------------------------------------------------------------------
CASH USED IN OPERATING ACTIVITIES $ (17,519)
- -------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE> 24
FINANCIAL HIGHLIGHTS
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS AND MARKET PRICE DATA.
<TABLE>
<CAPTION>
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 1.02(a) .88 .82 .87 .96
- ---------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions (.86) (.48) (.07) .27 .60
- ---------------------------------------------------------------------------------------------
Total from investment operations .16 .40 .75 1.14 1.56
- ---------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.86) (.81) (.89) (1.07) (1.01)
- ---------------------------------------------------------------------------------------------
Total distributions (.86) (.81) (.89) (1.07) (1.01)
- ---------------------------------------------------------------------------------------------
Net asset value, net assets $ 9.72 10.42 10.83 10.97 10.90
- ---------------------------------------------------------------------------------------------
Net asset value, market value $ 8.31 9.25 10.63 10.63 10.75
- ---------------------------------------------------------------------------------------------
TOTAL RETURN
- ---------------------------------------------------------------------------------------------
TOTAL RETURN, NET ASSET VALUE (%) 2.48 3.77 7.20 11.12 15.90
- ---------------------------------------------------------------------------------------------
TOTAL RETURN, MARKET VALUE (%) (1.27) (5.46) 8.72 9.14 26.92
- ---------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 195 209 218 220 217
- ---------------------------------------------------------------------------------------------
Ratio of expenses excluding interest expense (%) 1.09 .98 1.01 .99 1.02
- ---------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.65 .98 1.01 .99 1.02
- ---------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.65 .98 1.01 .99 1.02
- ---------------------------------------------------------------------------------------------
Ratio of net investment income (%) 10.16 8.25 7.61 8.06 9.13
- ---------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 51 118 304 310 271
- ---------------------------------------------------------------------------------------------
Total debt outstanding end of year ($ thousands) 30,000 -- -- -- --
- ---------------------------------------------------------------------------------------------
Asset coverage per $1,000 of debt $ 7,510 -- -- -- --
- ---------------------------------------------------------------------------------------------
</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 reinvestments of dividends. These
figures will differ depending upon the level of any discount or premium to net
asset value at which the fund's shares trade during the period.
(a) Based on monthly average shares outstanding during the period.
The accompanying notes are an integral part of the financial statements.
24
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 SIGNIFICANT
ACCOUNTING POLICIES Kemper Multi-Market Income Trust (the "Fund") is
registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as a closed-end,
diversified management investment company organized
as a Massachusetts business trust.
The Fund's financial statements are prepared in
accordance with generally accepted accounting
principles which require the use of management
estimates. The policies described below are
followed consistently by the Fund in the
preparation of its financial statements.
SECURITY VALUATION. Investments are stated at value
determined as of the close of regular trading on
the New York Stock Exchange. Securities which are
traded on U.S. or foreign stock exchanges are
valued at the most recent sale price reported on
the exchange on which the security is traded most
extensively. If no sale occurred, the security is
then valued at the calculated mean between the most
recent bid and asked quotations. If there are no
such bid and asked quotations, the most recent bid
quotation is used. Securities quoted on the Nasdaq
Stock Market ("Nasdaq"), for which there have been
sales, are valued at the most recent sale price
reported. If there are no such sales, the value is
the most recent bid quotation. Securities which are
not quoted on Nasdaq but are traded in another
over-the-counter market are valued at the most
recent sale price, or if no sale occurred, at the
calculated mean between the most recent bid and
asked quotations on such market. If there are no
such bid and asked quotations, the most recent bid
quotation shall be used.
Portfolio debt securities purchased with an
original maturity greater than sixty days are
valued by pricing agents approved by the officers
of the trust, whose quotations reflect
broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents
are unable to provide such quotations, the most
recent bid quotation supplied by a bona fide market
maker shall be used. Money market instruments
purchased with an original maturity of sixty days
or less are valued at amortized cost.
All other securities are valued at their fair value
as determined in good faith by the Valuation
Committee of the Board of Trustees.
FOREIGN CURRENCY TRANSLATIONS. 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
exchange rates at period end. 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 between trade and settlement dates on
securities transactions, the disposition of forward
foreign currency exchange contracts and 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 rates is not separately
disclosed but is included with net realized and
unrealized gains and losses on investment
securities.
25
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS
REPURCHASE AGREEMENTS. The Fund may enter into
repurchase agreements with certain banks and
broker/dealers whereby the Fund, through its
custodian or sub-custodian bank, receives delivery
of the underlying securities, the amount of which
at the time of purchase and each subsequent
business day is required to be maintained at such a
level that the market value is equal to at least
the principal amount of the repurchase price plus
accrued interest.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A
forward foreign currency exchange contract (forward
contract) is a commitment to purchase or sell a
foreign currency at the settlement date at a
negotiated rate. During the period, the Fund
utilized forward contracts as a hedge against
changes in the exchange rates relating to foreign
currency denominated assets.
Forward contracts are valued at the prevailing
forward exchange rate of the underlying currencies
and unrealized gain/loss is recorded daily. Sales
and purchases of forward contracts having the same
settlement date and broker are offset and any gain
(loss) is realized on the date of offset;
otherwise, gain (loss) is realized on settlement
date. Realized and unrealized gains and losses
which represent the difference between the value of
a forward contract to buy and a forward contract to
sell are included in net realized and unrealized
gain (loss) from foreign currency related
transactions.
Certain risks may arise upon entering into forward
contracts from the potential inability of
counterparties to meet the terms of their
contracts. Additionally, when utilizing forward
contracts to hedge, the Fund gives up the
opportunity to profit from favorable exchange rate
movements during the term of the contract.
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, 1999, the Fund had a net tax basis
capital loss carryforward of approximately
$9,486,000 which may be applied against any
realized net taxable capital gains of each
succeeding year until fully utilized or until
November 30, 2002 ($1,987,000), November 30, 2003
($5,253,000), and November 30, 2007 ($2,246,000),
the expiration dates, which ever occurs first. In
addition, from November 1, 1999 through November
30, 1999 the Fund incurred approximately $202,000
of net realized capital losses. As permitted by tax
regulations, the Fund intends to defer these losses
and treat them as arising in the fiscal year ended
November 30, 2000.
DISTRIBUTION OF INCOME AND GAINS. Distributions of
net investment income, if any, are made monthly.
Net realized gains from investment transactions, in
excess of available capital loss carryforwards,
would be taxable to the Fund if not distributed,
and, therefore, will be distributed to shareholders
at least annually.
The timing and characterization of certain income
and capital gains distributions are determined
annually in accordance with federal tax regulations
which may differ from generally accepted accounting
principles. As a result, net investment income
(loss) and net realized gain (loss) on investment
transactions for a reporting period may differ
significantly from distributions during such
period.
26
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS
Accordingly, the Fund may periodically make
reclassifications among certain of its capital
accounts without impacting the net asset value of
the Fund.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date. Interest income is recorded on
the accrual basis. Dividend income is recorded on
the ex-dividend date. Certain dividends from
foreign securities may be recorded subsequent to
the ex-dividend date as soon as the Fund is
informed of such dividends. Realized gains and
losses from investment transactions are recorded on
an identified cost basis.
All discounts are accreted for both tax and
financial reporting purposes.
STATEMENT OF CASH FLOWS. Information of financial
transactions which have been settled through the
receipt and disbursement of cash is presented in
the Statement of Cash Flows. The cash amount shown
in the statement of cash flows is the amount
reported as cash in the Fund's Statement of Assets
and Liabilities and represents the cash position in
its custodian bank at November 30, 1999.
Significant non-cash activity from market discount
accretion has been excluded from the Statement of
Cash Flows.
OTHER CONSIDERATIONS. The Fund invests a
substantial portion of its assets in high yield
bonds. These bonds ordinarily are in the lower
rating categories of recognized rating agencies or
are non rated, and thus involve more risk than
higher rated bonds.
- --------------------------------------------------------------------------------
2 INVESTMENT
TRANSACTIONS For the year ended November 30, 1999, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $138,969
Proceeds from sales 108,888
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The Fund has a management
agreement with Scudder Kemper Investments, Inc.
(Scudder Kemper) and pays a monthly investment
management fee of 1/12 of the annual rate of .85%
of average weekly net assets. The Fund incurred a
management fee of $1,725,000 for the year ended
November 30, 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 $24,000
for the year ended November 30, 1999.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. For the year ended November 30,
1999, the Fund made no payments to its officers and
incurred trustees' fees of $15,000 to independent
trustees.
- --------------------------------------------------------------------------------
4 NOTE PAYABLE The note payable represents a $30,000,000 loan from
Bank of America and State Street Bank and Trust
Company at November 30, 1999. The note bears
interest at the Eurodollar Rate plus .45% (6.04% at
November 30, 1999) which is payable quarterly. The
loan amount and rate are reset periodically under a
credit facility which is available until April 1,
2002. The weighted average outstanding daily
balance of all loans (based on the number of days
the
27
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS
loans were outstanding) during the period ended
November 30, 1999 was $29,452,000 with a weighted
average interest rate of 5.70%.
- --------------------------------------------------------------------------------
5 EXPENSE OFF-SET
ARRANGEMENTS The Fund has entered into arrangements with its
custodian whereby credits realized as a result of
uninvested cash balances were used to reduce a
portion of the fund's expenses. During the period,
the Fund's custodian fees were reduced by $9,000
under these arrangements.
- --------------------------------------------------------------------------------
6 COMMITMENTS As of November 30, 1999, the Fund had entered into
the following forward currency exchange contracts
resulting in net unrealized appreciation of
$109,524.
<TABLE>
<CAPTION>
CONTRACTS IN EXCHANGE SETTLEMENT NET UNREALIZED
TO DELIVER FOR DATE APPRECIATION
------------------------------------------------------------------------------
<S> <C> <C> <C>
EUR 2,500,000 US$ 2,663,625 7/24/2000 $109,524
</TABLE>
28
<PAGE> 29
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, 1999, 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 cash flows for the year then ended, and the financial highlights for
each of the fiscal periods since 1995. 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 auditing standards generally
accepted in the United States. 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, 1999, by correspondence with the custodian. 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, 1999, 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, its cash flows for the year then ended and the
financial highlights for each of the fiscal periods since 1995, in conformity
with accounting principles generally accepted in the United States.
/s/ERNST & YOUNG LLP
Chicago, Illinois
January 21, 2000
29
<PAGE> 30
SHAREHOLDERS' MEETING
ANNUAL SHAREHOLDERS' MEETING
An annual shareholders' meeting was held on July 14, 1999, for Kemper
Multi-Market Income Trust. Shareholders were asked to vote on two separate
issues: election of members to the Board of Trustees, and ratification of Ernst
& Young LLP as independent auditors. The following are the results for each
issue:
1) Election of Trustees
<TABLE>
<CAPTION>
For Withheld
<S> <C> <C>
James E. Akins 17,489,204 381,014
James R. Edgar 17,489,070 372,148
Arthur R. Gottschalk 17,497,116 373,102
Frederick T. Kelsey 17,526,507 343,711
Thomas W. Littauer 17,532,521 337,697
Fred B. Renwick 17,536,375 333,843
John G. Weithers 17,540,535 329,683
</TABLE>
2) Ratification of the selection of Ernst & Young LLP as independent auditors
for the fund. This item was approved.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
17,533,441 221,436 115,340
</TABLE>
30
<PAGE> 31
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 219066
Kansas City, Missouri 64121-6066
1-800-294-4366
31
<PAGE> 32
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.
32
<PAGE> 33
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 their 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.
33
<PAGE> 34
NOTES
34
<PAGE> 35
NOTES
35
<PAGE> 36
TRUSTEES&OFFICERS
<TABLE>
<S> <C> <C>
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 BRENDA LYONS
Vice President ANN M. MCCREARY Assistant Treasurer
Vice President
FRED B. RENWICK
Trustee ROBERT C. PECK, JR.
Vice President
JOHN G. WEITHERS
Trustee
</TABLE>
<TABLE>
<S> <C>
.............................................................................................
LEGAL COUNSEL VEDDER, PRICE KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
.............................................................................................
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 219066
Kansas City, MO 64121-6066
.............................................................................................
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
.............................................................................................
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
</TABLE>
[KEMPER FUNDS LOGO]
Long-term investing in a short-term world(SM)
Printed on recycled paper in the U.S.A.
KMMIT - 2(1/25/00) 1099450
