<PAGE> 1
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED JUNE 30, 2000
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
"... The impact of Fed tightening was initially bearish for the euro this past
winter, since it increased the interest-rate differential between Europe and the
United States. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
7
PORTFOLIO STATISTICS AND
GEOGRAPHIC COMPOSITION
8
PORTFOLIO OF INVESTMENTS
10
FINANCIAL STATEMENTS
13
FINANCIAL HIGHLIGHTS
15
NOTES TO FINANCIAL STATEMENTS
AT A GLANCE
KEMPER GLOBAL INCOME FUND
TOTAL RETURNS
FOR THE SIX-MONTH PERIOD ENDED JUNE 30,
2000 (UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER GLOBAL INCOME KEMPER GLOBAL INCOME LIPPER GLOBAL INCOME
KEMPER GLOBAL INCOME FUND CLASS A FUND CLASS B FUND CLASS C FUNDS CATEGORY AVERAGE*
--------------------------------- -------------------- -------------------- -----------------------
<S> <C> <C> <C>
-0.61% -0.97% -0.93% 0.69%
</TABLE>
RETURNS AND RANKINGS ARE HISTORICAL AND DO NOT GUARANTEE FUTURE PERFORMANCE.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN ORIGINAL COST.
*LIPPER 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 MIGHT HAVE BEEN LESS FAVORABLE.
NET ASSET VALUE
<TABLE>
<CAPTION>
AS OF AS OF
6/30/00 12/31/99
.........................................................
<S> <C> <C> <C> <C>
KEMPER GLOBAL INCOME FUND
CLASS A $7.75 $7.98
.........................................................
KEMPER GLOBAL INCOME FUND
CLASS B $7.76 $8.00
.........................................................
KEMPER GLOBAL INCOME FUND
CLASS C $7.78 $8.01
.........................................................
</TABLE>
KEMPER GLOBAL INCOME
FUND RANKINGS AS OF 6/30/00
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> <C> <C>
1-YEAR #74 of 122 funds #90 of 122 funds #91 of 122 funds
....................................................................................
5-YEAR #61 of 77 funds #68 of 77 funds #66 of 77 funds
....................................................................................
10-YEAR #10 of 17 funds N/A N/A
....................................................................................
</TABLE>
DIVIDEND AND YIELD REVIEW
THE FOLLOWING TABLE SHOWS PER SHARE DISTRIBUTION AND YIELD INFORMATION FOR THE
FUND AS OF JUNE 30, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
.................................................................
<S> <C> <C> <C> <C> <C>
SIX-MONTHS INCOME: $0.1800 $0.1522 $0.1553
.................................................................
JUNE DIVIDENDS: $0.0300 $0.0253 $0.0258
.................................................................
ANNUALIZED
DISTRIBUTION RATE:+ 4.65% 3.91% 3.98%
.................................................................
SEC YIELD:+ 3.96% 3.42% 3.53%
.................................................................
</TABLE>
+CURRENT ANNUALIZED DISTRIBUTION RATE IS THE LATEST MONTHLY DIVIDEND SHOWN AS AN
ANNUALIZED PERCENTAGE OF NET ASSET VALUE ON JUNE 30, 2000. 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 JUNE 30, 2000, 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.
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.
TERMS TO KNOW
YOUR FUND'S STYLE
MORNINGSTAR INTERNATIONAL EQUITY STYLE BOX(TM)
<TABLE>
<S> <C>
[MORNINGSTAR INCOME STYLE Morningstar's International Equity Style Box(TM)
BOX] placement is based on a fund's price-to-earnings
and price-to-cash-flow ratios relative to the
MSCI EAFE, as well as the size of the companies
in which it invests, or median market
capitalization. The style box represents a
snapshot of a fund's portfolio on a single day,
but it's not exact because a portfolio changes
from day to day. A longer-term view is
represented by the fund's Morningstar category,
which is based on actual investment style as
measured by the fund's underlying holdings over
the past three years.
</TABLE>
CREDIT SPREAD The difference in yields between higher-quality and lower-quality
bonds, typically comparing the same types of bonds. For example, if AAA-rated
corporate bonds yield 5 percent, and BBB-rated corporate bonds yield 6 percent,
the credit spread is 1 percent. When the spread becomes less because the higher
yield drops or the lower yield rises, the spread is said to narrow. When the
opposite occurs, the spread is said to widen.
FEDERAL FUNDS RATE The interest rate that banks charge each other on overnight
loans. The Federal Reserve Board's Open Market Committee sets a target rate to
either make credit more easily available or tighten monetary policy in an
attempt to avoid economic imbalances such as high inflation.
INVERTED YIELD CURVE A market phenomenon in which intermediate-term bonds
(securities with two- to 10-year maturities) have higher income potential and
current yields than long-term bonds (securities with 10- to 30-year maturities).
Historically it has occurred during a period of rising short-term interest rates
and been viewed as an indicator of a future economic slowdown.
<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,
When an irresistible force such as the ebullient U.S. economy meets an immovable
object, such as a determined Federal Reserve Board, the old song is right:
Something's gotta give. One possibility -- the economy could slow down as the
Fed has ordered. Or, if market volatility becomes truly distressful, the Fed
could back off, as it has in the past. A third possibility is that neither the
Fed nor the economy will give way until it until it's too late, which could lead
to a recession. Recent evidence suggests, however, that the economy probably
will slow down as ordered. The Fed decided to leave rates unchanged at its June
meeting, and in his testimony before Congress in late July, Fed Chairman Alan
Greenspan said he believes a slowdown has indeed arrived.
Before explaining why we agree with the Fed that a slowdown is a good bet,
let's review how monetary policy works. Central bankers often sound like witch
doctors reading animal entrails, so it's understandable that many people are
confused about monetary policy. But monetary policy still works in the same way
it always has. First, it changes the price and availability of money. More
subtly, it alters people's perceptions about and confidence in the future,
thereby adjusting their willingness to take risks.
The Fed only started raising interest rates about a year ago, and it takes at
least that long for higher rates to impact borrowers. There are two reasons.
First, interest rates on many existing loans are fixed. And, a family who has
just selected a dream house isn't going walk away if mortgage rates rise a
notch. Similarly, a company that has just approved an expansion program won't
stop cold because the prime rate is higher. So it's foolish to think that
America's economy has become less interest-sensitive because the economy roared
through the first several months of this year. Americans are more in hock than
ever, so higher interest rates will hurt more than ever. The May dip in housing
starts and auto sales -- especially the higher priced, gas guzzling sport
utility vehicles -- is probably the first sign that higher rates are biting.
They will bite harder in coming months. We look for both housing starts and
vehicle sales to drop about 10 percent in 2001.
Confidence is harder to measure, but there are some early flutters of
weakness. It's true that consumers remain cheerily upbeat. But corporate bond
markets, the most sensitive barometer of business confidence and a vital source
of corporate funds, have been nervous. Investors are demanding a big premium
before they'll buy lower quality bonds, which means there's less new money for
companies to spend. Corporate bond issuance through mid-June was 35 percent
below the first five and a half months of 1999.
So far, companies have been able to get around the bond market stinginess by
turning to their bankers. Banks lent businesses 8 percent more from January
through May of this year than they did during the first five months of 1999. But
some banks are beginning to worry, too. Bank examiners have been questioning the
quality of loans and the level of reserves. In response, more bankers are
tightening lending standards and raising rates. This is a textbook case of how
tighter monetary policy eventually slows an economy.
Aren't bond market and banker concerns overdone? As long as the economy keeps
growing at 3 percent or so, won't that guarantee such good profits that paying
the bills will be a cinch? Not necessarily. Profits are far more cyclical than
economic growth. Earnings actually fell during 1998, even though the economy
continued to roll. That was a global crisis, when foreign earnings fell sharply.
But take a look at the last "soft landing" during 1995. Revenue growth dipped
and pricing power fell, squeezing profits. The same thing is likely to happen
again in the coming slowdown -- and this time, tight labor markets could make it
even tougher for companies to control costs quickly. Assuming growth is between
2.5 percent and 3 percent by the end of 2001, we believe year-over-year profit
comparisons will have turned slightly negative.
A profit slowdown when new lines of credit are hard to come by will take its
toll on capital spending. We expect growth in business outlays for buildings and
equipment to slip from over 12 percent this year to around 8 percent in 2001.
That's still quite robust, and the "high-tech imperative" is the reason why.
Executives believe that they have no option but to keep up with the
technological revolution that is transforming the world. The fact that high-tech
gear keeps getting cheaper year after year and also helps save on expensive
labor makes the decision to buy it easy. Indeed, unit sales of computers and
peripherals to businesses have sustained growth rates in excess of 40 percent
since 1995. And the rush is on to lay down the infrastructure for the next
generation of wireless communications. We estimate that the sector will see unit
growth of about
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 (7/31/00) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 6 6.7 5.8 5.5
Prime rate (2) 9.5 8.5 8 8.5
Inflation rate (3)* 3.7 2.7 2 1.6
The U.S. dollar (4) 1.4 1.5 -2.2 8.5
Capital goods orders (5)* 39 20.5 -1 7.2
Industrial production (5)* 5.9 4.7 3.9 3.9
Employment growth (6) 2 2.3 2.4 2.4
</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 6/30/00.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
ECONOMIC OVERVIEW
50 percent this year, double the growth in 1999. It's hard even for superstars
to sustain these stratospheric compound growth rates forever, and we do expect
some moderation next year. However, high-tech orders continue to ratchet
upwards, and the shortage in semiconductors and other components has persisted
long enough to cause major players to announce huge capacity additions.
Another battle the Fed must win before is succeeds in slowing the economy is
bringing consumers to heel. Most families still feel better off than they were
last year and much richer than they were five years ago. That's a powerful
incentive to spend and enjoy. Indeed, total real consumption has been galloping
at a 5 percent rate or better since early 1998. But consumers are so important
to the economy that if they don't start spending less freely, there won't be a
slowdown. We expect the Fed to be successful and slow down shoppers in the
months ahead -- but the victory won't be an easy one. We expect at least one
more rate hike and more a few more financial fireworks before consumers and the
economy hoist the white flag.
So what will the slowdown look like? During the spring, retail sales, housing
starts and job creation slowed, but strength in high tech orders and capital
equipment production probably will help keep the slowdown from becoming too
abrupt. We expect about 3.5 percent growth in the second half. That would still
produce a hearty 5 percent growth for full year 2000. During 2001, the full
impact of the Fed's recent tightening will probably rein growth in to just 3
percent.
Sincerely,
Kemper Distributors, Inc.
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 JULY 26, 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
[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 PANGORA ASSET MANAGEMENT. HE RECEIVED A
BACHELOR'S DEGREE FROM WESTMONT COLLEGE, SANTA BARBARA, AND AN M.B.A. FROM THE
AMOS TUCK SCHOOL OF BUSINESS, DARTMOUTH COLLEGE.
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.
PERFORMANCE UPDATE
DURING THE FIRST HALF OF 2000, RISING INFLATION
FEARS AND MONETARY TIGHTENING IN THE UNITED STATES
AND AROUND THE WORLD GENERATED UNCERTAINTY IN
GLOBAL BOND MARKETS. PORTFOLIO MANAGER JAN FALLER
REVIEWS THESE EVENTS AND SHARES HIS OUTLOOK FOR THE
COMING MONTHS.
Q HOW DID WORLD MONETARY POLICY CHANGE DURING THE SIX MONTHS ENDED JUNE 30?
A With the exception of Japan, which maintained a zero interest rate policy
to sustain its economic policy, several of the world's central banks matched the
U.S. Federal Reserve Board in raising their targets for short-term interest
rates. Since June 1999, the Fed has raised rates six times -- including three
times this year -- to slow economic growth to a more sustainable pace. As of
June 30, 2000, the rate banks charge each other for overnight loans stood at
6.50 percent, the highest level since 1991.
The last U.S. rate increase of 50 basis points (0.50 percent) on May 16 was
matched by Canada's central bank. The European Central Bank followed suit with a
comparable increase in early June. Meanwhile, the U.K. interest rate cycle may
have peaked, with the Bank of England holding firm on rates since February. The
strength of the British pound enabled the Bank of England to be less restrictive
with its monetary policy during the first half of this year.
The impact of Fed tightening was initially bearish for the euro this past
winter, since it increased the interest-rate differential between Europe and the
United States. The prospect of rate increases in Europe sparked concerns that
the economic recovery under way would be derailed. In recent months, those
concerns have calmed as the European economy continued to thrive.
Q HOW DID KEMPER GLOBAL INCOME FUND PERFORM IN THIS ENVIRONMENT?
A The fund provided a total return of -0.61 percent (Class A shares,
unadjusted for sales charge) for the six months ended June 30, slightly less
than the 0.03 percent return of the benchmark -- the Salomon Brothers World
Government Bond index.
The dominant driver of the portfolio's performance was currency exposure. The
euro and the Japanese yen both declined sharply since the beginning of the year.
While the fund was partially hedged in both currencies, the yen hedge was
substantially larger than the euro hedge. Thus, the fall in the yen had less of
an impact on fund performance. The euro rebounded in mid-May, but this had
little positive effect on the fund, as the rally did not gain back nearly the
ground that the euro had lost since the beginning of the year.
The portfolio benefited from an overweight position in U.S. bonds, which
currently offer some of the most attractive yields available in high-quality
world government markets. Within the U.S. bond market, we remain focused on U.S.
Treasuries, which rallied due to increased demand and waning supply. This
supply-demand imbalance has caused the U.S. yield curve to invert. Thus, the
long bond returns in the United States have substantially outperformed shorter
Treasury returns.
Similar to the United States, the United Kingdom also has an
5
<PAGE> 6
PERFORMANCE UPDATE
inverted yield curve resulting from a supply-demand imbalance. As potential
legislation was considered to decrease demand for long U.K. government bonds,
yields rose in the U.K., hurting bond returns. More recently, however, the U.K.
market recovered, which bolstered fund performance.
Q DID THE FUND HAVE ANY EMERGING MARKET EXPOSURE?
A The fund had modest exposure to the emerging markets during the six-month
period. Volatility picked up significantly early in the year in response to the
Fed's aggressive campaign to keep domestic inflation in check and the markets'
anticipation of more U.S. rate increases. For this reason, we believed it was
not a good time to be invested in most emerging markets. We focused on
higher-quality countries, including Mexico and Poland. We remain cautious in our
approach to investing in less developed markets, given the greater potential
risks.
Q WHAT IS THE OVERALL CREDIT QUALITY OF THE PORTFOLIO?
A The portfolio's credit quality was AA as of June 30. We continue to focus
primarily on investment-grade foreign and domestic bonds. We did not own any
domestic or European high-yield bonds for much the same reasons we avoided
emerging markets: The markets were not attractive relative to their potential
risks. If we do reach a point when these markets look attractive, we may
consider adding exposure. However, we would tread cautiously, focusing on bonds
issued by creditworthy companies.
Q WHAT IS YOUR OUTLOOK FOR WORLD MARKETS FOR THE REMAINDER OF 2000?
A In Europe, the big question is whether or not it can replicate what has
happened in the United States, i.e., a period of good growth with benign
inflation. Until we see that growth convergence and convincing evidence that the
euro is moving higher toward being fairly valued, we expect to maintain moderate
exposure to the European bond market.
We have recently reduced our overweight in Japan relative to our peers. We
will watch for news from the central bank, but we believe that the market is
overreacting to the potential for a 25-basis-point rate increase from the
current zero interest rate. We do not anticipate that such a modest increase
will have any significant impact on Japan's market.
In the United States, any number of outcomes are possible. One is that the Fed
will successfully engineer a soft landing for the U.S. economy. Based on
history, this is not the most likely outcome. Another is that the United States
could enter a period of rising inflation and slowing growth, which would have
serious negative implications for the U.S. bond market. It's also possible that
the Fed could raise rates. As of June 30, U.S. bond yields were more attractive
than elsewhere, although the spring rally has somewhat diminished the margin of
attractiveness. In the coming months, as we see opportunities overseas that
offer greater total return potential on a risk-adjusted basis, we may reduce the
fund's positioning in domestic bonds.
INTEREST RATES IN SELECTED COUNTRIES
ALL YIELDS ARE SHOWN IN U.S. DOLLARS AS OF 6/30/00. INTEREST AND PRINCIPAL OF
FOREIGN GOVERNMENT BONDS ARE NOT INSURED OR GUARANTEED LIKE U.S. TREASURIES.
CURRENCY FLUCTUATIONS CAN REDUCE THE INCOME POTENTIAL OF FOREIGN BONDS.
[LINE CHART]
<TABLE>
<CAPTION>
UNITED
EURO- KINGDOM CANADIAN JAPANESE
DENOMINATED GOVERNMENT GOVERNMENT GOVERNMENT
BONDS BONDS BONDS BONDS
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
3M 4.23 5.97 5.67 0.14
6M 4.59 5.85 0.19
1Y 4.89 6.07 6.04 0.35
2Y 4.95 6.00 5.95 0.52
3Y 5.00 5.89 6.01 0.74
4Y 5.06 5.75 6.02 0.93
5Y 5.02 5.63 5.97 1.12
6Y 5.14 5.65 5.99 1.27
7Y 5.25 5.59 5.97 1.45
8Y 5.25 5.50 1.61
9Y 5.25 5.43 5.92 1.67
10Y 5.22 5.17 5.86 1.76
15Y 5.38 4.89 1.84
20Y 5.30 4.69 5.86 2.11
30Y 5.44 4.50 5.54 2.22
</TABLE>
SOURCE: BLOOMBERG BUSINESS NEWS
6
<PAGE> 7
PORTFOLIO STATISTICS GEOGRAPHIC
COMPOSITION
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
ON 6/30/00 ON 12/31/99
<S> <C> <C> <C> <C>
FOREIGN GOVERNMENT SECURITIES 64% 63%
................................................................................
U.S. TREASURIES 19 19
................................................................................
U.S. CORPORATES 8 10
................................................................................
EMERGING MARKETS 4 7
................................................................................
CASH AND EQUIVALENTS 5 1
--------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART]
AVERAGE MATURITY
<TABLE>
<CAPTION>
ON 6/30/00 ON 12/31/99
<S> <C> <C> <C> <C>
AVERAGE MATURITY 8.1 years 7.5 years
--------------------------------------------------------------------------------
</TABLE>
GEOGRAPHIC COMPOSITION*
BASED ON TOTAL INVESTMENTS IN KEMPER GLOBAL INCOME FUND ON JUNE 30, 2000.
[PIE CHART]
*PORTFOLIO HOLDINGS AND COMPOSITION ARE SUBJECT TO CHANGE.
7
<PAGE> 8
PORTFOLIO OF INVESTMENTS
KEMPER GLOBAL INCOME FUND
Portfolio of Investments at June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
SHORT-TERM OBLIGATIONS--7.9%
$ 3,800,000 $ 3,798,613
Fed Home Loan Discount Notes, 6.570%*,
07/03/2000
225,000 225,000
Chase Euro Time Deposit, 6.375%, 07/03/2000
--------------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
4,023,613
(Cost $4,023,613)
--------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
GOVERNMENT & CORPORATE OBLIGATIONS--92.1%
-------------------------------------------------------------------------------------------------------------------
BRITISH POUND--5.0%
1,670,000 2,538,454
General Motors Acceptance Corp., 6.875%,
09/09/2004
--------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
EURO--24.1%
2,200,000 1,966,913
Depfa Pfandbrief Bank, 4.750%, 07/15/2008
(b)
2,700,000 2,782,542
Federal Republic of Germany, 6.250%,
01/04/2024
1,400,000 1,234,494
Ford Motor Credit Corp., 3.750%, 07/12/2004
(b)
1,000,000 938,191
French Treasury Note, 4.500%, 07/12/2003
3,450,000 2,424,413
Government of Canada, 8.500%, 04/01/2002
2,050,000 1,903,553
Government of Spain, 4.500%, 07/30/2004 (b)
1,120,000 1,039,884
Rheinische Hypo Bank, 4.500%, 08/26/2003
(b)
--------------------------------------------------------------------------------
12,289,990
-------------------------------------------------------------------------------------------------------------------
JAPANESE YEN--7.1%
385,000,000 3,644,019
Province of Ontario, 1.875%, 01/25/2010
--------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
NORWEGIAN KRONER--9.0%
39,570,000 4,595,027
Norwegian Government, 7.000%, 05/31/2001
(b)
--------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
U.S. DOLLAR--46.9%
350,000,000 3,447,608
Federal National Mortgage Association,
2.13% with various maturities to
10/9/2007
125,000 119,250
Federal Republic of Brazil, 12.750%,
1/15/2020
100,000 84,125
Federative Republic of Brazil, "New" Money
Bond, Floating Rate Bond, LIBOR plus
.875%, 7.000%, 4/15/2009
162,547 119,675
Federative Republic of Brazil C Bond,
8.000%, 04/15/2014
111,000 87,413
Federative Republic of Brazil Global Bond,
10.125%, 05/15/2027
100,000 100,850
Federative Republic of Brazil, 11.625%,
04/15/2004
65,000 67,260
Government of Malaysia, 8.750%, 06/01/2009
4,000,000 3,674,400
Kingdom of Spain, 5.875%, 07/28/2008
45,000 33,075
Republic of Bulgaria, Collateralized
Floating Rate Interest Reduction Bond,
"A", Step-Up Coupon, 2.750%, 07/28/2012
380,000 299,725
Republic of Bulgaria, Floating Rate Bond,
LIBOR plus .8125%, 6.500%, 07/28/2011
100,000 88,750
Republic of South Africa, 8.500%,
06/23/2017
4,000,000 3,506,160
Sunamerica Institute Fund, 5.750%,
02/16/2009 (b)
</TABLE>
8 The accompanying notes are an integral part of the financial statements.
<PAGE> 9
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
$ 750,000 $ 1,497,576
United Kingdom Treasury Bond, 9.000%,
07/12/2011 (b)
300,000 294,750
United Mexican States, Floating Rate
Discount Bond (Detachable Oil Priced
Indexed Value Recovery Rights), Series D,
LIBOR plus .8125%, 6.902%, 12/31/2019
155,000 177,475
United Mexican States Global Bond, 11.375%,
09/15/2016
80,000 96,000
United Mexican States, 11.500%, 05/15/2026
1,810,000 2,044,160
U.S. Treasury Bonds: 7.500%, 11/15/2016
1,495,000 1,874,820
8.500%, 02/21/2020
1,730,000 1,699,448
U.S. Treasury Notes: 5.625%, 12/31/2002 (b)
700,000 688,079
5.750%, 08/15/2003 (b)
1,360,000 1,347,243
6.000%, 08/15/2004 (b)
2,500,000 2,536,725
7.875%, 08/15/2001 (b)
--------------------------------------------------------------------------------
23,884,567
--------------------------------------------------------------------------------
TOTAL GOVERNMENT & CORPORATE OBLIGATIONS
46,952,057
(Cost $50,066,154)
--------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100.0%
(Cost $54,089,767) (a) $50,975,670
--------------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
* Annualized yield at time of purchase; not a coupon rate.
(a) The cost for federal income tax purposes was $54,089,767. At June 30, 2000,
the net unrealized depreciation for all securities based on tax cost was
$3,114,097. This consists of aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost of $220,479
and aggregate gross unrealized depreciation for all securities in which
there was an excess of tax cost over value of $3,334,576.
(b) At June 30, 2000, these securities, in part or in whole, have been
segregated to cover when-issued securities and initial margin requirements
for open futures contracts.
At June 30, 2000, open futures contracts purchased (sold) were as follows:
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION AGGREGATE MARKET APPRECIATION/
FUTURES DATE CONTRACTS FACE VALUE VALUE (DEPRECIATION)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Liffa Gilt................................... 9/27/2000 (16) $(2,785,017) $(2,761,245) $23,772
U.S. Treasury 10 yr. Note.................... 8/19/2000 34 3,327,423 3,348,469 21,046
Euro Bond.................................... 8/24/2000 27 2,733,053 2,704,548 (28,545)
-------
Total net unrealized appreciation (depreciation)...................................................... $16,273
=======
</TABLE>
<TABLE>
<CAPTION>
CURRENCY ABBREVIATION
------------------------------
<S> <C>
EUR Euro
GBP British Pound
JPY Japanese Yen
NOK Norwegian Kroner
</TABLE>
The accompanying notes are an integral part of the financial statements. 9
<PAGE> 10
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 2000 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $54,089,767) $ 50,975,670
----------------------------------------------------------------------------
Receivable for investments sold 11,263
----------------------------------------------------------------------------
Interest receivable 1,135,647
----------------------------------------------------------------------------
Receivable for daily variation margin on open futures
contracts 13,433
----------------------------------------------------------------------------
Receivable for Fund shares sold 4,837
----------------------------------------------------------------------------
Unrealized appreciation on forward currency exchange
contracts 5,699
----------------------------------------------------------------------------
Other assets 9,000
----------------------------------------------------------------------------
TOTAL ASSETS 52,155,549
----------------------------------------------------------------------------
LIABILITIES
Due to custodian bank 3,308,659
----------------------------------------------------------------------------
Payable for Fund shares redeemed 103,915
----------------------------------------------------------------------------
Payable for daily variation margin on open futures contracts 9,266
----------------------------------------------------------------------------
Unrealized depreciation on forward currency exchange
contracts 247,454
----------------------------------------------------------------------------
Accrued management fee 30,414
----------------------------------------------------------------------------
Other accrued expenses 116,487
----------------------------------------------------------------------------
Total liabilities 3,816,195
----------------------------------------------------------------------------
NET ASSETS, AT VALUE $ 48,339,354
----------------------------------------------------------------------------
NET ASSETS
Net assets consist of:
Accumulated distributions in excess of net investment income $ (612,256)
----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on:
----------------------------------------------------------------------------
Investments (3,114,097)
----------------------------------------------------------------------------
Futures 16,273
----------------------------------------------------------------------------
Foreign currency related transactions (239,185)
----------------------------------------------------------------------------
Accumulated net realized gain (loss) (31,068,445)
----------------------------------------------------------------------------
Paid-in-capital 83,357,064
----------------------------------------------------------------------------
NET ASSETS, AT VALUE $ 48,339,354
----------------------------------------------------------------------------
NET ASSET VALUE AND OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($42,101,421 / 5,435,659 shares outstanding of beneficial
interest, $.01 par value, unlimited number of shares
authorized) $7.75
----------------------------------------------------------------------------
Maximum offering price per share (100/95.50 of $7.75) $8.12
----------------------------------------------------------------------------
CLASS B SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share ($5,026,270 /
647,385 shares outstanding of beneficial interest, $.01
par value, unlimited number of shares authorized) $7.76
----------------------------------------------------------------------------
CLASS C SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share ($1,211,663 /
155,764 shares outstanding of beneficial interest, $.01
par value, unlimited number of shares authorized) $7.78
----------------------------------------------------------------------------
</TABLE>
10 The accompanying notes are an integral part of the financial statements.
<PAGE> 11
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Six months ended June 30, 2000 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $ 1,528,760
---------------------------------------------------------------------------
Expenses:
Management fee 190,520
---------------------------------------------------------------------------
Services to shareholders 104,569
---------------------------------------------------------------------------
Custodian fees 8,784
---------------------------------------------------------------------------
Distribution services fees 26,320
---------------------------------------------------------------------------
Administrative services fees 57,935
---------------------------------------------------------------------------
Auditing 19,915
---------------------------------------------------------------------------
Legal 8,169
---------------------------------------------------------------------------
Trustees' fees and expenses 9,114
---------------------------------------------------------------------------
Reports to shareholders 45,988
---------------------------------------------------------------------------
Registration fees 30,078
---------------------------------------------------------------------------
Other 2,694
---------------------------------------------------------------------------
Total expenses, before expense reductions 504,086
---------------------------------------------------------------------------
Expense reductions (2,988)
---------------------------------------------------------------------------
Total expenses, after expense reductions 501,098
---------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 1,027,662
---------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments (894,288)
---------------------------------------------------------------------------
Futures 314,462
---------------------------------------------------------------------------
Foreign currency related transactions 558,323
---------------------------------------------------------------------------
(21,503)
---------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
on:
Investments (605,729)
---------------------------------------------------------------------------
Futures (17,129)
---------------------------------------------------------------------------
Options (10,380)
---------------------------------------------------------------------------
Foreign currency related transactions (833,161)
---------------------------------------------------------------------------
(1,466,399)
---------------------------------------------------------------------------
Net gain (loss) on investment transactions (1,487,902)
---------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $ (460,240)
---------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 11
<PAGE> 12
FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
JUNE 30, ENDED
2000 DECEMBER 31,
(UNAUDITED) 1999
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment gain (loss) $ 1,027,662 $ 2,630,388
--------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions (21,503) (4,304,108)
--------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
transactions during the period (1,466,399) (3,558,610)
--------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (460,240) (5,232,330)
--------------------------------------------------------------------------------------------
Distributions to shareholders:
From net investment income
Class A (1,031,355) (1,937,931)
--------------------------------------------------------------------------------------------
Class B (109,161) (270,138)
--------------------------------------------------------------------------------------------
Class C (25,990) (61,953)
--------------------------------------------------------------------------------------------
Tax return of capital
Class A -- (919,110)
--------------------------------------------------------------------------------------------
Class B -- (128,119)
--------------------------------------------------------------------------------------------
Class C -- (29,383)
--------------------------------------------------------------------------------------------
(1,166,506) (3,346,634)
--------------------------------------------------------------------------------------------
Fund share transactions:
Proceeds from shares sold 12,391,936 16,142,242
--------------------------------------------------------------------------------------------
Reinvestment of distributions 848,763 2,423,023
--------------------------------------------------------------------------------------------
Cost of shares redeemed (20,976,212) (37,079,670)
--------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions (7,735,513) (18,514,405)
--------------------------------------------------------------------------------------------
Increase (decrease) in net assets (9,362,259) (27,093,369)
--------------------------------------------------------------------------------------------
Net assets at beginning of period 57,701,613 84,794,982
--------------------------------------------------------------------------------------------
Net assets at end of period (including accumulated
distributions in excess of net investment income of $612,256
and $473,412, respectively) $ 48,339,354 $ 57,701,613
--------------------------------------------------------------------------------------------
</TABLE>
12 The accompanying notes are an integral part of the financial statements.
<PAGE> 13
FINANCIAL HIGHLIGHTS
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
CLASS A
SIX MONTHS
ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
2000 -------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $ 7.98 8.94 8.58 8.97 9.05 8.55
-----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (gain) .16(a) .32(a) .37(a) .48(a) .52(a) .61
-----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.21) (.88) .50 (.33) (.02) 1.05
-----------------------------------------------------------------------------------------------------------
Total from investment operations (.05) (.56) .87 .15 .50 1.66
-----------------------------------------------------------------------------------------------------------
Less distribution from:
Net investment income (.18) (.13) (.40) (.47) (.58) (1.16)
-----------------------------------------------------------------------------------------------------------
Tax return of capital -- (.27) (.11) (.07) -- --
-----------------------------------------------------------------------------------------------------------
Total distributions (.18) (.40) (.51) (.54) (.58) (1.16)
-----------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 7.75 7.98 8.94 8.58 8.97 9.05
-----------------------------------------------------------------------------------------------------------
TOTAL RETURN % (B) (.61)* (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) 42,101 49,407 69,913 72,145 86,240 102,988
-----------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.83** 1.68 1.58 1.32 1.48 1.34
-----------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.82** 1.67 1.58 1.32 1.48 1.34
-----------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) 4.06** 3.80 4.31 5.56 5.77 6.43
-----------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 74** 165 313 283 276 220
-----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
SIX MONTHS
ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
2000 -----------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $8.00 8.96 8.60 9.00 9.09 8.56
---------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (gain) .13(a) .26(a) .31(a) .41(a) .46(a) .56
---------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.22) (.88) .49 (.33) (.02) 1.05
---------------------------------------------------------------------------------------------------------
Total from investment operations (.09) (.62) .80 .08 .44 1.61
---------------------------------------------------------------------------------------------------------
Less distribution from:
Net investment income (.15) (.11) (.34) (.42) (.53) (1.08)
---------------------------------------------------------------------------------------------------------
Tax return of capital -- (.23) (.10) (.06) -- --
---------------------------------------------------------------------------------------------------------
Total distributions (.15) (.34) (.44) (.48) (.53) (1.08)
---------------------------------------------------------------------------------------------------------
Net asset value, end of year $7.76 8.00 8.96 8.60 9.00 9.09
---------------------------------------------------------------------------------------------------------
TOTAL RETURN % (B) (.97)* (6.98) 9.56 1.03 5.11 19.21
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 5,026 6,955 12,536 25,735 44,678 49,692
---------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 2.59** 2.37 2.32 2.18 2.14 1.98
---------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 2.58** 2.36 2.32 2.18 2.14 1.98
---------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) 3.31** 3.11 3.57 4.70 5.11 5.79
---------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 74** 165 313 283 276 220
---------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 14
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C
SIX MONTHS
ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
2000 ------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $8.01 8.99 8.62 9.02 9.09 8.56
----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (gain) .13(a) .27(a) .32(a) .42(a) .48(a) .57
----------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.20) (.90) .49 (.33) (.02) 1.05
----------------------------------------------------------------------------------------------------
Total from investment operations (.07) (.63) .81 .09 .46 1.62
----------------------------------------------------------------------------------------------------
Less distribution from:
Net investment income (.16) (.11) (.34) (.43) (.53) (1.09)
----------------------------------------------------------------------------------------------------
Tax return of capital -- (.24) (.10) (.06) -- --
----------------------------------------------------------------------------------------------------
Total distributions (.16) (.35) (.44) (.49) (.53) (1.09)
----------------------------------------------------------------------------------------------------
Net asset value, end of year $7.78 8.01 8.99 8.62 9.02 9.09
----------------------------------------------------------------------------------------------------
TOTAL RETURN % (B) (.93)* (7.06) 9.72 1.09 5.31 19.26
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 1,212 1,340 2,346 1,149 821 253
----------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 2.48** 2.32 2.13 2.11 2.06 2.06
----------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 2.47** 2.31 2.13 2.11 2.06 2.06
----------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) 3.41** 3.16 3.76 4.77 5.19 5.71
----------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 74** 165 313 283 276 220
----------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
(a) Based on monthly average shares outstanding during the period.
(b) Total return does not reflect the effect of sales charge.
14
<PAGE> 15
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 June 30, 2000) 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.
15
<PAGE> 16
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.
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
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
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,
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
2004 ($2,851,000), December 31, 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 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 $190,520 for the six
months ended June 30, 2000. 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). Underwriting commissions
retained by KDI in connection with the distribution
of Class A shares for the six months ended June 30,
2000 are $866.
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 six months ended June 30, 2000 are $44,780.
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 six
months ended June 30, 2000, are $57,935, of which
$1,910 was unpaid. In addition $347 was paid by KDI
to affiliates.
18
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
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 $63,328
for the six months ended June 30, 2000, of which
$30,520 was unpaid.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. During the six months ended June
30, 2000, the Fund made no payments to its officers
and incurred trustees' fees of $9,114 to
independent trustees.
--------------------------------------------------------------------------------
3 INVESTMENT
TRANSACTIONS For the six months ended June 30, 2000, investment
transactions (excluding short-term instruments) are
as follows:
Purchases $17,517,700
Proceeds from sales 24,195,164
Transactions in written options for the six months
ended June 30, 2000 are summarized as follows:
<TABLE>
<CAPTION>
OVER-THE-COUNTER OPTIONS ON CURRENCIES
--------------------------------------
JPY PREMIUMS
------------ --------
<S> <C> <C> <C> <C>
Beginning of year 203,500,000 $21,368
Expired (203,500,000) (21,368)
------------ --------
End of year -- $ --
============ ========
</TABLE>
--------------------------------------------------------------------------------
4 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund:
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 1,412,692 $ 11,098,155 1,371,043 $ 11,473,200
---------------------------------------------------------------------------------
Class B 80,983 633,327 277,786 2,350,082
---------------------------------------------------------------------------------
Class C 43,443 342,954 60,774 520,558
---------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 94,641 $ 736,750 245,037 2,043,548
---------------------------------------------------------------------------------
Class B 11,637 90,899 39,483 331,092
---------------------------------------------------------------------------------
Class C 2,700 21,114 5,782 48,383
---------------------------------------------------------------------------------
SHARES REDEEMED
Class A (2,304,581) $(18,056,302) (3,462,312) (28,692,161)
---------------------------------------------------------------------------------
Class B (274,113) (2,149,666) (632,941) (5,274,571)
---------------------------------------------------------------------------------
Class C (57,658) (452,744) (160,348) (1,314,536)
---------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 40,333 $ 317,500 214,939 1,798,402
---------------------------------------------------------------------------------
Class B (40,225) (317,500) (214,284) (1,798,402)
---------------------------------------------------------------------------------
NET INCREASE (DECREASE) FROM
CAPITAL SHARE TRANSACTIONS $ (7,735,513) $(18,514,405)
---------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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 six months ended June 30,
2000, the Fund's custodian and transfer agent fees
were reduced by $980 and $2,008, respectively,
under these arrangements.
--------------------------------------------------------------------------------
6 COMMITMENTS As of June 30, 2000 the Fund had entered into the
following forward currency exchange contracts
resulting in a net unrealized depreciation of
$241,755.
<TABLE>
<CAPTION>
NET UNREALIZED
SETTLEMENT APPRECIATION/
CONTRACTS TO DELIVER IN EXCHANGE FOR DATE (DEPRECIATION)
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CAD 2,970,138 USD 2,013,653 8/14/2000 $ 5,699
JPY 491,372,271 USD 4,561,887 8/5/2000 (115,326)
JPY 111,262,890 USD 1,057,632 8/15/2000 (1,443)
NOK 15,772,841 USD 1,744,783 8/15/2000 (90,770)
EUR 2,696,700 USD 2,555,393 8/22/2000 (23,481)
EUR 853,482 USD 808,760 8/22/2000 (7,431)
GBP 3,130,397 USD 2,067,415 8/15/2000 (9,003)
-----------------------------------------------------------------------
Net unrealized appreciation (depreciation) $(241,755)
=========
</TABLE>
--------------------------------------------------------------------------------
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.
20
<PAGE> 21
NOTES
21
<PAGE> 22
NOTES
22
<PAGE> 23
NOTES
23
<PAGE> 24
TRUSTEES&OFFICERS
<TABLE>
<S> <C> <C>
TRUSTEES OFFICERS
JOHN W. BALLANTINE MARK CASADY
Trustee President JOHN R. HEBBLE
Treasurer
LEWIS A. BURNHAM PHILLIP J. COLLORA
Trustee Vice President MAUREEN E. KANE
and Secretary Assistant Secretary
LINDA C. COUGHLIN
Trustee JAN C. FALLER CAROLINE PEARSON
Vice President Assistant Secretary
DONALD L. DUNAWAY
Trustee ANN M. MCCREARY BRENDA LYONS
Vice President Assistant Treasurer
ROBERT B. HOFFMAN
Trustee KATHRYN L. QUIRK
Vice President
DONALD R. JONES
Trustee LINDA J. WONDRACK
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
.............................................................................................
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)
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unless preceded or accompanied by a
Kemper Global and International Funds prospectus.
KGIF - 3 (8/17/00) 1118710
