<PAGE> 1
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED DECEMBER 31, 1997
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
[LOGO]
Seeks high current income consistent with prudent total
return asset management by investing primarily in investment
grade foreign and domestic fixed income securities.
KEMPER
GLOBAL INCOME FUND
"... We continued our long-term approach and
commitment to government and supranational
bonds with very high credit quality. At the end of
the year, we were at 66 percent AAA-rated issues,
30 percent AA-rated and the rest cash ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
Economic Overview
5
Performance Update
8
Market Performance
9
Country Concentrations
10
Portfolio Statistics
11
Portfolio of
Investments
13
Report of
Independent Auditors
14
Financial Statements
16
Notes to
Financial Statements
20
Financial Highlights
22
Shareholders'
Meeting
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER GLOBAL INCOME FUND
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 1.80%
CLASS B 1.03%
CLASS C 1.09%
LIPPER GENERAL WORLD
INCOME FUNDS CATEGORY AVERAGE* 3.00%
- --------------------------------------------------------------------------------
</TABLE>
Returns and rankings are historical and do not reflect future results. 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.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
12/31/97 12/31/96
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER GLOBAL INCOME
FUND CLASS A $8.58 $8.97
- --------------------------------------------------------------------------------
KEMPER GLOBAL INCOME
FUND CLASS B $8.60 $9.00
- --------------------------------------------------------------------------------
KEMPER GLOBAL INCOME
FUND CLASS C $8.62 $9.02
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
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 #80 of #96 of #92 of
139 funds 139 funds 139 funds
- --------------------------------------------------------------------------------
5-YEAR #23 of n/a n/a
50 funds
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND AND YIELD REVIEW
- --------------------------------------------------------------------------------
THE FOLLOWING TABLE SHOWS PER SHARE DISTRIBUTION AND YIELD INFORMATION FOR THE
FUND AS OF DECEMBER 31, 1997.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
ONE-YEAR
DISTRIBUTION: $0.5400 $0.4835 $0.4888
- --------------------------------------------------------------------------------
DECEMBER
DIVIDENDS: $0.0425 $0.0378 $0.0385
- --------------------------------------------------------------------------------
ANNUALIZED
DISTRIBUTION
RATE+: 5.94% 5.27% 5.36%
- --------------------------------------------------------------------------------
SEC YIELD+: 3.71% 3.17% 3.26%
- --------------------------------------------------------------------------------
</TABLE>
+ Current annualized distribution rate is the latest monthly dividend shown as
an annualized percentage of net asset value on December 31, 1997.
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, 1997 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
YOUR FUND'S STYLE
- --------------------------------------------------------------------------------
MORNINGSTAR FIXED INCOME STYLE BOX
- --------------------------------------------------------------------------------
[MATURITY/QUALITY DIAGRAM]
Source: Morningstar, Inc., Chicago, IL (312) 696-6000. (Morningstar Style Box
is based on a portfolio date as of December 31, 1997.) The Fixed-Income
Style Box placement is based on a fund's average effective maturity or duration
and the average credit rating of the bond portfolio.
Please note that style boxes do not represent an exact assessment of risk and
do not represent future performance. Please consult the prospectus for a
description of investment policies.
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 Duration is 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.
EUROPEAN MONETARY UNION An economic and monetary unification of European
countries to ultimately introduce a single currency and create a more
economically competitive region.
<PAGE> 3
ECONOMIC OVERVIEW
[ALLYN PHOTO]
MAUREEN F. ALLYN, A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.,
SERVES AS THE FIRM'S CHIEF ECONOMIST. ALLYN GRADUATED SUMMA CUM LAUDE FROM
OAKLAND UNIVERSITY NEAR DETROIT, WITH A BACHELOR'S DEGREE IN PSYCHOLOGY. SHE
RECEIVED HER MASTER'S IN ECONOMICS, WITH A SPECIALIZATION IN INTERNATIONAL TRADE
AND FINANCE, FROM THE NEW SCHOOL FOR SOCIAL RESEARCH IN NEW YORK.
SCUDDER KEMPER INVESTMENTS, INC. IS THE INVESTMENT ADVISOR FOR KEMPER FUNDS. IT
IS ONE OF THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS
WORLDWIDE, MANAGING MORE THAN $200 BILLION IN ASSETS GLOBALLY FOR MUTUAL FUND
INVESTORS, RETIREMENT AND PENSION PLANS, INSTITUTIONAL AND CORPORATE CLIENTS,
INSURANCE COMPANIES AND PRIVATE, FAMILY AND INDIVIDUAL ACCOUNTS. IT IS ONE OF
THE 10 LARGEST MUTUAL FUND COMPANIES IN THE UNITED STATES.
DEAR SHAREHOLDERS,
We start 1998 optimistic about the long-term prospects of the U.S. economy and
financial markets but cautious about the next several months. The Asian
financial crisis that dominated the global investment environment in the second
half of 1997 promises to continue, posing significant risks to the economy and
investors. We look for the strength of the American consumer -- currently
enjoying rising real incomes, better employment opportunities, lower mortgage
rates and easy access to credit -- and the secular strength of the trend toward
capital spending on high technology to be sufficient to override the influence
of Asia on the U.S. In short, our best case scenario calls for the U.S. to
muddle through an unsettling period.
As it has for several years, the country should continue to enjoy
relatively low interest rates and low inflation. But the new year will be
different in at least two ways, both of which can be expected to have direct
bearing on investment opportunities.
First, the economy should grow at a much slower pace. A slowdown in Asia
will depress capital goods spending and heighten import pricing pressure,
putting a damper on American corporations' pricing and profit growth at least
through 1999. While the U.S. economy grew at an almost 4 percent rate in 1997,
we look for no better than 2 percent growth for the next two years -- with more
than half of the change attributable to the effect of the Asian fallout.
Disappointing corporate profits is another given for 1998. Profits had
begun to slow last year even before the height of the Asian crisis. High current
valuations, however, seem to suggest that Wall Street has yet to recognize this.
The clash between Wall Street profit expectations and actual reported earnings
is part of the risk likely to be associated with equity investing in 1998.
Volatility, such as we experienced in 1997, should continue. In fact, the
overall market volatility is not likely to reflect the turmoil that individual
equities may experience. There will be a narrowing of the number of companies
able to meet analysts' expectations and this market will be absolutely
unforgiving to those companies that fall far short.
Having stated this, however, we look for the Standard & Poor's 500 to
return about 9.5 percent, including the effect of reinvested dividends. This
would be an average return and in line with the historical long-term 10 percent
return of the stock market. On the heels of the last three 20 percent-plus
return years, an investor in 1998 may weigh the 10 percent prospect against a
projected 7 percent total return on bonds and consider the difference
insufficient compensation for the inherent added risk. Adopting a more
conservative posture for the new year may be an appropriate step that you'll
want to discuss with your financial representative in the context of your
long-term investing objectives.
To achieve a 9.5 percent return in 1998, the market's already high
valuations need to move even higher. We expect this to occur for a few
reasons: the market has so far demonstrated a certain complacency about the
valuation levels; American investors don't perceive there's anywhere better to
go than the U.S. equity market; and foreigners think of the U.S. market as a
safe haven. All should help support the market.
Where, then, are the opportunities likely to be in 1998? Expect to see
disparate performance within industry sectors. For example, while the financial
services sector in 1997 tended to provide across-the-board strong performance,
in 1998 we expect the sector to include its share of winners and losers. Stock
selection will be key, too, to benefiting from the technology sector. Over the
long term, we are optimistic about technology and corporate America's continuing
commitment to it. It will be difficult to participate in a market return in 1998
without having some exposure to technology-based companies. One caution: Not all
technology companies will survive the year, which raises the risk of investing
in the sector.
Conventional wisdom might argue in favor of remaining in the U.S. with your
investment dollars in 1998 and, more specifically, invested in small
capitalization companies with domestic lines of business. We'd challenge such
thinking as slower growth, slower inflation and even
3
<PAGE> 4
ECONOMIC OVERVIEW
- --------------------------------------------------------------------------------
ECONOMIC GUIDEPOSTS
- --------------------------------------------------------------------------------
Economic activity is a key influence on investment performance and shareholder
decision-making. Periods of recession or boom, inflation or deflation, credit
expansion or credit crunch have a significant impact on mutual fund
performance.
The following are some significant economic guideposts and their
investment rationale that may help your investment decision-making. The 10-year
Treasury rate and the prime rate are prevailing interest rates. The other data
report year-to-year percentage changes.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (1/31/98) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1) 5.54 6.3 6.42 5.81
PRIME RATE(2) 8.5 8.5 8.25 8.25
INFLATION RATE(3)* 1.7 2.23 3.04 2.72
THE U.S. DOLLAR(4)* 10.43 7.32 4.59 -0.57
CAPITAL GOODS ORDERS(5)* 14.6 11.13 3.61 3.73
INDUSTRIAL PRODUCTION(5)* 5.95 4.69 5.19 1.58
EMPLOYMENT GROWTH(6) 2.74 2.09 2.2 1.74
</TABLE>
(1) Falling interest rates in recent years have been a big plus for financial
assets.
(2) The interest rate that commercial lenders charge their best borrowers.
(3) Inflation reduces an investor's real return. In the last five years,
inflation has been as high as 6 percent. The low, moderate inflation of the
last few years has meant high real returns.
(4) Changes in the exchange value of the dollar impact U.S. exporters and the
value of U.S. firms' foreign profits.
(5) These influence corporate profits and equity performance.
(6) An influence on family income and retail sales.
* Data as of December 31, 1997.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
deflation and pricing pressures change the U.S. economic climate. The only real
antidote is growth, and from now on growth is more likely to be found outside
the United States. Today to participate in the growth from global business you'd
need to be exposed to large capitalization companies.
International investing is a promising proposition in 1998, the Asian
fallout notwithstanding. In established markets, there are attractive
opportunities to be found in Europe and in Japan. Several Japanese companies
have real cash flows and even relatively attractive valuations. In addition, the
effect of the Asian problems has not been to discourage all investment into
emerging markets; rather investors have tended to divert investment dollars and
business to other increasingly attractive emerging markets in eastern Europe,
the Middle East, Africa and Latin America.
With that as an economic backdrop, we encourage you to read the following
detailed report of your fund, including an interview with your fund's portfolio
management. Thank you for your continued support. We appreciate the opportunity
to serve your investment needs.
Sincerely,
/s/ Maureen Allyn
MAUREEN ALLYN
CHIEF ECONOMIST, SCUDDER KEMPER INVESTMENTS, INC.
January 29, 1998
4
<PAGE> 5
PERFORMANCE UPDATE
[JOHNS PHOTO]
GORDON JOHNS JOINED WHAT IS NOW SCUDDER KEMPER INVESTMENTS, INC. IN 1988 AND IS
THE CHIEF INVESTMENT OFFICER OF GLOBAL BONDS FOR SCUDDER KEMPER INVESTMENTS, AND
PORTFOLIO 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
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
INTERNATIONAL BOND MARKETS AS A WHOLE HAD STRONG RETURNS FOR 1997 IN LOCAL
CURRENCY TERMS AS LONG-TERM INTEREST RATES FELL IN MOST DEVELOPED
COUNTRIES. HOWEVER, BOND MARKET GAINS WERE OFFSET FOR U.S. INVESTORS BY
DEPRECIATION OF FOREIGN CURRENCIES AGAINST THE U.S. DOLLAR. PORTFOLIO MANAGER
GORDON JOHNS PLACES THE RESULTS IN PERSPECTIVE.
Q GORDON, HOW WOULD YOU DESCRIBE THE INTERNATIONAL AND SUPRANATIONAL BOND
MARKETS IN 1997?
A Over the year the fund's bonds achieved satisfactory returns as long-term
interest rates dropped in most countries in the developed world. The United
Kingdom (up 14.8 percent in local currency terms, or 10.3 percent in U.S. dollar
terms) performed particularly well during the period.
Recognizing the steady growth and low inflation in dollar bloc countries
(the United States, Canada, Australia and New Zealand), we increased our
position in the U.S. dollar from 30 percent of net assets under management at
the end of 1996, to more than 54 percent one year later. This strategy helped
the fund as the dollar strengthened by offsetting some of the negative
exchange-rate effects of the dollar's appreciation against foreign currencies.
Yields of government bonds of the major developed countries declined more
sharply from October onward in a "flight to quality" ignited by the problems in
Southeast Asia.
Q HOW DID THIS "FLIGHT TO QUALITY" AFFECT THE FUND?
A During this volatile time we saw, once again, the value of the fund's
conservative approach in managing its international bond portfolio. Because the
Kemper Global Income Fund invests only in developed markets, we avoided the
drops seen in many emerging markets, for example. Throughout the year, we
continued our commitment to government and supranational bonds with very high
credit quality. At the end of the year, our credit ratio was 66 percent
AAA-rated issues, 30 percent AA-rated and the rest cash. Maturities remained in
the intermediate range at five to seven years.
Careful portfolio management in the selection of currencies and markets
enabled the fund to meet its objective of providing competitive bond market
returns. For the fiscal year, the fund was up 1.80 percent (Class A shares,
unadjusted for any sales charge) compared to a 0.23 percent return by the fund's
benchmark index, the Salomon Brothers World Government Bond Index. The fund's
performance did lag its category average for the period due largely to
differences in the fund's holdings compared to its peers. Over the long-term
however, the fund is outperforming its peer group average with a 7.01 percent
five-year return (Class A shares, unadjusted for sales charge) compared to the
Lipper Global Income Funds category average of 6.83 percent for the same period.
Q WHICH COUNTRIES DID YOU FAVOR?
A One of our bigger positions, ranging from 14 to 20 percent of net assets
under management during the year, has been the United Kingdom, which was the
top-performing market this year in local
5
<PAGE> 6
PERFORMANCE UPDATE
and U.S. dollar terms. The UK was helped by a number of things. First, the
election of a new Labour government in May was regarded as positive by the
market. The economic and fiscal actions taken by the party following the
election were also viewed favorably. After much debate, it became apparent
during 1997 that the UK will take part in European Monetary Union (EMU), and
therefore the process of reducing interest rates to bring the UK into line with
the EMU member-countries of Continental Europe is underway. This has been a
powerful force in reducing interest rates at the long end of the UK market and
therefore producing good performance from the government bond market.
Independently, sterling has also been strong on the foreign exchange markets.
Australia was another country in which we had a large position during the
year, ranging up to 20 percent of the portfolio. This investment was successful
over the first half of the year but the Australian dollar did suffer in the
second half of the year due to the ripple effects of the problems in Southeast
Asia. This currency weakness affected not only the currency but also the bond
market.
Japan, another large position, was increased to 13 percent in November
from 5 percent earlier in the year. Japan is the second-largest bond market in
the world and despite recent pessimism, the Japanese market performed quite well
during the year, with a 6.6 percent return in local currency terms. However, the
financial tightening at the start of 1998 has caused the fragile economic
recovery to fade which, combined with the high level of bad debts and flat
inflation should keep yields at low levels.
Kemper Global Income Fund's North American bond market exposure was 19
percent at the end of the fiscal year with investments in U.S. Treasuries and
in a Eurobond of Canada, a bond denominated in U.S. dollars but sold to
investors outside the country. The investment in the Canadian bond market was
made after spreads widened in November.
Q HAS YOUR CONSERVATIVE INVESTMENT APPROACH CAUSED YOU NOT TO PURSUE ANY
INVESTMENT OPTIONS OR MISS ANY OPPORTUNITIES?
A We did not invest in Spain and Portugal, which are countries that received
favorable price action from the market in anticipation of their joining EMU in
1999. Their entry into the single-currency was still uncertain, and we were
cautious about the possibility of substantial declines in price if an obstacle
to EMU entry is encountered. This approach did affect our performance relative
to our peers and may have cost us some short-term return. Going forward, we do
expect these two countries to be part of the 11 that join EMU at the start. We
will be assessing the Euro market as a block and considering investment
possibilities in these 11 countries as there will still be credit spreads
between them.
Q WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS?
A If you look at bond markets strictly in local currency terms, they have
performed remarkably well now for over three years. But, we believe they have
reached a level where we need to be a little cautious about their future
prospects. What caused the bond markets to rally during the second half of 1997
was the Southeast Asian crisis, which effectively cooled inflation and reduced
the rate of world growth, at least in developed markets. Interest rates both
short-and long-term are lower than they would have been otherwise. If this
tempered environment remains, bond markets may continue to be well supported and
continue to perform at their current levels. There is certainly no sign of what
Mr. Greenspan, Director of the Federal Reserve Board, called "irrational
exuberance" in regard to the stock market. Such signs were prevalent in the
market of 1993 before we went into the severe bond market correction of 1994. So
while valuations of bond markets worldwide are not cheap, the economic
background is supportive of bonds. We don't feel one should be actively bearish;
but we are not seeing huge buying opportunities in bond markets either.
Q AND WHAT IS YOUR OUTLOOK FOR CURRENCIES?
A It looks as if the dollar is going to remain reasonably strong unless
there is a change in the current economic environment. For example, if U.S.
growth were to slow, the Fed might move to reduce short-term interest rates. If
this happened, U.S.-based investors would see less depreciation in their dollar-
based returns. We will maintain our U.S. dollar currency weight at around 54
percent within the current economic environment. At year end our Australia
exposure and part of our United Kingdom and New Zealand exposures were hedged
into U.S. dollars which brought us to an over 50 percent dollar weighting.
6
<PAGE> 7
PERFORMANCE UPDATE
- --------------------------------------------------------------------------------
KEMPER GLOBAL INCOME FUND
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
FOR PERIODS ENDED DECEMBER 31, 1997 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
1-YEAR 5-YEAR LIFE OF CLASS
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEMPER GLOBAL INCOME FUND CLASS A -2.75% 6.03% 7.94% (since 10/1/89)
- -------------------------------------------------------------------------------------------------
KEMPER GLOBAL INCOME FUND CLASS B -1.84 n/a 6.89 (since 5/31/94)
- -------------------------------------------------------------------------------------------------
KEMPER GLOBAL INCOME FUND CLASS C 1.09 n/a 7.44 (since 5/31/94)
- -------------------------------------------------------------------------------------------------
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
Kemper Global Income Fund Class A
Growth of an assumed $10,000 investment in
Kemper Global Income Fund Class A shares from 10/1/89 to 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
10/1/89 12/31/92 12/31/95 12/31/97
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kemper Global Income Fund Class A(1) 10000 13388 17432 18783
Salomon Brothers World Government Bond Index+ 10000 14094 19451 20204
Consumer Price Index++ 10000 11352 12280 12920
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
Kemper Global Income Fund Class B
Growth of an assumed $10,000 investment in
Kemper Global Income Fund Class B shares from 5/31/94 to 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
5/31/94 12/31/95 12/31/96 12/31/97
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kemper Global Income Fund Class B(1) 10000 12146 12762 12696
Salomon Brothers World Government Bond Index+ 10000 10407 10753 10949
Consumer Price Index++ 10000 12276 12721 12752
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
Kemper Global Income Fund Class C
Growth of an assumed $10,000 investment in
Kemper Global Income Fund Class C shares from 5/31/94 to 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
5/31/94 12/31/95 12/31/96 12/31/97
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kemper Global Income Fund Class C(1) 10000 12154 12795 12935
Salomon Brothers World Government Bond Index+ 10000 10407 10753 10949
Consumer Price Index++ 10000 12276 12721 12752
</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.
* 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
percent and for Class B shares adjustment for the applicable contingent
deferred sales charge (CDSC) as follows: 1-year, 3 percent; 5-year,
1 percent; since inception, 0 percent. For Class C shares there is no
adjustment for sales charge. The maximum CDSC for Class B shares is
4 percent. For Class C shares, there is a 1 percent 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 Class A shares and the CDSC in effect at the end
of the period for Class 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 percent 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.
7
<PAGE> 8
MARKET PERFORMANCE
U.S. DOLLAR WEAKENS 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, 1997, expressed
in U.S. dollar terms. This information is historical and does not reflect future
returns of these markets.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
COUNTRY U.S. DOLLAR TERMS LOCAL CURRENCY
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
1. UNITED KINGDOM 10.34% 14.76%
- -------------------------------------------------------------------------------
2. UNITED STATES 9.64 9.64
- -------------------------------------------------------------------------------
3. CANADA 5.09 9.73
- -------------------------------------------------------------------------------
4. SWITZERLAND -1.87 6.59
- -------------------------------------------------------------------------------
5. ITALY -2.11 13.82
- -------------------------------------------------------------------------------
6. JAPAN -4.84 6.60
- -------------------------------------------------------------------------------
7. IRELAND -5.11 12.68
- -------------------------------------------------------------------------------
8. SPAIN -5.54 10.69
- -------------------------------------------------------------------------------
9. DENMARK -6.02 9.09
- -------------------------------------------------------------------------------
10. PORTUGAL -6.55 10.67
- -------------------------------------------------------------------------------
11. AUSTRALIA -7.10 13.24
- -------------------------------------------------------------------------------
12. NORWAY -7.12 7.24
- -------------------------------------------------------------------------------
13. SWEDEN -7.19 7.85
- -------------------------------------------------------------------------------
14. FRANCE -7.40 7.15
- -------------------------------------------------------------------------------
15. BELGIUM -8.58 6.64
- -------------------------------------------------------------------------------
16. GERMANY -9.01 6.16
- -------------------------------------------------------------------------------
17. FINLAND -9.20 7.28
- -------------------------------------------------------------------------------
18. NETHERLANDS -9.23 6.38
- -------------------------------------------------------------------------------
19. AUSTRIA -9.26 5.91
- -------------------------------------------------------------------------------
20. NEW ZEALAND -12.32 6.69
- -------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 9
COUNTRY CONCENTRATIONS
GEOGRAPHIC COMPOSITION OF KEMPER GLOBAL INCOME FUND
Based on total investments on December 31, 1997
[BAR GRAPH]
<TABLE>
<S> <C>
UNITED STATES 19%
AUSTRALIA 19%
UNITED KINGDOM 14%
JAPAN 13%
FRANCE 10%
NEW ZEALAND 10%
GERMANY 7%
CANADA 5%
ITALY 3%
</TABLE>
9
<PAGE> 10
PORTFOLIO STATISTICS
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
ON 12/31/97 ON 12/31/96
- -------------------------------------------------------------------------
<S> <C> <C>
FOREIGN/U.S. GOVERNMENT
SECURITIES 91% 94%
- -------------------------------------------------------------------------
OTHER** 5 5
- -------------------------------------------------------------------------
CASH AND EQUIVALENTS 4 1
- -------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 12/31/97 ON 12/31/96
[] Foreign/U.S. government
securities
[] Other**
[] Cash and equivalents
* Portfolio composition is subject to change
** Includes supranational entities and corporates guaranteed by governments
AVERAGE MATURITY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
ON 12/31/97 ON 12/31/96
- ------------------------------------------------------------------------
<S> <C> <C>
AVERAGE MATURITY 6.9 years 6.5 years
- ------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
KEMPER GLOBAL INCOME FUND
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
LOCAL CURRENCY U.S. DOLLAR
CURRENCY ISSUER PRINCIPAL VALUE
- ----------------------------------------------------------------------------------------------------------------------
GOVERNMENT OBLIGATIONS (91.3%) AND CORPORATE OBLIGATIONS (5.0%)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. DOLLAR--18.4% Government of Canada, 6.375%, 2005 9,200 $ 9,374
U.S. Treasury Bonds, 7.50%, 2016 2,850 3,315
U.S. Treasury Notes, 6.375%, 2000 5,500 5,573
--------------------------------------------------------------------------------
18,262
- ----------------------------------------------------------------------------------------------------------------------
AUSTRALIAN DOLLAR--17.9% Commonwealth of Australia
9.75%, 2002 4,600 3,455
8.75%, 2008 2,600 2,045
Federal National Mortgage Association,
6.50%, 2002 5,000 3,344
New South Wales Treasury Corp., 8.00%, 2001 6,250 4,385
Queensland Treasury Corp., 6.50%, 2005 6,800 4,534
--------------------------------------------------------------------------------
17,763
- ----------------------------------------------------------------------------------------------------------------------
BRITISH POUND--13.6% Export-Import Bank of the United States,
8.00%, 2007 2,750 4,912
Republic of Finland, 7.00%, 2000 2,250 3,729
United Kingdom
7.25%, 2007 500 885
8.00%, 2015 2,000 3,917
--------------------------------------------------------------------------------
13,443
- ----------------------------------------------------------------------------------------------------------------------
JAPANESE YEN--12.9% Government of Austria, 4.50%, 2005 400,000 3,681
Kingdom of Belgium, 5.00%, 1999 350,000 2,915
Kingdom of Spain, 3.10%, 2006 400,000 3,370
Republic of Italy, 5.00%, 2004 300,000 2,793
--------------------------------------------------------------------------------
12,759
- ----------------------------------------------------------------------------------------------------------------------
FRENCH FRANC--9.7% French Treasury
6.75%, 2003 14,100 2,570
6.75%, 2004 9,500 1,740
7.75%, 2005 8,500 1,652
6.00%, 2025 6,000 1,016
Kingdom of Spain, 6.50%, 2001 15,000 2,642
--------------------------------------------------------------------------------
9,620
- ----------------------------------------------------------------------------------------------------------------------
NEW ZEALAND DOLLAR--9.4% Government of New Zealand
6.50%, 2000 5,700 3,256
8.00%, 2004 10,000 6,076
--------------------------------------------------------------------------------
9,332
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
LOCAL CURRENCY U.S. DOLLAR
CURRENCY ISSUER PRINCIPAL VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GERMAN DEUTSCHEMARK--6.6% Federal Republic of Germany, 8.00%, 2002 6,400 $ 4,011
Province of Ontario, 6.25%, 2004 4,350 2,533
--------------------------------------------------------------------------------
6,544
- ----------------------------------------------------------------------------------------------------------------------
CANADIAN DOLLAR--4.6% Government of Canada
8.00%, 1999 2,850 1,982
7.00%, 2006 2,300 1,757
8.00%, 2027 900 803
--------------------------------------------------------------------------------
4,542
- ----------------------------------------------------------------------------------------------------------------------
ITALIAN LIRA--3.2% Italian Treasury, 12.00%, 2003 4,300,000 3,133
--------------------------------------------------------------------------------
TOTAL INVESTMENTS--96.3%
(Cost: $98,589) 95,398
--------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES--3.7% 3,656
--------------------------------------------------------------------------------
NET ASSETS--100% $99,054
--------------------------------------------------------------------------------
</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 $98,589,000 for federal income tax purposes
at December 31, 1997, the gross unrealized appreciation was $1,497,000, the
gross unrealized depreciation was $4,688,000 and the net unrealized depreciation
on investments was $3,191,000.
See accompanying Notes to Financial Statements.
12
<PAGE> 13
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, 1997, the related statements of operations for the year then ended
and changes in net assets for each of the two years in the period then ended,
and the financial highlights for each of the fiscal periods since 1993. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
December 31, 1997, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Kemper Global Income Fund at December 31, 1997, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended and the financial highlights for each of the
fiscal periods since 1993, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Chicago, Illinois
February 17, 1998
13
<PAGE> 14
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------
Investments, at value
(Cost: $98,589) $ 95,398
- ------------------------------------------------------------------------
Receivable for:
Interest 2,019
- ------------------------------------------------------------------------
Investments sold 3,193
- ------------------------------------------------------------------------
Fund shares sold 10
- ------------------------------------------------------------------------
TOTAL ASSETS 100,620
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ------------------------------------------------------------------------
Cash overdraft 761
- ------------------------------------------------------------------------
Payable for:
Investments purchased 201
- ------------------------------------------------------------------------
Fund shares redeemed 418
- ------------------------------------------------------------------------
Management fee 62
- ------------------------------------------------------------------------
Distribution services fee 17
- ------------------------------------------------------------------------
Administrative services fee 17
- ------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 50
- ------------------------------------------------------------------------
Trustees' fees and other 40
- ------------------------------------------------------------------------
Total liabilities 1,566
- ------------------------------------------------------------------------
NET ASSETS $ 99,054
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- ------------------------------------------------------------------------
Paid-in capital $150,771
- ------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (50,858)
- ------------------------------------------------------------------------
Net unrealized depreciation on investments and assets and
liabilities in foreign currencies (859)
- ------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $ 99,054
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
THE PRICING OF SHARES
- ------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($72,145 / 8,405 shares outstanding) $8.58
- ------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 4.71% of
net asset value or 4.50% of offering price) $8.98
- ------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($25,735 / 2,994 shares outstanding) $8.60
- ------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($1,149 / 133 shares outstanding) $8.62
- ------------------------------------------------------------------------
CLASS I SHARES
Net asset value and redemption price per share
($25 / 3 shares outstanding) $8.47
- ------------------------------------------------------------------------
</TABLE>
14
<PAGE> 15
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- -----------------------------------------------------------------------
NET INVESTMENT INCOME
- -----------------------------------------------------------------------
Interest income $ 7,879
- -----------------------------------------------------------------------
Expenses:
Management fee 858
- -----------------------------------------------------------------------
Distribution services fee 279
- -----------------------------------------------------------------------
Administrative services fee 238
- -----------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 339
- -----------------------------------------------------------------------
Professional fees 63
- -----------------------------------------------------------------------
Reports to shareholders 33
- -----------------------------------------------------------------------
Trustees' fees and other 24
- -----------------------------------------------------------------------
Total expenses 1,834
- -----------------------------------------------------------------------
NET INVESTMENT INCOME 6,045
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
- -----------------------------------------------------------------------
Net realized loss on sales of investments and foreign
currency transactions (2,323)
- -----------------------------------------------------------------------
Change in net unrealized depreciation on investments and
assets and liabilities in foreign currencies (2,309)
- -----------------------------------------------------------------------
Net loss on investments (4,632)
- -----------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,413
- -----------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996
- -------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income $ 6,045 7,762
- -------------------------------------------------------------------------------------------
Net realized gain (loss) (2,323) 2,418
- -------------------------------------------------------------------------------------------
Change in net unrealized depreciation (2,309) (3,104)
- -------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,413 7,076
- -------------------------------------------------------------------------------------------
Net equalization credits -- 38
- -------------------------------------------------------------------------------------------
Distribution from net investment income (6,027) (8,878)
- -------------------------------------------------------------------------------------------
Tax return of capital distribution (860) --
- -------------------------------------------------------------------------------------------
Total dividends to shareholders (6,887) (8,878)
- -------------------------------------------------------------------------------------------
Net decrease from capital share transactions (27,233) (19,434)
- -------------------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS (32,707) (21,198)
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------
Beginning of year 131,761 152,959
- -------------------------------------------------------------------------------------------
END OF YEAR $ 99,054 131,761
- -------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
15
<PAGE> 16
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. Exchange traded financial futures and
options are valued at the settlement price
established each day by the board of trade or
exchange on which they are traded. Over-the-counter
traded options are valued based upon prices
provided by market makers. Forward foreign currency
contracts 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 rates of exchange are
determined in good faith by the Board of Trustees.
Income and expenses and purchases and sales of
investments are translated into U.S. dollars at the
rates of exchange prevailing on the respective
dates of such transactions. The Fund includes that
portion of the results of operations resulting from
changes in foreign exchange rates with net realized
and unrealized gain or loss on investments, as
appropriate.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on the
trade date (date the order to buy or sell is
executed). 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.
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
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
class by dividing the Fund's net assets
attributable to that class by the number of shares
of the class outstanding. 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, 1997, amounting to approximately
$45,427,000, is available to offset future taxable
gains. However, of this amount, the availability of
approximately $21,000,000 obtained through prior
fund acquisitions is limited to $7,000,000 per year
from 1999 through 2001. If not applied, the total
loss 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.
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES INVESTMENT MANAGER COMBINATION. Effective December
31, 1997, Zurich Insurance Company, the parent of
Zurich Kemper Investments, Inc. (ZKI), acquired a
majority interest in Scudder, Stevens & Clark, Inc.
(Scudder), another major investment manager. As a
result of this transaction, the operations of ZKI
were combined with Scudder to form a new global
investment organization named Scudder Kemper
Investments, Inc. (Scudder Kemper). The transaction
resulted in the termination of the Fund's
investment management agreement with ZKI, however,
a new investment management agreement between the
Fund and Scudder Kemper was approved by the Fund's
Board of Trustees and by the Fund's Shareholders.
The new management agreement, which is effective
December 31, 1997, is the same in all material
respects as the previous management agreement,
except that Scudder Kemper is the new investment
adviser to the Fund. In addition, the names of the
Fund's principal underwriter and shareholder
service agent were changed to Kemper Distributors,
Inc. (KDI) and Kemper Service Company (KSvC),
respectively.
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
MANAGEMENT AGREEMENT. Under its management
agreement the Fund 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
$858,000 for the year ended December 31, 1997.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
The Fund has an underwriting and distribution
services agreement with KDI. Underwriting
commissions paid in connection with the
distribution of Class A shares are as follows:
<TABLE>
<CAPTION>
COMMISSIONS COMMISSIONS ALLOWED
RETAINED BY KDI BY KDI TO FIRMS
--------------- -------------------
<S> <C> <C>
Year ended December 31, 1997 $9,000 49,000
</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, CDSC
and commissions related to Class B and Class C
shares are as follows:
<TABLE>
<CAPTION>
DISTRIBUTION FEES COMMISSIONS AND
AND CDSC DISTRIBUTION FEES PAID
RECEIVED BY KDI BY KDI TO FIRMS
----------------- ----------------------
<S> <C> <C>
Year ended December 31, 1997 $342,000 155,000
</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 ASF PAID
THE FUND TO KDI BY KDI TO FIRMS
---------------- ----------------
<S> <C> <C>
Year ended December 31, 1997 $238,000 239,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
KSvC is the shareholder service agent of the Fund.
Under the agreement, KSvC received shareholder
services fees of $217,000 for the year ended
December 31, 1997.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. During the year ended December 31,
1997, the Fund made no direct payments to its
officers and incurred trustees' fees of $17,000 to
independent trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the year ended December 31, 1997, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $313,900
Proceeds from sales 339,944
18
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996
--------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 862 $ 7,486 1,139 $ 10,056
------------------------------------------------------------------------------
Class B 735 6,386 1,004 9,060
------------------------------------------------------------------------------
Class C 99 866 138 1,223
------------------------------------------------------------------------------
Class I 1 7 1 8
------------------------------------------------------------------------------
------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 378 3,265 459 4,021
------------------------------------------------------------------------------
Class B 163 1,406 210 1,846
------------------------------------------------------------------------------
Class C 6 53 3 28
------------------------------------------------------------------------------
------------------------------------------------------------------------------
SHARES REDEEMED
Class A (3,721) (32,238) (3,428) (30,237)
------------------------------------------------------------------------------
Class B (1,601) (13,911) (1,650) (14,736)
------------------------------------------------------------------------------
Class C (63) (550) (78) (692)
------------------------------------------------------------------------------
Class I (1) (3) (1) (11)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 1,270 10,982 67 612
------------------------------------------------------------------------------
Class B (1,268) (10,982) (69) (612)
------------------------------------------------------------------------------
NET DECREASE FROM CAPITAL
SHARE TRANSACTIONS $(27,233) $(19,434)
------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
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 or loss on these contracts is
reflected in the accompanying financial statements.
The Fund also bears the credit risk (which is
limited to the unrealized gain, if any) if the
counterparty fails to perform under the contract.
At December 31, 1997, the Fund's forward foreign
currency contracts outstanding 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>
27,350 Australian Dollars $19,735 April '98 $1,839
------------------------------------------------------------------------
3,720 British Pounds 5,989 February '98 (155)
------------------------------------------------------------------------
11,650 French Francs 1,979 February '98 27
------------------------------------------------------------------------
11,800 New Zealand Dollars 7,441 July '98 663
------------------------------------------------------------------------
NET UNREALIZED GAIN $2,374
------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
CLASS A
------------------------------------------------------------------------------
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED YEAR ENDED
------------------------------------------ DECEMBER 31, JUNE 30,
1997 1996 1995 1994 1993 1993
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $8.97 9.05 8.55 9.29 9.21 9.44
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .48 .52 .61 .60 .27 .72
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) (.33) (.02) 1.05 (.74) .16 (.17)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .15 .50 1.66 (.14) .43 .55
- --------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment
income .47 .58 1.16 .38 -- .72
- --------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain -- -- -- -- .11 .06
- --------------------------------------------------------------------------------------------------------------------------
Tax return of capital distribution .07 -- -- .22 .24 --
- --------------------------------------------------------------------------------------------------------------------------
Total dividends .54 .58 1.16 .60 .35 .78
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.58 8.97 9.05 8.55 9.29 9.21
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 1.80% 5.87 19.89 (1.47) 4.73 6.16
- --------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------------------------------------------------
Expenses 1.32% 1.48 1.34 1.53 1.29 1.52
- --------------------------------------------------------------------------------------------------------------------------
Net investment income 5.56% 5.77 6.43 6.67 5.75 7.87
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------
CLASS B
-----------------------------------------
MAY 31
YEAR ENDED DECEMBER 31, TO
----------------------- DECEMBER 31,
1997 1996 1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------
Net asset value, beginning of period $9.00 9.09 8.56 8.70
- -------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .41 .46 .56 .30
- -------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.33) (.02) 1.05 (.14)
- -------------------------------------------------------------------------------------------
Total from investment operations .08 .44 1.61 .16
- -------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .42 .53 1.08 .19
- -------------------------------------------------------------------------------------------
Tax return of capital distribution .06 -- -- .11
- -------------------------------------------------------------------------------------------
Total dividends .48 .53 1.08 .30
- -------------------------------------------------------------------------------------------
Net asset value, end of period $8.60 9.00 9.09 8.56
- -------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 1.03% 5.11 19.21 1.89
- -------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------------
Expenses 2.18% 2.14 1.98 2.27
- -------------------------------------------------------------------------------------------
Net investment income 4.70% 5.11 5.79 5.89
- -------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 21
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------- -------------------------------
CLASS C CLASS I
----------------------------------- -------------------------------
YEAR ENDED MAY 31 YEAR ENDED NOVEMBER 22
DECEMBER 31, TO DECEMBER 31, TO
-------------------- DECEMBER 31, ------------ DECEMBER 31,
1997 1996 1995 1994 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $9.02 9.09 8.56 8.70 8.93 9.05 9.57
- ---------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .42 .48 .57 .30 .41 .51 .07
- ---------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.33) (.02) 1.05 (.14) (.33) (.02) (.03)
- ---------------------------------------------------------------------------------------------------------------
Total from investment operations .09 .46 1.62 .16 .08 .49 .04
- ---------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .43 .53 1.09 .19 .47 .61 .56
- ---------------------------------------------------------------------------------------------------------------
Tax return of capital distribution .06 -- -- .11 .07 -- --
- ---------------------------------------------------------------------------------------------------------------
Total dividends .49 .53 1.09 .30 .54 .61 .56
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.62 9.02 9.09 8.56 8.47 8.93 9.05
- ---------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 1.09% 5.31 19.26 1.91 .94 5.81 .43
- ---------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------------
Expenses 2.11% 2.06 2.06 2.23 2.30 1.53 .88
- ---------------------------------------------------------------------------------------------------------------
Net investment income 4.77% 5.19 5.71 5.93 4.58 5.72 6.40
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ----------------------------------------------------------------------------------------------------------------
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED YEAR ENDED
------------------------------------- DECEMBER 31, JUNE 30,
1997 1996 1995 1994 1993 1993
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net assets at end of period (in thousands) $99,054 131,761 152,959 170,700 83,021 78,068
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 283% 276 220 378 484 372
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Total return does not reflect the effect of any sales charges. Per share
data for 1997 and 1996 were determined based on average shares outstanding
during the periods.
21
<PAGE> 22
SHAREHOLDERS' MEETING
SPECIAL SHAREHOLDERS' MEETING
On December 3, 1997, a special shareholders' meeting was held. Kemper Global
Income Fund shareholders were asked to vote on six separate issues: election of
nine members to the Board of Trustees, ratification of Ernst & Young LLP as
independent auditors, approval of new investment management agreement, approval
of new sub-advisory agreement with Zurich Investment Management Limited and
approval of new rule 12B-1 distribution plan with Kemper Distributors for Class
B shares and Class C shares.
1) Election of Trustees
<TABLE>
<CAPTION>
For Against
<S> <C> <C>
David W. Berlin 7,982,924 176,678
Lewis A. Burnham 7,987,821 171,781
Donald L. Dunaway 7,986,934 172,667
Robert B. Hoffman 7,984,634 174,968
Donald R. Jones 7,987,196 172,405
Shirley D. Peterson 7,989,065 170,536
Daniel Pierce 7,985,691 173,911
William P. Sommers 7,988,762 170,840
Edmond D. Villani 7,982,872 176,731
</TABLE>
2) Ratification of the selection of Ernst & Young LLP as independent auditors
for the fund
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
7,942,575 40,797 176,228
</TABLE>
3) Approval of new investment management agreement
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
7,672,212 146,830 261,438
</TABLE>
4) Approval of new sub-advisory agreement with Zurich Investment Management
Limited
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
7,613,863 168,674 297,943
</TABLE>
5) Approval of new rule 12B-1 distribution plan with Kemper Distributors
Class B shares
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
2,065,227 67,378 72,743
</TABLE>
Class C shares
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
71,744 0 1,019
</TABLE>
The meeting was adjourned until January 20, 1998 with respect to the following
item.
6) Approval of changes in policies to permit master/feeder fund structure
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
6,417,230 258,312 335,332 679,572
</TABLE>
22
<PAGE> 23
NOTES
23
<PAGE> 24
TRUSTEES&OFFICERS
TRUSTEES OFFICERS
DANIEL PIERCE MARK S. CASADY JOHN R. HEBBLE
Chairman and Trustee President Assistant Treasurer
DAVID W. BELIN PHILIP J. COLLORA MAUREEN E. KANE
Trustee Vice President, Assistant Secretary
Secretary and Treasurer
LEWIS A. BURNHAM CAROLINE PEARSON
Trustee JERARD K. HARTMAN Assistant Secretary
Vice President
DONALD L. DUNAWAY ELIZABETH C. WERTH
Trustee THOMAS W. LITTAUER Assistant Secretary
Vice President
ROBERT B. HOFFMAN
Trustee ANN M. MCCREARY
Vice President
DONALD R. JONES
Trustee ROBERT C. PECK, JR.
Vice President
SHIRLEY D. PETERSON
Trustee KATHRYN L. QUIRK
Vice President
WILLIAM P. SOMMERS
Trustee LINDA J. WONDRACK
Vice President
EDMOND D. VILLANI
Trustee
- --------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 419557
Kansas City, MO 64141
- --------------------------------------------------------------------------------
CUSTODIAN AND INVESTORS FIDUCIARY TRUST COMPANY
TRANSFER AGENT 801 Pennsylvania
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
- --------------------------------------------------------------------------------
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606
www.kemper.com
[KEMPER FUNDS LOGO]
Long-term investing in a short-term world(SM)
Printed on recycled paper in the U.S.A.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Global and International Funds prospectus
KGIF - 2 (2/98) 1043570
