<PAGE> 1
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED APRIL 30,1998
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
[LOGO]
Seeking total return, a combination of capital growth and income,
principally through an internationally diversified portfolio of equity
securities
KEMPER
INTERNATIONAL FUND
"... We were primarily invested in Europe
throughout the period, focusing on
financial services, pharmaceuticals and
the corporate service areas. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
8
INDUSTRY SECTORS
9
LARGEST HOLDINGS
10
PORTFOLIO OF
INVESTMENTS
15
FINANCIAL STATEMENTS
17
NOTES TO
FINANCIAL STATEMENTS
21
FINANCIAL HIGHLIGHTS
23
SHAREHOLDERS' MEETING
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER INTERNATIONAL FUND
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 1998
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 15.14%
CLSAS B 14.61%
CLASS C 14.60%
LIPPER INTERNATIONAL FUNDS CATEGORY AVERAGE* 16.25%
- --------------------------------------------------------------------------------
</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.
* 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.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
4/30/98 10/31/97
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER INTERNATIONAL FUND
CLASS A $13.87 $12.68
- --------------------------------------------------------------------------------
KEMPER INTERNATIONAL FUND
CLASS B $13.69 $12.50
- --------------------------------------------------------------------------------
KEMPER INTERNATIONAL FUND
CLASS C $13.70 $12.51
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
KEMPER INTERNATIONAL FUND
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 #217 of 466 funds #255 of 466 funds #256 of 466 funds
- --------------------------------------------------------------------------------
5-YEAR #29 of 128 funds N/A N/A
- --------------------------------------------------------------------------------
10-YEAR #14 of 35 funds N/A N/A
- --------------------------------------------------------------------------------
15-YEAR #6 of 11 funds N/A N/A
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
DURING THE PERIOD, KEMPER INTERNATIONAL FUND MADE THE FOLLOWING DISTRIBUTIONS
PER SHARE:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME DIVIDEND $0.0775 -- --
- --------------------------------------------------------------------------------
LONG-TERM
CAPITAL GAIN $0.5500 $0.5500 $0.5500
- --------------------------------------------------------------------------------
</TABLE>
Investment in foreign securities presents special risk considerations including
fluctuating currency exchange rates, government regulation and differences in
liquidity that may increase the volatility of your investment.
TERMS TO KNOW
YOUR FUNDS' STYLE
- --------------------------------------------------------------------------------
MORNINGSTAR EQUITY FUNDS STYLE BOX
- --------------------------------------------------------------------------------
(STYLE SIZE DIAGRAM)
Source: Morningstar, Inc., Chicago, IL (312) 696-6000. (Morningstar's Style Box
is based on a portfolio date as of April 30, 1998.) The Equity Style Box
placement is based on a fund's price-to-earnings and price-to-book ratio
relative to the S&P 500, as well as the size of the companies in which it
invests, or median market capitalization.
Please note that style boxes do not represent an exact assessment of risk and
do not represent future performance. Please consult the prospectus for a
description of investment policies.
EMERGING MARKETS A developing or emerging country in the initial stages of its
industrial cycle. Developing or "emerging" markets involve exposure to economic
structures and political systems that are generally less diverse, mature and
stable than in the United States.
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 the securities'
dividends.
MARKET CAPITALIZATION A measure of the size of a publicly traded company, as
determined by multiplying the current price per share 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.
<PAGE> 3
ECONOMIC OVERVIEW
[SILVIA PHOTO]
DR. JOHN E. SILVIA IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.
HIS PRIMARY RESPONSIBILITIES INCLUDE ANALYSIS, MODELING AND FORECASTING OF
ECONOMIC DEVELOPMENTS AND FEDERAL RESERVE ACTIVITY THAT AFFECT FINANCIAL
MARKETS, ESPECIALLY INTEREST RATE TRENDS. THIS EFFORT INCLUDES CLOSE
COLLABORATION WITH BOTH INCOME AND EQUITY MUTUAL FUND MANAGERS AND PENSION FUND
MANAGERS. HE IS ALSO A MEMBER OF THE INVESTMENT POLICY AND STRATEGY COMMITTEE
FOR KEMPER FUNDS.
SILVIA HOLDS BACHELOR OF ARTS AND PH.D. DEGREES IN ECONOMICS FROM NORTHEASTERN
UNIVERSITY IN BOSTON AND HAS A MASTER'S DEGREE IN ECONOMICS FROM BROWN
UNIVERSITY IN PROVIDENCE, R.I. PRIOR TO HIS CAREER AT SCUDDER KEMPER, HE WAS
WITH THE HARRIS BANK AND ALSO TAUGHT AT INDIANA UNIVERSITY.
SCUDDER KEMPER INVESTMENTS, INC. IS THE INVESTMENT MANAGER FOR KEMPER FUNDS. IT
IS ONE OF THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS
WORLDWIDE, MANAGING MORE THAN $200 BILLION IN ASSETS GLOBALLY FOR MUTUAL FUND
INVESTORS, RETIREMENT AND PENSION PLANS, INSTITUTIONAL AND CORPORATE CLIENTS,
INSURANCE COMPANIES AND PRIVATE, FAMILY AND INDIVIDUAL ACCOUNTS. IT IS ONE OF
THE 10 LARGEST MUTUAL FUND COMPLEXES IN THE UNITED STATES.
DEAR SHAREHOLDERS,
Stable economic growth, low interest rates and sustained lower inflation have
continued to produce a beneficial market environment for investors in the second
quarter of 1998. Despite heightened sensitivity to earnings estimates and
announcements, the market continued to support financial assets. We expect this
favorable climate to continue -- in spite of the sensitivity -- at least over
the shorter term.
As always, expectations have been at the heart of the actions and reactions
that move the markets. Expectations appear to be high, as demonstrated by a
record flow of new cash into mutual funds. As of April 30, 1998, a record $5
trillion in mutual fund assets surpassed total assets of the nation's banks,
according to the Investment Company Institute, a trade organization that
monitors the mutual fund industry, and the Federal Reserve Bank in Washington.
Unfortunately, high expectations often combine with high anxiety -- today's
investors are attuned to even the smallest hint of economic change. The result
is volatility. Many who believe that our long-running bull market is too good to
be true or that stock prices are too high are wondering when the market will
reverse.
While a reversal may not be on the immediate horizon, investors are wise to
watch for several signs that change is underway: rising prices, indicating
higher inflation; repercussions of the Asian economic crisis on American
business, which could appear in the form of reduced earnings; and a continued
widening of our trade deficit, a serious imbalance caused by heightened American
demand for foreign goods and services.
On April 27, expectations were tested by reports that the Federal Reserve
Board ("the Fed") was considering a hike in interest rates. The markets reacted
immediately to this news, driving stock prices downward. But at its monetary
policy meeting on May 19, the Fed chose to leave interest rates alone. In the
coming months, the Fed could raise rates if inflation accelerates or if growth
appears to be too rapid compared to the Fed's expectations.
Our positive outlook for the short term is based primarily on the current
resiliency of our marketplace. The United States appears to be firmly planted in
the middle of an economic cycle, with no evidence of detrimental pressures that
might be associated with the market's phenomenal growth. We are not seeing price
increases for goods and services or a downturn in the housing market, both of
which we might expect late in an economic cycle.
Equities have continued to reward investors. The U.S. stock market, as
measured by the Standard & Poor's 500, gained nearly 14 percent in the first
quarter of 1998 and returned more than 13 percent year-to-date through the end
of May. Bonds have also rewarded investors in terms of real return, which is
total return less the rate of inflation. The high yield and corporate debt
fixed-income markets also have performed well.
U.S. economic growth, as measured by the gross domestic product (GDP)
growth rate, was slightly above 4 percent for the first quarter. Our general
expectation for the year is that growth in all of 1998 will increase between 2.5
and 3 percent over last year. In other words, the economy will remain strong,
but will slow down as the year progresses.
Consumer spending and corporate fixed investment have fueled the economy's
solid growth. Spending on both capital goods and high technology has been
strong. Corporate profits have grown between 5 and 10 percent, which appears to
be acceptable in an environment of stable interest rates. U.S. employment growth
has ranged from 2 to 2.25 percent, continuing to exceed expectations. Consumer
confidence has continued to hit near all-time highs. The increase in output
prices, an indicator of inflation measured by the Consumer Price Index (CPI),
has remained at 1.5 to 2 percent.
Adding to the good news, all seems to be quiet on the domestic policy
front. At the end of February, the U.S. federal budget deficit essentially
vanished. Recent efforts to reduce the deficit, combined with higher federal
revenues due to the robust economy, have left us with an expected budget
surplus of $60 billion to $80 billion for fiscal 1998. To date, our Democratic
president and Republican Congress have not agreed on any significant
legislation regarding tax credits, spending cuts or health care that could
threaten the newfound federal budget surplus.
Can we expect a little more excitement from overseas? A full-scale global
recession from last year's Asian economic crisis seems unlikely at this point.
The crisis has yet
3
<PAGE> 4
ECONOMIC OVERVIEW
- --------------------------------------------------------------------------------
ECONOMIC GUIDEPOSTS
- --------------------------------------------------------------------------------
Economic activity is a key influence on investment performance and shareholder
decision-making. Periods of recession or boom, inflation or deflation, credit
expansion or credit crunch have a significant impact on mutual fund
performance.
The following are some significant economic guideposts and their
investment rationale that may help your investment decision-making. The 10-year
Treasury rate and the prime rate are prevailing interest rates. The other data
report year-to-year percentage changes.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (5/31/98) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1) 5.65 5.81 6.49 6.91
PRIME RATE(2) 8.5 8.5 8.5 8.25
INFLATION RATE(3)* 1.5 1.89 2.23 2.89
THE U.S. DOLLAR(4) 6.86 10.26 5.52 9.15
CAPITAL GOODS ORDERS(5)* 9.28 10.28 7.16 3.48
INDUSTRIAL PRODUCTION(5)* 3.85 5.76 4.28 3.79
EMPLOYMENT GROWTH(6) 2.61 2.8 2.5 2.13
</TABLE>
(1) Falling interest rates in recent years have been a big plus for financial
assets.
(2) The interest rate that commercial lenders charge their best borrowers.
(3) Inflation reduces an investor's real return. In the last five years,
inflation has been as high as 6 percent. The low, moderate inflation of the
last few years has meant high real returns.
(4) Changes in the exchange value of the dollar impact U.S. exporters and the
value of U.S. firms' foreign profits.
(5) These influence corporate profits and equity performance.
(6) An influence on family income and retail sales.
* Data as of April 30, 1998.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
to hurt most U.S. businesses and investors. Quite the contrary. While the mere
threat of repercussions from the Asian crisis added to the anxiety mentioned
earlier, it has also had the effect of keeping U.S. interest rates and prices in
check, making the U.S. economy all the more attractive to investors around the
world.
In the global economy, the U.S. dollar continues to appreciate in value
compared to other currencies. In fact, more capital is flowing into U.S. markets
as investors generally avoid Asia. Europe also has been benefiting from the
crisis. Canada, which is a commodity-producing exporter, has been somewhat
negatively affected as commodity prices have fallen. Political unrest in
Indonesia, nuclear tests in India and Pakistan and economic turmoil in Russia
have been keeping international investors on the edges of their seats.
Other major developments abroad include the final selection of countries to
participate in Europe's single currency next year. Many European countries are
adopting more restrictive fiscal policy and reducing inflation in anticipation
of the momentous European Economic and Monetary Union (EMU). But after the EMU
is established in 1999, tensions may indeed mount as countries work to adapt to
the new structure.
As we approach the turn of the century, one caveat remains: Don't
underestimate the potential of the Year 2000 computer code problem. It appears
that a significant number of federal government agencies will not meet the
criteria necessary to avoid the problem. Many businesses are revealing that
billions of dollars are being spent on the situation. Some experts say a global
recession is in store. Others adamantly disagree. In any event, we may indeed
see a reduction in capital spending toward the end of 1998 and the first half of
next year as companies focus on fixing existing computers rather than on
purchasing new equipment. We'll keep you posted!
Thank you for your continued support. We appreciate the opportunity to
serve your investment needs.
Sincerely,
/s/ John E. Silvia
JOHN E. SILVIA
June 10, 1998
4
<PAGE> 5
PERFORMANCE UPDATE
[FERRO PHOTO]
DENNIS FERRO JOINED THE ORGANIZATION IN 1994. HE IS MANAGING DIRECTOR OF
INTERNATIONAL EQUITIES 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.
DURING THE SIX MONTHS FROM OCTOBER 31, 1997 THROUGH APRIL 30, 1998, AN
EXPANDING ECONOMY AND CORPORATE GROWTH IN EUROPE PRESENTED ABUNDANT INVESTMENT
OPPORTUNITIES FOR KEMPER INTERNATIONAL FUND, DESPITE THE FALLING ASIAN MARKETS.
PORTFOLIO MANAGER DENNIS FERRO DISCUSSES SOME OF THE BEST PERFORMING AREAS FOR
GROWTH AND THE OPPORTUNITIES AHEAD FOR INTERNATIONAL INVESTMENTS.
Q HOW DID THE FUND PERFORM DURING THE SIX-MONTH PERIOD ENDING APRIL 30,
1998?
A Kemper International Fund returned 15.14 percent (Class A shares
unadjusted for any sales charge) for the six-month period ended April 30, 1998,
thanks to the remarkable growth in the European market. For the same period, the
EAFE Index returned 15.59 percent.
During the months of January and February, Kemper International Fund
underperformed the index because of its underweight position in Japan, which
bounced up briefly during those months. As that bounce dropped back down in
March and April, the fund gained back and outperformed the index for the
three-month period ending in April. The fund's six-month underperformance can be
partially attributed to some of the European pharmaceutical holdings where we
may have overstayed our welcome. We were also slightly underweighted in
telecommunications companies, which were strong performers.
Q CAN YOU DISCUSS THE GLOBAL ECONOMIC SITUATION OVER THE PAST SIX MONTHS?
WHAT WAS HAPPENING IN EACH OF THE KEY REGIONS: EUROPE, SOUTHEAST ASIA, JAPAN,
AND LATIN AMERICA?
A During this period we've had a two-tiered market environment on the global
economic stage. On one hand we've had the fast-growing Western economies, which
would include the United States and Canada and a good part of Western Europe.
These regions have been characterized by low interest rates, low inflation and a
strong U.S. dollar. The stronger U.S. dollar has actually benefited both sides
of the equation by helping European exporters ship goods outside of the European
marketplace and keeping inflation rates down in the United States.
The other tier of economic activity is in Asia, which has been
characterized by dramatically slowing growth, credit concerns and a general
reduction in corporate profitably. Southeast Asia faced a very difficult
period in late 1997, when there were serious concerns about creditworthiness as
sovereign debt ratings were downgraded. An IMF finance package had to be put in
place for Korea, which was the area of immediate concern. Japan has announced
several different programs to jump-start their economy; but none have been
taken well by either the economy or the equity markets. We did not see any
meaningful improvement in economic activity in Japan or the rest of Asia during
the six-month period. The political challenges in dealing with the crisis
remain very large. While a number of Asian markets moved higher earlier this
year, reflecting an optimism that things might soon get better, reality has
overcome wishful thinking. Those markets that saw
5
<PAGE> 6
PERFORMANCE UPDATE
jumps have since given back most of those temporary gains.
Because it is also an emerging region, the Latin American markets have been
linked to the Asian markets. However, we don't believe it is an accurate
comparison. There has been some threat to certain export industries in Mexico
from cheaper product being exported out of Asia due to the decline in those
currencies. While the Mexican economy has continued to improve, its equity
market has not reflected that improvement.
Q WHAT INDUSTRIES DID YOU FOCUS ON IN LIGHT OF ECONOMIC CONDITIONS?
A The fund was primarily invested in Europe throughout the period, focusing
on financial services, pharmaceuticals and the corporate service areas. The
financial services industry is benefiting from lower interest rates and the
demographic theme of increased savings. Our focus on the pharmaceutical sector
was consistent with our demographic theme of investing in companies that provide
products and services to an aging population.
Another important theme is European corporate restructuring and the
movement toward higher levels of profitability. The corporate services
area should be a major beneficiary of this trend. These are companies that
provide security services, office-cleaning services, temporary employment
services and general outsource capabilities to businesses. We also believe that
as European companies restructure and as technology is used to a greater
extent, an increased emphasis on office efficiency will create demand for
customized software. So, we're looking for firms that can fill this need.
As far as Asia, the fund was meaningfully underweighted in the region.
Going into the period, the fund had only a 1.0 percent position in Hong
Kong, after we sold all other Southeast Asia positions earlier in 1997. In
Japan the fund was underweight as of the end of October at about 12.5 percent
and we continued to slim that during the period, finishing April at 8.8
percent. We have not added any money into either market.
Q CAN YOU GIVE EXAMPLES OF SOME STOCKS THAT YOU INVESTED IN UNDER EACH OF
THESE THEMES?
A Sure. We're quite happy with SAP, a German firm that is one of the largest
software companies in Europe. Banco Santander and Bank of Ireland are two of our
bank holdings. Rentokil is a UK company that provides a broad cross-section of
corporate services. In the pharmaceutical sector we've owned Roche Holdings,
Novartis, Glaxo Wellcome and Zeneca, which are all large companies in that
industry.
Q WITH SUCH A WIDE INVESTMENT ARENA, IT MUST BE DIFFICULT TO DECIDE WHICH
COMPANIES AND COUNTRIES TO INVEST IN. CAN YOU EXPLAIN THE INVESTMENT PROCESS YOU
USE?
A Our investment process blends together the disciplines of individual
company analysis conducted within a framework of economic expectations. Although
we spend most of our time analyzing individual companies, the investment team
meets quarterly to review the economic prospects of different countries in
different regions of the world. We identify major investment themes and trends
in economic growth that will support earnings growth while discerning the risks
inherent in various economies.
We look at four components: the country's economic environment, current
market valuations, themes or opportunities within individual markets
and areas of specific risk. That helps us identify which markets or regions are
the most attractive when both return and risk are considered. We spend 80
percent of our time analyzing individual stocks, including examining their
financial statistics, understanding their profit dynamics and visiting company
managements to confirm their major business strategies.
Q DID YOU HEDGE THE FUND AT ALL DURING THE PAST SIX MONTHS?
A No, not at all. Our hedging policy is to hedge only when we think there is
a high level of risk for the base currency of our investors' U.S. dollars.
During this period of time, we felt that most currencies would range trade
around a central point against the dollar and that there was not an above
average amount of risk. That's in fact been the case. If you hedge, you add
additional volatility to the portfolio and we didn't think adding the volatility
in the range-trading environment made sense.
Q LOOKING FORWARD, WHAT ARE SOME GLOBAL ECONOMIC TRENDS WE CAN EXPECT, AND
HOW WILL YOU POSITION THE FUND TO CAPITALIZE ON THEM?
A We believe that growth and corporate profits will surprise on the up side
in Europe, creating a positive underpinning for the markets. Europe continues to
be a very attractive area over a two- to five-year period. Shorter term, the
markets have come a very long way and
6
<PAGE> 7
PERFORMANCE UPDATE
they may rest a while before they move on to the next higher level.
We feel we have the fund appropriately positioned for this growth.
Reductions were made in the pharmaceutical area while we added to the service
area and to some areas of the telephone sector. Exposure to stocks that are
sensitive to economic activity was increased because we believe economic
activity will be picking up.
In Southeast Asia we believe patience is required. It will take time
before the full financial effects of the most recent disappointing economic
activity and poor financial management is fully worked through the system.
While the market itself is still unattractive, I do think the current
environment of weakened stock prices creates an opportunity to very selectively
look for bargains. Those firms with strong finances that may have been beaten
down temporarily will be leaders when the region eventually does recover. We
expect to go about that selection process very methodically, so we're not
looking to meaningfully increase our exposure there at the moment.
The same thing can be said for Japan, where economic policy, especially
on the fiscal side, seems to be hamstrung by cultural background and the
dominance of the ministries in managing the financial sector and business in
general. So we're looking for companies that are competitive globally and that
sell at attractive prices. We'll move slowly back into specific opportunities
there. In Latin America, we'd look to continue to invest in companies that have
unique valuations and characteristics and very strong balance sheets.
On an intermediate-term or long-term basis, which any investor should
be looking at, I think that international markets and those dominated by
exposure to the fast growth in Europe present a very good investment
opportunity.
Q SO THIS IS STILL A GOOD TIME TO BE INVESTED IN INTERNATIONAL FUNDS?
A Today's world, with its global economy, will create increasing
opportunities for companies that have competitive advantages. And not all of
those companies are in the United States. Investors should look to invest in
funds that give them exposure to the best companies outside the United States as
a natural complement to their domestic portfolios. And I do think that growth
outside the United States, particularly as Europe expands and Asia also does so
later on, has the potential to be as large, if not larger than, that within the
United States.
7
<PAGE> 8
INDUSTRY SECTORS
KEMPER INTERNATIONAL FUND'S COUNTRY EXPOSURE COMPARED TO ITS BENCHMARK INDEX*
Data shows the geographic composition of the EAFE Index (Morgan Stanley Capital
International Europe, Australasia, Far East Index), the unmanaged index that is
a generally accepted benchmark for major overseas markets, and the corresponding
percentage for Kemper International Fund as of April 30, 1998. Differences in
the composition help explain the differences in the performance of each. Please
note, the fund also invests in other countries not reflected in the EAFE Index.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER INTERNATIONAL FUND
ON 4/30/98 EAFE INDEX ON 4/30/98
<S> <C> <C>
NETHERLANDS 16.6% 5.8%
UNITED KINGDOM 11.5% 21.7%
SWITZERLAND 9.9% 7.8%
JAPAN 8.8% 22.0%
FRANCE 8.8% 8.8%
ITALY 8.3% 4.7%
GERMANY 4.3% 10.3%
MEXICO 2.5% 0%
AUSTRALIA 1.7% 2.5%
HONG KONG 1.7% 2.1%
</TABLE>
8
<PAGE> 9
LARGEST HOLDINGS
KEMPER INTERNATIONAL FUND'S TOP 20 HOLDINGS*
Following is a list of the top 20 holdings in the fund as of April 30, 1998 and
the percentage of net assets for each holding.
<TABLE>
<CAPTION>
HOLDINGS COUNTRY PERCENT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. ING GROEP Netherlands 3.3%
- -------------------------------------------------------------------------------------------------------
2. TELECOM ITALIA MOBILE Italy 2.9%
- -------------------------------------------------------------------------------------------------------
3. ELF AQUITAINE France 2.9%
- -------------------------------------------------------------------------------------------------------
4. AKZO NOBEL Netherlands 2.7%
- -------------------------------------------------------------------------------------------------------
5. NESTLE Switzerland 2.6%
- -------------------------------------------------------------------------------------------------------
6. AXA-UAP France 2.5%
- -------------------------------------------------------------------------------------------------------
7. UNION BANK OF SWITZERLAND Switzerland 2.4%
- -------------------------------------------------------------------------------------------------------
8. TELECOM ITALIA Italy 2.1%
- -------------------------------------------------------------------------------------------------------
9. MANNESMANN Germany 2.0%
- -------------------------------------------------------------------------------------------------------
10. BRITISH PETROLEUM United Kingdom 2.0%
- -------------------------------------------------------------------------------------------------------
11. VEDIOR Netherlands 1.9%
- -------------------------------------------------------------------------------------------------------
12. ASSICURAZIONI GENERALI Italy 1.9%
- -------------------------------------------------------------------------------------------------------
13. VIAG Germany 1.6%
- -------------------------------------------------------------------------------------------------------
14. GETRONICS Netherlands 1.6%
- -------------------------------------------------------------------------------------------------------
15. PETRO CANADA Canada 1.6%
- -------------------------------------------------------------------------------------------------------
16. KONINKLIJKE AHOLD Netherlands 1.5%
- -------------------------------------------------------------------------------------------------------
17. GLAXO WELLCOME United Kingdom 1.5%
- -------------------------------------------------------------------------------------------------------
18. ISTITUTO MOBILIARE Italy 1.5%
- -------------------------------------------------------------------------------------------------------
19. BANK OF IRELAND Ireland 1.5%
- -------------------------------------------------------------------------------------------------------
20. TELECOMMUNICOES BRASILEIRO Brazil 1.4%
- -------------------------------------------------------------------------------------------------------
</TABLE>
*PORTFOLIO COMPOSITION AND HOLDINGS ARE SUBJECT TO CHANGE.
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
KEMPER INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS AT APRIL 30, 1998 (unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCKS NUMBER OF SHARES VALUE
EUROPE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NETHERLANDS--16.6% Aalberts Industries, N.V.
CAPITAL GOODS AND COMPONENTS 240,425 $ 6,949
Aegon, N.V.
INSURANCE COMPANY 42,039 5,451
Akzo Nobel, N.V.
INDUSTRIAL COMPANY 89,598 18,226
De Boer Unigro, N.V.
FOOD RETAILER 37,634 1,844
Getronics, N.V.
INFORMATION AND COMMUNICATION SERVICES 247,000 10,929
Hagemeyer, N.V.
WHOLESALER 115,187 5,501
ING Groep, N.V.
BANKING AND INSURANCE 340,060 22,099
Koninklijke Ahold, N.V.
FOOD RETAILER 329,886 10,286
Nedcon Groep
MANUFACTURER OF RACKING SYSTEMS 67,000 2,580
Royal Dutch Petroleum
PETROLEUM PRODUCER 123,040 6,790
Unique International, N.V.
TEMPORARY EMPLOYMENT 291,226 9,268
Vedior, N.V.
TEMPORARY EMPLOYMENT 431,593 13,115
-----------------------------------------------------------------------
113,038
- ----------------------------------------------------------------------------------------------------------------
UNITED KINGDOM--11.5% BBA Group, PLC
DIVERSIFIED ENGINEERING COMPANY 1,124,014 9,237
Barclays, PLC
BANKING 229,773 6,627
(a)British Bio-Technology Group
PHARMACEUTICAL COMPANY 1,397,500 1,402
British Petroleum
PETROLEUM PRODUCER 840,276 13,270
Compass Group, PLC
CONTRACT CATERING 390,000 6,742
Glaxo Wellcome, PLC
PHARMACEUTICAL COMPANY 362,283 10,237
Marks & Spencer, PLC
CONSUMER GOODS AND FOODS RETAILER 342,105 3,252
Norwich Union
FINANCIAL SERVICES 570,000 4,258
Rentokil Group, PLC
SERVICES COMPANY 1,440,000 9,277
Royal Bank of Scotland Group, PLC
BANKING 560,000 8,642
Zeneca Group, PLC
PHARMACEUTICAL COMPANY 117,094 5,043
-----------------------------------------------------------------------
77,987
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SWITZERLAND--9.9% Adecco, S.A.
TEMPORARY EMPLOYMENT 17,000 $ 7,424
Alusuisee-Lonza Holding
ALUMINUM, CHEMICALS, AND PACKAGING
MANUFACTURER 5,320 6,810
Ciba Specialty Chemicals
CHEMICAL PRODUCER 56,593 6,848
Nestle, S.A.
FOOD PRODUCER 8,950 17,364
Novartis
PHARMACEUTICAL COMPANY 5,035 8,325
Roche Holdings, A.G.
PHARMACEUTICAL COMPANY 405 4,106
Union Bank of Switzerland
BANKING 51,110 16,407
-----------------------------------------------------------------------
67,284
FRANCE--8.8% AXA-UAP
INSURANCE COMPANY 147,403 17,293
Banque Nationale de Paris
BANKING 89,360 7,529
Carrefour, S.A.
FOOD RETAILER 6,105 3,495
Elf Aquitaine
OIL AND GAS PRODUCER 149,000 19,536
Societe Generale
BANKING 37,587 7,819
Technip, S.A.
ENGINEERING COMPANY 29,200 3,707
-----------------------------------------------------------------------
59,379
- ----------------------------------------------------------------------------------------------------------------
ITALY--8.3% Assicurazioni Generali
INSURANCE COMPANY 423,425 12,737
Istituto Mobiliare Italiano, S.P.A.
BANKING 613,000 10,032
Telecom Italia, SpA
TELECOMMUNICATIONS PROVIDER 1,872,000 13,998
Telecom Italia Mobile, SpA
MOBILE TELECOMMUNICATIONS PROVIDER 3,480,000 19,836
-----------------------------------------------------------------------
56,603
- ----------------------------------------------------------------------------------------------------------------
SPAIN--4.3% Banco Bilbao Vizcaya, S.A.
BANKING 132,473 6,814
Banco Popular Espanol, S.A.
BANKING 31,017 2,544
Banco Santander, S.A.
BANKING 90,688 4,790
Bankinter, S.A.
BANKING 99,800 6,744
Telefonica de Espana, S.A., with rights
TELECOMMUNICATIONS COMPANY 200,000 8,503
-----------------------------------------------------------------------
29,395
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GERMANY--4.3% Mannesmann, A.G.
CAPITAL GOODS PRODUCER 17,000 $ 13,490
SAP, A.G.
COMPUTER SOFTWARE COMPANY 9,900 4,689
Viag, A.G.
DIVERSIFIED UTILITY COMPANY 21,900 11,094
-----------------------------------------------------------------------
29,273
- ----------------------------------------------------------------------------------------------------------------
SWEDEN--1.5% ABB AB
ENGINEERING COMPANY 480,000 7,443
Industri-Matematik International Corp.
SERVICE SOFTWARE APPLICATIONS 120,000 2,670
-----------------------------------------------------------------------
10,113
- ----------------------------------------------------------------------------------------------------------------
IRELAND--1.5% Bank of Ireland
BANKING 492,546 10,003
-----------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
PORTUGAL--.8% Electricidade de Portugal, S.A.
ELECTRICITY PROVIDER 208,000 5,384
-----------------------------------------------------------------------
TOTAL EUROPEAN COUNTRIES--67.5% 458,459
- ----------------------------------------------------------------------------------------------------------------
PACIFIC REGION
- ----------------------------------------------------------------------------------------------------------------
JAPAN--8.8% Bellsystem 24, Inc.
TELEMARKETING FIRM 27,000 3,752
Canon, Inc.
PRECISION INSTRUMENTS MANUFACTURER 150,000 3,553
Circle K Japan
CONVENIENCE RETAILER 99,000 4,083
Fuji Photo Film Co., Ltd.
PRECISION INSTRUMENTS MANUFACTURER 216,000 7,700
Honda Motor Co., Ltd.
AUTOMOBILE MANUFACTURER 159,000 5,776
Murata Manufacturing
ELECTRONICS COMPONENTS MANUFACTURER 142,000 4,170
Noritsu Koki Co., Ltd.
PRECISION INSTRUMENTS MANUFACTURER 82,600 2,469
Ricoh Co., Ltd.
PRECISION INSTRUMENTS MANUFACTURER 559,000 5,800
Sanwa Bank, Ltd., preferred stock
BANKING 214,000 4,713
Sony Corp.
ELECTRONICS MANUFACTURER 112,000 9,333
Toppan Printing Co., Ltd.
PRINTING SERVICES 236,000 2,810
Toray Industries
TEXTILE MANUFACTURER 1,015,000 5,470
-----------------------------------------------------------------------
59,629
- ----------------------------------------------------------------------------------------------------------------
HONG KONG--1.7% CITIC Pacific, Ltd.
CONGLOMERATE 1,450,000 4,455
HSBC Holdings, PLC
BANKING 245,804 7,013
-----------------------------------------------------------------------
11,468
-----------------------------------------------------------------------
TOTAL PACIFIC REGION--10.5% 71,097
</TABLE>
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
COMMONWEALTH COUNTRIES
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CANADA--7.2% BCE, Inc
TELECOMMUNICATIONS COMPANY 167,000 $ 7,113
(a)Boardwalk Equities, Inc.
REAL ESTATE COMPANY 250,500 3,942
Canadian National Railway
RAILROAD COMPANY 103,400 6,729
Hudson's Bay Co.
DEPARTMENT STORE RETAILER 412,400 8,970
Mackenzie Financial Corp.
FINANCIAL SERVICES 458,600 6,895
Petro-Canada
OIL AND GAS COMPANY 645,300 10,889
(a)Philip Services Corp.
RECYCLING 564,700 4,270
-----------------------------------------------------------------------
48,808
- ----------------------------------------------------------------------------------------------------------------
AUSTRALIA--1.7% Qantas Airways S.A.
TRANSPORTATION 3,675,000 5,607
St. George Bank, Ltd.
BANKING 1,032,540 6,133
-----------------------------------------------------------------------
11,740
- ----------------------------------------------------------------------------------------------------------------
NEW ZEALAND--.5% Restaurant Brands New Zealand, Ltd.
RESTAURANTS 4,475,000 3,258
-----------------------------------------------------------------------
TOTAL COMMONWEALTH COUNTRIES--9.4% 63,806
- ----------------------------------------------------------------------------------------------------------------
LATIN AMERICA
- ----------------------------------------------------------------------------------------------------------------
MEXICO--2.5% Fomento Economico Mexicano, ADR
BEER AND SOFT DRINK MANUFACTURER 722,400 5,459
Grupo Carso, S.A. de C.V., ADR
INDUSTRIAL CONGLOMERATE 2,647,100 3,783
Industrial Bachoco, S.A.
POULTRY PRODUCER 161,750 2,275
Kimberly-Clark de Mexico, S.A. de C.V.
PAPER PRODUCTS PRODUCER 1,075,400 5,166
-----------------------------------------------------------------------
16,683
- ----------------------------------------------------------------------------------------------------------------
BRAZIL--2.1% Petroleo Brasileiro, S.A.
OIL AND GAS COMPANY 20,450,000 5,132
Telecommunicoes Brasileiro, S.A.
TELEPHONE COMPANY 77,200 9,404
-----------------------------------------------------------------------
14,536
-----------------------------------------------------------------------
TOTAL LATIN AMERICAN COUNTRIES--4.6% 31,219
-----------------------------------------------------------------------
TOTAL COMMON STOCKS--92.0%
(Cost: $502,205) 624,581
-----------------------------------------------------------------------
</TABLE>
13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET Yield--5.51% to 5.71%
INSTRUMENTS--5.7%
Due--May 1998
ConAgra $ 29,700 $ 29,633
Other 9,000 8,979
-----------------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--5.7%
(Cost: $38,613) 38,612
-----------------------------------------------------------------------
TOTAL INVESTMENTS--97.7%
(Cost: $540,818) 663,193
-----------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES--2.3% 15,725
-----------------------------------------------------------------------
NET ASSETS--100% $678,918
-----------------------------------------------------------------------
</TABLE>
At April 30, 1998, the Fund's portfolio of investments had the following
industry diversification (dollars in thousands):
<TABLE>
<CAPTION>
VALUE %
- ---------------------------------------------------------------------------------
<S> <C> <C>
Finance $182,940 26.9
- ---------------------------------------------------------------------------------
Consumer Cyclicals 93,894 13.9
- ---------------------------------------------------------------------------------
Capital Goods 81,640 12.0
- ---------------------------------------------------------------------------------
Utilities 68,219 10.0
- ---------------------------------------------------------------------------------
Energy 55,617 8.2
- ---------------------------------------------------------------------------------
Consumer Staples 39,260 5.9
- ---------------------------------------------------------------------------------
Technology 38,164 5.6
- ---------------------------------------------------------------------------------
Health Care 29,113 4.3
- ---------------------------------------------------------------------------------
Basic Industries 23,398 3.4
- ---------------------------------------------------------------------------------
Transportation 12,336 1.8
- ---------------------------------------------------------------------------------
TOTAL COMMON STOCKS 624,581 92.0
- ---------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS AND OTHER NET ASSETS 54,337 8.0
- ---------------------------------------------------------------------------------
NET ASSETS $678,918 100.0
- ---------------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
Based on the cost of investments of $540,818,000 for federal income tax purposes
at April 30, 1998, the gross unrealized appreciation was $138,927,000, the gross
unrealized depreciation was $16,552,000 and the net unrealized appreciation on
investments was $122,375,000.
See accompanying Notes to Financial Statements.
14
<PAGE> 15
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998 (unaudited)
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------
Investments, at value
(Cost: $540,818) $663,193
- ------------------------------------------------------------------------
Receivable for:
Investments sold 38,550
- ------------------------------------------------------------------------
Fund shares sold 1,137
- ------------------------------------------------------------------------
Dividends 2,631
- ------------------------------------------------------------------------
TOTAL ASSETS 705,511
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ------------------------------------------------------------------------
Cash overdraft 6,224
- ------------------------------------------------------------------------
Payable for:
Investments purchased 18,838
- ------------------------------------------------------------------------
Fund shares redeemed 272
- ------------------------------------------------------------------------
Management fee 416
- ------------------------------------------------------------------------
Distribution services fee 116
- ------------------------------------------------------------------------
Administrative services fee 142
- ------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 526
- ------------------------------------------------------------------------
Trustees' fees 59
- ------------------------------------------------------------------------
Total liabilities 26,593
- ------------------------------------------------------------------------
NET ASSETS $678,918
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- ------------------------------------------------------------------------
Paid-in capital $485,997
- ------------------------------------------------------------------------
Undistributed net realized gain on investments and foreign
currency transactions 71,520
- ------------------------------------------------------------------------
Net unrealized appreciation on investments and assets and
liabilities in foreign currencies 122,322
- ------------------------------------------------------------------------
Accumulated net investment loss (921)
- ------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $678,918
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
THE PRICING OF SHARES
- ------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($476,390 / 34,354 shares outstanding) $13.87
- ------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $14.72
- ------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($159,690 / 11,664 shares outstanding) $13.69
- ------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($22,919 / 1,673 shares outstanding) $13.70
- ------------------------------------------------------------------------
CLASS I SHARES
Net asset value and redemption price per share
($19,919 / 1,436 shares outstanding) $13.87
- ------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
15
<PAGE> 16
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1998 (unaudited)
(IN THOUSANDS)
<TABLE>
<S> <C>
- -----------------------------------------------------------------------
INVESTMENT INCOME
- -----------------------------------------------------------------------
Dividends $ 4,118
- -----------------------------------------------------------------------
Interest 1,491
- -----------------------------------------------------------------------
5,609
- -----------------------------------------------------------------------
Less foreign taxes withheld 566
- -----------------------------------------------------------------------
Total investment income 5,043
- -----------------------------------------------------------------------
Expenses:
Management fee 2,268
- -----------------------------------------------------------------------
Administrative services fee 715
- -----------------------------------------------------------------------
Distribution services fee 631
- -----------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 1,993
- -----------------------------------------------------------------------
Professional fees 64
- -----------------------------------------------------------------------
Reports to shareholders 166
- -----------------------------------------------------------------------
Trustees' fees and other 68
- -----------------------------------------------------------------------
Total expenses 5,905
- -----------------------------------------------------------------------
NET INVESTMENT LOSS (862)
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
- -----------------------------------------------------------------------
Net realized gain on sales of investments and foreign
currency transactions 71,915
- -----------------------------------------------------------------------
Change in net unrealized appreciation on investments and
assets and liabilities in foreign currencies 17,759
- -----------------------------------------------------------------------
Net gain on investments 89,674
- -----------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $88,812
- -----------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31,
(UNAUDITED) 1997
- ----------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment loss $ (862) $ (1,231)
- ----------------------------------------------------------------------------------------------------
Net realized gain 71,915 29,101
- ----------------------------------------------------------------------------------------------------
Change in net unrealized appreciation 17,759 37,579
- ----------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 88,812 65,449
- ----------------------------------------------------------------------------------------------------
Net equalization charges (113) (309)
- ----------------------------------------------------------------------------------------------------
Distribution from net investment income (2,671) (4,092)
- ----------------------------------------------------------------------------------------------------
Distribution from net realized gain (25,096) (27,136)
- ----------------------------------------------------------------------------------------------------
Total dividends to shareholders (27,767) (31,228)
- ----------------------------------------------------------------------------------------------------
Net increase from capital share transactions 29,917 81,914
- ----------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 90,849 115,826
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------------------------------------
Beginning of period 588,069 472,243
- ----------------------------------------------------------------------------------------------------
END OF PERIOD (including undistributed net
investment income of $2,725 for year ended October 31, 1997) $678,918 $588,069
- ----------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE Kemper International Fund is an open-end management
FUND 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 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 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. All
shares of the Fund have equal rights with respect
to voting, dividends and assets, subject to class
specific preferences.
- --------------------------------------------------------------------------------
2 SIGNIFICANT INVESTMENT VALUATION. Investments are stated at
ACCOUNTING POLICIES 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 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. 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 quotations of such
currencies against U.S. dollars as last quoted by a
recognized dealer. If such quotations are not
readily available, the rates of exchange are
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
rates 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.
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
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, 1998.
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. These
differences are primarily due to differing
treatments for certain transactions such as foreign
currency transactions.
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 INVESTMENT MANAGER COMBINATION. Effective December
AFFILIATES 31, 1997, Zurich Insurance Company, the parent of
Zurich Kemper Investments, Inc. (ZKI), acquired a
majority interest in Scudder, Stevens & Clark, Inc.
(Scudder), another major investment manager. As a
result of this transaction, the operations of ZKI
were combined with Scudder to form a new global
investment organization named Scudder Kemper
Investments, Inc. (Scudder Kemper). The transaction
resulted in the termination of the Fund's
investment management agreement with ZKI, however,
a new investment management agreement between the
Fund and Scudder Kemper was approved by the Fund's
Board of Trustees and by the Fund's shareholders.
The new management agreement, which was effective
December 31, 1997, is the same in all material
respects as the previous management agreement,
except that Scudder Kemper is the new investment
adviser to the Fund. In addition, the names of the
Fund's principal underwriter and shareholder
service agent were changed to Kemper Distributors,
Inc. (KDI) and Kemper Service Company (KSvC),
respectively.
18
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
MANAGEMENT AGREEMENT. The Fund has a management
agreement with Scudder Kemper and pays a management
fee at an annual rate of .75% of the first $250
million of average daily net assets declining to
.62% of average daily net assets in excess of $12.5
billion. The Fund incurred a management fee of
$2,268,000 for the six months ended April 30, 1998.
UNDERWRITING AND DISTRIBUTION SERVICES
AGREEMENT. The Fund has an underwriting and
distribution services agreement with KDI.
Underwriting commissions paid in connection with
the distribution of Class A shares are as follows:
<TABLE>
<CAPTION>
COMMISSIONS COMMISSIONS
RETAINED BY ALLOWED BY KDI
KDI TO FIRMS
----------- ---------------
<S> <C> <C>
Six months ended April 30, 1998 $38,000 457,000
</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, CDSC
and commissions related to Class B and Class C
shares for the six months ended April 30, 1998 are
as follows:
<TABLE>
<CAPTION>
DISTRIBUTION FEES COMMISSIONS AND
AND CDSC DISTRIBUTION FEES PAID
RECEIVED BY KDI BY KDI TO FIRMS
----------------- ----------------------
<S> <C> <C>
Six months ended April 30, 1998 $777,000 762,000
</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 THE ASF PAID BY KDI
FUND TO KDI TO FIRMS
--------------- ----------------
<S> <C> <C>
Six months ended April 30, 1998 $715,000 715,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
KSvC is the shareholder service agent of the Fund.
Under the agreement, KSvC received shareholder
services fees of $1,155,000 for the six months
ended April 30, 1998.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. During the six months ended April
30, 1998, the Fund made no payments to its officers
and incurred trustees' fees of $13,000 to
independent trustees.
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the six months ended April 30, 1998, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $286,632
Proceeds from sales 267,037
- --------------------------------------------------------------------------------
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, 1998 OCTOBER 31, 1997
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 25,961 $ 342,492 14,874 $ 187,364
--------------------------------------------------------------------------------
Class B 2,962 38,754 8,424 106,475
--------------------------------------------------------------------------------
Class C 1,721 22,854 1,156 14,610
--------------------------------------------------------------------------------
Class I 446 6,059 1,171 14,846
--------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 1,538 18,355 2,001 22,720
--------------------------------------------------------------------------------
Class B 505 5,970 509 5,790
--------------------------------------------------------------------------------
Class C 57 669 42 481
--------------------------------------------------------------------------------
Class I 81 964 101 1,173
--------------------------------------------------------------------------------
SHARES REDEEMED
Class A (25,983) (344,302) (14,522) (184,532)
--------------------------------------------------------------------------------
Class B (2,708) (35,196) (5,205) (66,707)
--------------------------------------------------------------------------------
Class C (1,437) (19,073) (486) (6,267)
--------------------------------------------------------------------------------
Class I (569) (7,629) (1,094) (14,039)
--------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 539 7,031 433 5,529
--------------------------------------------------------------------------------
Class B (545) (7,031) (438) (5,529)
--------------------------------------------------------------------------------
NET INCREASE
FROM CAPITAL SHARE
TRANSACTIONS $ 29,917 $ 81,914
--------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 21
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-------------------------------------------
CLASS A
-------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, -----------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $12.68 11.96 10.59 11.13 10.56
- --------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.01) -- .04 .07 --
- --------------------------------------------------------------------------------------
Net realized and unrealized gain 1.83 1.52 1.50 .05 .86
- --------------------------------------------------------------------------------------
Total from investment operations 1.82 1.52 1.54 .12 .86
- --------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .08 .12 .12 -- --
- --------------------------------------------------------------------------------------
Distribution from net realized gain .55 .68 .05 .66 .29
- --------------------------------------------------------------------------------------
Total dividends .63 .80 .17 .66 .29
- --------------------------------------------------------------------------------------
Net asset value, end of period $13.87 12.68 11.96 10.59 11.13
- --------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 15.14% 13.49 14.70 1.69 8.32
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 1.66% 1.57 1.64 1.57 1.54
- --------------------------------------------------------------------------------------
Net investment income .13% .16 .34 .83 .02
- --------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------
CLASS B
-------------------------------------------------
SIX MONTHS YEAR ENDED OCTOBER
ENDED 31, MAY 31 TO
APRIL 30, --------------------- OCTOBER 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $12.50 11.81 10.46 11.09 10.58
- -----------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.05) (.12) (.06) (.02) (.04)
- -----------------------------------------------------------------------------------------
Net realized and unrealized gain 1.79 1.51 1.47 .05 .55
- -----------------------------------------------------------------------------------------
Total from investment operations 1.74 1.39 1.41 .03 .51
- -----------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- .02 .01 -- --
- -----------------------------------------------------------------------------------------
Distribution from net realized gain .55 .68 .05 .66 --
- -----------------------------------------------------------------------------------------
Total dividends .55 .70 .06 .66 --
- -----------------------------------------------------------------------------------------
Net asset value, end of period $13.69 12.50 11.81 10.46 11.09
- -----------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 14.61% 12.32 13.59 .84 4.82
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 2.61% 2.57 2.53 2.50 2.58
- -----------------------------------------------------------------------------------------
Net investment loss (.84)% (.84) (.55) (.10) (.97)
- -----------------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 22
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
------------------------------------------------
CLASS C
------------------------------------------------
SIX MONTHS YEAR ENDED OCTOBER
ENDED 31, MAY 31 TO
APRIL 30, --------------------- OCTOBER 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.51 11.81 10.46 11.09 10.58
- ------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.06) (.09) (.06) (.02) (.04)
- ------------------------------------------------------------------------------------------
Net realized and unrealized gain 1.80 1.49 1.47 .05 .55
- ------------------------------------------------------------------------------------------
Total from investment operations 1.74 1.40 1.41 .03 .51
- ------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- .02 .01 -- --
- ------------------------------------------------------------------------------------------
Distribution from net realized gain .55 .68 .05 .66 --
- ------------------------------------------------------------------------------------------
Total dividends .55 .70 .06 .66 --
- ------------------------------------------------------------------------------------------
Net asset value, end of period $13.70 12.51 11.81 10.46 11.09
- ------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 14.60% 12.45 13.59 .84 4.82
- ------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------------
Expenses 2.55% 2.49 2.50 2.50 2.52
- ------------------------------------------------------------------------------------------
Net investment loss (.78)% (.76) (.52) (.10) (.91)
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------
CLASS I
----------------------------------------
SIX MONTHS YEAR ENDED
ENDED OCTOBER 31, JULY 3 TO
APRIL 30, ------------- OCTOBER 31,
1998 1997 1996 1995
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------
Net asset value, beginning of period $12.72 11.99 10.61 10.09
- ----------------------------------------------------------------------------------
Income from investment operations:
Net investment income .03 .07 .10 .04
- ----------------------------------------------------------------------------------
Net realized and unrealized gain 1.82 1.53 1.48 .48
- ----------------------------------------------------------------------------------
Total from investment operations 1.85 1.60 1.58 .52
- ----------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .15 .19 .15 --
- ----------------------------------------------------------------------------------
Distribution from net realized gain .55 .68 .05 --
- ----------------------------------------------------------------------------------
Total dividends .70 .87 .20 --
- ----------------------------------------------------------------------------------
Net asset value, end of period $13.87 12.72 11.99 10.61
- ----------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 15.41% 14.19 15.19 5.15
- ----------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ----------------------------------------------------------------------------------
Expenses 1.08% 1.04 1.10 .85
- ----------------------------------------------------------------------------------
Net investment income .71% .69 .88 1.32
- ----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED OCTOBER 31,
ENDED -----------------------------------------
APRIL 30, 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets at end of period (in thousands) $678,918 588,069 472,243 364,708 418,282
- --------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 90% 76 104 114 103
- --------------------------------------------------------------------------------------------------------
Average commission rates paid per share on stock transactions for the six months ended April 30, 1998 and
years ended October 31, 1997 and 1996 were $.0538, $.0130 and $.0182, respectively. Foreign commissions
usually are lower than U.S. commissions when expressed as cents per share due to the lower per share price
of many non-U.S. securities.
- --------------------------------------------------------------------------------------------------------
</TABLE>
NOTES: Total return does not reflect the effect of any sales charges. Per share
data for the years ended 1995 and 1996 were determined based on average shares
outstanding. Data for the period ended April 30, 1998 is unaudited.
22
<PAGE> 23
SHAREHOLDERS' MEETING
SPECIAL SHAREHOLDERS' MEETING
On December 3, 1997, a special shareholders' meeting was held and adjourned as
necessary. Kemper International Fund shareholders were asked to vote on six
separate issues: election of the nine members to the Board of Trustees,
ratification of Ernst & Young LLP as independent auditors, approval of new
investment management agreement with Scudder Kemper Investments, Inc., approval
of changes in the fund's fundamental investment policies to permit a
master/feeder fund structure, approval of a new sub-advisory agreement with
Zurich Investment Management Limited and approval of a new rule 12b-1
distribution plan with Zurich Kemper Distributors, Inc., for Class B shares and
Class C shares. The following are the results for each issue:
1) Election of Trustees
<TABLE>
<CAPTION>
For Withheld
<S> <C> <C>
David W. Belin 24,228,733 456,654
Lewis A. Burnham 24,253,457 431,930
Donald L. Dunaway 24,250,826 434,560
Robert B. Hoffman 24,253,118 432,268
Donald R. Jones 24,247,576 437,810
Shirley D. Peterson 24,226,040 459,346
Daniel Pierce 24,237,844 447,542
William P. Sommers 24,254,307 431,079
Edmond D. Villani 24,232,318 453,068
</TABLE>
2) Ratification of the selection of Ernst & Young LLP as independent auditors
for the current fiscal year.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
24,027,025 188,028 470,333
</TABLE>
3) Approval of a new investment management agreement with Scudder Kemper
Investments, Inc.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
23,517,145 368,673 708,678
</TABLE>
4) Approval of changes in the fund's fundamental investment policies to permit a
master/feeder fund structure.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
21,822,495 927,713 1,439,588
</TABLE>
5) Approval of a new sub-advisory agreement with Zurich Investment Management
Limited.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
23,216,895 504,273 873,328
</TABLE>
6) To approve a new rule 12b-1 distribution plan with Zurich Kemper
Distributors, Inc.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C> <C>
Class B 5,292,014 123,359 227,341
Class C 638,435 2,006 21,216
</TABLE>
23
<PAGE> 24
TRUSTEES & OFFICERS
TRUSTEES OFFICERS
DANIEL PIERCE MARK S. CASADY
Chairman and Trustee President
DAVID W. BELIN PHILIP J. COLLORA
Trustee Vice President and
Secretary
LEWIS A. BURNHAM JOHN R. HEBBLE
Trustee Treasurer
DONALD L. DUNAWAY JERALD K. HARTMAN
Trustee Vice President
ROBERT B. HOFFMAN THOMAS W. LITTAUER
Trustee Vice President
DONALD R. JONES ANN M. MCCREARY
Trustee Vice President
SHIRLEY D. PETERSON KATHRYN L. QUIRK
Trustee Vice President
WILLIAM P. SOMMERS STEVEN H. REYNOLDS
Trustee Vice President
EDMOND D. VILLANI LINDA J. WONDRACK
Trustee Vice President
MAUREEN E. KANE
Assistant Secretary
CAROLINE PEARSON
Assistant Secretary
ELIZABETH C. WERTH
Assistant Secretary
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 419557
Kansas City, MO 64141
- --------------------------------------------------------------------------------
CUSTODIAN AND INVESTORS FIDUCIARY TRUST COMPANY
TRANSFER AGENT 801 Pennsylvania
Kansas City, MO 64105
- --------------------------------------------------------------------------------
FOREIGN CUSTODIAN THE CHASE MANHATTAN BANK
Chase Metro Center
Brooklyn, NY 11245
- --------------------------------------------------------------------------------
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606
www.kemper.com
</TABLE>
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LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
Printed on recycled paper in the U.S.A.
This report is not to be distributed unless preceded
or accompanied by a Kemper Global and International
Funds prospectus.
KIF - 3 (6/98) 1048330
