<PAGE> 1
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED APRIL 30, 2000
Seeks long-term growth of capital primarily through equity
investment in emerging markets around the globe.
KEMPER EMERGING
MARKETS GROWTH FUND
"... Old-economy stocks can be quite exciting when they are located in emerging
markets ... contrary to the developed markets, in the emerging markets, many of
these stocks offer high growth potential at reasonable prices. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
8
LARGEST HOLDINGS
9
PORTFOLIO OF INVESTMENTS
15
FINANCIAL STATEMENTS
18
FINANCIAL HIGHLIGHTS
20
NOTES TO FINANCIAL STATEMENTS
AT A GLANCE
KEMPER EMERGING MARKETS
GROWTH FUND TOTAL RETURNS
FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 2000 (UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER EMERGING KEMPER EMERGING
MARKETS GROWTH FUND MARKETS GROWTH FUND LIPPER EMERGING MARKETS
KEMPER EMERGING MARKETS GROWTH FUND CLASS A CLASS B CLASS C FUNDS CATEGORY AVERAGE*
------------------------------------------- ------------------- ------------------- -----------------------
<S> <C> <C> <C>
13.59 13.08 13.16 21.35
</TABLE>
RETURNS AND RANKINGS ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MIGHT BE WORTH MORE OR LESS THAN ORIGINAL COST.
INVESTMENT IN FOREIGN AND EMERGING MARKETS SECURITIES PRESENTS SPECIAL RISK
CONSIDERATIONS INCLUDING FLUCTUATING CURRENCY EXCHANGE RATES, GOVERNMENT
REGULATIONS AND DIFFERENCES IN LIQUIDITY.
NET ASSET VALUE
<TABLE>
<CAPTION>
AS OF AS OF
4/30/00 10/31/99
.........................................................
<S> <C> <C> <C> <C>
KEMPER EMERGING MARKETS
GROWTH FUND CLASS A $10.78 $9.49
.........................................................
KEMPER EMERGING MARKETS
GROWTH FUND CLASS B $10.55 $9.33
.........................................................
KEMPER EMERGING MARKETS
GROWTH FUND CLASS C $10.58 $9.35
.........................................................
</TABLE>
KEMPER EMERGING MARKETS GROWTH
FUND LIPPER RANKINGS AS OF 4/30/00*
COMPARED WITH ALL OTHER FUNDS IN THE LIPPER EMERGING MARKETS FUNDS CATEGORY
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
....................................................................................
<S> <C> <C> <C> <C> <C>
1-YEAR #123 of 183 funds #134 of 183 funds #131 of 183 funds
....................................................................................
</TABLE>
* LIPPER, INC. RETURNS AND RANKINGS ARE BASED UPON CHANGES IN NET ASSET VALUE
WITH ALL DIVIDENDS REINVESTED AND DO NOT INCLUDE THE EFFECT OF SALES CHARGES; IF
SALES CHARGES HAD BEEN INCLUDED, RESULTS MAY HAVE BEEN LESS FAVORABLE.
TERMS TO KNOW
YOUR FUND'S STYLE
MORNINGSTAR INTERNATIONAL EQUITY STYLE BOX(TM)
<TABLE>
<S> <C>
[MORNINGSTAR EQUITY STYLE Source: Data by Morningstar, Inc., Chicago, IL
BOX] (312) 696-6000. Morningstar's International
Equity Style Box placement is based on a fund's
price-to-earnings and price-to-cash-flow ratios
relative to the MSCI EAFE, as well as the size of
the companies in which it invests, or median
market capitalization. The style box represents a
snapshot of a fund's portfolio on a single day,
but it's not exact because a portfolio changes
from day to day. A longer-term view is
represented by the fund's Morningstar category,
which is based on actual investment style as
measured by the fund's underlying holdings over
the past three years.
</TABLE>
BOTTOM-UP INVESTMENT STYLE An investment style that assesses the performance of
individual companies before considering the impact of economic trends. The
companies may be identified from research reports, stock screens or personal
knowledge of the products and services. This approach, which is the opposite of
"top-down" investing, assumes that individual companies can do well even if the
industry as a whole may not be performing well.
OVERWEIGHTING/UNDERWEIGHTING The allocation of assets -- usually in terms of
sector, industry or country -- within a portfolio relative to the portfolio's
benchmark index or investment universe.
RESTRUCTURING Implementation of major corporate changes aimed at greater
efficiency and adaptation to changing markets. Cost-cutting initiatives, debt
retirement, management realignments and the sale of noncore businesses are all
developments frequently associated with corporate restructuring.
<PAGE> 3
ECONOMIC OVERVIEW
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.
DEAR KEMPER FUNDS SHAREHOLDER,
As we enter summer, there isn't much to complain about. For all the yammering
about the "new" economy, the old economy is doing pretty well. Consumers may
hanker for a new GPS handset or a Palm Pilot, but they lust after a suburban
mansion with a garage big enough to hold their luxury car and SUV -- and state
and local governments are laying old-fashioned asphalt almost as fast as
businesses are building the information superhighway. Satisfying both old and
new desires got the economy off to a fast start in the new century -- GDP growth
rose at an annual rate of more than 5 percent in the first quarter. Even with a
modest slowdown possible in the second half, growth for the year 2000 is likely
to be close to 5 percent.
So everyone is happy, right? Well, almost everyone. Consumers seldom have felt
so confident; businesspeople seldom have behaved so expansively. But there's
still one grump: Federal Reserve Board Chairman Alan Greenspan, who's become
increasingly worried that rapid growth will bring on inflation, and raised
interest rates by half a percentage point (0.50%) accordingly on May 16. The
Fed's move puts the benchmark federal funds rate at 6.5 percent, its highest
level since February 1991, and the more symbolic discount rate at 6.0 percent.
Despite Greenspan's attempt to slow spending by raising interest rates,
consumers are still splurging, and they show few signs of stopping. We know this
because shoppers are buying the big-ticket items they usually purchase early in
a cycle -- items such as personal computers, mobile phones, jewelry, fancy
kitchen appliances, exercise equipment and big boats. Why are consumers still
buying despite Greenspan's attempts to slow their splurging? There are three
answers: deflation, wealth and easy credit.
Falling prices have made big-ticket items almost irresistible. Since 1997,
prices of kitchen appliances have fallen 4.5 percent, TVs and VCRs 16 percent
and sporting equipment 6.5 percent. Even auto showrooms no longer produce
sticker shock, and drivers have responded with gusto, buying a record 16.9
million cars and light trucks in 1999. 2000 is likely to be the first year in
which automotive sales top 17 million.
Some of that spending has been made possible by stock market gains: Wall
Street has handed out windfalls to almost anyone holding equities in the past
few years. But consumers who don't own stocks are also spending, thanks to a
decade of debt. Young, poor or new to America? In the 1990s, it didn't matter;
lenders still loved you. While high-income families have been borrowing less,
those lower on the income scale have been borrowing more.
But it's not just consumers that Greenspan is concerned about; businesses are
splurging as well. During 1999, businesses increased spending on computers and
peripherals by 35 percent and spending on communications equipment by 25 percent
(both after adjusting for price declines). Far from slowing down this year, we
expect investment in these two categories to accelerate -- to 40 percent growth
for computers and 30 percent growth for communications equipment.
And just like consumers, businesses are borrowing to buy. You may think that
with booming sales, entrepreneurs are cash-rich and can afford it. But while
1999 saw economy-wide earnings jump 10 percent and profits of Standard and
Poor's (S&P) 500 companies leap nearly 14 percent, internal cash covered less
than 84 percent of capital spending. With the exception of 1998, that's the
lowest on record. Last year alone, corporate debt shot up by more than 11
percent to $560 billion. And new economy companies are no exception; they have
more debt than most people realize, issuing more than half of all convertible
bonds.
All this debt could cause problems. Although we've increased our 2001
inflation outlook to nearly 3 percent -- an entire percentage point higher than
our prediction three months ago -- we're not particularly worried about
inflation. It's the heavy borrowing we're concerned about. Debt continues to
exceed income growth, and when Greenspan succeeds in slowing the economy with
higher interest rates (which he will succeed in doing), all of the debt American
consumers and businesses are taking on could be tricky to handle. Private
financial obligations must be paid with personal income and corporate profits.
When the economy slows, personal income stagnates and corporate profits often
fall -- which makes it harder to pay off those debts. Consumers and businesses
may have to sell their assets to pay off the debt, and they may risk going into
default.
That being the case, a gradual economic slowdown may be in everyone's best
interest. But "gradual" is the key. Both the old and new economy have a lot
riding on the Fed's ability to rein in growth softly and smoothly, because
abrupt slowdowns encourage consumers and businesses to sell assets -- and
perhaps risk bankruptcy -- to pay off debt, as described above.
A gradual slowdown seems to be what the Fed is seeking, but for all of
Greenspan's semi-tough talk, some indicators suggest that monetary policy has
actually been lax. Broad money and credit creation have vastly exceeded
economic activity since 1995, and no central bank can allow that to continue
indefinitely without creating
3
<PAGE> 4
ECONOMIC OVERVIEW
ECONOMIC GUIDEPOSTS
ECONOMIC ACTIVITY IS A KEY INFLUENCE ON INVESTMENT PERFORMANCE AND
SHAREHOLDER DECISION-MAKING. PERIODS OF RECESSION OR BOOM, INFLATION OR
DEFLATION, CREDIT EXPANSION OR CREDIT CRUNCH HAVE A SIGNIFICANT IMPACT ON
MUTUAL FUND PERFORMANCE.
THE FOLLOWING ARE SOME SIGNIFICANT ECONOMIC GUIDEPOSTS AND THEIR
INVESTMENT RATIONALE THAT MAY HELP YOUR INVESTMENT DECISION-MAKING. THE
10-YEAR TREASURY RATE AND THE PRIME RATE ARE PREVAILING INTEREST RATES.
THE OTHER DATA REPORT YEAR-TO-YEAR PERCENTAGE CHANGES.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (5/31/00) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 6.40 6.00 5.50 5.60
Prime rate (2) 9.50 8.50 7.75 8.50
Inflation rate (3)* 3.00 2.60 2.30 1.50
The U.S. dollar (4) 4.30 -0.70 -0.90 6.40
Capital goods orders (5)* 17.00 12.30 2.50 14.50
Industrial production (5)* 6.10 3.70 2.90 5.20
Employment growth (6) 2.60 2.20 2.30 2.60
</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 4/30/00.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
inflation. If we begin to see higher core inflation, the Fed will have to deal
with all that money it's created in a less gradualist manner -- and that could
get tricky. Financial turmoil accompanied each of the Fed's last two efforts to
slow the economy down. In 1994, there was a bond market meltdown that resulted
in a Mexican debt crisis. After a more timid Fed tightening in 1997, crises in
Asia were followed by problems with Russian debt, Brazilian debt and a large
American hedge fund. We don't think this is a coincidence: The global debt
market is so vast and interconnected that it's highly vulnerable to a rise in
the cost of its basic raw material -- short-term funds.
Let's hope, then, that the Fed can slow the economy without upsetting the
financial applecart, because that could affect everyone. After all, the old
economy and the new economy are wedded in many ways. Much of the money that
flows to IPOs is available because mature industries have borrowed to carry out
mergers and share buybacks. Old economy companies are the biggest customers of
new economy products. And e-commerce sites are all about moving traditional
goods over old-fashioned highways. Despite a lot of talk about old and new,
we're all in this economy together.
Happily, financial markets got some better news along that front in late May
and early June. A range of economic data, from retail sales to mortgage
applications to the all-important employment report, began to point to somewhat
softer economic growth. If the Fed believes that the economy is finally slowing
in response to its tightening, the end of the rate hikes could be in sight.
Markets certainly were willing to believe, and they staged a strong relief rally
in late May and early June. While we don't expect a quick end to market
volatility, a slowdown in growth would be most welcome, and would make the
outlook for both stocks and bonds better for the remainder of the year.
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 JUNE 6, 2000, 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
[BLOOMFIELD PHOTO]
LEAD PORTFOLIO MANAGER JENNIFER BLOOMFIELD JOINED THE FIRM IN 1995 AND CURRENTLY
SERVES AS STRATEGIST ON SCUDDER KEMPER'S INVESTMENT COMMITTEE. SHE HAS ALSO
SERVED AS A RESEARCH ANALYST COVERING SOUTHEAST ASIAN COUNTRIES. JENNIFER HAS
EIGHT YEARS OF INVESTMENT EXPERIENCE AND HOLDS A BACHELOR'S DEGREE FROM CORNELL
UNIVERSITY.
[CORNELL PHOTO]
JOYCE CORNELL, FORMER LEAD PORTFOLIO MANAGER, IS A MEMBER OF SCUDDER KEMPER
INVESTMENTS' GLOBAL EQUITY GROUP, WHERE SHE FOCUSES HER PORTFOLIO MANAGEMENT AND
RESEARCH RESPONSIBILITIES ON THE EMERGING MARKETS. SHE HAS 11 YEARS OF
INVESTMENT EXPERIENCE. CORNELL RECEIVED A BACHELOR OF ARTS DEGREE FROM OBERLIN
COLLEGE IN 1966 AND AN M.ED. DEGREE FROM TUFTS UNIVERSITY IN 1967.
[DESIMONE PHOTO]
ANDRE DESIMONE, FORMER PORTFOLIO MANAGER, JOINED SCUDDER KEMPER INVESTMENTS IN
1997. PRIOR TO THAT, HE FOUNDED A STOCK BROKERAGE COMPANY IN KENYA. HE ALSO
WORKED WITH THE BLACKSTONE GROUP AND SMITH BARNEY. DESIMONE RECEIVED A BACHELOR
OF SCIENCE DEGREE FROM THE MASSACHUSETTS INSTITUTE OF TECHNOLOGY AND SERVED IN
THE PEACE CORPS IN FRENCH WEST AFRICA.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE
MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
DURING THE PERIOD, THE "TSUNAMI EFFECT" OF SEVERE STOCK MARKET TURBULENCE IN
THE UNITED STATES SENT TECHNOLOGY MARKETS AROUND THE WORLD INTO A TAILSPIN. IN
RESPONSE, IT SEEMS THAT MANY INVESTORS ARE RETURNING THEIR FOCUS TO MORE
TRIED-AND-TRUE METHODS OF VALUING STOCKS. IN THE BEGINNING OF THE
QUESTION-AND-ANSWER SESSION, JOYCE CORNELL AND ANDRE DESIMONE HIGHLIGHT THE
MAJORITY OF THE SEMIANNUAL PERIOD. IN APRIL, THE FUND CHANGED MANAGEMENT AND
TWEAKED ITS STRATEGY. JENNIFER BLOOMFIELD TOOK THE HELM AS LEAD PORTFOLIO
MANAGER. TOGETHER WITH THE INTERNATIONAL RESEARCH TEAM, SHE SET ABOUT
RESTRUCTURING THE FUND ACCORDING TO ITS REVISED INVESTMENT STRATEGY. JENNIFER
COMMENTS ON HOW THE FUND IS POSITIONED TO BENEFIT FROM THESE CHANGING
SHAREHOLDER EXPECTATIONS AND VALUES.
Q JOYCE AND ANDRE, HOW DID EMERGING MARKETS STOCKS PERFORM DURING THE LAST
SIX MONTHS?
A From November through February, stocks in developing countries staged an
impressive rally on the strength of improved global growth and massive Nasdaq
gains. Emerging markets generally held up well when the Nasdaq began to falter
in March, but by April, concerns over higher interest rates in the United States
-- and the possible slowdown in global growth that could result from a decline
in U.S. consumption -- led to a broad sell-off. In April alone, the fund's
benchmark, the IFCI Emerging Markets index, slid 10.2 percent. While the fund
also declined over the final weeks of the period, its returns were not closely
correlated with the Nasdaq because it tended to have large positions in areas
such as Africa and the Middle East where performance was determined more by
local fundamentals than external factors.
Q
WILL YOU PROVIDE AN OVERVIEW OF KEMPER EMERGING MARKET GROWTH FUND
PERFORMANCE DURING THE SEMIANNUAL PERIOD AND THE REASONS BEHIND IT?
A
Fund performance was positive, despite these considerable challenges. The
fund gained 13.59 percent (Class A shares, unadjusted for any sales charges)
during the six months ended April 30, 2000, compared with the IFCI Emerging
Markets Index, which was up 12.47 percent for the period. The IFCI Emerging
Markets index is an unmanaged, U.S. dollar-denominated index comprised of stocks
based in countries classified as low-or middle-income economies by the World
Bank, regardless of their stage of development. Stocks are screened for foreign
ownership restrictions, capitalization and liquidity parameters.
Positive drivers of performance included our position in Greece, where we
thought the country's
5
<PAGE> 6
PERFORMANCE UPDATE
good fundamentals were fully reflected in stock prices, and in South Africa,
where we were not impressed with the macroeconomic picture. Over the full
period, we were also helped by our holdings in the tech and telecom sectors,
such as Checkpoint Systems (Israel) and Samsung Electronics (Korea). On the
downside, performance was hurt by our underweight position in Brazil -- which
performed very well -- and our overweight position in Korea, which was hit hard
by a crisis in its financial sector.
Downside pressures on the fund came primarily from rising U.S. interest rates
and the collapse of the Nasdaq stock market in March, which sent tech markets
around the world into a downward spiral. In the aftermath, we observed a
surprisingly high correlation between emerging and developed markets, especially
in terms of TMT (technology, media and telecommunications) stocks, most of which
are fairly new to the emerging markets.
Q WHAT ARE SOME OF THE BROAD, GLOBAL FACTORS THAT HAVE BEEN INFLUENCING THE
PERFORMANCE OF THE EMERGING MARKETS?
A The near term is likely to be characterized by continued volatility in the
technology sector, particularly among stocks related to the Internet. This may
mean the complete collapse of some of the more speculative companies launched
with little in the way of viable business plans. It is clear that the Internet
universe is a globalized sector. The correlation in tech sector performance
across developed and emerging economies approaches unity. We do not expect the
inevitable washout of the froth in this sector to impair the overall growth of
the better emerging markets, nor to compromise their appreciation over anything
but the short term.
On the plus side, the continued strength in the global economy is a distinct
advantage for emerging markets equities. Synchronized global growth should be a
significant positive for the emerging markets. The United States has been
carrying the world's growth burden for a number of years. Finally, Europe has
begun to pick up, and Japan seems poised to grow slightly or at least not
detract by shrinking. This wider-spread growth should not be underestimated as a
driver for the emerging markets, which are a leveraged play on global growth.
Q HOW HAVE THESE THEMES AFFECTED YOUR MANAGEMENT STYLE?
A As always, we strive to pick out the most attractive countries and invest
in the best companies within those countries. Recently, we have found attractive
opportunities in so-called old-economy stocks. In our view, these companies
currently have two attractions over Internet stocks: they sport much better
valuations and are more sensitive to economic growth. The latter virtue is
unlike most old-economy stocks in the mature markets, which tend to have slow or
even negative growth. Conversely, many old-economy companies in the emerging
markets are high-growth, defensive plays, and we have found attractive
opportunities among brewers, construction materials and banking stocks. In these
sectors there are few of the risks associated with technology and telecom
stocks, such as the continuous supply of new stock or extreme disappointment
risk when revenue or earnings fail to materialize. Many companies have long
histories of revenue and earnings growth, proven strategies and capable
management teams.
Q JENNIFER, YOU BECAME THE FUND'S LEAD PORTFOLIO MANAGER IN APRIL. WILL YOU
TELL US HOW THE FUND'S INVESTMENT APPROACH HAS CHANGED?
A First, let me stress that the fund's investment approach, not its
objective, has changed. Kemper Emerging Markets Growth Fund continues to seek
long-term growth of capital by investing primarily in stocks of companies
located in emerging markets around the globe.
What's different is the analytical process that is the basis for our
investment discipline. In the past, the fund emphasized a "top-down" strategy.
By that we mean a process of research analysis and stock selection that began
with identifying geographic areas and industry sectors that were likely to
perform well. The portfolio's composition was determined accordingly. Then
stocks were chosen in those regions or industry sectors.
Beginning in April, we began to shift more toward a "bottom-up" approach. The
strategy relies on thorough quantitative and qualitative analysis of the
fundamental strengths of individual stocks. The geographic and sector
distributions are, in some ways, an afterthought; they are simply a result of
the number of stocks that pass a specific litmus test. Analysts rank the stocks
according to their projected upside potential. The goal is to construct a
portfolio by buying only the best stocks, in terms of their fundamentals and
growth potential, at optimal prices.
6
<PAGE> 7
PERFORMANCE UPDATE
With that said, as you know, diversification is extremely important in helping
to reduce investment risk. In making their recommendations, the quantitative
research team takes into account the geographic distribution of the portfolio to
ensure that we are regionally neutral to the benchmark. This change in strategy
was initiated, in fact, due to higher than desired levels of volatility that we
believe were associated with large concentrations of stock in one or more
countries.
Q WILL YOU WALK US THROUGH THE TRANSITION PROCESS AND HOW THE FUND'S
PORTFOLIO COMPOSITION HAS CHANGED?
A Our team of research analysts evaluated every security held in the
portfolio as though each were a new idea. They established prices and then
compared these with the current share prices for each company. The team
proceeded to rank the stocks according to what we determined was their upside
potential, as I described earlier. These were then compared with our upside
potential estimates of additional stocks proposed by the analysts.
In an effort to hone the portfolio, we established larger positions in stocks
with greater upside potential and smaller positions in those with less chance of
appreciation. We trimmed those that had reached or exceeded their targets.
Q WHAT IS YOUR NEAR-TERM OUTLOOK FOR THE EMERGING MARKETS AND HOW WILL YOUR
EXPECTATIONS SHAPE YOUR MANAGEMENT STRATEGY?
A In the markets of the recent past, the gains of a single stock could
benefit an entire sector. By the end of the period, we were seeing downside
momentum that was as fast and furious as the upside momentum had been. None of
it had much to do with the strength of the companies themselves. Now it seems
that investors may be starting to refocus on company fundamentals. In the near
future, we believe that competitiveness will return to the markets and that
there will be clear winners and losers as investors become more selective.
Because our investment strategy favors stocks with strong fundamentals, we
believe this shift should benefit the fund.
We do foresee further interest-rate hikes in the United States and, possibly,
in Europe. We expect volatility to continue to sway the tech markets, most
markedly Internet stocks. Consequently, we believe that it will take some time
for investor confidence to return and that it is unlikely that many of these
companies will see their highs again. The tech sector's return to more normal
levels, however, should have little dampening effect on the long-term growth
prospects of the emerging markets.
In terms of fund management, we have found that old-economy stocks can be
quite exciting when they are located in emerging markets. That's the very point
of emerging markets investing. As Joyce mentioned earlier, contrary to the
developed markets, in the emerging markets many of these stocks offer high
growth potential at reasonable prices. What's more, they tend to have capable
management teams whose proven strategies have resulted in a history of revenue
and earnings growth. These stocks are more resistant to moves in technology or
to earnings disappointments, which tend to have grave effects on new-economy
stocks.
Q JENNIFER, DO YOU HAVE ANY CLOSING THOUGHTS FOR SHAREHOLDERS?
A While risk is inherent in investing -- especially in the emerging markets
-- it is our goal to manage that risk as much as possible with thorough research
and a commitment to highly disciplined stock selection. I've worked side by side
with the members of Scudder Kemper's research team for years. I have great
confidence that their experience and expertise will provide only the very best
ideas and that together we will be able to reduce volatility and provide greater
returns to shareholders over time.
7
<PAGE> 8
LARGEST HOLDINGS
KEMPER EMERGING MARKETS GROWTH FUND'S
TOP 15 LARGEST HOLDINGS*
Representing 47.4 percent of the fund's common stock holdings on April 30, 2000
<TABLE>
<CAPTION>
HOLDINGS COUNTRY PERCENT
<S> <C> <C> <C>
---------------------------------------------------------------------------
1. SAMSUNG ELECTRONICS Korea 8.9%
---------------------------------------------------------------------------
2. COMVERSE TECHNOLOGIES United States 3.7%
---------------------------------------------------------------------------
3. UNITED MICROELECTRONICS Taiwan 3.4%
---------------------------------------------------------------------------
4. TELE NORTE LESTE PARTICIPACOES Brazil 3.2%
---------------------------------------------------------------------------
5. FOMENTO ECONOMICO MEXICANO Mexico 3.1%
---------------------------------------------------------------------------
6. EMBRATEL PARTICIPACOES Brazil 3.1%
---------------------------------------------------------------------------
7. TAIWAN SEMICONDUCTOR MANUFACTURING Taiwan 2.8%
---------------------------------------------------------------------------
8. SK TELECOM Korea 2.7%
---------------------------------------------------------------------------
9. TURKIYE GARANTI BANKASI Turkey 2.7%
---------------------------------------------------------------------------
10. GRUPO TELEVISA Mexico 2.7%
---------------------------------------------------------------------------
11. CEMEX Mexico 2.5%
---------------------------------------------------------------------------
12. CHINA TELECOM Hong Kong 2.2%
---------------------------------------------------------------------------
13. CHECK POINT SOFTWARE TECHNOLOGIES Israel 2.2%
---------------------------------------------------------------------------
14. WAL-MART DE MEXICO Mexico 2.1%
---------------------------------------------------------------------------
15. MATAV Hungary 2.1%
---------------------------------------------------------------------------
</TABLE>
*PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE.
8
<PAGE> 9
PORTFOLIO OF INVESTMENTS
KEMPER EMERGING MARKETS GROWTH FUND
Portfolio of Investments at April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OR
SHORT-TERM OBLIGATIONS--12.2% NUMBER OF SHARES VALUE
<S> <C> <C> <C> <C> <C> <C>
UNITED STATES
Federal Home Loan Discount
Corp.,
5.880%**, 05/01/2000
(Cost $878,000) $ 878,000 $ 878,000
-------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COMMON STOCKS--83.7%
<S> <C> <C> <C> <C> <C> <C>
BOTSWANA--0.2%
Sechaba Investment Trust Co.
(BREWERY) 16,000shs 13,557
-------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
BRAZIL--3.2%
Aracruz Celulose S.A. (ADR)
(PRODUCER OF EUCALYPTUS KRAFT
PULP) 1,900 35,506
Embratel Participacoes S.A.
(ADR)
(PROVIDER OF TELECOMMUNICATION
SERVICES) 8,600 193,500
-------------------------------------------------------------------------------
229,006
--------------------------------------------------------------------------------------------------------------------------
CZECH REPUBLIC--0.3%
Ceske Radiokomunikace (GDR)*
(TV AND RADIO SIGNAL
TRANSMISSION SERVICES) 460 20,769
-------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
EGYPT--3.2%
Commercial International Bank
(COMMERCIAL BANK) 1,200 12,921
Commercial International Bank
(GDR)
(COMMERCIAL BANK) 3,175 34,290
Eastern Tobacco Co.
(MAKER OF TOBACCO PRODUCTS) 2,820 68,033
Egyptian Mobile Phone Network,
Ltd.*
(CELLULAR TELECOMMUNICATION
SERVICES) 2,050 78,152
Orascom Construction Industries*
(CONSTRUCTION COMPANY) 2,787 38,274
-------------------------------------------------------------------------------
231,670
--------------------------------------------------------------------------------------------------------------------------
ESTONIA--0.7%
Hansabank Ltd.
(PROVIDER OF COMMERCIAL
BANKING SERVICES) 6,150 48,883
-------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
HONG KONG--3.0%
China Telecom Ltd. (ADR)
(PROVIDER OF CELLULAR
TELECOMMUNICATIONS SERVICES) 960 140,820
Legend Holdings Ltd.
(MANUFACTURER OF COMPUTERS AND
RELATED PRODUCTS) 61,000 70,875
-------------------------------------------------------------------------------
211,695
--------------------------------------------------------------------------------------------------------------------------
HUNGARY--2.6%
Matav Rt Ordinary "A"
(TELECOMMUNICATION SERVICES) 19,200 131,640
OTP Bank Rt
(SAVINGS AND COMMERCIAL BANK) 1,155 51,242
-------------------------------------------------------------------------------
182,882
</TABLE>
The accompanying notes are an integral part of the financial statements. 9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE
<S> <C> <C> <C> <C> <C> <C>
INDIA--2.0%
Dr. Reddy's Laboratories Ltd.*
(PHARMACEUTICAL COMPANY) 2,300 $ 74,750
Hindalco Industries Ltd. (GDR)
(MANUFACTURER OF ALUMINUM) 3,910 66,470
-------------------------------------------------------------------------------
141,220
--------------------------------------------------------------------------------------------------------------------------
ISRAEL--3.4%
Bank Hapoalim Ltd.
(BANK) 3,900 11,976
Check Point Software
Technologies, Ltd.*
(DEVELOPER, MARKETER AND
SUPPORTER OF MANAGEMENT
SOLUTIONS FOR ACTIVE NETWORKS) 800 138,400
Orbotech, Ltd.*
(DESIGNER OF AUTOMATED OPTICAL
INSPECTION SYSTEMS AND IMAGING
SOLUTIONS) 1,060 90,365
-------------------------------------------------------------------------------
240,741
--------------------------------------------------------------------------------------------------------------------------
KOREA--16.7%
Dacom Corp.
(PROVIDER OF DOMESTIC LONG-
DISTANCE AND INTERNET
SERVICES) 670 97,202
Dreamline Corp.*
(PROVIDER OF INTERNET
SERVICES) 720 22,838
Hite Brewery Co., Ltd.
(BREWERY) 1,370 38,887
Housing & Commercial Bank
(BANK) 3,460 59,239
Korea Telecom Corp.
(TELECOMMUNICATION SERVICES) 580 39,616
Korea Telecom Corp. (ADR)
(TELECOMMUNICATION SERVICES) 1,630 56,235
Opicom Co., Ltd.*
(FIBER OPTIC COMMUNICATIONS
COMPANY) 476 14,498
Pohang Iron & Steel Co., Ltd.(a)
(STEEL PRODUCER) 460 36,699
SK Telecom Co., Ltd.
(MOBILE TELECOMMUNICATION
SERVICES) 650 172,787
Samsung Electro-Mechanics Co.
(MAJOR ELECTRONICS PARTS
COMPANY) 811 55,175
Samsung Electronics Co., Ltd.
(ELECTRONICS MANUFACTURER) 2,080 562,289
Shinhan Bank
(MAJOR COMMERCIAL BANK) 4,320 41,458
-------------------------------------------------------------------------------
1,196,923
--------------------------------------------------------------------------------------------------------------------------
MALAYSIA--0.4%
Unisem (M) Berhad
(MANUFACTURER OF
SEMICONDUCTORS) 3,000 26,644
-------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
MEXICO--12.8%
Wal-Mart de Mexico S.A. de CV*
(DISCOUNT RETAILER) 63,000 134,449
Cemex S.A. de CV
(PRODUCER OF CONCRETE AND
CEMENT) 7,300 159,688
Corporacion GEO, S.A. de C.V.*
(DESIGNER AND DEVELOPER OF
HOUSING DEVELOPMENTS) 20,000 45,982
</TABLE>
10 The accompanying notes are an integral part of the financial statements.
<PAGE> 11
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE
<S> <C> <C> <C> <C> <C> <C>
Fomento Economico Mexicano S.A.
de C.V. "B"
(PRODUCER OF BEER AND SOFT
DRINKS) 49,950 $ 198,046
Grupo Financiero Banamex
Accival, S.A. de CV*
(PROVIDER OF INDIVIDUAL,
COMMERCIAL AND RETAIL BANKING
SERVICES) 12,800 46,323
Grupo Televisa S.A. de C.V.
(GDR)*
(MEDIA COMPANY) 2,700 171,281
Organizacion Soriana S.A. de
C.V. "A"*
(OPERATOR AND OWNER OF RETAIL
STORES) 9,500 37,919
Telefonos de Mexico S.A. de C.V.
"L" (ADR)
(TELECOMMUNICATION SERVICES) 2,100 123,506
-------------------------------------------------------------------------------
917,194
--------------------------------------------------------------------------------------------------------------------------
MOROCCO--0.2%
Wafabank
(COMMERCIAL BANK) 140 11,169
-------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
OMAN--1.1%
National Bank of Oman Ltd.*
(COMMERCIAL BANK) 9,036 80,972
-------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
POLAND--3.7%
Central European Distribution
Corp.
(DISTRIBUTOR OF ALCOHOLIC
BEVERAGES) 2,000 8,250
Elektrim Spolka Akcyjna S.A.*
(MANUFACTURER OF POWER
EQUIPMENT, ELECTRICAL
MACHINERY AND APPARATUS) 3,600 45,906
Europejski Fundusz Leasingowy
S.A.*
(PROVIDER OF EQUIPMENT
LEASING) 4,300 81,915
Netia Holdings S.A. (ADR)*
(TELECOMMUNICATION SERVICES) 3,000 82,688
Polski Koncern Naftowy Orlen
S.A. (GDR)
(REFINER AND DISTRIBUTOR OF
PETROLEUM PRODUCTS) 1,600 16,000
Telekomunikacja Polska S.A.
(OWNER AND OPERATOR OF
TELECOMMUNICATION NETWORKS) 4,000 30,872
-------------------------------------------------------------------------------
265,631
--------------------------------------------------------------------------------------------------------------------------
RUSSIA--3.0%
Golden Telecom, Inc.*
(PROVIDER OF TELECOMMUNICATION
SERVICES) 3,700 113,313
Lukoil Holdings (ADR)
(EXTRACTER, TRANSPORTER,
REFINER, AND PROVIDER OF OIL
AND GAS) 745 44,141
Surgutneftegaz
(PRODUCER OF OIL AND NATURAL
GAS) 3,600 54,900
-------------------------------------------------------------------------------
212,354
</TABLE>
The accompanying notes are an integral part of the financial statements. 11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE
<S> <C> <C> <C> <C> <C> <C>
SOUTH AFRICA--2.4%
Anglo American Platinum Corp.
(PLATINUM MINING COMPANY) 1,500 $ 36,289
Capital Alliance Holdings Ltd.
(PROVIDER OF INSURANCE AND
PENSION SERVICES) 3,500 6,867
Dimension Data Holdings Ltd.*
(INVESTMENT HOLDING COMPANY
COMPRISED OF SEVERAL
TECHNOLOGY GROUPS INCLUDING
COMMUNICATIONS, SOFTWARE,
INTERACTIVE TECHNOLOGIES, AND
INTERNET SERVICES) 6,400 42,012
Driefontein Consolidated Ltd.
(GOLD MINING COMPANY) 3,275 10,628
Harmony Gold Mining Co., Ltd.
(GOLD MINING COMPANY) 7,100 34,877
Sappi Ltd.
(PRODUCER OF PULP PAPER AND
TIMBER) 6,100 42,742
-------------------------------------------------------------------------------
173,415
--------------------------------------------------------------------------------------------------------------------------
TAIWAN--12.5%
Asustek Computer Inc.
(MANUFACTURER OF COMPUTER
MOTHERBOARDS) 10,000 110,802
Bank Sinopac
(BANK) 14,569 8,095
Chinatrust Commercial Bank*
(BANK) 120,400 99,563
Far Eastern Textile Ltd.
(MANUFACTURER OF NATURAL AND
SYNTHETIC TEXTILE PRODUCTS) 32,610 50,095
Formosa Plastic Corp.
(MANUFACTURER OF PLASTICS
MATERIALS) 39,000 80,945
GigaMedia Ltd.*
(PROVIDER OF BROADBAND
INTERNET ACCESS SERVICES AND
CONTENT) 5,000 120,000
Hon Hai Precision Industry Co.,
Ltd.*
(MANUFACTURER OF ELECTRONIC
CONNECTORS, CABLE ASSEMBLIES
AND MEMORY CHIPS) 3,400 32,783
Taiwan Semiconductor
Manufacturing Co.*
(MANUFACTURER OF INTEGRATED
CIRCUITS) 27,840 179,261
United Microelectronics Corp.*
(MANUFACTURER OF INTEGRATED
CIRCUITS) 64,000 216,504
-------------------------------------------------------------------------------
898,048
--------------------------------------------------------------------------------------------------------------------------
THAILAND--0.5%
Siam Cement Co., Ltd. (Foreign
registered)*
(CONSTRUCTION MATERIALS AND
INDUSTRIAL CONGLOMERATE) 1,300 30,062
TelecomAsia, Ltd. (Foreign
registered)*
(TELECOMMUNICATION SERVICES) 6,100 8,175
-------------------------------------------------------------------------------
38,237
</TABLE>
12 The accompanying notes are an integral part of the financial statements.
<PAGE> 13
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE
<S> <C> <C> <C> <C> <C> <C>
TURKEY--7.5%
Dogan Sirketler Grubu Holdings
AS
(INDUSTRIAL CONGLOMERATE) 910,000 $ 28,286
Ege Biracilik Ve Malt Sanayi AS
(BREWERY) 576,000 51,828
Erciyas Biracilik*
(BREWERY) 203,000 15,111
Koc Holding A.S.
(HOLDING COMPANY WITH
INTERESTS IN THE AUTOMOTIVE
AND DURABLE GOODS INDUSTRIES) 47,200 9,459
Migros Turkey
(OPERATOR OF RETAIL STORES) 146,900 99,736
Turkiye Garanti Bankasi AS*
(BANK) 10,168,000 171,338
Vestel Elektronik Sanayi ve
Ticaret AS A.S.*
(MANUFACTURER OF TELEVISIONS
AND MONITORS) 185,900 69,950
Yapi ve Kredi Bankasi AS
(COMMERCIAL BANK) 2,863,300 91,345
-------------------------------------------------------------------------------
537,053
--------------------------------------------------------------------------------------------------------------------------
UNITED STATES--3.2%
Comverse Technologies, Inc. *
(DESIGNS, MANUFACTURES,
MARKETS AND SUPPORTS VARIOUS
SOFTWARE FOR MULTIMEDIA
COMMUNICATIONS) 2,600 231,888
-------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
ZIMBABWE--1.1%
Econet Wireless Holdings*
(TELECOMMUNICATIONS PROVIDER) 225,300 82,355
-------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $5,442,789) 5,992,306
-------------------------------------------------------------------------------
PREFERRED STOCKS--4.1%
BRAZIL
Banco Itau S.A.
(COMMERCIAL BANK) 463,300 34,613
Petroleo Brasileiro S.A.
(PETROLEUM COMPANY) 270,550 64,396
Tele Nordeste Cellular
Participacoes S.A. (ADR)
(PROVIDER OF CELLULAR
TELECOMMUNICATIONS SERVICES) 800 41,600
Tele Norte Leste Participacoes
S.A. (ADR)
(PROVIDER OF LOCAL
TELECOMMUNICATION SERVICES) 8,798 156,714
-------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(Cost $262,813) 297,323
-------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
RIGHTS AND WARRANTS*--0.0% NUMBER OF SHARES VALUE
<S> <C> <C> <C> <C> <C> <C>
Cemex S.A. de CV
(PRODUCER OF CONCRETE AND
CEMENT) 31 $ 86
Dreamline Co., Ltd.(a)
(PROVIDER OF INTERNET SERVICES
IN KOREA THROUGH ADSL LINES) 106 640
-------------------------------------------------------------------------------
TOTAL RIGHTS AND WARRANTS
(Cost $0) 726
-------------------------------------------------------------------------------
TOTAL INVESTMENTS--100.0%
(Cost $6,583,602)(b) $7,168,355
-------------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
* Non-income producing.
** Annualized yield at time of purchase; not a coupon rate.
(a) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to 37,339 (0.52% of net assets). Their
values have been estimated by the Valuation Committee in the absence of
readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of these
securities at April 30, 2000 aggregated $50,083. These securities may also
have certain restrictions as to resale.
(b) The cost for federal income tax purposes was 6,583,602. At April 30, 2000,
the net unrealized appreciation for all securities based on tax cost was
584,753. This consisted of aggregate gross unrealized appreciation for all
securities in which there was an excess market value over tax cost of
$850,557 and aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over market value of $265,804.
<TABLE>
<CAPTION>
ACRONYM NAME
------- ----
<C> <S>
ADR American Depositary Receipt
GDR Global Depositary Receipt
</TABLE>
14 The accompanying notes are an integral part of the financial statements.
<PAGE> 15
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
As of April 30, 2000 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $6,583,602) $7,168,355
--------------------------------------------------------------------------
Cash 169,720
--------------------------------------------------------------------------
Foreign currency, at value (cost $183,833) 183,833
--------------------------------------------------------------------------
Receivable for investments sold 273,760
--------------------------------------------------------------------------
Dividend receivable 15,571
--------------------------------------------------------------------------
Receivable for Fund shares sold 100,691
--------------------------------------------------------------------------
Foreign taxes recoverable 40
--------------------------------------------------------------------------
Unrealized appreciation on forward currency exchange
contracts 119
--------------------------------------------------------------------------
Other assets 15,080
--------------------------------------------------------------------------
TOTAL ASSETS 7,927,169
--------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased 544,304
--------------------------------------------------------------------------
Payable for Fund shares redeemed 16,714
--------------------------------------------------------------------------
Organization fees 15,000
--------------------------------------------------------------------------
Accrued distribution services fee 5,291
--------------------------------------------------------------------------
Accrued administrative services fee 2,801
--------------------------------------------------------------------------
Other accrued expenses and payables 96,977
--------------------------------------------------------------------------
Total liabilities 681,087
--------------------------------------------------------------------------
NET ASSETS, AT VALUE $7,246,082
--------------------------------------------------------------------------
NET ASSETS
Net assets consist of:
Undistributed net investment income (loss) $ (43,257)
--------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on:
Investments 584,753
--------------------------------------------------------------------------
Foreign currency related transactions (685)
--------------------------------------------------------------------------
Accumulated net realized gain (loss) (269,530)
--------------------------------------------------------------------------
Paid-in-capital 6,974,801
--------------------------------------------------------------------------
NET ASSETS, AT VALUE $7,246,082
--------------------------------------------------------------------------
NET ASSET VALUE
CLASS A SHARES
Net asset value and redemption price per share ($3,694,282
/ 342,830 shares of capital stock outstanding, $.01 par
value, 33,333,333 number of shares authorized) $10.78
--------------------------------------------------------------------------
Maximum offering price per share (100/94.25 of $10.78) $11.29
--------------------------------------------------------------------------
CLASS B SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share ($2,618,404 /
248,193 shares of capital stock outstanding, $.01 par
value, 33,333,333 number of shares authorized) $10.55
--------------------------------------------------------------------------
CLASS C SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share ($933,396 /
88,234 shares of capital stock outstanding, $.01 par
value, 33,333,334 number of shares authorized) $10.58
--------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 15
<PAGE> 16
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Six months ended April 30, 2000 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $3,132) $ 41,360
------------------------------------------------------------------------
Interest 13,232
------------------------------------------------------------------------
Total income 54,592
------------------------------------------------------------------------
Expenses:
Management fee 38,548
------------------------------------------------------------------------
Services to shareholders 19,169
------------------------------------------------------------------------
Custodian and accounting fees 115,107
------------------------------------------------------------------------
Distribution services fees 11,021
------------------------------------------------------------------------
Administrative services fees 7,710
------------------------------------------------------------------------
Auditing 17,070
------------------------------------------------------------------------
Legal 16
------------------------------------------------------------------------
Trustees' fees and expenses 4,054
------------------------------------------------------------------------
Reports to shareholders 24,700
------------------------------------------------------------------------
Registration fees 84
------------------------------------------------------------------------
Other 1,501
------------------------------------------------------------------------
Total expenses, before expense reductions 238,980
------------------------------------------------------------------------
Expense reductions (158,231)
------------------------------------------------------------------------
Total expenses, after expense reductions 80,749
------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (26,157)
------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain from:
Investments (29,083)
------------------------------------------------------------------------
Foreign currency related transactions (8,596)
------------------------------------------------------------------------
(37,679)
------------------------------------------------------------------------
Net unrealized appreciation during the period on:
Investments 255,389
------------------------------------------------------------------------
Foreign currency related transactions (468)
------------------------------------------------------------------------
254,921
------------------------------------------------------------------------
Net gain (loss) on investment transactions 217,242
------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $191,085
------------------------------------------------------------------------
</TABLE>
16 The accompanying notes are an integral part of the financial statements.
<PAGE> 17
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
---------------- -----------
2000 1999
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS OPERATIONS:
Net investment income (loss) $ (26,157) (17,100)
-------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions (37,679) (89,011)
-------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
transactions during the period 254,921 573,499
-------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 191,085 467,388
-------------------------------------------------------------------------------------------------------
Fund share transactions:
Proceeds from shares sold 6,841,143 3,113,711
-------------------------------------------------------------------------------------------------------
Cost of shares redeemed (3,279,446) (1,859,021)
-------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions 3,561,697 1,254,690
-------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 3,752,782 1,722,078
-------------------------------------------------------------------------------------------------------
Net assets at beginning of period 3,493,300 1,771,222
-------------------------------------------------------------------------------------------------------
NET ASSETS AT END OF PERIOD (including accumulated net
investment loss of $26,157 and $17,100, respectively) $7,246,082 3,493,300
-------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 17
<PAGE> 18
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
(UNAUDITED) FOR THE PERIOD FROM
SIX MONTHS JANUARY 9, 1998
ENDED FOR THE YEAR (COMMENCEMENT OF
APRIL 30 ENDED OPERATIONS) TO
2000 OCTOBER 31, 1999 OCTOBER 31, 1998
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $ 9.49 7.80 9.50
-----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.06)(a) (.02)(a) .03
-----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.35 1.71 (1.73)
-----------------------------------------------------------------------------------------------------------------
Total from investment operations 1.29 1.69 (1.70)
-----------------------------------------------------------------------------------------------------------------
Net asset value, end of year $10.78 9.49 7.80
-----------------------------------------------------------------------------------------------------------------
TOTAL RETURN % (B)(C) 13.59* 21.67 (17.89)
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 3,694 2,064 1,046
-----------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 7.35** 10.23 22.38**
-----------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 2.18** 2.19 2.28**
-----------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.32)** (.22) .40**
-----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 141** 78 69**
-----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
(UNAUDITED) FOR THE PERIOD FROM
SIX MONTHS JANUARY 9, 1998
ENDED FOR THE YEAR (COMMENCEMENT OF
APRIL 30 ENDED OPERATIONS) TO
2000 OCTOBER 31, 1999 OCTOBER 31, 1998
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $ 9.33 7.74 9.50
-----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.16)(a) (.09)(a) (.01)
-----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.38 1.68 (1.75)
-----------------------------------------------------------------------------------------------------------------
Total from investment operations 1.22 1.59 (1.76)
-----------------------------------------------------------------------------------------------------------------
Net asset value, end of year $10.55 9.33 7.74
-----------------------------------------------------------------------------------------------------------------
TOTAL RETURN % (B)(C) 13.08* 20.54 (18.53)
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 2,619 1,002 508
-----------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 8.10** 11.25 24.06**
-----------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 3.15** 3.06 3.18**
-----------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (1.29)** (.93) (.50)**
-----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 141** 78 69**
-----------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 19
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C
(UNAUDITED) FOR THE PERIOD FROM
SIX MONTHS JANUARY 9, 1998
ENDED FOR THE YEAR (COMMENCEMENT OF
APRIL 30 ENDED OPERATIONS) TO
2000 OCTOBER 31, 1999 OCTOBER 31, 1998
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $9.35 7.76 9.50
-----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.19)(a) (.10)(a) .03
-----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.42 1.69 (1.71)
-----------------------------------------------------------------------------------------------------------------
Total from investment operations 1.23 1.59 (1.74)
-----------------------------------------------------------------------------------------------------------------
Net asset value, end of year $10.58 9.35 7.76
-----------------------------------------------------------------------------------------------------------------
TOTAL RETURN % (B)(C) 13.16* 20.49 (18.32)
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 933 427 217
-----------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 8.10** 11.55 24.03**
-----------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 2.82** 3.03 3.15**
-----------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.96)** (1.13) (.47)**
-----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 141** 78 69**
-----------------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
(a) Based on monthly average shares outstanding during the period.
(b) Total return does not reflect the effect of sales charge.
(c) Total return would have been lower had certain expenses not been waived.
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1 SIGNIFICANT
ACCOUNTING POLICIES Kemper Emerging Markets Growth 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 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 consistently 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 fund, 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.
20
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
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 TRANSLATION. 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 at period end. 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 between trade and settlement dates on
securities transactions, the disposition of forward
foreign currency exchange contracts and 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 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.
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
$229,000, which may be applied against any realized
net taxable capital gains of each succeeding year
until fully utilized or until October 31, 2006
($145,000) and October 31, 2007 ($84,000), the
respective expiration dates.
The Fund is subject to a 0.38% Contribuicao
Provisoria sobre Movimentacoes Financieras (CPMF)
tax which is applied to foreign exchange
transactions representing capital inflows or
outflows to the Brazillian 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
21
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS
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.
--------------------------------------------------------------------------------
2 TRANSACTIONS
WITH AFFILIATES MANAGEMENT AGREEMENT. The Fund has a management
agreement with Scudder Kemper Investments, Inc.
(Scudder Kemper) and pays a monthly investment
management fee of 1/12 of the annual rate of 1.25%
of average daily net assets. However, the Fund
incurred no management fee for the six months ended
April 30, 2000, after an expense reduction by
Scudder Kemper of $49,341.
In addition, Scudder Kemper has temporarily agreed
to absorb certain operating expenses of the Fund.
Under these arrangements, Scudder Kemper waived and
absorbed expenses of $158,231 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 are $1,061.
For services under the distribution services
agreement, the Fund pays KDI a fee of 0.75% of
average daily net assets of the Class B and Class C
shares pursuant to separate Rule 12b-1 plans for
Class B and Class C shares. Pursuant to the
agreement, KDI enters into related selling group
agreements with various firms at various rates for
sales of Class B and Class C shares. In addition,
KDI receives any contingent deferred sales charges
(CDSC) from redemptions of Class B and Class C
shares. Distribution fees and CDSC received by KDI
for the six months ended April 30, 2000 are
$20,350.
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 0.25% 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 paid by the Fund to
KDI for the six months ended April 30, 2000 are
$3,674, after an expense reduction by Scudder
Kemper of $4,036.
SHAREHOLDER SERVICE AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
Kemper Service Company (KSvC) is the shareholder
service agent of the Fund. Under the agreement,
KSvC received shareholder services fees of $7,102
for the six months ended April 30, 2000.
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
six months ended April 30, 2000, after an expense
reduction by Scudder Kemper of $25,002.
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 $4,054
to independent directors.
22
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
3 INVESTMENT
TRANSACTIONS For the six months ended April 30, 2000, investment
transactions (excluding short-term instruments) are
as follows:
Purchases $6,754,899
Proceeds from sales 3,940,620
--------------------------------------------------------------------------------
4 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2000 OCTOBER 31, 1999
-------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 251,669 $ 2,948,783 167,554 $1,534,150
------------------------------------------------------------------------------------
Class B 238,067 2,699,685 146,161 1,293,111
------------------------------------------------------------------------------------
Class C 102,399 1,192,675 31,623 286,450
------------------------------------------------------------------------------------
SHARES REDEEMED
Class A (126,334) (1,439,053) (85,185) (782,446)
------------------------------------------------------------------------------------
Class B (97,281) (1,121,007) (96,365) (889,165)
------------------------------------------------------------------------------------
Class C (59,853) (719,386) (20,879) (187,410)
------------------------------------------------------------------------------------
Class I -- --
------------------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $ 3,561,697 $1,254,690
------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
5 EXPENSE OFF-SET
ARRANGEMENTS The Fund has entered into arrangements with its
custodian whereby credits realized as a result of
uninvested cash balances were used to reduce a
portion of the Fund's expenses. During the period,
the Fund's custodian fees were reduced by $665
under these arrangements.
--------------------------------------------------------------------------------
6 COMMITMENTS As of April 30, 2000 the Fund had entered into the
following forward currency exchange contracts
resulting in a net unrealized appreciation of $119.
<TABLE>
<CAPTION>
NET UNREALIZED
SETTLEMENT APPRECIATION/
CONTRACTS TO DELIVER IN EXCHANGE FOR DATE (DEPRECIATION)
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
USD 27,999 MXP 264,171 05/02/2000 $119
--------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
7 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 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 25 percent of its net assets under the
agreement.
--------------------------------------------------------------------------------
8 INVESTING IN
EMERGING MARKETS 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.
23
<PAGE> 24
DIRECTORS&OFFICERS
<TABLE>
<S> <C> <C>
DIRECTORS OFFICERS
JAMES E. AKINS MARK S. CASADY TARA C. KENNEY
Director President Vice President
JAMES R. EDGAR PHILIP J. COLLORA THOMAS W. LITTAUER
Director Vice President and Vice President
Secretary
ARTHUR R. GOTTSCHALK ANN M. MCCREARY
Director JOHN R. HEBBLE Vice President
Treasurer
FREDERICK T. KELSEY WILLIAM F. TRUSCOTT
Director JENNIFER E. BLOOMFIELD Vice President
Vice President
KATHRYN L. QUIRK LINDA J. WONDRACK
Director and Vice President JOYCE E. CORNELL Vice President
Vice President
FRED B. RENWICK MAUREEN E. KANE
Director ANDRE J. DESIMONE Assistant Secretary
Vice President
JOHN G. WEITHERS CAROLINE PEARSON
Director DIEGO ESPINOSA Assistant Secretary
Vice President
BRENDA LYONS
JOAN R. GREGORY Assistant Treasurer
Vice President
</TABLE>
<TABLE>
<S> <C>
.............................................................................................
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
</TABLE>
[KEMPER FUNDS LOGO] Long-term investing in a short-term world(SM)
Printed on recycled paper in the U.S.A.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Global and International Funds prospectus.
KEMGF - 3 (6/25/00) 1114230
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
