<PAGE> 1
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED OCTOBER 31, 1999
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
[MORNINGSTAR RATINGS LOGO]
SEEKING TOTAL RETURN, A COMBINATION OF CAPITAL GROWTH AND INCOME, PRINCIPALLY
THROUGH AN INTERNATIONALLY DIVERSIFIED PORTFOLIO OF EQUITY SECURITIES.
KEMPER
INTERNATIONAL FUND
"... We focus on an industry's long-term prospects for
change, because change can create opportunities ... These can
be both growth and value companies, and we're not restricting
ourselves to purely large-cap companies, either. As we
uncover opportunities in several niches, the fund is more
diversified across sector and market cap than it was last
year at this time. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
Economic Overview
5
Performance Update
9
Largest Holdings
10
Portfolio of Investments
17
Financial Statements
19
Notes to Financial Statements
23
Financial Highlights
25
Report of Independent Auditors
26
Tax Information
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER INTERNATIONAL FUND
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED OCTOBER 31, 1999
(UNADJUSTED FOR ANY SALES CHARGE)
- --------------------------------------------------------------------------------
[BAR GRAPH]
<TABLE>
<S> <C>
Class A 23.47%
Class B 22.50%
Class C 22.49%
Lipper International Funds Category Average* 25.56%
</TABLE>
- --------------------------------------------------------------------------------
RETURNS AND RANKINGS ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH 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.
*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; IF SALES CHARGE HAD BEEN INCLUDED, RESULTS MAY HAVE BEEN LESS
FAVORABLE.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
10/31/99 10/31/98
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
KEMPER INTERNATIONAL FUND
CLASS A $12.85 $12.10
- --------------------------------------------------------------------------------
KEMPER INTERNATIONAL FUND
CLASS B $12.50 $11.90
- --------------------------------------------------------------------------------
KEMPER INTERNATIONAL FUND
CLASS C $12.51 $11.91
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
KEMPER INTERNATIONAL FUND
RANKINGS AS OF 10/31/99*
- --------------------------------------------------------------------------------
COMPARED WITH ALL OTHER FUNDS IN THE LIPPER INTERNATIONAL FUNDS CATEGORY
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1-YEAR #328 OF #365 OF #366 OF
591 FUNDS 591 FUNDS 591 FUNDS
- --------------------------------------------------------------------------------
5-YEAR #82 OF #117 OF #113 OF
217 FUNDS 217 FUNDS 217 FUNDS
- --------------------------------------------------------------------------------
10-YEAR #23 OF 42 FUNDS N/A N/A
- --------------------------------------------------------------------------------
15-YEAR #1 OF 15 FUNDS N/A N/A
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
DURING THE YEAR ENDED OCTOBER 31, 1999, KEMPER INTERNATIONAL FUND MADE THE
FOLLOWING DISTRIBUTIONS PER SHARE:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM CAPITAL GAIN $1.81 $1.81 $1.81
- --------------------------------------------------------------------------------
</TABLE>
TERMS TO KNOW
YOUR FUNDS' STYLE
- --------------------------------------------------------------------------------
MORNINGSTAR EQUITY STYLE BOX
- --------------------------------------------------------------------------------
[MORNINGSTAR EQUITY STYLE BOX]
Source: Data provided by Morningstar, Inc. The Equity Style Box placement is
based on a fund's price-to-earnings and price-to-book ratios 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. THE FUND'S PORTFOLIO CHANGES FROM DAY TO DAY.
A LONGER-TERM VIEW IS REPRESENTED BY THE FUND'S MORNINGSTAR CATEGORY, WHICH IS
BASED ON ITS ACTUAL INVESTMENT STYLE AS MEASURED BY ITS UNDERLYING PORTFOLIO
HOLDINGS OVER THE PAST THREE YEARS. MORNINGSTAR HAS PLACED KEMPER INTERNATIONAL
FUND IN THE FOREIGN STOCK CATEGORY. PLEASE CONSULT THE PROSPECTUS FOR A
DESCRIPTION OF INVESTMENT POLICIES.
BOTTOM-UP INVESTMENT STYLE An investment style that assesses the performance of
individual companies before considering the impact of economic trends. The
companies may be identified from research reports, stock screens or personal
knowledge of the products and services. This approach, which is the opposite of
"top-down" investing, assumes that individual companies can do well even if the
industry as a whole may not be performing well.
CYCLICAL STOCK A stock within an industry whose earnings tend to rise quickly
when the economy strengthens and fall quickly when the economy weakens. Examples
are automobiles, housing, paper and steel. Noncyclical industries, such as food,
insurance and drugs, are normally not as directly affected by economic changes.
OVER/UNDERWEIGHTING The allocation of assets -- usually by sector, industry or
country -- within a portfolio relative to a benchmark index (e.g., the MSCI EAFE
index) or an investment universe.
RESTRUCTURING Implementation of major corporate changes aimed at greater
efficiency and adaptation to changing markets. Cost-cutting initiatives, debt
retirement, management realignments and the sale of noncore businesses are all
developments frequently associated with corporate restructuring.
<PAGE> 3
ECONOMIC OVERVIEW
Scudder Kemper Investments, the investment manager for Kemper Funds, is one of
the largest and most experienced investment management organizations in the
world, managing more than $290 billion in assets for institutional and corporate
clients, retirement and pension plans, insurance companies, mutual fund
investors and individuals. Scudder Kemper Investments offers a full range of
investment counsel and asset management capabilities based on a combination of
proprietary research and disciplined, long-term investment strategies.
DEAR KEMPER FUNDS SHAREHOLDER:
Markets have been aquiver about inflation risks. Growth in the United States
continues to exceed most expectations. Labor markets are visibly tight. These
are the precursors to inflation -- everybody knows it.
Everybody except us, that is. We don't buy it in principle, and reality is
proving our theory correct.
First, let's look at growth. The traditional economic view is that growth
causes inflation. Today, we're seeing exactly the opposite: Low inflation is
causing growth. Low inflation keeps interest rates down, and low interest rates
spur investment by making borrowing money cheap. Investment allows companies to
add capacity, keeping competition fierce. As a result, companies aren't raising
prices; they're competing for business by keeping goods attractive and prices
low. That's true for the old economy, in which consumers were buying t-shirts,
and the new economy, in which consumers are buying Internet services. Everywhere
they look, consumers see bargains -- in the malls, in the auto showrooms, at the
mortgage companies.
As for tight labor markets, the traditional economic view is that tight
labor -- i.e., many "help-wanted" signs -- forces companies to pay a premium for
talent. That, in turn, forces companies to raise their prices in order to
protect their profits. And raising prices results in inflation. In contrast, we
believe that tight labor markets won't cause wages to surge. Why?
To start with, temporary agencies have proliferated, accounting for 2.2
percent of jobs, up from 0.5 percent in the early 1980s. They get just the right
amount and type of labor to the right spot at the right time to get the job
done.
Immigration also keeps a lid on wage rates, since it replenishes the work
force much faster than births. Immigration is at its highest level ever; an
amazing 10 percent of the population is foreign-born. Nearly 1 million people
enter the United States legally each year, and another 300,000 just show up.
When they get here, they look for jobs. And often, they're willing to accept
lower-paying jobs than the average citizen.
Finally, and perhaps most importantly, wage rates are kept in check by
executives' intense profit focus. Payroll is a company's biggest expense. When
payroll skyrockets, profits decline -- and that would be bad for a CEO who
promised Wall Street double-digit earnings growth from now to the end of time.
If investors are disappointed in earnings growth, they sell their stock. And
when they sell their stock, the stock options that are an essential part of many
executives' compensation are as valuable as scrap paper.
Supporting our theory are two distinct and important sets of data released
in late October: The Bureau of Economic Analysis released its third-quarter
estimate of gross domestic product (GDP), the value of all goods and services
produced in the United States, and the Bureau of Labor Statistics released its
employment cost index (ECI), which measures what employers pay for their
workers' wages, salaries and benefits.
GDP grew at a 4.8 percent rate in the third quarter, up sharply from the
revised 1.9 percent second-quarter pace and just slightly above the consensus
estimate of 4.7 percent.
At the same time, however, the ECI rose by 0.8 percent in the July-September
period, down from a 1.1 percent increase in the second quarter. The
third-quarter gain also was lower than the 0.9 percent increase forecast by
economists in a Reuters poll. (The report, by the way, is said to be one of the
favorites of Federal Reserve Chairman Alan Greenspan, who uses it as a key
indicator of inflation pressures in the world's largest economy.)
In essence, then, the U.S. economy posted its strongest growth so far this
year in the third quarter, while wage costs remained tame. The combination of
strong consumer demand and the lowest unemployment in a generation just isn't
igniting wage-driven inflation.
Nevertheless, the Federal Reserve Board raised the federal funds rate and
the discount rate by one quarter of a point (0.25%) each at its Nov. 16 meeting.
Do we think the Fed made a bad decision? Actually, no.
First, the Fed has to guard against the possibility that the old
relationship between growth and inflation will soon reassert itself. Even if the
Fed shared our belief that
3
<PAGE> 4
ECONOMIC OVERVIEW
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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 (11/30/99) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
-------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate(1) 6.00 5.50 4.80 5.90
Prime rate(2) 8.50 7.75 8.00 8.50
Inflation rate(3)* 2.60 2.30 1.50 2.00
The U.S. dollar(4) -0.7 -0.9 1.20 9.40
Capital goods orders(5)* 12.60 2.50 -0.6 6.40
Industrial production(5)* 3.30 2.90 3.50 6.90
Employment growth(6)* 2.10 2.10 2.30 2.70
</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 10/30/99.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
strong consumer demand and low unemployment isn't igniting wage-driven
inflation, the organization wouldn't be doing its job if it didn't act in the
face of any possibility that inflation might reassert itself.
More important, the Fed has to be concerned about the explosion in credit
we've seen during the last year. Almost everyone but Uncle Sam has been loading
up on debt. Companies have borrowed heavily to fund mergers, share buybacks and
new investments. Homeowners have taken out bigger mortgages on their houses and
new home equity loans. Equity shareholders have ramped up their margin debt.
Financial institutions have issued record amounts of new paper to fund their
aggressive growth. The Fed's decision to raise interest rates, thereby making
borrowing costlier, should take the frenzy out of this borrowing binge. That is
a good thing for future financial stability.
Indeed, the early positive market reaction to the Fed's move suggests that
the markets share our views that the Fed made the right decision.
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
Scudder Kemper Investments Economics Group
The information contained in this piece has been taken from sources believed to
be reliable, but the accuracy of the information is not guaranteed. the opinions
and forecasts expressed are those of the economic advisors of Scudder Kemper
Investments, Inc. as of November 18, 1999, and may not actually come to pass.
this information is subject to change. no part of this material is intended as
an investment recommendation.
To obtain a Kemper Funds prospectus, download one from www.kemper.com, talk to
your financial representative or call Shareholder Services at (800) 621-1048.
The prospectus contains more complete information, including management fees and
expenses. Please read it carefully before you invest or send money.
4
<PAGE> 5
PERFORMANCE UPDATE
[CHENG PHOTO]
LEAD PORTFOLIO MANAGER IRENE CHENG JOINED SCUDDER KEMPER INVESTMENTS, INC. IN
1993. PRIOR TO THAT, SHE WORKED IN MERCHANT BANKING AS AN EQUITY ANALYST, AND IN
OPERATIONS, FINANCE AND CORPORATE PLANNING. CHENG RECEIVED A BACHELOR'S DEGREE
SUMMA CUM LAUDE FROM HARVARD/RADCLIFFE COLLEGE, A MASTER'S DEGREE FROM THE
MASSACHUSETTS INSTITUTE OF TECHNOLOGY AND AN M.B.A. FROM HARVARD BUSINESS
SCHOOL.
[SLENDEBROEK PHOTO]
A NATIVE OF THE NETHERLANDS, PORTFOLIO MANAGER MARC SLENDEBROEK JOINED THE
FIRM'S LONDON OFFICE IN 1994. HE FOCUSES ON THE EUROPEAN COMPONENT OF THE
PORTFOLIO.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE
MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
OVER THE PAST 12 MONTHS, DEVELOPED INTERNATIONAL EQUITY MARKETS HAVE BEEN
NOTICEABLY STRENGTHENING. WHILE JAPANESE EQUITIES EXPERIENCED A LONG-AWAITED
REBOUND, EUROPE EMBARKED ON AN ECONOMIC RECOVERY. CHALLENGES CERTAINLY REMAIN;
LEAD PORTFOLIO MANAGER IRENE CHENG REVIEWS THE PERIOD AND SHARES HER OUTLOOK FOR
INTERNATIONAL EQUITY MARKETS.
Q WHAT ARE SOME OF THE MAJOR EVENTS THAT SHAPED INTERNATIONAL EQUITY MARKETS
OVER THE PAST 12 MONTHS?
A The recovery in the global economy has fueled a rally in stock prices in
virtually all areas of the world. In recent months, though, the fear that
stronger growth will lead to higher interest rates has capped the market's
advance and has increased volatility. Last fall, the U.S. Federal Reserve cut
interest rates three times to remedy a looming credit crunch. Europe's central
bank followed, cutting rates to stimulate slowing gross-domestic-product (GDP)
growth. With lower interest rates, liquidity spilled into the world's equity
markets, boosting the MSCI World index.*
Then, in the first quarter of 1999, early signs of economic turnaround and
corporate restructuring lured investors into the Japanese market they had
virtually abandoned five years earlier. By the end of the first quarter, the
MSCI Japan index+ had risen 12.23 percent. On the other hand, despite high hopes
for the introduction of the euro, European markets stumbled just as Japan was
picking up. Expectations for the success of the euro had been unrealistically
high and the new currency suffered marked depreciation.
Although the overall trend in international markets has been positive since
our April 30 report, volatility has been high. The cause of the fluctuation
seems to be uncertainty about the direction of the global economy. Throughout
the summer, market participants continued to weigh the impact of higher interest
rates and stronger corporate-earnings growth. In August, the markets absorbed
the impact of a U.S. interest-rate increase, then rallied briefly on the belief
that no further rate hikes would be forthcoming. By late in the month, however,
investors once again focused on the potential for another increase.
Despite the volatility, the overall economic backdrop is quite positive today.
Japanese equities have continued to rebound, with signs of an economic recovery
and the growing influence of corporate restructuring attracting foreign
investors and pushing up the value of the yen. Economic growth has been picking
up over the course of the year in Europe as well.
Still, at this time, we continue to see reasons for caution around the world.
Although a pickup in growth should, at long last, put the wind at the back of
European businesses, the potential for higher rates on the continent might
remain a cause for concern into next year. It remains to be seen how much of
Japan's nascent recovery has been driven by government stimulus programs, which
cannot be sustained at current levels without harmful increases to the country's
debt load.
5
<PAGE> 6
PERFORMANCE UPDATE
* MSCI WORLD INDEX IS A MORGAN STANLEY INDEX THAT INCLUDES STOCKS TRADED IN
EUROPE, AUSTRALIA, THE FAR EAST, PLUS THE U.S., CANADA AND SOUTH AFRICA,
WEIGHTED BY CAPITALIZATION. THIS INDEX REPRESENTS ASSET TYPES WHICH ARE
SUBJECT TO RISK, INCLUDING LOSS OF PRINCIPAL. INVESTORS CANNOT MAKE
INVESTMENTS IN THE INDEX.
+ MSCI JAPAN INDEX IS A MORGAN STANLEY INDEX THAT INCLUDES STOCKS TRADED ON THE
TOKYO STOCK EXCHANGE WEIGHTED BY CAPITALIZATION. THIS INDEX REPRESENTS ASSET
TYPES WHICH ARE SUBJECT TO RISK, INCLUDING LOSS OF PRINCIPAL. INVESTORS CANNOT
MAKE INVESTMENTS IN THE INDEX.
Q WHEN YOU ARE LOOKING FOR STOCKS THAT WILL SUCCEED IN THIS ENVIRONMENT,
WHAT ARE YOU CONCENTRATING ON, AND WHERE HAVE YOU FOUND MOST OPPORTUNITIES?
A First and foremost, we focus on an industry's long-term prospects for
change, because change can create opportunities. The change itself can take many
forms. It can mean old companies that are restructuring to meet the needs of the
marketplace or operate more efficiently. Or it can be great new growth companies
that are supporting a change in the technology industry. These can be both
growth and value companies, and we're not restricting ourselves to purely large-
cap companies, either. As we uncover opportunities in several niches, the fund
is more diversified across sector and market cap than it was last year at this
time. Of course, after a stock catches our eye, we look carefully at its
specific fundamentals and valuation.
At the end of the fiscal year, about one-third of the portfolio was invested
in technology and tech-related stocks. That is an overweight (see Terms To Know
on page 2) to our benchmark index, and it includes everything from semiconductor
stocks to stakes in telecommunication companies that offer alternative ways to
deliver voice and data. We're very interested in Internet stocks as well. On the
other hand, we have exposure to the older industries of Europe and Japan that
are restructuring (see Terms To Know on page 2) to become more competitive. We
also have a strong weighting in the Japanese financial sector, both banking and
brokerage firms. We are light on European banks, though we have recently
increased our European insurance holdings.
Keep in mind that because we follow a bottom-up investment (see Terms To Know
on page 2) process, the global economic background isn't the first step to our
investment process. Our country weightings reflect where we find interesting
investment opportunities, rather than a deliberate attempt to invest in or avoid
a particular region.
Q KEMPER INTERNATIONAL FUND IS UP 23.47 PERCENT (CLASS A SHARES UNADJUSTED
FOR SALES CHARGE) FOR THE 12-MONTH PERIOD ENDING OCTOBER 31, 1999. HOW DOES THAT
COMPARE WITH THE FUND'S BENCHMARK, THE MSCI EAFE INDEX?
A We basically matched the MSCI EAFE,* which returned 23.37 percent, though
the race was uneven. Last fall, the fund was defensively positioned and had a
very low weighting in Japan, a market that rallied heartily through the first
six months of the period. The MSCI EAFE, which holds a sizable Japanese
weighting, benefited from that country's performance. By the summer, we had
increased Japanese holdings substantially. The Japanese market was strong in the
last quarter of the fiscal year, making it the leader among developed markets.
Thanks to good sector exposure and strong stock picking, we caught up to the
benchmark by fiscal year-end.
* MSCI EAFE INDEX (MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE AUSTRAL-ASIA FAR
EAST INDEX) IS AN UNMANAGED INDEX GENERALLY ACCEPTED AS A BENCHMARK FOR MAJOR
OVERSEAS MARKETS. INVESTORS CANNOT MAKE INVESTMENTS IN THE INDEX.
Q WHAT ARE SOME OF THE THEMES DRIVING INTERNATIONAL EQUITIES TODAY?
A The portfolio was boosted by many holdings that were the subject of
takeover bids, and from many that were lifted when other companies in similar
industries announced deals. A case in point is the September announcement of a
proposed three-way merger in the Japanese financial industry among Fuji Bank,
Industrial Bank of Japan and Dai-Ichi Kangyo Bank. Although Fuji is the only one
of the three we own directly, our other holdings in the Japanese financial
sector responded strongly based on hopes that meaningful reform has begun.
In Europe, consolidation continues to accelerate, and we have benefited from
many sides of the deals. Carrefour (a fund holding) recently offered to merge
with Promodes, combining two of the biggest players in the food retailing
industry. And, in late October, one of the fund's top ten holdings, British
cellular operator Orange, agreed to be acquired by the large German
telecommunications firm Mannesmann.
Cyclicals (see Terms To Know on page 2) have been strong for us in both Europe
and Japan. We are more interested in Japanese cyclicals, where expectations have
not run very high; investors are more confident about the continuing growth of
the European economy, so European cyclicals are priced more fully. Some of our
favorite cyclicals include Rio Tinto (the premier global mining
6
<PAGE> 7
PERFORMANCE UPDATE
company), Siemens in Germany, as well as NEC, Hitachi and Nissan Motors in
Japan.
Q PLEASE SHARE SOME TOP-PERFORMING HOLDINGS, AND PERHAPS SOME
DISAPPOINTMENTS?
A As I mentioned, our Japanese holdings have done extremely well for us,
particularly in the financial sector. Japanese telecom has also contributed
enormously, particularly the cellular telephone company NTT Mobile
Communications Network, Inc. I would say that cellular stocks have done well in
both Japan and Europe. Japanese technology stocks also soared in the last part
of the period.
The portfolio has also responded well to the recent consolidation trend in
Europe and Japan. As I mentioned earlier, Fuji Bank was recently involved in a
three-way merger in the banking industry. Our Sakura Bank holding soared upwards
on rumors and then the confirmations that the bank planned to merge with
Sumitomo Trust & Banking Co., Ltd.
We haven't experienced many disappointments since we repositioned the
portfolio in the latter half of the period. Reuters Group, the British news and
information service firm, fell significantly. The underlying fundamentals are
fine, but the firm had done a poor job of communicating with analysts and
suffered because of it.
Q WHAT IS YOUR OUTLOOK FOR WORLD MARKETS, AND WHAT MIGHT POSE THREATS TO
THIS OUTLOOK?
A We remain optimistic about the restructuring and consolidation themes I
mentioned earlier. These will continue to provide a strong underpinning for the
foreign markets, and will give bottom-up investors the opportunity to take
advantage of the positive performance of the many individual companies that are
poised to benefit from the ongoing process of secular change. That said, we
believe some caution is warranted: global stock markets have come a long way in
the past 12 months, and are vulnerable to larger-than-expected jumps in interest
rates.
7
<PAGE> 8
PERFORMANCE UPDATE
AVERAGE ANNUAL TOTAL RETURNS*
FOR PERIODS ENDED OCTOBER 31, 1999 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEMPER INTERNATIONAL FUND CLASS A 16.35% 9.12% 8.70% 12.11% (since 5/21/81)
- --------------------------------------------------------------------------------------------
KEMPER INTERNATIONAL FUND CLASS B 19.50 9.31 N/A 9.50 (since 5/31/94)
- --------------------------------------------------------------------------------------------
KEMPER INTERNATIONAL FUND CLASS C 22.49 9.47 N/A 9.65 (since 5/31/94)
- --------------------------------------------------------------------------------------------
</TABLE>
[LINE GRAPH]
KEMPER INTERNATIONAL FUND CLASS A
Growth of an assumed $10,000 investment in Class A shares from 5/31/81 to
10/31/99
<TABLE>
<CAPTION>
KEMPER INTERNATIONAL U.S. CONSUMER PRICE
FUND CLASS A1 MSCI EAFI INDEX+ INDEX++
-------------------- ---------------- -------------------
<S> <C> <C> <C>
5/31/81 9424 10000 10000
9390 9974 10465
9659 9888 10870
12357 12322 11283
11233 13291 11729
17515 20830 12171
12/31/86 25247 35398 12309
26874 44224 12851
31510 56867 13416
37361 63007 14039
34561 48392 14896
37714 54440 15353
35909 47989 15793
12/31/93 48711 63799 16232
46763 68942 16666
52823 76906 17078
61829 81797 17657
67396 83481 17958
72709 100455 18247
10/31/99 82327 113362 18782
</TABLE>
[LINE GRAPH]
KEMPER INTERNATIONAL FUND CLASS B
Growth of an assumed $10,000 investment in Class B shares from 5/31/94 to
10/31/99
<TABLE>
<CAPTION>
KEMPER INTERNATIONAL U.S. CONSUMER PRICE
FUND CLASS B1 MSCI EAFE INDEX+ INDEX++
-------------------- ---------------- -------------------
<S> <C> <C> <C>
5/31/94 10000 10000 10000
9761 10063 10149
12/31/95 10929 11226 10400
12677 11940 10753
12/31/97 13684 12186 10936
14614 14663 11112
10/31/99 16360 16547 11438
</TABLE>
[LINE GRAPH]
KEMPER INTERNATIONAL FUND CLASS C
Growth of an assumed $10,000 investment in Class C shares from 5/31/94 to
10/31/99
<TABLE>
<CAPTION>
KEMPER INTERNATIONAL U.S. CONSUMER PRICE
FUND CLASS C1 MSCI EAFE INDEX+ INDEX++
-------------------- ---------------- -------------------
<S> <C> <C> <C>
5/31/94 10000 10000 10000
9761 10063 10149
12/31/95 10929 11226 10400
12681 11940 10753
12/31/97 13688 12186 10936
14618 14663 11112
10/31/99 16477 16547 11438
</TABLE>
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURNS AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN ORIGINAL COST.
* AVERAGE ANNUAL TOTAL RETURN AND TOTAL RETURN MEASURE NET INVESTMENT INCOME
AND CAPITAL GAIN OR LOSS FROM PORTFOLIO INVESTMENTS, ASSUMING REINVESTMENT
OF ALL DIVIDENDS AND, FOR CLASS A SHARES, ADJUSTMENT FOR THE MAXIMUM SALES
CHARGE OF 5.75% AND FOR CLASS B SHARES, ADJUSTMENT FOR THE APPLICABLE
CONTINGENT DEFERRED SALES CHARGE (CDSC) OF 3%, CLASS C SHARES HAVE NO
ADJUSTMENT FOR SALES CHARGE. THE MAXIMUM CDSC FOR CLASS B SHARES IS 4%. FOR
CLASS C SHARES, THERE IS A 1% CDSC ON CERTAIN REDEMPTIONS WITHIN THE FIRST
YEAR OF PURCHASE. SHARE CLASSES INVEST IN THE SAME UNDERLYING PORTFOLIO.
AVERAGE ANNUAL TOTAL RETURN REFLECTS ANNUALIZED CHANGES WHILE TOTAL RETURN
REFLECTS AGGREGATE CHANGE. DURING THE PERIODS NOTED, SECURITIES PRICES
FLUCTUATED. FOR ADDITIONAL INFORMATION, SEE THE PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION AND THE FINANCIAL HIGHLIGHTS AT THE END OF THIS
REPORT.
(1) PERFORMANCE INCLUDES REINVESTMENT OF DIVIDENDS AND ADJUSTMENT FOR THE
MAXIMUM SALES CHARGE FOR CLASS A SHARES AND THE CONTINGENT DEFERRED SALES
CHARGE IN EFFECT AT THE END OF THE PERIOD FOR CLASS B SHARES. IN COMPARING
KEMPER INTERNATIONAL FUND CLASS A SHARES WITH THE MSCI EAFE INDEX, YOU
SHOULD ALSO NOTE THAT THE FUND'S PERFORMANCE REFLECTS THE MAXIMUM SALES
CHARGE, WHILE NO SUCH CHARGE IS REFLECTED IN THE PERFORMANCE OF THE INDEX.
+ THE MSCI EAFE INDEX (MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE,
AUSTRALASIA ASIA, FAR EAST INDEX) IS AN UNMANAGED INDEX GENERALLY ACCEPTED
AS A BENCHMARK FOR MAJOR OVERSEAS MARKETS. SOURCE IS WIESENBERGER.
++ THE U.S. CONSUMER PRICE INDEX IS A STATISTICAL MEASURE OF CHANGE, OVER TIME,
IN THE PRICES OF GOODS AND SERVICES IN MAJOR EXPENDITURE GROUPS FOR ALL
URBAN CONSUMERS. SOURCE IS WIESENBERGER.
8
<PAGE> 9
LARGEST HOLDINGS
KEMPER INTERNATIONAL FUND'S TOP 20 HOLDINGS*
A comparison of the fund's top 20 holdings on October 31, 1999, with its top 20
holdings on October 31, 1998
<TABLE>
<CAPTION>
AT 10/31/99 AT 10/31/98
HOLDINGS PERCENT HOLDINGS PERCENT
<S> <C> <C> <C> <C>
- ------------------------------------------- ------------------------------
1. NTT MOBILE 2.5% NOVARTIS 3.6%
COMMUNICATIONS
NETWORK
- ------------------------------------------- ------------------------------
2. ELF AQUITAINE 2.3% BRITISH TELECOM 3.6%
- ------------------------------------------- ------------------------------
3. ORANGE 2.0% GROUPE DANONE 3.4%
- ------------------------------------------- ------------------------------
4. NOKIA 1.9% GLAXO WELLCOME 3.4%
- ------------------------------------------- ------------------------------
5. RIO TINTO 1.6% VIAG 3.2%
- ------------------------------------------- ------------------------------
6. MURATA MANUFACTURING 1.6% KONINKLIJKE AHOLD 2.9%
CO.
- ------------------------------------------- ------------------------------
7. DAIWA SECURITIES CO. 1.5% VEDIOR 2.8%
- ------------------------------------------- ------------------------------
8. NEC CORP 1.5% TELEFONICA NACIONAL 2.6%
DE ESPANA
- ------------------------------------------- ------------------------------
9. FUJITSU 1.4% UNILEVER 2.6%
- ------------------------------------------- ------------------------------
10. SONY 1.4% COMPASS GROUP 2.4%
- ------------------------------------------- ------------------------------
11. NIPPON TELEGRAPH & 1.3% GETRONICS 2.3%
TELEPHONE
- ------------------------------------------- ------------------------------
12. SIEMENS 1.3% TELECOM ITALIA 2.2%
- ------------------------------------------- ------------------------------
13. RHONE-POULENC 1.3% GEHE 2.1%
- ------------------------------------------- ------------------------------
14. MANNESMANN AG 1.3% SOCIETE LYONNAISE DES 2.0%
EAUX
- ------------------------------------------- ------------------------------
15. SHELL TRANSPORT & 1.2% RENTOKIL INITIAL 2.0%
TRADING
- ------------------------------------------- ------------------------------
16. SAKURA BANK 1.2% MANNESMANN 1.9%
- ------------------------------------------- ------------------------------
17. STMICROELECTRONICS 1.2% ELECTRIDADE DE 1.8%
PORTUGAL
- ------------------------------------------- ------------------------------
18. SUMITOMO TRUST & 1.2% TELEVISION FRANCAISE 1.7%
BANKING CO.
- ------------------------------------------- ------------------------------
19. FUJI BANK 1.2% BAYERISCHE VEREINBANK 1.7%
- ------------------------------------------- ------------------------------
20. TOKYO ELECTRON 1.1% ALCATEL 1.6%
- ------------------------------------------- ------------------------------
</TABLE>
*PORTFOLIO COMPOSITION AND HOLDINGS ARE SUBJECT TO CHANGE.
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
KEMPER INTERNATIONAL FUND
Portfolio of Investments as of October 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
MONEY MARKET INSTRUMENTS--10.0% AMOUNT ($) VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
UNITED STATES--2.3% (b) Repurchase Agreement with Chase Manhattan Bank,
5.063%, 11/01/1999 $ 15,106 $ 15,106
---------------------------------------------------------------------------
15,106
- ------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
OBLIGATIONS--7.7% Federal Home Loan Bank Discount Corp.,
5.160%, 01/10/1999 50,000 50,000
---------------------------------------------------------------------------
50,000
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--90.0% SHARES
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AUSTRALIA--1.7% Broken Hill Proprietary Co., Ltd.
(PETROLEUM, MINERAL AND STEEL EXPLORATION
PRODUCTION) 501,700 5,179
WMC Ltd.
(MINERAL EXPLORATION AND PRODUCTION) 889,800 3,814
Woodside Petroleum Ltd.
(MAJOR OIL AND GAS PRODUCER) 317,300 1,910
---------------------------------------------------------------------------
10,903
- ------------------------------------------------------------------------------------------------------------------
CANADA--0.9% Canadian National Railway Co.
(RAILROAD OPERATOR) 197,400 5,991
---------------------------------------------------------------------------
5,991
- ------------------------------------------------------------------------------------------------------------------
FINLAND--2.6% Nokia OYJ
(MANUFACTURER OF TELECOMMUNICATION NETWORKS AND
EQUIPMENT) 108,200 12,413
Sonera Oyj
(TELECOMMUNICATION SERVICES) 142,700 4,295
---------------------------------------------------------------------------
16,708
- ------------------------------------------------------------------------------------------------------------------
FRANCE--15.8% AXA SA
(INSURANCE GROUP PROVIDING INSURANCE, FINANCE
AND REAL ESTATE SERVICES) 38,846 5,492
Carrefour SA
(HYPERMARKET OPERATOR AND FOOD RETAILER) 29,070 5,394
Christian Dior
(FASHION HOUSE) 25,275 4,535
(a)Club Mediterranee SA
(OPERATOR OF VACATION RESORTS) 10,591 1,063
Elf Aquitaine
(INTERNATIONAL OIL) 102,870 15,184
Etablissements Economiques du Casin Guichard-
Perrachon S.A.
(OPERATOR OF SUPERMARKETS AND CONVENIENCE
STORES) 65,100 5,058
Eurotunnel S.A., Rights
(DEVELOPER OF CHANNEL TUNNEL) 4,950,460 157
(a)Eurotunnel SA (Bearer)
(CHANNEL TUNNEL CONSORTIUM) 4,950,460 6,368
France Telecom SA
(TELECOMMUNICATION SERVICES) 51,353 4,973
LVMH (Louis Vuitton Moet Hennessy)
(PRODUCER OF WINES, SPIRITS AND LUXURY
PRODUCTS) 10,401 3,147
Lafarge SA
(PRODUCER OF CEMENT, CONCRETE AND AGGREGATES) 53,035 5,116
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pinault-Printemps-Redoute SA
(OPERATOR OF DEPARTMENT STORES) 25,261 $ 4,829
Renault SA
(MANUFACTURER OF AUTOMOBILES, BUSES INDUSTRIAL
AND AGRICULTURAL VEHICLE) 64,709 3,357
Rhodia SA
(DRUG MANUFACTURER AND CHEMICALS SPECIALIST) 265,135 5,129
Rhone-Poulenc SA "A"
(PHARMACEUTICAL COMPANY) 152,418 8,549
STMicroelectronics
(MANUFACTURER OF SEMICONDUCTOR INTEGRATED
CIRCUITS) 86,836 7,645
Schneider S.A.
(MANUFACTURER OF ELECTRONIC COMPONENTS AND
AUTOMATED MANUFACTURING SYSTEMS) 53,513 3,695
Societe BIC SA
(MANUFACTURER OF OFFICE SUPPLIES) 104,065 5,102
Societe Television Francaise 1
(TELEVISION BROADCASTING) 2,021 635
Suez Lyonnaise des Eaux
(WATER AND ELECTRIC UTILITY) 30,100 4,871
Union des Assurances Federales
(INSURANCE GROUP) 24,281 3,133
---------------------------------------------------------------------------
103,432
- ------------------------------------------------------------------------------------------------------------------
GERMANY--10.1% Allianz AG
(MULTI-LINE INSURANCE COMPANY) 16,299 4,975
BASF AG
(INTERNATIONAL CHEMICAL PRODUCER) 153,627 6,924
(a)Celanese AG
(MANUFACTURER AND DISTRIBUTOR OF INDUSTRIAL
CHEMICALS) 15,396 244
Commerzbank AG
(BANK) 83,600 3,195
Dresdner Bank AG
(BANK) 93,700 4,816
(a)Epcos AG
(PRODUCER OF ELECTRONIC COMPONENTS AND
INTEGRATED CIRCUITS) 47,239 1,941
Hoechst AG
(CHEMICAL PRODUCER) 153,964 6,793
HypoVereinsbank AG
(BANK) 67,380 4,433
Karstadt AG
(OPERATOR OF DEPARTMENT STORES) 74,500 3,377
Mannesmann AG (Registered)
(MANUFACTURER OF PRODUCTION MACHINE AND
ASSEMBLY SYSTEMS) 52,000 8,196
SAP AG (pfd.)
(COMPUTER SOFTWARE MANUFACTURER) 14,224 6,283
Siemens AG
(ELECTRICAL ENGINEERING AND ELECTRONICS
COMPANY) 97,146 8,742
VEBA AG
(ELECTRIC UTILITY, DISTRIBUTOR OF OIL AND
CHEMICALS) 113,360 6,144
---------------------------------------------------------------------------
66,063
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HONG KONG--1.3% Cheung Kong Holdings Ltd.
(REAL ESTATE COMPANY) 349,000 $ 3,179
Citic Pacific Ltd.
(DIVERSIFIED HOLDING COMPANY) 1,047,000 2,716
(a)New World China Land Ltd.
(PROPERTY DEVELOPMENT) 6,445 3
New World Development Co., Ltd.
(PROPERTY INVESTMENT AND DEVELOPMENT COMPANY) 1,289,000 2,439
---------------------------------------------------------------------------
8,337
- ------------------------------------------------------------------------------------------------------------------
ITALY--3.0% Arnoldo Mondadori Editore SpA
(BOOK PUBLISHER) 124,500 2,338
(a)Banca Nazionale del Lavoro
(BANK) 1,333,500 4,527
Class Editori SpA
(PUBLISHING HOUSE) 141,100 1,192
(a)Finmeccanica SpA
(DESIGNER AND DEVELOPER OF COMMERCIAL AND
MILITARY AIRCRAFT, SPACE SYSTEM AND AIR DEFENSE
SYSTEMS) 330,800 302
Gruppo Editoriale L'Espresso
(PUBLISHER) 140,100 3,050
Mediaset SpA
(BROADCASTING AND TELEVISION NETWORKS) 337,100 3,373
Seat Pagine Gialle SpA
(PUBLISHER OF TELECOMMUNICATIONS DIRECTORIES
AND PROVIDER OF ADVERTISING SERVICES) 5,086,400 4,885
---------------------------------------------------------------------------
19,667
- ------------------------------------------------------------------------------------------------------------------
JAPAN--28.1% Advantest Corp.
(PRODUCER OF MEASURING INSTRUMENTS AND
SEMICONDUCTOR TESTING DEVICES) 26,400 3,979
Asahi Glass Co., Ltd.
(MANUFACTURER OF GLASS PRODUCTS) 417,000 3,319
Benesse Corp.
(PROVIDER OF EDUCATIONAL SERVICES) 16,600 3,554
Canon Inc.
(PRODUCER OF VISUAL IMAGE AND INFORMATION
EQUIPMENT) 109,000 3,087
Daiwa Securities Co., Ltd.
(PROVIDER OF BROKERAGE AND OTHER FINANCIAL
SERVICES) 928,000 9,915
Fanuc Ltd.
(MANUFACTURER OF NUMERICALLY CONTROLLED
EQUIPMENT FOR MACHINE TOOLS) 26,200 2,037
Fuji Bank, Ltd.
(COMMERCIAL BANK) 540,000 7,413
Fujisawa Pharmaceutical Co.
(MANUFACTURER OF MARKETER OF ANTIBIOTICS) 49,000 1,228
Fujitsu Ltd.
(MANUFACTURER OF COMPUTERS) 310,000 9,344
Fujitsu Support and Service Inc.
(PROVIDER OF INFORMATION SERVICES) 8,000 2,250
Hitachi, Ltd.
(MANUFACTURER OF GENERAL ELECTRONIC PRODUCTS) 644,000 6,967
Komatsu Ltd.
(MANUFACTURER OF CONSTRUCTION MACHINERY) 181,000 1,053
Matsushita Electric Industrial Co., Ltd.
(MANUFACTURER OF CONSUMER ELECTRONIC PRODUCTS) 275,000 5,795
</TABLE>
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Murata Manufacturing Co., Ltd.
(MANUFACTURER OF CERAMIC APPLIED ELECTRONIC
COMPUTERS) 82,000 $ 10,548
NEC Corp.
(MANUFACTURER OF TELECOMMUNICATION AND COMPUTER
EQUIPMENT) 489,000 9,905
NSK Ltd.
(MANUFACTURER OF BEARINGS AND MOTOR VEHICLE
MACHINE PARTS) 377,000 3,022
NTT Mobile Communications Network, Inc.
(PROVIDER OF VARIOUS TELECOMMUNICATION SERVICES
AND EQUIPMENT) 615 16,354
Nikko Securities Co., Ltd.
(SECURITIES BROKER AND DEALER) 657,000 6,181
Nippon Telegraph & Telephone Corp.
(PROVIDER OF TELECOMMUNICATION SERVICES) 570 8,755
Nissan Motor Co., Ltd.
(MANUFACTURER OF MOTOR VEHICLES) 473,000 2,838
Nomura Securities Co., Ltd.
(FINANCIAL ADVISOR, SECURITIES BROKER AND
UNDERWRITER) 387,000 6,394
SMC Corp.
(MANUFACTURER OF DIRECTIONAL CONTROL DEVICES) 11,100 1,874
Sakura Bank, Ltd.
(BANK) 897,000 7,715
Sanwa Bank, Ltd.
(BANK) 269,000 4,005
Shin-Etsu Chemical Co., Ltd.
(PRODUCER AND DISTRIBUTOR OF SYNTHETIC RESINS
AND CHEMICALS) 101,000 4,169
Sony Corp.
(MANUFACTURER OF CONSUMER ELECTRONIC PRODUCTS) 58,000 9,053
Sumitomo Trust & Banking Co., Ltd.
(COMMERCIAL BANK) 736,000 7,532
TDK Corp.
(MANUFACTURER OF MAGNETIC TAPES AND FLOPPY
DISCS) 32,600 3,195
THK Co., Ltd.
(MANUFACTURER OF LINEAR MOTION SYSTEMS FOR
INDUSTRIAL MACHINERY) 57,900 1,895
Teijin Ltd.
(MANUFACTURER OF POLYESTER PRODUCTS 467,000 2,385
Tokyo Electron Ltd.
(MANUFACTURER OF SEMICONDUCTOR PRODUCTION
EQUIPMENT) 89,000 7,399
Toray Industries, Inc.
(MANUFACTURER OF SYNTHETIC FIBERS, LEATHER AND
POLYESTER FIL) 52,000 287
Toshiba Corp.
(MANUFACTURER OF ELECTRIC MACHINERY) 834,000 5,252
Yamanouchi Pharmaceutical Co., Ltd.
(PHARMACEUTICAL COMPANY) 90,000 4,086
---------------------------------------------------------------------------
182,785
- ------------------------------------------------------------------------------------------------------------------
KOREA--0.8% Dacom Corp.
(PROVIDER OF DOMESTIC, LONG-DISTANCE SERVICES,
AND INTERNET SERVICES IN KOREA) 2,350 288
Samsung Electronics Co., Ltd.
(ELECTRONICS MANUFACTURER) 30,510 5,087
---------------------------------------------------------------------------
5,375
</TABLE>
13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NETHERLANDS--4.9% AEGON Insurance Group NV
(INSURANCE COMPANY) 40,400 $ 3,738
Akzo Nobel NV
(PRODUCER AND MARKETER OF HEALTHCARE PRODUCTS,
COATINGS, CHEMICALS AND FIBERS) 88,570 3,823
(a)Equant NV
(PROVIDER OF INTERNATIONAL DATA NETWORK
SERVICES) 54,397 5,305
Fortis (NL) NVBank 84,600 2,919
Gucci Group NV (New York Shares) (Registered)
(DESIGNER AND PRODUCER OF PERSONAL LUXURY
ACCESSORIES AND APPAREL) 81,800 6,605
Heineken Holding NV "A"
(PRODUCER AND DISTRIBUTOR OF BEERS, SPIRITS,
WINES AND SOFT DRINKS) 18,980 690
Laurus NV
(INTERNATIONAL FOOD RETAILER) 124,520 2,777
(a)United Pan-Europe Communications N.V
(TELECOMMUNICATION SERVICES) 35,570 2,741
VNU NV
(INTERNATIONAL PUBLISHING COMPANY) 106,820 3,621
---------------------------------------------------------------------------
32,219
- ------------------------------------------------------------------------------------------------------------------
SINGAPORE--0.5% DBS Group Holdings Ltd.
(PROVIDER OF BANKING AND OTHER FINANCING
SERVICES) 161,657 1,829
Oversea-Chinese Banking Corp., Ltd.
(BANK) 185,850 1,397
---------------------------------------------------------------------------
3,226
- ------------------------------------------------------------------------------------------------------------------
SPAIN--0.7% (a)Telefonica Publicidad e Informacion S.A.
(PUBLISHER OF TELEPHONE DIRECTORIES) 16,346 357
Telefonica SA
(PROVIDER OF TELECOMMUNICATION SERVICES) 258,535 4,263
---------------------------------------------------------------------------
4,620
- ------------------------------------------------------------------------------------------------------------------
SWITZERLAND--2.1% Clariant AG (Registered)
(MANUFACTURER OF DYE CHEMICALS) 4,208 1,843
Nestle SA (Registered)
(FOOD MANUFACTURER) 2,894 5,588
Novartis AG (Registered)
(PHARMACEUTICAL COMPANY) 2,050 3,070
Roche Holdings AG (PC)
(PRODUCER OF DRUGS AND MEDICINES) 269 3,232
---------------------------------------------------------------------------
13,733
- ------------------------------------------------------------------------------------------------------------------
TAIWAN--0.8% (a)Taiwan Semiconductor Manufacturing Co.
(MANUFACTURER OF INTEGRATED CIRCUITS) 155,718 5,392
---------------------------------------------------------------------------
5,392
- ------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM--16.7% BOC Group plc
(PRODUCER OF INDUSTRIAL GASES) 221,822 4,780
BP Amoco plc
(EXPLORER AND PRODUCER OF OIL AND NATURAL GAS) 695,742 6,763
(a)Billiton PLC
(RESOURCE GROUP THAT EXPLORES, PRODUCES AND
MARKETS ALUMINUM AND OTHER METAL PRODUCTS) 648,317 2,826
</TABLE>
14
<PAGE> 15
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Carlton Communications PLC
(TELEVISION POST PRODUCTION PRODUCT AND
SERVICES) 152,905 $ 1,107
General Electric Co., plc
(MANUFACTURER OF POWER, COMMUNICATIONS AND
DEFENSE EQUIPMENT) 566,403 6,172
Glaxo Wellcome PLC
(PHARMACEUTICAL COMPANY) 151,957 4,489
J Sainsbury plc
(RETAIL DISTRIBUTOR OF FOOD THROUGH
SUPERMARKETS) 895,000 5,381
Marks & Spencer, plc
(RETAILER OF CONSUMER GOODS AND FOODS) 1,000,000 4,622
(a) Orange plc
(OPERATOR OF DIGITAL MOBILE TELEPHONE NETWORK) 523,600 13,022
Prudential Corp. PLC
(PROVIDER OF BROAD RANGE OF FINANCIAL SERVICES) 466,385 7,318
Reed International PLC
(PUBLISHER OF SCIENTIFIC, PROFESSIONAL AND
BUSINESS TO BUSINESS MATERIALS) 921,850 5,413
Rentokil Initial PLC
(ENVIRONMENTAL SERVICES COMPANY) 1,061,406 3,557
Reuters Group plc
(INTERNATIONAL NEWS AND INFORMATION AGENCY) 694,448 6,396
Rio Tinto PLC (Registered)
(MINING COMPANY) 621,387 10,619
Royal & Sun Alliance Insurance Group plc
(INSURANCE COMPANY) 476,142 3,242
Shell Transport & Trading plc
(PETROLEUM COMPANY) 1,040,512 7,975
SmithKline Beecham PLC
(MANUFACTURER OF ETHICAL DRUGS AND HEALTHCARE
PRODUCTS) 312,790 4,039
Standard Chartered PLC
(INTERNATIONAL BANKING GROUP OPERATING
GLOBALLY) 368,463 5,163
Vodafone Group PLC
(PROVIDER OF TELECOMMUNICATION SERVICES) 1,317,100 6,141
---------------------------------------------------------------------------
109,025
---------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost $496,795) 587,476
---------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost $561,901) $652,582
---------------------------------------------------------------------------
</TABLE>
15
<PAGE> 16
PORTFOLIO OF INVESTMENTS
At October 31, 1999, the fund's portfolio of investments had the following
industry diversification (dollars in thousands):
<TABLE>
<CAPTION>
VALUE %
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Financial $113,670 17.4
- -----------------------------------------------------------------------------------------
Manufacturing 101,645 15.6
- -----------------------------------------------------------------------------------------
Technology 85,514 13.1
- -----------------------------------------------------------------------------------------
Communication 73,602 11.3
- -----------------------------------------------------------------------------------------
Consumer Staples 37,541 5.8
- -----------------------------------------------------------------------------------------
Energy 31,832 4.9
- -----------------------------------------------------------------------------------------
Service Industry 29,676 4.6
- -----------------------------------------------------------------------------------------
Consumer Discretionary 24,579 3.8
- -----------------------------------------------------------------------------------------
Metals & Minerals 22,438 3.4
- -----------------------------------------------------------------------------------------
Health 20,144 3.1
- -----------------------------------------------------------------------------------------
Media 11,694 1.7
- -----------------------------------------------------------------------------------------
Constructions 11,640 1.7
- -----------------------------------------------------------------------------------------
Utilities 11,014 1.7
- -----------------------------------------------------------------------------------------
Durables 6,496 1.0
- -----------------------------------------------------------------------------------------
Transportation 5,991 0.9
- -----------------------------------------------------------------------------------------
TOTAL COMMON STOCK 587,476 90.0
- -----------------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS 65,106 10.0
- -----------------------------------------------------------------------------------------
TOTAL INVESTMENTS $652,582 100.0
- -----------------------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
(b) Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities. The collateral is monitored daily by the fund
so that its market value is at least equal to the minimum carrying value of
the repurchase agreement.
Based on the cost of investments of $561,901,000 for federal income tax purposes
at October 31, 1999, the gross unrealized appreciation was $113,103,000, the
gross unrealized depreciation was $22,422,000 and the net unrealized
appreciation on investments was $90,681,000.
See accompanying Notes to Financial Statements.
16
<PAGE> 17
FINANCIAL STATEMENTS
STATEMENT OF ASSETS & LIABILITIES
October 31, 1999
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------
Investment securities, at value, (cost $561,901) $652,582
- ------------------------------------------------------------------------
Receivable for investments sold 2,290
- ------------------------------------------------------------------------
Dividends and interest 929
- ------------------------------------------------------------------------
Receivable for Fund shares sold 14,660
- ------------------------------------------------------------------------
Foreign taxes recoverable 537
- ------------------------------------------------------------------------
Reimbursement from Adviser 5,185
- ------------------------------------------------------------------------
TOTAL ASSETS 676,183
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------
Payable for investments purchased 8,676
- ------------------------------------------------------------------------
Due to custodian bank 249
- ------------------------------------------------------------------------
Payable for Fund shares redeemed 7,691
- ------------------------------------------------------------------------
Accrued management fee 368
- ------------------------------------------------------------------------
Other accrued expenses 988
- ------------------------------------------------------------------------
Total liabilities 17,972
- ------------------------------------------------------------------------
NET ASSETS $658,211
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- ------------------------------------------------------------------------
Undistributed net investment income (loss) $ 5
- ------------------------------------------------------------------------
Paid-in capital 521,770
- ------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
securities and foreign currency transactions 95,862
- ------------------------------------------------------------------------
Accumulated net realized gain (loss) 40,574
- ------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $658,211
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
NET ASSETS VALUE
- ------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($464,213 / 36,136 shares outstanding) $12.85
- ------------------------------------------------------------------------
Maximum offering price per share (net asset value, plus
6.10% of net asset value or 5.75% of offering price) $13.63
- ------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge) per share
($138,518 / 11,084 shares outstanding) $12.50
- ------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge) per share
($40,895 / 3,270 shares outstanding) $12.51
- ------------------------------------------------------------------------
CLASS I SHARES
Net asset value and redemption price
($14,585 / 1,122 shares outstanding) $13.01
- ------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
17
<PAGE> 18
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Year Ended October 31, 1999
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
INVESTMENT INCOME
- ------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $703) $ 7,088
- ------------------------------------------------------------------------
Interest 1,579
- ------------------------------------------------------------------------
8,667
- ------------------------------------------------------------------------
Expenses:
Management fee 4,348
- ------------------------------------------------------------------------
Services to shareholders 2,277
- ------------------------------------------------------------------------
Custodian fees 553
- ------------------------------------------------------------------------
Trustees' fees 30
- ------------------------------------------------------------------------
Reports to shareholders 400
- ------------------------------------------------------------------------
Auditing 110
- ------------------------------------------------------------------------
Legal 40
- ------------------------------------------------------------------------
Registration fees 108
- ------------------------------------------------------------------------
Interest expense 87
- ------------------------------------------------------------------------
Distribution fees 1,224
- ------------------------------------------------------------------------
Administrative services fees 1,374
- ------------------------------------------------------------------------
Other 99
- ------------------------------------------------------------------------
Total expenses before reductions 10,650
- ------------------------------------------------------------------------
Expense reductions (42)
- ------------------------------------------------------------------------
Expenses, net 10,608
- ------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (1,941)
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
- ------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currency related transactions 77,530
- ------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
on investment securities and foreign currency related
transactions 66,100
- ------------------------------------------------------------------------
Net gain on investment and foreign currency related
transactions 143,630
- ------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $141,689
- ------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1999 OCTOBER 31, 1998
- -----------------------------------------------------------------------------------------------------------
OPERATIONS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income (loss) $ (1,941) 462
- -----------------------------------------------------------------------------------------------------------
Net realized gain 77,530 88,163
- -----------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) 66,100 (74,800)
- -----------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 141,689 13,825
- -----------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net investment income 0 (2,673)
- -----------------------------------------------------------------------------------------------------------
From net realized gains (88,457) (26,096)
- -----------------------------------------------------------------------------------------------------------
Total dividends to shareholders (88,457) (27,769)
- -----------------------------------------------------------------------------------------------------------
Net increase from capital share transactions 295 30,559
- -----------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS 53,527 16,615
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------------
Net assets at beginning of year 604,684 588,069
- -----------------------------------------------------------------------------------------------------------
NET ASSETS AT END OF YEAR (including undistributed net
investment income of $5 for the year ended October 31,
1999) $658,211 604,684
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
18
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE
FUND Kemper International Fund ("the Fund") is
registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end,
diversified management investment company organized
as a Massachusetts business trust. The Fund offers
multiple classes of shares. Class A shares are
offered to investors subject to an initial sales
charge. Class B shares are offered without an
initial sales charge but are subject to higher
ongoing expenses than Class A shares and contingent
deferred sales charge payable upon certain
redemptions. Class B shares automatically convert
to Class A six years after issuance. Class C shares
are offered without an initial sales charge but are
subject to higher ongoing expenses than Class A
shares and a contingent deferred sales charge
payable upon certain redemptions within one year of
purchase. Class C shares do not convert into
another class. Class I shares are offered to a
limited group of investors, are not subject to
initial or contingent deferred sales charge and
have lower ongoing expenses than other classes.
Investment income, realized and unrealized gains
and losses, and certain fund level expenses and
expense reductions, if any, are borne pro rata on
the basis of relative net assets by the holders of
all classes of shares except that each class bears
certain expenses unique to that class such as
distribution services, shareholder services,
administrative services and certain other class
specific expenses. Differences in class expenses
may result in payment of different per share
dividends by class. All shares of the Fund have
equal rights with respect to voting subject to
class specific arrangements.
The Fund's financial statements are prepared in
accordance with generally accepted accounting
principles which require the use of management
estimates. The policies described below are
followed consistently by the Fund in the
preparation of its financial statements.
- --------------------------------------------------------------------------------
2 SIGNIFICANT
ACCOUNTING POLICIES SECURITY VALUATION. Investments are stated at value
determined as of the close of regular trading on
the New York Stock Exchange. Securities which are
traded on U.S. or foreign stock exchanges are
valued at the most recent sale price reported on
the exchange on which the security is traded most
extensively. If no sale occurred, the security is
then valued at the calculated mean between the most
recent bid and asked quotations. If there are no
such bid and asked quotations, the most recent bid
quotation is used. Securities quoted on the Nasdaq
Stock Market (Nasdaq), for which there have been
sales, are valued at the most recent sale price
reported. If there are no such sales, the value is
the most recent bid quotation. Securities which are
not quoted on Nasdaq but are traded in another
over-the-counter market are valued at the most
recent sale price, or if no sale occurred, at the
calculated mean between the most recent bid and
asked quotations on such market. If there are no
such bid and asked quotations, the most recent bid
quotation shall be used. Portfolio debt securities
purchased with an original maturity greater than
sixty days are valued by pricing agents approved by
the officers of the Trust, whose quotations reflect
broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents
are unable to provide such quotations, the most
recent bid quotation supplied by a bona fide market
maker shall be used. Money market instruments
purchased with an original maturity of sixty days
or less are valued at amortized cost.
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
FOREIGN CURRENCY TRANSLATIONS. The books and
records of the fund are maintained in U.S. dollars.
Investment securities and other assets and
liabilities denominated in a foreign currency are
translated into U.S. dollars at the prevailing
exchange rates at period end. Purchases and sales
of investment securities, income and expenses are
translated into U.S. dollars at the prevailing
exchange rates on the respective dates of the
transactions.
Net realized and unrealized gains and losses on
foreign currency transactions represent net gains
and losses from sales and maturities of forward
foreign currency exchange contracts, disposition of
foreign currencies, and the difference between the
amount of net investment income accrued and the
U.S. dollar amount actually received. That portion
of both realized and unrealized gains and losses on
investments that results from fluctuations in
foreign currency exchange rates is not separately
disclosed but is included with net realized and
unrealized gains and losses on investment
securities.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date. 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. Realized
gains and losses from investment transactions are
reported on an identified cost basis.
FEDERAL INCOME TAXES. The fund's policy is to
comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to
regulated investment companies, and to distribute
all of its taxable income to its shareholders.
Accordingly, the fund paid no federal income taxes
and no federal income tax provision was required.
DISTRIBUTION OF INCOME AND GAINS. Distributions of
net investment, income, if any, are made annually
which are recorded on the ex-dividend date. Net
realized gains from investment transactions, in
excess of available capital loss carryforwards,
would be taxable to the Fund if not distributed,
and, therefore, will be distributed to shareholders
at least annually.
The timing and characterization of certain income
and capital gains distributions are determined
annually in accordance with federal tax regulations
which may differ from generally accepted accounting
principles. As a result, net investment income
(loss) and net realized gain (loss) on investment
transactions for a reporting period may differ
significantly from distributions during such
period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital
accounts without impacting the net asset value of
the Fund.
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The fund has a management
agreement with Scudder Kemper Investments, Inc.
(Scudder Kemper) and pays a monthly investment
management fee of 1/12 of the annual rate of .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 $4,348,000 for the
year ended October 31, 1999. Scudder Investments
(U.K.) Ltd, an affiliate of Scudder Kemper serves
as sub-advisor for the fund and is paid by Scudder
Kemper for its services. Scudder Kemper pays a
monthly sub-advisory fee of 1/12 of the annual rate
of .35% of the Fund's net assets. For the year
ended October 31, 1999, Scudder Kemper paid
$2,063,000 in sub-advisory fees to Scudder
20
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
Investments (U.K.) Ltd. In addition, during the
year ended October 31, 1999, the Fund has a
receivable of $5,185,000 from the Adviser to
reimburse the Fund for losses incurred in
connection with certain portfolio transactions.
UNDERWRITING AND DISTRIBUTION SERVICES
AGREEMENT. The fund has an underwriting and
distribution services agreement with Kemper
Distributors, Inc. (KDI). Underwriting commissions
retained by KDI in connection with the distribution
of Class A for year ended October 31, 1999 are
$71,000.
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 separate Rule 12b-1 plans for
the Class B and Class C shares. Pursuant to the
agreement, KDI enters into related selling group
agreements with various firms at various rates for
sales of Class B and Class C shares. In addition,
KDI receives any contingent deferred sales charges
(CDSC) from redemptions of Class B and Class C
shares. Distribution fees and CDSC received by KDI
for the year ended October 31, 1999 are $1,656,000
of which $213,000 is unpaid.
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 paid by the
fund to KDI for the year ended October 31, 1999 are
$1,374,000, of which $216,000 is unpaid. $2,000 was
paid by KDI to affiliates.
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
$1,795,000 of which $196,000 is unpaid for the year
ended October 31, 1999.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the fund are also officers or directors of
Scudder Kemper. For the year ended October 31,
1999, the fund made no payments to its officers and
incurred trustees' fees of $30,000 to independent
trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the year ended October 31, 1999, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $792,655
Proceeds from sales 896,749
21
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the fund (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, 1999
1999 1998
------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 204,101 $ 2,385,886 99,055 $ 1,307,871
------------------------------------------------------------------------------------
Class B 4,540 52,195 6,108 79,630
------------------------------------------------------------------------------------
Class C 26,283 302,284 6,453 83,701
------------------------------------------------------------------------------------
Class I 476 5,899 837 11,244
------------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 5,044 55,843 1,539 18,354
-----------------------------------------------------------------------------------
Class B 1,808 19,579 504 5,970
-----------------------------------------------------------------------------------
Class C 309 3,350 57 669
-----------------------------------------------------------------------------------
Class I 204 2,276 81 964
-----------------------------------------------------------------------------------
SHARES REDEEMED
Class A (208,883) (2,452,808) (98,869) (1,319,184)
-----------------------------------------------------------------------------------
Class B (5,963) (67,875) (5,480) (71,221)
-----------------------------------------------------------------------------------
Class C (25,534) (294,934) (5,630) (73,743)
-----------------------------------------------------------------------------------
Class I (931) (11,400) (1,023) (13,696)
-----------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 810 9,453 1,040 13,781
-----------------------------------------------------------------------------------
Class B (830) (9,453) (1,053) (13,781)
-----------------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $ 295 $ 30,559
-----------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
6 EXPENSE OFF-SET
ARRANGEMENTS The Fund has entered into arrangements with its
custodian whereby credits realized as a result of
uninvested cash balances were used to reduce a
portion of the Fund's expenses. During the period,
the Fund's custodian fees were reduced by $42,000
under these arrangements.
- --------------------------------------------------------------------------------
7 LINE OF CREDIT The Fund and several Kemper funds (the
"Participants") share in a $750 million revolving
credit facility for temporary or emergency
purposes, including the meeting of redemption
requests that otherwise might require the untimely
disposition of securities. The Participants are
charged an annual commitment fee which is allocated
pro rata among each of the Participants. Interest
is calculated based on the market rates at the time
of the borrowing. The Fund may borrow up to a
maximum of 33% percent of its net assets under the
agreement.
- --------------------------------------------------------------------------------
8 BORROWINGS The weighted average outstanding daily balance of
all loans (based on the number of days the loans
were outstanding) was approximately $14,932,000,
with an average interest rate of 5.61%. Interest
for the year ended October 31, 1999 is $87,000. The
maximum borrowings outstanding during the year
ended October 31, 1999 is $22,650,000.
22
<PAGE> 23
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-----------------------------------------
CLASS A
-----------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------
Net asset value, beginning of year $12.10 12.68 11.96 10.59 11.13
- ------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.01) .04 -- .04 .07
- ------------------------------------------------------------------------------------
Net realized and unrealized gain 2.57 .01 1.52 1.50 .05
- ------------------------------------------------------------------------------------
Total from investment operations 2.56 .05 1.52 1.54 .12
- ------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- .08 .12 .12 --
- ------------------------------------------------------------------------------------
Distribution from net realized gain 1.81 .55 .68 .05 .66
- ------------------------------------------------------------------------------------
Total dividends 1.81 .63 .80 .17 .66
- ------------------------------------------------------------------------------------
Net asset value, end of year $12.85 12.10 12.68 11.96 10.59
- ------------------------------------------------------------------------------------
TOTAL RETURN 23.47%(A) .45 13.49 14.70 1.69
- ------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------------
Expenses, before expense reductions 1.59 1.64 1.57 1.64 1.57
- ------------------------------------------------------------------------------------
Expenses, net 1.59% 1.64 1.57 1.64 1.57
- ------------------------------------------------------------------------------------
Net investment income (loss) (.12)% .36 .16 .34 .83
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------
CLASS B
-----------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------
Net asset value, beginning of year $11.90 12.50 11.81 10.46 11.09
- ------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.11) (.08) (.12) (.06) (.02)
- ------------------------------------------------------------------------------------
Net realized and unrealized gain 2.52 .03 1.51 1.47 .05
- ------------------------------------------------------------------------------------
Total from investment operations 2.41 (.05) 1.39 1.41 .03
- ------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- -- .02 .01 --
- ------------------------------------------------------------------------------------
Distribution from net realized gain 1.81 .55 .68 .05 .66
- ------------------------------------------------------------------------------------
Total dividends 1.81 .55 .70 .06 .66
- ------------------------------------------------------------------------------------
Net asset value, end of period $12.50 11.90 12.50 11.81 10.46
- ------------------------------------------------------------------------------------
TOTAL RETURN 22.50%(A) (.37) 12.32 13.59 .84
- ------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------------
Expenses, before expense reductions 2.44 2.62 2.57 2.53 2.50
- ------------------------------------------------------------------------------------
Expenses, net 2.43% 2.62 2.57 2.53 2.50
- ------------------------------------------------------------------------------------
Net investment income (loss) (.96)% (.62) (.84) (.55) (.10)
- ------------------------------------------------------------------------------------
</TABLE>
23
<PAGE> 24
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------------
CLASS C
--------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------
Net asset value, beginning of period $11.91 12.51 11.81 10.46 11.09
- ---------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.10) (.08) (.09) (.06) (.02)
- ---------------------------------------------------------------------------------
Net realized and unrealized gain 2.51 .03 1.49 1.47 .05
- ---------------------------------------------------------------------------------
Total from investment operations 2.41 (.05) 1.40 1.41 .03
- ---------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- -- .02 .01 --
- ---------------------------------------------------------------------------------
Distribution from net realized gain 1.81 .55 .68 .05 .66
- ---------------------------------------------------------------------------------
Total dividends 1.81 .55 .70 .06 .66
- ---------------------------------------------------------------------------------
Net asset value, end of period $12.51 11.91 12.51 11.81 10.46
- ---------------------------------------------------------------------------------
TOTAL RETURN 22.49%(A) (.37) 12.45 13.59 .84
- ---------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------
Expense, before expense reductions 2.33% 2.55 2.49 2.50 2.50
- ---------------------------------------------------------------------------------
Expenses, net 2.32% 2.55 2.49 2.50 2.50
- ---------------------------------------------------------------------------------
Net investment income (loss) (.85)% (.55) (.76) (.52) (.10)
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS I
--------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998 1997 1996
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------
Net asset value, beginning of period $12.16 12.72 11.99 10.61
- ---------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .05 .11 .07 .10
- ---------------------------------------------------------------------------------
Net realized and unrealized gain 2.61 .03 1.53 1.48
- ---------------------------------------------------------------------------------
Total from investment operations 2.66 .14 1.60 1.58
- ---------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- .15 .19 .15
- ---------------------------------------------------------------------------------
Distribution from net realized gain 1.81 .55 .68 .05
- ---------------------------------------------------------------------------------
Total dividends 1.81 .70 .87 .20
- ---------------------------------------------------------------------------------
Net asset value, end of period $13.01 12.16 12.72 11.99
- ---------------------------------------------------------------------------------
TOTAL RETURN 24.25%(A) 1.18 14.19 15.19
RATIOS TO AVERAGE NET ASSETS
Expenses, before expense reductions 1.03% 1.00 1.04 1.10
- ---------------------------------------------------------------------------------
Expenses, net 1.02% 1.00 1.04 1.10
- ---------------------------------------------------------------------------------
Net investment income (loss) .45% 1.00 .69 .88
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
- -----------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- -----------------------------------------------------------------------------------------------
Net assets at end of year (in thousands) $658,211 604,684 588,069 472,243 364,708
- -----------------------------------------------------------------------------------------------
Portfolio turnover rate 140% 105 76 104 114
- -----------------------------------------------------------------------------------------------
</TABLE>
NOTES: Total return does not reflect the effect of any sales charges. Per share
data were determined based on average shares outstanding for the years ended
1995, 1996 and 1998, respectively.
(a) If the Adviser had not reimbursed the Fund (Note 3), the total return for
the year ended October 31, 1999 would have been lower.
24
<PAGE> 25
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER INTERNATIONAL FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper International Fund as of
October 31, 1999, and the related statements of operations for the year then
ended, and changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the fiscal periods since 1995.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
October 31, 1999, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Kemper
International Fund at October 31, 1999, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the fiscal periods
since 1995 in conformity with generally accepted accounting principles.
ERNST & YOUNG LOGO
Chicago, Illinois
December 15, 1999
25
<PAGE> 26
TAX INFORMATION
- --------------------------------------------------------------------------------
TAX INFORMATION
- --------------------------------------------------------------------------------
The fund paid a distribution of $1.81 per share from net long-term capital gains
during the year ended October 31, 1999, of which 100% represent 20% rate gains.
Pursuant to Section 852 of the Internal Revenue Code, the fund designates
$58,000,000 as capital gain dividends for the year ended October 31, 1999, of
which 100% represent 20% rate gains.
The fund paid foreign taxes of $955,697 and earned $955,697 of foreign source
income during the year ended October 31, 1998. Pursuant to Section 853 of the
Internal Revenue Code, the fund designates $.02 per share as foreign taxes paid
and $.02 per share as income earned from foreign sources for the year ended
October 31, 1999.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your Kemper Fund account, please call 1-800-621-1043.
26
<PAGE> 27
NOTES
27
<PAGE> 28
TRUSTEES & OFFICERS
TRUSTEES OFFICERS
JOHN W. BALLANTINE MARK S. CASADY MAUREEN E. KANE
Trustee President Assistant Secretary
LEWIS A. BURNHAM PHILIP J. COLLORA CAROLINE PEARSON
Trustee Vice President and Assistant Secretary
Secretary
DONALD L. DUNAWAY BRENDA LYONS
Trustee JOHN R. HEBBLE Assistant Treasurer
Treasurer
ROBERT B. HOFFMAN
Trustee ANN M. MCCREARY
Vice President
DONALD R. JONES
Trustee KATHRYN L. QUIRK
Vice President
THOMAS W. LITTAUER
Trustee and Vice President LINDA J. WONDRACK
Vice President
SHIRLEY D. PETERSON
Trustee
CORNELIA SMALL
Trustee and Vice President
WILLIAM P. SOMMERS
Trustee
- --------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 219557
Kansas City, MO 64121
- --------------------------------------------------------------------------------
CUSTODIAN THE CHASE MANHATTAN BANK
Chase Metro Center
Brooklyn, NY 11245
- --------------------------------------------------------------------------------
TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
801 Pennsylvania Avenue
Kansas City, MO 64105
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
- --------------------------------------------------------------------------------
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606
www.kemper.com
[KEMPER FUNDS LOGO]
Long-term investing in a short-term world(SM)
Printed on recycled paper in the U.S.A.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Global and International Funds prospectus.
KIF -2(12/23/99) 1096620
