<PAGE> 1
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
ANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED OCTOBER 31, 1998
[MORNINGSTAR RATINGS LOGO]
SEEKS LONG-TERM GROWTH OF CAPITAL PRIMARILY THROUGH EQUITY
INVESTMENT IN EMERGING MARKETS AROUND THE GLOBE.
KEMPER EMERGING MARKETS GROWTH FUND
"... In assessing the market environment and the fund's performance, we are
pleased to report that the fund escaped much of the most dramatic market fallout
by avoiding Russia and Asia completely. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
7
TERMS TO KNOW
9
GEOGRAPHIC COMPOSITION
10
LARGEST HOLDINGS
11
PORTFOLIO OF
INVESTMENTS
18
REPORT OF
INDEPENDENT AUDITORS
19
FINANCIAL STATEMENTS
21
NOTES TO
FINANCIAL STATEMENTS
25
FINANCIAL HIGHLIGHTS
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER EMERGING MARKETS
GROWTH FUND TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE 10-MONTH PERIOD ENDED OCTOBER 31, 1998
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
CLASS A -17.89
CLASS B -18.53
CLASS C -18.32
LIPPER EMERGING MARKETS CATEGORY AVERAGE* -30.06
- --------------------------------------------------------------------------------
</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.
NET ASSET VALUE
<TABLE>
<CAPTION>
AS OF AS OF
10/31/98 1/9/98
- -----------------------------------------------------------------------------------
<S> <C> <C>
KEMPER EMERGING MARKETS
GROWTH FUND CLASS A $7.80 $9.50
- -----------------------------------------------------------------------------------
KEMPER EMERGING MARKETS
GROWTH FUND CLASS B $7.74 $9.50
- -----------------------------------------------------------------------------------
KEMPER EMERGING MARKETS
GROWTH FUND CLASS C $7.76 $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.
YOUR FUND'S STYLE [DIAGRAM]
MORNINGSTAR EQUITY STYLE BOX
[MORNINGSTAR EQUITY STYLE Source: Data provided by Morningstar, Inc.,
BOX] 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 PORT-
FOLIO 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 JANUARY 9,
1998. MORNINGSTAR HAS PLACED KEMPER EMERGING
MARKETS GROWTH FUND IN THE DIVERSIFIED
EMERGING MARKETS 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.
<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
[CORNELL PHOTO]
JOYCE CORNELL IS A MEMBER OF SCUDDER KEMPER INVESTMENTS' GLOBAL EQUITY GROUP,
WHERE SHE FOCUSES HER PORTFOLIO MANAGEMENT AND RESEARCH RESPONSIBILITIES ON
EMERGING MARKETS. SHE HAS 11 YEARS OF INVESTMENT EXPERIENCE. CORNELL RECEIVED A
BACHELOR'S DEGREE FROM OBERLIN COLLEGE IN 1966 AND AN M.ED. DEGREE FROM TUFTS
UNIVERSITY IN 1967.
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.
IN A PERIOD OF EXTREME VOLATILITY IN EMERGING MARKETS, KEMPER EMERGING MARKETS
GROWTH FUND OUTPERFORMED ITS PEER GROUP AND ITS BENCHMARK INDEX BY AVOIDING
RUSSIA AND THROUGH STRONG POSITIONING IN THE RELATIVELY STABLE MIDDLE EAST. LEAD
PORTFOLIO MANAGER JOYCE CORNELL DISCUSSES MARKET CONDITIONS AND EXPLAINS WHY SHE
AND HER TEAM EXPECT TO SEE A REBOUND IN EMERGING MARKETS OVER THE COURSE OF THE
COMING YEAR.
Q CAN YOU PROVIDE US WITH AN OVERVIEW OF WHAT HAPPENED IN EMERGING MARKETS
AND HOW THE FUND PERFORMED?
A The past year was difficult for emerging markets with all emerging regions
being somewhat tarred by the Asian brush. Early September marked the low point,
however, as investor tolerance for emerging markets tumbled following Russia's
devaluation and debt moratorium. The Russian economy is small, measuring less
than one percent of the global total. Nonetheless, investors worried that other
emerging markets might be affected by Russia's troubles and fled, driving down
other emerging markets in the process. Most markets were swamped by negative
sentiment without regard for fundamentals.
In assessing the market environment and the fund's performance, we are pleased
to report that the fund escaped much of the most dramatic market fallout by
avoiding Russia and Asia completely. Kemper Emerging Markets Growth Fund
declined 17.89 percent (Class A shares, unadjusted for any sales charge).
Relative to its peers, the fund strongly outperformed the Lipper Emerging
Markets category average, down 30.06 percent year-to-date. The fund also ended
the period well ahead of its benchmark index, the International Finance
Corporation (IFC) Emerging Markets Investable Index which was down 22.89
percent.
Q WERE THERE ANY BRIGHT SPOTS?
A Our investments in several Arab markets held us in very good stead.
Morocco rose 31 percent for example, and Jordan dropped mildly to 6 percent.
Elsewhere in the Mediterranean Basin, Greece rose 43 percent and Portugal rose
33 percent. This contrasts mightily with the 38 percent drop in Hungary, and 14
percent drop in Poland not to mention Mexico's plunge of 50 percent and Brazil's
35 percent. Arab markets' strong economic growth, inexpensive markets with low
leverage continue to appeal and we believe will continue to outperform. Our
analysis is that many of these countries are well along in the implementation of
sound economic polices and the liberalization of their economies.
Arab countries have nurtured the growth of their domestic economies with
relatively less dependence on exports for growth. Where there is relatively more
external dependence in Morocco and Tunisia, it is on tourism and agricultural
exports with the linkage predominantly to Europe. All of these markets are
characterized by remarkable efforts at improving openness, transparency, and
economic growth. Their fiscal management is good to excellent and, with the
exception of Lebanon, debt burdens are moderate. Even Lebanon is showing
improvement this year. There is also very little foreign portfolio
5
<PAGE> 6
PERFORMANCE UPDATE
investment in these markets so there is a lot to gain when the world starts to
focus on their robust growth and cheap valuations.
Q YOU MENTIONED RUSSIA TRIGGERED A SELL-OFF IN MANY EMERGING MARKETS. CAN
YOU EXPAND ON HOW THIS HAPPENED?
A The country's devaluation and debt default this summer triggered a chain
reaction of selling in the more liquid emerging markets. Hedge funds were
significant holders of Russian paper and were typically quite leveraged.
Russia's financial collapse triggered margin calls, which were met by selling
whatever could be sold. Hungary and Poland fit this category in addition to
being former members of the old Soviet trade block, which caused some investors
to imagine that Russia's collapse could have a trade impact. In fact there is
little economic connection anymore between these countries and Russia, but the
need for liquidity, plus heightened risk aversion, sidelined consideration of
fundamentals. The fund's substantial positions in Hungary and Poland suffered as
a result. Russia's actions additionally prompted investors to again be wary of
any other countries with unstable fiscal or monetary policies. Brazil and Turkey
were prime targets. Happily the fund held little in these markets.
Q LATIN AMERICAN BOURSES WERE PARTICULARLY HARD HIT BY THE RUSSIAN CRISIS.
WILL THEY AVOID A MELTDOWN LIKE THAT OF ASIA?
A Brazil is a large economy in trouble. It is hugely indebted and increasing
its borrowing due to uncontrolled fiscal profligacy. Now escalating interest
rates are forcing an insupportable cost to rolling over maturing debt. Brazil
thus has the potential to unsettle markets further if it defaults or lets its
overvalued currency devalue. Brazil is on an unsustainable path; the IMF bailout
buys Brazil six months at most to get its fiscal spending under control. If
Brazil fails to do this, the likelihood of a debt restructuring and devaluation
is high. Such a failure on Brazil's part will temporarily rattle markets but
will likely be executed in a more orderly fashion than Russia's and will not
inflict substantial additional fundamental damage on the global financial
system. Markets are already anticipating some fallout. In short, we think we are
near the end of such destabilizing events because world markets have already
taken the big offenders to the woodshed. Now we can get back to the business of
investing in well run, growing (yes, such exist!) economies with extravagantly
cheap companies. Some of our favorite investments in Hungary are selling for 2.5
times free cash flow and 4 to 5 times trailing earnings. A number of our
Egyptian holdings have yields above 10 percent and sport strong earnings growth.
Q WHAT IS YOUR CURRENT INVESTMENT FOCUS?
A We anticipate that the deflation emanating from Asia will continue. As a
consequence we have emphasized companies with little or no debt and the ability
to fund growth from internally generated cash. We also have favored investments
in companies producing non-tradables. Services and products not fully exposed to
global deflationary forces are likely to have more pricing power and higher
earnings growth over the foreseeable future.
Orszagos Takarekpenztar es Kereskedelmi Bank Rt (OTP) in Hungary is an
excellent example, this bank is in Hungary and has a countrywide branch network
allowing them to source inexpensive deposits. This is a serious competitive
advantage against any newcomer trying to enter the market. OTP also uses this
branch network to sell other financial products such as insurance. Importantly,
Hungary provides a fine environment for bank growth with interest rates
declining steadily, stimulating loan growth and a robustly growing economy
creating loan demand as well. This increasing demand allows OTP to increase its
profitability dramatically through both volume growth and economies of scale.
OTP enjoys pricing power due to demand and structural barriers to entry.
Q BECAUSE OF ASIA'S DEEP-ROOTED PROBLEMS, VALUATIONS THERE ARE AMONG THE
LEAST ATTRACTIVE IN THE WORLD. WHEN WILL IT MAKE SENSE TO RETURN TO ASIA?
A We remain wary of Asia despite its recent bounce. A key restructuring step
has yet to be taken: recapitalization of the banking systems. Without a system
to provide financial intermediation, growth can't take place. We are
additionally concerned that with a slowing U.S. economy, Asia's exporting its
way to recovery will be more and more difficult. There are always exceptions to
broad generalizations and we are watching Taiwan and the Philippines, two
countries in the region that are in better shape with banking systems intact and
some interesting investment opportunities. Taiwan, in particular, has been more
capitalist than its neighbors by regularly allowing businesses to fail. This has
resulted in a competitive, resilient industrial
6
<PAGE> 7
PERFORMANCE UPDATE
base. We have added a few world-class technology companies to the portfolio. In
the stricken economies of Thailand and Indonesia, the smoke of confusion and
economic destruction is clearing a bit and we are buying a few promising
survivors. The recessions in Asia will last a long time and earnings of
companies are still falling.
Q WHAT IS YOUR OVERALL OUTLOOK FOR THE EMERGING EQUITY MARKETS?
A We believe the extremely attractive value now exposed in many solid
markets will attract investors as the financial world settles down after the
convulsions it experienced this summer. Speculators, various hedge funds and
many banks have been forced to sell at any price, but this process has about run
its course. Forced liquidations have created an excellent opportunity for
genuine investors. If ever there were a time when the investor could profit at
the expense of the speculator, it is now.
TERMS TO KNOW
CURRENCY DEVALUATION A significant decline of a currency's value relative to
other currencies, such as the U.S. dollar. Trading or central bank intervention
(or the lack of intervention) may prompt this in the currency markets. For U.S.
investors who are investing overseas, a devaluation of a foreign currency can
have the effect of reducing the total return of their investment.
EXCHANGE RATE The price at which one country's currency can be exchanged into
another currency. Currencies represent a store of value in the economic,
political, and financial health of the home country. Changes in the value of a
currency can add to or subtract from an investor's total return in a foreign
investment.
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.
OVER/UNDERWEIGHTING Refers to the allocation of assets -- usually by sector,
industry, or country -- within a portfolio relative to a benchmark index, (i.e.
the IFC Emerging Markets Investable Index) or an investment universe.
PRICE/EARNINGS RATIO (P/E) (also "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. Typically based on a company's projected earnings
for the next 12 months, a higher "earnings multiple" indicates a higher expected
growth rate and the potential for greater price fluctuations.
TRANSPARENCY The degree to which investors can evaluate if a company is managed
in the interests of shareholders. Transparency is often not as good in
developing markets where disclosure requirements may be less stringent, and
protectionism, subsidies, and cronyism may distort the business environment.
SOURCES: SCUDDER KEMPER INVESTMENTS, INC., BARRON'S DICTIONARY OF FINANCE AND
INVESTMENT TERMS
7
<PAGE> 8
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 EMERGING MARKETS GROWTH FUND CLASS A -22.62% (since 1/9/98)
- ------------------------------------------------------------------------------------------------------
KEMPER EMERGING MARKETS GROWTH FUND CLASS B -21.79 (since 1/9/98)
- ------------------------------------------------------------------------------------------------------
KEMPER EMERGING MARKETS GROWTH FUND CLASS C -18.32 (since 1/9/98)
- ------------------------------------------------------------------------------------------------------
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER ENERGY MARKETS GROWTH FUND CLASS A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
KEMPER EMERGING MARKETS IFC EMERGING MARKETS INVESTABLE
GROWTH FUND CLASS A1 INDEX+
----------------------- -------------------------------
<S> <C> <C>
1/9/98 9425.00 10000.00
3/31/98 10496.00 10684.00
9534.00 8314.00
7480.00 6475.00
10/31/98 7738.00 7205.00
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER ENERGY MARKETS GROWTH FUND CLASS B
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
KEMPER EMERGING MARKETS IFC EMERGING MARKETS INVESTABLE
GROWTH FUND CLASS B1 INDEX+
----------------------- -------------------------------
<S> <C> <C>
1/9/98 10000.00 10000.00
3/31/98 11105.20 10684.00
10079.70 8314.00
7884.20 6475.00
10/31/98 7821.50 7205.00
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER ENERGY MARKETS GROWTH FUND CLASS C
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
KEMPER EMERGING MARKETS IFC EMERGING MARKETS INVESTABLE
GROWTH FUND CLASS C1 INDEX+
----------------------- -------------------------------
<S> <C> <C>
1/9/98 10000.00 10000.00
3/31/98 11116.00 10684.00
10095.00 8314.00
7905.00 6475.00
10/31/98 8168.00 7205.00
</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 EMERGING MARKETS GROWTH FUND TO THE IFC EMERGING MARKETS INVESTABLE
INDEX, YOU SHOULD ALSO NOTE THAT FUND'S PERFORMANCE REFLECTS THE MAXIMUM
SALES CHARGE, WHILE NO SUCH CHARGES ARE REFLECTED IN THE PERFORMANCE OF THE
INDEX.
+ INTERNATIONAL FINANCE CORPORATION EMERGING MARKETS INVESTABLE INDEX IS
GENERALLY REPRESENTATIVE OF EQUITIES FROM 31 EMERGING MARKETS THAT ARE
ACCESSIBLE TO FOREIGN INVESTORS.
8
<PAGE> 9
GEOGRAPHIC COMPOSITION
GEOGRAPHIC COMPOSITION OF
KEMPER EMERGING MARKETS GROWTH FUND
Based on total equity holdings as of October 31, 1998
[BAR GRAPH]
<TABLE>
<CAPTION>
<S> <C>
POLAND 12.4%
EGYPT 10.2%
MEXICO 9.2%
HUNGARY 8.1%
GREECE 4.5%
PORTUGAL 4.0%
MOROCCO 4.0%
PERU 3.5%
CROATIA 3.2%
BRAZIL 3.2%
- -----------------------------------------------------------------------
*Portfolio composition is subject to change.
</TABLE>
9
<PAGE> 10
LARGEST HOLDINGS
KEMPER EMERGING MARKETS GROWTH FUND'S TOP 15 HOLDINGS*
Representing 22.5 percent of the fund's equity holdings on October 31, 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
HOLDINGS COUNTRY PERCENT
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
1. PLIVA D.D. Croatia 2.6%
- ----------------------------------------------------------------------------------------------------
2. WIELKOPOLSKI BANK KREDYTOWY Poland 2.3%
- ----------------------------------------------------------------------------------------------------
3. MATAV RT ORDINARY Hungary 2.0%
- ----------------------------------------------------------------------------------------------------
4. CESKE RADIOKOMUNIKACE Czech Republic 1.7%
- ----------------------------------------------------------------------------------------------------
5. FOMENTO ECONOMICO MEXICANO Mexico 1.7%
- ----------------------------------------------------------------------------------------------------
6. MAGYAR OLAJ-ES GAZIPARI Hungary 1.6%
- ----------------------------------------------------------------------------------------------------
7. OTP BANK Hungary 1.4%
- ----------------------------------------------------------------------------------------------------
8. EMBRATEL PARTICIPACOES Brazil 1.5%
- ----------------------------------------------------------------------------------------------------
9. IZOLACJA Poland 1.2%
- ----------------------------------------------------------------------------------------------------
10. EGYPTIAN MOBILE NETWORK Egypt 1.1%
- ----------------------------------------------------------------------------------------------------
11. MINAS BUENAVENTURA Peru 1.1%
- ----------------------------------------------------------------------------------------------------
12. OMNIUM NORD AFRICAINE Morocco 1.1%
- ----------------------------------------------------------------------------------------------------
13. NATIONAL BANK OF OMAN Oman 1.1%
- ----------------------------------------------------------------------------------------------------
14. PORTUGAL TELECOM Portugal 1.1%
- ----------------------------------------------------------------------------------------------------
15. BANCO COMERCIAL PORTUGUES Portugal 1.0%
- ----------------------------------------------------------------------------------------------------
</TABLE>
*PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE.
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
KEMPER EMERGING MARKETS GROWTH FUND
Portfolio of Investments at October 31, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT($) OR MARKET
SHORT-TERM NOTES--18.2% NUMBER OF SHARES VALUE($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
UNITED STATES
Federal National Mortgage Association,
5.45%, 11/2/98
(Cost: $326,951) 327,000 326,951
----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
EQUITY SECURITIES--81.8%
BAHRAIN--.4%
- -------------------------------------------------------------------------------------------------------------------------
(c)Arab Insurance Group (GDR)
(INSURANCE COMPANY) 700shs. 6,668
----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
BOLIVIA--.1%
(a)Corriente Resources, Inc.
(MINING AND PROCESSING OF GOLD, BISMUTH,
TIN AND TUNGSTEN IN SOUTH AMERICA) 2,000 907
----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
BOTSWANA--.6% Sechaba Investment Trust Co.
(BREWERY) 8,000 10,264
----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
BRAZIL--3.2%
Embratel Participacoes
(PROVIDER OF LONG-DISTANCE
TELECOMMUNICATION SERVICES) 1,942,000 27,350
Petroleo Brasileiro S.A.
(PETROLEUM COMPANY) 93,000 11,694
Saraiva S.A. Livreiros Editores
(BOOK PUBLISHER) 1,400 3,134
Telecomunicacoes de Sao Paulo S.A.
(TELECOMMUNICATION SERVICES) 51,200 8,584
Tele Norte Leste Participacoes
(PROVIDER OF LOCAL TELECOMMUNICATION
SERVICES) 450,000 5,658
----------------------------------------------------------------------------------
56,420
- -------------------------------------------------------------------------------------------------------------------------
CHILE--1.6%
Compania de Telefonos de Chile, S.A. (ADR)
(TELECOMMUNICATION SERVICES) 250 5,484
Laboratorio Chile S.A. (ADR)
(MANUFACTURER AND DISTRIBUTOR OF
OFF-PATENT PHARMACEUTICAL PRODUCTS) 400 5,800
Vina Concha y Toro S.A. (ADR)
(WINE PRODUCER) 680 17,468
----------------------------------------------------------------------------------
28,752
- -------------------------------------------------------------------------------------------------------------------------
CROATIA--3.2%
Pliva D.D. (GDR)
(PHARMACEUTICAL COMPANY) 3,125 45,938
(a)Zagrebacka Banka (GDR)
(COMMERCIAL BANK) 1,100 11,770
----------------------------------------------------------------------------------
57,708
- -------------------------------------------------------------------------------------------------------------------------
CZECH REPUBLIC--1.7%
(a)Ceske Radiokomunikace A.S. (GDR)
(TV AND RADIO SIGNAL TRANSMISSION
SERVICES) 1,000 30,500
----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
EGYPT--10.2%
Al Ahram Beverage Co. 200 13,119
Al Ahram Beverage Co. (GDR)
(BEVERAGE COMPANY) 400 11,240
(a)Arab International Construction Co.
(CONSTRUCTION COMPANY) 2,142 15,543
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
PRINCIPAL AMOUNT($) OR MARKET
NUMBER OF SHARES VALUE($)
----------------------------------------------------------------------------------
<S> <C> <C> <C>
EFG Hermes Holdings
(BROKERAGE FIRM) 1,600 18,400
Eastern Tobacco Co.
(MAKER OF TOBACCO PRODUCTS) 700 16,000
Egypt Gas Co.
(CONSTRUCTION OF NATURAL GAS PIPELINES) 100 8,608
Egyptian Financial & Industrial Co.
(FERTILIZER PRODUCER) 200 3,382
Egyptian International Pharmaceutical Co.
(PHARMACEUTICAL COMPANY) 100 5,042
(a)Egyptian Mobile Network., Ltd.
(CELLULAR TELECOMMUNICATION SERVICES) 3,725 19,982
Madinet Nasser City Housing Co.
(REAL ESTATE DEVELOPMENT COMPANY) 100 3,098
Misr International Bank 230 4,488
Misr International Bank (GDR)
(COMMERCIAL AND FOREIGN BANK) 500 4,688
Misr Refrigeration & Air Conditioning
Manufacturing Co.
(MANUFACTURER AND DISTRIBUTOR OF AIR
CONDITIONING UNITS) 320 6,764
(b)(c)ORASCOM
(HOTEL AND RESORT DEVELOPER) 3,100 9,942
Olympic Group Financial
(MANUFACTURER OF WHITE GOODS) 2,800 11,633
Oriental Weavers Corp.
(CARPET MANUFACTURER) 580 12,496
Suez Cement Co. 200 3,090
Suez Cement Co. (GDR)
(CEMENT PRODUCER) 600 8,820
(a)Torrah Portland Cement Co.
(CEMENT PRODUCER) 450 7,321
----------------------------------------------------------------------------------
183,656
- -------------------------------------------------------------------------------------------------------------------------
ESTONIA--.4%
(a)Eesti Uhispanka
(COMMERCIAL BANK) 2,200 3,778
(a)Hansabank Ltd.
(PROVIDER OF COMMERCIAL BANKING SERVICES) 800 3,320
----------------------------------------------------------------------------------
7,098
- -------------------------------------------------------------------------------------------------------------------------
FINLAND--.5%
Nokia A.B. Oy "A" (ADR)
(LEADING CELLULAR TELEPHONE MANUFACTURER) 100 9,306
----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
GHANA--.2%
(a)Social Security Bank Ltd.
(FULL SERVICE COMMERCIAL BANK) 4,500 3,827
----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
GREECE--4.5%
Alpha Credit Bank A.E.
(COMMERCIAL BANK) 222 17,745
Delta Informatics S.A.
(CORPORATE INFORMATION SERVICES) 600 11,172
Ethniki General Insurance Co.
(INSURANCE AND REINSURANCE COMPANY) 400 9,381
Hellenic Telecommunication Organization S.A.
(TELECOMMUNICATION SERVICES) 700 15,919
</TABLE>
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
PRINCIPAL AMOUNT($) OR MARKET
NUMBER OF SHARES VALUE($)
----------------------------------------------------------------------------------
<S> <C> <C> <C>
National Bank of Greece S.A.
(FULL SERVICE BANK) 70 9,950
(a)STET Hellas Telecommunications S.A.
(PROVIDER OF MOBILE TELECOMMUNICATION
SERVICES) 600 15,750
----------------------------------------------------------------------------------
79,917
- -------------------------------------------------------------------------------------------------------------------------
HUNGARY--8.1%
BorsodChem Rt
(CHEMICAL PRODUCER) 550 13,611
Magyar Olaj-es Gazipari Rt 1,300 29,166
Magyar Olaj-es Gazipari Rt (GDR)
(INTEGRATED DOMESTIC OIL AND GAS COMPANY) 400 9,100
Matav Rt Ordinary "A"
(TELECOMMUNICATION SERVICES) 6,800 35,356
OTP Bank Rt 720 25,629
OTP Bank Rt (GDR)
(COMMERCIAL AND SAVINGS BANK) 250 9,062
Pannonplast Rt
(MANUFACTURER OF PLASTIC PRODUCTS FROM
PVC, POLYPROPYLENE, POLYETHYLENE AND OTHER
RAW MATERIALS) 301 9,329
Pick Szeged Rt 200 8,326
Pick Szeged Rt (GDR)
(PROCESSES, MARKETS AND DISTRIBUTES MEAT
PRODUCTS) 300 2,587
Richter Gedeon Rt
(PHARMACEUTICAL COMPANY) 100 3,303
----------------------------------------------------------------------------------
145,469
- -------------------------------------------------------------------------------------------------------------------------
INDIA--.5%
(a)Dr. Reddy's Laboratories Ltd.
(PHARMACEUTICAL COMPANY) 700 8,313
----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
ISRAEL--1.2%
ECI Telecommunications Ltd.
(TELECOMMUNICATION SERVICES) 400 13,250
(a)ESC Medical Systems Ltd.
(PRODUCER OF DEVICES FOR NON-INVASIVE
TREATMENT OF BENIGN VASCULAR LESIONS) 610 4,956
(a)MEMCO Software Ltd.
(PRODUCER OF SECURITY SOFTWARE) 300 3,713
----------------------------------------------------------------------------------
21,919
- -------------------------------------------------------------------------------------------------------------------------
JORDAN--2.3%
Arab Bank PLC
(COMMERCIAL BANK) 50 14,256
Arab Potash Co., Ltd.
(SALT AND CHEMICAL PRODUCER) 600 2,907
(a)Aramex International Ltd.
(EXPRESS DELIVERY AND FREIGHT FORWARDING
IN THE MIDEAST AND INDIA) 850 6,906
(b)Hikma
(PHARMACEUTICAL COMPANY) 790 5,714
Housing Bank
(RESIDENTIAL CONSTRUCTION FINANCE) 3,200 12,180
----------------------------------------------------------------------------------
41,963
</TABLE>
13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
PRINCIPAL AMOUNT($) OR MARKET
NUMBER OF SHARES VALUE($)
----------------------------------------------------------------------------------
<S> <C> <C> <C>
KENYA--2.5%
James Finlay PLC
(TEA PRODUCER) 9,200 12,320
Kenya Commercial Bank, Ltd.
(COMMERCIAL BANK) 7,700 7,616
Kenya Power & Lighting Co., Ltd.
(DISTRIBUTION AND SALE OF ELECTRICITY) 3,210 10,386
(b)Sasini Tea & Coffee Ltd.
(TEA AND COFFEE GROWER AND PROCESSOR) 8,250 10,373
Uchumi Supermarket Ltd.
(SUPERMARKET OPERATOR) 7,000 5,046
----------------------------------------------------------------------------------
45,741
- -------------------------------------------------------------------------------------------------------------------------
LEBANON--.6%
Banque Audi SAL (GDR)
(COMMERCIAL BANK) 400 10,840
----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
MALAWI--.8%
(a)African Lakes Corp. PLC
(MOTOR TRADING, AGRICULTURE, MINING,
ENGINEERING, COMPUTER SUPPLIES AND GENERAL
TRADING) 6,000 4,971
Press Corp., Ltd. (GDR)
(CONGLOMERATE, INDUSTRIAL HOLDING COMPANY) 1,300 9,100
----------------------------------------------------------------------------------
14,071
- -------------------------------------------------------------------------------------------------------------------------
MALTA--.3%
(a)MaltaCon PLC (GDR)
(TELECOMMUNICATIONS SERVICES IN MALTA) 400 4,600
----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
MEXICO--9.2%
(a)Consorcio ARA, S.A. de C.V.
(LOW-INCOME HOUSING DEVELOPER) 6,100 13,397
Fomento Economico Mexicano S.A. de C.V.
(PRODUCER OF BEER AND SOFT DRINKS) 11,800 30,411
(a)Gruma S.A. de C.V.
(PRODUCER AND DISTRIBUTOR OF CORN FLOUR) 7,322 17,385
(a)Grupo CIFRA S.A. de C.V. "C"
(DISCOUNT RETAILER) 7,000 9,072
(a)Grupo Financiero Banamex-Accival, S.A. de
C.V. "B"
(BANK) 14,600 15,311
Grupo Industrial Bimbo, S.A. de C.V. "A"
(PRODUCER OF BREAD AND OTHER BAKED GOODS) 10,663 17,933
Grupo Industrial Maseca S.A. de C.V. "B"
(FOOD PRODUCER) 15,200 12,331
Grupo Modelo S.A. "C"
(LEADING BREWERY) 7,600 16,015
Industrias Penoles S.A. de C.V.
(EXPLORATION AND MARKETING OF MINERALS AND
NON-FERROUS METALS SUCH AS LEAD, ZINC AND
SILVER) 1,200 3,668
(a)Latinoamericana Duty Free, S.A. de C.V.
(OPERATOR OF HIGH QUALITY DUTY FREE
AIRPORT SHOPS) 5,100 1,115
Nacional de Drogas S.A. "L"
(DISTRIBUTOR OF PHARMACEUTICAL, HYGIENE
AND PERSONAL BEAUTY PRODUCTS) 17,500 7,012
Organizacion Soriana S.A. de C.V. "A"
(RETAILER) 2,000 5,946
</TABLE>
14
<PAGE> 15
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT($) OR MARKET
NUMBER OF SHARES VALUE($)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sigma Alimentos S.A. de C.V. "B"
(PRODUCER AND DISTRIBUTOR OF COLD STORAGE
FOODS) 3,400 5,012
Telefonos de Mexico S.A. de C.V. "L" (ADR)
(TELECOMMUNICATION SERVICES) 200 10,562
--------------------------------------------------------------------------------------
165,170
- -----------------------------------------------------------------------------------------------------------------------------
MOROCCO--4.0%
Banque Marocaine du Commerce Exterieur S.A.
(COMMERCIAL BANK) 300 7,455
Omnium Nord Africaine
(CONGLOMERATE) 150 19,469
Societe Nationale d'Investissements
(CONGLOMERATE, VARIOUS JOINT VENTURES) 100 10,851
Societe des Brasseries du Nord Marocain
(DISTRIBUTOR OF BEER AND CARBONATED
BEVERAGES) 50 16,292
WafaBank
(COMMERCIAL BANK) 130 16,944
--------------------------------------------------------------------------------------
71,011
- -----------------------------------------------------------------------------------------------------------------------------
OMAN--2.1%
(a)National Bank of Oman Ltd.
(COMMERCIAL BANK) 1,745 19,128
(a)(b)(c)Oman Cable Industry SAOG
(MANUFACTURER OF ELECTRICAL AND POWER
CABLES) 1,890 11,783
Oryx Fund, Ltd.
(MUTUAL FUND DOMICILED IN GUERNSEY,
INVESTING IN THE MIDDLE EAST) 650 7,637
--------------------------------------------------------------------------------------
38,548
- -----------------------------------------------------------------------------------------------------------------------------
PERU--3.5%
Cementos Lima S.A. "T"
(CEMENT PRODUCER) 839 9,849
Enrique Ferreyros y Cia.
(MACHINERY MANUFACTURER) 11,877 11,573
Grana y Montero S.A.
(HOLDING COMPANY: ENGINEERING,
CONSTRUCTION, OIL DRILLING) 28,466 10,297
Minas Buenaventura S.A. (ADR)
(MINING COMPANY) 1,626 19,918
(a)Pesquera Austral S.A.
(FISH HARVESTING, FISHMEAL AND FISH OIL
PRODUCTION) 39,200 11,370
--------------------------------------------------------------------------------------
63,007
- -----------------------------------------------------------------------------------------------------------------------------
PHILIPPINES--.2%
(a)International Container Terminal
Services, Inc.
(CONTAINERIZED CARGO HANDLING FIRM) 50,250 3,362
--------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
POLAND--12.4%
Bank Przemyslowo Handlowy
(BANK) 240 15,812
Cersanit, S.A.
(MANUFACTURER OF CERAMIC SANITARY
PRODUCTS) 2,550 6,920
(a)Computerland Poland S.A.
(PROVIDER OF COMPUTER SERVICES AND
SYSTEMS) 1,250 15,745
Debica S.A. "A"
(TIRE MANUFACTURER) 600 10,100
Elektrim Spolka Akcyjna S.A.
(MANUFACTURER OF POWER EQUIPMENT,
ELECTRICAL MACHINERY AND APPARATUS) 1,500 17,849
(a)IZOLACJA S.A.
(MANUFACTURER OF BUILDING MATERIAL) 500 20,824
</TABLE>
15
<PAGE> 16
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT($) OR MARKET
NUMBER OF SHARES VALUE($)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
KGHM Polska Miedz S.A.
(PRODUCER OF COPPER AND SILVER) 4,788 17,787
(a)Kredyt Bank S.A.
(PROVIDER OF A FULL RANGE OF BANKING
SERVICES) 4,300 16,973
(a)Mostostal Krakow S.A.
(HEAVY CONSTRUCTION COMPANY) 6,500 7,358
Mostostal Zabrze Holding S.A.
(CONSTRUCTION COMPANY) 3,000 10,187
(a)Orbis S.A.
(HOTEL OWNER AND OPERATOR) 1,800 15,673
Powszechny Bank Kredytowy S.A.
(COMMERCIAL BANK) 800 17,182
(a)Sanockie Zaklady Przemyslu Gumowego
Stomil S.A.
(MANUFACTURER OF TIRES AND INNER TUBES) 1,300 10,263
Wielkopolski Bank Kredytowy S.A.
(COMMERCIAL BANK) 6,205 40,520
--------------------------------------------------------------------------------------
223,193
- -----------------------------------------------------------------------------------------------------------------------------
PORTUGAL--4.0%
Banco Comercial Portugues
(COMMERCIAL BANK) 589 18,438
Banco Espirito Santo e Comercial de Lisboa,
S.A.
(COMMERCIAL AND INVESTMENT BANKING) 504 14,890
Banco Portugues do Investimento
(BANK) 530 16,251
Portugal Telecom S.A.
(TELECOMMUNICATION SERVICES) 400 18,951
Semapa Cement S.A.
(CEMENT PRODUCER) 186 3,629
--------------------------------------------------------------------------------------
72,159
- -----------------------------------------------------------------------------------------------------------------------------
SOUTH AFRICA--.2%
(a)Energy Africa Ltd.
(OIL AND GAS EXPLORATION AND PRODUCTION) 2,500 4,245
--------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
SRI LANKA--.2%
Maskeliya Plantation Ltd.
(TEA PLANTATION OPERATOR) 8,000 2,833
--------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
THAILAND--.5%
(a)(b)(c)PTT Exploration and Production Co.,
Ltd. (PETROLEUM REFINERY) 900 8,328
--------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
TUNISIA--.7%
(a)Banque International Arabe Tunisia, (GDR)
(BANK) 1,400 13,055
--------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
TURKEY--.9%
Migros Turkey
(RETAILER) 19,000 16,163
--------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
UNITED STATES--.3%
(a)Benton Oil & Gas Co.
(OIL AND GAS EXPLORATION, DEVELOPMENT AND
PRODUCTION) 1,200 6,150
--------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT($) OR MARKET
NUMBER OF SHARES VALUE($)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ZIMBABWE--.7% Delta Corp., Ltd.
(BREWERY) 16,973 3,815
National Merchant Bank of Zimbabwe
(COMMERCIAL BANK) 7,400 2,495
Tanganda Tea Co., Ltd.
(TEA PRODUCER AND DISTRIBUTOR) 29,570 5,484
------------------------------------------------------------------------------------
11,794
------------------------------------------------------------------------------------
TOTAL EQUITY SECURITIES--81.8%
(Cost: $1,711,304) 1,466,957
------------------------------------------------------------------------------------
TOTAL INVESTMENTS--100%
(Cost: $2,038,255) 1,793,908
------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $46,140 (2.6% of net assets). Their
values have been estimated by the Valuation Committee in the absence of
readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of these
securities at October 31, 1998 aggregated $47,991. These securities may
also have certain restrictions as to resale.
(c) Restricted securities -- securities which have not been registered with the
Securities and Exchange Commission under the Securities Act of 1933. The
aggregate fair value of restricted securities at October 31, 1998, amounted
to $36,721, which represents 2.1% of net assets. Information concerning
such restricted securities at October 31, 1998 is as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
SECURITY ACQUISITION DATE COST($)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Arab Insurance Group 1/9/98 8,450
- ----------------------------------------------------------------------------------------------
Oman Cable Industry SAOG 2/14/98 15,636
- ----------------------------------------------------------------------------------------------
ORASCOM 6/30/98 10,296
- ----------------------------------------------------------------------------------------------
PTT Exploration and Production Co., Ltd. 6/9/98 6,364
- ----------------------------------------------------------------------------------------------
</TABLE>
Based on the cost of investments of $2,043,874 for federal income tax purposes
at October 31, 1998, the gross unrealized appreciation was $65,478, the gross
unrealized depreciation was $315,444 and the net unrealized depreciation on
investments was $249,966.
See accompanying Notes to Financial Statements.
17
<PAGE> 18
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SHAREHOLDERS
KEMPER EMERGING MARKETS GROWTH FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper Emerging Markets Growth 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 from January 9, 1998 (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
Emerging Markets Growth 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
18
<PAGE> 19
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
<TABLE>
<S> <C>
- --------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------
Investments, at value
(Cost: $2,038,255) $1,793,908
- --------------------------------------------------------------------------
Cash 9,826
- --------------------------------------------------------------------------
Receivable for:
Investments sold 6,293
- --------------------------------------------------------------------------
Fund shares sold 5,701
- --------------------------------------------------------------------------
Dividends 3,096
- --------------------------------------------------------------------------
Foreign taxes 69
- --------------------------------------------------------------------------
Reimbursement from Adviser 98,470
- --------------------------------------------------------------------------
Deferred organization expense 12,495
- --------------------------------------------------------------------------
TOTAL ASSETS 1,929,858
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------
Payable for:
Investments purchased 47,700
- --------------------------------------------------------------------------
Fund shares redeemed 974
- --------------------------------------------------------------------------
Other payables and accrued expenses 109,962
- --------------------------------------------------------------------------
Total liabilities 158,636
- --------------------------------------------------------------------------
NET ASSETS $1,771,222
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- --------------------------------------------------------------------------
Paid-in capital $2,166,436
- --------------------------------------------------------------------------
Accumulated net realized loss on investments (150,862)
- --------------------------------------------------------------------------
Net unrealized depreciation on:
Investments (244,347)
- --------------------------------------------------------------------------
Foreign currency related transactions (5)
- --------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $1,771,222
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
THE PRICING OF SHARES
- --------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($1,054,139 / 135,127 shares outstanding) $7.80
- --------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $8.28
- --------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($445,916 / 57,611 shares outstanding) $7.74
- --------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($271,167 / 34,945 shares outstanding) $7.76
- --------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
19
<PAGE> 20
FINANCIAL STATEMENTS
For the period from January 9, 1998 (commencement of operations) to
October 31, 1998
STATEMENT OF OPERATIONS
<TABLE>
<S> <C>
- -------------------------------------------------------------------------
NET INVESTMENT INCOME
- -------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $1,324) $ 21,012
- -------------------------------------------------------------------------
Interest 3,788
- -------------------------------------------------------------------------
Total investment income 24,800
- -------------------------------------------------------------------------
Expenses:
Management fee 11,640
- -------------------------------------------------------------------------
Distribution services fee 2,169
- -------------------------------------------------------------------------
Administrative services fee 2,328
- -------------------------------------------------------------------------
Custodian, accounting and transfer agent fees and related
expenses 154,879
- -------------------------------------------------------------------------
Professional fees 24,699
- -------------------------------------------------------------------------
Reports to shareholders 4,599
- -------------------------------------------------------------------------
Registration fees 618
- -------------------------------------------------------------------------
Amortization of organization expenses 2,505
- -------------------------------------------------------------------------
Directors' fees and other 3,499
- -------------------------------------------------------------------------
Total expenses before expense waiver 206,936
- -------------------------------------------------------------------------
Less expenses waived and absorbed by adviser (183,861)
- -------------------------------------------------------------------------
Total expenses after expense waiver 23,075
- -------------------------------------------------------------------------
NET INVESTMENT INCOME 1,725
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
- -------------------------------------------------------------------------
Net realized loss from:
Investments (150,862)
- -------------------------------------------------------------------------
Foreign currency related transactions (net of CPMF tax of
$597) (1,954)
- -------------------------------------------------------------------------
(152,816)
- -------------------------------------------------------------------------
Change in net unrealized depreciation during the period on:
Investments (244,347)
- -------------------------------------------------------------------------
Foreign currency related transactions (5)
- -------------------------------------------------------------------------
(244,352)
- -------------------------------------------------------------------------
Net loss on investments (397,168)
- -------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(395,443)
- -------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------
OPERATIONS AND CAPITAL SHARE ACTIVITY
- ----------------------------------------------------------------------------------
Net investment income $ 1,725
- ----------------------------------------------------------------------------------
Net realized loss (152,816)
- ----------------------------------------------------------------------------------
Change in net unrealized depreciation (244,352)
- ----------------------------------------------------------------------------------
Net decrease in net assets resulting from operations (395,443)
- ----------------------------------------------------------------------------------
Net increase from capital share transactions 2,146,665
- ----------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 1,751,222
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------------------
Beginning of period 20,000
- ----------------------------------------------------------------------------------
END OF PERIOD $1,771,222
- ----------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE
FUND Kemper Emerging Markets Growth Fund (the fund) is a
non-diversified series of Kemper
Global/International Series, Inc. (the
Corporation), an open-end management investment
company organized as a corporation in the state of
Maryland. The fund commenced operations on January
9, 1998. 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.
21
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS
Net realized and unrealized gains and losses on
foreign currency transactions represent net gains
and losses from sales and maturities of forward
foreign currency exchange contracts, disposition of
foreign currencies, and the difference between the
amount of net investment income accrued and the
U.S. dollar amount actually received. That portion
of both realized and unrealized gains and losses on
investments that result from fluctuations in
foreign currency exchange rates is not separately
disclosed.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on the
trade date. Dividend income is recorded on the ex-
dividend date, and interest income is recorded on
the accrual basis. Realized gains and losses from
investment transactions are reported on an
identified cost basis.
FUND SHARE VALUATION. Fund shares are sold and
redeemed on a continuous basis at net asset value
(plus an initial sales charge on most sales of
Class A shares). Proceeds payable on redemption of
Class B and Class C shares will be reduced 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 $145,000 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.
The fund is also subject to a .20% Contribuicao
Provisoria sobre Movimentacoes Financeiras (CPMF)
tax which is applied to foreign exchange
transactions representing capital inflows or
outflows to the Brazilian market. This tax has been
reported as part of the net realized gain (loss) on
foreign currency related transactions.
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.
OTHER CONSIDERATIONS. Investing in emerging markets
may involve special risks and considerations not
typically associated with investing in the United
States. These risks include revaluation of
currencies, high rates of inflation, repatriation
restrictions on income and capital, and future
adverse political and economic
22
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS
developments. Moreover, securities issued in these
markets may be less liquid, subject to government
ownership controls, delayed settlements, and their
prices more volatile than those of comparable
securities in the United States.
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The fund has a management
agreement with Scudder Kemper Investments, Inc.
(Scudder Kemper) and pays a monthly investment
management fee of 1/12 of the annual rate of 1.25%
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 $183,861 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
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 $1,066 13,730
</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
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 $5 17,186
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The fund has an
administrative services agreement with KDI. For
providing information and administrative services
to
23
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS
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 $1,557 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 $6,596 for
the period ended October 31, 1998, $1,735 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 $48,584 by Scudder Kemper.
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 $3,000 to
independent directors.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the period ended October 31, 1998, investment
transactions (excluding short-term instruments) are
as follows:
Purchases $2,441,928
Proceeds from sales 579,762
- --------------------------------------------------------------------------------
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 143,890 $1,362,305
--------------------------------------------------------------------------
Class B 66,066 619,078
--------------------------------------------------------------------------
Class C 35,667 331,039
--------------------------------------------------------------------------
SHARES REDEEMED
--------------------------------------------------------------------------
Class A (9,465) (81,466)
--------------------------------------------------------------------------
Class B (9,157) (71,915)
--------------------------------------------------------------------------
Class C (1,424) (12,376)
--------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $2,146,665
--------------------------------------------------------------------------
</TABLE>
24
<PAGE> 25
FINANCIAL HIGHLIGHTS
For the period from January 9, 1998 (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 (loss) .03 (.01) (.03)
- ------------------------------------------------------------------------------------------------------------------
Net realized and unrealized loss (1.73) (1.75) (1.71)
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations (1.70) (1.76) (1.74)
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 7.80 7.74 7.76
- ------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) (17.89) % (18.53) (18.32)
- ------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------------------------------------
Expenses absorbed by the fund 2.28 % 3.18 3.15
- ------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .40 % (.50) (.47)
- ------------------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------------------------------------
Expenses 22.38% 24.06 24.03
- ------------------------------------------------------------------------------------------------------------------
Net investment loss (19.70) % (21.38) (21.35)
- ------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ------------------------------------------------------------------------------------------------------------------
Net assets at end of period $1,771,222
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 69%
- ------------------------------------------------------------------------------------------------------------------
</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.
25
<PAGE> 26
NOTES
26
<PAGE> 27
NOTES
27
<PAGE> 28
DIRECTORS AND OFFICERS
DIRECTORS OFFICERS
DANIEL PIERCE MARK S. CASADY
Chairman and Director President ANN M. MCCREARY
Vice President
JAMES E. AKINS PHILIP J. COLLORA
Director Vice President and SHERIDAN P. REILLY
Secretary Vice President
ARTHUR R. GOTTSCHALK
Director JOHN R. HEBBLE M. ISABEL SALTZMAN
Treasurer Vice President
FREDERICK T. KELSEY
Director JOYCE E. CORNELL LINDA J. WONDRACK
Vice President Vice President
KATHRYN L. QUIRK
Director and Vice President DIEGO ESPINOSA MAUREEN E. KANE
Vice President Assistant Secretary
FRED B. RENWICK
Director JOAN R. GREGORY CAROLINE PEARSON
Vice President Assistant Secretary
JOHN B. TINGLEFF
Director TARA C. KENNEY ELIZABETH C. WERTH
Vice President Assistant Secretary
JOHN G. WEITHERS
Director THOMAS W. LITTAUER BRENDA LYONS
Vice President Assistant Treasurer
- --------------------------------------------------------------------------------
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.
KEMGF - 2 (12/98) 1061690
