<PAGE> 1
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED MAY 31, 1999
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
[MORNINGSTAR RATINGS LOGO]
SEEKS TO PROVIDE LONG-TERM GROWTH
KEMPER
ASIAN GROWTH FUND
"... the fund began trending upward in April ... and has made up a lot of ground
as of the writing of this report. We believe our stock selection was on the mark
all along, the portfolio just took a bit
longer to reach its stride. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
Economic Overview
5
Performance Update
9
Largest Holdings
10
Portfolio of Investments
15
Financial Statements
17
Notes to Financial Statements
21
Financial Highlights
23
Shareholders' Meeting
AT A GLANCE
- -------------------------------------------------------------------------------
ABOUT YOUR REPORT
ON JUNE 1, 1999, TIEN-YU SIEH WAS NAMED LEAD PORTFOLIO MANAGER OF KEMPER ASIAN
GROWTH FUND. JOINING SIEH ARE PORTFOLIO MANAGER THERESA GUSMAN AND PORTFOLIO
MANAGER ELIZABETH J. ALLEN, WHO HAVE BEEN ON THE FUND'S MANAGEMENT TEAM SINCE
JUNE 1998.
GUSMAN, FORMERLY LEAD MANAGER OF THE FUND, WAS RECENTLY PROMOTED AND HER NEW
RESPONSIBILITIES NOW INCLUDE MANAGING ALL SCUDDER KEMPER INVESTMENTS, INC.'S
NON-U.S. EQUITY PORTFOLIO MANAGERS. HER EXPANDED RESPONSIBILITIES NECESSITATED
THE MANAGEMENT ADJUSTMENT.
- -------------------------------------------------------------------------------
KEMPER ASIAN GROWTH FUND
TOTAL RETURNS
- -------------------------------------------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED MAY 31, 1999
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
<TABLE>
<S> <C>
CLASS A 11.65%
CLASS B 11.24%
CLASS C 10.65%
LIPPER PACIFIC EX JAPAN FUNDS CATEGORY AVERAGE* 23.96%
- --------------------------------------------------------------------------------
</TABLE>
RETURNS ARE HISTORICAL AND DO NOT REPRESENT 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 ARE BASED UPON CHANGES IN NET ASSET
VALUE WITH ALL DIVIDENDS REINVESTED AND DO NOT INCLUDE THE EFFECT OF SALES
CHARGES AND, IF THEY HAD, RESULTS MAY HAVE BEEN LESS FAVORABLE.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
NET ASSET VALUE
- ----------------------------------------------------------------------------------------
AS OF AS OF
5/31/99 11/30/98
- ----------------------------------------------------------------------------------------
<S> <C> <C>
KEMPER ASIAN GROWTH FUND CLASS A $6.04 $5.41
- ----------------------------------------------------------------------------------------
KEMPER ASIAN GROWTH FUND CLASS B $5.94 $5.34
- ----------------------------------------------------------------------------------------
KEMPER ASIAN GROWTH FUND CLASS C $5.91 $5.35
- ----------------------------------------------------------------------------------------
</TABLE>
TERMS TO KNOW
YOUR FUND'S STYLE
- --------------------------------------------------------------------------------
MORNINGSTAR EQUITY STYLE BOX
- --------------------------------------------------------------------------------
[Equity Style Box]
Source: Morningstar, Inc. Chicago, IL. (312) 696-6000. The Equity Style Box
placement is based on two variables: a fund's market capitalization relative to
the movements of the market and a fund's valuation, which is calculated by
comparing the stocks in the fund's portfolio with the most relevant of the three
market-cap groups.
THE STYLEBOX REPRESENTS A SNAPSHOT OF THE FUND'S PORTFOLIO ON A SINGLE DAY. IT
IS NOT AN EXACT ASSESSMENT OF RISK AND DOES 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. CATEGORY PLACEMENTS OF NEW FUNDS ARE ESTIMATED. MORNINGSTAR HAS PLACED
KEMPER ASIAN GROWTH FUND IN THE PACIFIC/ASIAN EX-JAPAN STOCK CATEGORY. PLEASE
CONSULT THE PROSPECTUS FOR A DESCRIPTION OF INVESTMENT POLICIES.
CURRENCY DEVALUATION A significant decline of a currency's value relative to
other currencies, such as the U.S. dollar. Trading or central bank intervention
(or the lack of intervention) may prompt this in the currency markets. For U.S.
investors who are investing overseas, a devaluation of a foreign currency can
have the effect of reducing the total return, because when investments are
converted back into U.S. dollars it takes more of the foreign currency to
purchase U.S. dollars.
LIQUIDITY A characteristic of an investment or an asset referring to the ease of
convertibility into cash within a reasonably short period of time.
<PAGE> 3
ECONOMIC OVERVIEW
[SILVIA PHOTO]
DR. JOHN E. SILVIA IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.
HIS PRIMARY RESPONSIBILITIES INCLUDE ANALYSIS, MODELING AND FORECASTING OF
ECONOMIC DEVELOPMENTS AND FEDERAL RESERVE ACTIVITY THAT AFFECT FINANCIAL
MARKETS, ESPECIALLY INTEREST RATE TRENDS. THIS EFFORT INCLUDES CLOSE
COLLABORATION WITH BOTH INCOME AND EQUITY MUTUAL FUND MANAGERS AND PENSION FUND
MANAGERS.
SILVIA HOLDS A PH.D. IN ECONOMICS FROM NORTHEASTERN UNIVERSITY IN BOSTON, MASS.
HE IS A MEMBER OF BOTH THE BLUE CHIP ECONOMIC AND FINANCIAL SURVEYS, AND SERVES
ON THE POLICY ADVISORY COMMITTEES OF THE FEDERAL RESERVE BOARDS OF CHICAGO AND
CLEVELAND.
SCUDDER KEMPER INVESTMENTS, THE INVESTMENT MANAGER FOR KEMPER FUNDS, IS ONE OF
THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS IN THE
WORLD, MANAGING MORE THAN $280 BILLION IN ASSETS FOR INSTITUTIONAL AND CORPORATE
CLIENTS, RETIREMENT AND PENSION PLANS, INSURANCE COMPANIES, MUTUAL FUND
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.
DEAR KEMPER FUNDS SHAREHOLDER:
As expected, the Federal Reserve Board raised its federal funds interest rate
(the rate at which banks lend to each other overnight) by one-fourth of a
percentage point in June. Although higher interest rates tend to have a
dampening effect on the market, investors rallied in response to this move. The
Dow Jones Industrial Average, which was down 50 points before the Fed's
statement on June 30, reversed course and ended the day at its highest closing
level in six weeks. The Dow went on to close at a record-setting high of 11,187
on July 7.
What led to the interest rate hike, and why does the market reaction suggest
that investors are happy about it?
It is generally recognized that a modest rate hike by the Fed may be effective
in slowing the economy sufficiently to suppress any simmering inflationary
pressures. Although the economy has been strong, there are concerns that it will
be unable to maintain its current rate of growth without prompting inflationary
pressures -- which is at the heart of the Fed's decision to raise interest
rates. The Fed is acting now to be proactive. In the past, Fed policy has been
reactive, which meant that the Fed tended to respond to inflation only when it
picked up. A rate hike now is intended to halt any future buildup in inflation.
Moreover, by hinting at an increase well in advance -- then by limiting the
increase to 25 basis points -- the Fed relieved worried investors and gave a
boost to the financial markets.
Despite the minor rate increase, the long-term economic situation appears to
be positive. The federal budget surplus continues to benefit from good revenue
gains (which are based on good income gains, especially for households), good
capital gains and continued restraint in federal spending. The surplus this year
is expected to approach $100 billion.
This positive environment is exactly what sometimes poses risk for investors,
and is key to understanding recent volatility in the market. A strong economy
has the potential to feed inflation fears and drive up interest rates. Indeed,
recent market events illustrate the domino effect of investors reacting to
positive economic news, which they consider troubling at this point, more than
eight years into the economic expansion. Prior to its strong close in the second
quarter, the steady stream of positive economic news led to a sell-off in the
financial markets based on fears that the strong pace of economic growth would
eventually lead to higher inflation. The benchmark 30-year Treasury bond yield
rose, which pulled stocks lower.
Where can we expect to go from here? The fundamentals by which we judge the
health of the economy suggest continued growth as we move into the second half
of 1999. For example, the gross domestic product (GDP), the value of all goods
and services produced in the U.S., is expected to rise at an annual rate of 4
percent in the first half of 1999, following a tremendous fourth-quarter surge
of 6 percent. This is very much in line with what we've grown accustomed to over
the past year -- over the four quarters of 1998, the U.S. economy expanded by
4.3 percent. Some people aren't surprised at all by strong GDP growth that once
would have alarmed them. That's partially because we've grown accustomed to a
strong economy. But it's also because we've been able to absorb growth without
driving up inflation. That's important for investors. If prices had been rising
as the economy was growing, the Fed would have most likely raised short-term
interest rates earlier and more drastically, and that would have changed the
financial market outlook.
However, we do see some vulnerability on the economic front. Trade is a weak
spot in the economy right now. Exports of U.S. goods and services dropped in the
first half of 1999, while imports soared. This reflects the fact that the U.S.
is one of the few countries financially fit enough to buy goods produced
elsewhere in the world. But for as long as less vibrant international economies
are unable to buy U.S. goods, the profitability of U.S. companies trying to
export will be challenged.
When you think about it, vulnerability in regard to the international economy
is nothing new. Globally, the outlook is slightly more positive than it was a
few months ago. For example, the European markets are slowing down, which has
already led to the European Central Bank lowering interest rates in order to
boost domestic spending. In many countries in Europe there are no fixed-rate
mortgages, only adjustable-rate mortgages. When interest rates go down, mortgage
payments are reduced and homeowners can spend money elsewhere. This has a huge
impact on consumer spending, and will help European equities over time.
Additionally, the situation in Japan remains unchanged. And, problems in the
emerging markets haven't had the negative impact many people expected -- both
the Mexican and Brazilian stock markets have actually risen in the past two
months.
But don't forget that international crises have the potential to affect the
U.S. markets dramatically. Although the Kosovo crisis seems to be waning, past
increases in military spending on Kosovo by the 11 European Monetary Union (EMU)
countries could force them to spend less in other areas, which could have
economic implications, including higher interest rates. That's because many
European countries (especially Italy) have small economies and
3
<PAGE> 4
ECONOMIC OVERVIEW
- --------------------------------------------------------------------------------
ECONOMIC GUIDEPOSTS
- --------------------------------------------------------------------------------
ECONOMIC ACTIVITY IS A KEY INFLUENCE ON INVESTMENT PERFORMANCE AND
SHAREHOLDER DECISION-MAKING. PERIODS OF RECESSION OR BOOM, INFLATION OR
DEFLATION, CREDIT EXPANSION OR CREDIT CRUNCH HAVE A SIGNIFICANT IMPACT ON
MUTUAL FUND PERFORMANCE.
THE FOLLOWING ARE SOME SIGNIFICANT ECONOMIC GUIDEPOSTS AND THEIR
INVESTMENT RATIONALE THAT MAY HELP YOUR INVESTMENT DECISION-MAKING. THE
10-YEAR TREASURY RATE AND THE PRIME RATE ARE PREVAILING INTEREST RATES. THE
OTHER DATA REPORT YEAR-TO-YEAR PERCENTAGE CHANGES.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (6/30/99) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Ten Year Treasury Rate 5.90 4.81 5.65 6.69
Prime Rate 7.75 8.49 8.50 8.30
Inflation* 2.03 1.62 1.44 3.03
The U.S. Dollar* -2.4 4.31 4.88 8.58
Capital goods orders* 7.73 11.44 8.10 5.52
Industrial production * 1.72 3.58 5.05 5.86
Employment growth* 2.15 2.48 2.61 2.51
</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 MAY 31, 1999.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
little leeway in their budgets. Consequently, those countries financed unplanned
military expenditures by selling government bonds -- which, in Europe's small
bond market, typically raises interest rates. As an example, consider Italy,
which recently asked for more leeway on its deficit targets. When leeway was
granted, this led to a further sell-off in the eurodollar.
The international situation alone, however, is by no means an indicator of a
U.S. slowdown -- and without any such indications, complacency may be our
greatest concern. It's easy to look at the current U.S. economic situation and
behave as if no risk exists. But when you see the market soaring and are tempted
to jump in, note that the bull market grew to records on the strength of just a
few dozen stocks, while most other stock prices were flat or actually declined.
In summary, there are concerns that the current economy is unsustainable and
we soon could see an abrupt end. In many cases, however, people are looking for
a slowdown because they are fearful growth will drive up inflation these are
particularly older investors who are accustomed to inflation accompanying
growth. But again, sustained inflation seems unlikely, so a sharp slowdown is
not necessary. In the short term, we expect a modest economic slowdown but no
recession. The best approach now, as in any market, is to diversify and invest
for the long term.
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
/s/ JOHN E. SILVIA
John E. Silvia
THE INFORMATION CONTAINED IN THIS PIECE HAS BEEN TAKEN FROM SOURCES BELIEVED TO
BE RELIABLE, BUT THE ACCURACY OF THE INFORMATION IS NOT GUARANTEED. THE OPINIONS
AND FORECASTS EXPRESSED ARE THOSE OF DR. JOHN SILVIA AS OF JUNE 9, 1999, AND MAY
NOT ACTUALLY COME TO PASS. THIS INFORMATION IS SUBJECT TO CHANGE. NO PART OF
THIS MATERIAL IS INTENDED AS AN INVESTMENT RECOMMENDATION.
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
TIEN-YU SIEH JOINED SCUDDER KEMPER INVESTMENTS, INC. IN 1996 AND IS THE LEAD
PORTFOLIO MANAGER OF KEMPER ASIAN GROWTH FUND. BORN IN MALAYSIA AND EDUCATED
THROUGH THE HIGH SCHOOL LEVEL IN SINGAPORE, TIEN-YU HAS NINE YEARS OF ASIAN
MARKET INVESTMENT EXPERIENCE. HE GRADUATED FROM THE DUAL-DEGREE MANAGEMENT AND
TECHNOLOGY PROGRAM AT THE UNIVERSITY OF PENNSYLVANIA WITH A BACHELOR OF SCIENCE
DEGREE IN ECONOMICS AND A BACHELOR OF APPLIED SCIENCE DEGREE.
THERESA GUSMAN JOINED SCUDDER KEMPER INVESTMENTS IN 1995, AND IS A PORTFOLIO
MANAGER FOR KEMPER ASIAN GROWTH FUND. PRIOR TO JOINING SCUDDER IN 1995, SHE WAS
AN EQUITY RESEARCH ANALYST AT ARNHOLD & S. BLEICHROEDER FOR THREE YEARS AND
SALOMON BROTHERS FOR NINE YEARS.
PORTFOLIO MANAGER ELIZABETH ALLAN JOINED SCUDDER KEMPER INVESTMENTS IN 1987 WHEN
SHE TOOK A POSITION AS A RESEARCHER IN OUR TOKYO OFFICE. NOW BASED IN NEW YORK,
ELIZABETH SERVES AS PORTFOLIO MANAGER OF SEVERAL ASIAN AND JAPANESE FUNDS. PRIOR
TO JOINING THE FIRM, ELIZABETH SPENT SEVERAL YEARS WORKING FOR NOMURA SECURITIES
CO., LTD ON WALL STREET AND WAS A RESEARCHER AND TRANSLATOR FOR W.I. CARR, LTD.
IN TOKYO.
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.
A RALLY IN THE LONG-DEPRESSED ASIAN MARKETS REWARDED INVESTORS HANDSOMELY OVER
THE SIX-MONTH PERIOD ENDING MAY 31. WITH A CYCLICAL RECOVERY BUOYING THE
SHORT-TERM OUTLOOK FOR THE REGION, AND INSTITUTIONAL REFORMS AND CORPORATE
RESTRUCTURING POINTING TOWARD SUBSTANTIAL LONG-TERM MARKET IMPROVEMENT, THE
KEMPER ASIAN GROWTH FUND MANAGEMENT TEAM IS QUITE ENTHUSIASTIC ABOUT THE
REGION'S PROSPECTS. FOLLOWING, THE MANAGEMENT TEAM DISCUSSES THE REGION'S
RECOVERY AND THE POSITIVE OUTLOOK FOR KEMPER ASIAN GROWTH FUND.
Q TWO YEARS AGO, ASIAN MARKETS BEGAN A DRAMATIC DETERIORATION. DURING THIS
SIX-MONTH PERIOD, HOWEVER, WE SEEMED TO BE SEEING THE LIGHT AT THE END OF THE
TUNNEL. IS THE WORST BEHIND US, AND IF SO, IS THERE ROOM FOR FURTHER
APPRECIATION?
A Most signs indicate that Asian equity markets hit their lowest levels in
the third quarter of 1998. However, the crisis actually began on July 2, 1997
with the devaluation of the Thai baht. It spread very quickly, engulfing the
region and eventually most emerging markets. Interest expense increased
throughout the region, foreign currency debt rose, and Asian stocks fell very
sharply.
On the economic front, recent events confirm that a cyclical recovery is
underway. For example, we're seeing a very sharp rise in consumption oriented
economic indicators. In Korea, we have seen auto sales increase nearly 35
percent over last year in the first five months of 1999. Personal computer sales
have increased by approximately 45 percent in that time.
Another sign of the recovery is the continuing pickup in foreign domestic
investment (FDI). Most importantly, last year we saw FDI in Korea and Thailand
increase to record levels, and strong levels of FDI have continued. More
recently, FDI in Indonesia has picked up as well.
There are three main reasons Asian equity markets began recovering late
last year. First, Japan seemed poised for an economic recovery, which improved
the whole regional backdrop. Second, value had begun to emerge in the region
following a 62 percent decline in Pacific Basin equities. And finally, we were
beginning to see positive signs from a top-down perspective: interest rates were
falling, foreign direct investment was increasing, and consumption seemed to be
bottoming. Momentum continues to build and we are optimistic about the outlook
for Asian stocks for that reason.
Q KEMPER ASIAN GROWTH FUND WAS UP 11.65 PERCENT (CLASS A SHARES, UNADJUSTED
FOR ANY SALES CHARGE) FOR THE SIX-MONTH PERIOD ENDING MAY 31, 1999. THIS IS
SIGNIFICANTLY BELOW THE FUND'S BENCHMARK INDEX, THE MSCI ALL COUNTRY ASIA FREE
INDEX (EXCLUDING JAPAN)*, WHICH ROSE 27.64 PERCENT FOR THE SAME PERIOD. WHY THE
UNDERPERFORMANCE?
A Although the May 31 numbers lag our index, the fund began to close the gap
in April (the fund up 17.74 percent for the month, Class A shares, unadjusted
5
<PAGE> 6
PERFORMANCE UPDATE
for any sales charges verses the index, up 18.28 percent) and has made up a lot
of ground as of the writing of this report. We believe our stock selection has
been on the mark all along, the portfolio just took a bit longer to reach its
stride.
Our underperformance for the period under review was related to several
factors. First, we take a bottom-up approach to stock selection, choosing stocks
for the portfolio based on specific investment themes rather than focusing
primarily on country weightings. Both our themes and our analysis led us to be
significantly overweight verses the MSCI All Country Asia Free Index (ex Japan)
in Indonesia during a period when that market was still out of favor. Our faith
in the holdings we have in that market coupled with our view that the country's
June 7 election would proceed smoothly, moved us to actually increase our
Indonesian positions during the first quarter when that market was so weak. To
our benefit, the Indonesian market came back beginning late in the period.
The second factor in our underperformance was our holdings in Hong Kong and
Taiwan. Those stocks lagged their benchmarks in the first quarter and early in
the second quarter. In Taiwan, leading personal computer-related technology
holdings, including companies like Asustek, Compal and Delta Electronics, fell
in the first quarter while the Taiwan index** gained 12 percent. However, strong
first quarter earnings news turned the tables for these stocks, driving solid
returns over the past two months. These stocks are now outperforming the
Taiwanese market.
The final reason for our underperformance was our Chinese exposure. We had
significant exposure to fundamentally strong, attractively valued Chinese
companies that simply didn't perform as well as we expected. The Chinese
expressway companies that we owned, for example, posted consistently good
numbers and yet shares continued to trade at big discounts to the value of the
underlying assets. Those stocks were down 20 to 40 percent in the first quarter.
There was simply very little market interest in them, so they stagnated. In the
end we capitulated to the market and sold those holdings. But in most other
instances our conviction level only increased as stocks went down, and that has
paid off for the fund late in the second quarter of 1999.
* MSCI ALL COUNTRY ASIA FREE INDEX (EXCLUDING JAPAN) IS A GENERALLY ACCEPTED
BENCHMARK OF ASIAN FREE MARKET PERFORMANCE (MARKETS OPEN TO FOREIGN
INVESTMENT), EXCLUDING JAPAN. THE INDEX CANNOT BE INVESTED DIRECTLY. SOURCE
IS LIPPER ANALYTICAL SERVICES, INC.
** THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) TAIWAN INDEX SERVES AS A
BENCHMARK FOR TAIWANESE MARKET PERFORMANCE. THE INDEX CANNOT BE INVESTED
DIRECTLY. SOURCE IS LIPPER ANALYTICAL SERVICES, INC.
Q YOU MENTIONED THAT YOUR STOCK SELECTION PROCESS IS VERY BOTTOMS-UP
ORIENTED. HOW DOES THIS AFFECT THE FUND'S COMPOSITION?
A When we say the fund is bottom-up oriented, we mean that we focus
primarily on finding the best companies, and country allocation is a residual of
our company-specific investment focus. Kemper Asian Growth Fund is comprised of
the best ideas of the portfolio management team working closely with the
research team.
At present, we are working with four main investment themes. The first
theme is built around the premise that Asia is in the midst of a cyclical
recovery. To benefit from that, we have a significant overweight position in the
basic materials sector and are neutral in consumer-oriented stocks. As the
region emerges from a recession, reduced supply, increased demand and low
inventory levels portend higher prices for most basic materials -- and
potentially higher stock prices for producers.
Another theme has us looking for dominant local companies. This theme led
us to Indonesia and holdings such as Indofood, a producer of packaged noodles
that holds a 95 percent share of the market.
The third theme, which has us heavily exposed to technology companies,
focuses on facilitators of deflation. Many technology companies, such as Taiwan
Semiconductor Manufacturing Co. (TSMC) and Asustek, are enabling major U.S.
computer firms like Dell and Compaq to supply consumers with more and more
powerful computers at lower prices. These Asian firms supply the insides of the
computers and often do everything a manufacturing company would do, including
putting Compaq or Dell's name on the box.
The last theme is corporate restructuring. We believe the combination of
corporate restructuring and institutional reform will lead to long-term upward
movement in these markets. Samsung Corp, a construction company and Internet
service provider in Korea, is an example of a holding that is at the forefront
of the restructuring trend.
6
<PAGE> 7
PERFORMANCE UPDATE
Q BASED ON THESE THEMES, ONE WOULD ASSUME THE FUND HOLDS A LOT OF TECHNOLOGY
AND BASIC MATERIALS STOCKS. WHAT OTHER SECTORS LOOK PROMISING AND WHICH ONES ARE
YOU AVOIDING?
A The fund is heavily overweighted (verses the MSCI All Country Asia Free ex
Japan Index) in technology and basic materials. It is neutral in
consumer-oriented companies and underweight in banks and property companies. We
have underweighted banks because we question anyone's ability to estimate the
amount of non-performing loans these banks are holding. It's very difficult to
value these stocks. Also, U.S. interest rates play a big role in determining
interest rates in Asia. We've thought for some time that the U.S. Federal
Reserve is biased toward tightening, a prospect that also supports an
underweight in banks.
The biggest change we've made since the beginning of the period was to
increase our basic materials holdings. To do that we've gone more underweight in
banks and have avoided utilities.
Q ALTHOUGH YOU DON'T FOCUS PRIMARILY ON COUNTRY ALLOCATION WHEN SELECTING
STOCKS, COUNTRY WEIGHTINGS DO HAVE AN IMPACT ON PERFORMANCE. WHERE IS THE FUND
INVESTED AND HOW HAS THE ALLOCATION CHANGED OVER THE PERIOD?
A The fund's largest country overweights as compared to the index weightings
were in Indonesia and Taiwan. Taiwan gives the fund exposure to technology and
Indonesia is the least expensive market in Asia. The fund's underweightings were
in Hong Kong and Singapore, which are heavily weighted in the benchmark. We did
not find the number of suitable companies necessary to achieve a comparable
weighting in these markets. Our weightings in each market haven't changed
significantly over the course of the period. The primary change was moving from
a slightly underweight to a slight overweight in Korea.
Q LET'S TALK ABOUT SOME SPECIFIC HOLDINGS, INCLUDING TOP PERFORMERS AND
THOSE THAT DISAPPOINTED.
A Taiwan Semiconducter Manufacturing Co. (TSMC) is among the best performing
stocks in the portfolio. It is the largest foundry in the world and produces
many types of computer chips. Another strong performer was PT Astra
International, the largest producer of automobiles and motorcycles in Indonesia.
Astra holds more than 75 percent of the auto and motorcycle marketshare in that
country. This company came back from the brink as people gained confidence that
the Indonesian economy would recover.
On the negative side, we owned three Chinese expressway companies that
grossly lagged the Chinese
-------------------------------------------------------------------------------
COUNTRY WEIGHTINGS FOR THE FUND VS. THE BENCHMARK AS OF MAY 31, 1999
-------------------------------------------------------------------------------
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER ASIAN MSCI ALL COUNTRY
GROWTH FUND ASIA FREE EX JAPAN INDEX
------------ --------------------------
<S> <C> <C>
HONG KONG 26.1% 33.09%
TAIWAN 18.2% 13.43%
KOREA 16.7% 18.27%
SINGAPORE 8.6% 12.25%
INDONESIA 7.7% 2.85%
CHINA 4.5% 0.84%
AUSTRALIA 3.9% 0.0%
PHILIPPINES 3.5% 2.87%
THAILAND 2.1% 4.37%
MALAYSIA 1.6% 0.0%
PAPUA NEW GUINEA 1.5% 0.0%
</TABLE>
7
<PAGE> 8
PERFORMANCE UPDATE
index over the period. Their poor performance was due largely to a lack of
investor interest rather than fundamental weakness. What originally appealed to
us about these companies were their strong earnings streams and their very
attractive valuations -- most were trading at huge discounts to their net asset
value, and some were even trading below the value of their net cash. But as
these stocks continued to sell off for no logical reason, it became clear that
this was a dead asset class, so we eliminated our position. Some of our
Taiwanese companies also dragged on performance.
Q WHAT IS YOUR OUTLOOK FOR THE REGION, AND WHAT ARE SOME RISKS TO THIS
OUTLOOK?
A We are optimistic about the outlook for Asian equities for two reasons:
the cyclical economic rebound we discussed, and the trend toward corporate and
institutional restructuring.
The corporate restructuring trend seems to be gaining momentum. For the
first time, Asian companies are focusing on creating shareholder value, and
managements are shifting priorities from expansion to survival. Cost cutting
programs are announced daily, even in Japan, and we're hearing of more and more
industry consolidations and capacity shutdowns. Although this has been occurring
in the United States for over a decade, it is a relatively new phenomenon
elsewhere in the world.
The institutional reform we refer to has come in the form of newly enacted
bankruptcy laws, recognition of financial sector problems, and introduction of
deregulation measures. Throughout the region, banking systems, political systems
and regulatory systems are being changed to support businesses.
The biggest risk to this outlook would be a collapse in the U.S. economy.
That's really the biggest risk in every foreign market today. A local risk to
consider is the potential for backtracking on institutional reform, which we've
been calling reform fatigue. Change is difficult, and occasionally companies and
institutions make restructuring announcements and don't adhere to the plans they
put in place. Despite these risks, we remain very comfortable with our positive
outlook for the region.
8
<PAGE> 9
LARGEST HOLDINGS
THE FUND'S 15 LARGEST HOLDINGS*
Representing 33.1 percent of the fund's common stock holdings on May 31, 1999
<TABLE>
<CAPTION>
HOLDINGS COUNTRY PERCENT
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
1. HUTCHISON WHAMPOA Hong Kong 4.3%
- -----------------------------------------------------------------------------------------------
2. TAIWAN SEMICONDUCT MANUFACTURING CO. Taiwan 3.3%
- -----------------------------------------------------------------------------------------------
3. LI & FUNG Hong Kong 2.8%
- -----------------------------------------------------------------------------------------------
4. KOREA TELECOM Korea 2.6%
- -----------------------------------------------------------------------------------------------
5. HSBC HOLDINGS Hong Kong 2.2%
- -----------------------------------------------------------------------------------------------
6. HONG KONG TELECOMMUNICATIONS Hong Kong 2.1%
- -----------------------------------------------------------------------------------------------
7. SAMSUNG Korea 2.0%
- -----------------------------------------------------------------------------------------------
8. CITIC PACIFIC Hong Kong 2.0%
- -----------------------------------------------------------------------------------------------
9. POHANG IRON & STEEL Korea 1.9%
- -----------------------------------------------------------------------------------------------
10. CHEUNG KONG HOLDINGS Hong Kong 1.8%
- -----------------------------------------------------------------------------------------------
11. SAMSUNG ELECTRONICS Korea 1.7%
- -----------------------------------------------------------------------------------------------
12. NEW WORLD DEVELOPMENT Hong Kong 1.6%
- -----------------------------------------------------------------------------------------------
13. ASUSTEK COMPUTER Taiwan 1.6%
- -----------------------------------------------------------------------------------------------
14. YIZHENG CHEMICAL FIBRE China 1.6%
- -----------------------------------------------------------------------------------------------
15. OVERSEAS-CHINESE BANKING Singapore 1.6%
- -----------------------------------------------------------------------------------------------
</TABLE>
*Portfolio holdings are subject to change.
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
KEMPER ASIAN GROWTH FUND
PORTFOLIO OF INVESTMENTS AT MAY 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HONG KONG--26.1%
Cheung Kong Holdings Ltd.
REAL ESTATE COMPANY 24,000 $ 194,975
Citic Pacific Ltd.
DIVERSIFIED HOLDING COMPANY 80,000 208,902
Dah Sing Financial Group
GENERAL BANKING AND PROPERTY INVESTMENT
HOLDING COMPANY 33,400 95,184
Esprit Holdings Ltd.
DESIGNER AND MANUFACTURER OF HIGH QUALITY
FASHION PRODUCTS 193,000 95,817
Giordano International Ltd.
RETAILER OF CASUAL APPAREL 283,000 149,622
(a) Hengan International Group Co. Ltd.
MANUFACTURER AND SELLER OF PERSONAL HYGIENE
PRODUCTS 329,000 116,669
Hong Kong Telecommunications, Ltd.
TELECOMMUNICATION SERVICES 98,300 226,266
HSBC Holdings plc
INTERNATIONAL BANKING AND FINANCIAL SERVICES
PROVIDER 7,200 234,898
Hutchison Whampoa, Ltd.
DIVERSIFIED INVESTMENT HOLDING COMPANY 55,000 457,456
Legend Holdings Ltd.
COMPUTER COMPONENTS MANUFACTURER 215,000 146,940
Li & Fung Ltd.
EXPORTER OF CONSUMER PRODUCTS 126,000 297,337
New World Development Co., Ltd.
PROPERTY INVESTMENT AND DEVELOPMENT 72,587 177,376
New World Infrastructure Ltd.
INVESTMENT AND OPERATION OF INFRASTRUCTURE 64,200 103,070
PROJECTS
SmarTone Telecommunications Holdings Ltd.
TELECOMMUNICATION SERVICES 26,000 80,633
Sun Hung Kai Properties Ltd.
REAL ESTATE DEVELOPER AND FINANCE COMPANY 19,000 152,517
Wing Hang Bank Ltd.
CORPORATE AND RETAIL BANKING 15,500 43,773
----------------------------------------------------------------------------
2,781,435
- --------------------------------------------------------------------------------------------------------------------------
TAIWAN--18.2%
Acer Peripherals, Inc.
DEVELOPER AND DISTRIBUTOR OF COMPUTER 64,000 129,174
PERIPHERALS
(a) ASE Test Ltd.
TESTING SERVICES TO SEMICONDUCTOR 8,500 153,000
MANUFACTURERS
(a) Asustek Computer Inc.
MANUFACTURER OF COMPUTER MAINBOARDS, AUDIO, 15,000 173,853
VIDEO AND NETWORK CARDS
China Motor Company Ltd.
MANUFACTURER OF TRUCKS AND AUTOMOBILES 70,000 111,315
Compal Electronics Inc.
MANUFACTURER AND MARKETER OF NOTEBOOK 45,991 123,065
COMPUTERS AND COLOR MONITORS
Delta Electronic Industrial Co.
MANUFACTURER OF POWER SUPPLY EQUIPMENT 35,000 140,214
Far East Textile Ltd.
MANUFACTURER OF NATURAL AND SYNTHETIC 90,000 116,972
TEXTILE PRODUCTS
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Formosa Plastics Corp. 91,000 $ 155,841
MANUFACTURER OF PLASTICS MATERIALS
(a) Hon Hai Precision Industry Co., Ltd. 21,000 123,303
MANUFACTURER OF ELECTRONIC CONNECTORS, CABLE
ASSEMBLIES AND MEMORY CHIPS
(a) Siliconware Corp. 157,000 119,550
TESTING AND PACKAGING OF INTEGRATED CIRCUITS
(a) Siliconware Precision Industries Co. 71,340 116,718
MANUFACTURER OF PACKAGING FOR INTEGRATED
CIRCUITS
(a) Taiwan Semiconductor Manufacturing Co. 98,000 352,141
MANUFACTURER OF INTEGRATED CIRCUITS
(a) Winbond Electronics Corp. (GDR) 600 6,930
DESIGNER, MANUFACTURER AND RETAILER OF
INTEGRATED CIRCUITS AND RELATED PRODUCTS
Yang Ming Marine Transport 177,000 113,670
MARINE TRANSPORTATION
----------------------------------------------------------------------------
1,935,746
- --------------------------------------------------------------------------------------------------------------------------
KOREA--16.7 Cheil Jedang Corp.
KOREA'S LARGEST SUGAR REFINER AND MAJOR
INTEGRATED FOOD PROCESSOR 2,150 116,941
Honam Petrochemical Corp., Ltd.
MANUFACTURER OF A VARIETY OF CHEMICALS 8,970 149,771
Korea Data System
MANUFACTURER AND EXPORTER OF COMPUTER
MONITORS 4,786 166,078
(a) Korea Telecom Corp. (ADR)
TELECOMMUNICATION SERVICES 8,600 273,588
Medison Co., Ltd.
PRODUCER OF MEDICAL EQUIPMENT 8,010 101,995
(b) Pohang Iron & Steel Co., Ltd.
STEEL PRODUCER 2,170 198,042
Samsung Corp., Ltd.
TRADING COMPANY 3,570 211,700
Samsung Electronics Co., Ltd.
ELECTRONICS MANUFACTURER 2,521 175,387
(b) Samsung Electronics Co., Ltd.
RIGHTS 206 2,189
Samsung Securities Co., Ltd.
SECURITIES COMPANY 3,586 157,248
(a) Shinhan Bank (GDR)
BANK 5,700 107,588
Ssangyong Oil Refining Co.
MAJOR OIL REFINER 5,400 115,209
----------------------------------------------------------------------------
1,775,736
- --------------------------------------------------------------------------------------------------------------------------
SINGAPORE--8.6%
Allgreen Properties Limited
REAL ESTATE DEVELOPMENT 62,000 59,013
City Developments Ltd.
DEVELOPER OF RESIDENTIAL, INDUSTRIAL, RETAIL
AND INVESTMENT PROPERTIES, OWNER AND
OPERATOR OF HOTELS 17,000 101,625
JIT Holdings Ltd.
MANUFACTURER AND DISTRIBUTOR OF ELECTRONIC
PRODUCTS 85,000 126,785
Keppel Land Ltd.
PROPERTY INVESTMENT AND DEVELOPMENT 61,000 103,732
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Natsteel Electronics Ltd.
MANUFACTURER OF TELECOMMUNICATION AND
NETWORK PRODUCTS 35,000 $ 116,802
Overseas-Chinese Banking Corp., Ltd.
COMMERCIAL BANK 22,000 172,374
(a) Pacific Internet Ltd. (ADR)
PROVIDER OF INTERNET ACCESS SERVICES TO ASIA 2,800 126,700
AND PACIFIC MARKET
United Overseas Bank, Ltd.
COMMERCIAL BANK 15,000 99,246
----------------------------------------------------------------------------
906,277
- --------------------------------------------------------------------------------------------------------------------------
INDONESIA--7.7%
(a) Asia Pulp & Paper Co., Ltd. (ADR)
PRODUCER OF PULP AND PAPER 15,900 142,106
Asia Pulp & Paper Co., Ltd.
WARRANTS 3,180 8,348
Indonesia Satellite Corp. (ADR)
INTERNATIONAL TELECOMMUNICATION SERVICES 5,500 108,969
(a) Indorama Synthetics
PRODUCER OF POLYESTER YARN, FIBER AND FABRIC 486,500 118,258
PT Astra Agro Lestari Tbk
PLANTATION OPERATOR 240,000 66,462
(a) PT Astra International, Inc.
DISTRIBUTOR OF AUTOMOBILES AND RELATED PARTS 399,000 122,768
(a) PT Indah Kiat Pulp & Paper Corp., Tbk
MANUFACTURER OF PULP AND PAPER PRODUCTS 198,500 91,615
PT Indofood Sukses Makmur Tbk
MANUFACTURER OF FOOD PRODUCTS 169,500 167,935
----------------------------------------------------------------------------
826,461
- --------------------------------------------------------------------------------------------------------------------------
CHINA--4.5%
Beijing Datang Power Generation Co., Ltd.
"H"
OWNER AND OPERATOR OF COAL-FIRED ELECTRIC 140,000 33,760
POWER PLANTS
First Tractor Co.
MANUFACTURER OF AGRICULTURAL TRACTORS 282,000 51,274
Guangdong Kelon Electric Holdings, Ltd.
REFRIGERATOR MANUFACTURER 96,000 73,657
Harbin Power Equipment Co., Ltd.
MANUFACTURER OF ELECTRIC POWER GENERATION
EQUIPMENT 174,000 10,546
Shanghai Petrochemical Co., Ltd.
MANUFACTURER OF PETROCHEMICAL AND PETROLEUM
PRODUCTS 923,000 141,637
(a) Yizheng Chemical Fibre Co., Ltd.
MANUFACTURER AND DISTRIBUTOR OF POLYESTER
STABLE FIBERS 1,144,000 172,599
----------------------------------------------------------------------------
483,473
- --------------------------------------------------------------------------------------------------------------------------
AUSTRALIA--3.9%
Broken Hill Proprietary Co. Ltd.
PETROLEUM AND MINERAL EXPLORATION AND STEEL 9,200 94,524
PRODUCTION
(a) Cable & Wireless Optus Ltd.
TELECOMMUNICATION SERVICES 41,300 79,049
Pasminco Ltd.
DIVERSIFIED MINING COMPANY 77,900 76,332
Woodside Petroleum Ltd.
MAJOR OIL AND GAS PRODUCER 26,100 162,826
----------------------------------------------------------------------------
412,731
</TABLE>
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PHILIPPINES--3.5%
Bank of the Philippine Islands
COMMERCIAL BANK 36,000 $ 113,533
International Container Terminal Services, Inc.
CONTAINERIZED CARGO HANDLING FIRM 1,494,700 157,238
Metropolitan Bank and Trust Company
COMMERCIAL BANK AND TRUST COMPANY 11,300 109,139
-----------------------------------------------------------------------------
373,910
- ---------------------------------------------------------------------------------------------------------------------------
THAILAND--2.1%
(b) BEC World Public Co., Ltd.
HOLDING COMPANY INVOLVED IN ENTERTAINMENT
AND TELEVISION BROADCASTING 21,200 111,429
(a)(b) Siam Cement Co., Ltd. (Foreign registered)
CONSTRUCTION MATERIALS AND INDUSTRIAL
CONGLOMERATE 4,200 109,132
-----------------------------------------------------------------------------
220,561
- ---------------------------------------------------------------------------------------------------------------------------
MALAYSIA--1.6%
Malayan Banking Berhad
LEADING BANKING AND FINANCIAL SERVICES GROUP 34,000 94,842
Rothmans of Pall Mall Berhad
MANUFACTURER, IMPORTER AND RETAILER OF
TOBACCO PRODUCTS 10,000 73,684
-----------------------------------------------------------------------------
168,526
- ---------------------------------------------------------------------------------------------------------------------------
PAPUA NEW GUINEA--1.5%
Oil Search Ltd.
OIL AND GAS EXPLORATION AND PRODUCTION 86,000 108,426
Orogen Minerals Ltd.
INVESTMENT COMPANY WITH CONTROLLING INTEREST
IN PAPUA NEW GUINEA GOLD AND OIL COMPANIES 52,200 55,923
-----------------------------------------------------------------------------
164,349
-----------------------------------------------------------------------------
TOTAL COMMON STOCKS--94.4%
(Cost $8,224,360) 10,049,205
-----------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
CONVERTIBLE BONDS PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM--.3%
(Cost $29,479)
APP Global Finance Ltd., 2%, 7/25/2000
MANUFACTURER OF PULP AND PAPER PRODUCTS 38,000 36,100
-----------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
MONEY MARKET
INSTRUMENTS
(c) Repurchase agreement 264,000 264,000
Chase Manhattan Bank, 4.625%, Due 6/1/99
Other
Yield--4.68%
Due--June 1999
Federal Home Loan Mortgage Corp. 300,000 300,000
-----------------------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--5.3%
(Cost $564,000) 564,000
-----------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost $8,817,839) $10,649,305
-----------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
At May 31, 1999, the fund's portfolio of investments had the following industry
diversification:
<TABLE>
<CAPTION>
VALUE %
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Financial 2,222,877 20.9%
- -----------------------------------------------------------------------------------------
Manufacturing 1,820,347 17.1%
- -----------------------------------------------------------------------------------------
Technology 1,735,757 16.3%
- -----------------------------------------------------------------------------------------
Consumer staples 781,584 7.3%
- -----------------------------------------------------------------------------------------
Communications 768,505 7.2%
- -----------------------------------------------------------------------------------------
Service industries 660,275 6.2%
- -----------------------------------------------------------------------------------------
Energy 528,098 5.0%
- -----------------------------------------------------------------------------------------
Metals & minerals 368,898 3.5%
- -----------------------------------------------------------------------------------------
Durables 285,358 2.7%
- -----------------------------------------------------------------------------------------
Consumer discretionary 245,437 2.3%
- -----------------------------------------------------------------------------------------
Transportation 216,740 2.0%
- -----------------------------------------------------------------------------------------
Construction 168,145 1.6%
- -----------------------------------------------------------------------------------------
Media 111,429 1.1%
- -----------------------------------------------------------------------------------------
Health 101,995 1.0%
- -----------------------------------------------------------------------------------------
Utilities 33,760 0.3%
- -----------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 10,049,205 94.4%
- -----------------------------------------------------------------------------------------
CONVERTIBLE BONDS 36,100 0.3%
- -----------------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS 564,000 5.3%
- -----------------------------------------------------------------------------------------
TOTAL INVESTMENTS 10,649,305 100.0%
- -----------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- -------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Trustees at fair value amounted to $420,792 (3.89% of net assets). Their
values have been estimated by the Valuation Committee in the absence of
readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of these
securities at May 31, 1998 aggregated $324,887. These securities may also
have certain restrictions as to resale.
(c) Repurchase agreements are fully collateralized by U.S. Treasury or U.S.
Government agency securities. The collateral is monitored daily by the fund
so that its market value exceeds the carrying value of the repurchase
agreement.
Based on the cost of investments of $8,817,839 for federal income tax purposes
at May 31, 1999, the gross unrealized appreciation was $2,163,475, the gross
unrealized depreciation was $332,009 and the net unrealized appreciation on
investments was $1,831,466.
See accompanying Notes to Financial Statements.
14
<PAGE> 15
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1999 (UNAUDITED)
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------
ASSETS
- ---------------------------------------------------------------------------
Investments, at value
(Cost: $8,817,839) $10,649,305
- ---------------------------------------------------------------------------
Cash 3,590
- ---------------------------------------------------------------------------
Receivable for:
Investments sold 291,462
- ---------------------------------------------------------------------------
Fund shares sold 4,500
- ---------------------------------------------------------------------------
Dividends 25,126
- ---------------------------------------------------------------------------
Reimbursement from Adviser 84,703
- ---------------------------------------------------------------------------
TOTAL ASSETS 11,058,686
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
LIABILITIES
- ---------------------------------------------------------------------------
Payable for:
Investments purchased 230,605
- ---------------------------------------------------------------------------
Deferred foreign taxes 20,908
- ---------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 15,989
- ---------------------------------------------------------------------------
Total liabilities 267,502
- ---------------------------------------------------------------------------
NET ASSETS $10,791,184
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- ---------------------------------------------------------------------------
Paid-in capital $13,322,039
- ---------------------------------------------------------------------------
Undistributed net realized loss on investments and foreign
currency transactions (4,476,142)
- ---------------------------------------------------------------------------
Net unrealized appreciation on investments and assets and
liabilities on foreign currencies 1,832,640
- ---------------------------------------------------------------------------
Undistributed net investment income 112,647
- ---------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $10,791,184
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
THE PRICING OF SHARES
- ---------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share ($6,142,701
/ 1,017,001 shares outstanding) $6.04
- ---------------------------------------------------------------------------
Maximum offering price per share (net asset value, plus
6.10% of net asset value or 5.75% of offering price) $6.41
- ---------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge) per share ($4,120,221 /
693,896 shares outstanding) $5.94
- ---------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge) per share ($528,262 /
89,323 shares outstanding) $5.91
- ---------------------------------------------------------------------------
</TABLE>
15
<PAGE> 16
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1999 (UNAUDITED)
<TABLE>
<S> <C>
- --------------------------------------------------------------------------
NET INVESTMENT INCOME
- --------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $4,562) $ 66,604
- --------------------------------------------------------------------------
Interest income 31,793
- --------------------------------------------------------------------------
Total investment income 98,397
- --------------------------------------------------------------------------
Expenses:
Management fee 35,676
- --------------------------------------------------------------------------
Distribution services fee 13,895
- --------------------------------------------------------------------------
Administrative services fee 10,493
- --------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 65,998
- --------------------------------------------------------------------------
Professional fees 29,895
- --------------------------------------------------------------------------
Reports to shareholders 35,707
- --------------------------------------------------------------------------
Trustees' fees and other 3,017
- --------------------------------------------------------------------------
Total expenses 194,681
- --------------------------------------------------------------------------
Less expense waived and absorbed by investment manager (101,728)
- --------------------------------------------------------------------------
Total expenses after expense waiver 92,953
- --------------------------------------------------------------------------
NET INVESTMENT INCOME 5,444
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Net realized gain on sales of investments 125,831
- --------------------------------------------------------------------------
Change in net unrealized appreciation on investments (net
of deferred foreign tax 20,908) 1,160,785
- --------------------------------------------------------------------------
Net gain on investments 1,286,616
- --------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,292,060
- --------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MAY 31, YEAR ENDED
1999 NOVEMBER 31,
(UNAUDITED) 1998
- ---------------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income $ 5,444 111,605
- ---------------------------------------------------------------------------------------------------------
Net realized gain 125,831 (3,408,886)
- ---------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation 1,160,785 2,073,180
- ---------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,292,060 (1,224,101)
- ---------------------------------------------------------------------------------------------------------
Distributions to shareholders:
Distribution from net investment income -- (48,815)
- ---------------------------------------------------------------------------------------------------------
Net increase from capital share transactions 2,083,244 2,291,023
- ---------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 3,375,304 1,018,107
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------------------
Beginning of period 7,415,880 6,397,773
- ---------------------------------------------------------------------------------------------------------
END OF PERIOD $10,791,184 7,415,880
- ---------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF
THE FUND Kemper Asian Growth Fund is an open-end management
investment company organized as a business trust
under the laws of Massachusetts. The fund currently
offers four classes of shares. Class A shares are
sold to investors subject to an initial sales
charge. Class B shares are sold without an initial
sales charge but are subject to higher ongoing
expenses than Class A shares and a contingent
deferred sales charge payable upon certain
redemptions. Class B shares automatically convert
to Class A shares six years after issuance. Class C
shares are sold without an initial sales charge but
are subject to higher ongoing expenses than Class A
shares and a contingent deferred sales charge
payable upon certain redemptions within one year of
purchase. Class C shares do not convert into
another class. Class I shares (none sold through
May 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. Differences in class
expenses will result in the payment of different
per share income dividends by class. All shares of
the fund have equal rights with respect to voting,
dividends and assets, subject to class specific
preferences.
- --------------------------------------------------------------------------------
2 SIGNIFICANT
ACCOUNTING POLICIES SECURITY VALUATION. Investments are stated at
value. Portfolio 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 on such market. 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
shall be used. Forward foreign currency exchange
contracts are valued at the prevailing forward
exchanges rate of the underlying currencies on that
day. 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 market 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
rates of exchange. Purchases and sales of
investment securities, income and expenses are
translated into U.S. dollars at the prevailing
exchange rates on the respective dates of the
transactions. The fund includes that portion of the
results of operations resulting from changes in
foreign exchange rates with net realized and
unrealized gain (loss) on investments, as
appropriate.
Net realized and unrealized gains and losses on
foreign currency transactions represent net gains
and losses from sales and maturities of forward
foreign currency exchange contracts, disposition of
foreign currencies, and the difference between the
amount of net investment income accrued and the
U.S. dollar amount actually received. That portion
of both realized and unrealized gains
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
and losses on investments that result from
fluctuations in foreign currency exchange rates is
not separately disclosed.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date. Dividend income is recorded on
the ex-dividend date, except that certain dividends
from foreign securities are recorded as soon as the
information is available to the fund. Interest
income is recorded on the accrual basis. Realized
gains and losses from investment transactions are
reported on an identified cost basis.
FUND SHARE VALUATION. Fund shares are sold and
redeemed on a continuous basis at net asset value
(plus an initial sales charge on most sales of
Class A shares). Proceeds payable on redemption of
Class B and Class C shares will be reduced by the
amount of any applicable contingent deferred sales
charge. On each day the New York Stock Exchange is
open for trading, the net asset value per share is
determined as of the close of the Exchange. The net
asset value per share is determined separately for
each class by dividing the fund's net assets
attributable to that class by the number of shares
of the class outstanding.
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 November 30, 1998, the fund had a tax basis net
loss carryforward of approximately $4,401,854 which
may be applied against any realized net taxable
gains of each succeeding year until fully utilized
or it will expire during the period 2005 through
2006.
Principal amounts of cash and securities invested
in Malaysia are also subject to certain non-U.S.
taxes.
DIVIDENDS TO SHAREHOLDERS. The fund declares and
pays dividends of net investment income and net
realized capital gains annually, which are recorded
on the ex-dividend date. Dividends are determined
in accordance with income tax principles which may
treat certain transactions differently from
generally accepted accounting principles. These
differences are primarily due to differing
treatments for certain transactions such as foreign
currency transactions.
- --------------------------------------------------------------------------------
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 .85%
of the first $250 million of average daily net
assets declining to .72% of average daily net
assets in excess of $12.5 billion. However, the
fund incurred no management fees for the six months
ended May 31, 1999, after a fee waiver by Scudder
Kemper.
In addition, Scudder Kemper has temporarily agreed
to absorb certain operating expenses of the fund.
Under these arrangements, Scudder Kemper waived and
absorbed expenses of $101,728 for the six months
ended May 31, 1999.
UNDERWRITING AND DISTRIBUTION SERVICES
AGREEMENT. The fund has an underwriting and
distribution services agreement with Kemper
Distributors, Inc. (KDI). Underwriting commissions
paid in connection with the distribution of Class A
shares for the six months ended May 31, 1999 are
$8,977.
18
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
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 (after an expense
waiver), CDSC and received by KDI for the six
months ended May 31, 1999, are $7,744.
ADMINISTRATIVE SERVICES AGREEMENT. The fund has an
administrative services agreement with KDI. For
providing information and administrative services
to Class A, Class B and Class C shareholders, the
fund pays KDI a fee at an annual rate of up to .25%
of average daily net assets of each class. KDI in
turn has various agreements with financial services
firms that provide these services and pays these
firms based on assets of fund accounts the firms
service. The fund incurred no administrative
services fees (ASF) for the six months ended May
31, 1999, after an expense waiver by Scudder
Kemper.
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 $33,087
for the six months ended May 31, 1999.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the fund are also officers or directors of
Scudder Kemper. For the six months ended May 31,
1999, the fund made no payments to its officers and
incurred fees of $3,017 to independent trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the six months ended May 31, 1999, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $6,218,531
Proceeds from sales 4,042,476
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the fund:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MAY 31, 1999 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1998
---------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 6,620,501 $ 35,829,345 2,297,354 $ 12,245,270
---------------------------------------------------------------------------------------
Class B 2,771,343 14,726,044 1,653,639 8,787,025
---------------------------------------------------------------------------------------
Class C 271,406 1,481,742 154,877 788,250
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A -- -- 5,587 35,811
---------------------------------------------------------------------------------------
Class B -- -- 881 5,640
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
SHARES REDEEMED
Class A (6,362,526) (34,555,782) (2,104,419) (11,162,652)
---------------------------------------------------------------------------------------
Class B (2,635,051) (14,047,418) (1,455,850) (7,685,918)
---------------------------------------------------------------------------------------
Class C (244,496) (1,350,687) (138,617) (722,403)
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 10,981 58,959 16,350 103,070
---------------------------------------------------------------------------------------
Class B (11,141) (58,959) (16,445) (103,070)
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
INCREASE FROM
CAPITAL SHARE TRANSACTIONS $ 2,083,244 $ 2,291,023
---------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 21
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-------------------------------------------
CLASS A
-------------------------------------------
SIX MONTHS YEARS ENDED OCTOBER 21
ENDED NOVEMBER 30, TO
MAY 31, --------------- NOVEMBER 30,
1999 1998 1997 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 5.41 6.65 10.04 9.50
- --------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .01 .11 .08 --
- --------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .62 (1.27) (3.47) .54
- --------------------------------------------------------------------------------------------
Total from investment operations .63 (1.16) (3.39) .54
- --------------------------------------------------------------------------------------------
Less distribution from net investment income -- .08 -- --
- --------------------------------------------------------------------------------------------
Net asset value, end of period $ 6.04 5.41 6.65 10.04
- --------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 11.65% (17.66) (33.76) 5.68
- --------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------------------
Expenses 1.84% 1.80 1.60 1.46
- --------------------------------------------------------------------------------------------
Net investment income .50% 2.05 .97 .74
- --------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------------------
Expenses 3.93% 2.65 2.62 1.46
- --------------------------------------------------------------------------------------------
Net investment income (loss) (1.59)% 1.20 (.05) .74
- --------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------
CLASS B
-------------------------------------------
SIX MONTHS YEARS ENDED OCTOBER 21
ENDED NOVEMBER 30, TO
MAY 31, --------------- NOVEMBER 30,
1999 1998 1997 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 5.34 6.58 10.03 9.50
- --------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income -- .06 -- --
- --------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .60 (1.28) (3.45) .53
- --------------------------------------------------------------------------------------------
Total from investment operations .60 (1.22) (3.45) .53
- --------------------------------------------------------------------------------------------
Less distribution from net investment income -- .02 -- --
- --------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.94 5.34 6.58 10.03
- --------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 11.24% (18.65) (34.40) 5.58
- --------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------------------
Expenses 2.48% 2.78 2.57 2.34
- --------------------------------------------------------------------------------------------
Net investment income (loss) (.17)% 1.07 -- (.14)
- --------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------------------
Expenses 5.33% 4.29 3.51 2.34
- --------------------------------------------------------------------------------------------
Net investment loss (3.02)% (.44) (.94) (.14)
- --------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 22
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-------------------------------------------
CLASS C
-------------------------------------------
SIX MONTHS YEARS ENDED OCTOBER 21
ENDED NOVEMBER 30, TO
MAY 31, --------------- NOVEMBER 30,
1999 1998 1997 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 5.35 6.60 10.03 9.50
- --------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.05) .05 -- --
- --------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .61 (1.28) (3.43) .53
- --------------------------------------------------------------------------------------------
Total from investment operations .56 (1.23) (3.43) .53
- --------------------------------------------------------------------------------------------
Less distribution from net investment income -- .02 -- --
- --------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.91 5.35 6.60 10.03
- --------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 10.65% (18.72) (34.20) 5.58
- --------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------------------
Expenses 4.12% 2.71 2.54 2.34
- --------------------------------------------------------------------------------------------
Net investment income (loss) (1.75)% 1.14 .03 (.14)
- --------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------------------
Expenses 6.97% 4.56 3.55 2.34
- --------------------------------------------------------------------------------------------
Net investment loss (4.60)% (.71) (.98) (.14)
- --------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ---------------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED OCTOBER 21
ENDED NOVEMBER 30, TO
MAY 31, --------------------- NOVEMBER 30,
1999 1998 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net assets at end of period $10,791,184 7,415,880 6,397,773 1,949,035
- ---------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 109% 131 155 74
- ---------------------------------------------------------------------------------------------------
</TABLE>
NOTES: Total return does not reflect the effect of any sales charges. Scudder
Kemper Investments, Inc. agreed to waive a portion of its management fee and
absorb certain operating expenses of the fund during the years ended November
30, 1998 and 1997 and the six months ended May 31, 1999. The Other ratios to
average net assets are computed without this expense waiver or absorption. Per
share data for the six months ended May 31, 1999 was determined based on average
shares outstanding. Data for the six months ended May 31, 1999 is unaudited.
22
<PAGE> 23
SHAREHOLDERS' MEETING
SPECIAL SHAREHOLDERS' MEETING
On December 17, 1998, a special shareholders' meeting was held and adjourned to
January 15, 1999. Kemper Asian Growth Fund shareholders were asked to vote on
two separate issues: approval of the new Investment Management Agreement between
the fund and Scudder Kemper Investments, Inc and to modify or eliminate certain
policies and to eliminate the shareholder approval requirements as to certain
other matters. The following are the results.
1) Approval of the new Investment Management Agreement between the fund and
Scudder Kemper Investments, Inc. This item was approved.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
716,887 28,420 18,352
</TABLE>
2) To modify or eliminate certain policies and to eliminate the shareholder
approval requirements as to certain other matters. These items were approved.
<TABLE>
<CAPTION>
Investment objectives
For Against Abstain
<S> <C> <C>
647,376 62,116 55,283
</TABLE>
<TABLE>
<CAPTION>
Investment policies
For Against Abstain
<S> <C> <C>
647,376 62,116 55,283
</TABLE>
<TABLE>
<CAPTION>
Diversification
For Against Abstain
<S> <C> <C>
648,513 60,979 55,283
</TABLE>
<TABLE>
<CAPTION>
Borrowing
For Against Abstain
<S> <C> <C>
647,675 61,818 55,283
</TABLE>
<TABLE>
<CAPTION>
Senior securities
For Against Abstain
<S> <C> <C>
648,513 60,979 55,283
</TABLE>
<TABLE>
<CAPTION>
Concentration
For Against Abstain
<S> <C> <C>
648,513 60,979 55,283
</TABLE>
<TABLE>
<CAPTION>
Underwriting of securities
For Against Abstain
<S> <C> <C>
648,513 60,979 55,283
</TABLE>
<TABLE>
<CAPTION>
Investment in real estate
For Against Abstain
<S> <C> <C>
646,820 62,673 55,283
</TABLE>
<TABLE>
<CAPTION>
Purchase of commodities
For Against Abstain
<S> <C> <C>
648,513 60,979 55,283
</TABLE>
<TABLE>
<CAPTION>
Lending
For Against Abstain
<S> <C> <C>
647,831 61,661 55,283
</TABLE>
<TABLE>
<CAPTION>
Margin purchases and short sales
For Against Abstain
<S> <C> <C>
647,416 62,076 55,283
</TABLE>
<TABLE>
<CAPTION>
Pledging of assets
For Against Abstain
<S> <C> <C>
647,759 61,734 55,283
</TABLE>
<TABLE>
<CAPTION>
Purchases of securities
For Against Abstain
<S> <C> <C>
648,513 60,979 55,283
</TABLE>
<TABLE>
<CAPTION>
Purchases of options and warrants
For Against Abstain
<S> <C> <C>
647,708 61,785 55,283
</TABLE>
23
<PAGE> 24
TRUSTEES&OFFICERS
TRUSTEES OFFICERS
JOHN W. BALLANTINE MARK S. CASADY
Trustee President
LEWIS A. BURNHAM PHILIP J. COLLORA
Trustee Vice President and
Secretary
DONALD L. DUNAWAY
Trustee THERESA GUSMAN
Vice President
ROBERT B. HOFFMAN
Trustee JOHN R. HEBBLE
Treasurer
DONALD R. JONES
Trustee ANN M. MCCREARY
Vice President
THOMAS W. LITTAUER
Trustee and Vice President KATHRYN L. QUIRK
Vice President
SHIRLEY D. PETERSON
Trustee LINDA J. WONDRACK
Vice President
CORNELIA SMALL
Trustee and Vice President MAUREEN E. KANE
Assistant Secretary
WILLIAM P. SOMMERS
Trustee CAROLINE PEARSON
Assistant Secretary
ELIZABETH C. WERTH
Assistant Secretary
BRENDA LYONS
Assistant Treasurer
- --------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 419557
Kansas City, MO 64141
- --------------------------------------------------------------------------------
TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
801 Pennsylvania Avenue
Kansas City, MO 64105
- --------------------------------------------------------------------------------
CUSTODIAN THE CHASE MANHATTAN BANK
Chase Metro Center
Brooklyn, NY 11245
- --------------------------------------------------------------------------------
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606
www.kemper.com
[KEMPER FUNDS LOGO]
Long-term investing in a short-term world(SM)
Printed on recycled paper in the U.S.A.
This report is not to be distributed unless preceded or accompanied by a
Kemper Global and International Funds prospectus.
KHIT - 3 (7/27/99) 1080110
