<PAGE> 1
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED APRIL 30, 1998
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
[LOGO]
Seeks high current income and, as a secondary
objective, long-term capital appreciation.
KEMPER EMERGING
MARKETS INCOME FUND
"... Emerging market bonds weathered
the volatility experienced by the
financial markets around the world,
posting a solid return. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
KEMPER EMERGING MARKETS INCOME
FUND TOTAL RETURNS
FOR THE FOUR-MONTH PERIOD ENDED APRIL 30, 1998
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
Returns are historical and do not guarantee future performance. Returns and net
asset value fluctuate. Shares are redeemable at current net asset value, which
may be more or less than original cost. Investment in foreign securities
presents special risk considerations including fluctuating currency exchange
rates, government regulation and differences in liquidity that may increase the
volatility of your investment.
NET ASSET VALUE
<TABLE>
<CAPTION>
AS OF AS OF
4/30/98 12/31/97
......................................................
<S> <C> <C> <C> <C>
KEMPER EMERGING MARKETS INCOME
FUND CLASS A $9.93 $9.50
......................................................
KEMPER EMERGING MARKETS INCOME
FUND CLASS B $9.91 $9.50
......................................................
KEMPER EMERGING MARKETS INCOME
FUND CLASS C $9.92 $9.50
......................................................
</TABLE>
DIVIDEND REVIEW
DURING THE PERIOD, THE FUND MADE THE FOLLOWING DISTRIBUTIONS PER SHARE:
<TABLE>
<CAPTION>
INCOME
DIVIDEND
......................................................
<S> <C> <C> <C>
KEMPER EMERGING MARKETS INCOME FUND
CLASS A $.1400
......................................................
KEMPER EMERGING MARKETS INCOME FUND
CLASS B $.1251
......................................................
KEMPER EMERGING MARKETS INCOME FUND
CLASS C $.1257
......................................................
</TABLE>
* 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.
ARREARS An unpaid and overdue debt or an unfulfilled obligation.
CURRENCY DEVALUATION A significant decline of a currency's value relative to
other currencies, such as the U.S. dollar. This may be prompted by trading or
central bank intervention (or the lack of intervention) in the currency markets.
For U.S. investors who are investing overseas, a devaluation of a foreign
currency can have the effect of reducing the total return of their investment.
DUMA Russian national parliament.
INTERNATIONAL MONETARY FUND An organization focused on lowering trade barriers
and stabilizing currencies. While helping developing nations pay their debts,
the IMF usually imposes tough guidelines aimed at lowering inflation, cutting
imports, and raising exports.
LIQUIDITY A characteristic of an investment or an asset referring to the ease of
convertibility into cash within a reasonably short period of time.
At A GLANCE
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
7
COUNTRY CONCENTRATIONS
8
PORTFOLIO OF
INVESTMENTS
10
FINANCIAL STATEMENTS
13
NOTES TO
FINANCIAL STATEMENTS
17
FINANCIAL HIGHLIGHTS
Terms To KNOW
<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. HE IS ALSO A MEMBER OF THE INVESTMENT POLICY AND STRATEGY COMMITTEE
FOR KEMPER FUNDS.
SILVIA HOLDS BACHELOR OF ARTS AND PH.D. DEGREES IN ECONOMICS FROM NORTHEASTERN
UNIVERSITY IN BOSTON AND HAS A MASTER'S DEGREE IN ECONOMICS FROM BROWN
UNIVERSITY IN PROVIDENCE, R.I. PRIOR TO HIS CAREER AT SCUDDER KEMPER, HE WAS
WITH THE HARRIS BANK AND ALSO TAUGHT AT INDIANA UNIVERSITY.
SCUDDER KEMPER INVESTMENTS, INC. IS THE INVESTMENT MANAGER FOR KEMPER
FUNDS. IT IS ONE OF THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT
ORGANIZATIONS WORLDWIDE, MANAGING MORE THAN $200 BILLION IN ASSETS GLOBALLY FOR
MUTUAL FUND INVESTORS, RETIREMENT AND PENSION PLANS, INSTITUTIONAL AND
CORPORATE CLIENTS, INSURANCE COMPANIES AND PRIVATE, FAMILY AND INDIVIDUAL
ACCOUNTS. IT IS ONE OF THE 10 LARGEST MUTUAL FUND COMPLEXES IN THE UNITED
STATES.
DEAR SHAREHOLDERS,
Stable economic growth, low interest rates and sustained lower inflation have
continued to produce a beneficial market environment for investors in the second
quarter of 1998. Despite heightened sensitivity to earnings estimates and
announcements, the market continued to support financial assets. We expect this
favorable climate to continue -- in spite of the sensitivity -- at least over
the shorter term.
As always, expectations have been at the heart of the actions and
reactions that move the markets. Expectations appear to be high, as
demonstrated by a record flow of new cash into mutual funds. As of April 30,
1998, a record $5 trillion in mutual fund assets surpassed total assets of the
nation's banks, according to the Investment Company Institute, a trade
organization that monitors the mutual fund industry, and the Federal Reserve
Bank in Washington.
Unfortunately, high expectations often combine with high anxiety --
today's investors are attuned to even the smallest hint of economic change. The
result is volatility. Many who believe that our long-running bull market is too
good to be true or that stock prices are too high are wondering when the market
will reverse.
While a reversal may not be on the immediate horizon, investors are
wise to watch for several signs that change is underway: rising prices,
indicating higher inflation; repercussions of the Asian economic crisis on
American business, which could appear in the form of reduced earnings; and a
continued widening of our trade deficit, a serious imbalance caused by
heightened American demand for foreign goods and services.
On April 27, expectations were tested by reports that the Federal
Reserve Board ("the Fed") was considering a hike in interest rates. The markets
reacted immediately to this news, driving stock prices downward. But at its
monetary policy meeting on May 19, the Fed chose to leave interest rates alone.
In the coming months, the Fed could raise rates if inflation accelerates or if
growth appears to be too rapid compared to the Fed's expectations.
Our positive outlook for the short term is based primarily on the
current resiliency of our marketplace. The United States appears to be firmly
planted in the middle of an economic cycle, with no evidence of detrimental
pressures that might be associated with the market's phenomenal growth. We are
not seeing price increases for goods and services or a downturn in the housing
market, both of which we might expect late in an economic cycle.
Equities have continued to reward investors. The U.S. stock market, as
measured by the Standard & Poor's 500, gained nearly 14 percent in the first
quarter of 1998 and returned more than 13 percent year-to-date through the end
of May. Bonds have also rewarded investors in terms of real return, which is
total return less the rate of inflation. The high yield and corporate debt
fixed-income markets also have performed well.
U.S. economic growth, as measured by the gross domestic product (GDP)
growth rate, was slightly above 4 percent for the first quarter. Our general
expectation for the year is that growth in all of 1998 will increase between
2.5 and 3 percent over last year. In other words, the economy will remain
strong, but will slow down as the year progresses.
Consumer spending and corporate fixed investment have fueled the
economy's solid growth. Spending on both capital goods and high technology has
been strong. Corporate profits have grown between 5 and 10 percent, which
appears to be acceptable in an environment of stable interest rates. U.S.
employment growth has ranged from 2 to 2.25 percent, continuing to exceed
expectations. Consumer confidence has continued to hit near all-time highs. The
increase in output prices, an indicator of inflation measured by the Consumer
Price Index (CPI), has remained at 1.5 to 2 percent.
Adding to the good news, all seems to be quiet on the domestic policy
front. At the end of February, the U.S. federal budget deficit essentially
vanished. Recent efforts to reduce the deficit, combined with higher federal
revenues due to the robust economy, have left us with an expected budget
surplus of $60 billion to $80 billion for fiscal 1998. To date, our Democratic
president and Republican Congress have not agreed on any significant
legislation regarding tax credits, spending cuts or health care that could
threaten the newfound federal budget surplus.
Can we expect a little more excitement from overseas? A full-scale
global recession from last year's Asian economic crisis seems unlikely at this
point. The crisis has yet
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 (5/31/98) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1) 5.65 5.81 6.49 6.91
PRIME RATE(2) 8.5 8.5 8.5 8.25
INFLATION RATE(3)* 1.5 1.89 2.23 2.89
THE U.S. DOLLAR(4) 6.86 10.26 5.52 9.15
CAPITAL GOODS ORDERS(5)* 9.28 10.28 7.16 3.48
INDUSTRIAL PRODUCTION(5)* 3.85 5.76 4.28 3.79
EMPLOYMENT GROWTH(6) 2.61 2.8 2.5 2.13
</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) Change 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 April 30, 1998.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
to hurt most U.S. businesses and investors. Quite the contrary. While the mere
threat of repercussions from the Asian crisis added to the anxiety mentioned
earlier, it has also had the effect of keeping U.S. interest rates and prices in
check, making the U.S. economy all the more attractive to investors around the
world.
In the global economy, the U.S. dollar continues to appreciate in value
compared to other currencies. In fact, more capital is flowing into U.S. markets
as investors generally avoid Asia. Europe also has been benefiting from the
crisis. Canada, which is a commodity-producing exporter, has been somewhat
negatively affected as commodity prices have fallen. Political unrest in
Indonesia, nuclear tests in India and Pakistan and economic turmoil in Russia
have been keeping international investors on the edges of their seats.
Other major developments abroad include the final selection of countries to
participate in Europe's single currency next year. Many European countries are
adopting more restrictive fiscal policy and reducing inflation in anticipation
of the momentous European Economic and Monetary Union (EMU). But after the EMU
is established in 1999, tensions may indeed mount as countries work to adapt to
the new structure.
As we approach the turn of the century, one caveat remains: Don't
underestimate the potential of the Year 2000 computer code problem. It appears
that a significant number of federal government agencies will not meet the
criteria necessary to avoid the problem. Many businesses are revealing that
billions of dollars are being spent on the situation. Some experts say a global
recession is in store. Others adamantly disagree. In any event, we may indeed
see a reduction in capital spending toward the end of 1998 and the first half of
next year as companies focus on fixing existing computers rather than on
purchasing new equipment. We'll keep you posted!
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
/s/ John E. Silvia
JOHN E. SILVIA
June 10, 1998
4
<PAGE> 5
KEMPER EMERGING MARKETS INCOME FUND IS OFF TO A
STRONG START SINCE ITS LAUNCH ON DECEMBER 31, 1997.
IN ITS FIRST FOUR MONTHS OF OPERATION, THE FUND
PROVIDED INVESTORS WITH A TOTAL RETURN OF 6 PERCENT
(CLASS A SHARES, UNADJUSTED FOR ANY SALES CHARGE).
DURING THIS PERIOD, TROUBLES IN ASIA, POLITICAL
TURMOIL IN RUSSIA AND A DROP IN OIL PRICES AFFECTED
MOST EMERGING MARKET ECONOMIES. PORTFOLIO MANAGER
ISABEL SALTZMAN DISCUSSES WHERE SHE FOUND
OPPORTUNITIES AND RISK DURING THE PERIOD AND THE
OUTLOOK FOR EMERGING MARKET BONDS.
Q
HOW HAS EMERGING MARKET DEBT PERFORMED DURING THE FIRST FOUR MONTHS OF
THIS YEAR, AND HOW HAS KEMPER EMERGING MARKETS INCOME FUND PERFORMED BY
COMPARISON?
A
One interesting condition during this period was the outperformance of
emerging market fixed-income investments over emerging market equities, with
emerging market bonds, in general, outperforming other fixed-income benchmarks
for the period. U.S. high yield bonds (Merrill Lynch High Yield BB Index)
returned 2.63 percent this year and global bonds (JP Morgan Global Government
Index) gained 2.92 percent.
I'm pleased to report that the fund is up 6 percent (Class A shares,
unadjusted for any sales charge) during this time. It outperformed its benchmark
index, the JP Morgan Emerging Markets Bond Index Plus (EMBI+) Index, which was
up 5.46 percent for the same period. It was a good time to launch this fund.
Q
WHAT ECONOMIC FACTORS DROVE THIS EXCEPTIONAL PERFORMANCE?
A
The global environment provided a positive framework for emerging market
bonds. Most developed countries are experiencing steady growth with low
inflation. These are ideal conditions for emerging fixed-income markets. This
translates into growing global liquidity which means that investors worldwide
find themselves with money to invest. The increased flow eventually trickled
into emerging markets investments which provide high yields with the potential
for capital appreciation. The two biggest issues emerging markets faced during
the period were the Asian financial crisis and the decline in commodity prices,
specifically oil. The Asian crisis was the primary concern early on, and its
effect was felt beyond Asia and into other emerging markets. The sell off was
short lived, however, and once the International Monetary Fund (IMF) bailout
packages were announced, the Asian markets began to rebound. South Korea rolled
about $24 billion in debt, and Thailand and the Philippines pushed through
significant economic and financial reform. Only Indonesia was a dark spot,
showing lack of commitment towards the IMF program.
In Latin America, Brazil's financial stability had been called into question
last year in light of the Asian crisis. The government reacted quickly to defend
the currency, and their decisive action helped boost investor confidence this
year. By the end of April, Brazil's reserves were at $60 billion, higher than
before the attack. Brazil definitely showed us commitment in defending its
currency and moving forward in implementing market-oriented reform.
PERFORMANCE Update
[SALTZMAN PHOTO]
Isabel Saltzman is the product leader and senior portfolio manager for Scudder
Kemper Investments' Emerging Markets Bond Group. A native of Chile, Saltzman
received a B.A. degree in political science and economics from Tufts University
in 1975 and an M.I.A. degree from the School of International Affairs, Columbia
University in 1979. She has 17 years of emerging market investment experience.
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
5
time, based on market and other conditions.
<PAGE> 6
The rest of the Latin American markets were also affected by currency concerns
but began to recover in February and March. The fall in oil prices, caused by
the unusually mild winter, high production levels and a falloff in Asian demand,
hit major Latin American oil exporters such as Mexico and Venezuela especially
hard, while a drop in the price of copper has hurt Chile.
In Russia, oil prices, concerns about President Yeltsin's health, a large
fiscal deficit and currency concerns made for an uneasy market early in the
year. We capitalized on this volatility, adding to our Russian positions as
Russian assets offered extremely attractive value on a relative value basis,
especially in relation to similarly rated sovereigns.
Q
HOW DID YOU POSITION THE PORTFOLIO DURING THIS VOLATILE PERIOD AND WHERE
DO YOU SEE OPPORTUNITIES TODAY?
A
The Fund was well diversified across Latin America, Eastern Europe, Asia,
and Africa, helping to mitigate volatility. We have an overweight position in
Brazil, Russia and Bulgaria as they presented us with excellent opportunities to
add to the fund's positions. Brazil had come off with nervousness in Russia and,
as mentioned earlier, were implementing proper policies to defend their
currency.
We bought into the Russian market near their bottom when the bonds were
trading at 800 basis points over Treasuries. We benefited as the country's
financial picture improved late in February when the country cleaned up its tax
arrears and the Duma passed a budget on the third try. We also now hold about 9
percent of the fund in Bulgaria, and we remained positive about the country's
outlook and its low risk environment.
In April we invested in newly issued dollar-denominated South Korean debt. The
South Korean government issued $4 billion in Eurobonds at extremely attractive
levels. We believe that Korea offers tremendous value as the current account has
turned into a significant surplus and progress is being made in restructuring
the banking and corporate sector. Outside of Korea, however, we have almost no
Asian investments.
Q
IN SUCH A BROAD AND CHANGING MARKET, IT MUST BE DIFFICULT TO SELECT
APPROPRIATE SECURITIES. WHAT IS THE FUND'S INVESTMENT PHILOSOPHY?
A
We take a global view and emphasize fundamental research analysis. Taking
a top-down approach, we make our country allocations decisions based on our own
in-house research. The team then evaluates individual bond issues, analyzing
each country's yield curve. Our investment research team includes country,
industry and credit analysts, specializing in emerging markets.
Q
AS THE SITUATION IN ASIA IMPROVES, DO YOU EXPECT SOME OF THE DEBT TO BE
UPGRADED?
A
The Standard & Poor's 500 Index and Moody's are being extremely cautious
about awarding upgrades following the Asian debacle. I would expect the markets
to reflect improving credit fundamentals through higher prices before an actual
upgrade occurs.
Q
WHAT DO YOU EXPECT FROM EMERGING MARKETS IN THE FUTURE? ARE INVESTORS
RETURNING?
A
Overall flows into emerging markets funds are up year-to-date, although I
think people are going to be a bit gun shy for a while until the volatility and
noise levels subside. The global environment remains favorable as we do not
expect interest rates to rise in the US or Europe in the near-term and believe
that Japan's fiscal package will begin to show its effects in the third quarter.
We expect oil prices to stabilize as well. With this in mind, we continue to be
positive on emerging market fundamentals.
Favorable global conditions and ongoing improvements in most emerging
countries should continue to support the tightening of emerging market spreads,
leading to capital appreciation. With the notable exception of Japan, the
world's industrialized nations are enjoying strong growth. Southeast Asian
countries, including Korea, are taking the necessary steps to reform their
banking sectors and solve their financing problems. Although short-term
volatility may persist, there is significant potential for long-term capital
appreciation.
We are positive on Eastern Europe and Latin America and have leveraged the
fund in order to capture the capital appreciation potential. As investors return
to the region, a lot of new cash will be put to work. If anything, the Asian
crisis highlighted that countries needed to fix their fiscal deficits. Most
emerging market countries have demonstrated a willingness to implement the
necessary market reform. Those that have done so are better off then they were
before.
6
Performance UPDATE
<PAGE> 7
COUNTRY CONCENTRATIONS
GEOGRAPHIC DISTRIBUTION OF KEMPER EMERGING MARKETS INCOME FUND*
Based on total investments on April 30, 1998.
[BAR GRAPH]
<TABLE>
<CAPTION>
<S> <C>
BRAZIL 35%
MEXICO 18%
RUSSIA 15%
BULGARIA 9%
KOREA 5%
MOROCCO 4%
ARGENTINA 3%
PANAMA 3%
UNITED STATES 3%
VENEZUELA 3%
OTHER 2%
</TABLE>
* Geographic Distribution is subject to change.
<PAGE> 8
KEMPER EMERGING MARKETS INCOME FUND
Portfolio of Investments at April 30, 1998 (unaudited)
<TABLE>
<CAPTION>
LOCAL CURRENCY
SHORT-TERM NOTES--3.3% PRINCIPAL MARKET VALUE ($)
<S> <C> <C> <C> <C> <C>
UNITED STATES
Federal Home Loan Mortgage Corp.
Discount Note, 5/1/98 (Cost
$219,000) 219,000 219,000
----------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
BONDS--96.7%
ARGENTINA--3.3%
Argentine Republic, Floating Rate
Bond, Series L, LIBOR plus
.8125%, (6.625%), 3/31/05 237,500 218,203
----------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
BRAZIL--34.7%
Companhia Paranaense de Energia,
9.75%, 5/2/05 225,000 225,844
Federative Republic of Brazil,
Eligible Interest, Floating Rate
Bond, LIBOR plus .8125%,
(6.625%), 4/15/06 242,500 216,584
Federative Republic of Brazil,
"New" Money Bond, Floating Rate
Bond, LIBOR plus .875%,
(6.688%), 4/15/09 400,000 338,000
Federative Republic of Brazil,
Debt Conversion Bond, Series L,
LIBOR plus .875%, (6.688%),
4/15/12 150,000 118,969
Federative Republic of Brazil C
Bond, 4.5% with 3.5% Interest
Capitalization, 4/15/14 638,118 529,545
Federative Republic of Brazil,
Collateralized Discount Bond,
Floating Rate Bond, LIBOR plus
.8125%, (6.625%), 4/15/24 250,000 210,000
Federative Republic of Brazil
Global Bond, 10.125%, 5/15/27 50,000 48,657
Ford Brazil Ltda, Series A,
Tranche 1, 9.125%, 11/8/04 50,000 49,750
Ford Brazil Ltda, 9.25%, 1/22/07 50,000 49,500
Globo Comunicacoes e
Participacoes, 10.625%, 12/5/08 280,000 285,600
Republic National Bank of New
York, 9.65%, 5/1/03 200,000 200,000
----------------------------------------------------------------------------
2,272,449
- ----------------------------------------------------------------------------------------------------------------------------
BULGARIA--8.6%
Republic of Bulgaria, Interest
Arrears Bond, LIBOR plus .8125%,
(6.563%), 7/28/11 500,000 393,750
Republic of Bulgaria, Floating
Rate Interest Reduction Bond,
"A", Step-up Coupon, 2.25%,
7/28/12 250,000 167,187
----------------------------------------------------------------------------
560,937
- ----------------------------------------------------------------------------------------------------------------------------
IVORY COAST--.6%
Republic of the Ivory Coast,
Floating Rate Interest Reduction
Bond, 2.00%, 3/29/18 100,000 36,500
----------------------------------------------------------------------------
</TABLE>
8
Portfolio of INVESTMENTS
<PAGE> 9
<TABLE>
<CAPTION>
LOCAL CURRENCY
PRINCIPAL MARKET VALUE ($)
<S> <C> <C> <C> <C> <C>
KOREA--5.3%
Republic of Korea, 8.75%, 4/15/03 240,000 240,912
Republic of Korea, 8.875%, 4/15/08 110,000 108,449
----------------------------------------------------------------------------
349,361
- ----------------------------------------------------------------------------------------------------------------------------
MEXICO--18.3%
United Mexican States, Global
Bond, 11.375%, 9/15/16 300,000 352,125
United Mexican States,
Collateralized Par Bond,
(Detachable Oil Priced Indexed
Value Recovery Rights), Series
B, 6.25%, 12/31/19 1,000,000 845,000
----------------------------------------------------------------------------
1,197,125
- ----------------------------------------------------------------------------------------------------------------------------
MOROCCO--4.1%
Kingdom of Morocco, Restructuring
and Consolidation Agreement,
Tranche A, Floating Rate Bond,
LIBOR plus .8125%, (6.656%),
1/1/09 300,000 267,000
----------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
PANAMA--3.0%
Republic of Panama, Interest
Reduction Bond, Step-up Coupon,
3.75%, 7/17/14 250,000 196,250
----------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
RUSSIA--15.5%
City of Moscow, 9.50%, 5/31/00 150,000 147,563
Russian Federation Principal
Loans, 6.719%, 12/15/20 1,190,000 768,119
Russian Ministry of Finance,
10.00%, 6/26/07 100,000 96,000
----------------------------------------------------------------------------
1,011,682
- ----------------------------------------------------------------------------------------------------------------------------
VENEZUELA--3.3%
Republic of Venezuela,
Collateralized Par Bond, Series
A, 6.75%, 3/31/20, with warrants
expiring 4/15/20 250,000 213,125
----------------------------------------------------------------------------
TOTAL DEBT OBLIGATIONS
(Cost $6,166,411) 6,322,632
----------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost $6,385,411) 6,541,632
----------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
Based on the cost of investments of $6,385,411 for federal income tax purposes
at April 30, 1998, the gross unrealized appreciation was $181,413, the gross
unrealized depreciation was $25,192 and the net unrealized appreciation on
investments was $156,221.
See accompanying Notes to Financial Statements.
9
PORTFOLIO OF Investments
<PAGE> 10
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1998 (unaudited)
<TABLE>
<S> <C>
ASSETS
Investments, at value
(Cost $6,385,411) $6,541,632
- --------------------------------------------------------------------------
Cash 9,807
- --------------------------------------------------------------------------
Deferred organization expense 13,983
- --------------------------------------------------------------------------
Receivable for:
Investments sold 524,460
- --------------------------------------------------------------------------
Interest 105,038
- --------------------------------------------------------------------------
Fund shares sold 2,865
- --------------------------------------------------------------------------
TOTAL ASSETS 7,197,785
- --------------------------------------------------------------------------
LIABILITIES
Liability under reverse repurchase agreements 1,403,074
- --------------------------------------------------------------------------
Payable for:
Investments purchased 132,398
- --------------------------------------------------------------------------
Distribution services fee 224
- --------------------------------------------------------------------------
Other payables and accrued expenses 46,167
- --------------------------------------------------------------------------
Total liabilities 1,581,863
- --------------------------------------------------------------------------
NET ASSETS $5,615,922
- --------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
Paid-in capital $5,327,225
- --------------------------------------------------------------------------
Undistributed net realized gain on investments 90,134
- --------------------------------------------------------------------------
Net unrealized appreciation on investments 156,221
- --------------------------------------------------------------------------
Undistributed net investment income 42,342
- --------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $5,615,922
- --------------------------------------------------------------------------
THE PRICING OF SHARES
CLASS A SHARES
Net asset value and redemption price per share
($5,392,535 / 543,203 shares outstanding) $9.93
- --------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $10.54
- --------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($138,095 / 13,930 shares outstanding) $9.91
- --------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($85,292 / 8,602 shares outstanding) $9.92
- --------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
10
Financial STATEMENTS
<PAGE> 11
STATEMENT OF OPERATIONS
For the period from December 31, 1997 (commencement of operations) to
April 30, 1998 (unaudited)
<TABLE>
<S> <C>
NET INVESTMENT INCOME
Interest income $149,838
- --------------------------------------------------------------------------
Expenses:
Management fee 14,916
- --------------------------------------------------------------------------
Interest expense 3,689
- --------------------------------------------------------------------------
Distribution services fee 224
- --------------------------------------------------------------------------
Administrative services fee 3,731
- --------------------------------------------------------------------------
Custodian, accounting and transfer agent fees and related
expense 30,389
- --------------------------------------------------------------------------
Professional fees 4,991
- --------------------------------------------------------------------------
Registration fees 1,483
- --------------------------------------------------------------------------
Amortization of organization expenses 1,017
- --------------------------------------------------------------------------
Other 1,674
- --------------------------------------------------------------------------
Total expenses before expense waiver 62,114
- --------------------------------------------------------------------------
Less expenses waived and absorbed by investment manager (31,969)
- --------------------------------------------------------------------------
Total expenses after expense waiver 30,145
- --------------------------------------------------------------------------
NET INVESTMENT INCOME 119,693
- --------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on sale of investments 90,134
- --------------------------------------------------------------------------
Change in net unrealized appreciation on investments 156,221
- --------------------------------------------------------------------------
Net gain on investments 246,355
- --------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $366,048
- --------------------------------------------------------------------------
</TABLE>
11
FINANCIAL Statements
<PAGE> 12
STATEMENTS OF CHANGES IN NET ASSETS AND CASH FLOWS
For the period from December 31, 1997 (commencement of operations) to April 30,
1998 (unaudited)
<TABLE>
<S> <C>
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
Net investment income $ 119,693
- --------------------------------------------------------------------------
Net realized gain 90,134
- --------------------------------------------------------------------------
Change in net unrealized appreciation 156,221
- --------------------------------------------------------------------------
Net increase in net assets resulting from operations 366,048
- --------------------------------------------------------------------------
Distribution from net investment income (77,351)
- --------------------------------------------------------------------------
Net increase from capital share transactions 5,307,225
- --------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 5,595,922
- --------------------------------------------------------------------------
NET ASSETS
Beginning of period 20,000
- --------------------------------------------------------------------------
END OF PERIOD (including undistributed net investment income
of $42,342) $5,615,922
- --------------------------------------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES
Increase in net assets from operations $366,048
- --------------------------------------------------------------------------
Non-cash items (421,876)
- --------------------------------------------------------------------------
Purchase of investments (6,590,178)
- --------------------------------------------------------------------------
Net cash provided by operating activities (6,646,006)
- --------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from net fund share activity 5,330,090
- --------------------------------------------------------------------------
Proceeds from reverse repurchase agreements 1,403,074
- --------------------------------------------------------------------------
Distributions to shareholders (77,351)
- --------------------------------------------------------------------------
Net cash used in financing activities 6,655,813
- --------------------------------------------------------------------------
Net increase in cash 9,807
- --------------------------------------------------------------------------
Cash at beginning of period --
- --------------------------------------------------------------------------
Cash at end of period $9,807
- --------------------------------------------------------------------------
</TABLE>
12
Financial STATEMENTS
<PAGE> 13
- --------------------------------------------------------------------------------
1
DESCRIPTION OF THE
FUND Kemper Emerging Markets Income Fund (the Fund) is a
non-diversified series of Kemper
Global/International Series, Inc. (the
Corporation), an open-end management investment
company organized as a corporation in the state of
Maryland. The Fund currently offers three classes
of shares. Class A shares are sold to investors
subject to an initial sales charge. Class B shares
are sold without an initial sales charge but are
subject to higher ongoing expenses than Class A
shares and a contingent deferred sales charge
payable upon certain redemptions. Class B shares
automatically convert to Class A shares six years
after issuance. Class C shares are sold without an
initial sales charge but are subject to higher
ongoing expenses than Class A shares and a
contingent deferred sales charge payable upon
certain redemptions within one year of purchase.
Class C shares do not convert into another class.
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. Portfolio debt securities other
than money market securities with an original
maturity over sixty days are valued by pricing
agents approved by the officers of the Fund, which
quotations reflect broker/dealer-supplied
valuations and electronic data processing
techniques. If the pricing agents are unable to
provide such quotations, the most recent bid
quotation supplied by a bona fide market maker
shall be used. Money market instruments purchased
with an original maturity of sixty days or less are
valued at amortized cost. Forward foreign currency
exchange contracts are valued at the prevailing
forward exchange rate of the underlying currencies
on that day. All other securities are valued at
their fair market value as determined in good faith
by the Valuation Committee of the Board of
Directors.
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.
Net realized and unrealized gains and losses on
foreign currency transactions represent net gains
and losses from sales and maturities of forward
foreign currency exchange contracts, disposition of
foreign currencies, and the difference between the
amount of net investment income accrued and the
U.S. dollar amount actually received. That portion
of both realized and unrealized gains and losses on
investments that result from fluctuations in
foreign currency exchange rates is not separately
disclosed.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on the
trade date. Dividend income is recorded on the ex-
dividend date, and 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
13
NOTES TO Financial Statements
<PAGE> 14
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.
FEDERAL INCOME TAXES. The Fund has complied with
the special provisions of the Internal Revenue Code
available to investment companies for the period
ended April 30, 1998.
DIVIDENDS TO SHAREHOLDERS. The Fund declares and
pays dividends of net investment income monthly 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.
ORGANIZATIONAL COSTS. Costs incurred by the Fund in
connection with its organization and initial
registration of shares have been deferred and are
being amortized on a straight-line basis over a
five-year period.
OTHER CONSIDERATIONS. Investing in emerging markets
may involve special risks and considerations not
typically associated with investing in the United
States. These risks include revaluation of
currencies, high rates of inflation, repatriation
restrictions on income and capital, and future
adverse political and economic developments.
Moreover, securities issued in these markets may be
less liquid, subject to government ownership
controls, delayed settlements, and their prices
more volatile than those of comparable securities
in the United States.
- --------------------------------------------------------------------------------
3
TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The Fund has a management
agreement with Scudder Kemper Investments, Inc.
(the Adviser) and pays a management fee at an
annual rate of 1.00% of average daily net assets.
However, the Fund incurred no management fee for
the period ended April 30, 1998, after an expense
waiver by the Adviser. In addition, the Adviser has
temporarily agreed to absorb certain operating
expenses of the Fund. Under this arrangement, the
Adviser waived and absorbed expenses of $31,969 for
the period ended April 30, 1998.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
The Fund has an underwriting and distribution
services agreement with Kemper Distributors, Inc.
(KDI), a subsidiary of the Adviser. Underwriting
commissions paid in connection with the
distribution of Class A shares are as follows:
<TABLE>
<CAPTION>
COMMISSIONS ALLOWED
BY KDI TO FIRMS
-------------------
<S> <C>
Period ended April 30, 1998 $1,028
</TABLE>
For services under the distribution services
agreement, the Fund pays KDI a fee of .75% of
average daily net assets of the Class B and Class C
shares. Pursuant to the agreement, KDI enters into
related selling group agreements with various firms
at various rates for sales of Class B and Class C
shares. In addition, KDI receives any contingent
deferred sales charges from redemptions of Class B
and
14
Notes
to FINANCIAL STATEMENTS
<PAGE> 15
Class C shares. Distribution fees and commissions
related to Class B and Class C shares are as
follows:
<TABLE>
<CAPTION>
COMMISSIONS AND
DISTRIBUTION FEES DISTRIBUTION FEES PAID
RECEIVED BY KDI BY KDI TO FIRMS
----------------- ----------------------
<S> <C> <C>
Period ended April 30, 1998 $224 4,800
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with KDI. For
providing information and administrative services
to shareholders, the Fund pays KDI a fee at an
annual rate of up to .25% of average daily net
assets of each class. KDI in turn has various
agreements with financial services firms that
provide these services and pays these firms based
on assets of Fund accounts the firms service. The
Fund incurred no administrative services fees for
the period ended April 30, 1998, after an expense
waiver by the Adviser. During the period ended
April 30, 1998, KDI paid fees of $473 to various
firms.
SHAREHOLDER SERVICES AGREEMENT. Kemper Service
Company, a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service
agent for the Fund. The Fund incurred shareholder
services fees of $4,509 for the period ended April
30, 1998, all of which is unpaid.
FUND ACCOUNTING AGENT. Scudder Fund Accounting
Corporation, a subsidiary of the Adviser, is
responsible for determining the daily net asset
value per share and maintaining the portfolio and
general accounting records of the Fund. The Fund
incurred accounting fees of $3,345 for the period
ended April 30, 1998, after an expense waiver of
$13,322 by the Adviser, all of which is unpaid.
OFFICERS AND DIRECTORS. Certain officers or
directors of the Fund are also officers or
directors of the Adviser. For the period ended
April 30, 1998, the Fund made no payments to its
officers or directors.
- --------------------------------------------------------------------------------
4
INVESTMENT
TRANSACTIONS For the period ended April 30, 1998, investment
transactions (excluding short-term instruments) are
as follows:
Purchases $10,628,993
Proceeds from sales 4,573,343
- --------------------------------------------------------------------------------
5
REVERSE REPURCHASE
AGREEMENTS The Fund has entered into reverse repurchase
agreements with third parties involving its
holdings in foreign debt securities. At April 30,
1998, the Fund had outstanding reverse repurchase
agreements as follows:
<TABLE>
<CAPTION>
VALUE OF ASSETS SOLD WEIGHTED
UNDER AGREEMENT REPURCHASE AVERAGE
MATURITY TO REPURCHASE LIABILITY INTEREST RATE
-------- -------------------- ---------- -------------
<S> <C> <C> <C>
Demand $1,652,862 $1,403,074 4.71%
</TABLE>
15
NOTES TO Financial Statements
<PAGE> 16
- --------------------------------------------------------------------------------
6
CAPITAL SHARE
TRANSACTIONS
The following table summarizes the activity in
capital shares of the Fund:
<TABLE>
<CAPTION>
PERIOD ENDED
-----------------------------
-------APRIL-30,-1998--------
SHARES AMOUNT
<S> <C> <C>
SHARES SOLD
Class A 539,009 $5,066,658
--------------------------------------------------------------------------
Class B 13,215 128,851
--------------------------------------------------------------------------
Class C 7,846 76,501
--------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 3,808 37,737
--------------------------------------------------------------------------
Class B 80 788
--------------------------------------------------------------------------
Class C 54 537
--------------------------------------------------------------------------
SHARES REDEEMED
Class A (316) (3,191)
--------------------------------------------------------------------------
Class B (66) (656)
--------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $5,307,225
--------------------------------------------------------------------------
</TABLE>
16
Notes
to FINANCIAL STATEMENTS
<PAGE> 17
For the period from December 31, 1997 (commencement of operations) to April 30,
1998 (unaudited)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 9.50 9.50 9.50
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .22 .13 .12
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain .35 .41 .43
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations .57 .54 .55
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Distribution from net investment income .14 .13 .13
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.93 9.91 9.92
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 6.00% 5.63 5.74
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses absorbed by the Fund before interest expense 1.68% 2.56 2.53
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Expenses absorbed by the Fund after interest expense 1.93% 2.81 2.78
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Net investment income 8.12% 7.24 7.27
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses before interest expense 3.82% 4.70 4.67
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------`
Expenses after interest expense 4.07% 4.95 4.92
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Net investment income 5.98% 5.10 5.13
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
Net assets at end of period $5,615,922
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 340%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Total return does not reflect the effect of any sales charges. Scudder
Kemper Investments, Inc. has agreed to temporarily waive its management fee and
absorb certain operating expenses of the Fund. The Other Ratios to Average Net
Assets are computed without this expense waiver or absorption.
17
FINANCIAL Highlights
<PAGE> 18
18
NOTES
<PAGE> 19
19
NOTES
<PAGE> 20
DIRECTORS
OFFICERS
DANIEL PIERCE
Chairman and Director
JAMES E. AKINS
Director
ARTHUR R. GOTTSCHALK
Director
FREDERICK T. KELSEY
Director
FRED B. RENWICK
Director
JOHN B. TINGLEFF
Director
JOHN G. WEITHERS
Director
MARK S. CASADY
President
PHILIP J. COLLORA
Vice President and
Secretary
JOHN R. HEBBLE
Treasurer
JOYCE E. CORNELL
Vice President
DIEGO ESPINOSA
Vice President
JERARD K. HARTMAN
Vice President
TARA C. KENNEY
Vice President
THOMAS W. LITTAUER
Vice President
ANN M. MCCREARY
Vice President
KATHRYN L. QUIRK
Vice President
SHERIDAN P. REILLY
Vice President
M. ISABEL SALTZMAN
Vice President
LINDA J. WONDRACK
Vice President
MAUREEN E. KANE
Assistant Secretary
CAROLINE PEARSON
Assistant Secretary
ELIZABETH C. WERTH
Assistant Secretary
<TABLE>
<S> <C>
..........................................................................................................
LEGAL COUNSEL DECHERT PRICE & RHOADS
Ten Post Office Square South
Boston, MA 02109
..........................................................................................................
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 419557
Kansas City, MO 64141
..........................................................................................................
CUSTODIAN BROWN BROTHERS HARRIMAN & CO.
40 Water Street
Boston, MA 02109
..........................................................................................................
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606-5808
www.kemper.com
</TABLE>
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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.
KEMIF - 3 (6/98) 1048390
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
DIRECTORS&OFFICERS
