<PAGE> 1
KEMPER INTERNATIONAL FUND
SEMIANNUAL REPORT TO SHAREHOLDERS
FOR THE PERIOD ENDED APRIL 30, 1996
Seeking total return, a combination of capital growth and
income, principally through an internationally diversified portfolio of
equity securities
"...our holdings in multiple markets provided us with the opportunity to
always have some portion of our equities moving forward..."
<PAGE> 2
Table of
Contents
2
Terms to Know
3
General
Economic Overview
5
Performance Update
8
Country Sectors
9
Largest Holdings
10
Portfolio of Investments
16
Financial Statements
18
Notes to
Financial Statements
22
Financial Highlights
At A Glance
- --------------------------------------------------------------------------------
KEMPER INTERNATIONAL FUND
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 1996 (UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
CLASS A 14.31%
CLASS B 13.79%
CLASS C 13.79%
LIPPER INTERNATIONAL
FUNDS CATEGORY
AVERAGE * 11.95%
- --------------------------------------------------------------------------------
</TABLE>
Returns and rankings 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. Investment in foreign
securities presents special risk considerations including fluctuating currency
exchange rates, government regulation and differences in liquidity.
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AS OF AS OF
4/30/96 10/31/95
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER INTERNATIONAL FUND
CLASS A $11.92 $10.59
- --------------------------------------------------------------------------------
KEMPER INTERNATIONAL FUND
CLASS B $11.83 $10.46
- --------------------------------------------------------------------------------
KEMPER INTERNATIONAL FUND
CLASS C $11.83 $10.46
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
KEMPER INTERNATIONAL FUND
LIPPER RANKINGS*
- --------------------------------------------------------------------------------
Compared to all other funds in the Lipper International Funds Category
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1-YEAR #28 OF 281 #37 OF 281 #35 OF 281
FUNDS FUNDS FUNDS
- --------------------------------------------------------------------------------
5-YEAR #35 OF 63
FUNDS N/A N/A
- --------------------------------------------------------------------------------
10-YEAR #14 OF 24
FUNDS N/A N/A
- --------------------------------------------------------------------------------
</TABLE>
*Lipper Analytical Services, Inc. returns and rankings are based upon
changes in net asset value with all dividends reinvested and do not include the
effect of sales charges and, if they had, results may have been less favorable.
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
DURING THE PERIOD, KEMPER INTERNATIONAL FUND PAID THE FOLLOWING DIVIDENDS:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME DIVIDEND $0.115 $0.0141 $0.0141
- --------------------------------------------------------------------------------
LONG-TERM CAPITAL
GAIN $0.05 $0.05 $0.05
- --------------------------------------------------------------------------------
</TABLE>
TERMS TO KNOW
INDEX An unmanaged group of securities that is considered representative of the
stock or bond markets. An index does not take into account any fees or expenses
related to the individual securities that it tracks. However, for performance
comparisons, the index is adjusted to reflect reinvestment of dividends of the
securities in the index.
MARKET CAPITALIZATION Capitalization is a measure of the size of a publicly
traded company, as determined by multiplying the current price by the number of
shares outstanding. The market capitalization of a company has bearing on its
perceived earnings potential and risk. Small cap companies (less than $1
billion) may present the potential for greater growth than larger, more
established companies. On the other hand, the stock of small cap companies may
be expected to be more volatile and therefore a greater risk to capital.
TOTAL RETURN A fund's total return measures both the net investment income
generated by, and the effect of, any realized and unrealized appreciation or
depreciation of the underlying investments in its portfolio for the period.
Total return assumes the reinvestment of all dividends and it represents the
aggregate percentage or dollar value change over the period.
VOLATILITY The characteristic of an investment that causes it to rise or fall
sharply in price in a relatively short time period.
<PAGE> 3
GENERAL ECONOMIC OVERVIEW
[TIMBERS PHOTO]
STEPHEN B. TIMBERS IS PRESIDENT, CHIEF EXECUTIVE AND CHIEF INVESTMENT OFFICER
OF ZURICH KEMPER INVESTMENTS, INC. (ZKI). ZKI AND ITS AFFILIATES MANAGE
APPROXIMATELY $79 BILLION IN ASSETS, INCLUDING $45 BILLION IN RETAIL MUTUAL
FUNDS. TIMBERS IS A GRADUATE OF YALE UNIVERSITY AND HOLDS AN M.B.A. FROM
HARVARD UNIVERSITY.
DEAR SHAREHOLDER,
The first five months of 1996 have provided a few surprises. As the year began,
most of us expected sluggish economic and corporate growth -- which the Federal
Reserve Board would address by reducing short-term interest rates. Yet, what we
experienced was stronger-than-anticipated economic growth, better corporate
earnings and rising interest rates. Although such surprises unsettled the bond
market, the stock market has followed a spectacular 1995 with strength so far
this year.
Where is the economy headed now? Its direction is even less predictable as we
draw nearer to the November elections. Half of the country's leading economists
are forecasting 3 percent growth while an equal number are looking for no better
than 1 percent growth. At Kemper Funds, we suspect that the economy is growing
at a subpar rate of 2 percent. Although commodity prices may suggest otherwise,
we think inflation is holding at less than 3 percent. We see no reason to expect
the Fed to reduce rates to stimulate growth but neither is it likely to raise
rates significantly to control growth. In an environment of stable or gently
rising rates, we would expect corporate earnings to grow at a rate of about 7 to
8 percent -- that's somewhat higher than we believed likely at the start of the
year.
Our forecast calls for a generally comfortable environment for investors. But
both the economy and the general direction of the markets are due for a
reversal. In June, the U.S. economy entered its 63rd month of consecutive
growth. This is the longest expansion without a single quarter of negative
output growth since George Washington was president. Today's bull market started
in October 1990, which makes it one of the longest running bull markets in
history. By virtue of its length alone, the stock market is vulnerable to a
correction.
As expected, volatility has returned to the market this year. For example: The
stock market's performance on March 8, the date that a surprisingly strong
employment report was released, betrayed some level of investor skittishness.
But while the Standard & Poor's lost 3.1 percent that day, it quickly regained
the ground and moved higher.
- ----------------------------------------------------------------------------
CONSUMERS AND JOB SECURITY
- ----------------------------------------------------------------------------
The restructuring of corporate America, which is generally credited for its
improved profitability, has been an important influence on the consumer.
Economic growth is heavily dependent upon consumer spending which, in turn, is
a function of inflation, pay raises and fear of job loss. While the first two
have not been a recent concern, fear of losing one's job has dampened consumer
confidence.
Such anxiety in the workplace was the subject of a recent study by the
Council of Economic Advisors. According to that report, more than two-thirds of
the new jobs created in the United States in 1994 and 1995 paid better than the
average job. The report found that the rate at which jobs were eliminated has
risen slightly despite strong economic growth of recent years - however, it
reported that the length of time most workers spend unemployed has declined.
The graph below tracks Bureau of Labor Statistics data that show the recent
relationship between number of jobs created versus the number of jobs lost.
[LINE GRAPH]
<TABLE>
<CAPTION>
Jobs Created Jobs Lost
<S> <C> <C>
12/31/91 (300,000) 40,000
12/31/92 120,000 (30,000)
12/31/93 300,000 70,000
12/31/94 180,000 70,000
12/31/95 (80,000) (40,000)
3/31/96 490,000 (10,000)
</TABLE>
SOURCE: BUREAU OF LABOR STATISTICS
3
<PAGE> 4
GENERAL 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
(4/30/96) 6 months ago 1 year ago 2 years ago
<S> <C> <C> <C> <C>
10-year Treasury rate(1) 6.51 5.93 6.63 7.18
Prime rate(2) 8.25 8.75 9.00 6.99
Inflation rate(3) 2.90 2.60 3.12 2.29
The U.S. dollar(4) 8.94 -1.57 -10.02 2.34
Capital goods orders(5) 7.94 10.38 17.84 19.99
Industrial production(6) 2.56 1.71 3.31 6.22
Employment growth(7) 1.47 -1.55 2.30 2.93
</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%. 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 corporate profits and equity performance.
(7) An influence on family income and retail sales.
SOURCE: ECONOMICS DEPARTMENT, ZURICH KEMPER INVESTMENTS, INC.
Such ebb and flow is to be expected in investing, especially at this point
in the cycle. Attempting to "prepare" for a correction is futile, we
believe. Those whose caution caused them to excuse themselves from the market
early this year, for example, would have forgone its significant gain year to
date.
Several opportunities exist today for the careful investor. First, having
settled down some from a raucous 1995, the technology sector continues to enjoy
the product and market demand that make it the dominant sector of the 1990s.
Second, equity investors willing to look overseas may find opportunities in
countries whose economies today are at a point where the U.S. economy was in
1995. Our forecast assumes that strength in foreign markets could boost those
countries' currencies, which would weaken the value of the dollar.
We expect the fixed-income markets to continue to be sensitive to interest
rate and inflation news. However, for as long as economic growth is positive and
earnings are growing, we believe the high-yield market is one market segment
that has significant potential.
Finally, we look for political activity to have less and less bearing on the
markets' performance. Although they may continue to debate tax reform,
federal budget deficit reduction and health care reform, the incumbent
legislators are running out of time to take action before the November
elections. If there is any suspense by November, it is likely to be in whether
the Republicans can retain control of Congress. Their success would make a
balanced budget and tax reform likely agenda topics for 1997.
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
management. Thank you for your continued support. We appreciate the opportunity
to serve your investment needs.
Sincerely,
/s/ Stephen B. Timbers
STEPHEN B. TIMBERS
PRESIDENT, CHIEF INVESTMENT AND EXECUTIVE OFFICER
ZURICH KEMPER INVESTMENTS, INC.
June 5, 1996
4
<PAGE> 5
PERFORMANCE UPDATE
[FERRO PHOTO]
DENNIS FERRO JOINED ZURICH KEMPER INVESTMENTS, INC. (ZKI) IN 1994 AND IS AN
EXECUTIVE VICE PRESIDENT OF ZKI AND VICE PRESIDENT AND PORTFOLIO MANAGER OF
KEMPER INTERNATIONAL FUND. FERRO 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.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED
ON MARKET AND OTHER CONDITIONS.
THE LAST SIX MONTHS SAW A STRENGTHENING OF MULTIPLE OVERSEAS MARKETS,
ENCOURAGING KEMPER INTERNATIONAL FUND TO BROADEN THE DIVERSIFICATION OF THE
PORTFOLIO.
Q. DENNIS, INTERNATIONAL MARKETS SEEMED TO HAVE PICKED UP SOME STEAM
IN THE LAST SIX MONTHS. WHAT'S RESPONSIBLE FOR THEIR IMPROVED PERFORMANCE?
A. There is a perception that growth on a global basis is in place.
In some cases -- continental Europe, for example -- the growth is slow but it
continues to be positive. Governmental policies in general are predisposed
toward accommodating growth and, in Japan, growth has been supported by strong
fiscal and monetary medicine.
Q. FOR THE LAST YEAR OR MORE, MARKET EXPERTS HAVE BEEN EXPECTING
INTERNATIONAL MARKETS TO CATCH UP WITH AND ULTIMATELY OUTPACE THE U.S. EQUITY
MARKET. IS THIS WHAT WE ARE BEGINNING TO SEE?
A. I suppose everyone believes that a tradeoff is inevitable and,
when you consider the length of the U.S. bull market, it makes sense that its
upward momentum loses some of its steam at some point. For the six-month period
from November 1, 1995, through April 30, 1996, international markets measured
by the EAFE Index* advanced 13.38 percent. That's just shy of the 13.76 percent
return of the Standard & Poor's 500 Stock Index** over the same time period.
April was the first month that EAFE outperformed the S&P 500 (EAFE gained 2.93%
while the S&P 500 gained 1.47%) but, of course, we can't read too much into the
performance of one month. One robin doesn't make a spring.
*THE EAFE INDEX (MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA, FAR
EAST INDEX) IS AN UNMANAGED INDEX THAT IS A GENERALLY ACCEPTED BENCHMARK FOR
MAJOR OVERSEAS MARKETS.
**THE STANDARD & POOR'S 500 STOCK INDEX IS AN UNMANAGED INDEX THAT IS GENERALLY
CONSIDERED REPRESENTATIVE OF THE U.S. STOCK MARKET.
Q. FOR THE SIX MONTH PERIOD ENDED APRIL 30, 1996, KEMPER
INTERNATIONAL FUND BETTERED EAFE'S PERFORMANCE BY ALMOST A FULL PERCENTAGE
POINT, WITH CLASS A SHARES ADVANCING 14.31 PERCENT. FOR THE ONE-YEAR PERIOD
ENDED APRIL 30, 1996, CLASS A SHARES OF THE FUND RANKED #28 OUT OF 281 FUNDS IN
THE INTERNATIONAL FUNDS CATEGORY TRACKED BY LIPPER ANALYTICAL SERVICES, INC.
(FOR THE RANKINGS OVER OTHER TIME PERIODS, PLEASE SEE PAGE 2.) HOW WAS THE FUND
POSITIONED TO BETTER PARTICIPATE IN THE ADVANCE OF INTERNATIONAL MARKETS?
A. Our performance over these last six months was really a function
of broader diversification. Recently, we had been biased toward European
markets and away from Japan, whose economic recovery failed to materialize in
1995. While our specific investments in Europe continued to perform well for
us, we began late in 1995 to gradually
5
<PAGE> 6
PERFORMANCE UPDATE
heighten our exposure to Japan as well as broaden our exposure to other markets.
We have seen a lot of rotation in markets in the last several months --
Southeast Asia was strong for the first several weeks of 1996, for example, and
then went flat. At that point, Japan moved higher and then it turned quiet, as
well. Our earlier decision to more broadly diversify our holdings in multiple
markets provided us with the opportunity to always have some portion of our
equities moving forward.
That's a strategy that can work when markets are mostly positive, as
they have been lately. Only Finland, which we had eliminated almost all
of our holdings in, and South Africa, which we had no exposure to, lost ground
in the last six months, in U.S. dollar terms.
Q. WHICH MARKETS LED PERFORMANCE FOR THE PERIOD?
A. The Netherlands, Australia, Japan and France were the top performers.
With the exception of Japan, the fund had fairly good exposure to these
countries relative to the index.
Q. WOULD YOU ELABORATE ON HOW YOUR OPINION TOWARD JAPAN HAS CHANGED?
A. The last six months represented the fund's return in a meaningful
way to Japan. At its lowest point in the last six months, 15 percent of
the fund was invested in Japan. Encouraged by signs that an economic recovery
was finally underway, we've steadily increased our exposure to 31% by the end
of April. That's still an underweighted position compared to the composition of
the EAFE index, 41% of whose equities are Japan-based.
We like what we're seeing in Japan. Its monetary policy is accommodative
toward growth. The value of the yen against the dollar has declined steadily
since its peak about one year ago, and that also helps stimulate growth and
exports. Retail sales are up and, for the first time in five years, Japanese
property rental prices are on the rise. We have a fairly broad-based exposure in
Japan -- 30 stocks each represent 1% positions. For liquidity reasons, we tend
not to own small capitalization stocks. The portfolio had been oriented toward
cyclical stocks but, in anticipation of economic growth taking hold and
consumers beginning to spend again, we've recently increased our retail
exposure.
Q. THE FUND'S FAITH IN EUROPEAN MARKETS BOLSTERED PERFORMANCE LAST
YEAR. WHAT'S YOUR CURRENT THINKING ABOUT EUROPE?
A. Growth has slowed fairly dramatically and it appears to be
bottoming out without turning negative. Our reaction to the slowdown has been
to modestly reduce our overall exposure and focus on stocks with strong
noncyclical profit momentum. We were very overweighted in Europe in 1995 --
with European stocks representing as much as 63% of the portfolio in November.
At the end of April, about half of the portfolio was Europe-based, which is in
line with EAFE.
Our specific exposure, however, has a very different composition than
EAFE. In particular, we have about half the exposure to the United Kingdom (16%
of the EAFE is in UK equities versus 8% of Kemper International Fund). Economic
fundamentals just don't appear to support growth in the UK right now. The
prospect of political change is keeping interest rates high, inflation is
higher than what you'll find elsewhere and the economy is slowing. On the other
hand, we have an overweighted position in the Netherlands and Sweden.
One of our most recent successes in Europe has been in finding
opportunities among smaller and middle capitalization companies. These
companies, with capitalizations of about $500 million to $1 billion, offer
attractive valuations and growth prospects. Companies like Getronics in the
Netherlands, WM-data in Sweden and British Bio-Technology Group in the UK are a
few examples.
Taken together, the effect of broadening the base of the portfolio and
investing in smaller companies has increased the number of holdings in the
portfolio. While late last year the portfolio consisted of 86 stocks, we closed
April with 110. Such an expansion could place a burden on a more limited
research staff, but we're fortunate to have the capability to discover new
opportunities and to stay on top of their progress.
6
<PAGE> 7
PERFORMANCE UPDATE
Q. WHICH OTHER MARKETS HAS THE FUND DIVERSIFIED INTO?
A. As we've broadened our exposure, we've also added to our
Southeast Asian holdings. Hong Kong and Malaysia were two markets we found
attractive. Japan serves as an engine of growth for all of Asia, and its
improvement can have a ripple effect throughout the region. Elsewhere, Canada
is another market where we have found several individual companies with strong
growth and attractive valuations.
Q. WHICH INDUSTRY SECTORS ARE YOU FAVORING NOW?
A. We continue to like the pharmaceutical industry, especially those
companies with strong research and development and growing cash flow. In
addition, we like companies that help other companies become more efficient.
These include technology, telecommunication and work force management
providers.
Q. WHICH INDIVIDUAL STOCKS, IN PARTICULAR, WERE TOP PERFORMERS?
A. During the past six months, several of the mid-cap stocks
performed quite well. These include British Bio-Technology Group, Tabcorp
(Australia) and Aalberts Industries. Ciba-Geigy and Carrefour were among the
larger companies that made significant contributions.
Q. WHAT ABOUT THE VALUE OF THE DOLLAR? WHAT EFFECT HAS ITS
STRENGTHENING HAD ON THE FUND'S PERFORMANCE?
A. Our philosophy on currencies is purely defensive. As the U.S.
deficit has moderated and inflation has dropped to lower levels, we have used
currency hedges against a portion of our equity exposure. We use currency
forward contracts to help protect the portfolio against uncertainty in the
level of future foreign exchange rates, which provides the opportunity for us
to receive the positive returns resulting from stock movement while protecting
us from any adverse currency moves. Of course, there is no guarantee that these
strategies will be successful.
Q. INTERNATIONAL MARKETS ARE KNOWN FOR THEIR UNPREDICTABLE WAYS, YET
IT SOUNDS AS THOUGH THEY HAVE BEEN BEHAVING RECENTLY. HAVE THERE BEEN ANY
SURPRISES?
A. The strength in Latin American markets -- Mexico and Brazil, in
particular -- has been a surprise. The ongoing fiscal challenges facing these
countries contribute a great deal of volatility to these markets. Evidently,
investors are looking out a year or two and reacting to what could be an
improving situation. We continue to tread cautiously around these markets.
Q. WHAT ARE YOU FORECASTING FOR THE NEXT SEVERAL MONTHS?
A. A relatively positive environment that supports economic growth
and corporate earnings, which should lead to improved equity markets. We
believe Japan has the ability to surprise on the upside, and we look for a
resumption of growth in Europe in 1997.
Q. AND WHAT ARE THE RISKS TO YOUR FORECAST? WHAT COULD STAND IN THE
WAY OF GROWTH NOT MATERIALIZING AS YOU EXPECT IT TO?
A. The primary risks to our positive scenario appear to be in three areas:
First, political risk. Several elections, including in Russia, contain the
potential for a negative surprise. The second would be trade tensions.
While the last few years have been characterized by steady growth in world
trade, the potential for trade disputes remains very real. Third, a reversal in
the trend toward lower inflation would result in tighter monetary policies and
higher bond rates. However, we believe that inflation will remain within a
satisfactory range, even if it does move modestly higher over time.
7
<PAGE> 8
COUNTRY SECTORS
WHEN ALL BUT ONE MAJOR INTERNATIONAL MARKET ADVANCED...
THE TOP-PERFORMING INTERNATIONAL MARKETS REPRESENTED IN THE EAFE INDEX FOR THE
SIX-MONTH PERIOD FROM NOVEMBER 1, 1995, TO APRIL 30, 1996, ADJUSTED FOR U.S.
DOLLARS.
[BAR GRAPH]
<TABLE>
<S> <C>
Malaysla 27.96%
Spain 24.61%
Japan 18.16%
Italy 17.35%
Australia 16.25%
Hong Kong 15.97%
Singapore 15.90%
Netherlands 14.90%
France 14.77%
Ireland 13.83%
Norway 11.82%
Sweden 9.88%
Belgium 9.24%
Switzerland 8.22%
UK 5.40%
Denmark 4.75%
Germany 4.56%
Austria 4.25%
New Zealand 2.18%
Finland -19.40%
</TABLE>
SOURCE: MORGAN STANLEY CAPITAL INTERNATIONAL. THIS INFORMATION IS HISTORICAL AND
DOES NOT REPRESENT FUTURE RETURNS OF THESE MARKETS.
KEMPER INTERNATIONAL FUND BACKED AWAY FROM ITS EUROPEAN BIAS AND BROADENED ITS
EXPOSURE
[BAR GRAPH]
<TABLE>
<CAPTION>
Kemper Kemper EAFE
International International Index
Fund on Fund on on
4/30/96 10/31/95 4/30/96
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Japan 31.1% 16.1% 41.1%
United Kingdom 8.1% 15.3% 16.2%
Germany 3.5% 4.6% 6.6%
France 6.1% 4.1% 6.5%
Switzerland 5.2% 8.4% 5.8%
Netherlands 10.7% 8.1% 4.0%
Hong Kong 4.8% 6.3% 3.3%
Australia 2.3% 3.8% 2.7%
Italy 1.4% 2.1% 2.4%
Malaysia 2.9% 1.7% 2.5%
</TABLE>
8
<PAGE> 9
LARGEST HOLDINGS
KEMPER INTERNATIONAL FUND'S
TOP 5 HOLDINGS FOCUS ON GROWTH
A COMPARISON OF THE FUND'S TOP FIVE HOLDINGS ON APRIL 30, 1996, WITH ITS TOP
FIVE HOLDINGS ON OCTOBER 31, 1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
HOLDINGS AT 4/30/96 AT 10/31/95
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
1. CIBA-GEIGY 2.7% ROCHE 4.5%
SWITZERLAND HOLDINGS
SWITZERLAND
- -----------------------------------------------------------------
2. ROCHE HOLDINGS 2.6% LM 3.6%
SWITZERLAND ERICSSON
SWEDEN
- -----------------------------------------------------------------
3. GLAXO WELLCOME 2.0% POLYGRAM 3.5%
UNITED KINGDOM NETHERLANDS
- -----------------------------------------------------------------
4. ASTRA 2.0% CARREFOUR 3.2%
SWEDEN FRANCE
- -----------------------------------------------------------------
5. VEBA 1.8% ASTRA 3.0%
GERMANY SWEDEN
- -----------------------------------------------------------------
</TABLE>
9
<PAGE> 10
PORTFOLIO INVESTMENTS
KEMPER INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS APRIL 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EUROPE
- ----------------------------------------------------------------------------------------------------------------
DENMARK--.6%
Copenhagen Airports
AIRPORT OPERATOR 27,000 $ 2,512
- ----------------------------------------------------------------------------------------------------------------
FRANCE--6.1%
Axa Group
INSURANCE COMPANY 85,000 5,055
Carrefour S.A.
FOOD RETAILER 7,000 5,460
Christian Dior S.A.
TEXTILES AND APPAREL MANUFACTURER 7,500 998
Elf Aquitaine
OIL AND GAS PRODUCER 66,000 4,899
Moet Hennessy Louis Vuitton
LUXURY GOODS PRODUCER 27,000 6,894
Technip S.A.
ENGINEERING COMPANY 50,000 4,490
-------------------------------------------------------------------------------
27,796
- ----------------------------------------------------------------------------------------------------------------
GERMANY--3.5%
Allianz A.G. Holding
INSURANCE COMPANY 1,400 2,401
Mannesmann A.G.
CAPITAL GOODS PRODUCER 11,000 3,751
SGL CARBON A.G.
CHEMICAL COMPANY 15,000 1,413
Veba, A.G.
ELECTRIC UTILITY 168,000 8,337
-------------------------------------------------------------------------------
15,902
- ----------------------------------------------------------------------------------------------------------------
IRELAND--3.8%
Bank of Ireland
BANKING 783,433 5,612
Greencore Group PLC
FOOD PRODUCER 862,496 4,110
Independant Newspapers PLC
PUBLISHER 600,000 4,982
Kerry Group PLC
FOOD PROCESSING 296,070 2,734
-------------------------------------------------------------------------------
17,438
- ----------------------------------------------------------------------------------------------------------------
ITALY--1.4%
(a) Bulgari SpA
LUXURY GOODS PRODUCER 155,000 1,932
Telecom Italia Mobile
MOBILE TELECOMMUNICATIONS PROVIDER 1,980,000 4,335
-------------------------------------------------------------------------------
6,267
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
PORTFOLIO INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NETHERLANDS--10.7%
Aalberts Industries N.V.
CAPITAL GOODS AND COMPONENTS 28,373 $ 2,274
Aegon N.V.
INSURANCE COMPANY 70,000 3,329
DSM N.V.
CHEMICAL COMPANY 47,500 4,844
Getronics N.V.
SYSTEMS INTEGRATION SERVICES 30,538 2,118
GTI Holding
ENGINEERING SERVICES 14,100 1,389
(a)Gucci Group N.V.
LUXURY GOODS PRODUCER 41,250 2,231
Heineken N.V.
BREWERY 21,000 4,389
IHC Caland N.V.
MARINE TECHNOLOGY HOLDING COMPANY 63,000 2,471
Internationale Nederlanden Groep
BANKING 93,000 7,170
Koninklijke Ahold N.V.
RETAILER 70,500 3,472
PolyGram N.V.
MUSIC RECORDING COMPANY 51,420 3,056
Randstad Holding N.V.
BUSINESS SERVICES 55,500 3,551
VNU BV
PUBLISHER 195,700 3,285
Wolters Kluwer
PUBLISHER 45,000 4,912
--------------------------------------------------------------------------
48,491
- -----------------------------------------------------------------------------------------------------------
NORWAY--.3%
Schibsted A/S
PUBLISHER 88,460 1,290
- -----------------------------------------------------------------------------------------------------------
SPAIN--3.0%
Banco Bilbao Vizcaya
BANKING 114,380 4,342
Empresa Nacional de Electricidad S.A.
ELECTRIC UTILITY 61,000 3,827
Iberdrola, S.A.
ELECTRIC UTILITY 300,000 2,932
Pryca Cuntros
RETAILER 110,000 2,535
--------------------------------------------------------------------------
13,636
- -----------------------------------------------------------------------------------------------------------
SWEDEN--4.0%
Astra AB
PHARMACEUTICAL COMPANY 200,000 8,871
LM Ericsson Telephone Co. "B"
TELECOMMUNICATIONS EQUIPMENT MANUFACTURER 200,000 4,046
Getinge Industrier AB
MEDICAL SUPPLY COMPANY 27,600 1,449
Hoganas AB
ENGINEERING COMPANY 68,000 2,251
(a)WM-data AB
COMPUTER CONSULTING COMPANY 31,300 1,570
--------------------------------------------------------------------------
18,187
- -----------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SWITZERLAND--5.2%
Ciba-Geigy Limited
PHARMACEUTICAL COMPANY 10,500 $ 12,156
Roche Holdings AG
PHARMACEUTICAL COMPANY 1,487 11,666
----------------------------------------------------------------------------
23,822
- -------------------------------------------------------------------------------------------------------------
UNITED KINGDOM--8.1%
BBA Group PLC
AUTOMOTIVE PRODUCTS MANUFACTURER AND
DISTRIBUTOR 720,000 3,755
(a)British Bio-Technology Group
PHARMACEUTICAL COMPANY 90,000 3,950
Burton Group PLC
RETAILER 3,200,000 7,515
Dixons Group PLC
ELECTRONICS RETAILER 612,328 4,530
Glaxo Wellcome
PHARMACEUTICAL COMPANY 750,000 9,071
(a)Millenium & Co.
HOTEL OPERATOR 126,000 607
Reed International PLC
PUBLISHER 440,000 7,547
----------------------------------------------------------------------------
36,975
----------------------------------------------------------------------------
TOTAL EUROPEAN COUNTRIES--46.7% 212,316
- -------------------------------------------------------------------------------------------------------------
PACIFIC REGION
- -------------------------------------------------------------------------------------------------------------
HONG KONG--4.8%
CITIC Pacific Ltd.
CONGLOMERATE 800,000 3,144
Cheung Kong Holding Ltd.
REAL ESTATE 525,000 3,750
China Light & Power Co. Ltd.
ELECTRIC COMPANY 550,000 2,595
Dao Heng Bank Ltd.
BANKING 550,000 2,105
Guangdong Investment Ltd.
CONGLOMERATE 4,700,000 2,901
HSBC Holdings PLC
BANKING 249,849 3,731
Swire Pacific Ltd.
CONGLOMERATE 450,000 3,839
----------------------------------------------------------------------------
22,065
- -------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
JAPAN--31.1%
(a)Bank of Tokyo - Mitsubishi Ltd.
BANKING 236,250 $ 5,458
Bridgestone Corp.
RUBBER RELATED PRODUCTS MANUFACTURER 270,000 5,000
(a)Daicel Chemical Industries, Ltd.
CHEMICAL COMPANY 450,000 2,998
Daifuku Co., Ltd.
DIVERSIFIED MACHINERY MANUFACTURER 210,000 3,308
Ishikawajima-Harima Heavy Industries
HEAVY MACHINERY MANUFACTURER 930,000 4,617
Kyocera Corp.
ELECTRONICS MANUFACTURER 90,000 6,770
Mabuchi Motor Co., Ltd.
ENGINE MANUFACTURER 85,000 5,226
Matsushita Electric Industrial Co., Ltd.
ELECTRONICS MANUFACTURER 420,000 7,417
Mitsubishi Heavy Industries
INDUSTRIAL EQUIPMENT MANUFACTURER 500,000 4,458
Miura Co., Ltd.
BOILER MAKER 120,000 2,234
Murata Manufacturing
ELECTRONIC COMPONENTS MANUFACTURER 120,000 4,651
NEC Corporation
ELECTRONICS MANUFACTURER 540,000 6,856
NKK Corp.
STEEL MANUFACTURER 1,000,000 3,131
New Japan Securities Co., Ltd.
SECURITIES BROKER 450,000 3,114
Nippon Express
TRANSPORTATION COMPANY 550,000 5,723
Nomura Securities Co., Ltd.
BROKERAGE COMPANY 190,000 4,135
Olympus Optical Co., Ltd.
CAMERA AND OPTICAL EQUIPMENT MANUFACTURER 425,000 4,585
Seven Eleven Japan Co., Ltd.
CONVENIENCE RETAILER 28,600 2,023
Shimizu Corp.
CONSTRUCTION COMPANY 380,000 4,353
Sony Music Entertainment
ENTERTAINMENT SOFTWARE COMPANY 83,400 4,514
Sumitomo Bank Ltd.
BANKING 215,000 4,597
Sumitomo Corp.
GENERAL TRADING COMPANY 400,000 4,773
Sumitomo Metal Industries
STEEL MANUFACTURER 1,540,000 4,940
Sumitomo Trust & Banking
BANKING 480,000 7,011
Taisei Corp.
CONSTRUCTION COMPANY 740,000 5,722
Teijin Ltd.
TEXTILE MANUFACTURER 750,000 4,117
Tokyo Style
WOMEN'S APPAREL MANUFACTURER 275,000 4,883
Tokyu Department Store
RETAILER 765,000 5,404
Toray Industries
TEXTILE MANUFACTURER 850,000 5,777
Tsubakimoto Chain Co.
CHAIN AND CONVEYOR MANUFACTURER 500,000 3,527
-------------------------------------------------------------------------------
141,322
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MALAYSIA--2.9%
DCB Holdings Bhd
BANKING 1,150,000 $ 4,196
Hong Leong Industries Berhad
CONGLOMERATE 450,000 2,436
Hume Industries Bhd
CONSTRUCTION MATERIAL MANUFACTURER 450,000 2,562
KFC Holdings Bhd
RESTAURANT 187,000 1,125
Renong Berhad
CONGLOMERATE 1,750,000 3,046
---------------------------------------------------------------------------
13,365
- ------------------------------------------------------------------------------------------------------------
SINGAPORE--1.5%
Development Bank of Singapore
BANKING 245,000 3,102
Fraser & Neave Ltd.
BEER AND SOFT DRINK MANUFACTURER 182,000 2,019
Jurong Shipyard Ltd.
SHIPYARD COMPANY 281,000 1,609
---------------------------------------------------------------------------
6,730
- ------------------------------------------------------------------------------------------------------------
THAILAND--1.4%
Advanced Info Service Ltd.
TELECOMMUNICATION SERVICES 140,000 2,373
Shinawatra Computer Co.
COMPUTER EQUIPMENT DISTRIBUTOR 90,000 2,153
Siam Cement Co. Ltd.
BUILDING MATERIALS PRODUCER 17,000 875
Siam City Bank
BANKING 625,000 749
---------------------------------------------------------------------------
6,150
---------------------------------------------------------------------------
TOTAL PACIFIC REGION--41.7% 189,632
- ------------------------------------------------------------------------------------------------------------
COMMONWEALTH COUNTRIES
- ------------------------------------------------------------------------------------------------------------
AUSTRALIA--2.3%
Mayne Nickless Ltd.
TRANSPORT, SECURITY AND HEALTH CARE COMPANY 913,000 5,478
Tabcorp Holdings Ltd.
ENTERTAINMENT AND GAMING 1,193,700 4,946
---------------------------------------------------------------------------
10,424
- ------------------------------------------------------------------------------------------------------------
CANADA--5.1%
(a)Architel
COMPUTER SOFTWARE COMPANY 69,600 634
CAE Inc.
FLIGHT SIMULATOR PRODUCER 514,300 4,473
Canadian National Railway Company
RAILWAY COMPANY 233,700 4,440
Petro-Canada
OIL AND GAS COMPANY 645,300 4,517
(a)Philip Environmental
WASTE COLLECTION AND RECYCLING COMPANY 542,300 4,406
Shaw Communications
CABLE TELEVISION COMPANY 583,800 4,285
(a)Upper Canadian Brewing
BREWERY 114,500 605
---------------------------------------------------------------------------
23,360
- ------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 15
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NEW ZEALAND--1.0%
Lion Nathan Ltd.
BEER AND SOFT DRINK MANUFACTURER 1,796,800 $ 4,479
-------------------------------------------------------------------------------
TOTAL COMMONWEALTH COUNTRIES--8.4% 38,263
-------------------------------------------------------------------------------
TOTAL COMMON STOCKS--96.8%
(Cost: $370,577) 440,211
-------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET
INSTRUMENTS--3.8%
Yield--5.42% to 5.48%
Due--May 1996
(Cost: $17,554) $17,600 17,548
-------------------------------------------------------------------------------
TOTAL INVESTMENTS--100.6%
(Cost: $388,131) 457,759
-------------------------------------------------------------------------------
LIABILITIES, LESS CASH AND OTHER
ASSETS--(.6)% (2,863)
-------------------------------------------------------------------------------
NET ASSETS--100% $454,896
-------------------------------------------------------------------------------
At April 30, 1996, the Fund's portfolio of investments had the following
industry diversification (dollars in thousands):
VALUE %
-------------------------------------------------------------------------------
<S> <C> <C>
Finance $ 88,774 19.6
-------------------------------------------------------------------------------
Consumer Cyclicals 58,192 12.8
-------------------------------------------------------------------------------
Capital Goods 50,520 11.1
-------------------------------------------------------------------------------
Basic Industries 48,998 10.8
-------------------------------------------------------------------------------
Technology 48,399 10.6
-------------------------------------------------------------------------------
Health Care 47,163 10.4
-------------------------------------------------------------------------------
Consumer Staples 44,285 9.7
-------------------------------------------------------------------------------
Utilities 22,026 4.8
-------------------------------------------------------------------------------
Transportation 18,153 4.0
-------------------------------------------------------------------------------
Energy 9,416 2.1
-------------------------------------------------------------------------------
Consumer Durables 4,285 .9
-------------------------------------------------------------------------------
TOTAL COMMON STOCKS 440,211 96.8
-------------------------------------------------------------------------------
OTHER NET ASSETS 14,685 3.2
-------------------------------------------------------------------------------
NET ASSETS $454,896 100.0
-------------------------------------------------------------------------------
</TABLE>
- ------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- ------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $388,131,000 for federal income tax
purposes at April 30, 1996, the gross unrealized appreciation was
$72,583,000, the gross unrealized depreciation was $2,955,000 and the net
unrealized appreciation on investments was $69,628,000.
See accompanying Notes to Financial Statements.
15
<PAGE> 16
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------
Investments, at value
(Cost: $388,131) $457,759
- -------------------------------------------------------------------------------------------------------
Cash 2,171
- -------------------------------------------------------------------------------------------------------
Receivable for:
Fund shares sold 289
- -------------------------------------------------------------------------------------------------------
Investments sold 5,597
- -------------------------------------------------------------------------------------------------------
Dividends and interest 1,769
- -------------------------------------------------------------------------------------------------------
TOTAL ASSETS 467,585
- -------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- -------------------------------------------------------------------------------------------------------
Payable for:
Fund shares redeemed 154
- -------------------------------------------------------------------------------------------------------
Investments purchased 11,853
- -------------------------------------------------------------------------------------------------------
Management fee 269
- -------------------------------------------------------------------------------------------------------
Distribution services fee 48
- -------------------------------------------------------------------------------------------------------
Administrative services fee 92
- -------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 256
- -------------------------------------------------------------------------------------------------------
Other 17
- -------------------------------------------------------------------------------------------------------
Total liabilities 12,689
- -------------------------------------------------------------------------------------------------------
NET ASSETS $454,896
- -------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -------------------------------------------------------------------------------------------------------
Paid-in capital $357,864
- -------------------------------------------------------------------------------------------------------
Undistributed net realized gain on investments and foreign currency transactions 27,137
- -------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and assets and liabilities in foreign currencies 69,323
- -------------------------------------------------------------------------------------------------------
Undistributed net investment income 572
- -------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $454,896
- -------------------------------------------------------------------------------------------------------
THE PRICING OF SHARES
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($354,881 / 29,769 shares outstanding) $11.92
- -------------------------------------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $12.65
- -------------------------------------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($78,499 / 6,638 shares outstanding) $11.83
- -------------------------------------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($4,305 / 364 shares outstanding) $11.83
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES
Net asset value and redemption price per share
($17,211 / 1,443 shares outstanding) $11.93
- -------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
16
<PAGE> 17
STATEMENT OF OPERATIONS
Six months ended April 30, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME
- -------------------------------------------------------------------------------------------------------
Dividends $ 3,418
- -------------------------------------------------------------------------------------------------------
Interest 559
- -------------------------------------------------------------------------------------------------------
3,977
- -------------------------------------------------------------------------------------------------------
Less foreign taxes withheld 360
- -------------------------------------------------------------------------------------------------------
Total investment income 3,617
- -------------------------------------------------------------------------------------------------------
Expenses:
Management fee 1,466
- -------------------------------------------------------------------------------------------------------
Administrative services fee 446
- -------------------------------------------------------------------------------------------------------
Distribution services fee 222
- -------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 1,274
- -------------------------------------------------------------------------------------------------------
Professional fees 36
- -------------------------------------------------------------------------------------------------------
Reports to shareholders 62
- -------------------------------------------------------------------------------------------------------
Trustees' fees and other 39
- -------------------------------------------------------------------------------------------------------
Total expenses 3,545
- -------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 72
- -------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
- -------------------------------------------------------------------------------------------------------
Net realized gain on sales of investments and foreign currency transactions 29,876
- -------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation on investments and assets and liabilities in foreign
currencies 23,466
- -------------------------------------------------------------------------------------------------------
Net gain on investments 53,342
- -------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $53,414
- -------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
1996 1995
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- ----------------------------------------------------------------------------------------------------------
Net investment income $ 72 2,166
- ----------------------------------------------------------------------------------------------------------
Net realized gain 29,876 1,123
- ----------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation 23,466 (655)
- ----------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 53,414 2,634
- ----------------------------------------------------------------------------------------------------------
Net equalization credits (charges) 543 (332)
- ----------------------------------------------------------------------------------------------------------
Distribution from net investment income (3,561) --
- ----------------------------------------------------------------------------------------------------------
Distribution from net realized gain (1,726) (24,455)
- ----------------------------------------------------------------------------------------------------------
Total dividends to shareholders (5,287) (24,455)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital share transactions 41,518 (31,421)
- ----------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 90,188 (53,574)
- ----------------------------------------------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------------------------------------------
Beginning of period 364,708 418,282
- ----------------------------------------------------------------------------------------------------------
END OF PERIOD (including undistributed
net investment income of $572 and $1,320, respectively) $454,896 364,708
- ----------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE FUND Kemper International Fund is an open-end management
investment company organized as a business trust
under the laws of Massachusetts. The Fund currently
offers four classes of shares. Class A shares are
sold to investors subject to an initial sales
charge. Class B shares are sold without an initial
sales charge but are subject to higher ongoing
expenses than Class A shares and a contingent
deferred sales charge payable upon certain
redemptions. Class B shares automatically convert
to Class A shares six years after issuance. Class C
shares are sold without an initial sales charge but
are subject to higher ongoing expenses than Class A
shares and, for shares sold on or after April 1,
1996, a contingent deferred sales charge payable
upon certain redemptions within one year of
purchase. Class C shares do not convert into
another class. Class I shares, which are sold to a
limited group of investors, are not subject to
initial or contingent deferred sales charges and
have lower ongoing expenses than other classes.
Differences in class expenses will result in the
payment of different per share income dividends by
class. 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. Portfolio securities that are 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
18
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
the bid and offered 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 discount amortization on money market
instruments. Realized gains and losses from
investment transactions are reported on an
identified cost basis.
FUND SHARE VALUATION. Fund shares are sold and
redeemed on a continuous basis at net asset value
(plus an initial sales charge on most sales of
Class A shares). Proceeds payable on redemption of
Class B and Class C shares will be reduced by the
amount of any applicable contingent deferred sales
charge. On each day the New York Stock Exchange is
open for trading, the net asset value per share is
determined as of the 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. The Fund has complied with
the special provisions of the Internal Revenue Code
available to investment companies during the six
months ended April 30, 1996.
DIVIDENDS TO SHAREHOLDERS. The Fund declares and
pays dividends of net investment income and net
realized capital gains annually, which are recorded
on the ex-dividend date. Dividends are determined
in accordance with income tax principles which may
treat certain transactions differently from
generally accepted accounting principles.
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 Zurich Kemper Investments, Inc.
(ZKI) (formerly known as Kemper Financial Services,
Inc.) and pays a management fee at an annual rate
of .75% of the first $250 million of average daily
net assets declining to
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
.62% of average daily net assets in excess of $12.5
billion. The Fund incurred a management fee of
$1,466,000 for the six months ended April 30, 1996.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
The Fund has an underwriting and distribution
services agreement with Kemper Distributors, Inc.
(KDI). Underwriting commissions paid in connection
with the distribution of Class A shares are as
follows:
<TABLE>
<CAPTION>
COMMISSIONS
ALLOWED BY KDI
COMMISSIONS ---------------------------------
RETAINED BY KDI TO ALL FIRMS TO AFFILIATES
--------------- ------------- -------------
<S> <C> <C> <C>
Six months ended
April 30, 1996 $50,000 358,000 16,000
</TABLE>
For services under the distribution services
agreement, the Fund pays KDI a fee of .75% of
average daily net assets of the Class B and Class C
shares. Pursuant to 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
commissions paid in connection with the sale of
Class B and Class C shares and the CDSC received in
connection with the redemption of such shares are
as follows:
<TABLE>
<CAPTION>
COMMISSIONS AND
DISTRIBUTION DISTRIBUTION FEES
FEES PAID BY KDI
AND CDSC ------------------------------
RECEIVED BY KDI TO ALL FIRMS TO AFFILIATES
---------------- ------------- -------------
<S> <C> <C> <C>
Six months ended
April 30, 1996 $277,000 422,000 10,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with KDI. For
providing information and administrative services
to Class A, Class B and Class C shareholders, the
Fund pays KDI a fee at an annual rate of up to .25%
of average daily net assets of each class. KDI in
turn has various agreements with financial services
firms that provide these services and pays these
firms based on assets of Fund accounts the firms
service. Administrative services fees (ASF) paid
are as follows:
<TABLE>
<CAPTION>
ASF PAID BY KDI
ASF PAID BY ------------------------------
THE FUND TO KDI TO ALL FIRMS TO AFFILIATES
---------------- ------------- -------------
<S> <C> <C> <C>
Six months ended
April 30, 1996 $466,000 455,000 11,000
</TABLE>
SHAREHOLDER SERVICES 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 $726,000
for the six months ended April 30, 1996.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of ZKI.
During the six months ended April 30, 1996, the
Fund made no payments to its officers and incurred
trustees' fees of $12,000 to independent trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the six months ended April 30, 1996, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $278,609
Proceeds from sales 247,561
20
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED APRIL YEAR ENDED
30, 1996 OCTOBER 31, 1995
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
----------------------------------------------------------------------------
Class A 5,364 $ 57,735 7,931 $ 80,769
----------------------------------------------------------------------------
Class B 3,352 36,832 3,584 37,196
----------------------------------------------------------------------------
Class C 191 2,096 258 2,721
----------------------------------------------------------------------------
Class I 603 6,618 1,261 12,905
----------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
----------------------------------------------------------------------------
Class A 429 4,323 2,270 21,800
----------------------------------------------------------------------------
Class B 26 265 184 1,759
----------------------------------------------------------------------------
Class C 1 14 7 71
----------------------------------------------------------------------------
Class I 23 240 -- --
----------------------------------------------------------------------------
SHARES REDEEMED
----------------------------------------------------------------------------
Class A (5,169) (54,756) (16,162) (163,479)
----------------------------------------------------------------------------
Class B (726) (7,932) (2,182) (22,527)
----------------------------------------------------------------------------
Class C (34) (365) (130) (1,375)
----------------------------------------------------------------------------
Class I (325) (3,552) (119) (1,261)
----------------------------------------------------------------------------
CONVERSION OF SHARES
----------------------------------------------------------------------------
Class A 56 650 113 1,125
----------------------------------------------------------------------------
Class B (57) (650) (114) (1,125)
----------------------------------------------------------------------------
NET INCREASE (DECREASE)
FROM CAPITAL SHARE
TRANSACTIONS $ 41,518 $ (31,421)
----------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
6 FORWARD FOREIGN
CURRENCY CONTRACTS In order to protect itself against a decline in the
value of particular foreign currencies against the
U.S. Dollar, the Fund has entered into forward
contracts to deliver foreign currency in exchange
for U.S. Dollars as described below. The Fund bears
the market risk that arises from changes in foreign
exchange rates, and accordingly, the net unrealized
loss on these contracts is reflected in the
accompanying financial statements. The Fund also
bears the credit risk if the counterparty fails to
perform under the contract. At April 30, 1996, the
Fund had the following forward foreign currency
contracts outstanding with settlement dates in May
and July 1996 (in thousands):
<TABLE>
<CAPTION>
CONTRACT UNREALIZED
FOREIGN CURRENCY AMOUNT IN GAIN (LOSS)
TO BE DELIVERED U.S. DOLLARS AT 4/30/96
---------------------------------------------------------------
<S> <C> <C>
6,080 British Pounds $ 9,217 $ 101
---------------------------------------------------------------
17,640 Dutch Guilders 10,569 231
---------------------------------------------------------------
35,700 French Francs 7,017 98
---------------------------------------------------------------
5,327,000 Japanese Yen 50,348 (834)
---------------------------------------------------------------
7,320 Swiss Francs 6,057 132
---------------------------------------------------------------
Net unrealized loss $(272)
---------------------------------------------------------------
</TABLE>
21
<PAGE> 22
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------------------------------
CLASS A
--------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.59 11.13 10.56 8.17 8.76
- ------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .01 .07 -- .03 .22
- ------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.49 .05 .86 2.54 (.67)
- ------------------------------------------------------------------------------------------------------------
Total from investment operations 1.50 .12 .86 2.57 (.45)
- ------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .12 -- -- .18 --
- ------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .05 .66 .29 -- .14
- ------------------------------------------------------------------------------------------------------------
Total dividends .17 .66 .29 .18 .14
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.92 10.59 11.13 10.56 8.17
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 14.31% 1.69 8.32 32.08 (5.17)
- ------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------------------------------
Expenses 1.65% 1.57 1.54 1.69 1.36
- ------------------------------------------------------------------------------------------------------------
Net investment income .35% .83 .02 .37 2.61
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
CLASS B
-----------------------------------------------------------------------
SIX MONTHS MAY 31,
ENDED YEAR ENDED 1994 TO
APRIL 30, OCTOBER 31, OCTOBER 31,
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.46 11.09 10.58
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.03) (.02) (.04)
- -----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 1.46 .05 .55
- -----------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.43 .03 .51
- -----------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income
.01 -- --
- -----------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .05 .66 --
- -----------------------------------------------------------------------------------------------------------------------
Total dividends .06 .66 --
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.83 10.46 11.09
- --------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 13.79% .84 4.82
- -----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------------------------------------
Expenses 2.51% 2.50 2.58
- -----------------------------------------------------------------------------------------------------------------------
Net investment loss (.51)% (.10) (.97)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE> 23
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------- ------------------------------
CLASS C CLASS I
---------------------------------------- ------------------------------
SIX MONTHS MAY 31, SIX MONTHS JULY 3,
ENDED YEAR ENDED 1994 TO ENDED 1995 TO
APRIL 30, OCTOBER 31, OCTOBER 31, APRIL 30, OCTOBER 31,
1996 1995 1994 1996 1995
- -------------------------------------------------------------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------- ------------------------------
Net asset value, beginning of period $10.46 11.09 10.58 10.61 10.09
- -------------------------------------------------------------------------------------- ------------------------------
Income from investment operations:
Net investment income (loss) (.03) (.02) (.04) .04 .04
- -------------------------------------------------------------------------------------- ------------------------------
Net realized and unrealized gain 1.46 .05 .55 1.48 .48
- -------------------------------------------------------------------------------------- ------------------------------
Total from investment operations 1.43 .03 .51 1.52 .52
- -------------------------------------------------------------------------------------- ------------------------------
Less dividends:
Distribution from net investment income .01 -- -- .15 --
- -------------------------------------------------------------------------------------- ------------------------------
Distribution from net realized gain .05 .66 -- .05 --
- -------------------------------------------------------------------------------------- ------------------------------
Total dividends .06 .66 -- .20 --
- -------------------------------------------------------------------------------------- ------------------------------
Net asset value, end of period $11.83 10.46 11.09 11.93 10.61
- -------------------------------------------------------------------------------------- ------------------------------
TOTAL RETURN (NOT ANNUALIZED) 13.79% .84 4.82 14.62 5.15
- -------------------------------------------------------------------------------------- ------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------- ------------------------------
Expenses 2.45% 2.50 2.52 1.04 .85
- -------------------------------------------------------------------------------------- ------------------------------
Net investment income (loss) (.45)% (.10) (.91) .96 1.32
- -------------------------------------------------------------------------------------- ------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets at end of period (in thousands) $454,896 364,708 418,282 289,898 165,890
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 129% 114 103 156 143
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Average commission rate paid per share on stock transactions for
the six months ended April 30, 1996 was $.0205. Foreign commissions usually are
lower than U.S. commissions when expressed as cents per share due to the lower
per share prices of many non-U.S. securities.
- --------------------------------------------------------------------------------
NOTES: Total return does not reflect the effect of any sales charges. Per share
data for 1995 was determined based on average shares outstanding.
23
<PAGE> 24
TRUSTEES AND OFFICERS
TRUSTEES OFFICERS
STEPHEN B. TIMBERS DENNIS H. FERRO
President and Trustee Vice President
DAVID W. BELIN JOHN E. NEAL
Trustee Vice President
LEWIS A. BURNHAM JOHN E. PETERS
Trustee Vice President
DONALD L. DUNAWAY STEVEN H. REYNOLDS
Trustee Vice President
ROBERT B. HOFFMAN PHILIP J. COLLORA
Trustee Vice President
and Secretary
DONALD R. JONES
Trustee JEROME L. DUFFY
Treasurer
DOMINIQUE P. MORAX
Trustee ELIZABETH C. WERTH
Assistant Secretary
SHIRLEY D. PETERSON
Trustee
WILLIAM P. SOMMERS
Trustee
- --------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICE AGENT KEMPER SERVICE COMPANY
P.O. Box 419557
Kansas City, MO 64141
1-800-621-1048
- --------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
127 West 10th Street
Kansas City, MO 64105
- --------------------------------------------------------------------------------
INVESTMENT MANAGER ZURICH KEMPER INVESTMENTS, INC.
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
120 South LaSalle Street Chicago, IL 60603
http://www.kemper.com
(RECYCLE LOGO)
Printed on recycled paper in the U.S.A.
This report is not to be distributed
unless preceded or accompanied by a
Kemper International Fund prospectus.
KIF - 3 (6/96) KEMPER LOGO
1016900
Printed in the U.S.A.
