<PAGE> 1
Kemper Global Income Fund Class I Shares
Average Annual Total Returns*
For periods ended December 31, 1996
1-year Life of Class
------ -------------
Kemper Global Income Fund Class I Shares 5.81% 5.63%
(since 11/22/95)
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.
Growth of an assumed $10,000 investment in Kemper Global Income Fund Class I
Shares from 11/22/95 through 12/31/96
<TABLE>
<CAPTION>
November 22 June 30, December 31,
1995 1996 1996
----------- -------- ------------
<S> <C> <C> <C>
Kemper Global Income Fund Class I Shares * 10,000 9,950 10,627
Salomon Brothers World Gov't Bond Index ** 10,000 9,955 10,471
Consumer Price Index *** 10,000 10,202 10,326
</TABLE>
* Average annual total return measures net investment income and capital gain
or loss from portfolio investments, assuming reinvestment of all dividends. The
performance in the graph above also includes reinvestment of dividends. During
the periods noted, securities prices fluctuated. Performance of share classes
will vary because of differences in sales charges and fees paid by shareholders
investing in different share classes. For additional information, see the
Prospectus and Statement of Additional Information and the Financial Highlights
in the annual report.
** 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 14 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.
(over)
<PAGE> 2
Dividend and Yield Review
The following table shows per share dividend and yield information for the fund
as of December 31, 1996.
One-Year Income: $0.6100
December Dividend: $0.0533
Annualized Distribution Rate+: 7.16%
SEC Yield+: 4.66%
+Current annualized distribution rate is the latest monthly dividend shown as
an annualized percentage of net asset value on December 31, 1996. 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, 1996 shown as an annualized percentage of the maximum
offering price on that date. The SEC yield is computed in accordance with the
standardized method perscribed by the Securities and Exchange Commission.
Investment Manager
Zurich Kemper Investments, Inc.
Principal Underwriter
Kemper Distributors, Inc.
This report is not to be distrubuted unless preceded or accompanied by a Kemper
Global Income Fund prospectus and the 1996 Annual Report for Kemper Global
Income Fund.
<PAGE> 3
KEMPER
GLOBAL INCOME FUND
ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1996
Seeks high current income consistent with prudent total return asset
management by investing primarily in investment grade foreign and domestic
fixed income securities.
" . . . We stuck with our long-term
approach and remained committed
to . . . bonds with very high credit
quality ."
[KEMPER FUND LOGO]
<PAGE> 4
CONTENTS
3
Economic Overview
5
Performance Update
9
Market Performance
Country Concentrations
10
Portfolio Statistics
11
Portfolio of
Investments
13
Report of
Independent Auditors
14
Financial Statements
16
Notes to
Financial Statements
21
Financial Highlights
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER GLOBAL INCOME FUND
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 5.87%
CLASS B 5.11%
CLASS C 5.31%
LIPPER GENERAL WORLD
INCOME FUNDS
CATEGORY AVERAGE* 10.40%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
12/31/96 12/31/95
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER GLOBAL INCOME FUND
CLASS A $8.97 $9.05
- --------------------------------------------------------------------------------
KEMPER GLOBAL INCOME FUND
CLASS B $9.00 $9.09
- --------------------------------------------------------------------------------
KEMPER GLOBAL INCOME FUND
CLASS C $9.02 $9.09
- --------------------------------------------------------------------------------
</TABLE>
Returns and rankings 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.
*Lipper Analytical Services, Inc. returns and 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. Returns
and rankings are historical and do not reflect future performance.
- --------------------------------------------------------------------------------
KEMPER GLOBAL INCOME
FUND RANKINGS*
- --------------------------------------------------------------------------------
COMPARED TO ALL OTHER FUNDS IN THE LIPPER GENERAL WORLD INCOME FUNDS CATEGORY
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1-YEAR #94 OF 131 FUNDS #108 OF 131 FUNDS #105 OF 131 FUNDS
- --------------------------------------------------------------------------------
5-YEAR #25 OF 38 FUNDS N/A N/A
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND AND YIELD REVIEW
- --------------------------------------------------------------------------------
THE FOLLOWING TABLE SHOWS PER SHARE DIVIDEND AND YIELD INFORMATION FOR THE FUND
AS OF DECEMBER 31, 1996.
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1 YEAR INCOME: $0.5800 $0.5300 $0.5300
- --------------------------------------------------------------------------------
DECEMBER DIVIDENDS: $0.0500 $0.0454 $0.0448
- --------------------------------------------------------------------------------
ANNUALIZED
DISTRIBUTION RATE+: 6.69% 6.05% 5.96%
- --------------------------------------------------------------------------------
SEC YIELD+: 4.49% 4.04% 4.12%
- --------------------------------------------------------------------------------
</TABLE>
+Current annualized distribution rate is the latest monthly dividend shown as an
annualized percentage of net asset value on December 31, 1996. 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, 1996 shown as an annualized percentage of the maximum
offering price on that date. The SEC yield is computed in accordance with a
standardized method prescribed by the Securities and Exchange Commission.
TERMS TO KNOW
CURRENCY RISK The U.S. dollar value of a foreign security tends to decrease when
the value of the U.S. dollar rises against the foreign currency in which the
security is denominated. Conversely, the U.S. dollar value of a foreign security
tends to increase when the value of the U.S. dollar falls against the currency.
DURATION A measure of the interest rate sensitivity of a portfolio,
incorporating time to maturity and coupon size. The longer the duration, the
greater the interest rate risk.
EMERGING MARKETS A developing or emerging country that is in the initial stages
of its industrial cycle. Developing or "emerging" markets involve exposure to
economic structures that are generally less diverse and mature than in the
United States and to political systems that may be less stable.
RECESSION A downturn in economic activity defined by many economists as at least
two consecutive quarters of decline in a country's Gross Domestic Product (GDP).
YIELD RATE The return on a bond that takes into account the total of annual
interest payments, the purchase price, the redemption value, and the amount of
time remaining until maturity.
<PAGE> 5
ECONOMIC OVERVIEW
[TIMBERS PHOTO]
STEPHEN B. TIMBERS IS PRESIDENT, CHIEF INVESTMENT AND EXECUTIVE OFFICER OF
ZURICH KEMPER INVESTMENTS, INC. (ZKI). ZKI AND ITS AFFILIATES MANAGE
APPROXIMATELY $79 BILLION IN ASSETS, INCLUDING $44 BILLION IN RETAIL MUTUAL
FUNDS. TIMBERS IS A GRADUATE OF YALE UNIVERSITY AND HOLDS AN M.B.A. FROM HARVARD
UNIVERSITY.
DEAR SHAREHOLDER:
As we progress through the first quarter of 1997, the fundamentals of the
economy are remarkably similar to what they were one year ago. Long-term
interest rates are in the same 6.5% to 7% range they were in during the first
half of 1996. We believe the economy is growing at a rate of approximately 2.5%.
Inflation continues to be well under control, at about 3.0%.
One significant difference between today and last year is that prices of
the stocks are on average up 20%. While price movements were more volatile in
1996 than in the past few years, the patient investor was amply rewarded. The
prime element sending the stock market higher was strong positive cash flows.
This liquidity in an environment of modestly increasing corporate profits and
relatively stable interest rates pushed stocks higher for most of the year.
This higher stock market has caused many market observers to worry. While
we cannot ignore what has happened, we find no reason to be bearish over the
long term. The environment is benign to favorable for financial assets. Given
steady interest rates, moderate economic growth and continued moderate corporate
earnings growth, there are few excesses in the system. In fact, real interest
rates are probably too high considering our outlook for inflation, and we may
see them decline over time.
Naturally, we cannot rule out the possibility of a market correction. But,
in our belief, the downside would appear to be limited to 5% to 8%, which is the
size of a typical correction based on historical data. As we have said in
previous outlooks, three elements tend to move the market:
- EARNINGS. We forecast corporate earnings to range between 0% and 5% on
average for the Standard & Poor's 500* in 1997 -- not as high as in
recent years but positive nonetheless.
- INTEREST RATES. Rates should remain stable, and short-term interest rates
may even decline.
- LIQUIDITY. Investors, through mutual funds, 401(k)s and qualified
contribution plans in particular, will continue to create strong demand
for securities.
In order to move the market more than would be expected in a typical
decline, one or more of these elements will have to turn negative in 1997, and,
while future market conditions cannot be predicted with certainty, we fail to
see what would materially change our outlook. Our outlook going forward is that
1997 should be a lot like 1996.
While the economy continued along a relatively consistent path, the United
States took some politically significant steps in 1996. First, of course,
President Bill Clinton and a Republican Congress were re-elected by the voters.
In the first few days after the general election, especially, investors
demonstrated their support for such a balance in our leadership. But of much
greater long-term significance is the expressed commitment by both parties to
balance the federal budget and address certain entitlement programs. The first
year after an election can be a fertile time to accomplish major initiatives,
and we are hopeful that progress can be made.
The future of the Social Security system, which many experts believe will
run out of money about 20 years from now, will be a subject in which you can
expect Zurich Kemper Investments, Inc. to play a leadership role. The possible
solutions for "fixing Social Security" are finite: raise Social Security taxes,
reduce benefits, raise the retirement age, change inflation assumptions or
pursue a higher rate of return on assets contributed by workers. We believe that
a bipartisan solution will be worked out, which will include giving individuals
the option of investing a portion of their Social Security contributions in an
account earmarked for them. This change is needed to return credibility to the
system, which many Americans have lost faith in.
What to do with Social Security is a debate that spans generations and
promises to occupy much attention in the coming years. As we hope to help
advance constructive debate, we'll be advocating partial privatization for this
federal program while maintaining a safety net for many low-wage earners and
providing a seamless transition for seniors near or in retirement.
3
<PAGE> 6
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 (1/31/97) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1) 6.58 6.64 5.81 7.47
PRIME RATE(2) 8.25 8.25 8.25 9.00
INFLATION RATE(3)* 3.24 2.95 2.72 2.87
THE U.S. DOLLAR(4) 4.59 4.26 0.82 (5.54)
CAPTIAL GOODS ORDERS(5)* 0.58 15.00 4.72 21.53
INDUSTRIAL PRODUCTION(5)* 4.32 3.38 0.39 5.60
EMPLOYMENT GROWTH(6) 2.50 2.17 1.78 3.49
</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%. 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 December 31, 1996.
SOURCE: ECONOMICS DEPARTMENT, ZURICH KEMPER INVESTMENTS, INC.
With this letter as an economic backdrop, we encourage you to read the
following detailed report of your fund, including an interview with your fund's
portfolio management. Thank you for your continued support. We appreciate the
opportunity to serve your investment needs.
Sincerely,
/s/ Stephen B. Timbers
STEPHEN B. TIMBERS
PRESIDENT, CHIEF INVESTMENT AND EXECUTIVE OFFICER
Zurich Kemper Investments, Inc.
February 5, 1997
*THE STANDARD & POOR'S 500 STOCK INDEX IS AN UNMANAGED INDEX GENERALLY
REPRESENTATIVE OF THE U.S. STOCK MARKET.
4
<PAGE> 7
PERFORMANCE UPDATE
[BEIMFORD PHOTO]
J. PATRICK BEIMFORD, JR. JOINED ZURICH KEMPER INVESTMENTS, INC. IN 1976 AND IS
CHIEF INVESTMENT OFFICER FOR FIXED-INCOME INVESTMENTS AND PORTFOLIO CO-MANAGER
OF KEMPER GLOBAL INCOME FUND. BEIMFORD RECEIVED A BACHELOR OF SCIENCE AND
INDUSTRIAL MANAGEMENT DEGREE FROM PURDUE UNIVERSITY AND RECEIVED HIS M.B.A. FROM
THE UNIVERSITY OF CHICAGO.
[JOHNS PHOTO]
GORDON JOHNS JOINED ZURICH INVESTMENT MANAGEMENT LIMITED, A LONDON-BASED
AFFILIATE OF ZURICH KEMPER INVESTMENTS, INC., IN 1988 AND IS PORTFOLIO
CO-MANAGER OF KEMPER GLOBAL INCOME FUND. JOHNS GRADUATED WITH A B.A. IN LAW FROM
BALLIOL COLLEGE, OXFORD.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS 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.
STRATEGIC POSITIONING IN SOLID MARKETS AND CAREFUL ATTENTION TO CURRENCY
EXPOSURE HELPED KEMPER GLOBAL INCOME FUND OUTPERFORM ITS BENCHMARK INDEX.
HOWEVER, THE FUND'S STANDING RELATIVE TO ITS PEER GROUP SUFFERED DUE, IN PART,
TO A CAUTIOUS APPROACH TO COUNTRIES EXPECTED TO JOIN THE EUROPEAN MONETARY
UNION IN 1999.
Q HOW DID THE GLOBAL BOND MARKETS PERFORM AND WHAT EFFECT, IF ANY, DID THE
WEAK U.S. BOND MARKET PERFORMANCE HAVE ON WORLD MARKETS?
A In general, it was a good year for international bond markets. We saw
interest rates fall in most markets with Europe as a whole and Canada leading
performance. The exception to this low interest rate trend was the U.S. where
performance lagged throughout the year. U.S. bond markets suffered from
increased interest rates fueled by continued stock mania and inflation jitters.
Japan was another weak performer suffering from the troubles in the financial
sector. This led to low short-term interest rates throughout the year. Although
the Japanese economy was not in recession, it wasn't growing particularly fast.
The U.S. market usually does have some effect on what is happening in
the rest of the world, but in 1996, economies were not at all
synchronized so local influences tended to dominate the markets. In the U.S.,
the big concern was whether interest rates were going to continue to increase
and, if so, would the Federal Reserve Board (the Fed) decide to make an
adjustment. In Europe, it was quite the opposite. The question was whether the
lagging growth would lead to short-term rates being decreased. And in Japan,
low short-term interest rates were maintained in an effort to somewhat protect
the financial sector.
Q CURRENCY RISK IS AN ISSUE FOR U.S.-BASED INVESTORS. HOW DID THE U.S. DOLLAR
STRENGTH AFFECT RETURNS?
A Well, on the currency side, it was a mixed picture. The United Kingdom
sterling was very strong throughout the year and outperformed the U.S. dollar,
but the major European currencies (French franc, German mark) were weak. For the
U.S.-based investor, the strength of the dollar hurt most foreign bond
investments by diminishing strong local currency returns in the conversion to
the U.S. dollar. The dollar-bloc currencies -- the Canadian, Australian and New
Zealand dollar -- did perform better than some of the weaker international
currencies because they were positively affected by the U.S. dollar strength.
The Japanese yen was the weakest currency during the period, suffering from the
low level of activity and very low interest rates.
5
<PAGE> 8
PERFORMANCE UPDATE
Q HOW DID KEMPER GLOBAL INCOME FUND PERFORM IN THIS MARKET RELATIVE TO ITS
BENCHMARK INDEX AND IN RELATION TO ITS PEERS?
A Diversification outside the U.S. helped the fund's performance. The average
return from the U.S. bond market was somewhat lower than foreign issues which
was an obvious benefit to the globally diversified investor. However, as we
mentioned, the strength of the U.S. dollar against a number of the international
currencies worked against the global bond strength.
Strategic positioning in solid markets and careful attention to currency
exposure helped Kemper Global Income Fund outperform the Salomon Brothers World
Government Bond Index* by nearly 2%, but our performance lagged behind our peer
group. We were right to be positive about the dollar-bloc currencies. We were
also right to have a lesser exposure to Japan and the Japanese yen. These
decisions combined with a focus on the core markets of Europe helped us beat our
benchmark.
However, one area that hurt us relative to our peers was in convergence
plays, that is being invested in those markets and currencies that may be
members of the European Monetary Union (EMU) in 1999. These markets (Spain,
Italy and Portugal) offered significantly higher yields than they might have if
they were simply recognized by the market as another individual European
country. We were not heavily exposed to these countries or currencies because
we are not convinced they can, in fact, succeed in meeting the 1999 goal.
However, the market clearly took a different view and, therefore, those markets
did quite well. Going forward, it is going to be very difficult for them to
repeat that performance. Between now and 1999, a lot can happen so we were and
continue to be reluctant to place a significant emphasis on these markets based
on the POSSIBILITY they will be early EMU participants.
*THE SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX IS AN UNMANAGED INDEX THAT IS
GENERALLY CONSIDERED REPRESENTATIVE OF WORLD GOVERNMENT BOND MARKETS. THIS
INDEX SERVES AS A BENCHMARK TO WHICH WORLD INCOME BOND FUNDS COMPARE THEIR
PERFORMANCE.
Q WE HAVE DISCUSSED THE MARKETS YOU STAYED AWAY FROM DURING THE YEAR, BUT
WHICH DID YOU FAVOR?
A With the exception of those mentioned, we were biased toward the European
markets because they offered good value in a low short-term interest rate
environment. We were also heavily committed throughout the year to the non-U.S.
components of the dollar-bloc -- Australia, New Zealand and Canada -- where the
markets were somewhat undervalued. Although we did not have a particularly heavy
position in the U.S. treasury market, we did, nonetheless, have some hedges back
to the U.S. dollar. At the end of the period, over half of the fund, in currency
terms, was committed to dollar-bloc currencies.
Q WHAT PROCESS DID YOU AND YOUR TEAM USE IN MAKING YOUR INVESTMENT DECISIONS
AND WHAT WAS THE AVERAGE DURATION OF HOLDINGS IN THE FUND?
A We stuck with our long-term approach and remained committed to government
and supranational bonds with very high credit quality. Over 80% of the fund
throughout the year has been committed to government bonds and typically 90% or
more of the fund has been AAA rated so our investments were very high quality.
Throughout the year, we have had a neutral view on duration. This means we
didn't have either a really positive or really negative view of the direction of
rates. Therefore, our average duration was intermediate at just under five
years.
Q WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS?
A In general, we believe the bond markets are fairly valued. We don't expect
1997 to be a particularly exciting year -- there appears to be no reason for a
big sell off and no reason for a big bull market. Diversification out of the
U.S. market remains a strong investment decision for shareholders. The U.S.
market is still worried about growth in the U.S. economy and the possibility of
increases in short-term interest rates.
That contrasts with the situation in Europe where the pressures are
still more on short-term interest rates falling. So in much of the rest of the
world, but
6
<PAGE> 9
PERFORMANCE UPDATE
particularly in Europe, the general atmosphere for bond markets seems to be more
favorable than it is in the U.S.
As far as currencies are concerned, we still have a modestly positive
view of the dollar-bloc currencies because we suspect the dollar-bloc dollar
will do better than the U.S. dollar. In Europe there are one or two currencies
we consider attractive such as the UK sterling and the Norwegian krone. The
Japanese yen has been significantly overvalued against the dollar and we don't
expect that to change early in the new year.
Q WHAT ARE THE RISKS TO THIS OUTLOOK?
A Well I think there are two big risks for the markets. One is growth turning
out to be stronger than expected. This is a particular risk in the U.S. and in
some of the dollar-bloc countries. If growth were surprisingly strong,
short-term interest rates in the U.S. would increase and that could have a
ripple effect on all global markets. A second risk to the markets is problems
with the convergence towards EMU. If some incident affects these efforts in the
next year, that could weaken the European markets that have benefited from this
process. Further convergence of higher yielding markets toward the yield level
of German bonds may lead to assertions that countries outside the core European
markets will join EMU in January 1999. This looks less likely to happen with
Germany continuing to have doubts as to the early admissibility of some
countries. Accordingly, our asset allocation reflects this view.
7
<PAGE> 10
PERFORMANCE UPDATE
- --------------------------------------------------------------------------------
KEMPER GLOBAL INCOME FUND
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
FOR PERIODS ENDED DECEMBER 31, 1996 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
LIFE OF
1-YEAR 5-YEAR CLASS
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEMPER GLOBAL INCOME FUND CLASS A 1.07% 5.23% 8.81% (since 10/1/89)
- --------------------------------------------------------------------------------------------------
KEMPER GLOBAL INCOME FUND CLASS B 2.13 N/A 8.87 (since 5/31/94)
- --------------------------------------------------------------------------------------------------
KEMPER GLOBAL INCOME FUND CLASS C 5.31 N/A 9.98 (since 5/31/94)
- --------------------------------------------------------------------------------------------------
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Kemper Global Income Fund Class A FROM 10/1/89 THROUGH 12/31/96
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
10/1/89 12/31/90 12/31/92 12/31/94 12/31/96
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Kemper Global Income Fund Class A(1) 10,000 12,281 13,388 14,541 18,450
Salomon Brothers World Government Bond Index+ 10,000 11,532 14,094 16,340 20,155
Consumer Price Index++ 10,000 10,704 11,352 11,976 12,688
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Kemper Global Income Fund Class B FROM 5/31/94 THROUGH 12/31/96
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION> 5/31/94 12/31/94 12/31/96
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Kemper Global Income Fund Class B(1) 10,000 10,190 12,462
Salomon Brothers World Government Bond Index+ 10,000 10,313 12,721
Consumer Price Index++ 10,000 10,149 10,753
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Kemper Global Income Fund
Class C FROM 5/31/94 THROUGH 12/31/96
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
5/31/94 12/31/94 12/31/96
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Kemper Global Income Fund Class C(1) 10,000 10,191 12,795
Salomon Brothers World Government Bond Index+ 10,000 10,313 12,721
Consumer Price Index++ 10,000 10,149 10,753
</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.
* Average annual total return measures 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 applicable contingent deferred sales
charge (CDSC) as follows: 1-year, 3%; 5-year, 1%; since inception, 0%. The
maximum CDSC is 4%. For C shares purchased on or after April 1, 1996 there
is a 1% CDSC on certain redemptions within the first year of purchase.
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.
(1) Performance includes reinvestment of dividends and adjustment for the
maximum sales charge for A Shares and the contingent deferred sales charge
in effect at the end of the period for B Shares. In comparing the Kemper
Global Income Fund 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.
+ 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 14 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.
8
<PAGE> 11
MARKET PERFORMANCE
WORLD BOND MARKET PERFORMANCE
THE TABLE BELOW PRESENTS THE ONE-YEAR RETURNS OF 20 GOVERNMENT BOND MARKETS
TRACKED BY SALOMON BROTHERS FOR THE PERIOD ENDING DECEMBER 31, 1996, EXPRESSED
IN U.S. DOLLAR TERMS. THIS INFORMATION IS HISTORICAL AND DOES NOT REFLECT FUTURE
RETURNS OF THESE MARKETS.
[WORLD BOND MARKET BAR GRAPH]
<TABLE>
<CAPTION>
<S> <C>
Italy 27.19%
Australia 19.32%
United Kingdom 18.39%
New Zealand 17.86%
Ireland 17.64%
Portugal 15.15%
Sweden 14.78%
Spain 13.88%
Canada 11.28%
Norway 7.31%
Finland 6.16%
France 5.31%
Denmark 3.80%
United States 2.73%
Belgium 2.64%
Austria 1.09%
Netherlands 0.16%
Germany -0.35%
Japan -6.45%
Switzerland -9.98%
</TABLE>
COUNTRY CONCENTRATIONS
GEOGRAPHIC COMPOSITION OF KEMPER GLOBAL INCOME FUND
BASED ON TOTAL NET ASSETS ON DECEMBER 31, 1996
[KEMPER GLOBAL INCOME FUND BAR GRAPH]
<TABLE>
<CAPTION>
<S> <C>
Australia 20%
United States 19%
United Kingdom 15%
Netherlands 13%
New Zealand 9%
Norway 7%
Japan 5%
Italy 4%
Canada 4%
Sweden 3%
</TABLE>
9
<PAGE> 12
PORTFOLIO STATISTICS
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
ON 12/31/96 ON 12/31/95
- -------------------------------------------------------------------------------
<S> <C> <C>
FOREIGN/U.S. GOVERNMENT SECURITIES 94% 86%
- -------------------------------------------------------------------------------
OTHER SECURITIES** 5 10
- -------------------------------------------------------------------------------
CASH AND EQUIVALENTS 1 4
- -------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 12/31/96 ON 12/31/95
*Portfolio composition is subject to change.
**Includes supranational entities and corporates guaranteed by governments.
DURATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
ON 12/31/96 ON 12/31/95
- ------------------------------------------------------------------------------
<S> <C> <C>
DURATION 6.5 YEARS 4.4 YEARS
- ------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 13
PORTFOLIO OF INVESTMENTS
KEMPER GLOBAL INCOME FUND
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
LOCAL CURRENCY U.S. DOLLAR
CURRENCY ISSUER PRINCIPAL VALUE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GOVERNMENT OBLIGATIONS (93.9%) AND CORPORATE OBLIGATIONS (4.9%)
- -------------------------------------------------------------------------------------------------------------------------------
AUSTRALIAN DOLLAR--19.7% Commonwealth of Australia
7.00%, 2000 6,500 $ 5,217
10.00%, 2006 1,700 1,581
New South Wales Treasury Corp., 8.00%, 2001 7,800 6,434
Queensland Treasury Corp., 8.00%, 2001 7,600 6,272
Treasury Corporation of Victoria, 8.25%, 2003 7,800 6,508
--------------------------------------------------------------------------------------------
26,012
- -------------------------------------------------------------------------------------------------------------------------------
U.S. DOLLAR--19.0% U.S. Treasury Notes
6.375%, 2000 5,500 5,553
6.25%, 2003 4,500 4,496
7.50%, 2005 14,000 14,976
--------------------------------------------------------------------------------------------
25,025
- -------------------------------------------------------------------------------------------------------------------------------
BRITISH POUND--15.3% United Kingdom
10.50%, 1999 4,200 7,737
6.75%, 2004 1,950 3,206
9.00%, 2012 4,800 9,213
--------------------------------------------------------------------------------------------
20,156
- -------------------------------------------------------------------------------------------------------------------------------
NETHERLANDS Dutch State Loan
GUILDER--13.0%
6.75%, 1998 7,500 4,572
8.25%, 2002 8,000 5,351
8.25%, 2007 10,500 7,214
--------------------------------------------------------------------------------------------
17,137
- -------------------------------------------------------------------------------------------------------------------------------
NEW ZEALAND New Zealand Government
DOLLAR--8.9%
6.50%, 2000 8,000 5,573
8.00%, 2004 8,300 6,126
--------------------------------------------------------------------------------------------
11,699
- -------------------------------------------------------------------------------------------------------------------------------
NORWEGIAN KRONE--7.0% Kingdom of Norway
9.00%, 1999 23,000 3,914
9.50%, 2002 8,750 1,636
5.75%, 2004 24,000 3,708
--------------------------------------------------------------------------------------------
9,258
- -------------------------------------------------------------------------------------------------------------------------------
JAPANESE YEN--4.9% Int'l. Bank for Recon. and Dev., 4.75%, 2004 370,000 3,707
Interamerican Development Bank, 6.75%, 2001 260,000 2,694
--------------------------------------------------------------------------------------------
6,401
- -------------------------------------------------------------------------------------------------------------------------------
ITALIAN LIRA--4.1% Italian Treasury
12.00%, 2001 4,750,000 3,727
12.00%, 2002 2,000,000 1,605
--------------------------------------------------------------------------------------------
5,332
</TABLE>
11
<PAGE> 14
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
LOCAL CURRENCY U.S. DOLLAR
CURRENCY ISSUER PRINCIPAL VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CANADIAN DOLLAR--4.0% Government of Canada
6.50%, 1999 2,500 $ 1,912
7.50%, 2001 1,900 1,510
10.25%, 2014 1,900 1,866
--------------------------------------------------------------------------------------
5,288
- -------------------------------------------------------------------------------------------------------------------------
SWEDISH KRONER--2.9% Kingdom of Sweden
13.00%, 2001 12,000 2,263
10.25%, 2003 9,000 1,601
--------------------------------------------------------------------------------------
3,864
--------------------------------------------------------------------------------------
TOTAL INVESTMENTS--98.8%
(Cost: $128,518) 130,172
--------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES--1.2% 1,589
--------------------------------------------------------------------------------------
NET ASSETS--100% $131,761
--------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
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.
Based on the cost of investments of $128,518,000 for federal income tax purposes
at December 31, 1996, the gross unrealized appreciation was $2,521,000, the
gross unrealized depreciation was $867,000 and the net unrealized appreciation
on investments was $1,654,000.
See accompanying Notes to Financial Statements.
12
<PAGE> 15
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, of Kemper Global Income Fund as of
December 31, 1996, 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 financial highlights for each of the fiscal periods since 1992. 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, 1996, 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, 1996, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the fiscal periods
since 1992, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
February 18, 1997
13
<PAGE> 16
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------
Investments, at value
(Cost: $128,518) $130,172
- ------------------------------------------------------------------------
Receivable for:
Interest 3,051
- ------------------------------------------------------------------------
Investments sold 7,859
- ------------------------------------------------------------------------
Fund shares sold 82
- ------------------------------------------------------------------------
TOTAL ASSETS 141,164
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ------------------------------------------------------------------------
Cash overdraft 446
- ------------------------------------------------------------------------
Payable for:
Investments purchased 8,373
- ------------------------------------------------------------------------
Fund shares redeemed 246
- ------------------------------------------------------------------------
Management fee 83
- ------------------------------------------------------------------------
Distribution services fee 29
- ------------------------------------------------------------------------
Administrative services fee 24
- ------------------------------------------------------------------------
Custodian and transfer agent fees and related expense 167
- ------------------------------------------------------------------------
Trustees' fees and other 35
- ------------------------------------------------------------------------
Total liabilities 9,403
- ------------------------------------------------------------------------
NET ASSETS $131,761
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- ------------------------------------------------------------------------
Paid-in capital $178,864
- ------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (48,553)
- ------------------------------------------------------------------------
Net unrealized appreciation on investments and assets and
liabilities in foreign currencies 1,450
- ------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $131,761
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
THE PRICING OF SHARES
- ------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($86,240,000 / 9,616,000 shares outstanding) $8.97
- ------------------------------------------------------------------------
Maximum offering price per share (net asset value, plus
4.71% of net asset value or 4.50% of offering price) $9.39
- ------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge)
per share ($44,678,000 / 4,965,000 shares outstanding) $9.00
- ------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge)
per share ($821,000 / 91,000 shares outstanding) $9.02
- ------------------------------------------------------------------------
CLASS I SHARES
Net asset value and redemption price per share
($22,100 / 2,500 shares outstanding) $8.93
- ------------------------------------------------------------------------
</TABLE>
14
<PAGE> 17
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
- -----------------------------------------------------------------------
NET INVESTMENT INCOME
Interest income $10,145
- -----------------------------------------------------------------------
Expenses:
Management fee 1,050
- -----------------------------------------------------------------------
Distribution services fee 351
- -----------------------------------------------------------------------
Administrative services fee 287
- -----------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 555
- -----------------------------------------------------------------------
Professional fees 58
- -----------------------------------------------------------------------
Reports to shareholders 33
- -----------------------------------------------------------------------
Trustees' fees and other 49
- -----------------------------------------------------------------------
Total expenses 2,383
- -----------------------------------------------------------------------
NET INVESTMENT INCOME 7,762
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- -----------------------------------------------------------------------
Net realized gain on sales of investments and foreign
currency transactions 2,418
- -----------------------------------------------------------------------
Change in net unrealized appreciation on investments and
assets and liabilities in foreign currencies (3,104)
- -----------------------------------------------------------------------
Net loss on investments (686)
- -----------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 7,076
- -----------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995
<S> <C> <C>
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
Net investment income $ 7,762 10,293
- ----------------------------------------------------------------------------------------
Net realized gain 2,418 14,530
- ----------------------------------------------------------------------------------------
Change in net unrealized appreciation/depreciation (3,104) 5,108
- ----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 7,076 29,931
- ----------------------------------------------------------------------------------------
Net equalization credits 38 24
- ----------------------------------------------------------------------------------------
Distribution from net investment income (8,878) (19,283)
- ----------------------------------------------------------------------------------------
Net decrease from capital share transactions (19,434) (28,413)
- ----------------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS (21,198) (17,741)
- ----------------------------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------------------------
Beginning of year 152,959 170,700
- ----------------------------------------------------------------------------------------
END OF YEAR
(including undistributed net investment
income of $460 in 1995) $131,761 152,959
- ----------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
15
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF
THE FUND Kemper Global Income Fund is an open-end management
investment company organized as a business trust
under the laws of Massachusetts. The Fund currently
offers four 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 sales charge but
are subject to higher ongoing expenses than Class A
shares and a contingent deferred sales charge
payable upon certain redemptions within one year of
purchase. Class C shares do not convert into
another class. Class I shares, which are sold to a
limited group of investors, are not subject to
initial or contingent deferred sales charges.
Differences in class expenses will result in the
payment of different per share income dividends by
class. All shares of the Fund have equal rights
with respect to voting, dividends and assets,
subject to class specific preferences.
- --------------------------------------------------------------------------------
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. Financial futures and exchange traded
options are valued at the settlement price
established each day by the board of trade or
exchange on which they are traded. Over-the-counter
traded options are valued based upon prices
provided by market makers. Forward foreign currency
contracts 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.
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
16
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
with net realized and unrealized gain or loss from
investments and foreign currency transactions.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on the
trade date (date the order to buy or sell is
executed). Interest income is recorded on the
accrual basis and includes discount amortization on
fixed income securities. Realized gains and losses
from investment transactions are reported on an
identified cost basis.
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 and Class C 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. 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, 1996, amounting to approximately
$47,031,000, is available to offset future taxable
gains. However, of this amount, the availability of
approximately $28,000,000 obtained through prior
fund acquisitions is limited to $7,000,000 per year
from 1998 through 2001. If not applied, the loss
total carryover expires during the period 1999
through 2002.
DIVIDENDS TO SHAREHOLDERS. The Fund declares and
pays dividends of net investment income monthly and
any net realized capital gains annually, which are
recorded on the ex-dividend date. Dividends are
determined in accordance with income tax principles
which may treat certain transactions differently
from generally accepted accounting principles.
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.
17
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The Fund has a management
agreement with Zurich Kemper Investments, Inc.
(ZKI), and pays a management fee at an annual rate
of .75% of the first $250 million of average daily
net assets declining to .62% of average daily net
assets in excess of $12.5 billion. The Fund
incurred a management fee of $1,050,000 for the
year ended December 31, 1996.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
The Fund has an underwriting and distribution
services agreement with Kemper Distributors, Inc.
(KDI). Underwriting commissions paid in connection
with the distribution of Class A shares are as
follows:
<TABLE>
<CAPTION>
COMMISSIONS
ALLOWED BY KDI
COMMISSIONS ---------------------------------
RETAINED BY KDI TO ALL FIRMS TO AFFILIATES
--------------- ------------ -------------
<S> <C> <C> <C>
Year ended December 31, 1996 $31,000 72,000 1,000
</TABLE>
For services under the distribution services
agreement, the Fund pays KDI a fee of .75% of
average daily net assets of the Class B and Class C
shares. Pursuant to the agreement, KDI enters into
related selling group agreements with various firms
at various rates for sales of Class B and Class C
shares. In addition, KDI receives any contingent
deferred sales charges (CDSC) from redemptions of
Class B and Class C shares. Distribution fees and
commissions paid in connection with the sale of
Class B and Class C shares and CDSC received in
connection with the redemption of such shares are
as follows:
<TABLE>
<CAPTION>
COMMISSIONS AND
DISTRIBUTION FEES
DISTRIBUTION FEE PAID BY KDI
AND CDSC ---------------------------------
RECEIVED BY KDI TO ALL FIRMS TO AFFILIATES
---------------- ------------ -------------
<S> <C> <C> <C>
Year ended December 31, 1996 $435,000 181,000 1,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with KDI. For
providing information and administrative services
to Class A, Class B and Class C shareholders, the
Fund pays KDI a fee at an annual rate of up to .25%
of average daily net assets of each class. KDI in
turn has various agreements with financial services
firms that provide these services and pays these
firms based on assets of Fund accounts the firms
service. Administrative services fees (ASF) paid
are as follows:
<TABLE>
<CAPTION>
ASF PAID BY KDI
ASF PAID BY ---------------------------------
THE FUND TO KDI TO ALL FIRMS TO AFFILIATES
--------------- ------------ -------------
<S> <C> <C> <C>
Year ended December 31, 1996 $287,000 291,000 12,000
</TABLE>
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 $264,000
for the year ended December 31, 1996.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of ZKI.
During the year ended December 31, 1996, the Fund
made no direct payments to its officers and
incurred trustees' fees of $17,000 to independent
trustees.
18
<PAGE> 21
[BNOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the year ended December 31, 1996, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $375,031
Proceeds from sales 392,082
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995
--------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 1,139 $ 10,056 1,126 $ 10,635
-------------------------------------------------------------------------------
Class B 1,004 9,060 934 8,823
-------------------------------------------------------------------------------
Class C 138 1,223 42 393
-------------------------------------------------------------------------------
Class I 1 8 3 27
-------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 459 4,021 945 8,702
-------------------------------------------------------------------------------
Class B 210 1,846 418 3,856
-------------------------------------------------------------------------------
Class C 3 28 2 22
-------------------------------------------------------------------------------
SHARES REDEEMED
Class A (3,428) (30,237) (4,728) (43,893)
-------------------------------------------------------------------------------
Class B (1,650) (14,736) (1,801) (16,796)
-------------------------------------------------------------------------------
Class C (78) (692) (19) (182)
-------------------------------------------------------------------------------
Class I (1) (11) -- --
-------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 67 612 106 999
-------------------------------------------------------------------------------
Class B (69) (612) (105) (999)
-------------------------------------------------------------------------------
NET DECREASE
FROM CAPITAL SHARE
TRANSACTIONS $(19,434) $(28,413)
-------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6 FORWARD FOREIGN
CURRENCY CONTRACTS In order to help protect itself against a decline
in the value of particular foreign currencies
against the U.S. Dollar, the Fund has entered into
forward contracts to deliver foreign currency in
exchange for U.S. Dollars as described below. The
Fund bears the market risk that arises from changes
in foreign exchange rates, and accordingly, the net
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, 1996, the Fund's outstanding
forward foreign currency contracts are as follows
(in thousands):
<TABLE>
<CAPTION>
FOREIGN CURRENCY CONTRACT AMOUNT SETTLEMENT UNREALIZED
TO BE DELIVERED IN U.S. DOLLARS DATE GAIN (LOSS)
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
30,060 Australian Dollars $23,820 March '97 $ (36)
------------------------------------------------------------------------
1,606 British Pounds 2,566 January '97 (181)
------------------------------------------------------------------------
3,800 New Zealand Dollars 2,675 March '97 2
------------------------------------------------------------------------
NET UNREALIZED GAIN (LOSS) $(215)
------------------------------------------------------------------------
</TABLE>
20
<PAGE> 23
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------------------------
CLASS A
----------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30,
1996 1995 1994 1993 1993 1992
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $9.05 8.55 9.29 9.21 9.44 9.26
- --------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .52 .61 .60 .27 .72 .76
- --------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.02) 1.05 (.74) .16 (.17) .22
- --------------------------------------------------------------------------------------------------------
Total from investment operations .50 1.66 (.14) .43 .55 .98
- --------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .58 1.16 .38 -- .72 .73
- --------------------------------------------------------------------------------------------------------
Distribution from net realized gain -- -- -- .11 .06 .07
- --------------------------------------------------------------------------------------------------------
Tax return of capital distribution -- -- .22 .24 -- --
- --------------------------------------------------------------------------------------------------------
Total dividends .58 1.16 .60 .35 .78 .80
- --------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.97 9.05 8.55 9.29 9.21 9.44
- --------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 5.87% 19.89 (1.47) 4.73 6.16 10.77
- --------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------------------------------
Expenses 1.48% 1.34 1.53 1.29 1.52 1.53
- --------------------------------------------------------------------------------------------------------
Net investment income 5.77% 6.43 6.67 5.75 7.87 8.32
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------
CLASS B
-----------------------------------------------
MAY 31
TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
1996 1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------------
Net asset value, beginning of period $9.09 8.56 8.70
- ---------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .46 .56 .30
- ---------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.02) 1.05 (.14)
- ---------------------------------------------------------------------------------------------
Total from investment operations .44 1.61 .16
- ---------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .53 1.08 .19
- ---------------------------------------------------------------------------------------------
Tax return of capital distribution -- -- .11
- ---------------------------------------------------------------------------------------------
Total dividends .53 1.08 .30
- ---------------------------------------------------------------------------------------------
Net asset value, end of period $9.00 9.09 8.56
- ---------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 5.11% 19.21 1.89
- ---------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ---------------------------------------------------------------------------------------------
Expenses 2.14% 1.98 2.27
- ---------------------------------------------------------------------------------------------
Net investment income 5.11% 5.79 5.89
- ---------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 24
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
------------------------------ ------------------------------
CLASS C CLASS I
------------------------------ ------------------------------
MAY 31 NOVEMBER 22
YEAR ENDED TO YEAR ENDED TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1996 1995
- ---------------------------------------------------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------- ------------------------------
Net asset value, beginning of period $9.09 8.56 8.70 9.05 9.57
- ---------------------------------------------------------------------------- ------------------------------
Income from investment operations:
Net investment income .48 .57 .30 .51 .07
- ---------------------------------------------------------------------------- ------------------------------
Net realized and unrealized gain (loss) (.02) 1.05 (.14) (.02) (.03)
- ---------------------------------------------------------------------------- ------------------------------
Total from investment operations .46 1.62 .16 .49 .04
- ---------------------------------------------------------------------------- ------------------------------
Less dividends:
Distribution from net investment income .53 1.09 .19 .61 .56
- ---------------------------------------------------------------------------- ------------------------------
Tax return of capital distribution -- -- .11 -- --
- ---------------------------------------------------------------------------- ------------------------------
Total dividends .53 1.09 .30 .61 .56
- ---------------------------------------------------------------------------- ------------------------------
Net asset value, end of period $9.02 9.09 8.56 8.93 9.05
- ---------------------------------------------------------------------------- ------------------------------
TOTAL RETURN (NOT ANNUALIZED) 5.31% 19.26 1.91 5.81 .43
- ---------------------------------------------------------------------------- ------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ---------------------------------------------------------------------------- ------------------------------
Expenses 2.06% 2.06 2.23 1.53 .88
- ---------------------------------------------------------------------------- ------------------------------
Net investment income 5.19% 5.71 5.93 5.72 6.40
- ---------------------------------------------------------------------------- ------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ---------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30,
1996 1995 1994 1993 1993 1992
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net assets at end of year (in thousands) $131,761 152,959 170,700 83,021 78,068 71,790
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 276% 220 378 484 372 292
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Total return does not reflect the effect of any sales charges. Per share
data for 1996 was determined based on average shares outstanding during
the period.
22
<PAGE> 25
NOTES
23
<PAGE> 26
TRUSTEES & OFFICERS
TRUSTEES OFFICERS
STEPHEN B. TIMBERS J. PATRICK BEIMFORD, JR.
President and Trustee Vice President
DAVID W. BELIN CHARLES R. MANZONI, JR.
Trustee Vice President
LEWIS A. BURNHAM JOHN E. NEAL
Trustee Vice President
DONALD L. DUNAWAY PHILIP J. COLLORA
Trustee Vice President
and Secretary
ROBERT B. HOFFMAN JEROME DUFFY
Trustee Treasurer
DONALD R. JONES ELIZABETH C. WERTH
Trustee Assistant Secretary
DOMINIQUE P. MORAX
Trustee
SHIRLEY D. PETERSON
Trustee
WILLIAM P. SOMMERS
Trustee
- --------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICE AGENT KEMPER SERVICE COMPANY
P.O. Box 419557
Kansas City, MO 64141
- --------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
127 West 10th Street
Kansas City, MO 64105
- --------------------------------------------------------------------------------
FOREIGN CUSTODIAN THE CHASE MANHATTAN BANK
Chase Metro Tech Center
Brooklyn, NY 11245
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
- --------------------------------------------------------------------------------
INVESTMENT MANAGER ZURICH KEMPER INVESTMENTS, INC.
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 Riverside Plaza Chicago, IL 60606
http://www.kemper.com
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Printed on recycled paper in the U.S.A.
This report is not to be distributed unless preceded
or accompanied by a Kemper Global Income
Fund prospectus.
KGIF - 2 (2/97) 1028490
Printed in the U.S.A. [KEMPER FUNDS LOGO]
