<PAGE> 1
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED DECEMBER 31, 1999
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
"Given the consensus outlook for global growth and rising interest rates over
the next six months, we ... plan on maintaining a defensive bond position. We
hope to add value via active currency hedge management."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
8
MARKET PERFORMANCE
9
CURRENCY COMPOSITION
10
PORTFOLIO OF INVESTMENTS
13
FINANCIAL STATEMENTS
16
FINANCIAL HIGHLIGHTS
18
NOTES TO FINANCIAL STATEMENTS
25
REPORT OF INDEPENDENT AUDITORS
AT A GLANCE
TERMS TO KNOW
KEMPER GLOBAL INCOME FUND
TOTAL RETURNS
FOR THE YEAR ENDED DECEMBER 31, 1999 (UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------
KEMPER GLOBAL INCOME FUND CLASS A -6.38
- --------------------------------------------------------------------------------------
Kemper Global Income Fund Class B -6.98
- --------------------------------------------------------------------------------------
Kemper Global Income Fund Class C -7.06
- --------------------------------------------------------------------------------------
Lipper General World Income Funds Category Average* -2.43
- --------------------------------------------------------------------------------------
</TABLE>
RETURNS AND RANKINGS ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. INVESTMENT IN FOREIGN
SECURITIES PRESENTS SPECIAL RISK CONSIDERATIONS INCLUDING FLUCTUATING CURRENCY
EXCHANGE RATES, GOVERNMENT REGULATIONS AND DIFFERENCES IN LIQUIDITY.
*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; IF SALES CHARGES HAD BEEN INCLUDED, RESULTS MAY HAVE BEEN LESS
FAVORABLE.
NET ASSET VALUE
<TABLE>
<CAPTION>
AS OF AS OF
12/31/99 12/31/98
- --------------------------------------------------------
<S> <C> <C>
KEMPER GLOBAL INCOME FUND
CLASS A $7.98 $8.94
- --------------------------------------------------------
KEMPER GLOBAL INCOME FUND
CLASS B $8.00 $8.96
- --------------------------------------------------------
KEMPER GLOBAL INCOME FUND
CLASS C $8.01 $8.99
- --------------------------------------------------------
</TABLE>
KEMPER GLOBAL INCOME
FUND RANKINGS AS OF 12/31/99*
COMPARED WITH 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 #102 of 137 funds #110 of 137 funds #111 of 137 funds
- -------------------------------------------------------------------------------------
5-YEAR #50 of 82 funds #60 of 82 funds #59 of 82 funds
- -------------------------------------------------------------------------------------
10-YEAR #9 of 20 funds n/a /a
- -------------------------------------------------------------------------------------
</TABLE>
DIVIDEND AND YIELD REVIEW
THE FOLLOWING TABLE SHOWS PER SHARE DIVIDEND AND YIELD INFORMATION FOR THE FUND
AS OF DECEMBER 31, 1999.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- -----------------------------------------------------------------
<S> <C> <C> <C>
ONE-YEAR INCOME: $0.3975 $0.3423 $0.3542
- -----------------------------------------------------------------
DECEMBER DIVIDENDS: $0.0300 $0.0257 $0.0268
- -----------------------------------------------------------------
ANNUALIZED
DISTRIBUTION RATE+: 4.51% 3.86% 4.01%
- -----------------------------------------------------------------
SEC YIELD+: 4.40% 3.81% 3.48%
- -----------------------------------------------------------------
</TABLE>
+CURRENT ANNUALIZED DISTRIBUTION RATE IS THE LATEST MONTHLY DIVIDEND SHOWN AS AN
ANNUALIZED PERCENTAGE OF NET ASSET VALUE ON DECEMBER 31, 1999. 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, 1999, 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.
THIS IS A NONDIVERSIFIED FUND. THIS PRESENTS GREATER RISK OF LOSS OF PRINCIPAL
AS THE FINANCIAL CONDITION OR MARKET'S ASSESSMENT OF SUCH SECURITIES CHANGES.
YOUR FUND'S STYLE
MORNINGSTAR FIXED-INCOME STYLE BOX
<TABLE>
<S> <C>
[MORNINGSTAR FIXED-INCOME Source: Morningstar, Inc., Chicago, IL (312)
STYLE BOX] 696-6000. 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.
Maturity/Intermediate THE STYLE BOX REPRESENTS A SNAPSHOT OF A FUND'S
Quality/High 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.
</TABLE>
CREDIT SPREAD The difference in yield between non-U.S. Treasury bonds, such as
international bonds, and U.S. Treasury bonds of comparable maturity. If credit
spreads are said to be widening, for example, it typically means that the yields
of non-U.S. government issues have been rising. In contrast, narrowing spreads
generally mean that the yields of non-U.S. government issues have been falling.
HEDGING A strategy used to help protect an investment. Financial managers can
use any number of technical and nontechnical procedures to hedge, or reduce the
possibility of a loss on, an investment.
CURRENCY DEVALUATION A significant decline of a currency's value relative to
other currencies, such as the U.S. dollar. Devaluation 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 because the investment, converted back into U.S. dollars, will require
more of the foreign currency to purchase dollars.
<PAGE> 3
SCUDDER KEMPER INVESTMENTS, THE INVESTMENT MANAGER FOR KEMPER FUNDS, IS ONE OF
THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS IN THE
WORLD, MANAGING MORE THAN $290 BILLION IN ASSETS FOR INSTITUTIONAL AND CORPORATE
CLIENTS, RETIREMENT AND PENSION PLANS, INSURANCE COMPANIES, MUTUAL FUND
INVESTORS AND INDIVIDUALS. SCUDDER KEMPER INVESTMENTS OFFERS A FULL RANGE OF
INVESTMENT COUNSEL AND ASSET MANAGEMENT CAPABILITIES BASED ON A COMBINATION OF
PROPRIETARY RESEARCH AND DISCIPLINED, LONG-TERM INVESTMENT STRATEGIES.
ECONOMIC Overview
DEAR KEMPER FUNDS SHAREHOLDER:
The end of the metaphorical millennium, it turns out, was not a disaster.
Instead, it was an excuse to party. And why not? As our technological revolution
gained critical mass, its vast potential came into better focus. Capital
spending on information technology didn't slow down; it accelerated. Inflation
remained dormant. The budget surplus nearly doubled, with the promise of oceans
of black ink yet to come. Even the government delivered good news: Its
statisticians toyed with the national accounts to reveal a more productive
economy. It's no wonder the prevailing sentiment could be summed up with the
quintessentially American yelp of glee: Yahoo!
With the potential Y2K crisis seemingly averted, the main question hanging
over the economy has been whether the Federal Reserve Board would boost interest
rates to soak up extra liquidity caused by its pre-Y2K infusion of cash into the
economy. The Fed began that process on Feb. 2. Fearing that "increases in
demand" would foster "inflationary imbalances," they raised interest rates by a
quarter of a percentage point (0.25%).
Although some investors have expressed fear that the Fed's sucking cash out of
banks will jolt the financial system, we're more likely to see a slow winding
down, thanks to persistent low inflation. Yes, some prices are higher: Filling
up the SUV's gas tank definitely costs more. But the rate of inflation for
non-energy goods and services has actually slowed during the past year. Although
most analysts are worried that the reprieve won't last -- assuming that higher
commodity prices, a softer dollar and the scarcity of skilled workers will show
up as higher prices at the checkout counter -- we'd turn that worry on its head.
If inflation hasn't accelerated after three years of over 4-percent gross
domestic product (GDP) growth and an unprecedented credit explosion, prices
aren't likely to increase if growth slows and lenders get stingier.
More good news stems from the technological investment boom. While executives
have pared capital budgets in traditional areas such as industrial machinery and
buildings, they've boosted outlays on computers and software. Thanks to the
sheer force of technology spending, overall business investment has grown two to
four times as fast as GDP in every year since 1993. And that expansion should
continue, with more than 20 percent growth likely in high-tech through 2000 and
even beyond. And technology hurts inflation. It saves on labor and inventory,
increases capacity, creates new competitors, cuts out middlemen, gives shoppers
comparative price information and enables global auctions.
Our outlook is for inflation to stay centered around 2 percent, and we expect
a gentle slowing of growth from 4 percent in 1999 to around 3.5 percent in 2000
and just under 2.5 percent in 2001.
Despite this positive outlook, pre-Y2K fears were sufficient to show many
investors that risks exist in today's markets and remind them that they could be
in for a serious hangover.
The prospect of sparkling growth with no inflation has excited equity
investors, but there's a catch: declining corporate pricing power. If companies
don't have the ability to increase prices, profit growth will decline -- and
it's already happening. For the five years ending in June 1999, S&P 500
operating earnings averaged 9 percent, two and a half percentage points per year
slower than analysts had predicted. Profits did recover strongly in the second
half of 1999, but we suspect that they will soon sputter again. And the
economy's newfound productivity won't change the rules and allow companies to
make money even if they can't raise prices. Productivity gains do produce a
windfall, but historically customers and employees have grabbed the lion's
share. Web sites and dot.coms haven't changed this one iota. As a result, we
expect profits to be virtually flat in all of 2000 and to decline as the economy
slows in 2001.
Debt is another drink that could bring on future headaches. America has been
swigging it in prodigious amounts. Companies have borrowed heavily to fund
mergers, share buybacks and new investments. Homeowners have increased their
debt with new home equity loans and bigger mortgages. Financial institutions
have issued record amounts of new paper to fund aggressive growth. There's no
hard and fast rule for determining if the debt America is taking on is too much,
but warning bells should sound when debt grows by orders of magnitude faster
than necessary to fund economic activity. That happened in 1985 and 1986, when
excess credit created a commercial real estate bubble and funded dubious
leveraged buyouts with suspect
3
<PAGE> 4
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 (1/31/00) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 6.70 5.80 4.70 5.50
Prime rate (2) 8.50 7.75 7.75 8.50
Inflation rate (3)* 2.70 2.00 1.60 1.70
The U.S. dollar (4) 1.50 -2.2 -4.2 9.40
Capital goods orders (5)* 18.30 -0.2 10.60 6.50
Industrial production (5)* 5.00 3.90 2.40 6.70
Employment growth (6) 2.30 2.40 2.20 2.80
</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 12/31/99.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
Economic OVERVIEW
junk bonds, and it's happening again now. Both the commercial real estate and
the high yield markets took years to recover. Today, the sheer size of the
excesses could make the "morning after" even more painful.
The end result: Given the continuing thrust of growth from the technological
revolution, an improving world economy and the Fed's experience and skill, 2000
could turn out to be a good year. But it's highly unlikely to be as good a year
as 1999.
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
Scudder Kemper Investments Economics Group
THE INFORMATION CONTAINED IN THIS PIECE HAS BEEN TAKEN FROM SOURCES BELIEVED TO
BE RELIABLE, BUT THE ACCURACY OF THE INFORMATION IS NOT GUARANTEED. THE OPINIONS
AND FORECASTS EXPRESSED ARE THOSE OF THE ECONOMIC ADVISORS OF SCUDDER KEMPER
INVESTMENTS, INC. AS OF FEB. 2, 2000, AND MAY NOT ACTUALLY COME TO PASS. THIS
INFORMATION IS SUBJECT TO CHANGE. NO PART OF THIS MATERIAL IS INTENDED AS AN
INVESTMENT RECOMMENDATION.
TO OBTAIN A KEMPER FUNDS PROSPECTUS, DOWNLOAD ONE FROM WWW.KEMPER.COM, TALK TO
YOUR FINANCIAL REPRESENTATIVE OR CALL SHAREHOLDER SERVICES AT (800) 621-1048.
THE PROSPECTUS CONTAINS MORE COMPLETE INFORMATION, INCLUDING MANAGEMENT FEES AND
EXPENSES. PLEASE READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
4
<PAGE> 5
PERFORMANCE UPDATE
[FALLER PHOTO]
LEAD PORTFOLIO MANAGER JAN FALLER JOINED SCUDDER KEMPER INVESTMENTS' GLOBAL BOND
GROUP IN 1999. PRIOR TO JOINING THE COMPANY, JAN WAS PART OF THE GLOBAL
FIXED-INCOME PORTFOLIO MANAGEMENT TEAM AT PANAGORA ASSET MANAGEMENT. HE RECEIVED
A BACHELOR'S DEGREE FROM WESTMONT COLLEGE, SANTA BARBARA, AND AN M.B.A. FROM
AMOS TUCK SCHOOL, DARTMOUTH COLLEGE.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE
MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
OVER THE PAST 12 MONTHS, THE GLOBAL BOND MARKET HAS BEEN CHALLENGING, DOMINATED
BY CONCERNS OVER THE Y2K EFFECT, THE SUSTAINABILITY OF GROWTH IN THE UNITED
STATES AND ELSEWHERE, AND INTEREST-RATE FEARS. KEMPER GLOBAL INCOME FUND LEAD
PORTFOLIO MANAGER, JAN FALLER, RECAPS THE PERIOD AND SHARES HIS OUTLOOK FOR THE
GLOBAL BOND MARKET.
Q WHAT WERE THE MORE SIGNIFICANT ECONOMIC EVENTS AFFECTING GLOBAL BOND
MARKETS DURING THE FISCAL YEAR ENDING DECEMBER 31, 1999?
A For much of 1999, U.S. interest-rate concerns and Y2K fears were the main
focus of global bond markets. With the United States having served as the
world's growth engine for much of 1998, investors grew worried that global
growth would slow if the United States raised interest rates. Additionally,
uncertainty surrounding market appetite for new issues as the Y2K rollover
approached raised concerns that issuers would move their remaining 1999
financing needs forward. These concerns put significant pressure on credit
spreads (see Terms To Know on page 2) in general; by the end of June, the
Federal Reserve began to take back the 75 basis points of easing that it gave to
the market the previous year.
Not all central banks were in sync with the United States, however, reflecting
the economic-cycle disparity around the world. For example, rather than raising
rates as the Fed did, the Bank of Japan lowered its short-term rate to nearly
zero in an effort to stimulate an economy experiencing deflation and negative
growth. The Japanese bond market responded strongly, outperforming other global
markets for much of the year. While not with the same desperation as the
Japanese, the newly established European Central Bank also lowered the
short-term rate in the Eurobloc. Yield curves across Europe steepened in
response as investors priced in the potentially inflationary effects of the
monetary easing.
On the emerging-markets front, there was clearly an increase in risk tolerance
among bond market participants. Brazil's devaluation of the REAL in early 1999
initially created fears of even more instability among developing nations.
Instead, due to credible indications of serious fiscal reform from Brazil and
others, many emerging markets stabilized and subsequently rallied, particularly
in the latter half of the year. This was remarkable given that global bond
markets experienced the first-ever Brady bond default. Ecuador announced it
would delay a $96 million interest payment that was due at the end of August and
would seek a restructuring on its $6 billion of outstanding Brady debt. The
default had a muted impact on the markets; investors considered Ecuador to be
its own case and were able to differentiate its deteriorating credit from that
of other emerging markets.
Q AGAINST THIS SOMEWHAT CHALLENGING BACKDROP FOR 1999, HOW DID KEMPER GLOBAL
INCOME FUND PERFORM RELATIVE TO ITS BENCHMARK?
A Kemper Global Income Fund was down by 6.38 percent (Class A shares,
unadjusted for any sales charge) for the year, compared with the Salomon
Brothers World
5
<PAGE> 6
PERFORMANCE UPDATE
Government Bond Index*, which declined by 4.27 percent for the same period. The
fund's underperformance relative to the index can be attributed to three main
factors, all related to risk management. Cautious about the sustainability of
low yields in Japan, we were underweighted there. We also maintained a
significant hedge on the YEN, thereby missing out on that currency's rally. In
contrast, the index is unhedged. Additionally, we were overweighted in the weak
U.S. bond market in the earlier half of the year. We did have some exposure to
emerging markets throughout 1999, and we did maintain a hedge against the
declining euro, but these moves were not sufficient to place the fund ahead of
the benchmark.
* THE SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX IS AN UNMANAGED INDEX ON A
U.S. DOLLAR BASIS, WITH ALL DIVIDENDS REINVESTED, AND INCLUDES BONDS FROM 14
COUNTRIES. THE MINIMUM MATURITY IS ONE YEAR. INVESTORS CANNOT ACTUALLY INVEST
IN THE INDEX. SOURCE: SALOMON SMITH BARNEY.
Q HOW WOULD YOU DESCRIBE YOUR INVESTMENT PROCESS?
A Our process is best described as a rigorous, structured approach to
following all of the countries and currencies that are candidates for investment
by the fund. We regularly review current and potential holdings in a disciplined
manner, using consistent measures. Also, we consider any political or other
developments that might not be caught by the specific valuation measures that we
apply.
Our decisions are based on three factors: country, individual security credit
quality, and currency. Because changes in interest rates are the most
significant determinant of bond returns, identifying which countries will
outperform and which countries will underperform has a larger effect on
portfolio performance than individual security selection. However, once we
determine which countries to own, we then find attractive securities with high
credit quality that might enhance the yield of the fund without taking
significant credit risk. Currency selection is also important because currency
returns are generally more volatile than bond returns. Again, we rely on a
combination of specific valuation measures to determine what the appropriate
combination of hedges is for the fund at any given time. The fund seeks to hold
the optimal combination of hedges (see Terms To Know on page 2) in an attempt to
manage risk and increase return potential. We are very seldom fully hedged into
currencies or, conversely, fully unhedged. Instead the goal is to have partial
hedges which can help reduce the volatility of returns for the fund.
Q HOW DO YOU FORESEE APPLYING THIS PROCESS OVER THE NEXT SIX MONTHS OR SO?
A Given the consensus outlook for global growth and rising interest rates
over the next six months, we anticipate a continued tough global bond market and
plan on maintaining a defensive bond position. We hope to add value via active
currency hedge management. We believe that the euro is currently below its fair
value and that over the medium term it should rise relative to the dollar. We'll
adjust our hedge to take advantage of the expected move of the euro toward its
fair value. There is little appeal to the Japanese bond market. Almost any
economic scenario indicates that yields should rise there, which would hurt bond
returns. Therefore, we plan to maintain our underweight in Japanese bonds. If
their economic recovery is slow and steady, however, yields could remain at
their low levels for a significant period of time, rather than increasing due to
either oversupply or indications of inflation. Should yields remain at their
current levels, our underweight position could hurt the relative performance of
the fund, especially if yields in other major markets rise relative to Japan.
This is not a particularly likely scenario given the increasing supply and
continued signs of economic recovery in the Japanese market.
On the home front, we anticipate that there will be at least one more rate
hike in the United States as strong growth continues. The risk with the Fed's
raising rates comes mainly from the potentially negative effect on equity
markets. A drop in U.S. equity markets is not positive for bonds because credit
spreads and emerging-market spreads are highly correlated with U.S. equity
returns. We are managing this risk by sticking with high-quality bonds and
viewing our emerging-markets holdings as tactical. If we find that our positions
in developing markets face a potential increase in spreads, we will reduce our
holdings in an effort to reduce the risk.
6
<PAGE> 7
PERFORMANCE UPDATE
AVERAGE ANNUAL TOTAL RETURNS*
FOR PERIODS ENDED DECEMBER 31, 1999 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
LIFE OF
1-YEAR 5-YEAR 10-YEAR CLASS
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
KEMPER GLOBAL INCOME FUND CLASS A -10.58% 5.01% 6.36% 6.70% (since 10/01/89)
................................................................................................
KEMPER GLOBAL INCOME FUND CLASS B -9.66 5.07 n/a 4.88 (since 05/31/94)
................................................................................................
KEMPER GLOBAL INCOME FUND CLASS C -7.06 5.30 n/a 5.08 (since 05/31/94)
................................................................................................
</TABLE>
KEMPER GLOBAL INCOME FUND CLASS A
Growth of an assumed $10,000 investment in Class A
shares from 10/31/89 to 12/31/99
[LINE GRAPH]
<TABLE>
<CAPTION>
KEMPER GLOBAL INCOME SALOMON BROTHERS WORLD CONSUMER PRICE INDEX -
FUND CLASS A1 GOVERNMENT BOND INDEX+ US++
-------------------- ---------------------- ----------------------
<S> <C> <C> <C>
10/31/89 9546 10000 10000
9960 10215 10040
12216 11440 10653
13576 13252 10979
12/31/92 13318 13985 11298
14680 15844 11608
14464 16211 11919
17340 19297 12221
12/31/96 18358 19998 12627
18689 20047 12842
20648 23111 13049
12/31/99 19331 22134 13408
</TABLE>
- - Kemper Global Income Fund Class A (1)
- - Salomon Brothers World Government Bond Index (+)
- - Consumer Price Index - US (++)
KEMPER GLOBAL INCOME FUND CLASS B
Growth of an assumed $10,000 investment in Class B
shares from 05/31/94 to 12/31/99
[LINE GRAPH]
<TABLE>
<CAPTION>
KEMPER GLOBAL INCOME SALOMON BROTHERS WORLD CONSUMER PRICE INDEX -
FUND CLASS B1 GOVERNMENT BOND INDEX+ US++
-------------------- ---------------------- ----------------------
<S> <C> <C> <C>
5/31/94 10000 10000 10000
10189 10311 10149
12/31/95 12146 12274 10407
12767 12720 10753
12/31/97 12898 12751 10936
14132 14700 11112
12/31/99 13053 14079 11417
</TABLE>
- - Kemper Global Income Fund Class B (1)
- - Salomon Brothers World Government Bond Index (+)
- - Consumer Price Index - US (++)
KEMPER GLOBAL INCOME FUND CLASS C
Growth of an assumed $10,000 investment in Class C
shares from 05/31/94 to 12/31/99
[LINE GRAPH]
<TABLE>
<CAPTION>
KEMPER GLOBAL INCOME SALOMON BROTHERS WORLD CONSUMER PRICE INDEX -
FUND CLASS C1 GOVERNMENT BOND INDEX+ US++
-------------------- ---------------------- ----------------------
<S> <C> <C> <C>
5/31/94 10000 10000 10000
10191 10311 10149
12/31/95 12154 12274 10407
12799 12720 10753
12/31/97 12938 12751 10936
14195 14700 11112
12/31/99 13193 14079 11417
</TABLE>
- - Kemper Global Income Fund Class C (1)
- - Salomon Brothers World Government Bond Index (+)
- - Consumer Price Index - US (++)
PAST PERFORMANCE IS NOT A GUARANTEE OF
FUTURE RESULTS. INVESTMENT RETURNS AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT
SHARES, WHEN REDEEMED, MAY BE 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 ADJUSTMENT FOR THE APPLICABLE
CONTINGENT DEFERRED SALES CHARGE
(CDSC) IS AS FOLLOWS: 1-YEAR, 3%;
5-YEAR, 1%; SINCE INCEPTION, 0 PERCENT
AND FOR CLASS C SHARES NO ADJUSTMENT
FOR SALES CHARGE. THE MAXIMUM CDSC FOR
CLASS B SHARES IS 4%. FOR CLASS C
SHARES, THERE IS A 1% CDSC ON CERTAIN
REDEMPTIONS WITHIN THE FIRST YEAR OF
PURCHASE. SHARE CLASSES INVEST IN THE
SAME UNDERLYING PORTFOLIO. AVERAGE
ANNUAL 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 WITH 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
NONDIVERSIFIED 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 NONDIVERSIFIED
INVESTMENT COMPANY, THE FUND MAY
INVEST MORE THAN 5% OF ITS ASSETS IN
THE SECURITIES OF A PARTICULAR
FOREIGN GOVERNMENT.
(+)THE SALOMON BROTHERS WORLD
GOVERNMENT BOND INDEX IS AN
UNMANAGED INDEX ON A U.S. DOLLAR
TOTAL RETURN BASIS, WITH ALL
DIVIDENDS REINVESTED, AND INCLUDES
GOVERNMENT BONDS FROM 14 COUNTRIES.
THE MINIMUM MATURITY IS ONE YEAR.
SOURCE IS WIESENBERGER.
(++)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
WIESENBERGER.
THE INDICES ARE NOT AVAILABLE FOR
DIRECT INVESTMENT.
7
<PAGE> 8
MARKET PERFORMANCE
WORLD BOND MARKET PERFORMANCE
The table below presents the one-year returns of select government bond markets
tracked by Salomon Brothers for the period ending December 31, 1999, expressed
in local currencies and 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. AUSTRALIA 4.07 -2.45
- ---------------------------------------------------------------------------------------
2. AUSTRIA -17.14 -2.92
- ---------------------------------------------------------------------------------------
3. BELGIUM -16.84 -2.58
- ---------------------------------------------------------------------------------------
4. CANADA 4.29 -1.46
- ---------------------------------------------------------------------------------------
5. DENMARK -14.90 -0.73
- ---------------------------------------------------------------------------------------
6. EEC* -16.83 -2.57
- ---------------------------------------------------------------------------------------
7. FINLAND -16.25 -1.89
- ---------------------------------------------------------------------------------------
8. FRANCE -17.15 -2.95
- ---------------------------------------------------------------------------------------
9. GERMANY -16.42 -2.08
- ---------------------------------------------------------------------------------------
10. IRELAND -17.50 -3.35
- ---------------------------------------------------------------------------------------
11. ITALY -16.85 -2.59
- ---------------------------------------------------------------------------------------
12. JAPAN 15.53 4.83
- ---------------------------------------------------------------------------------------
13. NETHERLANDS -16.67 -2.38
- ---------------------------------------------------------------------------------------
14. NEW ZEALAND -1.83 -0.55
- ---------------------------------------------------------------------------------------
15. NORWAY -2.70 2.64
- ---------------------------------------------------------------------------------------
16. PORTUGAL -17.17 -2.96
- ---------------------------------------------------------------------------------------
17. SPAIN -17.20 -3.01
- ---------------------------------------------------------------------------------------
18. SWEDEN -7.50 -2.51
- ---------------------------------------------------------------------------------------
19. SWITZERLAND -16.33 -2.48
- ---------------------------------------------------------------------------------------
20. UNITED KINGDOM -4.30 -1.20
- ---------------------------------------------------------------------------------------
21. UNITED STATES -2.45 -2.45
- ---------------------------------------------------------------------------------------
</TABLE>
*EUROPEAN ECONOMIC COMMUNITY
8
<PAGE> 9
CURRENCY COMPOSITION
CURRENCY COMPOSITION OF KEMPER GLOBAL INCOME FUND
Based on total net assets on December 31, 1999
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER GLOBAL INCOME FUND ON 12/31/99
-------------------------------------
<S> <C>
United States 40
Euroland 33
Japan 10
Norway 9
United Kingdom 8
</TABLE>
Kemper Global Income Fund On 12/31/99
PORTFOLIO STATISTICS
PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
ON 12/31/99 ON 12/31/98
<S> <C> <C>
FOREIGN/U.S. GOVERNMENT SECURITIES 67% 96%
..............................................................................
OTHER* 32 2
..............................................................................
CASH AND EQUIVALENTS 1 2
- ------------------------------------------------------------------------------
100% 100%
</TABLE>
Foreign/U.S. Government Securities
Other*
Cash And Equivalents
[PIE CHART] [PIE CHART]
ON 12/31/99 ON 12/31/98
*INCLUDES SUPRANATIONAL ENTITIES AND CORPORATES GUARANTEED BY GOVERNMENTS
AVERAGE MATURITY
<TABLE>
<CAPTION>
ON 12/31/99 ON 12/31/98
<S> <C> <C>
AVERAGE MATURITY 7.5 years 7.0 years
- ------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
KEMPER GLOBAL INCOME FUND
Portfolio of Investments at December 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL
CURRENCY ISSUER AMOUNT VALUE
<S> <C> <C> <C>
MONEY MARKET INSTRUMENT--0.5%
- -------------------------------------------------------------------------------------------------------------------------
U.S. DOLLAR--0.5%
Chase Euro Time Deposit, 4.875%, due 01/03/2000
(cost $288) $ 288 $ 288
-----------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
GOVERNMENT & CORPORATE OBLIGATIONS--99.5%
- -------------------------------------------------------------------------------------------------------------------------
BRITISH POUNDS--7.7%
General Motors Acceptance Corp., 6.875%,
09/09/2004 1,670 2,670
United Kingdom Treasury Bond, 9.000%, 07/12/2011 750 1,572
-----------------------------------------------------------------------------
4,242
- -------------------------------------------------------------------------------------------------------------------------
EURO--32.5%
Depfa Pfandbrief Bank, 4.750%, 07/15/2008 (b) 2,200 2,081
Federal Republic of Germany, 6.250%,
01/04/2024 (b) 2,700 2,833
Ford Motor Credit Corp., 3.750%, 07/12/2004 (b) 3,400 3,211
French Treasury Note, 4.500%, 07/12/2003 (b) 1,000 1,003
Government of Spain, 4.500%, 07/30/2004 (b) 2,750 2,715
Kredit Fuer Wiederaufbau, 5.000%, 01/04/2009 (b) 3,180 3,068
Rheinische Hypo Bank, 4.500%, 08/26/2003 (b) 3,120 3,101
-----------------------------------------------------------------------------
18,012
- -------------------------------------------------------------------------------------------------------------------------
JAPANESE YEN--10.3%
Republic of Italy, 3.800%, 03/27/2008 (b) 500,000 5,702
-----------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
NORWEGIAN KRONER--9.0%
Norwegian Government, 7.000%, 05/31/2001 (b) 39,570 5,008
-----------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
U. S. DOLLARS--40.0%
Argentine Republic, Collateralized Par Bond,
Series L, 6.0% to 03/31/2023 200 131
Federative Republic of Brazil, Eligible Interest,
Floating Rate Bond, LIBOR plus .8125%, (6.938%),
04/15/2006 94 82
Federative Republic of Brazil, "New" Money Bond,
Floating Rate Bond, LIBOR plus .875%, (6.188%),
04/15/2009 200 162
Federative Republic of Brazil Global Bond,
10.125%, 05/15/2027 190 162
Government of Jamaica, 10.875%, 06/10/2005 (b) 275 261
Government of Malaysia, 8.750%, 06/01/2009 5 5
Kingdom of Spain, 5.875%, 07/28/2008 (b) 4,000 3,685
Petroliam Nasional BHD, 8.875%, 08/01/2004 75 78
Republic of Argentina, 11.000%, 12/04/2005 121 118
Republic of Argentina, 11.750%, 04/07/2009 75 75
Republic of Brazil, 11.625%, 04/15/2004 160 160
Republic of Bulgaria, Floating Rate Bond,
LIBOR plus .8125%, (6.500%), 07/28/2011 350 277
Republic of Colombia, 7.625%, 02/15/2007 150 127
Republic of Columbia, 9.750%, 04/23/2009 80 75
Republic of Panama, Interest Reduction Bond,
Step-up Coupon, 4.25% to 07/17/2014 225 174
Republic of Panama, Past Due Interest Bond Series
D, LIBOR plus .8125%, (6.500%) 07/17/2016 169 135
Republic of Peru, Floating Rate Interest Reduction
Bond, 3.750%, 03/07/2017 200 124
Republic of South Africa, 8.500%, 06/23/2017 225 205
Republic of Turkey, 9.875%, 02/23/2005 300 291
Republic of Venezuela Global, 9.250%, 09/15/2027 300 200
</TABLE>
10 The accompanying notes are an integral part of the financial statements.
<PAGE> 11
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL
CURRENCY ISSUER AMOUNT VALUE
<S> <C> <C> <C>
Republic of the Philippines, 9.875%,
01/15/2019 (b) $ 145 $ 143
Slovak Republic, 9.500%, 05/28/2003 75 76
Sunamerica Institute Fund, 5.750%, 02/16/2009 (b) 4,000 3,540
U.S. Treasury Bond, 7.500%, 11/15/2016 1,810 1,935
U.S. Treasury Bond, 8.500%, 02/21/2020 695 821
U.S. Treasury Note, 5.500%, 12/31/2000 1,000 994
U.S. Treasury Note, 5.625%, 12/31/2002 1,730 1,698
U.S. Treasury Note, 5.750%, 08/15/2003 700 686
U.S. Treasury Note, 6.000%, 05/15/2004 1,360 1,339
U.S. Treasury Note, 6.500%, 10/15/2006 999 996
U.S. Treasury Note, 7.875%, 08/15/2001 2,500 2,563
United Mexican States, Floating Rate Discount Bond
(Detachable Oil Priced Indexed Value Recovery
Rights), Series W-A, LIBOR plus .8125%,
(6.903%), 12/31/2019 425 398
United Mexican States, Collateralized Par Bond
(Detachable Oil Priced Indexed Value Recovery
Rights), Series W-A, 6.250%, 12/31/2019 250 197
United Mexican States, 11.500%, 05/15/2026 210 250
-----------------------------------------------------------------------------
22,163
-----------------------------------------------------------------------------
TOTAL GOVERNMENT & CORPORATE OBLIGATIONS
(Cost $57,617) 55,127
-----------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
PURCHASED OPTIONS--0.0%
- -------------------------------------------------------------------------------------------------------------------------
Put on Japanese Yen, strike price 108.50, expire
02/07/2000 (Cost $21) 203,500 3
-----------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost $57,926)(a) $55,418
-----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
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) The cost for federal income tax purposes was $57,926. At December 31, 1999
the net unrealized depreciation for all securities based on tax cost was
$2,508. This consisted of aggregate gross unrealized appreciation for all
securities in which there was an excess of market value over tax cost of
$763 and aggregate gross unrealized depreciation for all securities in which
there was an excess of tax cost over market value of $3,271.
(b) At December 31, 1999, these securities, in part or in whole, have been
segregated to cover when-issued securities and initial margin requirements
for open futures contracts.
At December 31, 1999, outstanding written options were as follows (in
thousands):
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT EXPIRATION STRIKE MARKET
WRITTEN OPTIONS (000'S) DATE PRICE VALUE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
JPY............................................. 203,500 02/07/2000 98.00 $11
---
Total outstanding written options
(Premium received $21)........................ $11
===
</TABLE>
At December 31, 1999, open futures contracts purchased (sold) were as follows
(in thousands):
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION AGGREGATE MARKET APPRECIATION/
FUTURES DATE CONTRACTS FACE VALUE VALUE (DEPRECIATION)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Canadian 10 yr. Bond............................ 3/22/2000 52 $ 4,339 $ 4,264 $(75)
Euro Bond....................................... 3/8/2000 (15) (1,619) (1,573) 46
US Treasury 10 yr. Note......................... 3/22/2000 (24) (2,363) (2,301) 62
----
Total net unrealized appreciation on open futures contracts...........................................
$ 33
====
</TABLE>
<TABLE>
<CAPTION>
CURRENCY ABBREVIATION
- -----------------------------
<S> <C>
CAD Canadian Dollar
EUR Euro
GBP British Pound
JPY Japanese Yen
NOK Norwegian Kroner
NZD New Zealand Dollar
USD U.S. Dollar
</TABLE>
12 The accompanying notes are an integral part of the financial statements.
<PAGE> 13
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
as of December 31, 1999
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------
Investments in securities, at value (cost $57,926) $ 55,418
- ------------------------------------------------------------------------
Cash 5
- ------------------------------------------------------------------------
Foreign currencies at value (cost $30) 30
- ------------------------------------------------------------------------
Interest receivable 1,604
- ------------------------------------------------------------------------
Receivable for Fund shares sold 91
- ------------------------------------------------------------------------
Receivable for daily variation margin on open futures
contracts 287
- ------------------------------------------------------------------------
Net receivable appreciation on open forward currency
exchange contracts 820
- ------------------------------------------------------------------------
Other assets 9
- ------------------------------------------------------------------------
TOTAL ASSETS 58,264
- ------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------
Payable for investments purchased 2
- ------------------------------------------------------------------------
Payable for Fund shares redeemed 107
- ------------------------------------------------------------------------
Net payable depreciation of open forward currency exchange
contracts 232
- ------------------------------------------------------------------------
Written options, at value (premiums received $21) 11
- ------------------------------------------------------------------------
Accrued management fee 41
- ------------------------------------------------------------------------
Other accrued expenses 169
- ------------------------------------------------------------------------
Total liabilities 562
- ------------------------------------------------------------------------
NET ASSETS, AT VALUE $ 57,702
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income (loss) $ (473)
- ------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on:
Investment securities (2,508)
- ------------------------------------------------------------------------
Futures 33
- ------------------------------------------------------------------------
Written options 10
- ------------------------------------------------------------------------
Foreign currency related transactions 594
- ------------------------------------------------------------------------
Accumulated net realized gain (loss) (31,047)
- ------------------------------------------------------------------------
Paid-in capital 91,093
- ------------------------------------------------------------------------
NET ASSETS, AT VALUE $ 57,702
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
NET ASSET VALUE AND OFFERING PRICE
- ------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share ($49,407 /
6,193 shares of capital stock outstanding, $.01 par value) $7.98
- ------------------------------------------------------------------------
Maximum offering price per share (100/95.50 of $7.98) $8.36
- ------------------------------------------------------------------------
CLASS B SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share ($6,955 / 869
shares of capital stock outstanding, $.01 par value) $8.00
- ------------------------------------------------------------------------
CLASS C SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share ($1,340 / 167
shares of capital stock outstanding, $.01 par value) $8.01
- ------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 13
<PAGE> 14
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Year ended December 31, 1999
(IN THOUSANDS)
<TABLE>
<S> <C>
- -----------------------------------------------------------------------
INVESTMENT INCOME
- -----------------------------------------------------------------------
Interest (net of foreign taxes withheld of $975) $ 3,902
- -----------------------------------------------------------------------
Expenses:
Management fee 536
- -----------------------------------------------------------------------
Services to shareholders 242
- -----------------------------------------------------------------------
Custodian fees 34
- -----------------------------------------------------------------------
Distribution services fees 89
- -----------------------------------------------------------------------
Administrative services fees 154
- -----------------------------------------------------------------------
Auditing 76
- -----------------------------------------------------------------------
Legal 10
- -----------------------------------------------------------------------
Trustees' fees and expenses 15
- -----------------------------------------------------------------------
Reports to shareholders 110
- -----------------------------------------------------------------------
Other 13
- -----------------------------------------------------------------------
Total expenses, before expense reductions 1,279
- -----------------------------------------------------------------------
Expense reductions (7)
- -----------------------------------------------------------------------
Total expenses, after expense reductions 1,272
- -----------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 2,630
- -----------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
- -----------------------------------------------------------------------
Net realized gain (loss) from:
Investments (4,377)
- -----------------------------------------------------------------------
Futures (36)
- -----------------------------------------------------------------------
Written options 37
- -----------------------------------------------------------------------
Foreign currency related transactions 72
- -----------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
on:
Investments (4,196)
- -----------------------------------------------------------------------
Futures 33
- -----------------------------------------------------------------------
Written options 10
- -----------------------------------------------------------------------
Foreign currency related transactions 594
- -----------------------------------------------------------------------
Net gain (loss) on investment transactions (7,863)
- -----------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $(5,233)
- -----------------------------------------------------------------------
</TABLE>
14 The accompanying notes are an integral part of the financial statements.
<PAGE> 15
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1999 1998
<S> <C> <C>
- --------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
- --------------------------------------------------------------------------------------------
Operations:
Net investment income (loss) $ 2,630 $ 3,707
- --------------------------------------------------------------------------------------------
Net realized gain (loss) (4,304) 2,351
- --------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
transactions during the period (3,559) 2,547
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (5,233) 8,605
- --------------------------------------------------------------------------------------------
Distributions to shareholders:
From net investment income
Class A (919) (3,266)
- --------------------------------------------------------------------------------------------
Class B (128) (633)
- --------------------------------------------------------------------------------------------
Class C (29) (61)
- --------------------------------------------------------------------------------------------
Tax return of capital:
Class A (1,938) (913)
- --------------------------------------------------------------------------------------------
Class B (270) (177)
- --------------------------------------------------------------------------------------------
Class C (62) (17)
- --------------------------------------------------------------------------------------------
Fund share transactions:
Proceeds from shares sold 14,344 13,827
- --------------------------------------------------------------------------------------------
Reinvestment of distributions 2,423 3,662
- --------------------------------------------------------------------------------------------
Cost of shares redeemed (35,281) (35,286)
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions (18,514) (17,797)
- --------------------------------------------------------------------------------------------
Increase (decrease) in net assets (27,093) (14,259)
- --------------------------------------------------------------------------------------------
Net assets at beginning of period 84,795 99,054
- --------------------------------------------------------------------------------------------
Net assets at end of period (including undistributed of net
investment income (loss) of $(473) at December 31, 1999) $ 57,702 $ 84,795
- --------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 15
<PAGE> 16
FINANCIAL HIGHLIGHTS
The following tables include selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
------------------------------------------------
CLASS A
------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------
Net asset value, beginning of period
$ 8.94 8.58 8.97 9.05 8.55
- -------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .32(a) .37 (a) .48 (a) .52 (a) .61
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions (.88) .50 (.33) (.02) 1.05
- -------------------------------------------------------------------------------------------------
Total from investment operations (.56) .87 .15 .50 1.66
- -------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.13) (.40) (.47) (.58) (1.16)
- -------------------------------------------------------------------------------------------------
Tax return of capital (.27) (.11) (.07) -- --
- -------------------------------------------------------------------------------------------------
Total distributions (.40) (.51) (.54) (.58) (1.16)
- -------------------------------------------------------------------------------------------------
Net asset value, end of period $ 7.98 8.94 8.58 8.97 9.05
- -------------------------------------------------------------------------------------------------
TOTAL RETURN % (B) (6.38) 10.48 1.80 5.87 19.89
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets, end of period ($ in thousands) 49,407 69,913 72,145 86,240 102,988
- -------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.68 1.58 1.32 1.48 1.34
- -------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.67 1.58 1.32 1.48 1.34
- -------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) 3.80 4.31 5.56 5.77 6.43
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 165 313 283 276 220
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------
CLASS B
------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------
Net asset value, beginning of period
$ 8.96 8.60 9.00 9.09 8.56
- -------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .26(a) .31 (a) .41 (a) .46 (a) .56
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions (.88) .49 (.33) (.02) 1.05
- -------------------------------------------------------------------------------------------------
Total from investment operations (.62) .80 .08 .44 1.61
- -------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.11) (.34) (.42) (.53) (1.08)
- -------------------------------------------------------------------------------------------------
Tax return of capital (.23) (.10) (.06) -- --
- -------------------------------------------------------------------------------------------------
Total distributions (.34) (.44) (.48) (.53) (1.08)
- -------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.00 8.96 8.60 9.00 9.09
- -------------------------------------------------------------------------------------------------
TOTAL RETURN % (B) (6.98) 9.56 1.03 5.11 19.21
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets, end of period ($ in thousands) 6,955 12,536 25,735 44,678 49,692
- -------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 2.37 2.32 2.18 2.14 1.98
- -------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 2.36 2.32 2.18 2.14 1.98
- -------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) 3.11 3.57 4.70 5.11 5.79
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 165 313 283 276 220
- -------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------------------------
CLASS C
----------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period
$8.99 8.62 9.02 9.09 8.56
- -----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .27(a) .32 (a) .42 (a) .48 (a) .57
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions (.90) .49 (.33) (.02) 1.05
- -----------------------------------------------------------------------------------------------------------
Total from investment operations (.63) .81 .09 .46 1.62
- -----------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.11) (.34) (.43) (.53) (1.09)
- -----------------------------------------------------------------------------------------------------------
Tax return of capital (.24) (.10) (.06) -- --
- -----------------------------------------------------------------------------------------------------------
Total distributions (.35) (.44) (.49) (.53) (1.09)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.01 8.99 8.62 9.02 9.09
- -----------------------------------------------------------------------------------------------------------
TOTAL RETURN % (B) (7.06) 9.72 1.09 5.31 19.26
- -----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------
Net assets, end of period ($ in thousands) 1,340 2,346 1,149 821 253
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 2.32 2.13 2.11 2.06 2.06
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 2.31 2.13 2.11 2.06 2.06
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) 3.16 3.76 4.77 5.19 5.71
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 165 313 283 276 220
- -----------------------------------------------------------------------------------------------------------
</TABLE>
NOTES:
(a) Based on monthly average shares outstanding during the period.
(b) Total return does not reflect the effect of sales charges.
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1
SIGNIFICANT
ACCOUNTING POLICIES Kemper Global Income Fund (the "Fund") is
registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open end,
non-diversified management investment company
organized as a Massachusetts business trust.
The Fund offers multiple classes of shares. Class A
shares are offered to investors subject to an
initial sales charge. Class B shares are offered
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 offered 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, 1999) 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.
Investment income, realized and unrealized gains
and losses, and certain fund-level expenses and
expense reductions, if any, are borne pro rata on
the basis of relative net assets by the holders of
all classes of shares except that each class bears
certain expenses unique to that class such as
distribution services, shareholder services,
administrative services and certain other class
specific expenses. Differences in class expenses
may result in payment of different per share
dividends by class. All shares of the Fund have
equal rights with respect to voting subject to
class specific arrangements.
The Fund's financial statements are prepared in
accordance with generally accepted accounting
principles which require the use of management
estimates. The policies described below are
followed consistently by the Fund in the
preparation of its financial statements.
SECURITY VALUATION. Investments are stated at value
determined as of the close of regular trading on
the New York Stock Exchange. Securities which are
traded on U.S. or foreign stock exchanges are
valued at the most recent sale price reported on
the exchange on which the security is traded most
extensively. If no sale occurred, the security is
then valued at the calculated mean between the most
recent bid and asked quotations. If there are no
such bid and asked quotations, the most recent bid
quotation is used. Securities quoted on the Nasdaq
Stock Market ("Nasdaq"), for which there have been
sales, are valued at the most recent sale price
reported. If there are no such sales, the value is
the most recent bid quotation. Securities which are
not quoted on Nasdaq but are traded in another
over-the-counter market are valued at the most
recent sale price or, if no sale occurred, at the
calculated mean between the most recent bid and
asked quotations on such market. If there are no
such bid and asked quotations, the most recent bid
quotation shall be used.
Portfolio debt securities purchased with an
original maturity greater than sixty days are
valued by pricing agents approved by the officers
of the Fund, whose quotations reflect
broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents
are unable to provide such quotations, the most
recent bid quotation supplied by a bona fide market
maker shall be used.
18
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
Money market instruments purchased with an original
maturity of sixty days or less are valued at
amortized cost. All other securities are valued at
their fair value as determined in good faith by the
Valuation Committee of the Board of Trustees.
FOREIGN CURRENCY TRANSLATIONS. The books and
records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and
liabilities denominated in a foreign currency are
translated into U.S. dollars at the prevailing
exchange rates at period end. Purchases and sales
of investment securities, income and expenses are
translated into U.S. dollars at the prevailing
exchange rates on the respective dates of the
transactions.
Net realized and unrealized gains and losses on
foreign currency transactions represent net gains
and losses between trade and settlement dates on
securities transactions, the disposition of forward
foreign currency exchange contracts and foreign
currencies, and the difference between the amount
of net investment income accrued and the U.S.
dollar amount actually received. That portion of
both realized and unrealized gains and losses on
investments that results from fluctuations in
foreign currency exchange rates is not separately
disclosed but is included with net realized and
unrealized gains and losses on investment
securities.
OPTIONS. An option contract is a contract in which
the writer of the option grants the buyer of the
option the right to purchase from (call option), or
sell to (put option), the writer a designated
instrument at a specified price within a specified
period of time. Certain options, including options
on indices, will require cash settlement by the
Fund if the option is exercised. During the period,
the Fund purchased put options on currencies and
wrote call options on currencies as a hedge against
potential adverse price movements in the value of
portfolio assets.
The liability representing the Fund's obligation
under an exchange traded written option or
investment in a purchased option is valued at the
last sale price or, in the absence of a sale, the
mean between the closing bid and asked prices or at
the most recent asked price (bid for purchased
options) if no bid and asked price are available.
Over-the-counter written or purchased options are
valued using dealer supplied quotations. Gain or
loss is recognized when the option contract expires
or is closed.
If the Fund writes a covered call option, the Fund
foregoes, in exchange for the premium, the
opportunity to profit during the option period from
an increase in the market value of the underlying
security above the exercise price. If the Fund
writes a put option it accepts the risk of a
decline in the market value of the underlying
security below the exercise price. Over-the-counter
options have the risk of the potential inability of
counterparties to meet the terms of their
contracts. The Fund's maximum exposure to purchased
options is limited to the premium initially paid.
In addition, certain risks may arise upon entering
into option contracts including the risk that an
illiquid secondary market will limit the Fund's
ability to close out an option contract prior to
the expiration date and that a change in the value
of the option contract may not correlate exactly
with changes in the value of the securities or
currencies hedged.
FUTURES CONTRACTS. A futures contract is an
agreement between a buyer or seller and an
established futures exchange or its clearinghouse
in which the buyer or seller agrees to take or make
a delivery of a specific amount of a financial
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
instrument at a specified price on a specific date
(settlement date). During the period, the Fund
purchased interest rate futures to manage the
duration of the portfolio. In addition, the Fund
also sold interest rate futures to hedge against
declines in the value of portfolio securities.
Upon entering into a futures contract, the Fund is
required to deposit with a financial intermediary
an amount ("initial margin") equal to a certain
percentage of the face value indicated in the
futures contract. Subsequent payments ("variation
margin") are made or received by the Fund dependent
upon the daily fluctuations in the value of the
underlying security and are recorded for financial
reporting purposes as unrealized gains or losses by
the Fund. When entering into a closing transaction,
the Fund will realize a gain or loss equal to the
difference between the value of the futures
contract to sell and the futures contract to buy.
Futures contracts are valued at the most recent
settlement price.
Certain risks may arise upon entering into futures
contracts, including the risk that an illiquid
secondary market will limit the Fund's ability to
close out a futures contract prior to the
settlement date and that a change in the value of a
futures contract may not correlate exactly with the
changes in the value of the securities or
currencies hedged. When utilizing futures contracts
to hedge, the Fund gives up the opportunity to
profit from favorable price movements in the hedged
positions during the term of the contract.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A
forward foreign currency exchange contract (forward
contract) is a commitment to purchase or sell a
foreign currency at the settlement date at a
negotiated rate. During the period, the Fund
utilized forward contracts as a hedge against
changes in the exchange rates relating to foreign
currency denominated assets.
Forward contracts are valued at the prevailing
forward exchange rate of the underlying currencies
and unrealized gain/loss is recorded daily. Sales
and purchases of forward contracts having the same
settlement date and broker are offset and any gain
(loss) is realized on the date of offset;
otherwise, gain (loss) is realized on settlement
date. Realized and unrealized gains and losses
which represent the difference between the value of
a forward contract to buy and a forward contract to
sell are included in net realized and unrealized
gain (loss) from foreign currency related
transactions.
Certain risks may arise upon entering into forward
contracts from the potential inability of
counterparties to meet the terms of their
contracts. Additionally, when utilizing forward
contracts to hedge, the Fund gives up the
opportunity to profit from favorable exchange rate
movements during the term of the contract.
FEDERAL INCOME TAXES. The Fund's policy is to
comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to
regulated investment companies and to distribute
all of its taxable income to its shareholders.
Accordingly, the Fund paid no federal income taxes
and no federal income tax provision was required.
At December 31, 1999 the Fund had a net tax basis
capital loss carryforward of approximately
$30,985,000 which may be applied against any
realized net taxable capital gains of each
succeeding year until fully utilized or until
December 31, 2002 ($4,524,000), December 31, 2004
($2,851,000), December 31,
20
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
2005 ($7,021,000), December 31, 2006 ($7,021,000),
December 31, 2007 ($9,568,000) the respective
expiration dates.
DISTRIBUTION OF INCOME AND GAINS. Distributions of
net investment income, if any, are made monthly.
Net realized gains from investment transactions, in
excess of available capital loss carryforwards,
would be taxable to the Fund if not distributed
and, therefore, will be distributed to shareholders
at least annually.
The timing and characterization of certain income
and capital gains distributions are determined
annually in accordance with federal tax regulations
which may differ from generally accepted accounting
principles. As a result, net investment income
(loss) and net realized gain (loss) on investment
transactions for a reporting period may differ
significantly from distributions during such
period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital
accounts without impacting the net asset value of
the Fund.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date. Interest income is recorded on
the accrual basis. Dividend income is recorded on
the ex-dividend date. Realized gains and losses
from investment transactions are recorded on an
identified cost basis. All discounts are accreted
for both tax and financial reporting purposes.
- --------------------------------------------------------------------------------
2
PURCHASE AND SALES
OF SECURITIES For the year ended December 31, 1999, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $114,042
Proceeds from sales 131,806
The aggregate face value of futures contracts
opened and closed during the year ended December
31, 1999 was (in thousands) $10,976 and $7,198,
respectively.
Transactions in written options for the year ended
December 31, 1999 are summarized as follows:
<TABLE>
<CAPTION>
OVER-THE-COUNTER OPTIONS
ON CURRENCIES (000 OMITTED)
- ---------------------------------------------------------------------------
NZD JPY PREMIUMS
------ -------- --------
<S> <C> <C> <C>
Beginning of year -- -- --
Written 7,540 407,000 $ 81
Closed -- (203,500) (26)
Exercised -- -- --
Expired (7,540) -- (34)
------ -------- ----
End of year 0 203,500 $ 21
====== ======== ====
</TABLE>
- ---------------------------------------------------------------------------
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 $536,000 for the year
ended December 31, 1999. 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.
UNDERWRITING AND DISTRIBUTION SERVICES
AGREEMENT. The Fund has an underwriting and
distribution services agreement with Kemper
Distributors, Inc. (KDI).
21
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS
Underwriting commissions retained by KDI in
connection with the distribution of Class A shares
for the year ended December 31, 1999 are 3,000.
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 and CDSC received by KDI
for the year ended December 31, 1999, are $119,000.
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 paid for the year
ended December 31, 1999, are $154,000, of which
$5,000 was unpaid at December 31, 1999. In addition
$1,000 was paid by KDI to affiliates.
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 $165,000
for the year ended December 31, 1999, of which
$15,000 was unpaid at December 31, 1999.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. During the year ended December 31,
1999, the Fund made no payments to its officers and
incurred trustees' fees of $15,000 to independent
trustees.
22
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4
CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998
------------------ ------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------
SHARES SOLD
-------------------------------------------------------------------------------
Class A 1,371 $ 11,473 991 $ 8,688
-------------------------------------------------------------------------------
Class B 278 2,350 409 3,579
-------------------------------------------------------------------------------
Class C 60 521 178 1,560
-------------------------------------------------------------------------------
Class I -- -- -- --
-------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
-------------------------------------------------------------------------------
Class A 245 2,044 336 2,920
-------------------------------------------------------------------------------
Class B 39 331 78 682
-------------------------------------------------------------------------------
Class C 6 48 7 60
-------------------------------------------------------------------------------
Class I -- -- -- --
-------------------------------------------------------------------------------
SHARES REDEEMED
-------------------------------------------------------------------------------
Class A (3,462) (28,691) (3,195) (27,830)
-------------------------------------------------------------------------------
Class B (633) (5,275) (797) (6,933)
-------------------------------------------------------------------------------
Class C (160) (1,315) (57) (498)
-------------------------------------------------------------------------------
Class I -- -- (3) (25)
-------------------------------------------------------------------------------
CONVERSION OF SHARES
-------------------------------------------------------------------------------
Class A 215 1,798 1,287 11,130
-------------------------------------------------------------------------------
Class B (214) (1,798) (1,285) (11,130)
-------------------------------------------------------------------------------
NET INCREASE (DECREASE) FROM CAPITAL
SHARE TRANSACTIONS $(18,514) $(17,797)
-------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
5
EXPENSE OFF-SET
ARRANGEMENTS The Fund has entered into arrangements with its
custodian and transfer agent whereby credits
realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's
expenses. During the period, the Fund's custodian
and transfer agent fees were reduced by $4,000 and
$3,000, respectively, under these arrangements.
- --------------------------------------------------------------------------------
6
COMMITMENTS As of December 31, 1999 the fund had entered into
the following forward currency exchange contracts
resulting in a net unrealized appreciation of
$588,000.
<TABLE>
<CAPTION>
(in thousands)
NET UNREALIZED
SETTLEMENT APPRECIATION/
CONTRACTS TO DELIVER IN EXCHANGE FOR DATE (DEPRECIATION)
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CAD 5,391 USD 3,618 3/7/2000 $(119)
EUR 9,409 USD 9,991 1/31/2000 496
GBP 2,886 USD 4,762 2/14/2000 134
JPY 68,666 USD 655 2/14/2000 (21)
NOK 15,773 USD 2,033 2/14/2000 65
USD 1,770 CAD 2,612 1/18/2000 39
USD 3,651 CAD 5,391 3/07/2000 86
USD 2,733 EUR 2,651 1/31/2000 (58)
USD 4,426 GBP 2,720 2/14/2000 (34)
-------------------------------------------------------------------
Net unrealized gain (loss) $ 588
=====
</TABLE>
23
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7
LINE OF CREDIT The Fund and several Kemper funds (the
"Participants") share in a $750 million revolving
credit facility for temporary or emergency
purposes, including the meeting of redemption
requests that otherwise might require the untimely
disposition of securities. The Participants are
charged an annual commitment fee which is allocated
pro rata among each of the Participants. Interest
is calculated based on the market rates at the time
of the borrowing. The Fund may borrow up to a
maximum of 33 percent of its net assets under the
agreement.
24
<PAGE> 25
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, 1999, the related statements of operations for the year then ended
and changes in net assets for each of the two years in the period then ended and
the financial highlights for each of the fiscal periods since 1995. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of investments
owned as of December 31, 1999, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Kemper
Global Income Fund at December 31, 1999, the results of its operations for the
year then ended, the changes in its net assets for each of the two years then
ended and the financial highlights for each of the period since 1995 in
conformity with accounting principles generally accepted in the United States.
ERNST & YOUNG LLP
Chicago, Illinois
February 15, 2000
25
<PAGE> 26
NOTES
26
<PAGE> 27
NOTES
27
<PAGE> 28
TRUSTEES&OFFICERS
<TABLE>
<S> <C> <C>
TRUSTEES OFFICERS
JOHN W. BALLANTINE MARK CASADY LINDA J. WONDRACK
Trustee President Vice President
LEWIS A. BURNHAM PHILIP J. COLLORA JOHN R. HEBBLE
Trustee Vice President Treasurer
and Secretary
LINDA C. COUGHLIN MAUREEN E. KANE
Trustee JAN C. FOWLER Assistant Secretary
Vice President
DONALD L. DUNAWAY CAROLINE PEARSON
Trustee ANN M. MCCREARY Assistant Secretary
Vice President
ROBERT B. HOFFMAN BRENDA LYONS
Trustee ROBERT C. PECK, JR. Assistant Treasurer
Vice President
DONALD R. JONES
Trustee KATHRYN L. QUIRK
Vice President
THOMAS W. LITTAUER
Trustee and Vice President
SHIRLEY D. PETERSON
Trustee
WILLIAM P. SOMMERS
Trustee
</TABLE>
<TABLE>
<S> <C>
.............................................................................................
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
.............................................................................................
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 219557
Kansas City, MO 64121-9066
.............................................................................................
TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
801 Pennsylvania Avenue
Kansas City, MO 64105
.............................................................................................
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
</TABLE>
[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 (2/25/00) 1102920
