<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 through a diversified worldwide portfolio of
marketable securities
KEMPER GLOBAL BLUE CHIP FUND
"... The prospects for a transition within the global
economy have led us to maintain a high level of
flexibility in the portfolio. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
Economic Overview
5
Performance Update
8
Geographic Composition
9
Largest Holdings
10
Portfolio of Investments
15
Report of Independent Auditors
16
Financial Statements
18
Notes to
Financial Statements
22
Financial Highlights
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER GLOBAL BLUE CHIP FUND
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE 10-MONTH PERIOD ENDED OCTOBER 31, 1998
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 7.47
CLASS B 6.63
CLASS C 6.74
LIPPER GLOBAL FUNDS CATEGORY* 3.91
- --------------------------------------------------------------------------------
</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.
* Lipper Analytical Services, Inc. returns are based upon changes in net asset
value with all dividends reinvested and do not include the effect of sales
charges and, if they had, results may have been less favorable.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
10/31/98 12/31/97
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER GLOBAL BLUE
CHIP FUND CLASS A $10.21 $9.50
- --------------------------------------------------------------------------------
KEMPER GLOBAL BLUE
CHIP FUND CLASS B $10.13 $9.50
- --------------------------------------------------------------------------------
KEMPER GLOBAL BLUE
CHIP FUND CLASS C $10.14 $9.50
- --------------------------------------------------------------------------------
</TABLE>
TERMS TO KNOW
YOUR FUND'S STYLE
- --------------------------------------------------------------------------------
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 Global Blue
Chip Fund in the World Stock Category. Please consult the prospectus for a
description of investment policies.
CURRENCY DEVALUATION A significant decline of a currency's value relative to
other currencies, such as the U.S. dollar. 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 an investment's total return.
EXCHANGE RATE The price at which one country's currency is exchangeable for
another currency. Currencies represent a store of value in the economic,
political, and financial health of the home country. Changes in its value add to
or subtract from an investor's return.
FUNDAMENTAL RESEARCH Analysis of a company's financial statements to project
future stock price changes. Considers past records of sales and earnings as well
as the future impact of products, consumer markets, and management in weighing a
company's prospects. This is distinct from technical analysis, which evaluates
the attractiveness of a stock based on historical price and trading volume
movements.
PRICE/EARNINGS RATIO (also "P/E" or "earnings multiple") -- A widely used gauge
of a stock's valuation that indicates what investors are paying for a company's
earnings on a per share basis. A high earnings multiple indicates a high
expected growth rate and greater risk; a lower multiple is associated with
mature or out-of-favor companies, and lower stock price volatility.
Source: Scudder Kemper Investments, Inc. and 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
[ESPINOSA PHOTO]
DIEGO ESPINOSA IS A MEMBER OF SCUDDER KEMPER INVESTMENTS' GLOBAL EQUITY GROUP.
HE HAS SIX YEARS OF INVESTMENT EXPERIENCE AND IS PART OF A FUND MANAGEMENT TEAM
WITH MORE THAN 55 YEARS OF COMBINED EXPERIENCE. ESPINOSA RECEIVED A BACHELOR'S
DEGREE IN CIVIL ENGINEERING FROM TUFTS UNIVERSITY IN 1983 AND A MASTER'S DEGREE
IN INTERNATIONAL RELATIONS FROM JOHNS HOPKINS SCHOOL OF ADVANCED INTERNATIONAL
STUDIES IN 1987. IN 1991, HE RECEIVED AN M.B.A. DEGREE IN FINANCE FROM WHARTON
BUSINESS SCHOOL AT THE UNIVERSITY OF PENNSYLVANIA.
WORLDWIDE, SIGNIFICANT GROWTH IN EUROPE AND THE UNITED STATES WAS TEMPERED BY
THE CONTINUED DETERIORATION OF SOUTHEAST ASIAN MARKETS, THE RECESSION IN JAPAN
AND SHOCKWAVES EMANATING FROM THE RUSSIAN DEBT DEFAULT. THESE DECLINES HAVE LED
TO SPECULATION THAT THE BULL MARKET RUN MIGHT BE OVER. FOLLOWING, LEAD PORTFOLIO
MANAGER DIEGO ESPINOSA DISCUSSES THE MARKET AND ITS FUTURE AS IT RELATES TO
KEMPER GLOBAL BLUE CHIP FUND.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
Q WHAT FACTORS DROVE THE MARKET VOLATILITY WE SAW DURING THIS 10-MONTH
PERIOD?
A At the end of the first quarter, a combination of International Monetary
Fund financing and government restructuring moves helped stem the fourth
quarter's deterioration in the Asian markets. This stability was short-lived,
however, as rapidly deteriorating Asian economic fundamentals and a sliding yen
led to further market declines.
Domestically, the national infatuation with stocks continued. However,
corporate profit growth in the U.S. slowed to a crawl. While the Asian crisis,
high dollar valuation and pricing pressures were cited as reasons, the slowdown
looked suspiciously like the maturing of an economic cycle. Record numbers of
takeovers and mergers indicated a move by corporations to dominate their
markets.
The real star through the second quarter of the fiscal year was Continental
Europe. A friendly interest rate environment facilitated the completion of the
European Monetary Union (EMU) arrangements which will give 11 countries one
currency on January 1, 1999. Investors began to appreciate the benefits of a
broader European, rather than local, monetary policy. Equally important,
however, was the perception of investors that European corporations are rapidly
developing a new view of the world. Learning lessons from the U.S. revival,
these corporations are striving to use their resources more efficiently.
In Asia, Japan's stock market continued to languish. The economic recession in
Japan put pressure on the already debilitated banking system creating a need for
further government intervention in the system. In the third quarter, we did see
the Japanese government take action which, somewhat surprisingly, was well
received by the market.
However, the third quarter saw much of the positive market moves in the U.S.
and Europe unravel. The large collapse in investor confidence during this
quarter had its roots in the emerging markets, particularly those in Asia. While
the attention of world policy makers was focused on these economies, Russia's
government defaulted on some of its bonds. This default, in turn, intensified
doubts about Brazilian and other obligations. Investors quickly sought the
safety of U.S. Treasuries. Appreciation of these Treasuries upset hedge-fund
strategies, which further intensified the move to safety.
In mid-September and moving into October, markets were offered some relief in
the form of a series of rate cuts led by the U.S. Key markets around the globe
mirrored these cuts. This combined effort to stabilize markets sent a message to
investors that governments were going to be more aggressive in fighting debt
deflation and in stemming a
5
<PAGE> 6
PERFORMANCE UPDATE
possible global credit crunch. This action saw a nearly immediate upswing in
investor confidence as liquidity returned to the markets.
Q HOW DID YOU POSITION KEMPER GLOBAL BLUE CHIP FUND IN THIS ENVIRONMENT?
A The fund has been positioned, since inception, for a deterioration in
corporate profits growth and for continuing crisis in the emerging markets. Over
20 percent of the portfolio was invested in the "Secure Streams of Income" theme
which is made up of stocks that can deliver reliable returns in the face of
price competition and credit concerns.
We also initiated positions in the gold mining sector by adding Barrick Gold
Corp. and Normandy Mining Ltd. to the portfolio. Should deflationary tendencies
prevail, gold would be an attractive asset if the consequence were the
imposition of capital controls in the world's weaker economies.
Q THIS REPORT COVERS THE LIFE OF THE FUND THROUGH OCTOBER 31, 1998. FOR THIS
PERIOD, KEMPER GLOBAL BLUE CHIP FUND WAS UP 7.47 PERCENT (CLASS A SHARES,
UNADJUSTED FOR ANY SALES CHARGE) STRONGLY OUTPERFORMING ITS PEERS (SEE LIPPER
CATEGORY INFORMATION ON PAGE 2). HOWEVER, THE FUND'S BENCHMARK INDEX, THE MSCI
WORLD INDEX, RETURNED 12.27 PERCENT. WHY THE LESSER PERFORMANCE?
A Many of the stocks in the portfolio could not keep pace with the largest
names that dominate the index, particularly in the U.S. When the markets became
so volatile late in the summer, these larger stocks were considered a safe haven
by many equity investors so they held up better than some of the names we hold.
Saying this, it begs the question, "Why didn't the fund own them?" It is our
view that these names are greatly overvalued and, in a slowing economy, these
large capitalization stocks are likely to come off.
Q WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS?
A As I mentioned, returns from the largest cap names are likely to
underperform given intensifying price competition. While some of the fundamental
drivers underlying the global corporate economy have changed, others have
remained the same. Restructuring may have run its course in the U.S., but
elsewhere considerable potential remains. New technologies continue to develop
while existing ones have not yet been fully absorbed into the household and
government sectors, let alone the European or Japanese economies. Many emerging
economies will not reach their peaks for many years.
Q WITH THIS OUTLOOK IN MIND, HAVE YOU MADE ANY ADJUSTMENTS TO THE PORTFOLIO?
A The prospects for a transition within the global economy have led us to
maintain a high level of flexibility in the portfolio. As part of this process,
we have continued to add to our "Secure Streams of Income" theme while taking
modest positions in the oil and metals industries.
Longer term, we are working to uncover clues to new themes, but for now,
downgrades of economic activity raise the specter of falling general price
levels and outright deflation. Our researchers are evaluating this phenomenon to
decide whether growth or recession will accompany it. What would falling prices
mean for savings behavior? Which industries and companies will lose or win? Will
the new environment galvanize the Japanese system into action? More critically:
How will the authorities react? Will there be a general worldwide easing of
interest rates? Will capital controls appear in the world as countries try to
protect themselves from economic contagion?
Going forward, these are the key questions to be answered as we consider the
ramifications of the current market turmoil on the global economy.
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 GLOBAL BLUE CHIP FUND CLASS A 1.29% (since 12/31/97)
- ------------------------------------------------------------------------------------------------------
KEMPER GLOBAL BLUE CHIP FUND CLASS B 2.63 (since 12/31/97)
- ------------------------------------------------------------------------------------------------------
KEMPER GLOBAL BLUE CHIP FUND CLASS C 5.74 (since 12/31/97)
- ------------------------------------------------------------------------------------------------------
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER GLOBAL BLUE CHIP FUND CLASS A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
KEMPER
GLOBAL BLUE
CHIP FUND THE MSCI
CLASS A1 WORLD INDEX'
- --------------------------------------------------------------------------------
<S> <C> <C>
12/31/97 9425.00 10000.00
3/31/98 10397.00 11442.00
10665.00 11685.00
9812.00 10295.00
10/31/98 10129.00 11227.00
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER GLOBAL BLUE CHIP FUND CLASS B
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
KEMPER
GLOBAL BLUE
CHIP FUND THE MSCI
CLASS B1 WORLD INDEX'
- --------------------------------------------------------------------------------
<S> <C> <C>
12/31/97 10000.00 10000.00
3/31/98 11000.00 11442.00
11263.10 11685.00
10326.30 10295.00
10/31/98 10263.10 11227.00
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER GLOBAL BLUE CHIP FUND CLASS C
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
KEMPER
GLOBAL BLUE
CHIP FUND THE MSCI
CLASS C1 WORLD INDEX'
- --------------------------------------------------------------------------------
<S> <C> <C>
12/31/97 10000.00 10000.00
3/31/98 11011.00 11442.00
11263.00 11685.00
10347.00 10295.00
10/31/98 10574.00 11227.00
</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 period specified, assuming reinvestment of
all 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 contingent deferred sales charge of 1%. Share
classes invest in the same underlying portfolio. During the period 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 Global Blue Chip Fund Class A shares to the MSCI World INDEX, you
should also note that the fund's performance reflects the maximum sales
charge, while no such charge is reflected in the performance of the index.
+ The MSCI World Index (Morgan Stanley Capital International) is an unmanaged
index generally accepted as a benchmark for world equity markets.
7
<PAGE> 8
GEOGRAPHIC COMPOSITION
KEMPER GLOBAL BLUE CHIP FUND'S GEOGRAPHIC COMPOSITION*
Based on total investments on October 31, 1998.
[BAR GRAPH]
<TABLE>
<CAPTION>
PRIMARY GEOGRAPHIC COMPOSITION*
-------------------------------
<S> <C>
UNITED STATES 44.30%
UNITED KINGDOM 14.90%
GERMANY 12.50%
SWITZERLAND 6.40%
CANADA 5.10%
JAPAN 4.90%
AUSTRALIA 2.30%
SWEDEN 1.90%
FRANCE 1.80%
ARGENTINA 1.50%
DENMARK 1.40%
BRAZIL 1.10%
PORTUGAL 1.00%
NETHERLANDS 0.70%
HONG KONG 0.20%
</TABLE>
*Portfolio composition is subject to change.
8
<PAGE> 9
LARGEST HOLDINGS
KEMPER GLOBAL BLUE CHIP FUND'S 15 LARGEST HOLDINGS*
Representing 29.6 percent of the fund's equity holdings on October 31, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
HOLDINGS COUNTRY PERCENTAGE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
1. NESTLE Switzerland 2.5%
- -------------------------------------------------------------------------------------------------------
2. VIAG Germany 2.2%
- -------------------------------------------------------------------------------------------------------
3. BRITISH TELECOM United Kingdom 2.2%
- -------------------------------------------------------------------------------------------------------
4. NORTHROP GRUMMAN United States 2.1%
- -------------------------------------------------------------------------------------------------------
5. YAMANOUCHI PHARMACEUTICAL Japan 2.0%
- -------------------------------------------------------------------------------------------------------
6. DEUTSCHE TELEKOM Germany 2.0%
- -------------------------------------------------------------------------------------------------------
7. LOCKHEED MARTIN United States 2.0%
- -------------------------------------------------------------------------------------------------------
8. CINERGY United States 1.9%
- -------------------------------------------------------------------------------------------------------
9. CANADIAN NATIONAL RAILWAY Canada 1.9%
- -------------------------------------------------------------------------------------------------------
10. WILLIAMS COS. United States 1.9%
- -------------------------------------------------------------------------------------------------------
11. UNUM United States 1.8%
- -------------------------------------------------------------------------------------------------------
12. USEC United States 1.8%
- -------------------------------------------------------------------------------------------------------
13. SHELL TRANSPORT & TRADING United Kingdom 1.8%
- -------------------------------------------------------------------------------------------------------
14. RWE Germany 1.8%
- -------------------------------------------------------------------------------------------------------
15. MUENCHENER RUECKVERSICHERUNGS-GESELLSCHAFT Germany 1.7%
- -------------------------------------------------------------------------------------------------------
</TABLE>
*Portfolio holdings are subject to change.
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
KEMPER GLOBAL BLUE CHIP FUND
Portfolio of Investments at October 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT($) MARKET
(A)REPURCHASE AGREEMENTS--2.7% OR NUMBER OF SHARES VALUE ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
UNITED STATES
Donaldson, Lufkin & Jenrette, dated
10/30/98, 5.40%, due 11/2/98
(Cost $253,000) 253,000 253,000
----------------------------------------------------------------------------
GOVERNMENT OBLIGATIONS--8.6%
UNITED KINGDOM--1.4%
(PRINCIPAL AMOUNT IN
LOCAL CURRENCY)
United Kingdom Treasury Bond,
8.50%, 7/16/07 63,400 130,831
- ---------------------------------------------------------------------------------------------------------------------
UNITED STATES--7.2%
U.S. Treasury Bond, 6.375%, 8/15/27 600,000 691,404
----------------------------------------------------------------------------
TOTAL GOVERNMENT OBLIGATIONS
(Cost $833,754) 822,235
----------------------------------------------------------------------------
EQUITY SECURITIES--88.7%
ARGENTINA--1.5%
YPF S.A. "D" (ADR)
(PETROLEUM COMPANY) 4,800 shs. 138,900
----------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
AUSTRALIA--2.3%
Foster's Brewing Group, Ltd.
(LEADING BREWERY) 43,200 106,110
Normandy Mining Ltd.
(MINING AND OIL ENTERPRISES) 54,300 48,531
Woodside Petroleum Ltd.
(MAJOR OIL AND GAS PRODUCER) 13,100 69,225
----------------------------------------------------------------------------
223,866
- ---------------------------------------------------------------------------------------------------------------------
BRAZIL--1.1%
Aracruz Celulose S.A. (ADR)
(PRODUCER OF EUCALYPTUS KRAFT PULP) 7,800 65,325
Companhia Vale do Rio Doce (ADR)
(MINING, RAIL TRANSPORTATION AND
MINERAL SALES IN IRON ORE, ALUMINUM,
MANGANESE, TITANIUM, GOLD AND COPPER) 2,900 44,225
----------------------------------------------------------------------------
109,550
- ---------------------------------------------------------------------------------------------------------------------
CANADA--5.1%
BCE, Inc.
(TELECOMMUNICATION SERVICES) 3,900 132,191
Barrick Gold Corp.
(GOLD EXPLORATION AND PRODUCTION IN
NORTH AND SOUTH AMERICA) 4,300 91,912
Canadian National Railway
(RAILROAD OPERATOR) 3,200 159,793
Molson Cos., Ltd. "A"
(BREWERY) 6,700 101,390
----------------------------------------------------------------------------
485,286
- ---------------------------------------------------------------------------------------------------------------------
DENMARK--1.4%
Unidanmark A/S "A"
(BANK HOLDING COMPANY) 1,800 137,208
----------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE ($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FRANCE--1.8%
AXA S.A.
(INSURANCE GROUP PROVIDING INSURANCE,
FINANCE AND REAL ESTATE SERVICES) 1,042 117,768
Canal Plus S.A.
(LEADING PAY TELEVISION NETWORK) 234 56,768
----------------------------------------------------------------------------
174,536
- ---------------------------------------------------------------------------------------------------------------------
GERMANY--12.5%
Allianz AG
(MULTI-LINE INSURANCE COMPANY) 383 131,328
BASF AG
(LEADING INTERNATIONAL CHEMICAL
PRODUCER) 2,487 105,395
Bayerische Vereinsbank AG
(COMMERCIAL BANK) 1,428 113,361
Deutsche Telekom AG
(TELECOMMUNICATION SERVICES) 6,267 170,702
Gerresheimer Glas AG
(MANUFACTURER OF GLASS CONTAINERS AND
TUBING) 7,609 110,242
Hoechst AG
(CHEMICAL PRODUCER) 1,703 71,143
Muenchener Rueckversicherungs-
Gesellschaft AG 323 147,802
Warrants, expire 6/3/02 12 522
(PROVIDER OF COMPREHENSIVE
REINSURANCE SERVICES)
RWE AG 2,754 149,296
RWE AG (pfd.) 200 7,305
(PRODUCER AND MARKETER OF PETROLEUM AND
CHEMICAL PRODUCTS)
VIAG AG
(PROVIDER OF ELECTRICAL POWER AND
NATURAL GAS SERVICES, ALUMINUM
PRODUCTS, CHEMICALS, CERAMICS AND
GLASS) 277 188,123
----------------------------------------------------------------------------
1,195,219
- ---------------------------------------------------------------------------------------------------------------------
HONG KONG--.2%
New World Development Co., Ltd.
(PROPERTY INVESTMENT AND DEVELOPMENT,
CONSTRUCTION AND ENGINEERING, HOTELS
AND RESTAURANTS, TELECOMMUNICATIONS) 7,108 16,520
----------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
JAPAN--4.9%
Canon Inc.
(LEADING PRODUCER OF VISUAL IMAGE AND
INFORMATION EQUIPMENT) 5,000 94,716
Daiwa Securities Co., Ltd.
(BROKERAGE AND OTHER FINANCIAL
SERVICES) 21,000 59,536
Sumitomo Metal Mining Co., Ltd.
(LEADING GOLD, NICKEL AND COPPER
MINING COMPANY) 19,000 63,497
Nichido Fire & Marine Insurance Co.,
Ltd.
(PROPERTY AND CASUALTY INSURANCE
COMPANY) 15,000 77,448
Yamanouchi Pharmaceutical Co., Ltd.
(LEADING MANUFACTURER OF ETHICAL
DRUGS) 6,000 172,165
----------------------------------------------------------------------------
467,362
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE ($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NETHERLANDS--.7%
AEGON Insurance Group NV
(INSURANCE COMPANY) 720 62,470
----------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
PORTUGAL--1.0%
Electricidade de Portugal
(ELECTRIC UTILITY) 3,850 96,774
----------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
SWEDEN--1.9%
AGA AB "B"
(PRODUCER AND DISTRIBUTOR OF
INDUSTRIAL AND MEDICAL GASES) 8,900 117,559
Astra AB "A"
(PHARMACEUTICAL COMPANY) 4,200 68,135
----------------------------------------------------------------------------
185,694
- ---------------------------------------------------------------------------------------------------------------------
SWITZERLAND--6.4%
Ciba Specialty Chemicals
(MANUFACTURER OF CHEMICAL PRODUCTS
FOR PLASTICS, COATINGS, FIBERS AND
FABRICS) 661 67,787
Nestle SA
(FOOD MANUFACTURER) 98 208,234
Novartis AG
(PHARMACEUTICAL COMPANY) 79 142,216
Swiss Reinsurance
(LIFE, ACCIDENT AND HEALTH INSURANCE
COMPANY) 44 97,908
Swisscom AG
(OPERATOR OF TELECOMMUNICATION
NETWORKS AND NETWORK APPLICATION
SERVICES) 268 90,757
----------------------------------------------------------------------------
606,902
- ---------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM--13.5%
British Telecom PLC
(TELECOMMUNICATION SERVICES) 14,127 182,556
Diageo PLC
(PRODUCER AND DISTRIBUTOR OF FOOD
PRODUCTS, BEER AND LIQUOR; OWNER OF
FAST FOOD RESTAURANTS) 10,441 112,728
Enterprise Oil PLC
(OIL AND GAS EXPLORATION AND
PRODUCTION) 14,122 96,446
Flextech PLC
(BROADCASTER OF ENTERTAINMENT
PROGRAMS) 12,195 114,314
General Electric Co., PLC
(MANUFACTURER OF POWER,
COMMUNICATIONS AND DEFENSE EQUIPMENT
AND OTHER VARIOUS ELECTRICAL
COMPONENTS) 13,357 106,202
National Grid Group PLC
(OWNER AND OPERATOR OF ELECTRIC
TRANSMISSION SYSTEMS) 17,238 118,016
Railtrack Group PLC
(OPERATOR OF RAILWAY INFRASTRUCTURE) 5,127 137,743
Reuters Holdings PLC
(INTERNATIONAL NEWS AGENCY) 8,201 84,425
Shell Transport & Trading PLC
(PART OWNER OF ROYAL DUTCH SHELL CO.) 24,831 150,048
</TABLE>
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unilever PLC
(MANUFACTURER OF BRANDED AND PACKAGED
CONSUMER GOODS, FOOD, DETERGENTS AND
PERSONAL CARE PRODUCTS) 14,411 144,735
United Assurance Group PLC
(HOLDING COMPANY FOR INSURANCE
BUSINESSES AND FINANCIAL SERVICES
PROVIDERS) 3,732 36,326
----------------------------------------------------------------------------
1,283,539
- ---------------------------------------------------------------------------------------------------------------------
UNITED STATES--34.4%
American Greeting Corp., "A"
(DESIGNER OF GREETING CARDS) 2,800 112,350
CINergy Corp.
(HOLDING COMPANY OF ELECTRICAL
UTILITIES IN OHIO, INDIANA AND
KENTUCKY) 4,700 162,150
Comcast Corp. "A"
(CABLE TV, SOUND AND
TELECOMMUNICATION SYSTEMS) 2,600 128,375
Computer Associates International, Inc.
(DESIGNER AND PRODUCER OF
STANDARDIZED SOFTWARE FOR VARIOUS
BUSINESS APPLICATIONS) 2,600 102,375
CSX Corp.
(RAILROAD, INTEGRATED TRANSPORTATION
SYSTEMS AND SHIPPING CONTAINER
COMPANY) 2,800 109,900
Duke Energy Corp.
(ELECTRIC UTILITY IN THE CAROLINAS) 1,200 77,625
Enron Corp.
(MAJOR NATURAL GAS PIPELINE SYSTEM) 1,400 73,850
Homestake Mining Co.
(MAJOR INTERNATIONAL GOLD PRODUCER) 6,300 74,812
International Business Machines Corp.
(PRINCIPAL MANUFACTURER AND SERVICER
OF BUSINESS AND COMPUTING MACHINES) 700 103,906
Lockheed Martin Corp.
(MANUFACTURER OF AIRCRAFT, MISSILES
AND SPACE EQUIPMENT) 1,500 167,062
Newmont Mining Corp.
(INTERNATIONAL GOLD EXPLORATION AND
MINING COMPANY) 4,900 104,125
Northrop Grumman Corp.
(MANUFACTURER OF AIRCRAFT, AIRCRAFT
ASSEMBLIES AND ELECTRONIC SYSTEMS FOR
MILITARY AND COMMERCIAL USE) 2,200 175,450
PacifiCorp
(ELECTRIC UTILITY) 5,700 108,656
Peco Energy Co.
(ELECTRIC AND GAS UTILITY) 3,600 139,275
P G & E Corp.
(ELECTRIC AND GAS UTILITY) 3,300 100,444
ProLogis Trust
(OWNER AND OPERATOR OF BULK
DISTRIBUTION AND INDUSTRIAL
FACILITIES) 5,600 122,150
(b)Sabre Group Holdings Inc.
(TRAVEL RESERVATION SYSTEM PROVIDER) 3,700 139,444
(b)Sterling Commerce, Inc.
(PRODUCER OF ELECTRONIC DATA
INTERCHANGE PRODUCTS AND SERVICES) 1,800 63,450
</TABLE>
13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
MARKET
NUMBER OF SHARES VALUE ($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(b)Stillwater Mining Co.
(EXPLORATION AND DEVELOPMENT OF MINES
IN MONTANA PRODUCING PLATINUM,
PALLADIUM AND ASSOCIATED METALS) 2,600 84,175
(b)Sun Microsystems, Inc.
(PRODUCER OF HIGH-PERFORMANCE
WORKSTATIONS, SERVERS AND NETWORKING
SOFTWARE) 2,200 128,150
(b)Tele-Comm Liberty Media Group "A"
(OPERATOR OF CABLE TELEVISION
SYSTEMS) 2,700 102,769
(b)Tele-Communications Inc. "A"
(CABLE TELEVISION SYSTEMS AND
MICROWAVE SERVICES) 2,700 113,737
(b)Tele-Communications International,
Inc. "A"
(TELECOMMUNICATION AND BROADBAND
CABLE TELEVISION SERVICES) 3,400 75,862
UNUM Corp.
(PROVIDER OF DISABILITY, HEALTH AND
LIFE INSURANCE AND GROUP PENSION
PRODUCTS) 3,500 155,531
(b)US Airways Group, Inc.
(MAJOR AIRLINE) 1,900 107,469
USEC Inc.
(PROVIDER OF ENRICHED URANIUM
PRODUCTS AND SERVICES) 10,500 153,562
Unicom Corp.
(ELECTRIC UTILITY IN NORTHERN
ILLINOIS) 3,700 139,444
Williams Cos., Inc.
(GAS PIPELINE OPERATOR, PETROLEUM
PRODUCER) 5,800 159,137
----------------------------------------------------------------------------
3,285,235
----------------------------------------------------------------------------
TOTAL EQUITY SECURITIES
(Cost $8,418,098) 8,469,061
----------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost $9,504,852) 9,544,296
----------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities. The collateral is monitored daily by the fund
so that its market value exceeds the carrying value of the repurchase
agreement.
(b) Non-income producing security.
Based on the cost of investments of $9,533,493 for federal income tax purposes
at October 31, 1998, the gross unrealized appreciation was $501,706, the gross
unrealized depreciation was $490,903 and the net unrealized appreciation on
investments was $10,803.
See accompanying Notes to Financial Statements.
14
<PAGE> 15
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SHAREHOLDERS
KEMPER GLOBAL BLUE CHIP FUND
We have audited the accompanying statements of assets and liabilities,
including the portfolio of investments, of Kemper Global Blue Chip 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.
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
Global Blue Chip 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
15
<PAGE> 16
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1998
<TABLE>
<S> <C>
- --------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------
Investments, at value
(Cost $9,251,852) $9,291,296
- --------------------------------------------------------------------------
Repurchase agreement, at value
(Cost $253,000) 253,000
- --------------------------------------------------------------------------
Cash 348
- --------------------------------------------------------------------------
Receivable for:
Dividends and interest 22,212
- --------------------------------------------------------------------------
Fund shares sold 60,862
- --------------------------------------------------------------------------
Foreign taxes 3,046
- --------------------------------------------------------------------------
Reimbursement from Adviser 62,057
- --------------------------------------------------------------------------
Deferred organization expense 12,495
- --------------------------------------------------------------------------
TOTAL ASSETS 9,705,316
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------
Payable for:
Fund shares redeemed 2,350
- --------------------------------------------------------------------------
Unrealized depreciation on forward foreign currency
exchange contracts 40,722
- --------------------------------------------------------------------------
Other payables and accrued expenses 122,621
- --------------------------------------------------------------------------
Total liabilities 165,693
- --------------------------------------------------------------------------
NET ASSETS $9,539,623
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- --------------------------------------------------------------------------
Paid-in capital $9,698,373
- --------------------------------------------------------------------------
Accumulated net realized loss on investments (184,846)
- --------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on:
Investments 39,444
- --------------------------------------------------------------------------
Foreign currency related transactions (40,503)
- --------------------------------------------------------------------------
Undistributed net investment income 27,155
- --------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $9,539,623
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
THE PRICING OF SHARES
- --------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($6,111,816 / 598,383 shares outstanding) $10.21
- --------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $10.83
- --------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($2,695,332 / 266,060 shares outstanding) $10.13
- --------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($732,475 / 72,227 shares outstanding) $10.14
- --------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
16
<PAGE> 17
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 $5,231) $ 74,663
- -------------------------------------------------------------------------
Interest 42,657
- -------------------------------------------------------------------------
Total investment income 117,320
- -------------------------------------------------------------------------
Expenses:
Management fee 43,083
- -------------------------------------------------------------------------
Distribution services fee 11,317
- -------------------------------------------------------------------------
Administrative services fee 10,771
- -------------------------------------------------------------------------
Custodian, accounting and transfer agent fees and related
expenses 181,052
- -------------------------------------------------------------------------
Reports to shareholders 3,860
- -------------------------------------------------------------------------
Professional fees 27,500
- -------------------------------------------------------------------------
Registration fees 2,768
- -------------------------------------------------------------------------
Amortization of organization expenses 2,505
- -------------------------------------------------------------------------
Directors' fees and other 2,601
- -------------------------------------------------------------------------
Total expenses before expense waiver 285,457
- -------------------------------------------------------------------------
Less expenses waived and absorbed by investment manager (194,546)
- -------------------------------------------------------------------------
Total expenses after expense waiver 90,911
- -------------------------------------------------------------------------
NET INVESTMENT INCOME 26,409
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- -------------------------------------------------------------------------
Net realized gain (loss) from:
Investments (184,846)
- -------------------------------------------------------------------------
Foreign currency related transactions 746
- -------------------------------------------------------------------------
(184,100)
- -------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) on:
Investments 39,444
- -------------------------------------------------------------------------
Foreign currency related transactions (40,503)
- -------------------------------------------------------------------------
(1,059)
- -------------------------------------------------------------------------
Net loss on investments (185,159)
- -------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(158,750)
- -------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
- --------------------------------------------------------------------------
OPERATIONS AND CAPITAL SHARE ACTIVITY
- --------------------------------------------------------------------------
<S> <C>
Net investment income $ 26,409
- --------------------------------------------------------------------------
Net realized loss (184,100)
- --------------------------------------------------------------------------
Change in net unrealized depreciation (1,059)
- --------------------------------------------------------------------------
Net decrease in net assets resulting from operations (158,750)
- --------------------------------------------------------------------------
Net increase from capital share transactions 9,678,373
- --------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 9,519,623
- --------------------------------------------------------------------------
- -------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------
Beginning of period 20,000
- --------------------------------------------------------------------------
END OF PERIOD (including undistributed
net investment income of $27,155) $9,539,623
- --------------------------------------------------------------------------
</TABLE>
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE
FUND Kemper Global Blue Chip 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 exchange
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 currency exchange contracts, disposition of
foreign currencies, and the
18
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
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 $156,000, 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 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 management fee
of 1/12 of the annual rate of 1.00% of the first
$250 million of average daily net assets declining
to .90% of average daily net assets in excess of $1
billion. 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 $194,546 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
19
<PAGE> 20
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 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 $3,024 136,361
</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 (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.
Distribution fees, CDSC and commissions related to
Class B and Class C shares are as follows:
<TABLE>
<CAPTION>
COMMISSIONS AND
CDSC DISTRIBUTION FEES PAID
RECEIVED BY KDI BY KDI TO FIRMS
--------------- ----------------------
<S> <C> <C>
Period ended October 31, 1998 $518 98,788
</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 $9,416 to
various firms.
SHAREHOLDER SERVICES AGREEMENT. Kemper Service
Company is the transfer, dividend paying and
shareholder service agent for the fund. The fund
incurred shareholder services fees of $30,174 for
the period ended October 31, 1998, $9,514 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 fee waiver
of $41,667 by Scudder Kemper.
20
<PAGE> 21
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 $12,842,450
Proceeds from sales 3,405,752
- --------------------------------------------------------------------------------
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 652,704 $6,738,953
---------------------------------------------------------------------------
Class B 315,577 3,205,303
---------------------------------------------------------------------------
Class C 86,586 897,853
---------------------------------------------------------------------------
---------------------------------------------------------------------------
SHARES REDEEMED
Class A (55,023) (561,638)
---------------------------------------------------------------------------
Class B (50,219) (450,263)
---------------------------------------------------------------------------
Class C (15,061) (151,835)
---------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $9,678,373
---------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
6 FORWARD FOREIGN
CURRENCY CONTRACTS In order to protect itself against a decline in the
value of a particular foreign currency against the
U.S. dollar, the fund has entered into forward
contracts to deliver foreign currency in exchange
for U.S. dollars as described below. The fund bears
the market risk that arises from changes in foreign
exchange rates, and accordingly, the net unrealized
gain or loss on these contracts are reflected in
the accompanying financial statements. The fund
also bears the credit risk (which is limited to the
unrealized gain, if any) if the counterparty fails
to perform under the contract. At October 31, 1998,
the fund had the following forward foreign currency
contracts outstanding with a settlement date in
March 1999.
<TABLE>
<CAPTION>
CONTRACT UNREALIZED
FOREIGN CURRENCY AMOUNT IN LOSS AT
TO BE DELIVERED U.S. DOLLARS 10/31/98
------------------------------------------------------------------------------
<S> <C> <C>
34,042,655 Japanese Yen $258,017 $(40,722)
------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 22
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 .05 -- --
- ---------------------------------------------------------------------------------------------------------
Net realized and unrealized gain .66 .63 .64
- ---------------------------------------------------------------------------------------------------------
Total from investment operations .71 .63 .64
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.21 10.13 10.14
- ---------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 7.47% 6.63 6.74
- ---------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------
Expenses absorbed by the fund 1.80% 2.68 2.65
- ---------------------------------------------------------------------------------------------------------
Net investment income .92% .04 .07
- ---------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------
Expenses 6.06% 7.69 7.66
- ---------------------------------------------------------------------------------------------------------
Net investment loss (3.34)% (4.97) (4.94)
- ---------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ---------------------------------------------------------------------------------------------------------
Net assets at end of period $9,539,623
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 84%
- ---------------------------------------------------------------------------------------------------------
</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.
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 DIEGO ESPINOSA Assistant Secretary
Vice President Vice President
CAROLINE PEARSON
FRED B. RENWICK JOAN R. GREGORY Assistant Secretary
Director Vice President
ELIZABETH C. WERTH
JOHN B. TINGLEFF TARA C. KENNEY Assistant Secretary
Director Vice President
BRENDA LYONS
JOHN G. WEITHERS THOMAS W. LITTAUER Assistant Treasurer
Director 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.
KGBCF - 2(12/98) 1061710
