<PAGE> 1
Kemper Global Income Fund
Annual Report to Shareholders
For the Year
Ended December 31, 1994
Seeks high current income
consistent with prudent total
return asset management
[KEMPER MUTUAL FUNDS LOGO]
<PAGE> 2
DEAR SHAREHOLDER:
We are pleased to provide you with an economic overview and performance of your
fund for the year ended December 31, 1994. In addition, following the overview
is a question and answer interview with your fund's Portfolio Managers.
- -----------------------------
PERFORMANCE & DIVIDEND REVIEW
<TABLE>
<S> <C>
Total Return Performance*
FOR THE YEAR ENDED DECEMBER 31, 1994
(UNADJUSTED FOR ANY SALES CHARGE)
Kemper Global Income Fund A -1.47%
Kemper Global Income Fund B** 1.89%
Kemper Global Income Fund C** 1.91%
Lipper General World Income Funds
Category Average -6.49%
</TABLE>
Returns are historical and do not represent future performance. Returns and net
asset value fluctuate. Shares are redeemable at current net asset value, which
may be more or less than original cost.
**Performance is since inception of May 31, 1994.
When comparing Kemper Global Income Fund A to all other General World Income
Funds in its Lipper++ category for the following time periods ended December 31,
1994, this fund ranked: 1-year, 18 of 106 and 5-year, 11 of 26.
The following table shows dividend and yield information for Kemper Global
Income Fund as of December 31, 1994.
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
1 Year
Distribution: $ 0.60 $ 0.30 ** $ 0.30 **
December Dividend: $0.0500 $0.0434 $0.0436
Net Asset Value: $ 8.55 $ 8.56 $ 8.56
Annualized
Distribution
Rate+: 7.02% 6.08% 6.11%
SEC Yield+: 6.49% 5.71% 5.72%
</TABLE>
**Since inception of May 31, 1994.
* Total return measures net investment income and capital gain or loss from
portfolio investments, assuming reinvestment of all dividends. During the
periods noted, securities prices fluctuated. For additional information, see
the Prospectus and Statement of Additional Information and the Financial
Highlights at the end of this report.
++ Lipper Analytical Services, Inc. rankings are based upon changes in net asset
value with all dividends reinvested and do not include the effect of sales
charges and, if they had, results may have been less favorable. Rankings are
historical and do not reflect future performance.
+ Current annualized distribution rate is the latest monthly dividend shown as
an annualized percentage of net asset value on December 31, 1994. Distribution
rate simply measures the level of dividends and is not a complete measure of
performance. The SEC yield is net investment income per share earned over the
month ended December 31, 1994 shown as an annualized percentage of the maximum
offering price on that date.
- -------------------------
GENERAL ECONOMIC OVERVIEW
The momentum of the 1994 economic expansion produced some of the most positive
economic reports we've seen in years. Income, consumer spending, construction
spending and hiring all were at high levels as we closed the pages on 1994 and
progressed through the first month of 1995.
It was almost a year ago that the Federal Reserve Board initiated its series of
rate hikes intended to cool down the economy. As you'll note in the accompanying
graphs, the high 6.3 percent increase in gross domestic product (GDP) in the
fourth quarter of 1993 provoked the Fed's first rate increase in February of
1994. The government raised rates five additional times in 1994, yet the economy
continued to expand at relatively high rates. The economy's ability to produce a
fourth quarter 1994 GDP of 4.5% one year after steadily rising rates virtually
assured that the Fed would raise rates again in February.
Several measures indicate the strength and stability of today's economy compared
to the early 1990s: consumers are not in as much debt as they were just three or
four years ago, nonfinancial corporations have a much lower level of debt
relative to their cash flow, and the federal budget deficit relative to its
gross domestic product (GDP) is lower than it was earlier in the decade.
As the new year unfolds, a slowdown in housing and auto sales may be offset
somewhat by accelerated activity in other sectors of the economy. For example,
while it's true that manufacturers today do not have the same incentive they
once had to accumulate inventories, we expect inventories to continue to build.
Products are needed both in this country and overseas, where many economies are
in the early phase of economic recovery. Nonresidential construction may also
start to pick up.
1
<PAGE> 3
STRONG ECONOMIC GROWTH...
Data show the annual rate of increase in the U.S. gross domestic product by
quarter
<TABLE>
<CAPTION>
4Q1993 1Q1994 2Q1994 3Q1994 4Q1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
6.30 3.30 4.10 4.00 4.50
</TABLE>
Source: Commerce Department
PROVOKED A SERIES OF INTEREST RATE HIKES
The Federal Reserve Board started raising the Federal Funds (short-term)
interest rates in February 1994 and raised rates six times since.
<TABLE>
<CAPTION>
BEFORE
RATE
HIKES 2/4/94 3/22/94 4/18/94 5/17/94 8/16/94 11/15/94 2/1/95
- ----- ------ ------- ------- ------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
3.00 3.25 3.50 3.75 4.25 4.75 5.50 6.00
</TABLE>
OUR OUTLOOK
While we believe that higher interest rates will help economic growth decline to
closer to 3 percent, this will probably still be too much growth for the Federal
Reserve. As a consequence, we expect the Fed to raise rates as appropriate until
growth slows to 2.5 percent to 2.75 percent. Alan Greenspan, chairman of the
Federal Reserve, has made it quite clear that this is the level of growth the
Fed associates with moderate inflation. Long-term rates may rise but not to the
same extent as short-term rates.
We expect the economy to slow significantly this year--but we do not expect a
recession. Inflation will likely increase gradually, ranging between 3.5 percent
and 4.0 percent in the next six months. The Federal Reserve's commitment to
fighting inflation should be a long-term positive for financial assets.
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
/s/ Sandy A. Lincoln
Sandy A. Lincoln
Chief Investment Officer
February 3, 1995
Sandy Lincoln is Chief Investment Officer of
Kemper Financial Services, Inc. In this
[PHOTO] capacity, he oversees more than $60 billion in assets
managed, including $42 billion in retail
mutual funds. Lincoln is a graduate of Valparaiso
University in Indiana and holds an M.B.A. in
finance from Loyola University of Chicago.
2
<PAGE> 4
Q & A
AN INTERVIEW
WITH PORTFOLIO
MANAGERS
Gordon Johns &
Pat Beimford
- --------------------------------------------------------------------------------
Gordon Johns joined Kemper in 1988 and is now the
[PHOTO] Managing Director of Kemper Investment Management
Company Limited, London, and is Co-Portfolio Manager of
Kemper Global Income Fund. Mr. Johns graduated with a
B.A. in law from Balliol College, Oxford.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Pat Beimford joined Kemper Financial Services, Inc., in
[PHOTO] 1976 and is now a Senior Vice President and
Co-Portfolio Manager of Kemper Global Income Fund. Mr.
Beimford received a B.S.I.M. degree from Purdue
University and a M.B.A. degree from the University of
Chicago.
- --------------------------------------------------------------------------------
- ---------
Q: HOW DID THE GLOBAL BOND MARKET PERFORM FOR THE PAST TWELVE MONTHS?
A: Although nearly all the twenty-one bond markets covered by the fund
declined for the year, only the U.K., United States and Canada had negative
returns in U.S. dollar terms (Salomon Brothers World Government Bond Market
Indexes). This is because most currencies appreciated relative to the U.S.
dollar during the year. Appreciation of a foreign currency raises the value of
bonds denominated in that currency.
The first half of 1994 saw a sharp reversal in world bond markets after a
tremendous bull run in 1993. Foreign bond yields surged in February, and
continued to climb in subsequent months. The Federal Reserve's monetary
tightening in response to strong economic growth set the stage for higher
interest rates worldwide.
The second half of the year saw a reversal of the bear market. Most of the
markets witnessed higher short-term rates due to monetary tightening and
falling long-term rates, as investors became more confident that inflation
would remain near current levels. According to Salomon Brothers, of the major
world government bond markets, the U.S. bond market had the lowest returns in
the fourth quarter in local currency terms.
- ---------
Q: HOW DID YOU ADJUST THE PORTFOLIO TO RESPOND TO THIS ENVIRONMENT?
A: Because of the high level of volatility, we kept the fund's average
maturity at approximately 6.2 years for most of the first half of the year.
This made the fund less sensitive to interest rate changes than if it had
maintained a longer average maturity. In late June, we lengthened average
maturity to 6.8 years on the premise that bonds had declined to attractive
levels; the large and swift rise in yields during the first half of the year
seemed to adequately discount a potentially higher inflation rate. In
subsequent months we continued to hold this view, as is reflected in an average
maturity of 7.5 years on September 30, and 8.0 years at the end of the year.
Additional activity involved shifting assets between various markets according
to their comparative levels of attractiveness. Following the U.S. bond market's
steep fall in the first quarter, we began to boost the fund's U.S. exposure
from 5% in March, to 46% at the end of May. This was done by reducing the
fund's exposure to Japan. The U.S. market was in fact a top performer in the
second quarter. In dollar terms, however, it underperformed those countries
whose currencies remained strong relative to the dollar.
Beginning in June we fell back to a lower U.S. weighting with our belief that
European markets such as France and Italy offered opportunity. Exposure to the
U.S. market was approximately 20% for most of the second half. Also, after
healthy performance by Canadian bonds in mid-September, our exposure there was
lowered to 4%, bringing total North American exposure to 24% at the end of
November.
The fund's European weighting moved from 27% to 55% between May and December.
Additions were made to France, Italy and the Netherlands. In the fourth
quarter, the fund maintained a weighting of between 3% and 7% in Finnish bonds.
Because of a strong Finnish currency, these bonds were top performers for the
year in U.S. dollar terms.
- ---------
Q: WHAT WERE THE FUND'S BEST AND WORST PERFORMING MARKETS IN 1994?
A: The fund's holdings in Finland, New Zealand and Sweden were the best
performing countries both in local currency terms and in U.S. dollar terms.
The worst performing market was the United Kingdom due to weakness of the gilt.
3
<PAGE> 5
- ---------
Q: HOW DID THE FUND PERFORM RELATIVE TO THE MARKET AND TO ITS PEER GROUP?
A: The fund performed well in relative terms. Along with out-performing
the average of the fund's Lipper peer group (as previously shown), the fund
also surpassed the Salomon Brothers World Government Bond Index,+ which fell
2.34% for the year.
- ---------
Q: WHAT IS YOUR OUTLOOK FOR GLOBAL BOND MARKETS?
A: We believe there continues to be opportunity in global bond markets,
particularly outside the United States. In particular we believe the markets in
Spain, New Zealand and Canada offer significant value.
Our currency model, composed of twenty markets outside of the United States,
suggests the opportunity for appreciation of all currencies against the dollar
in 1995. This could boost the fund's bond holdings since the appreciation of a
foreign currency raises the value of bonds denominated in that currency. (Of
course, trends in currency values can not be predicted with certainty and such
currencies could also depreciate.)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* 1 5
For Periods Ended 12/31/94 Year Year Life of Class
<S> <C> <C> <C>
(adjusted for the applicable sales charge)
KEMPER GLOBAL INCOME FUND A -5.93% 6.75% 7.39% (Since 10/1/89)
KEMPER GLOBAL INCOME FUND B** N/A N/A -2.04% (Since 5/31/94)
KEMPER GLOBAL INCOME FUND C** N/A N/A 1.91% (Since 5/31/94)
</TABLE>
Past performance is not predictive of future performance. Returns and net asset
value fluctuate. Shares are redeemable at current net asset value, which may be
more or less than original cost.
**Performance is total return.
Growth of an assumed $10,000 investment in
KEMPER GLOBAL INCOME FUND from 10/1/89 through 12/31/94
<TABLE>
<CAPTION>
Salomon
Date Kemper Global(1) Brothers + CPI ++
- ------- ------------- ------- ------
<S> <C> <C> <C>
10/1/89 $10,000 10,000 10,000
1989 10,012 10,300 10,704
1990 12,281 11,540 11,032
1991 13,648 13,360 11,032
1992 13,388 14,100 11,325
1993 14,758 15,980 11,664
12/31/94 14,541 16,357 11,976
</TABLE>
(1)Performance shown is for A Shares. Performance of other classes will be
greater or less than the line shown based on differences in loads and fees paid
by shareholders investing in the different classes. Performance includes
reinvestment of dividends and adjustment for the maximum sales charge of 4.50%.
In comparing the Kemper Global Income Fund A to the two indices, you should
also note that the fund's performance reflects the maximum sales charge, while
no such charges are reflected in the performance of the indices.
The special risk considerations associated with an investment in the fund,
including risks related to foreign investments and to a non-diversified
investment company, are discussed in the prospectus. Risks associated with
foreign securities, including fluctuating exchange rates, government regulations
and differences in liquidity, may affect your investment. As a non-diversified
investment company, the fund may invest more than 5% of its assets in the
securities of a particular foreign government.
* Average annual total return and, for B and C shares, total return measure net
investment income and capital gain or loss from portfolio investments,
assuming reinvestment of dividends and for Class A shares adjustment for
the maximum sales charge of 4.50% and for Class B shares adjustment for the
maximum contingent deferred sales charge of 4.00%. Average annual total
return is annualized and total return is cumulative.
+ The Salomon Brothers World Government Bond Index is an unmanaged index on a
U.S. dollar total return basis with all dividends reinvested and is comprised
of government bonds from ten countries. The minimum maturity is one year.
Source is Lipper Analytical Services, Inc.
++The Consumer Price Index is a statistical measure of change, over time, in
the prices of goods and services in major expenditure groups for all urban
consumers. Source is Towers Data Systems.
4
<PAGE> 6
KEMPER GLOBAL INCOME FUND
ANNUAL REPORT TO SHAREHOLDERS
FOR YEAR ENDED 12/31/94
PORTFOLIO OF INVESTMENTS BY CURRENCY December 31, 1994
(in thousands)
<TABLE>
<CAPTION>
Principal
Amount
(in Local Value
Currency) (in U.S. Dollars)
---------- -----------------
<S> <C> <C>
AUSTRALIAN DOLLAR--9.8%
- -----------------------------------------------------------------
GOVERNMENT OBLIGATIONS
- -----------------------------------------------------------------
Commonwealth of Australia
7.00%, 2000 11,000 $ 7,483
12.00%, 2001 1,000 849
- -----------------------------------------------------------------
Queenlands Treasury
8.00%, 2001 6,000 4,147
6.50%, 2005 7,250 4,254
- -----------------------------------------------------------------
16,733
DANISH KRONER--6.7%
- -----------------------------------------------------------------
GOVERNMENT OBLIGATIONS
- -----------------------------------------------------------------
Kingdom of Denmark
9.00%, 1998 19,000 3,144
9.00%, 2000 20,000 3,287
8.00%, 2003 33,000 5,065
- -----------------------------------------------------------------
11,496
FINNISH MARKKA--6.9%
- -----------------------------------------------------------------
GOVERNMENT OBLIGATIONS
- -----------------------------------------------------------------
Republic of Finland
11.00%, 1997 11,000 2,435
11.00%, 1999 20,000 4,436
9.50%, 2004 24,000 4,893
- -----------------------------------------------------------------
11,764
FRENCH FRANC--4.8%
- -----------------------------------------------------------------
GOVERNMENT OBLIGATION
- -----------------------------------------------------------------
French Treasury,
8.50%, 2008 17,000 3,224
- -----------------------------------------------------------------
CORPORATE OBLIGATION
- -----------------------------------------------------------------
French Telecom,
7.875%, 2003 27,000 4,933
- -----------------------------------------------------------------
IRISH PUNT--9.8%
- -----------------------------------------------------------------
GOVERNMENT OBLIGATIONS
- -----------------------------------------------------------------
Government of Ireland
6.25%, 1999 4,000 5,609
6.25%, 2004 8,700 11,131
- -----------------------------------------------------------------
16,740
JAPANESE YEN--10.2%
- -----------------------------------------------------------------
GOVERNMENT OBLIGATION
- -----------------------------------------------------------------
Republic of Austria,
5.00%, 2001 480,000 4,950
- -----------------------------------------------------------------
<CAPTION>
Principal
Amount
(in Local Value
Currency) (in U.S. Dollars)
---------- -----------------
<S> <C> <C>
CORPORATE OBLIGATIONS
- -----------------------------------------------------------------
European Investment Bank,
4.625%, 2003 800,000 $ 8,012
- -----------------------------------------------------------------
Export-Import Bank of Japan,
4.375%, 2003 450,000 4,413
- -----------------------------------------------------------------
17,375
NETHERLAND GUILDER--19.5%
- -----------------------------------------------------------------
GOVERNMENT OBLIGATIONS
- -----------------------------------------------------------------
Dutch State Loan
8.25%, 2002 20,000 11,883
7.00%, 2003 20,000 11,030
8.25%, 2007 17,500 10,387
- -----------------------------------------------------------------
33,300
NEW ZEALAND DOLLAR--3.8%
- -----------------------------------------------------------------
GOVERNMENT OBLIGATIONS
- -----------------------------------------------------------------
Government of New Zealand
8.00%, 1998 2,000 1,240
6.50%, 2000 5,500 3,199
10.00%, 2002 3,100 2,131
- -----------------------------------------------------------------
6,570
PORTUGESE ESCUDO--4.7%
- -----------------------------------------------------------------
GOVERNMENT OBLIGATIONS
- -----------------------------------------------------------------
Government of Portugal
8.375%, 1999 290,000 1,640
11.875%, 2000 1,000,000 6,344
- -----------------------------------------------------------------
7,984
U.S. DOLLAR--20.4%
- -----------------------------------------------------------------
GOVERNMENT OBLIGATIONS
- -----------------------------------------------------------------
U.S. Treasury Notes
6.375%, 2000 3,500 3,292
6.25%, 2003 4,000 3,622
7.25%, 2004 10,500 10,096
9.375%, 2006 16,000 17,779
- -----------------------------------------------------------------
34,789
TOTAL INVESTMENTS--96.6%
(Cost: $165,446) 164,908
- -----------------------------------------------------------------
CASH AND OTHER ASSETS,
LESS LIABILITIES--3.4% 5,792
- -----------------------------------------------------------------
NET ASSETS--100% $170,700
- -----------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS BY CURRENCY
The Fund is a non-diversified investment company and may invest a relatively
high percentage of its assets in the obligations of a limited number of issuers.
At December 31, 1994, the Fund had 86.4% of its net assets in government
obligations, 10.2% in corporate obligations and 3.4% in other assets.
Based on the cost of investments of $165,446,000 for federal income tax purposes
at December 31, 1994, the aggregate gross unrealized appreciation was $908,000,
the aggregate gross unrealized depreciation was $1,446,000 and the net
unrealized depreciation was $538,000.
See accompanying Notes to Financial Statements.
5
<PAGE> 7
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER GLOBAL INCOME FUND
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments by currency, of Kemper Global Income Fund as of
December 31, 1994, the related statement of operations for the year ended
December 31, 1994, the statement of changes in net assets for the year ended
December 31, 1994, the six months ended December 31, 1993 and the year ended
June 30, 1993, and financial highlights for each of the fiscal periods since
1990. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
December 31, 1994, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Kemper
Global Income Fund at December 31, 1994, the results of its operations, the
changes in its net assets and financial highlights for the periods referred to
above, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
February 3, 1995
6
<PAGE> 8
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
(in thousands)
<TABLE>
<S> <C>
ASSETS
- -------------------------------------------------------
Investments, at value
(Cost: $165,446) $164,908
- -------------------------------------------------------
Cash 670
- -------------------------------------------------------
Receivable for:
Investments sold 8,637
- -------------------------------------------------------
Interest 6,300
- -------------------------------------------------------
Fund shares sold 31
- -------------------------------------------------------
Total assets 180,546
- -------------------------------------------------------
LIABILITIES AND NET ASSETS
- -------------------------------------------------------
Payable for:
Investments purchased 8,600
- -------------------------------------------------------
Fund shares redeemed 1,061
- -------------------------------------------------------
Management fee 108
- -------------------------------------------------------
Administrative services fee 27
- -------------------------------------------------------
Distribution services fee 33
- -------------------------------------------------------
Other 17
- -------------------------------------------------------
Total liabilities 9,846
- -------------------------------------------------------
Net assets 170,700
- -------------------------------------------------------
ANALYSIS OF NET ASSETS
- -------------------------------------------------------
Excess of amounts received from
issuance of shares over amounts paid
on redemptions of shares on account
of capital $231,307
- -------------------------------------------------------
Accumulated net realized loss on investments
and foreign currency transactions (60,696)
- -------------------------------------------------------
Unrealized depreciation of investments and
foreign currency transactions (554)
- -------------------------------------------------------
Undistributed net investment income 643
- -------------------------------------------------------
Net assets applicable to shares
outstanding $170,700
- -------------------------------------------------------
THE PRICING OF SHARES
- -------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per
share
($119,100,846/13,930,543 shares
outstanding) $8.55
- -------------------------------------------------------
Maximum offering price per share
(net asset value, plus 4.71% of net
asset value or 4.50% of offering price) $8.95
- -------------------------------------------------------
CLASS B SHARES
Net asset value, offering price and
redemption
price (subject to contingent deferred
sales
charge) per share
($51,575,721/6,024,073 shares outstanding) $8.56
- -------------------------------------------------------
CLASS C SHARES
Net asset value, offering price and
redemption price per share
($23,056/2,693 shares outstanding) $8.56
- -------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
Year ended December 31, 1994
(in thousands)
<TABLE>
<S> <C>
INTEREST INCOME $ 9,430
- -------------------------------------------------------
EXPENSES
- -------------------------------------------------------
Management fee 864
- -------------------------------------------------------
Administrative services fee 199
- -------------------------------------------------------
Distribution services fee 146
- -------------------------------------------------------
Custodian and transfer agent
fees and related expenses 396
- -------------------------------------------------------
Professional fees 121
- -------------------------------------------------------
Reports to shareholders 184
- -------------------------------------------------------
Trustees' fees and other 17
- -------------------------------------------------------
Total expenses 1,927
- -------------------------------------------------------
Net investment income 7,503
- -------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS
- -------------------------------------------------------
Net realized loss on investments
and foreign currency transactions (6,845)
- -------------------------------------------------------
Net change in balance of unrealized
depreciation of investments and foreign
currency transactions (757)
- -------------------------------------------------------
Net loss on investments (7,602)
- -------------------------------------------------------
Net decrease in net assets resulting
from operations $ (99)
- -------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
7
<PAGE> 9
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
<TABLE>
<CAPTION>
Year
ended
December 31, Six months Year
1994 ended ended
------------ December 31, June 30,
OPERATIONS 1993 1993
------------ --------
<S> <C> <C> <C>
- ---------------------------
Net investment income $ 7,503 2,539 5,996
- ---------------------------
Net realized (loss) gain
on investments and
foreign currency
transactions (6,845) 455 (3,395)
- ---------------------------
Net change in unrealized
(depreciation)
appreciation (757) 832 2,060
- ---------------------------
Net (decrease) increase in
net assets resulting from
operations (99) 3,826 4,661
- ---------------------------
Net equalization credits 42 123 66
- ---------------------------
DIVIDENDS TO SHAREHOLDERS
- ---------------------------
Distribution from net
investment income (4,876) -- (5,998)
- ---------------------------
Distribution from net
realized gain on
investments -- (455) (464)
- ---------------------------
Distribution in excess of
net realized gain on
investments -- (569) --
- ---------------------------
Tax return of capital
distribution (2,738) (2,331) --
- ---------------------------
Total dividends to
shareholders (7,614) (3,355) (6,462)
- ---------------------------
Net increase from capital
share transactions 95,350 4,359 8,013
- ---------------------------
Total increase in net
assets 87,679 4,953 6,278
- ---------------------------
NET ASSETS
- ---------------------------
Beginning of period 83,021 78,068 71,790
- ---------------------------
End of period (including
undistributed net
investment income of
$643, $601 and $501
respectively) $170,700 83,021 78,068
- ---------------------------
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE FUND
Effective May 31, 1994, the Fund began offering three classes of shares. Class A
shares are sold to investors subject to an initial sales charge. Class B shares
are sold without an initial sales charge but are subject to higher ongoing
expenses than Class A shares and a contingent deferred sales charge payable upon
certain redemptions. Class B shares automatically convert to Class A shares six
years after issuance. Class C shares are sold without an initial or a contingent
deferred sales charge but are subject to higher ongoing expenses than Class A
shares and do not convert into another class. The Fund may offer, to a limited
group of investors, Class I shares (none sold through December 31, 1994) which
are not subject to initial or contingent deferred sales charges and have lower
ongoing expenses than other classes. Each share represents an identical interest
in the investments of the Fund and has the same rights.
On August 26, 1994, the Fund acquired the assets of Kemper Investment
Portfolios -- Short Term Global Income Portfolio ("KIP-STGP") and Kemper Short
Term Global Income Fund ("KSGIF") in a tax-free exchange. KIP-STGP and KSGIF net
assets on that date of $59 million and $58 million, respectively, were exchanged
for 13.5 million shares of the Fund (including Class A shares and Class B
shares), and the aggregate net assets of the Fund after the acquisition were
$192 million.
In 1993, the Fund changed its fiscal year end for financial reporting purposes
and federal income tax purposes from June 30 to December 31.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION
Investments are stated at value. Fixed income securities are valued by using
market quotations, or independent pricing services that use prices provided by
market makers or estimates of market values obtained from yield data relating to
instruments or securities with similar characteristics. Portfolio securities
that are traded on a domestic securities exchange are valued at the last sale
price on the exchange where primarily traded or, if there is no recent sale, at
the last current bid quotation. Portfolio securities that are primarily traded
on foreign securities exchanges are generally valued at the preceding closing
values of such securities on their respective exchanges where primarily traded.
Securities not so traded are valued at the last current bid quotation if market
quotations are available. Exchange traded options are valued at the last sale
price unless there is no sale price, in which event prices provided by market
makers are used. Over-the-counter traded options are valued based upon prices
provided by market makers. Financial futures and options thereon are valued at
the settlement price established each day by the board of trade or exchange on
which they are traded. Forward foreign currency contracts and foreign currencies
are valued at the forward and current exchange rates, respectively, prevailing
on the day of valuation. Other securities and assets are valued at fair value as
determined in good faith by the Board of Trustees.
8
<PAGE> 10
CURRENCY TRANSLATION
The books and records of the Fund are maintained in U.S. dollars. All assets and
liabilities initially expressed in foreign currency values are converted into
U.S. dollar values at the mean between the bid and offered quotations of such
currencies against U.S. dollars as last quoted by a recognized dealer. If such
quotations are not readily available, the rate of exchange is determined in good
faith by the Board of Trustees. Income and expenses and purchases and sales of
investments are translated into U.S. dollars at the rate of exchange prevailing
on the respective dates of such transactions. The Fund includes that portion of
the results of operations resulting from changes in foreign exchange rates with
net realized and unrealized gain or loss from investments and foreign currency
transactions, as appropriate.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date (date the order to
buy or sell is executed). Interest income is recorded on the accrual basis; it
includes premium and discount amortization on money market instruments and
discount amortization on long-term fixed income securities. Realized gains and
losses from investment transactions are reported on an identified cost basis.
Realized and unrealized gains and losses on financial futures, options and
forward foreign currency contracts are included in net realized and unrealized
(gain) loss on investments, as appropriate.
FUND SHARE VALUATION
Fund shares are sold and redeemed on a continuous basis at net asset value (plus
an initial sales charge on most sales of Class A shares). Proceeds payable on
redemption of Class B shares will be reduced by the amount of any applicable
contingent deferred sales charge. On each day the New York Stock Exchange is
open for trading, the net asset value per share is determined as of the earlier
of 3:00 p.m. Chicago time or the close of the Exchange. The net asset value per
share is determined separately for each share class by dividing the attributable
net assets by the number of outstanding shares of each class. Because of the
need to obtain prices as of the close of trading on various exchanges throughout
the world, the calculation of net asset value does not take place
contemporaneously with the determination of the prices of the Fund's foreign
securities.
FEDERAL INCOME TAXES AND DIVIDENDS TO SHAREHOLDERS
The Fund has complied with the special provisions
of the Internal Revenue Code available to investment companies and therefore no
federal income tax provision is required. The accumulated net realized loss on
sales of investments for federal income tax purposes at December 31, 1994,
amounting to approximately $60,696,000, is available to offset future taxable
gains. Of this amount approximately $56,000,000 was obtained in the acquisition
of KIP-STGP and KSGIF. Under Internal Revenue Code provisions the amount of
acquired loss carryover available each year is limited to approximately
$7,000,000. If not applied, the loss carryover expires during the period 1997
through 2002.
Dividends are declared separately for each class. Differences in per share
dividend rates are generally due to differences in separate class expenses.
Dividends payable to its shareholders are recorded by the Fund on the
ex-dividend date.
On January 18, 1995, the following per share dividends were declared, payable
January 31, 1995 to shareholders of record on January 19, 1995.
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
- ----------------------------------------------------------------
Income $.0500 .0435 .0437
- ----------------------------------------------------------------
</TABLE>
Distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments for certain transactions such as foreign
currency transactions.
EQUALIZATION ACCOUNTING
A portion of proceeds from sales and cost of redemptions of Fund shares is
credited or charged to undistributed net investment income so that income per
share available for distribution is not affected by sales or redemptions of
shares.
3. TRANSACTIONS WITH AFFILIATES
MANAGEMENT AGREEMENT
The Fund has a management agreement with Kemper Financial Services, Inc. (KFS).
For the period ended May 31, 1994, the Fund paid an effective investment
management fee of .75% of average daily net assets. Effective May 31, 1994, the
Fund pays a fee at an annual rate of .75% of the first $250 million of average
daily net assets declining gradually to .62% of average daily net assets in
excess of $12.5 billion. The Fund incurred a management fee of $864,000 for the
year ended December 31, 1994.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT
The Fund has an underwriting and distribution services agreement with KFS. As
principal underwriter for the Fund, KFS retained commissions of $15,000 for the
year ended December 31, 1994 for sales of Class A shares after allowing $111,000
as commissions to firms; of which $37,000 was paid to firms affiliated with KFS.
For services under the distribution services agreement, the Fund pays KFS a fee
of .75% of average daily net assets of the Class B shares and Class C shares.
Pursuant to the agreement, KFS enters into related selling group agreements with
various firms that provide distribution services to investors. KFS compensates
these firms at various rates for sales of Class B and Class C shares. During the
year ended December 31, 1994, the Fund incurred a distribution services fee for
Class B and Class C shares of $146,000, and KFS paid $40,000 for commissions and
distribution fees to firms, including $13,000 to firms affiliated with KFS. In
addition, KFS received $107,000 of contingent deferred sales charges.
ADMINISTRATIVE SERVICES AGREEMENT
The Fund has an administrative services agreement with KFS. For providing
information and administrative services to shareholders, the Fund pays KFS a fee
at the annual rate of up to .25% of average daily net assets.
9
<PAGE> 11
KFS in turn has various arrangements with financial services firms that provide
these services and pays these firms based on assets of Fund accounts the firms
service. For the year ended December 31, 1994, the Fund incurred an
administrative services fee of $199,000, and KFS paid $224,000 to firms,
including $58,000 that was paid to firms affiliated with KFS.
Effective February 1, 1995, KFS transferred all of its duties and
responsibilities as principal underwriter and administrator to Kemper
Distributor's, Inc., a wholly-owned subsidiary of KFS.
CUSTODIAN AND TRANSFER AGENT AGREEMENT
The Fund has a custodian agreement and a transfer agent agreement with Investors
Fiduciary Trust Company (IFTC), which was 50% owned by KFS until January 31,
1995, when KFS completed the sale of IFTC to a third party. Under these
agreements, the Fund incurred custodian and transfer agent fees of $263,000
(excluding related expenses) for the year ended December 31, 1994. Pursuant to a
services agreement with IFTC, Kemper Service Company (KSvC), an affiliate of
KFS, is the shareholder service agent of the Fund. For the year ended December
31, 1994, IFTC remitted shareholder service fees of $261,000 to KSvC.
OFFICERS AND TRUSTEES
Certain officers or trustees of the Fund are also officers or directors of KFS.
During the year ended December 31, 1994, the Fund made no direct payments to its
officers and incurred trustees' fees of $12,000 to independent trustees.
4. INVESTMENT TRANSACTIONS
For the year ended December 31, 1994, investment transactions (excluding money
market instruments) are as follows (in thousands):
<TABLE>
<S> <C>
Purchases $509,577
- -------------------------------------------------------------
Proceeds from sales 421,789
- -------------------------------------------------------------
</TABLE>
5. CAPITAL SHARE TRANSACTIONS
The following tables summarize the activity in capital shares of the Fund (in
thousands):
<TABLE>
<CAPTION>
Year Six month Year
ended period ended ended
December 31, December 31, June 30,
1994 1993 1993
----------------- ----------------- -----------------
Shares Amount Shares Amount Shares Amount
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Shares sold:
Class A 3,146 $ 28,131 4,685 $ 43,541 4,064 $ 37,306
- ------------------------------------------------------------------------------
Class B 589 5,090 -- -- -- --
- ------------------------------------------------------------------------------
Class C 12 104 -- -- -- --
- ------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends:
Class A 532 4,663 271 2,513 571 4,887
- ------------------------------------------------------------------------------
Class B 82 709 -- -- -- --
- ------------------------------------------------------------------------------
Shares redeemed:
Class A (5,754) (50,420) (4,500) (41,695) (3,764) (34,180)
- ------------------------------------------------------------------------------
Class B (1,104) (9,675) -- -- -- --
- ------------------------------------------------------------------------------
Class C (9) (81) -- -- -- --
- ------------------------------------------------------------------------------
Conversion of
shares:
Class A 15 132 -- -- -- --
- ------------------------------------------------------------------------------
Class B (15) (132) -- -- -- --
- ------------------------------------------------------------------------------
Shares issued in
acquisition:
Class A 7,058 60,897 -- -- -- --
- ------------------------------------------------------------------------------
Class B 6,472 55,932 -- -- -- --
- ------------------------------------------------------------------------------
Net increase from
capital share
transactions $ 95,350 $ 4,359 $ 8,013
- ------------------------------------------------------------------------------
</TABLE>
6. FORWARD FOREIGN CURRENCY CONTRACTS
In order to protect itself against a decline in the value of particular foreign
currencies against the U.S. Dollar, the Fund has entered into forward contracts
to deliver foreign currency in exchange for U.S. Dollars as described below. The
Fund bears the market risk that arises from changes in foreign exchange rates,
and accordingly, the unrealized gain (loss) on these contracts is reflected in
the accompanying financial statements. The Fund also bears the credit risk if
the counterparty fails to perform under the contract. At December 31, 1994, the
Fund had outstanding forward foreign currency contracts as follows:
<TABLE>
<CAPTION>
Contract Unrealized
Foreign Currency amount in Gain/(Loss)
to be delivered U.S. Dollars Settlement 12/31/94
(in thousands) (in thousands) Date (in thousands)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------
46,000 French Franc $8,486 March 1995 $ (138)
- ------------------------------------------------------------------------------
850,000 Japanese Yen 8,687 February 1995 122
- ------------------------------------------------------------------------------
Net unrealized loss (16)
- ------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 12
7. LITIGATION
In August of 1993, three shareholders of KIP-STGP and KSGIF filed an action in
the U.S. District Court for the Northern District of Illinois against KIP-STGP,
KSGIF, KFS, Kemper Financial Companies, Inc., Kemper Investment Management
Company, Limited, Kemper Corporation and the portfolio manager. The suit is a
class action brought on behalf of all persons who purchased shares of KIP-STGP
and KSGIF between October 29, 1990 and December 31, 1992. The complaint alleges
that sales literature and the registration statements of KIP-STGP and KSGIF were
misleading in violation of the Securities Act of 1933, the Securities Exchange
Act of 1934 and common law. The defendants believe the suit is without merit. As
mentioned above, on August 26, 1994, the Fund acquired the assets, and assumed
the liabilities, of KIP-STGP and KSGIF pursuant to an agreement and plan of
reorganization.
11
<PAGE> 13
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Six months Year October 1,
ended ended ended 1989 to
December 31, December 31, June 30, June 30,
------------ ------------ ----------------------------- ----------
CLASS A SHARES 1994 1993 1993 1992 1991 1990
- -------------------------------------------------- ------------ ------------ ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $9.29 9.21 9.44 9.26 9.98 9.00
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .60 .27 .72 .76 .94 .60
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency transactions (.74) .16 (.17) .22 -- .70
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.14) .43 .55 .98 .94 1.30
- --------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .38 -- .72 .73 1.22 .32
- --------------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain on
investments -- .05 .06 .07 .44 --
- --------------------------------------------------------------------------------------------------------------------------------
Distribution in excess of net realized gain on
investments -- .06 -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Tax return of capital distribution .22 .24 -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Total dividends .60 .35 .78 .80 1.66 .32
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.55 9.29 9.21 9.44 9.26 9.98
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%): (1.47) 4.73 6.16 10.77 9.30 14.74
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 1.53 1.29 1.52 1.53 1.60 1.64
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income 6.67 5.75 7.87 8.32 9.17 9.23
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B AND CLASS C SHARES
May 31, 1994 to December 31, 1994 Class B Class C
------- -------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $8.70 $8.70
- -------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .30 .30
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign currency transactions (.14 ) (.14)
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .16 .16
- -------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .19 .19
- -------------------------------------------------------------------------------------------------------------------------------
Tax return of capital distribution .11 .11
- -------------------------------------------------------------------------------------------------------------------------------
Total dividends .30 .30
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.56 $8.56
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%): 1.89 1.91
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 2.27 2.23
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income 5.89 5.93
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year Six months Year October 1,
ended ended ended 1989 to
December 31, December 31, June 30, June 30,
------------ ------------ --------------------------- ----------
SUPPLEMENTAL FUND DATA 1994 1993 1993 1992 1991 1990
- ---------------------------------------------------- ------------ ------------ ------ ------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Net assets at end of period (in thousands) $170,700 83,021 78,068 71,790 58,631 28,391
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 378 484 372 292 346 444
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Ratios have been determined on an annualized basis. Total return is not
annualized and does not reflect the effect of any sales charges.
12
<PAGE> 14
[KEMPER MUTUAL FUNDS LOGO]
KEMPER FINANCIAL SERVICES, INC.
120 South LaSalle Street
Chicago, IL 60603
KEMPER GLOBAL INCOME FUND
<TABLE>
<S> <C>
Trustees Officers
DAVID W. BELIN JOHN E. PETERS
Trustee Vice President
LEWIS A. BURNHAM J. PATRICK BEIMFORD, JR.
Trustee Vice President
DONALD L. DUNAWAY GORDON K. JOHNS
Trustee Vice President
ROBERT B. HOFFMAN PHILIP J. COLLORA
Trustee Vice President
DONALD R. JONES and Secretary
Trustee CHARLES F. CUSTER
Vice President and
WILLIAM P. SOMMERS Assistant Secretary
Trustee JEROME L. DUFFY
STEPHEN B. TIMBERS Treasurer
Trustee and
Vice President ELIZABETH C. WERTH
Assistant Secretary
</TABLE>
- -----------------------------------------------------------
<TABLE>
<S> <C>
Legal Counsel Custodian and Transfer Agent
VEDDER, PRICE, KAUFMAN INVESTORS FIDUCIARY
& KAMMHOLZ TRUST COMPANY
222 North LaSalle Street 127 West 10th Street
Chicago, IL 60601 Kansas City, MO 64105
Shareholder Service Agent Foreign Custodian
KEMPER SERVICE COMPANY THE CHASE MANHATTAN
P.O. Box 419557 BANK, N.A.
Kansas City, MO 64141 Chase MetroTech Center
Brooklyn, NY 11245
Independent Auditors
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
</TABLE>
Investment Manager
KEMPER FINANCIAL SERVICES, INC.
Principal Underwriter
KEMPER DISTRIBUTORS, INC.
120 South LaSalle Street
Chicago, IL 60603
[LOGO]
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This report is not to be distributed
unless preceded or accompanied by 236350
KGIF-2 (2/95) a Kemper Global Income Fund prospectus. Printed in the U.S.A.
