<PAGE> 1
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED OCTOBER 31, 1999
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
[MORNINGSTAR RATINGS BOX]
SEEKS LONG-TERM CAPITAL APPRECIATION THROUGH INVESTMENT
PRIMARILY IN THE SECURITIES OF LATIN AMERICAN ISSUERS.
KEMPER LATIN
AMERICA FUND
"There are many reasons for optimism. The pickup in commodity prices has had an
enormously positive impact on the region. Higher commodity prices mean more
revenue, and that boosts local spending; ultimately the fiscal situation of
these countries improves."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
Economic Overview
5
Performance Update
9
Geographic Composition
10
Largest Holdings
11
Portfolio of Investments
13
Financial Statements
15
Notes to Financial Statements
19
Financial Highlights
21
Report of Independent Auditors
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER LATIN AMERICA FUND TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE ONE-YEAR PERIOD ENDED OCTOBER 31, 1999
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 12.01%
CLASS B 11.02%
CLASS C 11.02%
LIPPER LATIN AMERICA FUNDS CATEGORY AVERAGE* 16.19%
- --------------------------------------------------------------------------------
</TABLE>
Returns and rankings are historical and do not guarantee future results.
Investment returns and principal value 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. These risks
are generally intensified for investments in emerging markets.
*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; if sales charges had been included, results may have been less
favorable.
Returns and rankings during part of the periods shown for Kemper Latin America
Fund include the effect of a temporary waiver of management fees and/or
absorption of certain operating expenses by the investment adviser. Without such
waiver or absorption, results would have been less favorable.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
10/31/99 10/31/98
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER LATIN AMERICA FUND
CLASS A $8.12 $7.31
- --------------------------------------------------------------------------------
KEMPER LATIN AMERICA FUND
CLASS B $8.06 $7.26
- --------------------------------------------------------------------------------
KEMPER LATIN AMERICA FUND
CLASS C $8.06 $7.26
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
KEMPER LATIN AMERICA FUND
RANKINGS AS OF 10/31/99*
- --------------------------------------------------------------------------------
COMPARED WITH ALL OTHER FUNDS IN THE LIPPER INTERNATIONAL FUNDS CATEGORY.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1-YEAR FUNDS #27 of 49 funds #29 of 49 funds #29 of 49 funds
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
DURING THE YEAR ENDED OCTOBER 31, 1999, KEMPER LATIN AMERICA FUND MADE THE
FOLLOWING DISTRIBUTIONS PER SHARE:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME DIVIDEND $0.06 -- --
- --------------------------------------------------------------------------------
</TABLE>
TERMS TO KNOW
YOUR FUND'S STYLE
- --------------------------------------------------------------------------------
MORNINGSTAR EQUITY STYLE BOX
- --------------------------------------------------------------------------------
MATURITY QUALITY 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.
Please note that style boxes do not represent an exact assessment of risk and do
not represent future performance. The fund's portfolio changes from day-to-day.
A longer-term view is represented by the Fund's Morningstar category,
which is based on its actual investment style as measured by its underlying
portfolio holdings over the past three years. Category placements of new funds
are estimated. Morningstar has place Kemper Latin America Fund in the Latin
America Stock Category.
Please note that style boxes do not represent an exact assessment of risk and do
not represent future performance. Please consult the prospectus for a
description of investment policies.
CURRENCY DEVALUATION A significant decline of a currency's value relative to
other currencies, such as the U.S. dollar. Devaluation may be prompted by
trading or central bank intervention (or the lack of intervention) in the
currency markets. For U.S. investors who are investing overseas, a devaluation
of a foreign currency can have the effect of reducing an investment's total
return, because when investments are converted back into U.S. dollars, it takes
more of the foreign currency to purchase U.S. dollars.
LIQUIDITY The ease with which an investment or asset can be converted into cash
within a reasonably short period of time.
OVER/UNDERWEIGHTING The allocation of assets -- usually by sector, industry or
country -- within a portfolio relative to a benchmark index (e.g., the MSCI
World index) or an investment universe.
<PAGE> 3
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 $290 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.
ECONOMIC Overview
DEAR KEMPER FUNDS SHAREHOLDER:
Markets have been aquiver about inflation risks. Growth in the United States
continues to exceed most expectations. Labor markets are visibly tight. These
are the precursors to inflation -- everybody knows it.
Everybody except us, that is. We don't buy it in principle, and reality is
proving our theory correct.
First, let's look at growth. The traditional economic view is that growth
causes inflation. Today, we're seeing exactly the opposite: Low inflation is
causing growth. Low inflation keeps interest rates down, and low interest rates
spur investment by making borrowing money cheap. Investment allows companies to
add capacity, keeping competition fierce. As a result, companies aren't raising
prices; they're competing for business by keeping goods attractive and prices
low. That's true for the old economy, in which consumers were buying t-shirts,
and the new economy, in which consumers are buying Internet services. Everywhere
they look, consumers see bargains -- in the malls, in the auto showrooms, at the
mortgage companies.
As for tight labor markets, the traditional economic view is that tight
labor -- i.e., many "help-wanted" signs -- forces companies to pay a premium for
talent. That, in turn, forces companies to raise their prices in order to
protect their profits. And raising prices results in inflation. In contrast, we
believe that tight labor markets won't cause wages to surge. Why?
To start with, temporary agencies have proliferated, accounting for 2.2
percent of jobs, up from 0.5 percent in the early 1980s. They get just the right
amount and type of labor to the right spot at the right time to get the job
done.
Immigration also keeps a lid on wage rates, since it replenishes the work
force much faster than births. Immigration is at its highest level ever; an
amazing 10 percent of the population is foreign-born. Nearly 1 million people
enter the United States legally each year, and another 300,000 just show up.
When they get here, they look for jobs. And often, they're willing to accept
lower-paying jobs than the average citizen.
Finally, and perhaps most importantly, wage rates are kept in check by
executives' intense profit focus. Payroll is a company's biggest expense. When
payroll skyrockets, profits decline -- and that would be bad for a CEO who
promised Wall Street double-digit earnings growth from now to the end of time.
If investors are disappointed in earnings growth, they sell their stock. And
when they sell their stock, the stock options that are an essential part of many
executives' compensation are as valuable as scrap paper.
Supporting our theory are two distinct and important sets of data released in
late October: The Bureau of Economic Analysis released its third-quarter
estimate of gross domestic product (GDP), the value of all goods and services
produced in the United States, and the Bureau of Labor Statistics released its
employment cost index (ECI), which measures what employers pay for their
workers' wages, salaries and benefits.
GDP grew at a 4.8 percent rate in the third quarter, up sharply from the
revised 1.9 percent second-quarter pace and just slightly above the consensus
estimate of 4.7 percent.
At the same time, however, the ECI rose by 0.8 percent in the July-September
period, down from a 1.1 percent increase in the second quarter. The
third-quarter gain also was lower than the 0.9 percent increase forecast by
economists in a Reuters poll. (The report, by the way, is said to be one of the
favorites of Federal Reserve Chairman Alan Greenspan, who uses it as a key
indicator of inflation pressures in the world's largest economy.)
In essence, then, the U.S. economy posted its strongest growth so far this
year in the third quarter, while wage costs remained tame. The combination of
strong consumer demand and the lowest unemployment in a generation just isn't
igniting wage-driven inflation.
Nevertheless, the Federal Reserve Board raised the federal funds rate and the
discount rate by one quarter of a point (0.25%) each at its Nov. 16 meeting. Do
we think the Fed made a bad decision? Actually, no.
First, the Fed has to guard against the possibility that the old relationship
between growth and inflation will soon reassert itself. Even if the Fed shared
our belief that
3
<PAGE> 4
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 (11/30/99) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
-------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 6.00 5.50 4.80 5.90
Prime rate (2) 8.50 7.75 8.00 8.50
Inflation rate (3)* 2.60 2.30 1.50 2.00
The U.S. dollar (4) -0.7 -0.9 1.20 9.40
Capital goods orders (5)* 12.60 2.50 -0.6 6.40
Industrial production (5)* 3.30 2.90 3.50 6.90
Employment growth (6)* 2.10 2.10 2.30 2.70
</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 10/30/99.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
Economic OVERVIEW
strong consumer demand and low unemployment isn't igniting wage-driven
inflation, the organization wouldn't be doing its job if it didn't act in the
face of any possibility that inflation might reassert itself.
More important, the Fed has to be concerned about the explosion in credit
we've seen during the last year. Almost everyone but Uncle Sam has been loading
up on debt. Companies have borrowed heavily to fund mergers, share buybacks and
new investments. Homeowners have taken out bigger mortgages on their houses and
new home equity loans. Equity shareholders have ramped up their margin debt.
Financial institutions have issued record amounts of new paper to fund their
aggressive growth. The Fed's decision to raise interest rates, thereby making
borrowing costlier, should take the frenzy out of this borrowing binge. That is
a good thing for future financial stability.
Indeed, the early positive market reaction to the Fed's move suggests that the
markets share our views that the Fed made the right decision.
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
Scudder Kemper Investments Economics Group
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 THE ECONOMIC ADVISORS OF SCUDDER KEMPER
INVESTMENTS, INC. AS OF NOVEMBER 18, 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. KENNEY HAS
15 YEARS OF EXPERIENCE IN THE FIELD. SHE RECEIVED A BACHELOR'S DEGREE IN
POLITICAL SCIENCE AND LATIN AMERICAN STUDIES FROM THE UNIVERSITY OF NOTRE DAME
AND AN M.B.A. DEGREE IN FINANCE 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.
A POWERFUL RALLY IN THE FIRST HALF OF THIS 12-MONTH PERIOD TURNED INTO A
PAINFUL TUMBLE DURING THE SECOND HALF. LATIN AMERICAN EQUITIES HAVE SUFFERED
RECENTLY UNDER REGIONWIDE ECONOMIC TROUBLES, POLITICAL TURMOIL AND GLOBAL
INTEREST-RATE CONCERNS. LEAD PORTFOLIO MANAGER TARA KENNEY DISCUSSES THESE
ISSUES AND SHARES HER OUTLOOK FOR THE COMING MONTHS.
Q WHAT ARE SOME OF THE MORE IMPORTANT DEVELOPMENTS AFFECTING LATIN AMERICAN
MARKETS SINCE LAST OCTOBER, AND ESPECIALLY SINCE OUR APRIL 30 REPORT?
A Latin American markets were depressed when the period began, a result of
Russia's August default on its debt. That default had prompted a massive
sell-off of all emerging markets, causing severe liquidity problems around the
world. Latin America was especially hard hit because investors were drawing
parallels between Russia and Brazil, which was struggling with its own currency
and debt problems. In mid-January, those concerns were confirmed when Brazil
devalued its currency (see Terms To Know on page 2). The good news was that the
market had been expecting the devaluation for so long, investors were actually
relieved to have that uncertainty behind them; Latin American markets rebounded
dramatically in March and April.
This strength continued through mid-May, when an array of disturbances once
again interrupted progress. Latin America frequently made headlines, from
general economic malaise in the region to misstatements related to Argentina's
dollar peg and from the steady decline in President Cardoso's popularity to
political noise in Mexico. Then, in September, Ecuador became the first country
ever to default on a Brady bond. Outside the region, global-credit conditions,
the lack of liquidity, nervousness surrounding the U.S. Federal Reserve's
interest-rate policy and the threat of Y2K have heightened the risk premium for
Latin America. Liquidity (see Terms To Know on page 2) has significantly
declined in the equity markets, with trading volumes in the big markets roughly
half of normal levels.
Against this backdrop, Latin American equity markets faced tough going during
the summer, giving up most of the gains they had posted earlier in the year.
Argentina, Chile, Colombia and Venezuela all are announcing record-low growth
and industrial production numbers. And despite the developing recovery of the
global economy, five of the seven major Latin American economies were in the
midst of a severe recession as of October-end. The only solid growth story at
present is Mexico, which should exceed the government's target of a 3-percent
increase in gross domestic product for 1999. The government has managed its
fiscal affairs well in recent years, and with oil prices strengthening and lower
external-debt payments, Mexico boasts a relatively healthy balance sheet.
Q HOW WAS THE FUND ALLOCATED DURING THE PERIOD? DID YOU MAKE ANY CHANGES TO
THOSE ALLOCATIONS BECAUSE OF THE DIFFICULT MARKET CONDITIONS?
A In an effort to limit risk in down markets, the fund typically
concentrates its holdings in the larger, more-liquid markets,
5
<PAGE> 6
PERFORMANCE UPDATE
primarily Brazil and Mexico. Because of this, we are traditionally overweighted
(see Terms To Know on page 2) in those two countries, as we were at the time of
Brazil's devaluation in January. This overweight in Brazil hurt us, especially
in April and May, as some of our holdings there suffered under a lag effect.
With respect to changing allocations, we typically hold a good number of
utility stocks, and we made a major adjustment to our holdings after the
Brazilian devaluation, when we began paring back Brazilian electric utilities.
This sector has less ability to pass on the costs of inflation due to its tariff
structure. We held onto a few stronger utilities, such as Electricas Brasileiras
and Companhia Energetica de Minas Gerais, until political issues began to affect
them, and divested the fund of those as well in August and September.
At mid-year, we began moving into commodity stocks in Brazil, primarily the
better steel and paper companies. Although we would have liked to have been in
these stocks earlier, they nevertheless added to performance, as commodity
prices have been strong. That said, they may have reached their maximum benefit,
so we may shift back out of them soon. During the latter part of the period, we
increased our position in Petroleo Brasileiro, which was a strong performer in
September and was the second largest holding in the portfolio at the end of the
fiscal year.
Q HOW WOULD YOU DESCRIBE THE LATIN AMERICAN EQUITY ENVIRONMENT TODAY?
A The bottom of the economic cycle is in the making. In particular, Brazil's
economy is likely to take a turn for the better. Brazil has also taken steps to
improve its interest-rate situation; the Brazilian monetary council recently
lowered the benchmark currency interest rate.
There are many reasons for optimism. The pickup in commodity prices has had an
enormously positive impact on the region. Higher commodity prices mean more
revenue, and that boosts local spending; ultimately the fiscal situation of
these countries improves. Across all countries, consumer interest is finally
strengthening, and that should help the fund because of our heavy bias toward
consumer-driven stocks. The fact that valuations are still very reasonable means
that we should benefit as global investors look to different parts of the world
for investment opportunities.
Finally, the political upheavals that characterized the recent period are
beginning to fade. The Argentine presidential elections were held in October
1999, the first ever presidential primary was held in Mexico in November 1999,
and Chilean presidential elections will take place in December 1999. Brazilian
politics will be messy for some time, as President Cardoso has lost some
popularity and power due to his country's financial and economic problems.
Q COULD YOU SHARE SOME HOLDINGS THAT PERFORMED ESPECIALLY WELL FOR THE FUND?
A Once again, Telefonos de Mexico was the workhorse for the portfolio. We've
traditionally liked telephone companies; they are large and liquid, there is
enormous pent-up demand for telephone systems in the region, and they are
benefiting from a trend toward privatization. We prefer the fixed-line companies
to the cellular due to their lower leverage and less competitive environment. We
look for dominant market share and defensive characteristics.
In addition to Petroleo Brasileiro, another petroleum stock performed well for
us -- YPF, an Argentine oil company that was purchased by Repsol in mid-May.
Q HOW DID THE FUND DO RELATIVE TO ITS BENCHMARK INDEX?
A The fund returned 12.01 percent (Class A shares unadjusted for sales
charge) for the 12-month period, versus the IFC index (the International Finance
Corporation's Latin America index) gain of 19.24 percent. The primary reason for
our underperformance was again our big stake position in Brazil after the
devaluation. Also, despite our significant stake in Mexico, a country with
strong performance, we weren't invested in some of the stocks that provided a
big boost to the index, such as banks and cyclicals. We avoided banks because
our fundamental research indicated that they are undercapitalized, have poor
balance sheets and maintain lingering problems with non-performing loans.
Besides the banks, several other highly indebted Mexican conglomerates helped
boost the IFC index. Although avoiding these issues hurt our relative
performance during the past 12-month period, I think we are well positioned for
next year, if the market is a bit more rational. In addition, some of our
traditional holdings in Brazil, namely electric utilities, suffered after the
devaluation.
6
<PAGE> 7
PERFORMANCE UPDATE
Q WHAT IS YOUR OUTLOOK FOR LATIN AMERICAN MARKETS FOR THE NEXT SIX MONTHS?
A Looking ahead to the year 2000, we believe that the obstacles that have
hindered Latin America's progress in 1999 should be removed as global growth
expands, concerns over Y2K dissipate, and the political season in Latin America
passes. While there continue to be new worries over a global credit squeeze,
overall the region is in much better shape to withstand an external shock than
it was a year ago. Brazil will likely muddle through, a pattern observed by
investors for the past decade or more. Mexico remains the bright spot, with an
above-average growth forecast, a sound fiscal balance sheet, low leverage and a
strengthening economic base. We estimate foreign direct investment at roughly
$44 billion this year for Latin America, based on continuing evidence of the
attractiveness of the region to long-term investors. What's more, with global
growth on the mend, we expect nondedicated investors to recognize the value and
prospects for Latin American companies soon, and we therefore expect flows to
resume. Finally, the region should also be a prime beneficiary of a continuing
rise in global commodity prices.
Despite the significant political risk inherent in the region, restructuring
continues at the corporate level. In Mexico, we see U.S. companies outsourcing a
growing variety of products. In Brazil, the focus is now on exporting, or at
least on substituting imports. We have seen telecommunications firms sourcing
more equipment locally, and car and truck manufacturers looking for local
suppliers. This is good for local industry and the balance of payments.
We remain convinced that Latin America offers tremendous value and better
growth prospects in the year 2000. Price levels today reflect most of the bad
news and much of the uncertainty with regard to the political cycle. The
companies have been battle tested and are emerging stronger than before. We have
realigned the portfolio to focus on companies that have pricing power to
survive. Additionally, the local pension funds, from Argentina to Chile to
Brazil, are at record-low levels in equities and, with falling local interest
rates, are beginning to reposition from local fixed securities income to
equities.
Q HOW WILL YOU POSITION THE FUND IN LIGHT OF THIS OUTLOOK?
A We have learned that with the current lack of liquidity in the markets,
the best stocks to own, particularly in a small portfolio like this one, are the
larger, highly liquid names in the big markets. We intend to continue to hold
these going forward. Today 82 percent of the portfolio is invested in Brazil and
Mexico. Although there are some excellent companies with compelling values in
some of the peripheral markets, these companies don't enjoy the benefit of
global flows, which means it can be difficult to trade them at times and they
don't appreciate as quickly. So we intend to follow our investment style of
owning the most solid blue-chip companies in Latin America -- our experience has
shown these are the kind of stocks that can do well if the markets settle down
again.
7
<PAGE> 8
PERFORMANCE UPDATE
AVERAGE ANNUAL TOTAL RETURNS*
FOR PERIODS ENDED OCTOBER 31, 1999 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
LIFE OF
1-YEAR CLASS
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
KEMPER LATIN AMERICA FUND CLASS A 5.51% -10.72% (since 12/31/97)
- ---------------------------------------------------------------------------------------------------
KEMPER LATIN AMERICA FUND CLASS B 8.02 -10.08 (since 12/31/97)
- ---------------------------------------------------------------------------------------------------
KEMPER LATIN AMERICA FUND CLASS C 11.02 -8.57 (since 12/31/97)
- ---------------------------------------------------------------------------------------------------
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER LATIN AMERICA FUND CLASS A
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Class A shares from 12/31/97 to
10/31/99
<TABLE>
<CAPTION>
KEMPER LATIN AMERICA IFC LATIN AMERICA
FUND CLASS A(1) INVESTABLE RETURN INDEX+ CONSUMER PRICE INDEX++
-------------------- ------------------------ ----------------------
<S> <C> <C> <C>
12/31/97 9425.00 10000.00 10000.00
9/30/98 6657.00 5947.00 10143.00
3/31/99 7973.00 7304.00 10229.00
10/31/99 8123.00 7902.00 10459.00
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER LATIN AMERICA FUND CLASS B
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Class B shares from 12/31/97 to
10/31/99
<TABLE>
<CAPTION>
KEMPER LATIN AMERICA IFC LATIN AMERICA
FUND CLASS B(1) INVESTABLE RETURN INDEX+ CONSUMER PRICE INDEX++
-------------------- ------------------------ ----------------------
<S> <C> <C> <C>
12/31/97 10000.00 10000.00 10000.00
9/30/98 7021.00 5947.00 10143.00
3/31/99 8368.00 7304.00 10229.00
10/31/99 8158.00 7902.00 10459.00
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER LATIN AMERICA FUND CLASS C
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Class C shares from 12/31/97 to
10/31/99
<TABLE>
<CAPTION>
KEMPER LATIN AMERICA IFC LATIN AMERICA
FUND CLASS C(1) INVESTABLE RETURN INDEX+ CONSUMER PRICE INDEX++
-------------------- ------------------------ ----------------------
<S> <C> <C> <C>
12/31/97 10000 10000 10000
9/30/98 7021 5947 10143
3/31/99 8379 7304 10229
10/31/99 8484 7902 10459
</TABLE>
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURNS AND
PRINCIPAL VALUE WILL FLUCTUATE, SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN ORIGINAL COST.
* AVERAGE ANNUAL TOTAL RETURN AND TOTAL RETURN MEASURE NET INVESTMENT INCOME
AND CAPITAL GAIN OR LOSS FROM PORTFOLIO INVESTMENTS, ASSUMING REINVESTMENT
OF ALL DIVIDENDS AND, FOR CLASS A SHARES, ADJUSTMENT FOR THE MAXIMUM SALES
CHARGE OF 5.75% AND FOR CLASS B SHARES ADJUSTMENT FOR THE APPLICABLE
CONTINGENT DEFERRED SALES CHARGE (CDSC) OF 3%, CLASS C SHARES HAVE NO SALES
CHARGE ADJUSTMENT. THE MAXIMUM CDSC FOR CLASS B SHARES IS 4%. FOR CLASS C
SHARES, THERE IS A 1% CDSC ON CERTAIN REDEMPTIONS WITHIN THE FIRST YEAR OF
PURCHASE. SHARE CLASSES INVEST IN THE SAME UNDERLYING PORTFOLIO. AVERAGE
ANNUAL TOTAL RETURN REFLECTS ANNUALIZED CHANGE WHILE TOTAL RETURN REFLECTS
AGGREGATE CHANGE. 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 LATIN AMERICA FUND CLASS A SHARES WITH THE IFC LATIN AMERICA
INVESTABLE RETURN INDEX, YOU SHOULD ALSO NOTE THAT THE FUND'S PERFORMANCE
REFLECTS THE MAXIMUM SALES CHARGE, WHILE NO SUCH CHARGE IS REFLECTED IN THE
PERFORMANCE OF THE INDEX.
+ IFC LATIN AMERICA INVESTABLE RETURN INDEX IS A U.S. DOLLAR DENOMINATED INDEX
COMPRISED OF LATIN AMERICA'S STOCK MARKETS WITHOUT REFERENCE TO THE STOCK'S
AVAILABILITY TO OVERSEAS INVESTORS. THE TARGET COVERAGE OF THE INDEX IS
ROUGHLY 70-75% OF TOTAL MARKET CAPITALIZATION, DRAWING UPON STOCKS IN THESE
MARKETS IN ORDER OF THEIR LIQUIDITY. SOURCE IS WIESENBERGER.
++ THE CONSUMER PRICE INDEX IS A STATISTICAL MEASURE OF CHANGE, OVER TIME, IN
THE PRICES OF GOODS AND SERVICES IN MAJOR EXPENDITURE GROUPS FOR ALL URBAN
CONSUMERS. SOURCE IS WIESENBERGER.
8
<PAGE> 9
GEOGRAPHIC COMPOSITION
GEOGRAPHIC COMPOSITION OF KEMPER LATIN AMERICA FUND*
BASED ON EQUITY HOLDINGS ON OCTOBER 31, 1999
[PIE CHART]
<TABLE>
<CAPTION>
ON 10/31/99
<S> <C>
MEXICO 44.6%
- --------------------------------------------------------------------------------
BRAZIL 44.3
- --------------------------------------------------------------------------------
CHILE 6.1
- --------------------------------------------------------------------------------
UNITED STATES 1.8
- --------------------------------------------------------------------------------
PERU 1.7
- --------------------------------------------------------------------------------
ARGENTINA 1.5
- --------------------------------------------------------------------------------
100%
</TABLE>
* Portfolio Composition is subject to change.
9
<PAGE> 10
LARGEST HOLDINGS
KEMPER LATIN AMERICA FUND'S 20 LARGEST HOLDINGS*
Representing 74.0 percent of the fund's equity holdings on October 31, 1999
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
HOLDINGS COUNTRY PERCENT
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
1. TELEFONOS DE MEXICO "L" Mexico 9.9%
- ----------------------------------------------------------------------------------
2. PETRO LEO BRASILEIRO Brazil 8.9%
- ----------------------------------------------------------------------------------
3. GRUPO MODEL S.A. Mexico 4.0%
- ----------------------------------------------------------------------------------
4. COMPANHIA CERVECERICIS UNIDAS Chile 3.9%
- ----------------------------------------------------------------------------------
5. ARACRUZ CELULOSE S.A. Brazil 3.6%
- ----------------------------------------------------------------------------------
6. TELECENTRO SUL PARTICIPACOES Brazil 3.5%
- ----------------------------------------------------------------------------------
7. COMPANHIA CERVEJAIA BRAHMA Brazil 3.4%
- ----------------------------------------------------------------------------------
8. FORMENTO ECONOMICO MEXICANO Mexico 3.2%
- ----------------------------------------------------------------------------------
9. COMPANHIA SIDERURGICA NACIONAL Brazil 3.1%
- ----------------------------------------------------------------------------------
10. APASCO S.A. Mexico 3.1%
- ----------------------------------------------------------------------------------
11. KIMBERLY CLARK DE MEXICO Mexico 3.1%
- ----------------------------------------------------------------------------------
12. TUBUS DE ACER DE MEXICO Mexico 3.1%
- ----------------------------------------------------------------------------------
13. COMPANHIA BRASILEIRA DE DISTRIBUCA Mexico 3.0%
- ----------------------------------------------------------------------------------
14. TELE NORTE LESTE PARTICIPACOES Brazil 2.9%
- ----------------------------------------------------------------------------------
15. BANCO ITAU S.A. Brazil 2.8%
- ----------------------------------------------------------------------------------
16. COMPANHIA VALE DO RIO DOCE Brazil 2.7%
- ----------------------------------------------------------------------------------
17. GRUPO CARS S.A. Mexico 2.7%
- ----------------------------------------------------------------------------------
18. CIFRA S.A. Mexico 2.7%
- ----------------------------------------------------------------------------------
19. TELECELULAR SUL PARTICIPACOES Brazil 2.2%
- ----------------------------------------------------------------------------------
20. GRUPO INDUSTRIAL BIMBO Mexico 2.2%
- ----------------------------------------------------------------------------------
</TABLE>
*Portfolio composition and holdings are subject to change.
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
KEMPER LATIN AMERICA FUND
PORTFOLIO OF INVESTMENTS AT OCTOBER 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE($)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER--7.3%
Federal Home Loan Bank
5.16%*, 11/01/1999
(Cost $185,000) 185,000 $ 185,000
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET
COMMON STOCKS OF SHARES VALUE($)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ARGENTINA--1.4%
Telecom Argentina S.A. "B" (ADR)
(PROVIDER OF TELECOMMUNICATION SERVICES) 1,300 35,750
-----------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
BRAZIL--41.1%
Aracruz Celulose S.A. (ADR)
(PRODUCER OF EUCALYPTUS KRAFT PULP) 4,500 92,250
Banco Bradesco S.A. (ADR)
(BANK) 10,000 48,750
Banco Itau S.A. (pfd.)
(BANK) 1,250,000 71,867
Companhia Brasileira de Distribuicao
Grupo Pao de Acucar
(OPERATOR OF HYPERMARKETS, SUPERMARKETS
AND APPLIANCE STORES) 3,500 76,563
Companhia Cervejaria Brahma (pfd.)
(BEER PRODUCER AND DISTRIBUTOR) 135,000 86,281
Companhia Siderurgica Nacional (ADR)
(MANUFACTURER AND DISTRIBUTOR OF STEEL
AND TIN MILL PRODUCTS) 3,000 79,688
Companhia Vale do Rio Doce (ADR)
(MINING, RAIL TRANSPORTATION, AND MINERAL
SALES IN IRON ORE, ALUMINUM, MANGANESE,
TITANIUM, GOLD, & COPPER) 3,500 69,672
Petroleo Brasileiro S.A. (pfd.)
(PETROLEUM COMPANY) 1,421,000 226,499
Souza Cruz S.A.
(HOLDING COMPANY FOR CIGARETTES, TOBACCO,
AND FIBER CELLULOSE) 5,500 31,481
Tele Celular Sul Participacoes S.A. (pfd.) (ADR)
(PROVIDER OF CELLULAR TELECOMMUNICATION SERVICES) 3,200 56,000
Tele Centro Sul Participacoes S.A. (ADR)
(PROVIDER OF LOCAL TELECOMMUNICATION SERVICES) 1,500 89,625
Tele Norte Leste Participacoes S.A. (pfd.) (ADR)
(PROVIDER OF LOCAL TELECOMMUNICATION SERVICES) 4,325 72,984
Telecommunicacoes de Sao Paulo S.A. (ADR)
(PROVIDER OF LOCAL TELECOMMUNICATION SERVICES
IN SAO PAULO) 2,500 40,469
-------------------------------------------------------------------------------
1,042,129
-------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
CHILE--5.6%
Companhia Cervecerias Unidas S.A. (ADR)
(BOTTLER AND DISTRIBUTOR OF BEER, SOFT DRINKS
AND MINERAL WATER) 4,500 98,156
Compania de Telefonos de Chile, S.A. (ADR) (New)
(PROVIDER OF TELECOMMUNICATION SERVICES) 2,650 44,222
-------------------------------------------------------------------------------
142,378
-------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
MEXICO--41.3%
Apasco, S.A. de C.V.
(CEMENT PRODUCER) 15,000 79,646
(a) CIFRA S.A. de C.V. "C"
(DISCOUNT RETAILER) 45,000 68,870
Fomento Economico Mexicano S.A. de C.V. "B"
(PRODUCER OF BEER AND SOFT DRINKS) 14,000 45,476
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET
COMMON STOCKS OF SHARES VALUE($)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fomento Economico Mexicano, S.A. de C.V. (ADR)
(PRODUCER OF BEER, SOFT DRINKS AND MINERAL WATER) 2,450 $ 80,391
(a) Grupo Carso, S.A. de C.V. "A"
(DIVERSIFIED INDUSTRIAL GROUP) 16,500 69,230
Grupo Continental S.A.
(PRODUCER AND DISTRIBUTOR OF SOFT DRINKS, SUGAR
AND MINERAL WATER) 44,000 49,474
Grupo Financiero Inbursa, S.A. de C.V. "O"
(PROVIDER OF FINANCIAL SERVICES) 7,000 24,269
Grupo Industrial Bimbo S.A. de C.V. "A"
(PRODUCER OF BREAD AND OTHER BAKED GOODS) 28,000 51,423
Grupo Industrial Maseca S.A. de C.V. (ADR)
(FOOD PRODUCER) 4,000 27,500
Grupo Modelo S.A. "C"
(BREWERY) 41,500 101,536
(a) Grupo Televisa S.A. de C.V. (GDR)
(MEDIA COMPANY) 1,000 42,500
Kimberly Clark de Mexico S.A. de C.V. "A"
(PRODUCER OF CONSUMER PAPER PRODUCTS) 24,600 78,884
Telefonos de Mexico S.A. de C.V. "L" (ADR)
(PROVIDER OF TELECOMMUNICATION SERVICES) 2,945 251,798
Tubos de Acero de Mexico S.A. (ADR)
(MANUFACTURER OF VARIOUS TYPES OF PIPES, CASINGS
AND TUBING) 7,100 77,656
---------------------------------------------------------------------------------
1,048,653
---------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
PERU--1.6%
Cementos Lima S.A. "T"
(CEMENT PRODUCER) 13,616 15,819
Union de Cerveceria Backus & Johnston S.A. "T"
(PRODUCER OF MALTED, NONALCOHOLIC AND CARBONATED
DRINKS) 63,663 23,559
---------------------------------------------------------------------------------
39,378
---------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
UNITED STATES--1.7%
Colgate-Palmolive Co.
(MANUFACTURER OF HOUSEHOLD AND PERSONAL CARE
PRODUCTS) 700 42,350
---------------------------------------------------------------------------------
TOTAL COMMON STOCKS--92.7%
(Cost $2,283,657) 2,350,638
---------------------------------------------------------------------------------
TOTAL INVESTMENTS--100%
(Cost $2,468,657) $2,535,638
---------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Non income producing security
* Annualized yield at time of purchase; not a coupon rate. (Unaudited)
Based on the cost of investments of $2,472,980 for federal income tax
purposed at October 31, 1999, the gross unrealized appreciation was
$193,544, the gross unrealized depreciation was $130,886, and the net
unrealized appreciation on investments was $62,658.
The accompanying Notes are an integral part of the Financial Statements.
12
<PAGE> 13
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
- --------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------
Investments, at value
(Cost $2,468,657) $2,535,638
- --------------------------------------------------------------------------
Receivable for:
Fund shares sold 3,196
- --------------------------------------------------------------------------
Dividends and interest 7,018
- --------------------------------------------------------------------------
Reimbursement from Adviser 53,564
- --------------------------------------------------------------------------
Deferred organization expense 3,912
- --------------------------------------------------------------------------
Other assets 2,149
- --------------------------------------------------------------------------
TOTAL ASSETS 2,605,477
- --------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
Due to custodian bank 2,604
- --------------------------------------------------------------------------
Payable for investments purchased 62,366
- --------------------------------------------------------------------------
Other payables and accrued expenses 78,476
- --------------------------------------------------------------------------
Total liabilities 143,446
- --------------------------------------------------------------------------
NET ASSETS $2,462,031
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- --------------------------------------------------------------------------
Paid-in capital $2,660,095
- --------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency related transactions (265,273)
- --------------------------------------------------------------------------
Undistributed net investment income 1,492
- --------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on:
Investments 66,981
- --------------------------------------------------------------------------
Foreign currency related transactions (1,264)
- --------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $2,462,031
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
THE PRICING OF SHARES
- --------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($1,726,213 / 212,626 shares outstanding) $8.12
- --------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $8.62
- --------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($649,668 / 80,592 shares outstanding) $8.06
- --------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($86,150 / 10,689 shares outstanding) $8.06
- --------------------------------------------------------------------------
</TABLE>
The accompanying Notes are an integral part of the Financial Statements.
13
<PAGE> 14
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Year ended October 31, 1999
<TABLE>
<S> <C>
- -------------------------------------------------------------------------
NET INVESTMENT INCOME
- -------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $5,488) $ 52,392
- -------------------------------------------------------------------------
Interest 5,033
- -------------------------------------------------------------------------
Total investment income 57,425
- -------------------------------------------------------------------------
Expenses:
Management fee 23,693
- -------------------------------------------------------------------------
Distribution services fee 3,927
- -------------------------------------------------------------------------
Administrative services fee 4,739
- -------------------------------------------------------------------------
Shareholder services fee 9,268
- -------------------------------------------------------------------------
Custodian, accounting and transfer agent fees and related
expenses 95,610
- -------------------------------------------------------------------------
Auditing 3,189
- -------------------------------------------------------------------------
Legal 6,310
- -------------------------------------------------------------------------
Reports to shareholders 19,793
- -------------------------------------------------------------------------
Amortization of organization expenses 1,234
- -------------------------------------------------------------------------
Directors' fees and other 10,414
- -------------------------------------------------------------------------
Expenses, before expense reductions 178,177
- -------------------------------------------------------------------------
Expense reductions (132,079)
- -------------------------------------------------------------------------
Expenses, net 46,098
- -------------------------------------------------------------------------
NET INVESTMENT INCOME 11,327
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- -------------------------------------------------------------------------
Net realized loss on:
Investments (178,480)
- -------------------------------------------------------------------------
Foreign currency related transactions (including CPMF
tax of $1,569) (8,912)
- -------------------------------------------------------------------------
(187,392)
- -------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation)
during the period on:
Investments 328,787
- -------------------------------------------------------------------------
Foreign currency related transactions (1,252)
- -------------------------------------------------------------------------
327,535
- -------------------------------------------------------------------------
Net gain on investments 140,143
- -------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 151,470
- -------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
DECEMBER 31, 1997
(COMMENCEMENT
YEAR ENDED OF OPERATIONS)
OCTOBER 31, 1999 TO OCTOBER 31, 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
Net investment income $ 11,327 11,259
- ----------------------------------------------------------------------------------------------------------
Net realized loss (187,392) (90,204)
- ----------------------------------------------------------------------------------------------------------
Change in net unrealized gain (depreciation) on
investments 327,535 (261,818)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 151,470 (340,763)
- ----------------------------------------------------------------------------------------------------------
Distribution from net investment income (8,957) --
- ----------------------------------------------------------------------------------------------------------
Net increase from capital share transactions 859,020 1,781,261
- ----------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 1,001,533 1,440,498
- ----------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of period 1,460,498 20,000
- ----------------------------------------------------------------------------------------------------------
END OF PERIOD (including undistributed net investment
income of $1,492 and $7,847 respectively) $2,462,031 1,460,498
- ----------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying Notes are an integral part of the Financial Statements.
14
<PAGE> 15
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), which is registered under the
Investment Company Act of 1940, as amended (the
"1940 Act"), as an open-end management investment
company organized as a Maryland corporation.
The fund currently offers multiple 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.
Investment income, realized and unrealized gains
and losses, and certain fund level expenses and
expense reductions, if any, are borne pro rata on
the basis of relative net assets by the holders of
all classes of shares except that each class bears
certain expenses unique to that class such as
distribution services, shareholder services,
administrative services and certain other class
specific expenses. Differences in class expenses
may result in payment of different per share
dividends by class. All shares of the fund have
equal rights with respect to voting subject to
class specific arrangements.
The fund's financial statements are prepared in
accordance with generally accepted accounting
principles which require the use of management
estimates. The policies described below are
followed consistently by the fund in the
preparation of its financial statements.
- --------------------------------------------------------------------------------
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.
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.
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
FOREIGN CURRENCY TRANSLATIONS. The books and
records of the fund are maintained in U.S. dollars.
Investment securities and other assets and
liabilities denominated in a foreign currency are
translated into U.S. dollars at the prevailing
rates of exchange. Purchases and sales of
investment securities, income and expenses are
translated into U.S. dollars at the prevailing
exchange rates on the respective dates of the
transactions.
Net realized and unrealized gains and losses on
foreign currency transactions represent net gains
and losses from sales and maturities of forward
foreign currency exchange contracts, disposition of
foreign currencies, and the difference between the
amount of net investment income accrued and the
U.S. dollar amount actually received. That portion
of both realized and unrealized gains and losses on
investments that result from fluctuations in
foreign currency exchange rates is not separately
disclosed but is included with the net realized and
unrealized gains and losses on investment
securities.
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, 1999, the fund had a tax basis net
loss carryforward of approximately $261,000 which
may be applied against any realized net taxable
gains of each succeeding year until fully utilized
or until October 31, 2006 ($87,000) and October 31,
2007 ($174,000), the respective expiration dates.
The fund is also subject to a .38% Contribuicao
Provisoria sobre Movimentacao Financiera (CPMF) tax
which is applied to foreign exchange transactions
representing capital inflows or outflows to the
Brazilian market.
DISTRIBUTION OF INCOME AND GAINS. Distributions of
net investment income, if any, are made annually.
Net realized gains from investment transactions, in
excess of available capital loss carryforwards,
would be taxable to the fund if not distributed,
and, therefore, will be distributed to shareholders
at least annually.
The timing and characterization of certain income
and capital gains distributions are determined
annually in accordance with federal tax regulations
which may differ from generally accepted accounting
principles. As a result, net investment income
(loss) and net realized gain (loss) on investment
transactions for a reporting period may differ
significantly from distributions during such
period. Accordingly, the fund may periodically make
reclassifications among certain of its capital
accounts without impacting the net asset value of
the fund.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on the
trade date. Interest income is recorded on the
accrual basis. Dividend income is recorded on the
ex-dividend date. Certain dividends from foreign
securities may be recorded subsequent to the
ex-dividend date as soon as the fund is informed of
such dividends. Realized gains and losses from
investment transactions are recorded on an
identified cost basis.
All discounts are accreted for both tax and
financial reporting purposes.
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
ORGANIZATIONAL COSTS. Costs incurred by the fund in
connection with its organization have been deferred
and are being amortized on a straight-line basis
over a five-year period.
OTHER CONSIDERATIONS. Investing in emerging markets
may involve special risks and considerations not
typically associated with investing in the United
States. These risks include revaluation of
currencies, high rates of inflation, repatriation
restrictions on income and capital, and future
adverse political and economic developments.
Moreover, securities issued in these markets may be
less liquid, subject to government ownership
controls, delayed settlements, and their prices
more volatile than those of comparable securities
in the United States.
- --------------------------------------------------------------------------------
3 TRANSACTIONS
WITH AFFILIATES MANAGEMENT AGREEMENT. The fund has a management
agreement with Scudder Kemper Investments, Inc.
(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 October 31, 1999, after an expense reduction
by Scudder Kemper.
In addition, Scudder Kemper has temporarily agreed
to absorb certain operating expenses of the fund.
Under these arrangements, Scudder Kemper absorbed
expenses of $132,079 for the period ended October
31, 1999.
UNDERWRITING AND DISTRIBUTION SERVICES
AGREEMENT. The fund has an underwriting and
distribution services agreement with Kemper
Distribution, Inc. (KDI). Underwriting commissions
retained by KDI in connection with the distribution
of Class A shares for the year ended October 31,
1999 are $283:
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.
Distribution fees and CDSC received by KDI for the
year ended October 31, 1999 are $5,436, after an
expense reduction of $512, of which $3,416 is
unpaid as of October 31, 1999.
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.
Administrative services fees for the year ended
October 31, 1999 are $429 after an expense
reduction of $4,309, all of which is unpaid at
October 31, 1999.
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 $9,389 for
the period ended October 31, 1999, all of which is
unpaid at October 31, 1999.
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
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, 1999, after a fee
reduction of $50,001 by Scudder Kemper.
OFFICERS AND DIRECTORS. Certain directors of the
fund are also directors of Scudder Kemper. For the
period ended October 31, 1999, the fund made no
direct payments to its officers and incurred
directors' fees of $8,887 to independent directors.
- --------------------------------------------------------------------------------
4
INVESTMENT
TRANSACTIONS For the period ended October 31, 1999, investment
transactions (excluding short-term instruments) are
as follows:
Purchases $2,221,496
Proceeds from sales 1,386,271
- --------------------------------------------------------------------------------
5
CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the fund:
<TABLE>
<CAPTION>
PERIOD ENDED PERIOD ENDED
OCTOBER 31, 1999 OCTOBER 31, 1998
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 152,036 $1,239,279 174,127 $1,545,225
----------------------------------------------------------------------------------
Class B 92,066 764,751 43,991 383,435
----------------------------------------------------------------------------------
Class C 23,856 190,641 25,380 189,834
----------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 1,195 8,603 -- --
----------------------------------------------------------------------------------
Class B -- -- -- --
----------------------------------------------------------------------------------
Class C -- -- -- --
----------------------------------------------------------------------------------
SHARES REDEEMED
Class A (95,598) (773,622) (19,836) (148,437)
----------------------------------------------------------------------------------
Class B (49,760) (409,690) (6,407) (50,967)
----------------------------------------------------------------------------------
Class C (19,986) (160,942) (19,263) (137,829)
----------------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $ 859,020 $1,781,261
----------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
6
LINE OF CREDIT The fund and several Kemper Funds (the
"Participants") share in a $750 million revolving
credit facility for temporary or emergency
purposes, including the meeting of redemption
requests that otherwise might require the untimely
disposition of securities. The Participants are
charged an annual commitment fee which is allocated
pro rata among each of the Participants. Interest
is calculated based on the market rates at the time
of the borrowing. The fund may borrow up to a
maximum of 33 percent of its net assets under the
agreement.
18
<PAGE> 19
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------------------------
CLASS A
--------------------------------------------------
FOR THE
PERIOD FROM
DECEMBER 31, 1997
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
OCTOBER 31, 1999(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 .07 .06
- --------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .80 (2.25)
- --------------------------------------------------------------------------------------------------------------
Total from investment operations .87 (2.19)
- --------------------------------------------------------------------------------------------------------------
Distribution from net investment income (.06) --
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.12 7.31
- --------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 12.01% (23.05)
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------------------------------------
Expenses, before expense reductions 9.16% 12.75
- --------------------------------------------------------------------------------------------------------------
Expenses, net 2.19% 2.21
- --------------------------------------------------------------------------------------------------------------
Net investment income .87% 1.38
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------
CLASS B
--------------------------------------------------
FOR THE
PERIOD FROM
DECEMBER 31, 1997
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
OCTOBER 31, 1999(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 (.01) .04
- --------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .81 (2.28)
- --------------------------------------------------------------------------------------------------------------
Total from investment operations .80 (2.24)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.06 7.26
- --------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 11.02% (23.58)
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses, before expense reductions 9.93% 14.38
- --------------------------------------------------------------------------------------------------------------
Expenses, net 3.06% 3.09
- --------------------------------------------------------------------------------------------------------------
Net investment income (.13)% .50
- --------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------------
CLASS C
----------------------------------------------
FOR THE
PERIOD FROM
DECEMBER 31, 1997
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
OCTOBER 31, 1999(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 -- .04
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .80 (2.28)
- ----------------------------------------------------------------------------------------------------------
Total from investment operations .80 (2.24)
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period 8.06 7.26
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 11.02% (23.58)
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses, before expense reductions 10.73% 14.34
- ----------------------------------------------------------------------------------------------------------
Expenses, net 3.04% 3.06
- ----------------------------------------------------------------------------------------------------------
Net investment income (.02)% .53
- ----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
Net assets at end of period $2,462,031 1,460,498
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 76% 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.
(a) Per share data was determined based on monthly average shares outstanding
during the period.
TAX INFORMATION
The fund paid foreign taxes of $3,766 and earned $6,368 of foreign source income
during the year ended October 31, 1999. Pursuant to Section 853 of the Internal
Revenue Code, the fund designates $0.02 per share as foreign taxes paid and
$0.03 per share as income earned from foreign sources for the year ended October
31, 1999.
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.
20
<PAGE> 21
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SHAREHOLDERS
KEMPER LATIN AMERICA FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper Latin America Fund (one of the
portfolios constituting Kemper Global/International Series, Inc.) as of October
31, 1999, and the related statement of operations for the year then ended, the
statements of changes in net assets and the financial highlights for the year
then ended and for the period from December 31, 1997 (commencement of
operations) to October 31, 1998. These financial statements and financial
highlights are the responsibility of the fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits 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, 1999, by correspondence with the custodian
and brokers, or other procedures when replies from brokers were not received. 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 audits provide 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
Latin America Fund of Kemper Global/International Series, Inc. at October 31,
1999, the results of its operations, the changes in its net assets and the
financial highlights for the periods referred to above, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
December 14, 1999
21
<PAGE> 22
NOTES
22
<PAGE> 23
NOTES
23
<PAGE> 24
DIRECTORS & 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
BRENDA LYONS
THOMAS W. LITTAUER Assistant Treasurer
Vice President
- --------------------------------------------------------------------------------
LEGAL COUNSEL DECHERT PRICE & RHOADS
Ten Post Office Square South
Boston, MA 02109
- --------------------------------------------------------------------------------
TRANSFER AND SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 219557
Kansas City, MO 64121
- --------------------------------------------------------------------------------
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 - 2 (12/23/99) 1096710
