<PAGE> 1
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED DECEMBER 31, 1998
[MORNINGSTAR RATINGS 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
"... While bond markets will surprise us, we expect
to see a very stable environment in what will be a
single European market. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
Economic Overview
5
Performance Update
9
Market Performance
10
Currency Concentrations Portfolio Statistics
11
Portfolio Of Investments
13
Report Of Independent Auditors
14
Financial Statements
16
Notes to Financial Statements
21
Financial Highlights
23
Shareholders' Meeting
AT A GLANCE
- -------------------------------------------------------------------------------
KEMPER GLOBAL INCOME FUND
TOTAL RETURNS
- -------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 10.48%
CLASS B 9.56%
CLASS C 9.72%
LIPPER GENERAL WORLD INCOME FUNDS CATEGORY AVERAGE* 6.23%
- -------------------------------------------------------------------------------
</TABLE>
RETURNS AND RANKINGS ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUES WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH 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.
-------------------------------------------------------------------------------
NET ASSET VALUE
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AS OF AS OF
12/31/98 12/31/97
- -----------------------------------------------------------------------------------------
<S> <C> <C>
KEMPER GLOBAL INCOME FUND CLASS A $8.94 $8.58
- -----------------------------------------------------------------------------------------
KEMPER GLOBAL INCOME FUND CLASS B $8.96 $8.60
- -----------------------------------------------------------------------------------------
KEMPER GLOBAL INCOME FUND CLASS C $8.99 $8.62
- -----------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
KEMPER GLOBAL INCOME
FUND RANKINGS AS OF 12/31/98*
- --------------------------------------------------------------------------------
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 #40 of #61 of #55 of
145 funds 145 funds 145 funds
- -------------------------------------------------------------------------------------------------
3-YEAR #72 of #88 of #86 of
111 funds 111 funds 111 funds
- -------------------------------------------------------------------------------------------------
5-YEAR #18 of N/A N/A
67 funds
- -------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
DIVIDEND AND YIELD REVIEW
- -------------------------------------------------------------------------------
THE FOLLOWING TABLE SHOWS PER SHARE DISTRIBUTION AND YIELD INFORMATION FOR THE
FUND AS OF DECEMBER 31, 1998.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ONE-YEAR DISTRIBUTION: $.5100 $.4387 $.4430
- ----------------------------------------------------------------------------------------------
DECEMBER DISTRIBUTION: $.0425 $.0361 $.0367
- ----------------------------------------------------------------------------------------------
ANNUALIZED DISTRIBUTION RATE+: 5.70% 4.83% 4.90%
- ----------------------------------------------------------------------------------------------
SEC YIELD+: 2.09% 1.25% 2.50%
- ----------------------------------------------------------------------------------------------
</TABLE>
+ CURRENT ANNUALIZED DISTRIBUTION RATE IS THE LATEST MONTHLY DIVIDEND SHOWN AS
AN ANNUALIZED PERCENTAGE OF NET ASSET VALUE ON DECEMBER 31, 1998. 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, 1998 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.
YIELDS AND DISTRIBUTION RATES ARE HISTORICAL AND WILL FLUCTUATE.
TERMS TO KNOW
YOUR FUNDS' STYLE
- --------------------------------------------------------------------------------
MORNINGSTAR FIXED-INCOME STYLE BOX
- --------------------------------------------------------------------------------
[MATURITY QUALITY DIAGRAMS]
Source: Data provided by Morningstar, Inc., Chicago, IL 312-696- 6000. The
Income Style Box placement is based on a fund's average effective maturity or
duration and the average credit rating of the bond portfolio.
THE STYLE BOX REPRESENTS A SNAPSHOT OF A FUND'S PORTFOLIO ON A SINGLE DAY.
PLEASE NOTE THAT STYLE BOXES DO NOT REPRESENT AN EXACT ASSESSMENT OF RISK AND DO
NOT REPRESENT FUTURE PERFORMANCE. THE FUND'S PORTFOLIO CHANGES FROM DAY-TO-DAY.
A LONGER-TERM VIEW IS REPRESENTED BY THE FUND'S MORNINGSTAR CATEGORY, WHICH IS
BASED ON ITS ACTUAL INVESTMENT STYLE AS MEASURED BY ITS UNDERLYING PORTFOLIO
HOLDINGS OVER THE PAST THREE-YEARS. MORNINGSTAR HAS PLACED KEMPER GLOBAL INCOME
FUND IN THE INTERNATIONAL BOND CATEGORY. PLEASE CONSULT THE PROSPECTUS FOR A
DESCRIPTION OF INVESTMENT POLICIES.
CURRENCY DEVALUATION A significant decline of a currency's value relative to
other currencies, such as the U.S. dollar. This may be prompted by trading or
central bank intervention (or the lack of intervention) in the currency markets.
For U.S. investors who are investing overseas, a devaluation of a foreign
currency can have the effect of reducing an investment's total return.
EUROPEAN MONETARY UNION An economic and monetary unification of European
countries to introduce a single currency and create a more economically
competitive region.
INTERNATIONAL MONETARY FUND An organization focused on lowering trade barriers
and stabilizing currencies. While helping developing nations pay their debts,
the IMF usually imposes tough guidelines aimed at lowering inflation, cutting
imports, and raising exports.
<PAGE> 3
ECONOMIC OVERVIEW
[SILVIA PHOTO]
DR. JOHN E. SILVIA IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.
HIS PRIMARY RESPONSIBILITIES INCLUDE ANALYSIS, MODELING AND FORECASTING OF
ECONOMIC DEVELOPMENTS AND FEDERAL RESERVE ACTIVITY THAT AFFECT FINANCIAL
MARKETS, ESPECIALLY INTEREST RATE TRENDS. THIS EFFORT INCLUDES CLOSE
COLLABORATION WITH BOTH INCOME AND EQUITY MUTUAL FUND MANAGERS AND PENSION FUND
MANAGERS.
SILVIA HOLDS A BACHELOR'S DEGREE AND PH.D. IN ECONOMICS FROM NORTHEASTERN
UNIVERSITY IN BOSTON AND A MASTER'S DEGREE IN ECONOMICS FROM BROWN UNIVERSITY IN
PROVIDENCE, R.I. PRIOR TO HIS CAREER AT SCUDDER KEMPER INVESTMENTS, HE WAS WITH
THE HARRIS BANK AND ALSO TAUGHT AT INDIANA UNIVERSITY.
SCUDDER KEMPER INVESTMENTS, THE INVESTMENT MANAGER FOR KEMPER FUNDS, IS ONE OF
THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS IN THE
WORLD, MANAGING MORE THAN $280 BILLION IN ASSETS FOR INSTITUTIONAL AND CORPORATE
CLIENTS, RETIREMENT AND PENSION PLANS, INSURANCE COMPANIES, MUTUAL FUND
DEAR KEMPER FUNDS SHAREHOLDER:
If you think the first quarter of 1999 has seemed rather anticlimactic compared
to 1998, you're not alone. The year began with a quiet bang in the U.S. stock
market, with the Dow Jones Industrial Average hitting an all-time high of 9643
points in the first week of January. While stock market volatility has
continued, it seems to be phasing investors less and less. Even global events
are being taken in stride. Europe's Economic and Monetary Union (EMU) was
launched without much notice. And when Brazil's economy recently took a turn for
the worse, Wall Street was only mildly concerned. Also contributing to today's
laid-back attitude -- the impeachment trial of President Clinton has all but
fizzled into obscurity without significantly affecting the U.S. economy or
markets.
Indeed, the U.S. economy looks good. The fundamentals by which we measure the
state of the economy remain strong. We continue to see solid consumer spending
growth, continued investment spending and low inflation. This suggests that
there are no internal problems for continued U.S. economic growth.
Additionally, we can expect the Federal Reserve Board to keep short-term
interest rates low. On February 3, the Fed left interest rates unchanged. It is
likely that this "hands-off" approach will continue, particularly if the U.S.
economy remains in check and there is a degree of uncertainty in the
international arena.
The U.S. budget surplus for 1998 came in at $60 billion, with another budget
surplus of between $80 billion and $100 billion expected for fiscal 1999. Growth
in the nation's gross domestic product (GDP), which represents the total value
of all goods and services produced within the U.S. economy, has remained steady.
GDP, driven by consumer spending, is expected to grow at an annualized rate of
approximately 3 percent in 1999. We also anticipate modest capital spending
growth and modest inventory growth.
The consumer price index (CPI) remains in the vicinity of 2 percent. However,
energy prices, which were down 6 to 7 percent last year and helped keep the CPI
down, are unlikely to remain so low this year.
Employment growth has slowed to 2 percent, combined with real wage growth of
between 2 percent and 2.5 percent. But real income growth is between 4 percent
and 5 percent. In addition, gains in household net worth, which tends to fuel
consumer spending, are also on the rise. Banks appear to be only a little less
willing to lend in 1999, so the threat of a general credit crunch is minimal.
On a less positive note, corporate profits have slowed in 1999, growing at a
rate of 1 percent to 3 percent on a year-over-year basis. As a result, we may
see a slowdown in capital spending this year. The current U.S. account deficit
is rising, which suggests the U.S. economy is increasingly dependent on foreign
capital inflows to finance its economic activity. This is acceptable as long as
foreign money continues to flow in. But if foreign investors, particularly the
Japanese, no longer wish to invest in the United States, we can expect problems
for interest rates and exchange rates, as well as increased uncertainty and
market volatility.
At this point, investors may be comforted by the fact that the U.S. markets
and economy have withstood the test of a tumultuous 1998. While certain
countries, such as Malaysia, Indonesia, Brazil and Russia, are still suffering
from economic crises, others, including the Philippines, South Korea, Thailand
and China, appear to have survived. As long as the Fed and the Group of Eight
leading industrial nations (G8) are committed to avoiding recession on national
and global levels respectively, investors have a good chance of experiencing a
more stable economic environment.
At home, there has been somewhat of a slowdown in manufacturing, as reduced
U.S. exports reflect foreign economic turmoil. But the global impact of the
Asian crisis still has not hit the U.S. as hard as some analysts expected.
Indeed, Asian turmoil has not affected U.S. export volumes as much as it has
lowered import prices and helped reduce global interest rates.
Ultimately, Europe's recently inaugurated EMU is likely to bring more
flexibility and growth potential for the region. European equities may be the
beneficiaries of
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( 1/31/99) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1)* 4.65 5.65 6.21 6.83
PRIME RATE(2) 7.75 8.50 8.50 8.25
INFLATION RATE(3)* 1.61 1.38 2.22 3.00
THE U.S. DOLLAR(4) -4.37 3.92 7.62 4.74
CAPITAL GOODS ORDERS(5)* 11.78 10.47 15.67 4.79
INDUSTRIAL PRODUCTION(5)* 1.88 5.09 6.12 4.87
EMPLOYMENT GROWTH(6) 2.17 2.57 2.65 2.22
</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, 1998.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
increased spending, as governments seek to ease fiscal and monetary policy,
foster growth and reduce unemployment. It's going to be interesting to watch as
the monetary union continues to evolve. One lesson for investors -- particularly
those with international holdings -- is to diversify. With the democratization
of the world, the globalization of trade and more free market economies at our
fingertips, international markets are becoming more and more attractive. But if
you subscribe to the concept of international investment, be cautious -- don't
put all of your investment eggs in one basket.
Other key elements to watch in 1999: the race for the next presidency and
preparedness for the year 2000. And remember, while it is nearly impossible to
predict the next big crisis, there always appears to be one just around the
bend.
Thank you for choosing to invest with Kemper Funds. We appreciate the
opportunity to serve your investment needs.
Sincerely,
/S/John E. Silvia
THE INFORMATION CONTAINED IN THIS PIECE HAS BEEN TAKEN FROM SOURCES BELIEVED TO
BE RELIABLE, BUT THE ACCURACY OF THE INFORMATION IS NOT GUARANTEED. THE OPINIONS
AND FORECASTS EXPRESSED ARE THOSE OF DR. JOHN E. SILVIA AS OF FEBRUARY 8, 1999,
AND MAY NOT ACTUALLY COME TO PASS. THIS INFORMATION IS SUBJECT TO CHANGE. NO
PART OF THIS MATERIAL IS INTENDED AS AN INVESTMENT RECOMMENDATION.
4
<PAGE> 5
PERFORMANCE UPDATE
TERENCE PRIDEAUX JOINED SCUDDER KEMPER INVESTMENTS' LONDON BASED OPERATION,
SCUDDER INVESTMENTS (U.K.) LIMITED, IN 1989. HE IS A SENIOR VICE PRESIDENT AND
MEMBER OF THE GLOBAL BOND GROUP. PRIDEAUX HAS SPENT MOST OF HIS CAREER IN FUND
MANAGEMENT, WITH PREVIOUS POSITIONS INCLUDING MANAGEMENT OF THE FIXED INCOME
PORTFOLIOS FOR A CANADIAN LIFE ASSURANCE OFFICE AND MANAGING THE MULTICURRENCY
PORTFOLIOS AND BALANCE SHEET EXPOSURES OF A KUWAITI BANK. HE WAS ALSO WITH BOTH
CITICORP AND DAIWA SECURITIES IN TOKYO WHERE HE WAS RESPONSIBLE FOR THE
MANAGEMENT OF INTERNATIONAL SECURITIES IN THE FAR EAST. PRIDEAUX IS A GRADUATE
OF WORCESTER COLLEGE, OXFORD, ENGLAND, WHERE HE RECEIVED AN M.A. IN POLITICS,
PHILOSOPHY AND ECONOMICS.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER 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.
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998, KEMPER GLOBAL INCOME FUND WAS UP
10.48 PERCENT (CLASS A SHARES, UNADJUSTED FOR ANY SALES CHARGE) STRONGLY
OUTPACING ITS LIPPER PEERS (SEE PAGE 2). FOLLOWING, PORTFOLIO MANAGER TERENCE
PRIDEAUX DISCUSSES THE MARKETS AND HIS INVESTMENT APPROACH.
Q COULD YOU PROVIDE AN OVERVIEW OF THE EVENTS THAT GUIDED GLOBAL BOND
MARKETS THROUGHOUT THE 12-MONTH PERIOD?
A While it happened well before this fiscal period, the effects of the Asian
debt crisis that began during the summer of 1997 still festered into 1998. This
event spurred the severe declines that hit markets late in October 1997 which
drove a 'flight-to-quality' as investors flocked to U.S. Treasuries and mortgage
securities. Foreign bonds became very cheap, and even high yield investors were
opting for the higher-rated of the below-investment-grade bonds. The result of
the 'flight-to-quality' was a Treasury rally in December that pushed the
benchmark 30-year Treasury yield to new lows, which meant their prices were at
new highs since a bond's yield and price are inversely related.
For a period during the first part of 1998, confidence returned to the
markets and equities and emerging market investments returned to the spotlight.
Continued strong economic growth sparked concerns about inflation and rising
interest rates. These fears were squashed, however, as it became clear Asia's
financial crisis was having adjunct effects on the U.S. and other developed
economies. For example, devalued currencies allowed imported goods to sell below
what domestic manufacturers could charge.
Uncertainty returned to the markets when economic problems in Russia and
Latin America came to the world's attention in August. The tottering of the
equity and bond markets moved the Federal Reserve Board to do something twice
within one month that it had not done since 1996 -- cut interest rates, by 0.25
percent on September 29 and by the same amount on October 16. The second cut
finally had the effect the Fed was looking for -- appeasing markets. Several
European markets mirrored these cuts with this combined effort effectively
showing a commitment to supporting economies worldwide. This show of support
sparked a second rally in the fourth quarter. Calculations at year end showed
that the average return of the 22 markets in our investment universe was
positive in every month of the year except for two and in those months, the
lesser performers were off just 0.25 percent.
Q HOW DID THIS ENVIRONMENT IMPACT YOUR INVESTMENT STRATEGY?
A In January, we made a significant adjustment to one of the components of
the bond valuation model used by the global bond group in London. We lowered the
real yields, the yield minus the impact of inflation, we require from markets in
our investment universe by fifty basis points. This decision was based on a
belief that the timescale required to address the fiscal crisis facing regions
such as Asia will be measured in years, not quarters.
5
<PAGE> 6
PERFORMANCE UPDATE
Governments in Asia, for example, can contribute to stabilization efforts
in the region but for the affected countries to become redirected towards
growth, significant microeconomic changes -- in corporate governance and banking
supervision, and in the disengagement of administrations from the corporate
sector -- are required.
When the International Monetary Fund (IMF) went into Asia in the early
part of this year, they found themselves dealing mainly with the private sector.
Since the governments were not directly at fault for the currency crisis, the
curing of the problems is expected to take a long time to sort out. We contrast
that with what happened in Mexico in 1995 when the IMF aided Mexican authorities
in implementing tax and interest rate increases, sorting out their debt problems
in a matter of months.
Q FOR THE PERIOD, THE FUND WAS UP 10.48 PERCENT (CLASS A SHARES, UNADJUSTED
FOR ANY SALES CHARGE) STRONGLY OUTPERFORMING THE LIPPER CATEGORY AVERAGE OF 6.23
PERCENT (SEE PAGE 2). THE SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX, HOWEVER,
WAS UP 15.30 PERCENT. CAN YOU FIRST ADDRESS THE FACTORS THAT HELPED PERFORMANCE
VS. THE CATEGORY AND THEN OFFER YOUR THOUGHTS ON WHY THE FUND AND ITS PEERS FELL
SHORT OF THE BENCHMARK?
A In comparison to our Lipper category, we were nicely rewarded for the
fund's more conservative approach to investing. Many of our peers, in seeking
higher yields, had exposure to emerging markets. As these markets tumbled
following the Russian market debacle, their performance took some devastating
hits. Our risk-adverse stance minimizes the impact of big market swings both on
the up and down sides.
With regard to the index, the most obvious reason for the divergence is
that actively managed funds vary in structure from the index. In our case, we
vary significantly in the amount of exposure we have to the U.S. dollar. The
Salomon Brothers World Government Bond Index has roughly a 30 percent exposure
to the dollar while we generally maintain a minimum dollar position of roughly
50 percent. At the beginning of the year this served us well but from mid-August
onward the dollar was weak which cost us some return relative to the index.
Q DID YOU MAKE ANY ADJUSTMENTS TO DURATION OR TO THE FUND'S CREDIT QUALITY?
A While we thought bond markets looked attractive throughout the year, our
shifts in duration were minimal. Our practice is to keep durations fairly
constant unless the market is really giving us a reason to do otherwise such as
if bonds become extraordinarily cheap or, conversely, very expensive. We hovered
around the five-year duration mark for most of the year.
As far as credit quality goes, the portfolio held a 72 percent weight in
AAA-rated bonds and 28 percent in AA in January. At year-end, we had a 40
percent AAA weight, 58 percent AA and two percent A. The dip into single A-rated
bonds was the result of introducing Greece into the fund's investment universe.
Q YOU MENTION GREECE AS A NEW ADDITION TO THE FUND. WHAT SPARKED YOUR
INTEREST IN THIS MARKET?
A We added a small exposure to Greece at the end of the first quarter. While
it has always been a lovely vacation spot, historically, it hasn't been a spot
that drew the attention of investors. It is a predominantly agricultural country
offset by very successful tourism and shipping industries. Interest in the
region was sparked when a newly-elected government decided early in the year to
step up efforts to meet the requirements for inclusion in the European Monetary
Union (EMU). Not only was it announced that they were taking their efforts for
inclusion more seriously, the government also said they were going to accelerate
their schedule from a three year program ending in 2002, to an 18-month program
to end in the year 2000. We felt this news justified a small exposure.
Q WERE THERE ANY OTHER MARKET STANDOUTS ON THE POSITIVE AND/OR NEGATIVE
SIDE?
A The course of the Japanese bond market versus its currency, the yen, was
significant for global bond investors in 1998. The Japanese bonds were yielding
two or three percent at the beginning of the year and then dropped below one
percent in late summer. By the end of the year, this yield had doubled and was
back up to the two-percent level. It was a difficult market to get right. On the
currency side, our exposure to the yen of 12 percent at the start of the year
was under-weighted compared to the index and, at that point, it was a positive
positioning. However, when the yen strengthened suddenly in the later part of
the year, we had taken our position down to five percent so we lost some of the
currency upside. We did have a 13 percent exposure to the rallying bond market
though, which helped to minimize the loss.
6
<PAGE> 7
PERFORMANCE UPDATE
Q WHAT IMPACT DID THE RUN-UP TO A SINGLE EUROPEAN CURRENCY HAVE ON MARKETS?
HOW WILL YOUR MANAGEMENT APPROACH BE IMPACTED, IF AT ALL, BY THE CONVERSION AS
YOU MOVE INTO 1999?
A The run up to the European Monetary Union on January 1, 1999 influenced
bond markets as the 11 member countries made the necessary rate adjustments to
approach the interest rate level established by the Bundesbank. The Bundesbank
is Germany's equivalent to the U.S. Federal Reserve and, when establishing the
criteria for admittance into the EMU, it was agreed that Germany's three-percent
rate would be the required rate for inclusion. The general convergence of yields
by countries that were to become members -- and it became very clear during the
course of the year which ones those would be -- was key. To reach a common
interest rate at the front end of the yield curve, they couldn't afford to have
massive differences at the back end. With this convergence of yields at the
front end, yield differentials at the long end (10-years and longer), ebbed away
very rapidly. As the year progressed, we saw less opportunity to benefit from
investments in non-core countries.
While bond markets will surprise us, we expect to see a very stable
environment in what will be a single European market. We believe the non-member
countries -- the United Kingdom, Sweden, Denmark, Norway and Greece -- will, at
times, offer interesting opportunities but our greater focus will be on outlying
countries such as Australia and New Zealand. This is where we expect the moves
to be and the opportunity to achieve differential returns.
Q WHAT IS YOUR OUTLOOK AS YOU MOVE INTO 1999?
A We believe the bond markets are fully valued and performance going forward
is likely to be very stable with slightly lower returns. Possible pitfalls
include a reassessment of the benign influences on bond markets. Central Banks
worldwide have moved away from inflation fighting to focus on the encouragement
of growth and employment. A second risk is that Japan shows signs of life. If it
does, yields are likely to shoot up very rapidly.
7
<PAGE> 8
PERFORMANCE UPDATE
- ---------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- ---------------------------------------------------------------------------
FOR PERIODS ENDED DECEMBER 31, 1998 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
LIFE OF
1-YEAR 3-YEAR 5-YEAR CLASS
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
KEMPER GLOBAL INCOME FUND CLASS A 5.56% 4.36% 6.08% 8.21% (since 10/1/89)
...............................................................................................
KEMPER GLOBAL INCOME FUND CLASS B 6.56 4.58 n/a 7.49 (since 5/31/94)
...............................................................................................
KEMPER GLOBAL INCOME FUND CLASS C 9.72 5.31 n/a 7.93 (since 5/31/94)
...............................................................................................
</TABLE>
KEMPER GLOBAL INCOME FUND CLASS A
[LINE GRAPH]
<TABLE>
<CAPTION>
KEMPER GLOBAL INCOME SALOMON BROTHERS WORLD
FUND CLASS A(1) GOVERNMENT BOND INDEX+ CONSUMER PRICE INDEX++
-------------------- ---------------------- ----------------------
<S> <C> <C> <C>
10/1/89 9554.00 10000.00 10000.00
10012.00 10308.00 10088.00
10185.00 9908.00 10296.00
10963.00 10392.00 10392.00
11553.00 10753.00 10616.00
12281.00 11532.00 10704.00
11860.00 11395.00 10800.00
11982.00 11434.00 10880.00
13019.00 12371.00 10976.00
13648.00 12356.00 11032.00
13059.00 12808.00 11144.00
13273.00 13773.00 11216.00
13137.00 14034.00 11304.00
12/31/92 13388.00 14094.00 11352.00
13818.00 14846.00 11488.00
14091.00 15279.00 11552.00
14474.00 16124.00 11608.00
14758.00 15983.00 11664.00
14225.00 16888.00 11776.00
14194.00 16872.00 11840.00
14441.00 16200.00 11952.00
14541.00 16340.00 11976.00
16174.00 18128.00 12112.00
16940.00 19092.00 12200.00
17050.00 18882.00 12256.00
12/31/95 17432.00 18461.00 12280.00
17175.00 19005.00 12456.00
17238.00 19183.00 12536.00
17778.00 19887.00 12624.00
18450.00 20155.00 12688.00
17933.00 19322.00 12800.00
18450.00 18987.00 12824.00
18832.00 20161.00 12896.00
18783.00 20204.00 12904.00
19017.00 20180.00 12976.00
19278.00 20687.00 13040.00
20457.00 22279.00 13088.00
12/31/98 20751.00 23070.00 13120.00
</TABLE>
KEMPER GLOBAL INCOME FUND CLASS B
[LINE GRAPH]
<TABLE>
<CAPTION>
KEMPER GLOBAL INCOME SALOMON BROTHERS WORLD
FUND CLASS B(1) GOVERNMENT BOND INDEX+ CONSUMER PRICE INDEX++
-------------------- ---------------------- ----------------------
<S> <C> <C> <C>
5/31/94 10000.00 10000.00 10000.00
9981.00 10144.00 10034.00
10143.00 10263.00 10129.00
10189.00 10313.00 10149.00
11320.00 11440.00 10264.00
11832.00 12050.00 10339.00
11898.00 11924.00 10386.00
12/31/95 12146.00 12276.00 10407.00
11928.00 12046.00 10556.00
11965.00 12095.00 10624.00
12317.00 12426.00 10698.00
12762.00 12721.00 10753.00
12387.00 12195.00 10847.00
12708.00 12564.00 10868.00
12948.00 12724.00 10929.00
12/31/97 12893.00 12752.00 10936.00
13014.00 12728.00 10997.00
13166.00 12981.00 11051.00
13941.00 14061.00 11092.00
12/31/98 13926.00 14560.00 11119.00
</TABLE>
KEMPER GLOBAL INCOME FUND CLASS C
[LINE GRAPH]
<TABLE>
<CAPTION>
KEMPER GLOBAL INCOME SALOMON BROTHERS WORLD
FUND CLASS C(1) GOVERNMENT BOND INDEX+ CONSUMER PRICE INDEX++
-------------------- ---------------------- ----------------------
<S> <C> <C> <C>
5/31/94 10000.00 10000.00 10000.00
9993.00 10144.00 10034.00
10144.00 10263.00 10129.00
10191.00 10313.00 10149.00
11311.00 11440.00 10264.00
11836.00 12050.00 10339.00
11903.00 11924.00 10386.00
12/31/95 12154.00 12276.00 10407.00
11947.00 12046.00 10556.00
11984.00 12095.00 10624.00
12337.00 12426.00 10698.00
12795.00 12721.00 10753.00
12407.00 12195.00 10847.00
12744.00 12564.00 10868.00
12987.00 12724.00 10929.00
12/31/97 12935.00 12752.00 10936.00
13058.00 12728.00 10997.00
13211.00 12981.00 11051.00
13988.00 14061.00 11092.00
12/31/98 14192.00 14560.00 11119.00
</TABLE>
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURNS AND
PRINCIPAL VALUES WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAYBE WORTH MORE
OR LESS THAN ORIGINAL COST.
* AVERAGE ANNUAL TOTAL RETURN AND TOTAL RETURN MEASURE NET INVESTMENT INCOME
AND CAPITAL GAIN OR LOSS FROM PORTFOLIO INVESTMENTS OVER THE PERIODS
SPECIFIED, ASSUMING REINVESTMENT OF DIVIDENDS AND, WHERE INDICATED,
ADJUSTMENT FOR THE MAXIMUM SALES CHARGE. THE MAXIMUM SALES CHARGE FOR CLASS
A SHARES IS 4.5%. FOR CLASS B SHARES, THE MAXIMUM CONTINGENT DEFERRED SALES
CHARGE (CDSC) IS 4%. CLASS C SHARES HAVE NO SALES CHARGE ADJUSTMENT, BUT
REDEMPTIONS WITHIN ONE YEAR OF PURCHASE MAY BE SUBJECT TO A CDSC OF 1%.
SHARE CLASSES INVEST IN THE SAME UNDERLYING PORTFOLIO. AVERAGE ANNUAL TOTAL
RETURN REFLECTS ANNUALIZED CHANGE WHILE TOTAL RETURN REFLECTS AGGREGATE
CHANGE. 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.
THERE ARE SPECIAL RISK CONSIDERATIONS ASSOCIATED WITH AN INVESTMENT IN THE
FUND, INCLUDING RISKS RELATED TO FOREIGN INVESTMENTS AND TO A
NON-DIVERSIFIED INVESTMENT COMPANY. 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. PLEASE SEE THE
PROSPECTUS FOR MORE INFORMATION.
+ 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 TOWERSDATA.
INVESTORS CANNOT ACTUALLY MAKE INVESTMENTS IN THESE INDICES.
8
<PAGE> 9
MARKET PERFORMANCE
WORLD BOND MARKET PERFORMANCE
The table below presents the one-year returns of government bond markets tracked
by Salomon Brothers for the period ending December 31, 1998, expressed in local
currencies and U.S. dollar terms. This information is historical and does not
guarantee future returns of these markets.
<TABLE>
<CAPTION>
COUNTRY U.S. DOLLAR TERMS LOCAL CURRENCY
<C> <S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
1. FRANCE 21.3% 12.6%
- ---------------------------------------------------------------------------------------
2. SPAIN 21.1 12.6
- ---------------------------------------------------------------------------------------
3. UNITED KINGDOM 20.9 19.6
- ---------------------------------------------------------------------------------------
4. BELGIUM 20.9 12.1
- ---------------------------------------------------------------------------------------
5. FINLAND 20.7 12.2
- ---------------------------------------------------------------------------------------
6. NETHERLANDS 20.4 11.5
- ---------------------------------------------------------------------------------------
7. ITALY 20.3 12.2
- ---------------------------------------------------------------------------------------
8. GERMANY 19.8 11.0
- ---------------------------------------------------------------------------------------
9. AUSTRIA 19.7 10.9
- ---------------------------------------------------------------------------------------
10. PORTUGAL 19.6 11.1
- ---------------------------------------------------------------------------------------
11. IRELAND 19.3 14.0
- ---------------------------------------------------------------------------------------
12. DENMARK 19.0 10.7
- ---------------------------------------------------------------------------------------
13. JAPAN 15.9 0.5
- ---------------------------------------------------------------------------------------
14. SWITZERLAND 13.9 7.2
- ---------------------------------------------------------------------------------------
15. SWEDEN 11.5 13.9
- ---------------------------------------------------------------------------------------
16. UNITED STATES 10.0 10.0
- ---------------------------------------------------------------------------------------
17. NEW ZEALAND 4.0 14.2
- ---------------------------------------------------------------------------------------
18. AUSTRALIA 3.9 10.4
- ---------------------------------------------------------------------------------------
19. CANADA 2.0 9.4
- ---------------------------------------------------------------------------------------
20. NORWAY 1.0 4.4
- ---------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
CURRENCY CONCENTRATIONS
CURRENCY COMPOSITION OF KEMPER GLOBAL INCOME FUND
Based on total investments on December 31, 1998
[BAR GRAPH]
<TABLE>
<CAPTION>
CURRENCY PERCENT
- -------- -------
<S> <C>
U.S. DOLLAR 37%
EUROPEAN CURRENCY UNIT 17%
ITALIAN LIRE 16%
CANADIAN DOLLAR 11%
JAPANESE YEN 5%
NEW ZEALAND DOLLAR 5%
SPANISH PESETA 4%
SWEDISH KRONA 3%
GREEK DRACHMA 2%
</TABLE>
PORTFOLIO STATISTICS
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
ON 12/31/98 ON 12/31/97
<S> <C> <C>
FOREIGN/U.S. GOVERNMENT SECURITIES 96% 91%
- --------------------------------------------------------------------------------
OTHER** 2 5
- --------------------------------------------------------------------------------
CASH AND EQUIVALENTS 2 4
- --------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
AVERAGE MATURITY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ON 12/31/98 ON 12/31/97
- --------------------------------------------------------------------------------
<S> <C> <C>
AVERAGE MATURITY 7.0 years 6.9 years
- --------------------------------------------------------------------------------
</TABLE>
* PORTFOLIO COMPOSITION AND HOLDINGS ARE SUBJECT TO CHANGE.
** INCLUDES SUPRANATIONAL ENTITIES AND CORPORATES GUARANTEED BY GOVERNMENTS
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
KEMPER GLOBAL INCOME FUND
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
U.S. DOLLAR
CURRENCY ISSUER PRINCIPAL VALUE
- -----------------------------------------------------------------------------------------------------------------------
GOVERNMENT OBLIGATIONS (95.6%) AND CORPORATE OBLIGATIONS (2.0%)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. DOLLAR--34.6%
Credit Local de France, 6.50%, 2004 4,000 $ 4,195
Kingdom of Spain, 5.875%, 2008 4,000 4,168
Province of British Columbia, 7.13%, 2007 3,840 4,333
U.S. Treasury Bonds, 7.50%, 2024 3,000 3,888
U.S. Treasury Notes
6.375%, 2000 4,080 4,149
5.75%, 2003 3,200 3,342
5.875%, 2005 4,425 4,720
-----------------------------------------------------------------------------
28,795
- -----------------------------------------------------------------------------------------------------------------------
EUROPEAN CURRENCY UNIT--17.1%
French Treasury
4.50%, 2002 2,000 2,436
7.50%, 2005 2,950 4,209
Kingdom of Spain, 5.15%, 2009 3,000 3,729
Republic of Portugal, 6.00%, 2004 3,000 3,888
-----------------------------------------------------------------------------
14,262
- -----------------------------------------------------------------------------------------------------------------------
ITALIAN LIRA--16.2%
Italian Treasury
8.50%, 2004 15,000,000 11,128
5.00%, 2008 3,600,000 2,347
-----------------------------------------------------------------------------
13,475
- -----------------------------------------------------------------------------------------------------------------------
CANADIAN DOLLAR--10.4%
Government of Canada
4.50%, 2001 3,500 2,273
7.00%, 2006 4,400 3,269
5.50%, 2009 4,500 3,078
-----------------------------------------------------------------------------
8,620
- -----------------------------------------------------------------------------------------------------------------------
JAPANESE YEN--5.1%
Government of Austria, 4.50%, 2005 250,000 2,588
Int'l Bank for Recon. and Dev., 4.75%, 2004 163,000 1,699
-----------------------------------------------------------------------------
4,287
- -----------------------------------------------------------------------------------------------------------------------
NEW ZEALAND DOLLAR--4.9%
Government of New Zealand
8.00%, 2004 4,500 2,645
7.00%, 2009 2,400 1,414
-----------------------------------------------------------------------------
4,059
- -----------------------------------------------------------------------------------------------------------------------
SPANISH PESETA--4.2%
Kingdom of Spain
4.50%, 2004 483,000 3,492
-----------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
SWEDISH KRONA--3.1%
Kingdom of Sweden, 5.00%, 2004 20,000 2,601
-----------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
GREEK DRACHMA--2.0%
Republic of Greece, 8.90%, 2003 440,000 1,652
-----------------------------------------------------------------------------
TOTAL GOVERNMENT AND CORPORATE
OBLIGATIONS--97.6%
(Cost: $79,611) 81,243
-----------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
U.S. DOLLAR
ISSUER PRINCIPAL VALUE
- -----------------------------------------------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS
<S> <C> <C> <C>
(a)Repurchase agreement with Investors Fiduciary
Trust Co., dated 12/31/98, 4.00%, due 1/4/99 $ 490 $ 490
Other, 4.50%, due January 1999 1,500 1,499
-----------------------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--2.4%
(Cost: $1,989) 1,989
-----------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $81,600) $83,232
-----------------------------------------------------------------------------
</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.
(a) Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities. The collateral is monitored daily by the fund so
that its market value exceeds the carrying value of the repurchase agreement.
Based on the cost of investments of $81,600,000 for federal income tax purposes
at December 31, 1998, the gross unrealized appreciation was $1,805,000, the
gross unrealized depreciation was $173,000 and the net unrealized appreciation
on investments was $1,632,000.
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, 1998, 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 1994. 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, 1998, 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, 1998, 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 1994, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
February 18, 1999
13
<PAGE> 14
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------
Investments, at value
(Cost: $81,600) $ 83,232
- ------------------------------------------------------------------------
Receivable for:
Interest 1,713
- ------------------------------------------------------------------------
Fund shares sold 238
- ------------------------------------------------------------------------
Unrealized appreciation on forward currency exchange
contracts 135
- ------------------------------------------------------------------------
TOTAL ASSETS 85,318
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ------------------------------------------------------------------------
Payable for:
Fund shares redeemed 227
- ------------------------------------------------------------------------
Net closed forward foreign currency contracts 31
- ------------------------------------------------------------------------
Management fee 57
- ------------------------------------------------------------------------
Distribution services fee 12
- ------------------------------------------------------------------------
Administrative services fee 15
- ------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 44
- ------------------------------------------------------------------------
Trustees' fees and other 61
- ------------------------------------------------------------------------
Unrealized depreciation on forward currency exchange
contracts 76
- ------------------------------------------------------------------------
Total liabilities 523
- ------------------------------------------------------------------------
NET ASSETS $ 84,795
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- ------------------------------------------------------------------------
Paid-in capital $131,614
- ------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (48,507)
- ------------------------------------------------------------------------
Net unrealized appreciation on investments and assets and
liabilities in foreign currencies 1,688
- ------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $ 84,795
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
THE PRICING OF SHARES
- ------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share ($69,913 /
7,824 shares outstanding) $8.94
- ------------------------------------------------------------------------
Maximum offering price per share (net asset value, plus
4.71% of
net asset value or 4.50% of offering price) $9.36
- ------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge) per share
($12,536 / 1,399 shares outstanding) $8.96
- ------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge) per share
($2,346 / 261 shares outstanding) $8.99
- ------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
14
<PAGE> 15
STATEMENT OF OPERATIONS
Year ended December 31, 1998
(IN THOUSANDS)
<TABLE>
<S> <C>
- ----------------------------------------------------------------------
NET INVESTMENT INCOME
- ----------------------------------------------------------------------
Interest $5,240
- ----------------------------------------------------------------------
Expenses:
Management fee 675
- ----------------------------------------------------------------------
Distribution services fee 135
- ----------------------------------------------------------------------
Administrative services fee 189
- ----------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 337
- ----------------------------------------------------------------------
Professional fees 75
- ----------------------------------------------------------------------
Reports to shareholders 102
- ----------------------------------------------------------------------
Trustees' fees and other 20
- ----------------------------------------------------------------------
Total expenses 1,533
- ----------------------------------------------------------------------
NET INVESTMENT INCOME 3,707
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
- ----------------------------------------------------------------------
Net realized gain on sales of investments and foreign
currency transactions 2,351
- ----------------------------------------------------------------------
Change in net unrealized depreciation on investments and
assets and liabilities in foreign currencies 2,547
- ----------------------------------------------------------------------
Net gain on investments 4,898
- ----------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $8,605
- ----------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1998 1997
<S> <C> <C>
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
Net investment income $ 3,707 6,045
- -------------------------------------------------------------------------------------------
Net realized gain (loss) 2,351 (2,323)
- -------------------------------------------------------------------------------------------
Change in net unrealized depreciation 2,547 (2,309)
- -------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 8,605 1,413
- -------------------------------------------------------------------------------------------
Distribution from net investment income (3,960) (6,027)
- -------------------------------------------------------------------------------------------
Tax return of capital distribution (1,107) (860)
- -------------------------------------------------------------------------------------------
Total dividends to shareholders (5,067) (6,887)
- -------------------------------------------------------------------------------------------
Net decrease from capital share transactions (17,797) (27,233)
- -------------------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS (14,259) (32,707)
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------
Beginning of year 99,054 131,761
- -------------------------------------------------------------------------------------------
END OF YEAR $ 84,795 99,054
- -------------------------------------------------------------------------------------------
</TABLE>
15
FINANCIAL Statements
<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 three classes of shares. Class A shares are
sold to investors subject to an initial sales
charge. Class B shares are sold without an initial
sales charge but are subject to higher ongoing
expenses than Class A shares and a contingent
deferred sales charge payable upon certain
redemptions. Class B shares automatically convert
to Class A shares six years after issuance. Class C
shares are sold without an initial 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 (none sold through
December 31, 1998) are offered to a limited group
of investors, are not subject to initial or
contingent deferred sales charges and have lower
ongoing expenses than other classes. 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 SECURITY VALUATION. Investments are stated at
value. Portfolio debt securities are valued by
pricing agents approved by the officers of the
fund, which quotations reflect
broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents
are unable to provide such quotations, the most
recent bid quotation supplied by a bona fide market
maker shall be used. Money market instruments
purchased with an original maturity of sixty days
or less are valued at amortized cost. Forward
foreign currency exchange contracts are valued at
the prevailing forward exchange rates of the
underlying currencies on that day. All other
securities are valued at their fair market value as
determined in good faith by the Valuation Committee
of the Board of Trustees.
FOREIGN CURRENCY TRANSLATION. The books and records
of the fund are maintained in U.S. dollars.
Investment securities and other assets and
liabilities denominated in a foreign currency are
translated into U.S. dollars at the prevailing
rates of exchange. Purchases and sales of
investment securities, income and expenses are
translated into U.S. dollars at the prevailing
exchange rates on the respective dates of the
transactions.
Net realized and unrealized gains and losses on
foreign currency transactions represent net gains
and losses from sales and maturities of forward
foreign currency exchange contracts, disposition of
foreign currencies, and the difference between the
amount of net investment income accrued and the
U.S. dollar amount actually received. That portion
of both realized and unrealized gains and losses on
investments that result from fluctuations in
foreign currency exchange rates is not separately
disclosed.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on the
trade date. 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
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
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 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's policy is to
comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to
regulated investment companies, and to distribute
all of its taxable income to its shareholders.
Accordingly, the fund paid no federal income taxes
and no federal income tax provision was required.
At December 31, 1998, the fund had a net tax basis
loss carryforward of approximately $42,482,000,
which may be applied against any realized net
taxable gains of each succeeding year until fully
utilized or it will expire during the period 1999
through 2002. However, of this amount, the
availability of approximately $14,000,000 obtained
through prior fund acquisitions is limited to
$7,000,000 per year from 2000 through 2001.
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. Prior to January 1, 1998,
the fund used equalization accounting to keep a
continuing shareholder's per share interest in
undistributed net investment income unaffected by
shareholder activity. This was accomplished by
allocating a portion of the proceeds from sales and
the cost of redemptions of fund shares to
undistributed net investment income. As of January
1, 1998, the fund discontinued using equalization.
This change has no effect on the fund's net assets,
net asset value per share or distributions to
shareholders. Discontinuing the use of equalization
accounting will result in simpler financial
statements. The cumulative effect of the
discontinuance of equalization accounting was to
decrease undistributed net investment income and
increase paid-in capital previously reported
through December 31, 1997 by $705,000.
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The fund has a management
agreement with Scudder Kemper Investments, Inc.
(Scudder Kemper) and pays a monthly investment
management fee of 1/12 of the annual rate of .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 $675,000 for the year
ended December 31, 1998. Scudder Investments (U.K.)
Limited, an affiliate of Scudder Kemper serves as
sub-advisor for the fund and is paid by Scudder
Kemper for its services.
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
ZURICH/B.A.T MERGER. On September 7, 1998, Zurich
Insurance Company (Zurich), majority owner of
Scudder Kemper, entered into an agreement with
B.A.T Industries p.l.c. (B.A.T) pursuant to which
the financial services businesses of B.A.T were
combined with Zurich's businesses to form a new
global insurance and financial services company
known as Zurich Financial Services. Upon
consummation of the transaction, the fund's
investment management agreement with Scudder Kemper
was deemed to have been assigned and, therefore,
terminated. The Board of Trustees of the fund has
approved a new investment management agreement with
Scudder Kemper, which is substantially identical to
the former investment management agreement, except
for the dates of execution and termination.
Shareholders approved the new investment management
agreement through a proxy solicitation that
concluded in mid-December.
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 COMMISSIONS ALLOWED
RETAINED BY KDI BY KDI TO FIRMS
--------------- -------------------
<S> <C> <C>
Year ended December 31, 1998 $3,000 $24,000
</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 separate Rule 12b-1 plans for
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, 1998 $186,000 74,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The fund has an
administrative services agreement with KDI. For
providing information and administrative services
to 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, 1998 $189,000 192,000
</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 $197,000
for the year ended December 31, 1998.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the fund are also officers or directors of
Scudder Kemper. During the year ended December 31,
1998, the fund made no payments to its officers and
incurred trustees' fees of $15,000 to independent
trustees.
18
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the year ended December 31, 1998, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $268,150
Proceeds from sales 286,100
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the fund (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997
--------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 991 $ 8,688 862 $ 7,486
------------------------------------------------------------------------------
Class B 409 3,579 735 6,386
------------------------------------------------------------------------------
Class C 178 1,560 99 866
------------------------------------------------------------------------------
Class I -- -- 1 7
------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 336 2,920 378 3,265
------------------------------------------------------------------------------
Class B 78 682 163 1,406
------------------------------------------------------------------------------
Class C 7 60 6 53
------------------------------------------------------------------------------
SHARES REDEEMED
Class A (3,195) (27,830) (3,721) (32,238)
------------------------------------------------------------------------------
Class B (797) (6,933) (1,601) (13,911)
------------------------------------------------------------------------------
Class C (57) (498) (63) (550)
------------------------------------------------------------------------------
Class I (3) (25) (1) (3)
------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 1,287 11,130 1,270 10,982
------------------------------------------------------------------------------
Class B (1,285) (11,130) (1,268) (10,982)
------------------------------------------------------------------------------
NET DECREASE FROM CAPITAL
SHARE TRANSACTIONS $(17,797) $ (27,233)
------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6 FORWARD FOREIGN
CURRENCY CONTRACTS In order to protect itself against a decline in the
value of a particular foreign currency against
another currency, the fund has entered into forward
contracts to deliver or receive 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 amounts on these contracts
are 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, 1998, the fund had the
following forward foreign currency contracts
outstanding with settlement dates in March 1999 (in
thousands):
<TABLE>
<CAPTION>
CONTRACT UNREALIZED
FOREIGN CURRENCY AMOUNT IN GAIN (LOSS) AT
TO BE (DELIVERED)/RECEIVED U.S. DOLLARS 12/31/98
------------------------------------------------------------------
<C> <S> <C> <C>
(8,000) Canadian dollars $5,206 $(18)
------------------------------------------------------------------
(7,800) New Zealand dollars 4,243 135
------------------------------------------------------------------
3,480 Swiss francs 2,614 (58)
------------------------------------------------------------------
NET UNREALIZED GAIN $ 59
------------------------------------------------------------------
</TABLE>
20
<PAGE> 21
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------
CLASS A
---------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year
$8.58 8.97 9.05 8.55 9.29
- ----------------------------------------------------------------------------------
Income from investment operations:
Net investment income .37 .48 .52 .61 .60
- ----------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .50 (.33) (.02) 1.05 (.74)
- ----------------------------------------------------------------------------------
Total from investment operations .87 .15 .50 1.66 (.14)
- ----------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .40 .47 .58 1.16 .38
- ----------------------------------------------------------------------------------
Tax return of capital distribution .11 .07 -- -- .22
- ----------------------------------------------------------------------------------
Total dividends .51 .54 .58 1.16 .60
- ----------------------------------------------------------------------------------
Net asset value, end of year $8.94 8.58 8.97 9.05 8.55
- ----------------------------------------------------------------------------------
TOTAL RETURN 10.48% 1.80 5.87 19.89 (1.47)
RATIOS TO AVERAGE NET ASSETS
Expenses 1.58% 1.32 1.48 1.34 1.53
- ----------------------------------------------------------------------------------
Net investment income 4.31% 5.56 5.77 6.43 6.67
- ----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------
MAY 31
YEAR ENDED DECEMBER 31, TO
--------------------------- DECEMBER 31,
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $8.60 9.00 9.09 8.56 8.70
- -----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .31 .41 .46 .56 .30
- -----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .49 (.33) (.02) 1.05 (.14)
- -----------------------------------------------------------------------------------------
Total from investment operations .80 .08 .44 1.61 .16
- -----------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .34 .42 .53 1.08 .19
- -----------------------------------------------------------------------------------------
Tax return of capital distribution .10 .06 -- -- .11
- -----------------------------------------------------------------------------------------
Total dividends .44 .48 .53 1.08 .30
- -----------------------------------------------------------------------------------------
Net asset value, end of period $8.96 8.60 9.00 9.09 8.56
- -----------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 9.56% 1.03 5.11 19.21 1.89
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 2.32% 2.18 2.14 1.98 2.27
- -----------------------------------------------------------------------------------------
Net investment income 3.57% 4.70 5.11 5.79 5.89
- -----------------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 22
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------------------
MAY 31
YEAR ENDED DECEMBER 31, TO
------------------------------------ DECEMBER 31,
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 8.62 9.02 9.09 8.56 8.70
- --------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .32 .42 .48 .57 .30
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .49 (.33) (.02) 1.05 (.14)
- --------------------------------------------------------------------------------------------------
Total from investment operations .81 .09 .46 1.62 .16
- --------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .34 .43 .53 1.09 .19
- --------------------------------------------------------------------------------------------------
Tax return of capital distribution .10 .06 -- -- .11
- --------------------------------------------------------------------------------------------------
Total dividends .44 .49 .53 1.09 .30
- --------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.99 8.62 9.02 9.09 8.56
- --------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 9.72% 1.09 5.31 19.26 1.91
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 2.13% 2.11 2.06 2.06 2.23
- --------------------------------------------------------------------------------------------------
Net investment income 3.76% 4.77 5.19 5.71 5.93
- --------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
Net assets at end of year (in thousands) $84,795 99,054 131,761 152,959 170,700
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate 313% 283 276 220 378
- --------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Total return does not reflect the effect of any sales charges. Per share
data for 1998, 1997 and 1996 were determined based on average shares
outstanding.
22
<PAGE> 23
SHAREHOLDERS' MEETING
SPECIAL SHAREHOLDERS' MEETING
On December 17, 1998, a special shareholders' meeting was held and adjourned for
certain purposes to January 15, 1999. Kemper Global Income Fund shareholders
were asked to vote on three separate issues: approval of the new Investment
Management Agreement between the fund and Scudder Kemper Investments, Inc.,
approval of a new Sub-Advisory Agreement for the fund with Scudder Investments
(U.K.) Limited and to modify or eliminate certain policies and to eliminate the
shareholder approval requirements as to certain other matters. Following are the
results.
1) Approval of the new Investment Management Agreement between the fund and
Scudder Kemper Investments, Inc. This item was approved.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
6,292,233 108,327 257,658
</TABLE>
2) Approval of the new Sub-Advisory Agreement for the fund with Scudder Kemper
(U.K.) Limited. This item was approved.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
6,236,948 112,665 308,605
</TABLE>
3) To modify or eliminate certain policies and to eliminate the shareholder
approval requirements as to certain other matters. These items were approved.
Investment objectives
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
4,574,265 273,646 509,058
</TABLE>
Investment policies
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
4,570,222 277,688 509,058
</TABLE>
Diversification
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
4,573,145 274,765 509,058
</TABLE>
Borrowing
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
4,563,975 283,935 509,058
</TABLE>
Senior securities
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
4,573,016 274,895 509,058
</TABLE>
Concentration
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
4,571,262 276,648 509,058
</TABLE>
Underwriting of securities
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
4,573,988 273,923 509,058
</TABLE>
Investment in real estate
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
4,572,105 275,805 509,058
</TABLE>
Purchase of commodities
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
4,568,972 278,938 509,058
</TABLE>
Lending
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
4,565,926 281,984 509,058
</TABLE>
Margin purchases and short sales
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
4,565,302 282,609 509,058
</TABLE>
Pledging of assets
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
4,560,731 287,179 509,058
</TABLE>
Purchases of securities
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
4,571,087 276,823 509,058
</TABLE>
Purchases of options and warrants
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
4,559,362 288,549 509,058
</TABLE>
23
<PAGE> 24
TRUSTEES AND OFFICERS
TRUSTEES OFFICERS
DANIEL PIERCE MARK S. CASADY LINDA J. WONDRACK
Chairman and Trustee President Vice President
LEWIS A. BURNHAM PHILIP J. COLLORA MAUREEN E. KANE
Trustee Vice President Assistant Secretary
and Secretary
DONALD L. DUNAWAY CAROLINE PEARSON
Trustee JOHN R. HEBBLE Assistant Secretary
Treasurer
ROBERT B. HOFFMAN ELIZABETH C. WERTH
Trustee ANN M. MCCREARY Assistant Secretary
Vice President
DONALD R. JONES BRENDA LYONS
Trustee ROBERT C. PECK, JR. Assistant Treasurer
Vice President
THOMAS W. LITTAUER
Trustee and Vice President KATHRYN L. QUIRK
Vice President
SHIRLEY D. PETERSON
Trustee
WILLIAM P. SOMMERS
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 Avenue
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 (2/23/99) 1066850
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
