<PAGE> 1
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED APRIL 30, 1999
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
[MORNINGSTAR RATINGS LOGO]
Seeks long-term capital appreciation through investment
primarily in the securities of Latin American issuers.
KEMPER LATIN
AMERICA FUND
"... The rebound in sentiment toward Latin American
equities since the dark days of mid-January has been
dramatic. ... Confidence has returned to the area, largely
due to the strengthening of the Brazilian real and lower
than expected inflation figures for the first quarter. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
Economic Overview
5
Performance Update
8
Largest Holdings
9
Portfolio of Investments
11
Financial Statements
13
Notes to Financial Statements
17
Financial Highlights
19
Shareholders' Meeting
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER LATIN AMERICA FUND
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 1999
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 23.04
CLASS B 22.45
CLASS C 22.45
LIPPER LATIN AMERICA FUNDS CATEGORY AVERAGE* 25.52
- --------------------------------------------------------------------------------
</TABLE>
RETURNS AND RANKINGS 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.
*LIPPER ANALYTICAL SERVICES, INC. RETURNS AND RANKINGS 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.
INVESTMENT IN FOREIGN SECURITIES PRESENTS SPECIAL RISK CONSIDERATIONS INCLUDING
FLUCTUATING CURRENCY EXCHANGE RATES, GOVERNMENT REGULATION AND DIFFERENCES IN
LIQUIDITY.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
4/30/99 10/31/98
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER LATIN AMERICA FUND
CLASS A $8.92 $7.31
- --------------------------------------------------------------------------------
KEMPER LATIN AMERICA FUND
CLASS B $8.89 $7.26
- --------------------------------------------------------------------------------
KEMPER LATIN AMERICA FUND
CLASS C $8.89 $7.26
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
KEMPER LATIN AMERICA FUND
LIPPER RANKINGS AS OF 4/30/99*
- --------------------------------------------------------------------------------
COMPARED TO ALL OTHER FUNDS IN THE LIPPER LATIN AMERICAN FUNDS CATEGORY
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1-YEAR #4 of 45 funds #5 of 45 funds #5 of 45 funds
- --------------------------------------------------------------------------------
</TABLE>
TERMS TO KNOW
YOUR FUND'S STYLE
- --------------------------------------------------------------------------------
MORNINGSTAR EQUITY STYLE BOX
- --------------------------------------------------------------------------------
[STYLE/SIZE DIAGRAM]
Source: 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.
THE STYLE BOXES REPRESENT A SNAPSHOT OF A FUND'S PORTFOLIO ON A SINGLE DAY. IT
IS NOT AN EXACT ASSESSMENT OF RISK AND DOES NOT REPRESENT FUTURE PERFORMANCE.
THE FUND'S PORTFOLIO CHANGES FROM DAY-TO-DAY. A LONGER-TERM VIEW IS REPRESENTED
BY THE FUND'S MORNINGSTAR CATEGORY, WHICH IS BASED ON ITS ACTUAL INVESTMENT
STYLE AS MEASURED BY ITS UNDERLYING PORTFOLIO HOLDINGS. MORNINGSTAR HAS PLACED
KEMPER LATIN AMERICA FUND IN THE LATIN AMERICA STOCK CATEGORY. PLEASE CONSULT
THE PROSPECTUS FOR A DESCRIPTION OF INVESTMENT POLICIES.
AMERICAN DEPOSITORY RECEIPTS (ADRS) Receipt for the shares of a foreign-based
corporation held in the vault of a U.S. bank and entitling the shareholder to
all dividends and capital gains.
FUNDAMENTAL RESEARCH Analysis of the balance sheets and income statements of
companies used to forecast their future stock price movements. Fundamental
analysis considers past records of assets, earnings, sales, products, management
and markets in helping predict future trends in these indicators and of a
company's success or failure. By appraising a firm's prospects, this analysis
may be used to help assess whether a particular stock or group of stocks is
undervalued or overvalued at its current market price.
LIQUIDITY The ease with which assets can be converted to cash.
PEGGING Stabilizing the price of a security, commodity or currency by
intervening in the market. Since 1971, a floating exchange rate system has
prevailed, in which countries use pegging--the buying or selling of their own
currencies--simply to offset fluctuations in exchange rates.
<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 INVESTMENTS, HE WAS WITH
THE HARRIS BANK AND ALSO TAUGHT AT INDIANA UNIVERSITY.
SCUDDER KEMPER INVESTMENTS, THE INVESTMENT MANAGER FOR KEMPER FUNDS, IS ONE OF
THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS IN THE
WORLD, MANAGING MORE THAN $280 BILLION IN ASSETS FOR INSTITUTIONAL AND CORPORATE
CLIENTS, RETIREMENT AND PENSION PLANS, INSURANCE COMPANIES, MUTUAL FUND
INVESTORS AND INDIVIDUALS. SCUDDER KEMPER INVESTMENTS OFFERS A FULL RANGE OF
INVESTMENT COUNSEL AND ASSET MANAGEMENT CAPABILITIES BASED ON A COMBINATION OF
PROPRIETARY RESEARCH AND DISCIPLINED, LONG-TERM INVESTMENT STRATEGIES.
DEAR KEMPER FUNDS SHAREHOLDER:
In April, investor enthusiasm drove the market to its second milestone in a
year -- the Dow Jones Industrial Average rose to 11,000 just a month after it
broke 10,000 for the first time. In May, expectations of rising inflation and
higher short-term interest rates led to a slowdown. But in early June, the
market rallied again. What drove the market rallies, and what, at the same time,
led to investor anxiety?
Inflation worries have been seeping into the market for months. The growing
conviction that Asian and Latin American economies are recovering is raising
commodity prices, particularly oil. The price of West Texas Intermediate oil
surged from less than $12 in February to almost $19 in early May. That alone
almost guarantees a rise in the "headline" inflation rate this year, which is
the rate of inflation as measured by the entire CPI. But it's important to note
that the Federal Reserve Board looks primarily at the core inflation rate, which
is the CPI minus food and energy -- and the core inflation rate looks at if it
will remain low at about 2 percent this year. Investors should note, however,
that the Federal Reserve Board also considers what will happen to inflation next
year -- and all indications are that the Fed expects inflation to increase in
2000.
As a result, the Fed is considering a change in monetary policy. Recent Fed
policy has been reactive, not proactive, which means that the Fed tends to
respond to inflation only when it picks up. That may change as the Fed tries to
preemptively halt inflation momentum. Such a change in monetary policy would
likely lead to an increase in short-term interest rates before the end of the
year. However, the change is likely to be small. Because we don't see pressure
toward sustained inflation, there's no reason for the Fed to want a sharp
slowdown in the overall economy.
The long-term economic situation, however, appears to be positive. The
federal budget surplus continues to benefit from good revenue gains (which are
based on good income gains, especially for households), good capital gains and
continued restraint in federal spending. The surplus this year is expected to
approach $100 billion.
This positive environment is exactly what sometimes poses risk for
investors, and is key to understanding recent volatility in the market. A strong
economy has the potential to feed inflation fears and drive up interest rates.
Indeed, recent market events illustrate the domino effect of investors reacting
to positive economic news, which they consider troubling at this point, more
than eight years into the economic expansion. In April, the steady stream of
positive economic news led to a sell-off in the financial markets based on fears
that the strong pace of economic growth would eventually lead to higher
inflation. The benchmark 30-year Treasury bond yield rose, which pulled stocks
lower.
Where can we expect to go from here? The fundamentals by which we judge the
health of the economy suggest continued growth as we move into the second half
of 1999. For example, the gross domestic product (GDP), the value of all goods
and services produced in the U.S., rose at an annual rate of 4.5 percent in the
first quarter, following a tremendous fourth-quarter surge of 6 percent. This is
very much in line with what we've grown accustomed to over the past year -- over
the four quarters of 1998, the U.S. economy expanded by 4.3 percent. Some people
aren't surprised at all by strong GDP growth that once would have alarmed them.
That's partially because we've grown accustomed to a strong economy. But it's
also because we've been able to absorb growth without driving up inflation.
That's important for investors. If prices had been rising as the economy was
growing, the Fed would have most likely raised short-term interest rates by now,
and that would have changed the financial market outlook.
However, we do see some vulnerability on the economic front. Trade is a weak
spot in the economy right now. Exports of U.S. goods and services dropped in the
first quarter while imports soared. This reflects the fact that the U.S. is one
of the few countries financially fit enough to buy goods produced elsewhere in
the world. But for as long as less vibrant international economies are unable to
buy U.S. goods, the profitability of U.S. companies trying to export will be
challenged.
When you think about it, vulnerability in regard to the international
economy is nothing new. Globally, the outlook is slightly more positive than it
was a few months ago. For example, the European markets are slowing down, which
has already led to the European Central Bank lowering interest rates in order to
boost domestic spending. In many countries in Europe there are no fixed-rate
mortgages, only adjustable-rate mortgages. When interest rates go down, mortgage
payments are reduced and homeowners can spend money elsewhere. This has a huge
impact on consumer spending, and will help European equities over time.
Additionally, the situation in Japan remains unchanged. And, problems in the
emerging markets haven't had the negative impact many people expected -- both
the Mexican and Brazilian stock markets have actually risen in the past two
months.
3
<PAGE> 4
ECONOMIC OVERVIEW
ECONOMIC GUIDEPOSTS
ECONOMIC ACTIVITY IS A KEY INFLUENCE ON INVESTMENT PERFORMANCE AND SHAREHOLDER
DECISION-MAKING. PERIODS OF RECESSION OR BOOM, INFLATION OR DEFLATION, CREDIT
EXPANSION OR CREDIT CRUNCH HAVE A SIGNIFICANT IMPACT ON MUTUAL FUND PERFORMANCE.
THE FOLLOWING ARE SOME SIGNIFICANT ECONOMIC GUIDEPOSTS AND THEIR INVESTMENT
RATIONALE THAT MAY HELP YOUR INVESTMENT DECISION-MAKING. THE 10-YEAR TREASURY
RATE AND THE PRIME RATE ARE PREVAILING INTEREST RATES. THE OTHER DATA REPORT
YEAR-TO-YEAR PERCENTAGE CHANGES.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (5/31/99) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10 Year Treasury Rate(1) 5.54 5.34 5.57 6.42
Prime Rate(2) 7.75 8.5 8.5 8.25
Inflation Rate(3)* 2.28 1.68 1.63 3.04
The U.S. Dollar(4) -1.22 8.17 5.05 7.67
Capital goods orders(5)* 11.67 3.05 12.61 3.93
Industrial production (5)* 2.01 2.71 5.92 6.44
Employment growth(6) 2.14 2.67 2.76 2.44
</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 APRIL 30, 1999.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
But don't forget that international crises have the potential to affect the
U.S. markets dramatically. An increase in military spending on Kosovo by the 11
European Monetary Union (EMU) countries could force them to spend less in other
areas, which could have economic implications, including higher interest rates.
That's because many European countries have small economies and little leeway in
their budgets. Consequently, those countries finance unplanned military
expenditures by selling government bonds -- which, in Europe's small bond
market, typically raises interest rates. As an example, consider Italy, which
recently asked for more leeway on its deficit targets. When leeway was granted,
this led to a further sell-off in the eurodollar.
The international situation alone, however, is by no means an indicator of
a U.S. slowdown -- and without any such indications, complacency may be our
greatest concern. It's easy to look at the current U.S. economic situation and
behave as if no risk exists. But when you see the market soaring and are tempted
to jump in, note that the bull market grew to records on the strength of just a
few dozen stocks, while most other stock prices were flat or actually declined.
In summary, there are concerns that the current economy is unsustainable and
we soon could see an abrupt end. In many cases, however, people are looking for
a slowdown because they are fearful growth will drive up inflation these are
particularly older investors who are accustomed to inflation accompanying
growth. But again, sustained inflation seems unlikely, so a sharp slowdown is
not necessary. In the short term, we expect a modest economic slowdown but no
recession. The best approach now, as in any market, is to diversify and invest
for the long term.
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
/s/ JOHN E. SILVIA
John E. Silvia
THE INFORMATION CONTAINED IN THIS PIECE HAS BEEN TAKEN FROM SOURCES BELIEVED TO
BE RELIABLE, BUT THE ACCURACY OF THE INFORMATION IS NOT GUARANTEED. THE OPINIONS
AND FORECASTS EXPRESSED ARE THOSE OF DR. JOHN SILVIA AS OF JUNE 9, 1999, AND MAY
NOT ACTUALLY COME TO PASS. THIS INFORMATION IS SUBJECT TO CHANGE. NO PART OF
THIS MATERIAL IS INTENDED AS AN INVESTMENT RECOMMENDATION.
TO OBTAIN A KEMPER FUNDS PROSPECTUS, DOWNLOAD ONE FROM WWW.KEMPER.COM, TALK TO
YOUR FINANCIAL REPRESENTATIVE OR CALL SHAREHOLDER SERVICES AT (800) 621-1048.
THE PROSPECTUS CONTAINS MORE COMPLETE INFORMATION, INCLUDING MANAGEMENT FEES AND
EXPENSES. PLEASE READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
4
<PAGE> 5
PERFORMANCE UPDATE
[KENNEY PHOTO]
TARA KENNEY IS A MEMBER OF SCUDDER KEMPER INVESTMENTS' GLOBAL EQUITY GROUP,
FOCUSING ON PORTFOLIO MANAGEMENT OF LATIN AMERICAN EQUITY SECURITIES. PRIOR TO
JOINING THE COMPANY, KENNEY WAS WITH THE LATIN AMERICAN MERCHANT BANKING GROUP
OF BANKERS TRUST WHERE SHE WAS RESPONSIBLE FOR THE ORIGINATION AND EXECUTION OF
CORPORATE FINANCE TRANSACTIONS IN LATIN AMERICA. KENNEY HAS 15 YEARS OF
EXPERIENCE IN THE FIELD. SHE RECEIVED A B.A. DEGREE FROM THE UNIVERSITY OF NOTRE
DAME AND AN M.B.A. FROM NEW YORK UNIVERSITY.
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.
LATIN AMERICAN EQUITIES HAVE ASTONISHED INVESTORS WITH THEIR REMARKABLE
RESILIENCE DURING THE SIX-MONTH PERIOD ENDING APRIL 30, 1999. AFTER A YEAR AND A
HALF OF EXTREME VOLATILITY AND UNCERTAINTY, A POWERFUL RALLY IS UNDERWAY IN
LATIN AMERICA. LEAD PORTFOLIO MANAGER TARA KENNEY DISCUSSES THE RECENT TROUBLES
AND DRAMATIC RECOVERY OF THIS PROMISING REGION.
Q EARLY LAST FALL, LATIN AMERICAN EQUITIES PLUMMETED WILDLY. THE MARKETS
CONTINUED TO FALTER THROUGH THE FIRST HALF OF THIS PERIOD, BUT POSTED HUGE GAINS
DURING THE SECOND HALF. WHAT WAS CAUSING THIS MOVEMENT?
A Last year's underperformance had as much to do with events outside of the
region as inside. Russia's default on its debt last August prompted a dramatic
sell off in all emerging markets, causing liquidity problems. Emerging market
investors were also drawing parallels between Russia and Brazil -- both had
overvalued currency and a growing internal debt. Because Brazil is a Latin
America cornerstone, the whole region stumbled.
Latin America rebounded somewhat following Brazil's October presidential
elections, but there was continued uncertainty over President Cardoso's fiscal
approach and ability to implement necessary changes. A Brazilian default seemed
a real possibility. December brought bad news on two fronts: key reform
legislation failed to pass in Brazil, and Russia defaulted on some bond
payments, making investors even more skittish. The markets took the news very
hard.
The situation reached a turning point in mid-January, when long-suffering
Brazil finally succumbed to pressure and devalued its currency. Rather than
lament the devaluation, investors were relieved that the uncertainty was over
and viewed this as an opportunity for a fresh start. After an initial drop
following the devaluation, the Latin American market actually found itself in a
relief rally.
The rebound in sentiment toward Latin American equities since the dark
days of mid-January has been dramatic. The Brazilian crisis has largely abated.
Confidence has returned to the area, largely due to the strengthening of the
Brazilian real and lower than expected inflation figures for the first quarter.
The credit picture has improved substantially. Interest rates are higher than
they were a year ago but drastically reduced from January and February levels,
when real interest rates in Brazil topped 40 percent. Rebounding oil prices are
buoying Argentina and Mexico, which rely heavily on oil exports.
Best of all, the powerful combination of improving economic fundamentals
in the region and ample global liquidity should continue to support the rally.
Q CAN YOU EXPAND ON HOW EACH OF THE MAJOR MARKETS YOU MENTIONED WEATHERED
THIS PERIOD?
A The 60 percent devaluation of Brazil's real in January was the most
significant event in the region during this period. Prior to the devaluation,
investors were fleeing the country and cash reserves were being depleted.
Interest rates topped 40 percent and trade lines were rapidly disappearing. In
short, the economy was crumbling.
5
<PAGE> 6
PERFORMANCE UPDATE
After the devaluation, Brazil's economy rebounded more strongly and
quickly than anyone could have hoped. The trend toward lower interest rates,
stemming from stronger than expected exchange rates and lower than expected
inflation rates, largely boosted the market. Inflation was held in check because
low demand for goods meant companies were unable to pass along price increases
post-devaluation. The lower inflation and interest rate forecast is a plus for
Brazilian corporates and is boosting consumer confidence. All this good news
coming out of Brazil was very positive for the rest of the region.
Argentina felt the effects of the Brazilian situation the most. The
country slipped into a mild, and hopefully short, recession. Investors have
shown concern about the overvaluation of its currency, which is pegged (see
Terms To Know on page 2) to the U.S. dollar. However, the country is not
suffering a liquidity (see Terms To Know on page 2) crisis. The banking system
is healthy, flush with cash, and looking only for a return of confidence to
lend. Argentina is a large exporter of oil, grains and steel, so any further
improvement in prices should improve confidence and bolster the market.
Mexico was virtually untouched by the Brazilian troubles largely due to
its almost immediate decoupling from the Brazilian contagion. Because Mexico
exports very little to Brazil, its economy is tied much more closely with its
trading partner to the north. The strong U.S. economy and strengthening oil
prices helped fuel Mexico's performance.
Each visit we make to Mexico confirms the country's growing ties to the
United States. Mexican companies are growing more competitive under NAFTA, and
many U.S. companies have moved their operations south or are outsourcing
components from Mexico. We expect foreign direct investment to remain strong
into the next century.
Q THE FUND RETURNED 23.04 PERCENT (FOR CLASS A SHARES UNADJUSTED FOR ANY
SALES CHARGES) OVER THE SIX-MONTH PERIOD. AS FANTASTIC AS THIS PERFORMANCE IS,
IT LAGGED ITS IFC INDEX (THE INTERNATIONAL FINANCE CORPORATION'S LATIN AMERICA
INDEX), UP 27.88 PERCENT, AND THE LIPPER CATEGORY (SEE PAGE 2). WHY THE
DISPARITY?
A Yes, we were pleased with the 23.04 percent return. The relative
underperformance resulted from our conservative investment approach. We strive
to manage the risk in Kemper Latin America Fund to protect in a period of
downturn, and as such may underperform in a period of extreme overperformance,
as we saw early this year. In early 1999 we avoided certain sectors -- namely
Mexican banks and some Mexican conglomerates -- for defensive and fundamental
reasons and they enjoyed a strong rally.
Our fundamental research indicated that the banks were undercapitalized,
had poor balance sheets and huge problems with non-performing loans. Based on
the weaknesses of these companies, we wouldn't include them in the fund. They
are found in the IFC Index, however, and when they rose 60 percent or more in
the first quarter, the index moved upward accordingly (Source: IFC). Over time,
when the euphoria dissipates and investors get back to looking at fundamentals,
we feel certain the solid, long-term performers we hold in the portfolio will
come out very strong.
Q WHERE DID YOU FIND INVESTMENT OPPORTUNITIES, AND HOW HAVE THOSE
OPPORTUNITIES SHIFTED OVER THE 6-MONTH PERIOD?
THE FOLLOWING TABLE PROVIDES A BREAKDOWN OF THE FUND'S EXPOSURE TO EACH OF THE
LATIN AMERICAN MARKETS AS COMPARED TO THE IFC INDEX.
- --------------------------------------------------------------------------------
KEMPER LATIN AMERICA FUND
WEIGHTINGS VS. THE INDEX
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND IFC INDEX
COUNTRY WEIGHTING WEIGHTING
- --------------------------------------------------------------------------------
<S> <C> <C>
MEXICO 34.92% 36.50%
- --------------------------------------------------------------------------------
BRAZIL 36.18% 28.00%
- --------------------------------------------------------------------------------
ARGENTINA 20.23% 13.90%
- --------------------------------------------------------------------------------
CHILE 3.16% 15.20%
- --------------------------------------------------------------------------------
PERU 2.81% 2.40%
- --------------------------------------------------------------------------------
COLUMBIA 0.94% 2.10%
- --------------------------------------------------------------------------------
UNITED STATES 1.76% 0%
- --------------------------------------------------------------------------------
VENEZUELA 0% 1.90%
- --------------------------------------------------------------------------------
</TABLE>
Brazil is our largest overweight to the index today. We're excited about
Brazil's prospects as the crisis there continues to stabilize. The country has
falling interest rates, benign inflation, strengthening reserves and an
improving political climate.
Our modest position in the smaller markets is due primarily to liquidity
concerns. Although we are finding value in some of the smaller markets like
Colombia, Peru and Venezuela, there simply isn't enough investor interest to
support a rally at this time. Our holdings in these markets are limited to what
we believe are the best consumer companies (namely beverage) which have dominant
market shares and should rebound once the economies recover.
We are not convinced that much value remains in the Chilean market today.
Our holdings there are confined to the dominant telephone and beverage
companies, both of which are rapidly approaching our target valuations.
6
<PAGE> 7
PERFORMANCE UPDATE
In the last few months we have also trimmed some of the multinational
companies we held. We added exposure to these large com-panies that have
significant business exposure in the region but that are based in the U.S. last
year in a defensive move to offset some of the volatility we were seeing
locally. But with the improved conditions we are seeing in the region, we sold
companies like Gillette and have put that money to work in these rebounding
markets.
Q WHAT TYPES OF COMPANIES DID YOU LOOK FOR DURING THE PERIOD, AND CAN YOU
TALK ABOUT SOME OF THE NAMES THE FUND HELD?
A Coming into this period we favored companies that we thought would do well
even if there should be a drastic recession. We felt fixed-line
telecommunication firms and consumer staples were our best opportunities under
these conditions. We like consumer staples because of the large population of
consumers with growing disposable income in the region. Grupo CIFRA, a WalMart
outlet in Mexico was one of the fund's top performers.
Telecommunication companies have multiple advantages. They are large and
liquid; there is enormous pent-up demand for telephone systems in Latin America;
and they are benefiting from a trend toward privatization. The Mexican
telecommunications firm Telefonos de Mexico was up substantially for the 6-month
period. We also took advantage of the uptick in oil prices. YPF is an
Argentinean oil and gas company we hold that was a strong performer for the
portfolio.
Our bias toward investing in cash rich, low leverage companies proved
beneficial in a difficult credit environment. Coming into this period, many of
the names we hold in the portfolio were expected to see some exchange weakness
due to the overvalued Brazilian real. To offset the impact of this, they had
prudently hedged their dollar-denominated debts or were in a negative net debt
position. It is this type of proactive management we are looking for when
selecting holdings for the fund.
One of the drags on our performance this period was the Brazilian firm
Telesp. The local shares that we hold of this fixed-line telecommunications
company dramatically underperformed the American Depository Receipts (ADRs) for
the holding company, due to investors' preference for the ADR.
Q DO YOU THINK THE RALLY IS SUSTAINABLE AND CAN WE EXPECT MORE PERFORMANCE
IN LATIN AMERICA?
A The powerful rally underway in Latin equities appears to be sustainable,
as long as there is ample global liquidity and the economic fundamentals in the
region continue to improve. The Latin valuation levels are still very
attractive, particularly with the upward earnings revisions we've been seeing.
Declining Latin American risk premium and increased investor appetite to
diversify from the lofty levels of the U.S. market should fuel the rally. Latin
price-earnings multiples, particularly for the telecommunications, electricity
and energy companies, are at a significant discount compared to their global
peers.
Of course risk remains. Any further exogenous shocks, such as a major
devaluation in China or a severe contraction in the U.S. market, could have a
detrimental effect on Latin America. In addition, some political risk remains as
Mexico and Argentina are preparing for presidential elections later this year
and Brazil is still implementing its new economic and fiscal agenda.
The fund is fully invested, and we will seek to take advantage of the
region's rally while managing the volatility by positioning the portfolio in
companies which we believe generate sufficient cash flow to survive the
remaining economic turmoil this year and prosper in the recovery.
7
<PAGE> 8
LARGEST HOLDINGS
KEMPER LATIN AMERICA FUND'S 15 LARGEST HOLDINGS*
Representing 65.7 percent of the fund's equity holdings on April 30, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
HOLDINGS COUNTRY PERCENT
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. TELEFONOS DE MEXICO Mexico 8.8%
- --------------------------------------------------------------------------------------
2. YPF Argentina 7.6%
- --------------------------------------------------------------------------------------
3. PETROLEO BRASILEIRO Brazil 7.3%
- --------------------------------------------------------------------------------------
4. TELEFONICA DE ARGENTINA Argentina 5.5%
- --------------------------------------------------------------------------------------
5. TELECOM ARGENTINA Argentina 5.0%
- --------------------------------------------------------------------------------------
6. CENTRAIS ELETRICAS BRASILEIRAS Brazil 4.1%
- --------------------------------------------------------------------------------------
7. COMPANHIA PARANAENSE DE ENERGIA Brazil 3.5%
- --------------------------------------------------------------------------------------
8. TELECOMUNICACOES DE SAO PAULO Brazil 3.3%
- --------------------------------------------------------------------------------------
9. CIFRA Mexico 3.3%
- --------------------------------------------------------------------------------------
10. GRUPO CONTINENTAL Mexico 3.2%
- --------------------------------------------------------------------------------------
11. KIMBERLY CLARK DE MEXICO Mexico 3.0%
- --------------------------------------------------------------------------------------
12. COMPANHIA ENERGETICA DE MINAS Brazil 3.0%
GERAIS
- --------------------------------------------------------------------------------------
13. FOMENTO ECONOMICO MEXICANO Mexico 2.7%
- --------------------------------------------------------------------------------------
14. BANCO ITAU Brazil 2.7%
- --------------------------------------------------------------------------------------
15. COMPANHIA CERVEJARIA BRAHMA Brazil 2.7%
- --------------------------------------------------------------------------------------
</TABLE>
*Portfolio compositions and holdings are subject to change.
8
<PAGE> 9
PORTFOLIO OF INVESTMENTS
KEMPER LATIN AMERICA FUND
Portfolio of Investments at April 30, 1999 (unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ARGENTINA--20.2%
Quilmes Industrial S.A. (ADR)
(BEER DISTRIBUTOR) 4,000 $ 43,750
Telecom Argentina S.A. "B" (ADR)
(TELECOMMUNICATION SERVICES) 3,000 103,500
Telefonica de Argentina S.A. "B" (ADR)
(TELECOMMUNICATION SERVICES) 3,000 112,125
YPF S.A. "D" (ADR)
(PETROLEUM COMPANY) 3,700 155,400
-------------------------------------------------------------------------------
414,775
-------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
BRAZIL--36.2%
Banco Itau S.A. (pfd.)
(BANK) 105,000 55,629
Centrais Eletricas Brasileiras S.A. "B" (pfd.)
(HOLDING COMPANY FOR ELECTRIC UTILITIES) 4,000,000 84,287
Companhia Brasileira de Distribuicao Grupo Pao de
Acucar
(OPERATOR OF HYPERMARKETS, SUPERMARKETS AND
CONVENIENCE STORES) 1,500 26,156
Companhia Cervejaria Brahma (pfd.)
(BEER PRODUCER AND DISTRIBUTOR) 115,000 54,419
Companhia Energetica de Minas Gerais (pfd.)
(ELECTRIC UTILITY) 2,587,929 61,543
Companhia Paranaense de Energia (voting) (ADR)
(ELECTRIC POWER UTILITY) 8,700 71,231
Companhia Siderurgica Nacional (ADR)
(MANUFACTURER AND DISTRIBUTOR OF STEEL AND TIN
MILL PRODUCTS) 2,000 43,750
Petroleo Brasileiro S.A. (pfd.)
(PETROLEUM COMPANY) 920,000 148,994
Souza Cruz S.A.
(HOLDING COMPANY FOR CIGARETTES AND TOBACCO) 5,500 36,755
Tele Centro Sul Participacoes S.A. (ADR)
(TELECOMMUNICATION SERVICES) 1,000 53,125
Tele Norte Leste Participacoes S.A. (pfd.) (ADR)
(TELECOMMUNICATION SERVICES) 2,200 37,262
Telecomunicacoes de Sao Paulo S.A. (pfd.)
(TELECOMMUNICATION SERVICES) 550,000 68,543
------------------------------------------------------------------------------
741,694
- -------------------------------------------------------------------------------------------------------------------------
CHILE--3.2%
Companhia Cervecerias Unidas S.A. (ADR)
(BOTTLER AND DISTRIBUTOR OF BEER, SOFT DRINKS,
AND MINERAL WATER) 1,400 34,388
Companhia de Telefonos de Chile, S.A. (ADR)(New)
(TELECOMMUNICATION SERVICES) 1,150 30,403
------------------------------------------------------------------------------
64,79
- -------------------------------------------------------------------------------------------------------------------------
COLOMBIA--.9%
Bavaria S.A.
(BEER PRODUCER AND DISTRIBUTOR) 3,500 19,216
-------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MEXICO--34.9%
Apasco S.A. de C.V.
(CEMENT AND CONCRETE MANUFACTURER) 7,600 $ 44,827
(a)CIFRA S.A. de CV "C"
(DISCOUNT RETAILER) 36,000 67,403
Fomento Economico Mexicano S.A. de C.V. "B"
(PRODUCER OF BEER, SOFT DRINKS AND MINERAL WATER) 14,000 50,000
Fomento Economico Mexicano S.A. de C.V. (ADR) 1,550 56,381
Grupo Continental S.A.
(PRODUCER AND DISTRIBUTOR OF SOFT DRINKS, SUGAR
AND MINERAL WATER) 19,000 65,801
Grupo Financiero Inbursa S.A. de C.V. "B"
(BROKERAGE, INSURANCE, BANKING AND LEASING
SERVICES) 7,000 22,652
Grupo Industrial Bimbo S.A. de C.V. "A"
(PRODUCER OF BREAD AND OTHER BAKED GOODS) 18,000 38,766
Grupo Industrial Maseca S.A. de C.V. (ADR)
(FOOD PRODUCER) 5,100 53,869
Grupo Modelo S.A. "C"
(BREWERY) 20,000 52,706
Kimberly Clark de Mexico S.A. de C.V. "A"
(PRODUCER OF CONSUMER PAPER PRODUCTS) 15,800 61,558
Panamerican Beverages Inc. "A"
(SOFT DRINK BOTTLER) 1,000 22,188
Telefonos de Mexico S.A. de C.V. "L" (ADR)
(TELECOMMUNICATION SERVICES) 2,370 179,528
-------------------------------------------------------------------------------
715,679
-------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
PERU--2.8%
Cementos Lima S.A. "T"
(CEMENT PRODUCER) 12,785 17,815
Telefonica del Peru S.A. (ADR)
(TELECOMMUNICATION SERVICES) 1,000 15,063
Union de Cerveceria Backus & Johnston S.A. "T"
(PRODUCER OF MALTED, NONALCOHOLIC AND CARBONATED
DRINKS) 57,617 24,690
-------------------------------------------------------------------------------
57,568
-------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
UNITED STATES--1.8%
Colgate-Palmolive Co.
(MANUFACTURER OF HOUSEHOLD AND PERSONAL CARE
PRODUCTS) 350 35,853
-------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $1,845,433) 2,049,576
-------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost $1,845,433) 2,049,576
-------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTE TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non income producing security
Based on the cost of investments of $1,845,433 for federal income tax purposes
at April 30, 1999, the gross unrealized appreciation was $281,709, the gross
unrealized depreciation was $77,566, and the net unrealized appreciation on
investments was $204,143.
See accompanying Notes to Financial Statements.
10
<PAGE> 11
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1999 (unaudited)
<TABLE>
<S> <C>
- --------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------
Investments, at value
(Cost $1,845,433) $2,049,576
- --------------------------------------------------------------------------
Cash 16,957
- --------------------------------------------------------------------------
Receivable for:
Investments sold 110,684
- --------------------------------------------------------------------------
Dividends and interest 13,543
- --------------------------------------------------------------------------
Reimbursement from Adviser 63,262
- --------------------------------------------------------------------------
Deferred organization expense 10,995
- --------------------------------------------------------------------------
TOTAL ASSETS 2,265,017
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- --------------------------------------------------------------------------
Payables for investments purchased 92,636
- --------------------------------------------------------------------------
Other payables and accrued expenses 101,834
- --------------------------------------------------------------------------
194,470
- --------------------------------------------------------------------------
NET ASSETS $2,070,547
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- --------------------------------------------------------------------------
Paid-in capital $2,058,992
- --------------------------------------------------------------------------
Accumulated net realized loss on investments (206,493)
- --------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on:
Investments 204,143
- --------------------------------------------------------------------------
Foreign currency related transactions (410)
- --------------------------------------------------------------------------
Undistributed net investment income 14,315
- --------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $2,070,547
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
THE PRICING OF SHARES
- --------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($1,453,274 / 162,945 shares outstanding) $8.92
- --------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $9.46
- --------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($537,443 / 60,442 shares outstanding) $8.89
- --------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($79,830 / 8,975 shares outstanding) $8.89
- --------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
11
<PAGE> 12
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
For the six months ended April 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
- -------------------------------------------------------------------------
NET INVESTMENT INCOME
- -------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $2,157) $ 31,501
- -------------------------------------------------------------------------
Interest 1,828
- -------------------------------------------------------------------------
Total investment income 33,329
- -------------------------------------------------------------------------
Expenses:
Management fee 9,307
- -------------------------------------------------------------------------
Distribution services fee 1,369
- -------------------------------------------------------------------------
Administrative services fee 1,861
- -------------------------------------------------------------------------
Custodian, accounting and transfer agent fees and related
expenses 59,223
- -------------------------------------------------------------------------
Professional fees 15,750
- -------------------------------------------------------------------------
Reports to shareholders 5,250
- -------------------------------------------------------------------------
Amortization of organization expenses 1,500
- -------------------------------------------------------------------------
Directors' fees and other 6,539
- -------------------------------------------------------------------------
Total expenses before expense waiver 100,799
- -------------------------------------------------------------------------
Less expenses waived and absorbed by adviser (82,895)
- -------------------------------------------------------------------------
Total expenses after expense waiver 17,904
- -------------------------------------------------------------------------
NET INVESTMENT INCOME 15,425
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
- -------------------------------------------------------------------------
Net realized loss on:
Investments (114,830)
- -------------------------------------------------------------------------
Foreign currency related transactions (including CPMF
tax of $268) (4,870)
- -------------------------------------------------------------------------
(119,700)
- -------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation)
during the period on:
Investments 465,949
- -------------------------------------------------------------------------
Foreign currency related transactions (398)
- -------------------------------------------------------------------------
465,551
- -------------------------------------------------------------------------
Net gain on investments 345,851
- -------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 361,276
- -------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FOR THE DECEMBER 31, 1997
SIX MONTHS (COMMENCEMENT
ENDED OF OPERATIONS)
APRIL 30, 1999 TO OCTOBER 31, 1998
- -----------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income $ 15,425 11,259
- -----------------------------------------------------------------------------------------------------
Net realized loss (119,700) (90,204)
- -----------------------------------------------------------------------------------------------------
Change in net unrealized gain (depreciation) on
investments 465,551 (261,818)
- -----------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 361,276 (340,763)
- -----------------------------------------------------------------------------------------------------
Distribution from net investment income (8,957) --
- -----------------------------------------------------------------------------------------------------
Net increase from capital share transactions 257,730 1,781,261
- -----------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 610,049 1,440,498
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------
Beginning of period 1,460,498 20,000
- -----------------------------------------------------------------------------------------------------
END OF PERIOD (including undistributed net
investment income of $14,315 and $7,847, respectively) $2,070,547 1,460,498
- -----------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF
THE FUND Kemper Latin America 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 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
13
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
currency exchange contracts, disposition of foreign
currencies, and the difference between the amount
of net investment income accrued and the U.S.
dollar amount actually received. That portion of
both realized and unrealized gains and losses on
investments that result from fluctuations in
foreign currency exchange rates is not separately
disclosed.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date. Dividend income is recorded on
the ex-dividend date, and interest income is
recorded on the accrual basis. Realized gains and
losses from investment transactions are reported on
an identified cost basis.
FUND SHARE VALUATION. Fund shares are sold and
redeemed on a continuous basis at net asset value
(plus an initial sales charge on most sales of
Class A shares). Proceeds payable on redemption of
Class B and Class C shares will be reduced by the
amount of any applicable contingent deferred sales
charge. On each day the New York Stock Exchange is
open for trading, the net asset value per share is
determined as of the close of the Exchange. The net
asset value per share is determined separately for
each class by dividing the fund's net assets
attributable to that class by the number of shares
of the class outstanding.
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 $87,000 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 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.
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 the first $250 million of average daily net
assets, 1.20% of the next $750 million of average
daily net assets, declining to 1.15% of average
daily net assets in excess of $1 billion. However,
the fund incurred no management fee for the period
ended April 30, 1999, 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 $82,895 for the period ended
April 30, 1999.
UNDERWRITING AND DISTRIBUTION SERVICES
AGREEMENT. The fund has an underwriting and
distribution services agreement with Kemper
Distribution, 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 April 30, 1999 $43 790
</TABLE>
For services under the distribution services
agreement, the fund pays KDI a fee of .75% of
average daily net assets of the Class B and Class C
shares pursuant to separate Rule 12b-1 plans for
the Class B and Class C shares. Pursuant to the
agreement, KDI enters into related selling group
agreements with various firms at various rates for
sales of Class B and Class C shares. In addition,
KDI receives any contingent deferred sales charges
from redemptions of Class B and Class C shares. The
fund incurred no distribution fees for the period
ended April 30, 1999, 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 RECEIVED DISTRIBUTION FEES PAID
BY KDI BY KDI TO FIRMS
------------- ----------------------
<S> <C> <C>
Period ended April 30, 1999 $70 2,276
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The fund has an
administrative services agreement with KDI. For
providing information and administrative services
to shareholders, the fund pays KDI a fee at an
annual rate of up to .25% of average daily net
assets of each class. KDI in turn has various
agreements with financial services firms that
provide these services and pays these firms based
on assets of fund accounts the firms service. The
fund incurred no administrative services fees for
the period ended April 30, 1999, after an expense
waiver by Scudder Kemper. During the period ended
April 30, 1999, KDI paid fees of $919 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 $2,797 for
the period ended April 30, 1999.
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
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
fees for the period ended April 30, 1999, after a
fee waiver of $25,000 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
April 30, 1999, the fund made no direct payments to
its officers and incurred directors' fees of $6,539
to independent directors.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the period ended April 30, 1999, investment
transactions (excluding short-term instruments) are
as follows:
Purchases $906,167
Proceeds from sales 572,816
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the fund:
<TABLE>
<CAPTION>
PERIOD ENDED PERIOD ENDED
APRIL 30, 1999 OCTOBER 31, 1998
---------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
-------------------------------------------------------------------------------
Class A 61,652 $ 478,208 174,127 $1,545,225
-------------------------------------------------------------------------------
Class B 30,902 246,196 43,991 383,435
-------------------------------------------------------------------------------
Class C 9,774 71,586 25,380 189,834
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
SHARES REDEEMED
-------------------------------------------------------------------------------
Class A (53,691) (415,163) (19,836) (148,437)
-------------------------------------------------------------------------------
Class B (8,746) (66,035) (6,407) (50,967)
-------------------------------------------------------------------------------
Class C (7,618) (57,062) (19,263) (137,829)
-------------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE
TRANSACTIONS $ 257,730 $1,781,261
-------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------------
CLASS A
----------------------------------------------
FOR THE
PERIOD FROM
DECEMBER 31, 1997
SIX MONTHS ENDED (COMMENCEMENT OF
APRIL 30, 1999 OPERATIONS) TO
(UNAUDITED)(A) OCTOBER 31, 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 7.31 9.50
- -----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .08 .06
- -----------------------------------------------------------------------------------------------------------
Distribution from net investment income--Class A (.06) --
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.59 (2.25)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations 1.61 (2.19)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.92 7.31
- -----------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 23.04% (23.05)
- -----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------------------------
Expenses absorbed by the fund 2.19% 2.21
- -----------------------------------------------------------------------------------------------------------
Net investment income 2.27% 1.38
- -----------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------------------------
Expenses 13.12% 12.75
- -----------------------------------------------------------------------------------------------------------
Net investment loss (8.66)% (9.16)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------
CLASS B
----------------------------------------------
FOR THE
PERIOD FROM
DECEMBER 31, 1997
SIX MONTHS ENDED (COMMENCEMENT OF
APRIL 30, 1999 OPERATIONS) TO
(UNAUDITED)(A) OCTOBER 31, 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 7.26 9.50
- -----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .05 .04
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.58 (2.28)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations 1.63 (2.24)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.89 7.26
- -----------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 22.45% (23.58)
- -----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------------------------
Expenses absorbed by the fund 3.07% 3.09
- -----------------------------------------------------------------------------------------------------------
Net investment income 1.45% .50
- -----------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------------------------
Expenses 14.80% 14.38
- -----------------------------------------------------------------------------------------------------------
Net investment loss (10.28)% (10.79)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 18
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------------
CLASS C
----------------------------------------------
FOR THE
PERIOD FROM
DECEMBER 31, 1997
SIX MONTHS ENDED (COMMENCEMENT OF
APRIL 30, 1999 OPERATIONS) TO
(UNAUDITED)(A) OCTOBER 31, 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 7.26 9.50
- -----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .05 .04
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.58 (2.28)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations 1.63 (2.24)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.89 7.26
- -----------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 22.45% (23.58)
- -----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------------------------
Expenses absorbed by the fund 3.02% 3.06
- -----------------------------------------------------------------------------------------------------------
Net investment income 1.42% .53
- -----------------------------------------------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------------------------
Expenses 14.73% 14.34
- -----------------------------------------------------------------------------------------------------------
Net investment loss (10.29)% (10.75)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
DECEMBER 31, 1997
SIX MONTHS ENDED (COMMENCEMENT OF
APRIL 30, 1999 OPERATIONS) TO
(UNAUDITED) OCTOBER 31, 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUPPLEMENTAL DATA FOR ALL CLASSES
- -----------------------------------------------------------------------------------------------------------
Net assets at end of period $2,070,547 $1,460,498
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 78% 55%
- -----------------------------------------------------------------------------------------------------------
</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.
(a) Based on monthly average shares outstanding during the period.
- --------------------------------------------------------------------------------
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.
18
<PAGE> 19
SHAREHOLDERS' MEETING
SPECIAL SHAREHOLDERS' MEETING
On December 17, 1998, a special shareholders' meeting was held. Kemper Latin
America Fund shareholders were asked to vote on two separate issues: approval of
the new Investment Management Agreement between the fund and Scudder Kemper
Investments, Inc., and to modify or eliminate certain policies and to eliminate
the shareholder approval requirements as to certain other matters. The following
are the results.
1) Approval of the new Investment Management Agreement between the fund and
Scudder Kemper Investments, Inc. This item was approved.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
157,895 338 656
</TABLE>
2) To modify or eliminate certain policies and to eliminate the shareholder
approval requirements as to certain other matters. These items were approved.
Investment objectives
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
128,605 0 1,065 29,219
</TABLE>
Lending
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
128,605 0 1,065 29,219
</TABLE>
19
<PAGE> 20
DIRECTORS AND OFFICERS
DIRECTORS OFFICERS
JAMES E. AKINS MARK S. CASADY ANN M. MCCREARY
Director President Vice President
JAMES R. EDGAR 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 CORNELIA SMALL
Director JOYCE E. CORNELL Vice President
Vice President
KATHRYN L. QUIRK LINDA J. WONDRACK
Director and Vice President DIEGO ESPINOSA Vice President
Vice President
FRED B. RENWICK MAUREEN E. KANE
Director JOAN R. GREGORY Assistant Secretary
Vice President
JOHN G. WEITHERS CAROLINE PEARSON
Director TARA C. KENNEY Assistant Secretary
Vice President
ELIZABETH C. WERTH
THOMAS W. LITTAUER Assistant Secretary
Vice President
BRENDA LYONS
Assistant Treasurer
- --------------------------------------------------------------------------------
LEGAL COUNSEL DECHERT PRICE & RHOADS
Ten Post Office Square South
Boston, MA 02109
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICE AGENT KEMPER SERVICE COMPANY
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.
KLAF - 3 (6/21/99) 1076930
