<PAGE> 1
ANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED OCTOBER 31, 1998
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
[MORNINGSTAR RATINGS LOGO]
Seeks long-term growth of capital and current
income primarily from foreign equity securities.
KEMPER
INTERNATIONAL
GROWTH AND INCOME FUND
"... In an attempt to try to protect shareholder
value, we began trimming our positions in financial
holdings ahead of the correction that took place
in late summer ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
8
GEOGRAPHIC COMPOSITION
9
LARGEST HOLDINGS
10
PORTFOLIO OF
INVESTMENTS
14
REPORT OF
INDEPENDENT AUDITORS
15
FINANCIAL STATEMENTS
17
NOTES TO
FINANCIAL STATEMENTS
21
FINANCIAL HIGHLIGHTS
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER INTERNATIONAL GROWTH AND
INCOME FUND TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE TEN-MONTH PERIOD ENDED OCTOBER 31, 1998
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 3.31
CLASS B 2.64
CLASS C 2.65
LIPPER INTERNATIONAL CATEGORY AVERAGE* 4.11
- --------------------------------------------------------------------------------
</TABLE>
RETURNS ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL FLUCTUATE SO THAT SHARES WHEN REDEEMED MAY BE WORTH
MORE OR LESS THAN ORIGINAL COST. INVESTMENT IN FOREIGN SECURITIES PRESENTS
SPECIAL RISK CONSIDERATIONS INCLUDING FLUCTUATING CURRENCY EXCHANGE RATES,
GOVERNMENT REGULATION AND DIFFERENCES IN LIQUIDITY.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
NET ASSET VALUE
- -------------------------------------------------------------------------------------
AS OF AS OF
10/31/98 12/31/97
- -------------------------------------------------------------------------------------
<S> <C> <C>
KEMPER INTERNATIONAL
GROWTH AND INCOME FUND
CLASS A $9.73 $9.50
- -------------------------------------------------------------------------------------
KEMPER INTERNATIONAL
GROWTH AND INCOME FUND
CLASS B $9.71 $9.50
- -------------------------------------------------------------------------------------
KEMPER INTERNATIONAL
GROWTH AND INCOME FUND
CLASS C $9.71 $9.50
- -------------------------------------------------------------------------------------
</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.
TERMS TO KNOW
YOUR FUND'S STYLE
- --------------------------------------------------------------------------------
MORNINGSTAR EQUITY STYLE BOX
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MORNINGSTAR EQUITY STYLE BOX
- --------------------------------------------------------------------------------
[MATURITY/QUALITY DIAGRAM]
Source: Data provided by Morningstar, Inc., Chicago, IL (312) 696-6000. The
Equity Style Box placement is based on a fund's price-to-earnings and
price-to-book ratios relative to the S&P 500, as well as the size of the
companies in which it invests, or median market capitalization.
PLEASE NOTE THAT STYLE BOXES DO NOT REPRESENT AN EXACT ASSESSMENT OF RISK AND DO
NOT REPRESENT FUTURE PERFORMANCE. THE FUND'S PORTFOLIO CHANGES FROM DAY-TO-DAY.
A LONGER-TERM VIEW IS REPRESENTED BY THE FUND'S MORNINGSTAR CATEGORY, WHICH IS
BASED ON ITS ACTUAL INVESTMENT STYLE AS MEASURED BY ITS UNDERLYING PORTFOLIO
HOLDINGS SINCE INCEPTION 12/31/97. MORNINGSTAR HAS PLACED KEMPER INTERNATIONAL
GROWTH AND INCOME FUND IN THE FOREIGN STOCK CATEGORY. PLEASE CONSULT THE
PROSPECTUS FOR A DESCRIPTION OF INVESTMENT POLICIES, PRICE-TO-EARNINGS AND
PRICE-TO-BOOK RATIOS RELATIVE TO THE S&P 500, AS WELL AS THE SIZE OF THE
COMPANIES IN WHICH IT INVESTS, OR MEDIAN MARKET CAPITALIZATION.
FUNDAMENTAL RESEARCH Analysis of companies based on the projected impact of
management, products, sales, and earnings on balance sheets and income
statements. Distinct from TECHNICAL ANALYSIS, which evaluates the attractiveness
of a stock based on historical price and trading volume movements, rather than
the financial results of the underlying company.
LIQUIDITY A characteristic of an investment or an asset referring to the ease of
convertibility into cash within a reasonably short period of time.
MARKET CAPITALIZATION The value of a company's outstanding shares of common
stock, determined by multiplying the number of shares outstanding by the share
price (Shares X Price = Market Capitalization). The universe of publicly traded
companies is frequently divided into large-, mid-, and small-capitalizations.
VOLATILITY The tendency of a security, commodity, or market to rise and fall in
price over time. Volatility is inherent in almost all investments but differs in
degree from investment to investment and from market to market. For example, in
the United States, money-market mutual funds strive to maintain a fixed price
and thus experience very little volatility, if any. By comparison, stocks can be
very volatile.
SOURCES: SCUDDER KEMPER INVESTMENTS, INC.; BARRON'S DICTIONARY OF FINANCE AND
INVESTMENT TERMS
<PAGE> 3
ECONOMIC OVERVIEW
[SILVIA PHOTO]
DR. JOHN E. SILVIA IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.
HIS PRIMARY RESPONSIBILITIES INCLUDE ANALYSIS, MODELING AND FORECASTING OF
ECONOMIC DEVELOPMENTS AND FEDERAL RESERVE ACTIVITY THAT AFFECT FINANCIAL
MARKETS, ESPECIALLY INTEREST RATE TRENDS. THIS EFFORT INCLUDES CLOSE
COLLABORATION WITH BOTH INCOME AND EQUITY MUTUAL FUND MANAGERS AND PENSION FUND
MANAGERS.
SILVIA HOLDS A BACHELOR'S DEGREE AND PH.D. IN ECONOMICS FROM NORTHEASTERN
UNIVERSITY IN BOSTON AND A MASTER'S DEGREE IN ECONOMICS FROM BROWN UNIVERSITY IN
PROVIDENCE, R.I. PRIOR TO HIS CAREER AT SCUDDER KEMPER, 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 $245 BILLION IN ASSETS GLOBALLY FOR MUTUAL FUND
INVESTORS, RETIREMENT AND PENSION PLANS, INSTITUTIONAL AND CORPORATE CLIENTS,
INSURANCE COMPANIES, AND PRIVATE, FAMILY AND INDIVIDUAL ACCOUNTS.
DEAR SHAREHOLDERS,
If you're like most investors, you may be wondering if you should allow yourself
to breathe a sigh of relief as 1998 comes to a close. After several months of
generally declining stock prices and extreme volatility, the U.S. stock market
seems to have rediscovered its resiliency. In the fourth quarter, the Standard &
Poor's 500, an unmanaged index generally representative of the U.S. stock
market, bounced back into the 1100-point range, up nearly 20 percent from its
third-quarter low of 957. The blue chip Dow Jones Industrial Average enjoyed a
comparable rise. Investor confidence suddenly overtook the investor uncertainty
that had plagued the markets at summer's end. While financial volatility appears
to be continuing, the mood for investors definitely has improved.
To what can we attribute the change? Simply this -- the cumulative effect of
some good news, not the least of which was a long-awaited series of interest
rate reductions by the Federal Reserve Board. In September, the Fed reduced the
federal funds rate a modest quarter of a percentage point, however, this first
cut disappointed some investors who were expecting a more dramatic gesture. Two
weeks later, the Fed came back with an additional quarter of a percentage point
reduction. This was an unexpected cut that seemed to have a positive effect on
Wall Street. In November, a third rate cut of a quarter of a percentage point
also boosted investor confidence. Investors were further surprised by
better-than-expected corporate earnings reports early in the fourth quarter.
Finally, economic data regarding retail sales, employment and home sales
suggested continued economic growth and very little prospect of recession.
Although there was no good news to be garnered from the sensationalized
presidential scandal, as the shock of Kenneth Starr's report wore off, the
nation seemed to refocus its attention on other matters. In this sense, another
veil of despair was lifted.
In many ways, 1998's market activity provides a study in how investor
perceptions can upstage economic realities. Certainly, the tumultuous lessons of
Russia and Southeast Asia renewed investors' awareness of risk in 1998, which
was an important wake-up call. At all times, investors must understand and
consider risk. But over the course of 1998, U.S. economic fundamentals have
essentially remained strong. In fact, inflation has remained low for the entire
year. Economic growth has been solid. Our consumer confidence has remained
fairly high, although not quite as high as last year. The nation's budget
surplus for 1998 came in at $60 billion, with another budget surplus expected
for fiscal 1999.
Growth in the nation's gross domestic product (GDP), which represents the
total value of all goods and services produced within the U.S. economy, has
remained remarkably steady. GDP is expected to have grown at an annualized rate
of between 2.5 percent and 3.5 percent for the second half of 1998 and is
anticipated to hover around 2 percent for the first half of 1999. The consumer
price index (CPI) remains in a range of 1.5 percent to 2 percent.
While employment growth has slowed a bit, the slowdown in wage gains may
provide the Fed with an incentive to reduce interest rates even further. U.S.
corporate profits have generally been flat, so we may see a decrease in capital
spending. Banks appear to be only a little less willing to lend, so the threat
of a general credit crunch is minimal.
Investors may take comfort in the fact that the U.S. markets and economy have
withstood the test of 1998's tumultuous third quarter. Similarly, while certain
countries, such as Malaysia, Indonesia, Brazil and Russia, are still suffering
from economic crises, others, including the Philippines, South Korea, Thailand
and China, appear to have survived. As long as the Fed and the Group of Seven
leading industrial nations (G7) are committed to avoiding recession on national
and global levels respectively, investors have a good chance of experiencing a
more stable economic environment.
At home, there has been somewhat of a slowdown in manufacturing, as reduced
U.S. exports reflect foreign economic turmoil. But the global impact of the
Asian crisis still has not hit the U.S. as hard as was expected. Indeed, Asian
turmoil has not affected U.S. trade as much as it has lowered import prices and
helped reduce global interest rates.
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>
NOV 98 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1)* 4.53 5.64 6.03 6.53
PRIME RATE(2)* 8.12 8.50 8.50 8.25
INFLATION RATE(3)* 1.49 1.50 2.08 2.99
THE U.S. DOLLAR(4) 0.83 6.86 9.65 3.46
CAPITAL GOODS ORDERS(5)* 2.51 7.47 10.64 9.19
INDUSTRIAL PRODUCTION(5)* 2.12 4.97 6.72 4.93
EMPLOYMENT GROWTH(6) 2.28 2.65 2.70 2.33
</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 OCTOBER 31, 1998.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
In Europe, the much anticipated Economic and Monetary Union (EMU) is on the
move, with a focus on more flexibility and growth potential for the region.
European equities may be the beneficiaries of increased spending, as governments
seek to foster growth and reduce unemployment.
If you're a long-term investor in today's short-term world, go ahead and
breathe that sigh of relief as 1998 comes to an end -- but get ready for 1999.
It's going to be an interesting year as the EMU emerges, the race for the next
presidency heats up and the year 2000 approaches. And, remember: Investors don't
like uncertainty, be it economic or political. The threat of impeachment, new
acts of terrorism or any other hints of crisis could prompt a downward spike in
our markets in the short run. In the long run, the keys to investment
performance remain moderate growth, low inflation and limited taxation and
regulation.
I would like to take this opportunity to thank you for choosing to invest with
Kemper Funds. We appreciate the opportunity to serve your investment needs.
Sincerely,
/s/ John E. Silvia
JOHN E. SILVIA
MANAGING DIRECTOR
SCUDDER KEMPER INVESTMENTS, INC
THE INFORMATION CONTAINED IN THIS PIECE HAS BEEN TAKEN FROM SOURCES BELIEVED TO
BE RELIABLE, BUT THE ACCURACY OF THE INFORMATION IS NOT GUARANTEED. THE OPINIONS
AND FORECASTS EXPRESSED ARE THOSE OF DR. JOHN SILVIA AS OF DECEMBER 2, 1998, AND
MAY NOT ACTUALLY COME TO PASS. THIS INFORMATION IS SUBJECT TO CHANGE. NO PART OF
THIS MATERIAL IS INTENDED AS AN INVESTMENT RECOMMENDATION.
4
<PAGE> 5
PERFORMANCE UPDATE
[REILLY PHOTO]
SHERIDAN REILLY IS A MEMBER OF SCUDDER KEMPER INVESTMENTS' GLOBAL EQUITY GROUP
AND LEAD PORTFOLIO MANAGER OF KEMPER INTERNATIONAL GROWTH AND INCOME FUND. HE
HAS 11 YEARS OF INVESTMENT EXPERIENCE. REILLY RECEIVED A B.A. DEGREE FROM ST.
JOHN'S UNIVERSITY AND AN M.A. DEGREE FROM GREGORIAN UNIVERSITY, ROME. HE IS A
MEMBER OF THE INTERNATIONAL ASSOCIATION OF FINANCIAL ANALYSTS AND THE AMERICAN
MATHEMATICS ASSOCIATION.
VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
THE 10-MONTH PERIOD ENDED OCTOBER 31, SAW THE ECONOMIC CRISIS THAT BEGAN IN ASIA
SPREAD TO THE REST OF THE DEVELOPING WORLD CAUSING SIGNIFICANT DISRUPTION IN THE
MATURE MARKETS AS WELL. IN THE FOLLOWING INTERVIEW, LEAD PORTFOLIO MANAGER
SHERIDAN REILLY DISCUSSES KEMPER INTERNATIONAL GROWTH AND INCOME FUND'S STRATEGY
AND THE VOLATILE MARKET ENVIRONMENT.
Q WHAT CAUSED THE DRAMATIC VOLATILITY WE SAW IN WORLD MARKETS?
A The period consisted of several different phases. The first occurred from
March until mid-July, when the markets of the developed world were in the midst
of a dramatic rise and Europe in particular was benefiting from a number of
positive factors. Investor optimism was strong as interest rates continued to
fall, the move to the common currency approached its final stages, and the
European governments exhibited an ongoing commitment to fiscal and monetary
discipline. In the second phase from mid-July through August, all of these
factors remained in place, but external forces, namely the Russian debt crisis
and the subsequent turmoil in the emerging markets, pummeled equities. As a
result, both the fund and our benchmark index gave up almost all of their gains
for the year in a very short time frame.
In September, overseas markets continued to spiral downward with European
equities taking the worst hits in the global selloff for two reasons. First, in
the previous two quarters stocks had benefited from a huge rally that left them
vulnerable to negative surprises. Second, the European banking system had large
exposure to the Russian debt crisis in the form of significant outstanding
loans. In the panic that followed news of the Russian default, stocks were sold
indiscriminately with little regard for fundamentals. October then saw an
important upswing as investors became a little more discriminating.
Q HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARK, THE MSCI EAFE + CANADA
INDEX*?
A The fund had a total return of 3.31 percent (Class A shares, unadjusted
for any sales charge), compared to a 9.12 percent return for the index for the
same period. This gap can be directly attributed to poor performance of value
stocks. During the European market selloffs, value stocks, which traditionally
have strong relative performance in down markets, actually underperformed their
growth-oriented counterparts. Positive bounces late in the period in markets
that had suffered the most during the summer declines were also a factor in our
underperformance. We have been largely underweight in these markets for quite
some time but this hurt us when these regions bounced. Fundamentally, areas such
as Asia and Russia still have a long way to go.
In an attempt to try to protect shareholder value, we began trimming our
positions in financial holdings ahead of the correction that took place in late
summer and reduced our exposure to those financial institutions with exposure to
Russia.
* MORGAN STANLEY CAPITAL INTERNATIONAL EAFE + CANADA INDEX, IS GENERALLY
REPRESENTATIVE OF CANADIAN, EUROPE, ASIAN AND FAR EAST INTERNATIONAL MARKETS.
5
<PAGE> 6
PERFORMANCE UPDATE
Q HOW DO YOU SELECT STOCKS FOR THE FUND?
A The objective of the fund is to achieve long-term capital growth and
current income through investment in dividend-paying stocks listed on foreign
exchanges. To this end, we look for established, well-managed companies in
mature overseas markets.
The primary threshold we use in stock selection is to find companies that
have high yields relative to their domestic equity market. We attempt to unearth
value by screening for companies that have a yield at least 25 percent higher
than the median of their market. Conversely, we consider SELLING those holdings
that have appreciated to the point where they have a yield 25 percent LOWER than
that of their market.
Q ONCE YOU HAVE NARROWED THE INVESTMENT UNIVERSE BASED ON RELATIVE YIELD,
WHAT IS YOUR NEXT STEP?
A The second step of the selection process involves a rigorous fundamental
analysis of the equities that have met our criteria. Each individual company's
financial strength, projected profitability, competitive positioning and
management ability is reviewed to further discern which of the available
companies has the strongest long-term growth potential.
The third step in our selection process is rigorous sector and country
diversification. We pursue sector diversification in order to reduce the
investment risk associated with interest rates and economic growth in the
countries where we invest. Similarly, we seek to minimize currency risk and
political risk by diversifying among a number of different countries. The
ultimate goal of this intensive process is to provide superior risk-adjusted
returns over the long term.
Q PLEASE TELL US ABOUT ANY SPECIFIC COMPANIES THAT DEMONSTRATE THE FUND'S
INVESTMENT APPROACH.
A Telecom Italia is one of many telecommunications stocks currently held by
the fund. This is one of our favorite stocks in an industry where strong top
line revenue is being generated by new products and technologies. When combined
with the restructuring that continues to take place as formerly state-owned
companies such as this one adjust to the marketplace, there exists a catalyst
for excellent earnings potential. Telecom Italia fits nicely with this theme in
that the company holds a dominant position in its home market, it has had huge
success with its new products, and it has plenty of cost-cutting potential still
ahead.
Metro, a German retailer, serves as another excellent example of our
investment style. In addition to fulfilling our basic requirements of being a
high-yielding, modestly-valued company, it possesses an outstanding fundamental
story. As a leading retailer in Europe, it is at the forefront of the
restructuring and consolidation that is taking place in retailing. As a result,
Metro stands to prosper even in a moderate consumer environment, generating
growth through acquisitions and cost cutting.
Q WHAT IS YOUR OUTLOOK FOR INTERNATIONAL EQUITIES?
A We think that the global equity markets will be volatile due to the
continued instability in the developing world. Though the fund invests primarily
in stocks from mature markets, the fluctuations in recent months have shown that
even relatively conservative holdings can be affected by negative events in the
emerging markets. While these problems may not be resolved quickly, the recent
market turmoil presents new opportunities for us to capitalize on longer-term
themes such as the economic integration in continental Europe.
Despite the recent underperformance of the value sector, we still believe
in the proven long-term benefit of investing in modestly valued stocks with high
relative dividends. Looking ahead, we plan to reduce our cash position by taking
advantage of new opportunities in undervalued sectors that have healthy
businesses and recurring cash flow, such as food companies and
telecommunications companies.
We are confident in the long-term value of our approach, and believe that
the fund can be an appropriate choice for investors who wish to add a relatively
conservative international investment to their portfolios, or who are seeking
diversification and balance for other, more aggressive international
investments.
6
<PAGE> 7
PERFORMANCE UPDATE
- --------------------------------------------------------------------------------
TOTAL RETURNS*
- --------------------------------------------------------------------------------
FOR THE PERIOD ENDED OCTOBER 31, 1998 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
LIFE OF CLASS
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
KEMPER INTERNATIONAL GROWTH AND INCOME FUND CLASS A -2.54% (since 12/31/97)
- --------------------------------------------------------------------------------------------------
KEMPER INTERNATIONAL GROWTH AND INCOME FUND CLASS B -1.36 (since 12/31/97)
- --------------------------------------------------------------------------------------------------
KEMPER INTERNATIONAL GROWTH AND INCOME FUND CLASS C 1.65 (since 12/31/97)
- --------------------------------------------------------------------------------------------------
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER INTERNATIONAL GROWTH AND INCOME FUND CLASS A
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Class A shares from 12/31/97 to 10/31/98
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
KEMPER INTERNATIONAL GROWTH AND
INCOME FUND CLASS A(1) MSCI EAFE + CANADA INDEX+
------------------------------- -------------------------
<S> <C> <C>
12/31/97 10000.00 10000.00
3/31/98 10764.00 11479.00
11127.00 11576.00
9286.00 9881.00
10/31/98 9746.00 10913.00
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER INTERNATIONAL GROWTH AND INCOME FUND CLASS B
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Class B shares from 12/31/97 to 10/31/98
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
KEMPER INTERNATIONAL GROWTH AND
INCOME FUND CLASS B(1) MSCI EAFE + CANADA INDEX+
------------------------------- -------------------------
<S> <C> <C>
12/31/97 10000.00 10000.00
3/31/98 11389.50 11479.00
11754.10 11576.00
9788.00 9881.00
10/31/98 9863.70 10913.00
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER INTERNATIONAL GROWTH AND INCOME FUND CLASS C
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Class C shares from 12/31/97 to 10/31/98
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
KEMPER INTERNATIONAL GROWTH AND
INCOME FUND CLASS C(1) MSCI EAFE + CANADA INDEX+
------------------------------- -------------------------
<S> <C> <C>
12/31/97 10000.00 10000.00
3/31/98 11389.00 11479.00
11756.00 11576.00
9790.00 9881.00
10/31/98 10265.00 10913.00
</TABLE>
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURNS AND
PRINCIPAL VALUES WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN ORIGINAL COST.
* TOTAL RETURN MEASURES NET INVESTMENT INCOME AND CAPITAL GAIN OR LOSS FROM
PORTFOLIO INVESTMENTS OVER THE PERIODS SPECIFIED, ASSUMING REINVESTMENT OF
DIVIDENDS AND, WHERE INDICATED, ADJUSTMENT FOR THE MAXIMUM SALES CHARGE. THE
MAXIMUM SALES CHARGE FOR CLASS A SHARES IS 5.75%. FOR CLASS B SHARES, THE
MAXIMUM CONTINGENT DEFERRED SALES CHARGE (CDSC) IS 4%. CLASS C SHARES HAVE
NO SALES CHARGE ADJUSTMENT, BUT REDEMPTIONS WITHIN ONE YEAR OF PURCHASE MAY
BE SUBJECT TO A CDSC OF 1%. SHARE CLASSES INVEST IN THE SAME UNDERLYING
PORTFOLIO. DURING THE PERIODS NOTED, SECURITIES PRICES FLUCTUATED. FOR
ADDITIONAL INFORMATION, SEE THE PROSPECTUS AND STATEMENT OF ADDITIONAL
INFORMATION AND THE FINANCIAL HIGHLIGHTS AT THE END OF THIS REPORT.
(1) PERFORMANCE INCLUDES REINVESTMENT OF DIVIDENDS AND ADJUSTMENT FOR THE
MAXIMUM SALES CHARGE FOR CLASS A SHARES AND THE CONTINGENT DEFERRED SALES
CHARGE IN EFFECT AT THE END OF THE PERIOD FOR CLASS B SHARES. IN COMPARING
KEMPER INTERNATIONAL GROWTH AND INCOME FUND TO THE MSCI EAFE + CANADA INDEX,
YOU SHOULD ALSO NOTE THAT THE FUND'S PERFORMANCE REFLECTS THE MAXIMUM SALES
CHARGE, WHILE NO SUCH CHARGES ARE REFLECTED IN THE PERFORMANCE OF THE INDEX.
+ MORGAN STANLEY CAPITAL INTERNATIONAL EAFE + CANADA INDEX IS GENERALLY
REPRESENTATIVE OF CANADIAN, EUROPE, ASIAN AND FAR EAST INTERNATIONAL
MARKETS.
7
<PAGE> 8
GEOGRAPHIC COMPOSITION
GEOGRAPHIC COMPOSITION OF KEMPER INTERNATIONAL GROWTH AND INCOME FUND*
Based on total investments as of October 31, 1998
[BAR GRAPH]
<TABLE>
<S> <C>
UNITED KINGDOM 15.60%
UNITED STATES 12.50%
GERMANY 12.30%
FRANCE 12.00%
NETHERLANDS 6.10%
JAPAN 5.90%
SPAIN 5.00%
SWEDEN 4.70%
ITALY 4.60%
SWITZERLAND 4.30%
CANADA 4.20%
FINLAND 3.60%
IRELAND 2.60%
AUSTRALIA 2.40%
NORWAY 1.50%
HONG KONG 1.40%
BELGIUM 1.30%
</TABLE>
* PORTFOLIO COMPOSITION IS SUBJECT TO CHANGE.
8
<PAGE> 9
LARGEST HOLDINGS
KEMPER INTERNATIONAL GROWTH AND INCOME FUND'S TOP 20 HOLDINGS*
REPRESENTING 53.7 PERCENT OF THE FUND'S EQUITY HOLDINGS ON OCTOBER 31,1998
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
HOLDING COUNTRY PERCENT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. METRO Germany 3.1%
2. RWE Germany 3.0%
3. AUTOPISTAS DEL MARE NOSTRUM Spain 3.0%
4. SCOR France 2.9%
5. DEXIA FRANCE France 2.9%
6. BCE Canada 2.9%
7. SOCIETE NATIONALE ELF AQUITAINE France 2.9%
8. ALLIED IRISH BANK Ireland 2.8%
9. OM GRUPPEN Sweden 2.7%
10. NIPPON MEAT PACKERS Japan 2.6%
11. SIKA FINANZ Switzerland 2.6%
12. COMMONWEALTH BANK OF AUSTRALIA Australia 2.6%
13. IBERDROLA Spain 2.5%
14. HOCHTIEF Germany 2.5%
15. TELECOM ITALIA Italy 2.5%
16. ACCOR France 2.5%
17. BAYER Germany 2.5%
18. LA RINASCENTE SPA DI RISPARMIO Italy 2.4%
19. NINTENDO Japan 2.4%
20. BRITISH TELECOM United Kingdom 2.4%
</TABLE>
* Portfolio holdings are subject to change.
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
KEMPER INTERNATIONAL GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS AT OCTOBER 31, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT($) OR MARKET
SHORT TERM INVESTMENTS--12.5% NUMBER OF SHARES VALUE($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
UNITED STATES Federal National Mortgage
Association, Discount Note, 5.45%, 11/2/98
(Cost $570,914) 571,000 570,914
----------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--1.3%
- -------------------------------------------------------------------------------------------------------------------------
BELGIUM (a)(b)Lernout & Hauspie Speech
Products N.V.
(DEVELOPER OF ADVANCED SPEECH
TECHNOLOGIES)
(Cost $82,713) 1,700 shs. 60,775
----------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--86.2%
- -------------------------------------------------------------------------------------------------------------------------
AUSTRALIA--2.4% Commonwealth Bank of Australia
(BANK) 8,645 107,468
----------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
CANADA--4.2% BCE, Inc.
(TELECOMMUNICATION SERVICES) 3,600 122,022
Hudson's Bay Co.
(OPERATOR OF RETAIL DEPARTMENT) 5,600 71,497
----------------------------------------------------------------------------
193,519
- -------------------------------------------------------------------------------------------------------------------------
FINLAND--3.6% Merita Ltd. "B"
(FINANCIAL SERVICES GROUP) 16,400 86,273
Metsa-Serla Oy "B"
(MANUFACTURER OF PAPERS,
CORRUGATED AND PAPER BOARD, SOFT
AND HARDWOOD PULP) 10,400 78,658
----------------------------------------------------------------------------
164,931
- -------------------------------------------------------------------------------------------------------------------------
FRANCE--12.0% Accor S.A.
(CATERING, HOTELS, TRAVEL
SERVICES) 501 105,222
Dexia France
(MUNICIPAL AND LOCAL DEVELOPMENT
FINANCING) 830 122,338
Scor S.A.
(PROPERTY, CASUALTY AND LIFE
REINSURANCE COMPANY) 2,151 123,335
Societe Nationale Elf Aquitaine
(PETROLEUM COMPANY) 1,047 121,159
Sommer-Allibert
(MANUFACTURER OF PLASTIC PRODUCTS
FOR AUTOMOTIVE INDUSTRY) 2,680 77,123
----------------------------------------------------------------------------
549,177
- -------------------------------------------------------------------------------------------------------------------------
GERMANY--12.3% Bayer AG
(LEADING CHEMICAL PRODUCER) 2,563 104,129
Dyckerhoff AG
(PRODUCER OF CEMENT, READY-MIXED
CONCRETE AND FINISHING PRODUCTS) 311 95,750
Hochtief AG
(CONSTRUCTION AND CIVIL
ENGINEERING SERVICES) 2,895 105,734
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF SHARES VALUE($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Metro AG
(OPERATOR OF BUILDING, CLOTHING
AND FOOD STORES AND SUPERMARKETS) 3,260 128,904
RWE AG
(PRODUCER AND MARKETER OF
PETROLEUM AND CHEMICAL PRODUCTS) 2,340 126,853
----------------------------------------------------------------------------
561,370
- -------------------------------------------------------------------------------------------------------------------------
HONG KONG--1.4% HSBC Holdings Ltd.
(BANK) 2,800 64,171
----------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
IRELAND--2.6% Allied Irish Bank PLC
(BANK) 8,160 117,853
----------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
ITALY--4.6% La Rinascente SpA di Risparmio
(DEPARTMENT STORE CHAIN) 22,700 102,700
Telecom Italia SpA
(TELECOMMUNICATIONS, ELECTRONICS
AND NETWORK CONSTRUCTION) 20,900 105,332
----------------------------------------------------------------------------
208,032
- -------------------------------------------------------------------------------------------------------------------------
JAPAN--5.9% East Japan Railway Co.
(RAILROAD OPERATOR) 8 47,491
Nintendo Co., Ltd.
(GAME EQUIPMENT MANUFACTURER) 1,200 101,650
Nippon Meat Packers, Inc.
(LEADING MEAT PROCESSOR) 8,000 111,409
Nippon Telegraph & Telephone Corp.
(LEADING TELECOMMUNICATIONS
COMPANY) 1 7,835
----------------------------------------------------------------------------
268,385
- -------------------------------------------------------------------------------------------------------------------------
NETHERLANDS--6.1% KLM Royal Dutch Air Lines NV
(WORLD-WIDE FULL SERVICE AIRLINE) 2,410 72,753
Koninklijke KPN NV
(PROVIDER OF TELECOMMUNICATIONS
SERVICES) 1,850 71,889
Koninklijke Nedlloyd Groep NV
(CONTAINER SHIPPING AND
TRANSPORTATION) 4,870 65,166
Royal Dutch Petroleum Co.
(OWNER OF 60% OF ROYAL DUTCH/SHELL
GROUP) 1,480 71,453
----------------------------------------------------------------------------
281,261
- -------------------------------------------------------------------------------------------------------------------------
NORWAY--1.5% Christiania Bank og Kreditkasse
(COMMERCIAL BANK) 20,000 70,340
----------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
SPAIN--5.0% Autopistas del Mare Nostrum S.A.
(BUILDER AND OPERATOR OF TOLL
MOTORWAYS) 4,950 124,224
Iberdrola SA
(ELECTRIC UTILITY) 6,560 105,949
----------------------------------------------------------------------------
230,173
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
MARKET
NUMBER OF SHARES VALUE($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SWEDEN--4.7% AssiDoman AB
(FORESTRY GROUP) 2,500 47,449
OM Gruppen AB
(OPERATOR OF EXCHANGES AND
CLEARING ORGANIZATIONS FOR
OPTIONS, FUTURES AND STOCK LOANS) 7,510 114,608
Svedala Industri AB
(MANUFACTURER OF MACHINERY FOR
CONSTRUCTION, MINERAL PROCESSING
AND MATERIALS HANDLING) 3,257 51,375
----------------------------------------------------------------------------
213,432
- -------------------------------------------------------------------------------------------------------------------------
SWITZERLAND--4.3% Georg Fischer AG
(MANUFACTURER OF AUTOMOTIVE
PRODUCTS AND PIPING SYSTEMS) 263 90,616
Sika Finanz AG
(MANUFACTURER OF WATER MANAGEMENT
PRODUCTS AND SYSTEMS) 1,825 107,717
----------------------------------------------------------------------------
198,333
- -------------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM--15.6% Bank of Scotland
(BANK) 55 598
British Airways PLC
(PROVIDER OF PASSENGER AND CARGO
AIRLINE SERVICES) 13,015 94,551
British Telecom PLC
(TELECOMMUNICATION SERVICES) 7,819 101,041
Dorling Kindersley Holdings PLC
(BOOK PUBLISHER) 19,370 78,789
EMI Group PLC
(MUSIC RECORDING AND RETAILING
COMPANY) 13,697 81,220
Laporte PLC
(PRODUCER OF SPECIALTY CHEMICALS) 8,689 82,031
Man (ED&F) Group PLC
(COMMODITIES TRADING COMPANY) 9,220 51,007
Royal & Sun Alliance Insurance Group
PLC
(MULTI-LINE INSURANCE HOLDING
COMPANY) 9,694 88,761
Tomkins PLC
(MANUFACTURER OF FLUID CONTROLS,
INDUSTRIAL PRODUCTS, GARDEN AND
LEISURE PRODUCTS) 13,660 63,223
Transport Development Group PLC
(DISTRIBUTION, STORAGE AND
TRANSPORT SERVICES) 18,690 73,520
----------------------------------------------------------------------------
714,741
----------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $4,160,685) 3,943,186
----------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost $4,814,312) 4,574,875
----------------------------------------------------------------------------
</TABLE>
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
(b) Restricted security -- security which has not been registered with the
Securities and Exchange Commission under the Securities Act of 1933. The
fair value of this restricted security at October 31, 1998, amounted to
$60,775, which represents 1.42% of net assets. Information concerning this
restricted security at October 31, 1998 is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE COST($)
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Lernount & Hauspie Speech Products, N.V. 5/20/98 82,713
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
At October 31, 1998, outstanding written call options were as follows:
<TABLE>
<CAPTION>
NUMBER OF MARKET
EXPIRATION DATE SHARES STRIKE PRICE VALUE ($)
--------------- --------- ------------ ---------
<S> <C> <C> <C> <C>
Bayer AG March 19, 1999 1,925 75 DEM 4,369
RWE AG March 19, 1999 2,060 90 DEM 11,491
Royal Dutch Petroleum Co. April 16, 1999 1,000 105 NLG 2,248
------
Total outstanding written options
(premiums received $16,461) 18,108
======
</TABLE>
Based on the cost of investments of $4,815,949 for federal income tax purposes
at October 31, 1998, the gross unrealized appreciation was $119,642, the gross
unrealized depreciation was $360,716 and the net unrealized depreciation on
investments was $241,074.
See accompanying Notes to Financial Statements.
13
<PAGE> 14
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SHAREHOLDERS
KEMPER INTERNATIONAL GROWTH AND INCOME FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper International Growth And
Income Fund (one of the portfolios constituting Kemper Global/International
Series, Inc.) as of October 31, 1998, and the related statements of operations
and changes in net assets and the financial highlights for the period from
December 31, 1997 (commencement of operations) to October 31, 1998. These
financial statements and financial highlights are the responsibility of the
fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
investments owned as of October 31, 1998, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Kemper
International Growth And Income Fund of Kemper Global/International Series, Inc.
at October 31, 1998, the results of its operations, the changes in its net
assets and the financial highlights for the period referred to above, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
December 16, 1998
14
<PAGE> 15
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1998
<TABLE>
<S> <C>
- --------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------
Investments, at value
(Cost $4,814,312) $4,574,875
- --------------------------------------------------------------------------
Cash 809
- --------------------------------------------------------------------------
Foreign currency, at value
(Cost $23,265) 23,052
- --------------------------------------------------------------------------
Receivable for:
Investments sold 145,031
- --------------------------------------------------------------------------
Fund shares sold 5,538
- --------------------------------------------------------------------------
Dividends 3,663
- --------------------------------------------------------------------------
Foreign taxes 2,638
- --------------------------------------------------------------------------
Reimbursement from Adviser 129,424
- --------------------------------------------------------------------------
Deferred organization expense 12,495
- --------------------------------------------------------------------------
TOTAL ASSETS 4,897,525
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------
Written options, at value (premiums received $16,461) 18,108
- --------------------------------------------------------------------------
Payable for:
Investments purchased 455,463
- --------------------------------------------------------------------------
Fund shares redeemed 8,766
- --------------------------------------------------------------------------
Other payables and accrued expenses 144,209
- --------------------------------------------------------------------------
Total liabilities 626,546
- --------------------------------------------------------------------------
NET ASSETS $4,270,979
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- --------------------------------------------------------------------------
Paid-in capital $4,658,318
- --------------------------------------------------------------------------
Accumulated net realized loss on investments (149,782)
- --------------------------------------------------------------------------
Net unrealized depreciation on:
Investments (239,437)
- --------------------------------------------------------------------------
Options (1,647)
- --------------------------------------------------------------------------
Foreign currency related transactions (164)
- --------------------------------------------------------------------------
Undistributed net investment income 3,691
- --------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $4,270,979
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
THE PRICING OF SHARES
- --------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($2,081,466 / 213,842 shares outstanding) $ 9.73
- --------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $10.32
- --------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($1,714,250 / 176,555 shares outstanding) $ 9.71
- --------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($475,263 / 48,938 shares outstanding) $ 9.71
- --------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
15
<PAGE> 16
FINANCIAL STATEMENTS
For the period from December 31, 1997 (commencement of operations) to
October 31, 1998
STATEMENT OF OPERATIONS
<TABLE>
<S> <C>
- --------------------------------------------------------------------------
NET INVESTMENT INCOME
- --------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $3,592) $ 45,962
- --------------------------------------------------------------------------
Interest 15,340
- --------------------------------------------------------------------------
Total investment income 61,302
- --------------------------------------------------------------------------
Expenses:
Management fee 18,218
- --------------------------------------------------------------------------
Distribution services fee 5,936
- --------------------------------------------------------------------------
Administrative services fee 4,555
- --------------------------------------------------------------------------
Custodian, accounting and transfer agent fees and related
expenses 193,373
- --------------------------------------------------------------------------
Professional fees 27,500
- --------------------------------------------------------------------------
Reports to shareholders 5,158
- --------------------------------------------------------------------------
Registration fees 1,306
- --------------------------------------------------------------------------
Amortization of organization expenses 2,505
- --------------------------------------------------------------------------
Directors' fees and other 1,900
- --------------------------------------------------------------------------
Total expenses before expense waiver 260,451
- --------------------------------------------------------------------------
Less expenses waived and absorbed by adviser (220,353)
- --------------------------------------------------------------------------
Total expenses after expense waiver 40,098
- --------------------------------------------------------------------------
NET INVESTMENT INCOME 21,204
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
- --------------------------------------------------------------------------
Net realized loss from:
Investments (149,766)
- --------------------------------------------------------------------------
Foreign currency related transactions (1,584)
- --------------------------------------------------------------------------
(151,350)
- --------------------------------------------------------------------------
Change in net unrealized depreciation on:
Investments (239,437)
- --------------------------------------------------------------------------
Options (1,647)
- --------------------------------------------------------------------------
Foreign currency related transactions (164)
- --------------------------------------------------------------------------
(241,248)
- --------------------------------------------------------------------------
Net loss on investments (392,598)
- --------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (371,394)
- --------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- -----------------------------------------------------------------------------
Net investment income $ 21,204
- -----------------------------------------------------------------------------
Net realized loss (151,350)
- -----------------------------------------------------------------------------
Change in net unrealized depreciation (241,248)
- -----------------------------------------------------------------------------
Net decrease in net assets resulting from operations (371,394)
- -----------------------------------------------------------------------------
Distribution from net investment income (15,945)
- -----------------------------------------------------------------------------
Net increase from capital share transactions 4,638,318
- -----------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 4,250,979
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------
Beginning of period 20,000
- -----------------------------------------------------------------------------
END OF PERIOD (including undistributed net investment income
of $3,691) $4,270,979
- -----------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE
FUND Kemper International Growth And Income Fund (the
fund) is a 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 commenced operations on December
31, 1997. 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. 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 contracts
are valued at the prevailing forward exchange rate
of the underlying currencies on that day.
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. 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
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
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 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'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 October 31, 1998, the fund had a tax basis net
loss carryforward of approximately $148,000, which
may be applied against any realized net taxable
gains of each succeeding year until fully utilized
or it will expire in the period ended 2006.
DIVIDENDS TO SHAREHOLDERS. The fund declares and
pays dividends of net investment income
semi-annually 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.
- --------------------------------------------------------------------------------
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 1.00%
of average daily net assets. However, the fund
incurred no management fee for the period ended
October 31, 1998, after an expense 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 $220,353 for the period ended
October 31, 1998.
ZURICH/B.A.T MERGER. On September 7, 1998, Zurich
Insurance Company (Zurich), majority owner of
Scudder Kemper, entered into an agreement with
18
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
B.A.T Industries p.l.c. (B.A.T) pursuant to which
the financial services businesses of B.A.T were
combined with Zurich's businesses to form a new
global insurance and financial services company
known as Zurich Financial Services. Upon
consummation of the transaction, the fund's
investment management agreement with Scudder Kemper
was deemed to have been assigned and, therefore,
terminated. The Board of Directors of the fund has
approved a new investment management agreement with
Scudder Kemper, which is substantially identical to
the former investment management agreement, except
for the dates of execution and termination.
Shareholders approved of the new investment
management agreement through a proxy solicitation
that concluded in mid-December.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
The fund has an underwriting and distribution
services agreement with Kemper Distributors, Inc.
(KDI). Underwriting commissions paid in connection
with the distribution of Class A shares are as
follows:
<TABLE>
<CAPTION>
COMMISSIONS COMMISSIONS ALLOWED
RETAINED BY KDI BY KDI TO FIRMS
--------------- -------------------
<S> <C> <C>
Period ended October 31, 1998 $1,636 46,649
</TABLE>
For services under the distribution services
agreement, the fund pays KDI a fee of .75% of
average daily net assets of the Class B and Class C
shares pursuant to separate Rule 12b-1 plans for
the Class B and Class C shares. Pursuant to the
agreement, KDI enters into related selling group
agreements with various firms at various rates for
sales of Class B and Class C shares. In addition,
KDI receives any contingent deferred sales charges
(CDSC) from redemptions of Class B and Class C
shares. The fund incurred no distribution fees for
the period ended October 31, 1998, after an expense
waiver by Scudder Kemper. CDSC and commissions
related to Class B and Class C shares are as
follows:
<TABLE>
<CAPTION>
COMMISSIONS AND
CDSC RECEIVED DISTRIBUTION FEES PAID
BY KDI BY KDI TO FIRMS
------------- ----------------------
<S> <C> <C>
Period ended October 31, 1998 $160 47,090
</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 October 31, 1998, after an expense
waiver by Scudder Kemper. During the period ended
October 31, 1998, KDI paid fees of $4,617 to
various firms.
SHAREHOLDER SERVICES AGREEMENT. Kemper Service
Company (KSvC), is the transfer, dividend paying
and shareholder service agent for the fund. The
fund incurred shareholder services fees of $11,672
for the period ended October 31, 1998, $5,170 of
which is unpaid.
FUND ACCOUNTING AGENT. Scudder Fund Accounting
Corporation 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 no accounting fees for the
period ended October 31, 1998, after a waiver of
$43,910 by Scudder Kemper.
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
OFFICERS AND DIRECTORS. Certain officers or
directors of the fund are also officers or
directors of Scudder Kemper. For the period ended
October 31, 1998, the fund made no payments to its
officers and incurred directors' fees of $1,500 to
independent directors.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the period ended October 31, 1998, investment
transactions (excluding short-term instruments) are
as follows:
Purchases $5,945,430
Proceeds from sales 1,552,266
Transactions in written options for the period
ended October 31, 1998 were:
<TABLE>
<CAPTION>
PREMIUMS
SHARES RECEIVED
------ --------
<S> <C> <C>
Options outstanding at December 31, 1997
(commencement of operations) -- --
Written:
Bayer AG 1,925 $ 5,818
RWE AG 2,060 7,481
Royal Dutch Petroleum Co. 1,000 3,162
-------
Outstanding at October 31, 1998 $16,461
=======
</TABLE>
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS
The following table summarizes the activity in
capital shares of the fund:
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1998
-----------------------------
SHARES AMOUNT
--------------------------------------------------------------------------
<S> <C> <C>
SHARES SOLD
--------------------------------------------------------------------------
Class A 226,411 $2,362,397
--------------------------------------------------------------------------
Class B 184,498 1,985,454
--------------------------------------------------------------------------
Class C 65,361 687,745
--------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
--------------------------------------------------------------------------
Class A 1,039 11,397
--------------------------------------------------------------------------
Class B 314 3,449
--------------------------------------------------------------------------
Class C 58 642
--------------------------------------------------------------------------
SHARES REDEEMED
--------------------------------------------------------------------------
Class A (14,309) (146,012)
--------------------------------------------------------------------------
Class B (8,959) (92,920)
--------------------------------------------------------------------------
Class C (17,183) (173,834)
--------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $4,638,318
--------------------------------------------------------------------------
</TABLE>
20
<PAGE> 21
FINANCIAL HIGHLIGHTS
For the period from December 31, 1997 (commencement of operations) to October
31, 1998
<TABLE>
<CAPTION>
-----------------------------------------------
CLASS A CLASS B CLASS C
-----------------------------------------------
<S> <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 .13 .04 .05
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Net realized and unrealized gain .20 .22 .21
- ------------------------------------------------------------------------------------------------------------
Total from investment operations .33 .26 .26
- ------------------------------------------------------------------------------------------------------------
Less distribution from net investment income .10 .05 .05
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.73 9.71 9.71
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 3.31% 2.64 2.65
- ------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------------------------------
Expenses absorbed by the fund 1.81% 2.69 2.66
- ------------------------------------------------------------------------------------------------------------
Net investment income 1.54% .66 .69
- ------------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------------------------------
Expenses 13.58% 15.21 15.18
- ------------------------------------------------------------------------------------------------------------
Net investment loss (10.23)% (11.86) (11.83)
- ------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ------------------------------------------------------------------------------------------------------------
Net assets at end of period $4,270,979
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 97%
- ------------------------------------------------------------------------------------------------------------
</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.
TAX INFORMATION
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your Kemper Fund account, please call 1-800-621-1048.
21
<PAGE> 22
NOTES
22
<PAGE> 23
NOTES
23
<PAGE> 24
DIRECTORS AND OFFICERS
DIRECTORS OFFICERS
DANIEL PIERCE MARK S. CASADY ANN M. MCCREARY
Chairman and Director President Vice President
JAMES E. AKINS PHILIP J. COLLORA SHERIDAN P. REILLY
Director Vice President and Vice President
Secretary
ARTHUR R. GOTTSCHALK M. ISABEL SALTZMAN
Director JOHN R. HEBBLE Vice President
Treasurer
FREDERICK T. KELSEY LINDA J. WONDRACK
Director JOYCE E. CORNELL Vice President
Vice President
KATHRYN L. QUIRK MAUREEN E. KANE
Director and Vice President DIEGO ESPINOSA Assistant Secretary
Vice President
FRED B. RENWICK CAROLINE PEARSON
Director JOAN R. GREGORY Assistant Secretary
Vice President
JOHN B. TINGLEFF ELIZABETH C. WERTH
Director TARA C. KENNEY Assistant Secretary
Vice President
JOHN G. WEITHERS BRENDA LYONS
Director THOMAS W. LITTAUER Assistant Treasurer
Vice President
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS ERNST & YOUNG LLP
200 Clarendon Street
Boston, MA 02116
- --------------------------------------------------------------------------------
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606-5808
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.
KIGIF - 2 (12/98) 1061720
