SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED APRIL 30, 2000
Kemper International Growth & Income Fund
<PAGE>
Kemper International Growth And Income Fund
Portfolio of Investments at April 30, 2000 (unaudited)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
Short Term Investments--9.1% Principal Amount($) Value ($)
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
United States Federal Home Loan Bank Discount Corp.,
5.88%, 05/01/2000
(Cost $308,000) 308,000 308,000
--------------------------------------------------------------------------------------------------------------
Convertible Bond--3.2%
--------------------------------------------------------------------------------------------------------------
United States Merrill Lynch & Co., 2.00%, 04/14/2004
(Provider of financial and investment services)
(Cost 124,537) 128,000.00 108,480
--------------------------------------------------------------------------------------------------------------
Currency Protected Securities--10.1% Shares
--------------------------------------------------------------------------------------------------------------
Japan (b) Canon, Inc.
(Producer of visual image and
information equipment) 4,000 182,563
(b) Matsushita Electric Industrial Co., Ltd.
(Manufacturer of consumer
electronic products) 6,000 158,537
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
TOTAL CURRENCY PROTECTED SECURITIES
(Cost $298,926) 341,100
----------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Common Stocks--77.6%
--------------------------------------------------------------------------------------------------------------
Belgium-- 3.8% Dexia
(Provider of municipal lending services) 2,020 130,981
----------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Canada-- 2.8% BCE, Inc.
(Provider of telecommunication services) 814 94,223
----------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Finland-- 3.3% UPM-Kymmene Oyj
(Manufacturer of paper and pulp products) 4,300 111,435
----------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
France-- 4.4% Schneider Electric SA
(Manufacturer of electronic components and automated
manufacturing systems) 2,308 151,104
----------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Germany-- 5.9% Bayerische Motoren Werke(BMW) AG
(Manufacturer of luxury cars and motorcycles) 4,112 109,367
SAP AG
(Computer software manufacturer) 196 91,963
----------------------------------------------------------------------------------
201,330
--------------------------------------------------------------------------------------------------------------
Italy-- 3.2% Telecom Italia Mobile SPA *
(Cellular telecommunication services) 11,500 109,798
----------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Japan-- 15.9%
Matsushita Electric Works, Ltd.
(Manufacturer of building materials
and lighting equipment) 14,000 155,081
Nintendo Co., Ltd.
(Manufacturer of game equipment) 700 116,408
Sumitomo Trust & Banking Co., Ltd.
(Commercial Bank) 17000 124,076
Teijin, Ltd.
(Manufacturer of polyester products) 33,000 147,256
----------------------------------------------------------------------------------
542,821
--------------------------------------------------------------------------------------------------------------
Netherlands-- 9.4% DSM NV
(Chemical manufacturer) 2,750 90,346
Koninklijke KPN NV
(Provider of telecommunication services) 1,050 105,836
<PAGE>
Royal Dutch Petroleum Co.
(Manufacturer of petroleum products) 2,160 124,523
----------------------------------------------------------------------------------
320,705
--------------------------------------------------------------------------------------------------------------
Spain-- 3.2% Union Electrica Fenosa S.A.
(Producer and distributor of electrical energy) 5,659 108,421
----------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Sweden-- 7.2% Averta-Sheffield AB *
(Manufacturer of stainless steel products) 28,800 102,528
Investor AB "B"
(Investment company ) 10,200 143,877
----------------------------------------------------------------------------------
246,405
--------------------------------------------------------------------------------------------------------------
Switzerland-- 3.0% Novartis AG (Registered)
(Pharmaceutical company) 73 102,041
----------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
United Kingdom-- 15.5% British Aerospace PLC 28,722 176,123
(Producer of military aircraft)
Corus Group PLC 44,044 59,143
(Manufacturer and distributor of metal products)
LASMO PLC 66,301 111,153
(Oil production and exploration)
Peninsular and Oriental Steam Navigation Co. 8,710 85,861
(Shipping and transportation company)
Royal & Sun Alliance Insurance Group PLC 16,720 93,442
(Insurance company)
----------------------------------------------------------------------------------
525,722
---------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $2,618,128) 2,644,986
----------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO-- 100.0%
(Cost $3,349,591) (a) $3,402,566
----------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Notes to Portfolio of Investments
--------------------------------------------------------------------------------------------------------------
</TABLE>
* Non Income producing security.
(a) The cost for federal income tax purposes was $
3,349,591. At April 30, 2000, net unrealized appreciation
for all securities based on tax cost was $52,975. This
consisted of aggregate gross unrealized appreciation for all
securities in which there was an excess of value over cost
of $ 368,809 and aggregate gross unrealized depreciation for
all securities in which there was an excess of tax cost over
value of $ 315,834.
(b) Currency Protected Securities are Medium Term Notes of
Morgan Stanley Dean Witter & Co. These securities permit the
investor to participate in the price fluctuation of the
common stock of the underlying company without the effects
of future changes in the Japanese Yen exchange rates.
<PAGE>
Kemper International Growth and Income Fund
Statement of Assets and Liabilities
as of April 30, 2000 (unaudited)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Assets
------------------------------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (Cost $3,349,591 ) $ 3,402,566
------------------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 5,509
------------------------------------------------------------------------------------------------------------
Dividends receivable 16,429
------------------------------------------------------------------------------------------------------------
Foreign taxes recoverable 7,067
------------------------------------------------------------------------------------------------------------
Due from advisor 49,150
------------------------------------------------------------------------------------------------------------
Other assets 3,925
------------------------------------------------------------------------------------------------------------
Total assets 3,484,646
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
Liabilities
------------------------------------------------------------------------------------------------------------
Due to custodian bank 4,938
------------------------------------------------------------------------------------------------------------
Payable for Fund shares redeemed 5,397
------------------------------------------------------------------------------------------------------------
Other accrued expenses and payables 43,340
------------------------------------------------------------------------------------------------------------
Total liabilities 53,675
------------------------------------------------------------------------------------------------------------
Net assets, at value $ 3,430,971
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
Net assets
------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income $ 24,806
------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment securities
------------------------------------------------------------------------------------------------------------
Investments 52,975
------------------------------------------------------------------------------------------------------------
Foreign currency related transactions (1,249)
------------------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) 244,752
------------------------------------------------------------------------------------------------------------
Paid-in capital 3,109,687
------------------------------------------------------------------------------------------------------------
Net assets, at value $ 3,430,971
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
Net Asset Value and Offering Price
------------------------------------------------------------------------------------------------------------
Class A Shares
Net asset value and redemption price per share
($1,687,378 / 151,758 shares of capital stock outstanding,
$.01 par value, 33,333,333 shares authorized) $11.12
------------------------------------------------------------------------------------------------------------
Maximum offering price per share (100/94.25 of $11.12) $11.80
------------------------------------------------------------------------------------------------------------
Class B Shares
Net asset value, offering and redemption price (subject to contingent deferred
sales charge) per share ($1,376,762 /125,325 shares of capital stock outstanding,
$.01 par value, 33,333,333 shares authorized) $10.99
------------------------------------------------------------------------------------------------------------
Class C Shares
Net asset value, offering and redemption price (subject to contingent deferred
sales charge) per share ($366,831 / 33,393 shares of capital stock outstanding,
$.01 par value, 33,333,334 shares authorized) $10.99
------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Kemper International Growth and Income Fund
Statement of Operations
as of April 30, 2000 (unaudited)
Six months ended April 30, 2000 (unaudited)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
Investment income
-----------------------------------------------------------------------------------------------------------------------
<S> <C>
Dividends (net of foreign taxes withheld of $ 5,419) $ 42,656
-----------------------------------------------------------------------------------------------------------------------
Interest 6,522
-----------------------------------------------------------------------------------------------------------------------
Total Income 49,178
-----------------------------------------------------------------------------------------------------------------------
Expenses:
Management fee 24,758
-----------------------------------------------------------------------------------------------------------------------
Services to shareholders 13,124
-----------------------------------------------------------------------------------------------------------------------
Custodian and accounting fees 52,082
-----------------------------------------------------------------------------------------------------------------------
Distribution services fees 8,221
-----------------------------------------------------------------------------------------------------------------------
Administrative services fees 6,189
-----------------------------------------------------------------------------------------------------------------------
Auditing 11,715
-----------------------------------------------------------------------------------------------------------------------
Legal 7,503
-----------------------------------------------------------------------------------------------------------------------
Directors' fees and expenses 5,275
-----------------------------------------------------------------------------------------------------------------------
Reports to shareholders 22,864
-----------------------------------------------------------------------------------------------------------------------
Other 6,847
-----------------------------------------------------------------------------------------------------------------------
Total expenses, before expense reductions 158,578
-----------------------------------------------------------------------------------------------------------------------
Expense reductions (104,467)
-----------------------------------------------------------------------------------------------------------------------
Total expenses, after expense reductions 54,111
-----------------------------------------------------------------------------------------------------------------------
Net investment loss (4,933)
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
-----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments 470,215
-----------------------------------------------------------------------------------------------------------------------
Foreign currency transactions (1,312)
-----------------------------------------------------------------------------------------------------------------------
468,903
-----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation(depreciation) during the period on:
-----------------------------------------------------------------------------------------------------------------------
Investments (172,072)
-----------------------------------------------------------------------------------------------------------------------
Foreign currency related transactions (1,371)
-----------------------------------------------------------------------------------------------------------------------
(173,443)
-----------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 295,460
-----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 290,527
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Kemper International Growth and Income Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Six months ended
April 30, 2000 Year ended
(unaudited) October 31, 1999
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase(Decrease) in Net Assets
-------------------------------------------------------------------------------------------------------------------------------
Operations:
Net investment income (loss) $ (4,933) $ 47,740
-------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 468,903 (81,742)
-------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment transactions during the period (173,443) 466,417
-------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 290,527 432,415
-------------------------------------------------------------------------------------------------------------------------------
Distributions from shareholders:
From net investmet income
-------------------------------------------------------------------------------------------------------------------------------
Class A - (11,421)
-------------------------------------------------------------------------------------------------------------------------------
Class B - (2,562)
-------------------------------------------------------------------------------------------------------------------------------
Class C - (793)
-------------------------------------------------------------------------------------------------------------------------------
Fund share transactions:
Proceeds from shares sold 1,217,081 3,399,556
-------------------------------------------------------------------------------------------------------------------------------
Reinvestment of distributions - 14,289
-------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (3,284,464) (2,894,636)
-------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share transactions (2,067,383) 519,209
-------------------------------------------------------------------------------------------------------------------------------
Increase(decrease) in net assets (1,776,856) 936,848
-------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of period 5,207,827 4,270,979
-------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (including undistributed net investment
income of $24,806 and 29,739, respectively) $ 3,430,971 $ 5,207,827
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Financial Highlights
The following tables include selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
---------------------------------------------------------------
Class A
---------------------------------------------------------------
For the period
Six months ended December 31, 1997
April 30, 2000 Year ended (commencement of operations)
(unaudited) October 31, 1999 to October 31, 1998
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.62 9.73 9.50
------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) - (a) 0.15 (a) 0.13
------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investment transactions 0.50 0.79 0.20
------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.50 0.94 0.33
------------------------------------------------------------------------------------------------------------------------------------
Less distributions from net investment income - (0.05) (0.10)
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period 11.12 10.62 9.73
------------------------------------------------------------------------------------------------------------------------------------
Total return(%)(b)(c) 4.71** 9.51 3.31**
------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period ($ in thousands) 1,687 3,003 2,082
------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions(%) 6.10* 5.65 13.58*
------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions(%) 1.81* 1.81 1.81*
------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)(%) 0.02* 1.40 1.54*
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover (%) 74* 151 97*
------------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------
Class B
---------------------------------------------------------------
For the period
Six months ended December 31, 1997
April 30, 2000 Year ended (commencement of operations)
(unaudited) October 31, 1999 to October 31, 1998
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.54 9.71 9.50
------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03) (a) 0.05 (a) 0.04
------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investment transactions 0.48 0.79 0.22
------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.45 0.84 0.26
------------------------------------------------------------------------------------------------------------------------------------
Less distributions from net investment income - (0.01) (0.05)
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period 10.99 10.54 9.71
------------------------------------------------------------------------------------------------------------------------------------
Total return(%)(b) (c) 4.27** 8.69 2.64**
------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period ($ in thousands) 1,377 1,681 1,714
------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions(%) 6.83* 6.76 15.21*
------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions(%) 2.69* 2.69 2.69*
------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)(%) (0.48)* 0.52 0.66*
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover (%) 74* 151 97*
------------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------
Class C
---------------------------------------------------------------
For the period
Six months ended December 31, 1997
April 30, 2000 Year ended (commencement of operations)
(unaudited) October 31, 1999 to October 31, 1998
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.54 9.71 9.50
------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03) (a) 0.06 (a) 0.05
------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investment transactions 0.48 0.79 0.21
------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.45 0.85 0.26
------------------------------------------------------------------------------------------------------------------------------------
Less distributions from net investment income - (0.02) (0.05)
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period 10.99 10.54 9.71
------------------------------------------------------------------------------------------------------------------------------------
Total return(%)(b) (c) 4.27** 8.73 2.65**
------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period ($ in thousands) 367 524 475
------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions(%) 6.70* 6.38 15.18*
------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions(%) 2.56* 2.66 2.66*
------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)(%) (.50)* 0.55 0.69*
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover (%) 74* 151 97*
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been reduced.
(c) Total return does not reflect the effect of sales charges.
<PAGE>
* Annualized
** Not Annualized
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies
Kemper International Growth and Income Fund (the "Fund") is a 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 offers multiple classes of shares. Class A shares are offered to
investors subject to an initial sales charge. Class B shares are offered 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 offered 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 by the Fund in the preparation of its
financial statements.
Security Valuation. Investments are stated at value determined as of the close
of regular trading on the New York Stock Exchange. 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, or if no sale occurred, at the calculated mean between the most recent
bid and asked quotations on such market. If there are no such bid and asked
quotations, the most recent bid quotation shall be used.
Portfolio debt securities purchased with an original maturity greater than sixty
days are valued by pricing agents approved by the officers of the Corporation,
whose 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 value as determined in good faith
by the Valuation Committee of the Board of Trustees.
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
<PAGE>
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 results from fluctuations in foreign
currency exchange rates is not separately disclosed but is included with net
realized and unrealized gains and losses on investment securities.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian or
sub-custodian bank, receives delivery of the underlying securities, the amount
of which at the time of purchase and each subsequent business day is required to
be maintained at such a level that the market value is equal to at least the
principal amount of the repurchase price plus accrued interest.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, the Fund paid no federal income taxes and no federal
income tax provision was required.
At October 31, 1999, the Fund had a net tax basis capital loss carryforward of
approximately $221,000, which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until October 31,
2006 ($148,000) and October 31, 2007 ($73,000), the respective expiration dates,
whichever occurs first.
Distribution of Income and Gains. Distributions of net investment income, if
any, are made semi- 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 reported on an identified cost basis.
2. Purchases and Sales of Securities For the six months ended April 30, 2000,
investment transactions (excluding short-term instruments) are as follows:
Purchases
$1,713,158
Proceeds from sales
3,587,474
<PAGE>
3. Transactions with Affiliates
Management Agreement. The Fund has a management agreement with Scudder Kemper
Investments, Inc. ("Scudder Kemper") and pays a monthly investment management
fee of 1/12 of the annual rate of 1.00% of average daily net assets. The Fund
incurred no management fee after an expense waiver by Scudder Kemper.
In addition, certain affiliates agreed to temporarily waive their fees. Under
these arrangements, Scudder Kemper and its affiliates waived and absorbed
expenses of $104,467 for the six months ended April 30, 2000.
Underwriting and Distribution Services Agreement. The Fund has an underwriting
and distribution services agreement with Kemper Distributors, Inc. ("KDI").
Underwriting commissions retained by KDI in connection with the distribution of
Class A shares for the six months ended April 30, 2000 were $372.
For services under the distribution services agreement, the Fund pays KDI a fee
of .75% of average daily net assets of Class B and Class C shares pursuant to
separate Rule 12b-1 plans for the Class B and Class C shares. Pursuant to the
agreement, KDI enters into related selling group agreements with various firms
at various rates for sales of Class B and Class C shares. In addition, KDI
receives any contingent deferred sales charges ("CDSC") from redemptions of
Class B and Class C shares. Distribution fees and CDSC received by KDI for the
six months ended April 30, 2000 were $11,176, of which $5,644 was unpaid at
April 30, 2000.
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 an
administrative services fee of $632 for the six months ended April 30, 2000,
after an expense waiver of $5,557 by Scudder Kemper.
Shareholder Services Agreement. Pursuant to an agency agreement with the Fund,
Kemper Service Company ("KSvC") serves as transfer agent and shareholder service
agent of the Fund. Under the agreement, KSvC received shareholder service fees
of $13,124 of which $5,093 was unpaid at April 30, 2000.
Fund Accounting Agent. Scudder Fund Accounting Corporation, a subsidiary of
Scudder Kemper, 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 six months ended April 30, 2000
after an expense waiver of $25,001 by Scudder Kemper.
Officers and Directors. Certain officers or directors of the Fund are also
officers or directors of Scudder Kemper. For the six months ended April 30,
2000, the Fund made no payments to its officers and incurred directors' fees of
$5,275 to independent directors.
<PAGE>
4. Capital Share Transactions
The following table summarizes the activity in capital shares of the Fund:
<TABLE>
<CAPTION>
Six Months Ended For the period ended
April 30, 2000 October 31, 1999
-------------- ----------------
Shares Amount Shares Amount
------------------------------------------------------------------------------------------------------------------
Shares sold
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 42,485 $ 481,688 207,908 $ 2,108,818
------------------------------------------------------------------------------------------------------------------
Class B 50,787 563,274 87,902 889,934
------------------------------------------------------------------------------------------------------------------
Class C 15,572 172,119 31,937 316,905
------------------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of dividends
------------------------------------------------------------------------------------------------------------------
Class A - - 1,064 11,064
------------------------------------------------------------------------------------------------------------------
Class B - - 247 2,553
------------------------------------------------------------------------------------------------------------------
Class C - - 65 672
------------------------------------------------------------------------------------------------------------------
Shares redeemed
------------------------------------------------------------------------------------------------------------------
Class A (173,407) (1,972,337) (148,501) (1,501,980)
------------------------------------------------------------------------------------------------------------------
Class B (84,944) (952,874) (96,747) (982,073)
------------------------------------------------------------------------------------------------------------------
Class C (31,883) (359,253) (31,236) (326,684)
------------------------------------------------------------------------------------------------------------------
Conversion of shares
------------------------------------------------------------------------------------------------------------------
Class A - - 8,367 83,899
------------------------------------------------------------------------------------------------------------------
Class B - - 8,475 83,899
------------------------------------------------------------------------------------------------------------------
Net increase from
capital share transactions $ (2,067,383) $ 519,209
</TABLE>
5. 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.
6. Cessation of Operations
The Board of Trustees of the Fund approved the cessation of operations of the
Fund effective May 26, 2000. Accordingly, the Board voted to involuntarily
redeem the shares of any Fund shareholder outstanding at that time. This may be
a taxable event for shareholders with the exception of those participating in a
qualified defined contribution plan, defined benefit plan or other qualified
retirement vehicle. In conjunction with the approval of the cessation of
operations of the Fund, the Board approved closing the Fund to new investors
effective as of the close of business on January 19, 2000.
