<PAGE> 1
Kemper International Fund
Semiannual Report to Shareholders
For the Period Ended
April 30, 1995
Seeking total return, a combination
of capital growth and income,
principally through an internationally
diversified portfolio of equity securities
[KEMPER LOGO]
<PAGE> 2
DEAR SHAREHOLDER:
We are pleased to provide you with an overview of the performance of your fund
for the six-month period ended April 30, 1995. In addition, following the
economic overview is a question and answer interview with your fund's Portfolio
Manager.
- ----------------------------
PERFORMANCE REVIEW
<TABLE>
<CAPTION>
- ----------------------------------------------------------
Total Return Performance*
FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 1995
(UNADJUSTED FOR ANY SALES CHARGE)
<S> <C>
Kemper International Fund A -4.84%
Kemper International Fund B -5.24%
Kemper International Fund C -5.33%
Lipper International Funds
Category Average -4.55%
- ----------------------------------------------------------
</TABLE>
Returns are historical and do not represent future performance. Returns and net
asset value fluctuate. Shares are redeemable at current net asset value, which
may be more or less than original cost.
When comparing Kemper International Fund A to all other International funds in
its Lipper** category for the following time periods ended April 30, 1995, this
fund ranked:
<TABLE>
<CAPTION>
1-YEAR 5-YEAR 10-YEAR
<S> <C> <C>
84 of 183 35 of 52 10 of 19
</TABLE>
- ---------------------------------------
GENERAL ECONOMIC OVERVIEW
Comfortable with the pace of economic growth and the level of interest rates,
investors enjoyed generally positive performance in both the fixed-income and
stock markets in the first five months of 1995. But as we enter the summer
months, we are seeing a decided weakening in the economy and heightened
uncertainty.
What effect has the recent economic growth had on price inflation? Have higher
interest rates slowed the economy so much that a recession is now a true
threat--and will the Federal Reserve Board now reverse itself and start to ease
rates? Of course, these are the questions that only time will answer. At Kemper,
we believe that economic growth in the second quarter will be flat or
possibly even negative. Such a scenario is more severe than the press-heralded
"soft landing" and could conceivably set the scene for lower interest
rates. At this point--before the release of second quarter data--we believe
we have seen only signs of a slowdown, not a recession. We think that the
Fed is not likely to alter direction quickly.
Against this backdrop, we believe that the opportunities for investors will be
concentrated in high quality investments. Companies can no longer count on the
economy to provide an above average earnings boost. Rather, stocks that have
proven themselves with a pattern of consistent earnings are likely to attract
investor support. Specifically, industries that produce more consistent
earnings, such as consumer nondurables, technology and selected capital goods
can be expected to do well. Picking the right sectors to invest in will be the
key challenge for equity investors during the next few quarters.
We look for the fixed-income markets to continue their strong performance as
they tend to do well during periods of slow growth and low inflation.
Leading international economies are lagging the U.S. economy. Japan and Germany,
whose economies typically follow U.S. growth, are not as robust as in past
cycles. This phenomenon makes international investing very complex currently.
Moreover, conditions in emerging market countries underline the importance of
careful research and experience in understanding how these markets work.
We are calm about what has been described as a dollar crisis. While it's true
that the dollar has depreciated against the Japanese yen and many European
currencies, we note that the dollar has appreciated in value against the
currency of Canada and Mexico, two of our largest trading partners.
Political leadership also has some bearing on the progress of the economy and
the state of the financial markets. In the months preceding a presidential
election year, it has not been uncommon for incumbents to attempt to stimulate
growth. Given our Republican Congress and Democratic President, however, we do
not consider this a foregone conclusion as we move closer to 1996.
1
<PAGE> 3
With that as an economic backdrop, we encourage you to read the following
detailed report of your fund, including an interview with your fund's portfolio
manager. Thank you for your continued support. We appreciate the opportunity to
serve your investment needs.
Sincerely,
[SIG]
Stephen B. Timbers
Chief Investment and Executive Officer
June 13, 1995
- -------------------- Stephen Timbers is Chief Executive Officer and
is also Chief Investment Officer of Kemper
Financial Services, Inc. (KFS). KFS and its
affiliates manage approximately $60 billion in
[PHOTO] assets, including $42 billion in retail mutual
funds. Timbers is a graduate of Yale
- -------------------- University and holds an M.B.A. from Harvard
University.
* Total return measures net investment income and capital gain or loss from
portfolio investments, assuming reinvestment of all dividends. During the
period noted, securities prices fluctuated. For additional information, see
the Prospectus and Statement of Additional Information and the Financial
Highlights at the end of this report.
**Lipper Analytical Services, Inc. performance and rankings are based upon
changes in net asset value with all dividends reinvested and do not include
the effect of sales charges and, if they had, results may have been less
favorable. Performance and rankings are historical and do not reflect future
performance.
2
<PAGE> 4
Q&A
AN INTERVIEW
WITH PORTFOLIO
MANAGER
DENNIS FERRO
- ----------- Dennis Ferro is an Executive Vice-President of Kemper Financial
Services, Inc. and Director of International Equities as well as
[PHOTO] Vice-President and Portfolio Manager of the Kemper International
Fund. Dennis holds an M.B.A. in finance from St. John's University
in New York and a bachelor's degree from Villanova University in
- ----------- Pennsylvania. He is a Chartered Financial Analyst.
Q: IN GENERAL, HOW WOULD YOU CHARACTERIZE THE LAST SIX MONTHS?
A: It was a difficult but important period. Interest rates peaked in the
United States during the fourth quarter of 1994, and the subsequent decline of
rates boosted the performance of the U.S. equity market. Just as the U.S. stock
market was becoming more attractive to investors, a litany of events influenced
the performance of international markets. The devaluation of the Mexican peso
resulted in a sharp decline in Mexican and other Latin American stock markets,
an earthquake shook Japan and brought into question its economic recovery and
the well established Barings Bank of London collapsed in a wake of
improprieties.
But most important during the period was the decline of the U.S. dollar. While
we had not expected the dollar to be especially strong, we were surprised by
the breadth of its weakness during the last six months.
Q: WHAT WAS YOUR RESPONSE TO THESE EVENTS?
A: I'll elaborate on just a few of the changes that we made as events unfolded.
Fortunately, we had the insight to significantly reduce the fund's Mexican
holdings before the peso fell. Our entire Latin American position had been
curtailed, in fact.
In our last report to shareholders six months ago, we singled Latin America out
as a region that offered significant potential. While we continue to believe
that Latin America promises higher than average growth over the long term, we
have re-evaluated its short-term prospects. Despite the great strides that
many countries are making in adopting free market systems, some markets are
currently wrestling with inflation, trade balance and currency challenges. We
expect the fund to have little to no exposure to Latin America for the near
term.
The fund's investment in Japan changed quite a bit as we continued to assess
opportunities there. Six months ago, we expected Japan's economic recovery to
finally show some momentum. Our plan was to gradually increase our Japanese
holdings as economic factors supported our growth forecasts. We had as much as
31 percent of the fund invested in Japan in January, the time of the Kobe
earthquake. The earthquake represented an immediate setback to the economy but,
again, the strength of the yen relative to the U.S. dollar is what concerned us
more about Japan. The subsequent reduction of our holdings, to 21 percent by
the end of April, reflects our revised expectations. The growth we expected in
Japan is not going to materialize to the extent we had hoped.
We had what I'll call "residual" exposure in both Latin America and Japan -
which hurt fund performance when these markets stumbled - but overall we're
pleased that we acted to cut back when we did.
Q: YOU'VE CUT BACK ON LATIN AMERICAN AND JAPANESE HOLDINGS - WHICH REGIONS
PICKED UP THE SLACK?
A: Our priority in making those moves was to dampen the amplitude of the
swings of overseas markets. Toward that end, over the past six months we moved
to the more stable markets in Europe where the fiscal and inflationary
environments are investor-friendly and markets continue to be reasonably
valued. Specifically, our investments in France, Netherlands and Switzerland
significantly contributed to performance over this reporting period.
Q: DENNIS, YOU'VE BEEN FOLLOWING INTERNATIONAL MARKETS FOR YEARS. DID YOU LEARN
ANYTHING NEW IN THE LAST SIX MONTHS?
A: Well, just that currency strength creates market weakness. Of course, we've
always known that, but the pace with which markets reacted to currency changes
was a surprise. And it confirmed for us the importance of being flexible and
fast-acting in our decisions.
Markets can be volatile and they are always reacting to economic fundamentals.
But this period demonstrated what happens when economic fundamentals change so
quickly and dramatically that they challenge long-term expectations.
Germany is an example of the way in which
3
<PAGE> 5
dramatic and quick currency moves can influence earnings forecasts and
competitiveness. At its highest, the fund had 8 percent of its assets invested
in German companies. That was in November, when Germany was leading the
European recovery. Since then, the German mark has gained significant strength
and forecasts for economic growth and corporate earnings have been cut back as
a result. German manufacturing and industry is extremely sensitive to weaker
currencies. Because the country's prospects have changed so dramatically, we've
cut the fund's exposure in half.
Q: MOVING AWAY FROM THE GEOGRAPHY OF THE HOLDINGS, WHICH INDUSTRIES DID YOU
FAVOR?
A: We continued to invest in telecommunications, with our exposure focused on
equipment suppliers in fast-growing companies. Nokia in Finland and Ericsson in
Sweden are two examples. It's been said that half the world has yet to make its
first telephone call - so you can see the growth potential for this industry.
We like the pharmaceutical industry, particularly as it consolidates. Two of
our favorites are the British company Glaxo PLC, which just acquired Wellcome
PLC in the United Kingdom, and Roche Holdings, a Swiss company that has
announced an expanded business arrangement with Genentech, based in the U.S.
Finally, consumer retail in Europe has shown promise. The European recovery is
about a full year behind the U.S.'s. We look for consumer spending to pick up
as inflation remains low and Europeans find that their strong currencies will
result in lower prices for imported goods.
Q: WHAT DO YOU EXPECT THE NEXT SIX MONTHS OR SO TO BRING?
A: There's no question that the first quarter of 1995 was tumultuous. But in
April international markets started to catch up and show good performance. The
economic expansion is continuing overseas, and we are finding attractive
opportunities in stocks that we expect to demonstrate good, sustainable growth.
On a country basis, we are especially optimistic about the United Kingdom. The
UK, which exports technology, automobiles and a cross section of basic
products, seems to be improving its competitiveness in world markets. We also
like our prospects in Sweden, where machinery and high value-added exporters
are positioned to do well.
Q: WHAT COULD THREATEN YOUR FORECAST?
A: Naturally, there are no guarantees. I can think of a few factors - all of
which I assign a low probability to - that could threaten the assumptions we're
making:
- - a continued dramatic decline of the U.S. dollar
- - an escalation of trade tensions between U.S. and Japan
- - another negative surprise in Latin America
- - the potential for oil prices to spike up due to tensions in the Mideast.
4
<PAGE> 6
Dennis Ferro on...
- - INTERNATIONAL INVESTING
"World growth is continuing at an attractive rate. Remember that two-thirds
of the world's equity market opportunity is outside the United States, and
opportunities are continually increasing as overseas industrialization
continues".
- - VOLATILITY
"We believe that investors use Kemper International Fund as a 'core'
international investment. Our mission is to seek to provide the benefits of
diversification in non-U.S. markets but with reduced volatility."
Morgan Stanley Capital International World Index is an unmanged index that
is a generally accepted benchmark for the global market.
- - KEMPER INTERNATIONAL FUND'S PERFORMANCE COMPARED TO ITS BENCHMARK
"While the fund and the EAFE, which is a weighted index, are in the same
international markets, there are often significant differences between the
levels of investment. When the fund has more invested in a given country than
the weights reflected in the EAFE index, we describe it as overweighted. Our
recent above-index investment in Europe, for example, helped the fund's
performance. However, the fund had significantly less (21 percent versus 45
percent at the end of April) invested in Japanese holdings than the EAFE.
This underweighting explains part of the difference between the performance
and volatility of the fund and its benchmark".
- - THE VALUE OF THE DOLLAR
"Currencies are always going to fluctuate, and there will be periods of time
when volatility seems excessive. However, value should prevail. The U.S.
competitive position is strong and while future currency trends cannot be
guaranteed, over the long term, it's reasonable to expect that the dollar can
reverse its current trend and appreciate against our major trading partners.
It's in the U.S.' best interests to promote a healthy trade environment".
INTERNATIONAL DIVERSIFICATION CAN REDUCE RISK, INCREASE RETURN POTENTIAL
An investor can actually increase the return potential and possibly reduce the
overall risk of his or her portfolio over the long term, according to a study
by Merrill Lynch. The graph below makes a compelling argument for some exposure
to international markets. According to this data, the investor with as much as
30 percent invested in the Morgan Stanley Capital International World
(Excluding the U.S.) Index and 70 percent of his or her portfolio invested in
the Standard & Poor's 500 was exposed to lower risk and higher return from 1970
through March 1995 than an investor 100 percent invested in the S&P 500.
Of course, this information is historical and does not represent future
performance of the indices or any Kemper mutual fund. Also, there is no
guarantee that any particular portfolio strategy will reduce risk or result in
a profit. Investors may not make direct investments in any of these indices.
RISK RETURN FRONTIER - S & P 500 VS. MSCI WORLD INDEX ($)
12/31/70 - 3/31/95
<TABLE>
<CAPTION>
RISK/RETURN AVG. 12 MO. PRICE RETURN RISK
<S> <C> <C>
1 8.44% 15.20%
2 8.56% 15.16%
3 8.64% 15.10%
4 8.80% 15.12%
5 8.92% 15.21%
6 9.00% 15.36%
7 9.12% 15.57%
8 9.24% 15.82%
9 9.35% 16.12%
10 9.44% 16.48%
11 9.56% 16.88%
</TABLE>
RISK (STANDARD DEVIATION OF AVERAGE 12 MONTH PRICE RETURNS)
Source: Merrill Lynch International Quantitative Analysis, MSCI
The EAFE is an unmanaged index that is a generally accepted benchmark
for major overseas markets. The Standard & Poor's 500 index is an unmanaged
index considered to be generally representative of the U.S. stock market.
Investors may not make direct investments in any of these indices.
5
<PAGE> 7
PORTFOLIO OF INVESTMENTS April 30, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- --------
<S> <C> <C>
COMMON STOCKS
CONTINENTAL EUROPE
FINLAND-3.6%
-----------------------------------------------------------
Oy Nokia AB
Telecommunications company 332,000 $ 13,570
-----------------------------------------------------------
FRANCE-4.2%
-----------------------------------------------------------
Carrefour S.A.
Food retailer 20,000 10,045
-----------------------------------------------------------
L'Oreal S.A.
Consumer products and services 10,566 2,786
-----------------------------------------------------------
(a)Technip S.A.
Oil company 50,000 2,995
-----------------------------------------------------------
15,826
GERMANY-3.6%
-----------------------------------------------------------
Mannesmann, A.G.
Construction and engineering company 22,000 5,984
-----------------------------------------------------------
Veba, A.G.
Electric utility 21,000 7,839
-----------------------------------------------------------
13,823
IRELAND-2.1%
-----------------------------------------------------------
(a)Allied Irish Banks PLC
Banking 880,000 4,059
-----------------------------------------------------------
Greencore Group PLC
Food producer 565,633 4,011
-----------------------------------------------------------
8,070
NETHERLANDS-13.2%
-----------------------------------------------------------
Aalberts Industries N.V.
Hardware company 55,800 2,989
-----------------------------------------------------------
ABN Amro Bank
Banking 148,500 5,722
-----------------------------------------------------------
Hagemeyer N.V.
Trading company 63,048 5,453
-----------------------------------------------------------
Koninklijke Ahold
Food retailer and distributor 130,000 4,481
-----------------------------------------------------------
Koninklijke PTT Netherland N.V.
Commercial services 153,000 5,343
-----------------------------------------------------------
PolyGram N.V.
Music recording company 225,000 12,722
-----------------------------------------------------------
Unilever N.V.
Food processing 54,400 7,293
-----------------------------------------------------------
Wolters Kluwer
Multinational publishing organization 74,145 6,044
-----------------------------------------------------------
50,047
SPAIN-1.3%
-----------------------------------------------------------
Repsol S.A.
Oil and gas producer 150,000 4,776
-----------------------------------------------------------
(a)Tipel, S.A.
Leather skins manufacturer 73,500 10
-----------------------------------------------------------
4,786
SWEDEN-7.7%
-----------------------------------------------------------
Astra AB
Pharmaceutical company 300,000 8,752
-----------------------------------------------------------
Atlas Copco
Industrial machinery manufacturer 320,000 4,404
-----------------------------------------------------------
<CAPTION>
Number
of Shares Value
--------- --------
<S> <C> <C>
-----------------------------------------------------------
LM Ericsson "B"
Telecommunications equipment
manufacturer 200,000 $ 13,239
-----------------------------------------------------------
Gambro AB
Pharmaceutical company 200,000 2,601
-----------------------------------------------------------
28,996
SWITZERLAND-5.6%
-----------------------------------------------------------
Nestle S.A.
Food processor 5,500 5,389
-----------------------------------------------------------
Roche Holdings AG
Pharmaceutical company 2,632 15,868
-----------------------------------------------------------
21,257
-----------------------------------------------------------
TOTAL CONTINENTAL EUROPE-41.3% 156,375
-----------------------------------------------------------
PACIFIC REGION
HONG KONG-2.5%
-----------------------------------------------------------
Hong Kong Telecommunications Ltd.
Telecommunication services 1,174,800 2,300
-----------------------------------------------------------
HSBC Holdings PLC
Banking 192,000 2,227
-----------------------------------------------------------
Hutchison Whampoa Ltd.
Diversified holding company 500,000 2,171
-----------------------------------------------------------
New World Development Co., Ltd.
Investment holding and property
investment company 490,000 1,273
-----------------------------------------------------------
Peregrine Investment Holdings
Investment banking 1,229,000 1,294
-----------------------------------------------------------
Wai Kee Holdings, with
warrants expiring 1996
Construction company 2,118,000 338
-----------------------------------------------------------
9,603
JAPAN-20.8%
-----------------------------------------------------------
Amada Co. Ltd.
Equipment manufacturer 210,000 2,244
-----------------------------------------------------------
Bridgestone Corp.
Manufacturer of rubber related
products 120,000 1,942
-----------------------------------------------------------
DDI Corp.
Telecommunications company 416 3,664
-----------------------------------------------------------
Daifuku Co., Ltd.
Manufacturer of diversified machinery 150,000 1,964
-----------------------------------------------------------
Fuji Bank Ltd.
Banking 190,000 4,568
-----------------------------------------------------------
Fujisawa Pharmaceutical
Pharmaceutical company 400,000 5,142
-----------------------------------------------------------
JMS Co. Ltd.
Medical equipment supplier 222,000 1,747
-----------------------------------------------------------
Keiyo Company Ltd.
Retailer 145,000 1,681
-----------------------------------------------------------
Kurita Water Industries
Water treatment equipment and
chemicals manufacturer 100,000 2,440
-----------------------------------------------------------
Kyocera Corporation
Electronics manufacturer 36,000 2,785
-----------------------------------------------------------
Marui Co., Ltd.
Retailer 210,000 3,224
-----------------------------------------------------------
Mitsubishi Heavy Industries
Industrial machinery manufacturer 500,000 3,630
-----------------------------------------------------------
</TABLE>
6
<PAGE> 8
(Dollars in thousands)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- --------
<S> <C> <C>
-----------------------------------------------------------
Nippon Paper Industries
Paper company 225,000 $ 1,749
-----------------------------------------------------------
Nippondenso Co., Ltd.
Automotive components manufacturer
and supplier 110,000 2,212
-----------------------------------------------------------
Nissan Motor Co., Ltd.
Automobile manufacturer 550,000 4,019
-----------------------------------------------------------
(a)Nisshin Steel Co., Ltd.
Steel manufacturer 600,000 3,014
-----------------------------------------------------------
(a)NKK Corp.
Steel manufacturer 1,353,000 3,784
-----------------------------------------------------------
Omron Corp.
Electronics manufacturer 150,000 2,946
-----------------------------------------------------------
Sanyo Shinpan Finance Co.
Consumer finance company 14,000 1,145
-----------------------------------------------------------
Seven-Eleven Japan Co., Ltd.
Convenience retailer 52,500 3,780
-----------------------------------------------------------
Sharp Corporation
Electronics manufacturer 90,000 1,478
-----------------------------------------------------------
Sumitomo Bank Ltd.
Banking 240,000 5,199
-----------------------------------------------------------
Sumitomo Corporation
Wholesaler 350,000 3,478
-----------------------------------------------------------
Sumitomo Trust & Banking
Banking 360,000 5,442
-----------------------------------------------------------
Tokyo Electron Ltd.
Electronics manufacturer 61,000 1,902
-----------------------------------------------------------
(a)Ube Industries, Ltd.
Diversified company 900,000 3,728
-----------------------------------------------------------
78,907
MALAYSIA-1.9%
-----------------------------------------------------------
Hume Industries Bhd
Steel and concrete manufacturer 348,000 1,388
-----------------------------------------------------------
Resorts World Bhd
Operation of tourist resorts 422,000 2,222
-----------------------------------------------------------
Road Builder Holdings
Construction company 343,000 789
-----------------------------------------------------------
(a)Technology Resources Industries
Telecommunications company 1,037,000 2,646
-----------------------------------------------------------
7,045
PHILIPPINES
-----------------------------------------------------------
(a)Universal Robina Corporation
Food manufacturer 154,000 85
-----------------------------------------------------------
SINGAPORE-2.6%
-----------------------------------------------------------
DBS Land Ltd.
Real estate 99,000 1,058
-----------------------------------------------------------
Keppel Corporation Limited
Conglomerate holding company 500,000 4,055
-----------------------------------------------------------
Singapore Press Holdings
Publisher 270,000 4,650
-----------------------------------------------------------
9,763
-----------------------------------------------------------
TOTAL PACIFIC REGION-27.8% 105,403
-----------------------------------------------------------
<CAPTION>
Number
of Shares Value
--------- --------
<S> <C> <C>
COMMONWEALTH COUNTRIES
AUSTRALIA-3.9%
-----------------------------------------------------------
Australian and New Zealand Banking
Group Ltd.
Financial services 1,563,500 $ 5,781
-----------------------------------------------------------
CSL Ltd.
Plasma producer 843,900 1,714
-----------------------------------------------------------
Tabcorp Holdings Ltd.
Entertainment and gaming 1,768,700 4,055
-----------------------------------------------------------
(a)TNT Ltd.
Transportation and logistics 2,100,000 3,010
-----------------------------------------------------------
14,560
CANADA-1.1%
-----------------------------------------------------------
Magna International, "A"
Automobile parts company 123,400 4,233
-----------------------------------------------------------
NEW ZEALAND-.2%
-----------------------------------------------------------
Lion Nathan Ltd.
Beer and soft drink manufacturer 310,000 676
-----------------------------------------------------------
UNITED KINGDOM-15.4%
-----------------------------------------------------------
British Petroleum Co., PLC
Petroleum mining and production
company 1,016,790 7,323
-----------------------------------------------------------
Dixons Group PLC
Electronics retailer 1,400,000 5,419
-----------------------------------------------------------
Glaxo Wellcome PLC
Pharmaceutical company 750,000 8,865
-----------------------------------------------------------
LLoyds Bank PLC
Banking 600,000 6,175
-----------------------------------------------------------
Manweb PLC
Electric utility company 550,000 5,966
-----------------------------------------------------------
Reed International PLC
Publisher 440,000 5,665
-----------------------------------------------------------
(a)Telewest Communications
Communications utility 1,078,000 2,671
-----------------------------------------------------------
Tesco PLC
Food retailer 1,200,000 5,397
-----------------------------------------------------------
Tomkins PLC
Industrial manufacturer 1,400,000 5,272
-----------------------------------------------------------
Vodafone Group PLC
Cellular telephone services 1,792,977 5,612
-----------------------------------------------------------
58,365
-----------------------------------------------------------
TOTAL COMMONWEALTH COUNTRIES-20.6% 77,834
-----------------------------------------------------------
LATIN AMERICA AND EMERGING MARKETS
CHILE-.7%
-----------------------------------------------------------
(a)Provida Corporation, ADR
Financial services 130,500 2,789
-----------------------------------------------------------
VENEZUELA
-----------------------------------------------------------
Electricidad de Caracas
Electric utility company 960 1
-----------------------------------------------------------
TOTAL LATIN AMERICA AND EMERGING MARKETS-.7% 2,790
-----------------------------------------------------------
</TABLE>
7
<PAGE> 9
(Dollars in thousands)
<TABLE>
<CAPTION>
Principal
Amount Value
--------- --------
<S> <C> <C>
- -----------------------------------------------------------
TOTAL COMMON STOCKS-90.4%
(Cost: $307,111) $342,402
- -----------------------------------------------------------
MONEY MARKET INSTRUMENTS
Yield-5.97% to 6.00%
Due-May 1995
- -----------------------------------------------------------
Caterpillar Finance $ 2,000 1,999
- -----------------------------------------------------------
ConAgra 16,300 16,296
- -----------------------------------------------------------
General Motors Acceptance Corp. 19,000 18,983
- -----------------------------------------------------------
<CAPTION>
Value
--------
<S> <C>
- -----------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS-9.9%
(Cost $37,266) $ 37,278
- -----------------------------------------------------------
TOTAL INVESTMENTS-100.3%
(Cost $344,377) 379,680
- -----------------------------------------------------------
LIABILITIES, LESS CASH AND OTHER ASSETS-(.3)% (1,007)
- -----------------------------------------------------------
NET ASSETS-100% $378,673
- -----------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
(b) Based on the cost of investments of $344,377,000 for federal income tax
purposes at April 30, 1995, the aggregate gross unrealized appreciation was
$46,094,000, the aggregate gross unrealized depreciation was $10,791,000 and
the net unrealized appreciation of investments was $35,303,000.
(c) At April 30, 1995, the Fund's portfolio of investments had the following
diversification (dollars in thousands):
<TABLE>
<CAPTION>
Value %
-------------------------------------------------------
<S> <C> <C>
Automobiles, Parts and Service $10,464 2.8
-------------------------------------------------------
Chemicals, Medical Equipment and
Pharmaceuticals 44,689 11.8
-------------------------------------------------------
Communications 43,702 11.5
-------------------------------------------------------
Construction and Building Materials 7,111 1.9
-------------------------------------------------------
Consumer Products and Services 34,533 9.1
-------------------------------------------------------
Diversified 9,954 2.6
-------------------------------------------------------
Electrical and Electronics 9,111 2.4
-------------------------------------------------------
Energy Sources 15,094 4.0
-------------------------------------------------------
Financial Services 46,732 12.3
-------------------------------------------------------
Food and Beverages 27,499 7.3
-------------------------------------------------------
Industrial Products and Services 31,129 8.2
-------------------------------------------------------
Paper Products 1,749 .5
-------------------------------------------------------
Publishing 16,359 4.3
-------------------------------------------------------
Retailing 27,460 7.3
-------------------------------------------------------
Transportation 3,010 .8
-------------------------------------------------------
Utilities 13,806 3.6
-------------------------------------------------------
TOTAL COMMON STOCKS 342,402 90.4
-------------------------------------------------------
MONEY MARKET INSTRUMENTS 37,278 9.9
-------------------------------------------------------
TOTAL INVESTMENTS 379,680 100.3
-------------------------------------------------------
LIABILITIES, LESS CASH
AND OTHER ASSETS (1,007) (.3)
-------------------------------------------------------
NET ASSETS $378,673 100.0
=======================================================
</TABLE>
8
<PAGE> 10
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995
(in thousands)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
- ------------------------------------------------------
Investments, at value
(Cost: $344,377) $379,680
- ------------------------------------------------------
Cash 12,087
- ------------------------------------------------------
Receivable for:
Fund shares sold 63
- ------------------------------------------------------
Investments sold 5,294
- ------------------------------------------------------
Dividends and interest 1,393
- ------------------------------------------------------
Total assets 398,517
- ------------------------------------------------------
LIABILITIES AND NET ASSETS
- ------------------------------------------------------
Payable for:
Fund shares redeemed 425
- ------------------------------------------------------
Investments purchased 18,455
- ------------------------------------------------------
Management fee 228
- ------------------------------------------------------
Distribution services fee 21
- ------------------------------------------------------
Administrative services fee 65
- ------------------------------------------------------
Custodian and transfer agent
fees and related expenses 611
- ------------------------------------------------------
Other 39
- ------------------------------------------------------
Total liabilities 19,844
- ------------------------------------------------------
Net assets $378,673
======================================================
ANALYSIS OF NET ASSETS
- ------------------------------------------------------
Excess of amounts received from
issuance of shares over amounts
paid on redemptions of shares
on account of capital $354,952
- ------------------------------------------------------
Accumulated net realized loss on
sales of investments and foreign
currency transactions (12,010)
- ------------------------------------------------------
Unrealized appreciation of investments
and other foreign denominated assets and
liabilities 35,144
- ------------------------------------------------------
Undistributed net investment income 587
- ------------------------------------------------------
Net assets applicable to shares outstanding $378,673
======================================================
THE PRICING OF SHARES
- ------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price
per share ($342,984,229 + 34,620,215
shares outstanding) $9.91
======================================================
Maximum offering price per share
(net asset value, plus 6.10% of net
asset value or 5.75% of offering price) $10.51
======================================================
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales
charge) per share ($34,388,000 + 3,499,419
shares outstanding) $9.83
======================================================
CLASS C SHARES
Net asset value and redemption price per
share ($1,300,418 + 132,375 shares
outstanding) $9.82
======================================================
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS
Six months ended April 30, 1995
(in thousands)
<TABLE>
<CAPTION>
INVESTMENT INCOME
- ------------------------------------------------------
<S> <C>
Dividends $ 2,774
- ------------------------------------------------------
Interest 924
- ------------------------------------------------------
3,698
- ------------------------------------------------------
Less foreign taxes withheld 273
- ------------------------------------------------------
Total investment income 3,425
- ------------------------------------------------------
EXPENSES
- ------------------------------------------------------
Management fee 1,372
- ------------------------------------------------------
Administrative services fee 392
- ------------------------------------------------------
Distribution services fees 112
- ------------------------------------------------------
Custodian and transfer agent
fees and related expenses 1,098
- ------------------------------------------------------
Professional fees 37
- ------------------------------------------------------
Reports to shareholders 18
- ------------------------------------------------------
Trustees' fees and other 49
- ------------------------------------------------------
Total expenses 3,078
- ------------------------------------------------------
Net investment income 347
- ------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS
- ------------------------------------------------------
Net realized loss on investments and
foreign currency transactions (10,795)
- ------------------------------------------------------
Net change in balance of unrealized
appreciation of investments and other
foreign denominated assets and liabilities (11,368)
- ------------------------------------------------------
Net loss on investments (22,163)
- ------------------------------------------------------
Net decrease in net assets resulting
from operations $(21,816)
======================================================
</TABLE>
9
<PAGE> 11
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
<TABLE>
<CAPTION>
Six months Year ended
ended April 30, October 31,
1995 1994
--------------- -----------
OPERATIONS
- ----------------------------------------------------------
<S> <C> <C>
Net investment income $ 347 7
- ----------------------------------------------------------
Net realized (loss) gain
on investments and foreign
currency transactions (10,795) 25,062
- ----------------------------------------------------------
Net change in unrealized
appreciation and other
foreign denominated assets
and liabilities (11,368) 2,606
- ----------------------------------------------------------
Net (decrease) increase in
net assets resulting from
operations (21,816) 27,675
- ----------------------------------------------------------
Net equalization (charges)
credits (523) 641
- ----------------------------------------------------------
Distribution from net
realized gain on
investments (24,455) (8,297)
- ----------------------------------------------------------
Net increase from capital
share transactions 7,185 108,365
- ----------------------------------------------------------
Total (decrease) increase in
net assets (39,609) 128,384
- ----------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------
Beginning of period 418,282 289,898
- ----------------------------------------------------------
End of period (including
undistributed net investment
income of $587 in 1995 and
$763 in 1994) $ 378,673 418,282
==========================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE FUND
Kemper International Fund currently offers three classes of shares. Class A
shares are sold to investors subject to an initial sales charge. Class B shares
are sold without an initial sales charge but are subject to higher ongoing
expenses than Class A shares and a contingent deferred sales charge payable upon
certain redemptions. Class B shares automatically convert to Class A shares six
years after issuance. Class C shares are sold without an initial or a contingent
deferred sales charge but are subject to higher ongoing expenses than Class A
shares and do not convert into another class. The Fund may offer, to a limited
group of investors, Class I shares (none sold at April 30, 1995) which are not
subject to initial or contingent deferred sales charges and have lower ongoing
expenses than other classes. Each share represents an identical interest in the
investments of the Fund and has the same rights.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION
Investments are stated at value. Any portfolio securities that are primarily
traded on a domestic securities exchange are valued at the last sale price on
that exchange or, if there is no recent last sale price available, at the last
current bid quotation. Portfolio securities that are primarily traded on foreign
securities exchanges are generally valued at the preceding closing values of
such securities on their respective exchanges where primarily traded. A security
that is listed or traded on more than one exchange is valued at the quotation on
the exchange determined to be the primary market for such security by the Board
of Trustees or its delegates. All other securities not so traded are valued at
the last current bid quotation if market quotations are available. Fixed income
securities are valued by using market quotations, or independent pricing
services that use prices provided by market makers or estimates of market values
obtained from yield data relating to instruments or securities with similar
characteristics. Equity options are valued at the last sale price unless the bid
price is higher or the asked price is lower, in which event such bid or asked
price is used. Exchange traded fixed income options are valued at the last sale
price unless there is no sale price, in which event prices provided by market
makers are used. Over-the-counter traded fixed income options are valued based
upon current prices provided by market makers. Financial futures and options
thereon are valued at the settlement price established each day by the board of
trade or exchange on which they are traded. Forward foreign currency contracts
and foreign currencies are valued at the forward and current exchange rates,
respectively, prevailing on the day of valuation. Other securities and assets
are valued at fair value as determined in good faith by the Board of Trustees.
CURRENCY TRANSLATION
The books and records of the Fund are maintained in U.S. dollars. All assets and
liabilities initially expressed in foreign currency values are converted into
U.S. dollar values at the mean between the bid and offered
10
<PAGE> 12
quotations of such currencies against U.S. dollars as last quoted by a
recognized dealer. If such quotations are not readily available, the rate of
exchange is determined in good faith by the Board of Trustees. Income and
expenses and purchases and sales of investments are translated into U.S. dollars
at the rate of exchange prevailing on the respective dates of such transactions.
The Fund includes that portion of the results of operations resulting from
changes in foreign exchange rates with net realized and unrealized gain (loss)
on investments, as appropriate.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date (date the order to
buy or sell is executed). Dividend income is recorded on the ex-dividend date,
except that certain dividends from foreign securities are recorded as soon as
the information is available to the Fund. Interest income is recorded on the
accrual basis and includes amortization of money market instrument premium and
discount. Realized gains and losses from investment transactions are reported on
an identified cost basis. Realized and unrealized gains and losses on financial
futures, options and forward foreign currency contracts are included in net
realized and unrealized gain (loss) on investments, as appropriate.
FUND SHARE VALUATION
Fund shares are sold and redeemed on a continuous basis at net asset value (plus
an initial sales charge on most sales of Class A shares). Proceeds payable on
redemption of Class B shares will be reduced by the amount of any applicable
contingent deferred sales charge. On each day the New York Stock Exchange is
open for trading, the net asset value per share is determined as of the earlier
of 3:00 p.m. Chicago time or the close of the Exchange. The net asset value per
share is determined separately for each class by dividing the Fund's net assets
attributable to that class by the number of shares of the class outstanding.
Because of the need to obtain prices as of the close of trading on various
exchanges throughout the world, the calculation of net asset value does not
take place contemporaneously with the determination of the prices of the
majority of the portfolio securities.
FEDERAL INCOME TAXES AND DIVIDENDS TO SHAREHOLDERS
The Fund has complied with the special provisions of the Internal
Revenue Code available to investment companies for the six months ended April
30, 1995.
The Fund may make an election under the Internal Revenue Code so that
shareholders may claim a tax credit or deduction for their share of foreign
taxes paid by the Fund.
Net realized capital gains, if any, reduced by capital loss carryovers will be
distributed at least annually. Differences in dividends per share are due to
different class expenses. Dividends payable to its shareholders are recorded by
the Fund on the ex-dividend date.
Distributions are determined in accordance with income tax principles which may
treat certain transactions differently from generally accepted accounting
principles.
EQUALIZATION ACCOUNTING
A portion of proceeds from sales and cost of redemptions of Fund shares is
credited or charged to undistributed net investment income so that income per
share available for distribution is not affected by sales or redemptions of
shares.
3. TRANSACTIONS WITH AFFILIATES
MANAGEMENT AGREEMENT
The Fund has a management agreement with Kemper Financial Services, Inc. (KFS)
and pays a management fee at an annual rate of .75% of the first $250 million of
average daily net assets declining gradually to .62% of average daily net assets
in excess of $12.5 billion. The Fund incurred a management fee of $1,372,000 for
the six months ended April 30, 1995.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT
The Fund has an underwriting and distribution services agreement with Kemper
Distributors, Inc. (KDI). Before February 1, 1995, KFS was the Fund's principal
underwriter and distributor. As principal underwriter for the Fund, KDI (as
successor to KFS) retained commissions of $42,000 for the six months ended April
30, 1995 for sales of Class A shares, after allowing $352,000 as commissions to
firms of which $58,000 was paid to firms affiliated with KDI. For distribution
services, the Fund pays KDI a fee of .75% of average daily net assets of the
Class B and Class C shares. Pursuant to the agreement, KDI enters into related
selling group agreements with various firms that provide distribution services
to investors. KDI compensates these firms at various rates for sales of Class B
and Class C shares. During the six months ended April 30, 1995, the Fund
incurred a distribution services fee for Class B and Class C shares of $112,000,
and KDI paid $284,000 for commissions and distribution fees to firms, including
$53,000 to firms affiliated with KDI. In addition, KDI received $31,000 of
contingent deferred sales charges.
ADMINISTRATIVE SERVICES AGREEMENT
The Fund has an administrative services agreement with KDI. Before February 1,
1995, KFS was the Fund's administrator. 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. 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. For the six
months ended April 30, 1995, the Fund incurred an administrative services fee of
$392,000 and KDI (as successor to KFS) paid $399,000 to firms, including $81,000
that was paid to firms affiliated with KDI.
CUSTODIAN AND TRANSFER AGENT AGREEMENT
The Fund has a custodian agreement and a transfer agent agreement with Investors
Fiduciary Trust Company (IFTC), which was 50% owned by KFS until January 31,
1995, when KFS completed the sale of
11
<PAGE> 13
IFTC to a third party. For the six months ended April 30, 1995, the Fund
incurred custodian and transfer agent fees of $723,000 (excluding related
expenses). Pursuant to a services agreement with IFTC, Kemper Service Company
(KSvC), an affiliate of KFS, is the shareholder service agent of the Fund. For
the six months ended April 30, 1995, IFTC remitted shareholder service fees of
$723,000 to KSvC.
OFFICERS AND TRUSTEES
Certain officers or trustees of the Fund are also officers or directors of KFS.
During the six months ended April 30, 1995, the Fund made no payments to its
officers and incurred trustees' fees of $6,000 to independent trustees.
4. INVESTMENT TRANSACTIONS
Investment transactions for the six months ended April 30, 1995 (excluding short
term instruments) are as follows (in thousands):
<TABLE>
<S> <C>
Purchases $199,741
- ------------------------------------------------------
Proceeds from sales 216,031
- ------------------------------------------------------
</TABLE>
5. CAPITAL SHARE TRANSACTIONS
The following table summarizes the activity in capital shares of the Fund (in
thousands):
<TABLE>
<CAPTION>
Six months ended Year ended
April 30, October 31,
1995 1994
----------------- ------------------
Shares Amount Shares Amount
------ -------- ------- --------
<S> <C> <C> <C> <C>
Shares sold:
Class A 4,494 $ 44,543 20,528 $217,366
- ----------------------------------------------------------
Class B 1,953 19,786 3,185 34,449
- ----------------------------------------------------------
Class C 154 1,578 76 814
- ----------------------------------------------------------
Shares issued in
reinvestment of
dividends:
Class A 2,263 21,733 774 8,085
- ----------------------------------------------------------
Class B 184 1,755 1 14
- ----------------------------------------------------------
Class C 7 71 -- --
- ----------------------------------------------------------
Shares redeemed:
Class A (7,126) (69,643) (13,841) (145,844)
- ----------------------------------------------------------
Class B (1,156) (11,630) (600) (6,469)
- ----------------------------------------------------------
Class C (100) (1,008) (5) (50)
- ----------------------------------------------------------
Conversion of
shares:
Class A 52 492 15 167
- ----------------------------------------------------------
Class B (52) (492) (15) (167)
- ----------------------------------------------------------
Net increase from
capital share
transactions $ 7,185 $108,365
- ----------------------------------------------------------
</TABLE>
12
<PAGE> 14
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Class A
----------------------------------------------------------
Six months
ended
April 30, Year ended October 31,
1995 1994 1993 1992 1991
---------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $11.13 10.56 8.17 8.76 9.52
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .01 -- .03 .22 .13
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currency transactions (.57) .86 2.54 (.67) .31
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.56) .86 2.57 (.45) .44
- --------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- -- .18 -- .11
- --------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain on investments .66 .29 -- .14 1.09
- --------------------------------------------------------------------------------------------------------------------------
Total dividends .66 .29 .18 .14 1.20
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.91 11.13 10.56 8.17 8.76
==========================================================================================================================
TOTAL RETURN (%): (4.84) 8.32 32.08 (5.17) 5.38
==========================================================================================================================
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 1.59 1.54 1.69 1.36 1.41
- --------------------------------------------------------------------------------------------------------------------------
Net investment income .41 .02 .37 2.61 1.42
==========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class B Class C
---------------------------- ----------------------------
Six months May 31, Six months May 31,
ended 1994 to ended 1994 to
April 30, October 31, April 30, October 31,
1995 1994 1995 1994
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $11.09 10.58 11.09 10.58
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.02) (.04) (.02) (.04)
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currency transactions (.58) .55 (.59) .55
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.60) .51 (.61) .51
- ----------------------------------------------------------------------------------------------------------------------------
Less distribution from net realized gain on investments .66 -- .66 --
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.83 11.09 9.82 11.09
============================================================================================================================
TOTAL RETURN (%): (5.24) 4.82 (5.33) 4.82
============================================================================================================================
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 2.50 2.58 2.44 2.52
- ----------------------------------------------------------------------------------------------------------------------------
Net investment loss (.50) (.97) (.44) (.91)
============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Six months
ended
April 30, Year ended October 31,
1995 1994 1993 1992 1991
---------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL DATA FOR ALL CLASSES:
Net assets at end of period (in thousands) $378,673 418,282 289,898 165,890 184,946
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 117 103 156 143 209
==========================================================================================================================
</TABLE>
NOTE: Ratios have been determined on an annualized basis. Total return is not
annualized and does not reflect the effect of any sales charges.
13
<PAGE> 15
[KEMPER LOGO]
KEMPER FINANCIAL SERVICES, INC.
120 SOUTH LASALLE STREET
CHICAGO, IL 60603
KEMPER INTERNATIONAL FUND
Trustees Officers
STEPHEN B. TIMBERS JOHN E. PETERS
President and Trustee Vice President
DAVID W. BELIN DENNIS H. FERRO
Trustee Vice President
LEWIS A. BURNHAM PHILIP J. COLLORA
Trustee Vice President and
Secretary
DONALD L. DUNAWAY
Trustee
ROBERT B. HOFFMAN CHARLES F. CUSTER
Trustee Vice President and
Assistant Secretary
DONALD R. JONES JEROME L. DUFFY
Trustee Treasurer
DAVID B. MATHIS ELIZABETH C. WERTH
Trustee Assistant Secretary
SHIRLEY D. PETERSON
Trustee
WILLIAM P. SOMMERS
Trustee
- -----------------------------------------------------------
Legal Counsel Custodian and Transfer Agent
VEDDER, PRICE, KAUFMAN INVESTORS FIDUCIARY TRUST
& KAMMHOLZ COMPANY
222 North LaSalle Street 127 West 10th Street
Chicago, IL 60601 Kansas City, MO 64105
Shareholder Service Agent Foreign Custodian
KEMPER SERVICE COMPANY THE CHASE MANHATTAN BANK, N.A.
P.O. Box 419557 Chase MetroTech Center
Kansas City, MO 64141 Brooklyn, NY 11245
800-621-1048
Investment Manager
KEMPER FINANCIAL SERVICES,
INC.
Principal Underwriter
KEMPER DISTRIBUTORS, INC.
120 South LaSalle Street
Chicago, IL 60603
[RECYCLE LOGO]
PRINTED ON RECYCLED PAPER
KIF-3 (6/95) This report is not to be distributed unless preceded 239700
or accompanied by a Kemper International Funds prospectus. Printed
in the
U.S.A.
