<PAGE> 1
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED APRIL 30, 2000
Seeking total return, a combination of capital growth and income, principally
through an internationally diversified portfolio of equity securities.
KEMPER
INTERNATIONAL FUND
"... For the semiannual period, in both Europe and Japan, industrial
reorganization continued through corporate restructuring, and consolidation
activity thrived. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
8
LARGEST HOLDINGS
9
PORTFOLIO OF INVESTMENTS
16
FINANCIAL STATEMENTS
19
FINANCIAL HIGHLIGHTS
21
NOTES TO FINANCIAL STATEMENTS
AT A GLANCE
KEMPER INTERNATIONAL FUND
TOTAL RETURNS
FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 2000 (UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
<TABLE>
<S> <C>
Kemper International Fund Class A 11.06
Kemper International Fund Class B 10.63
Kemper International Fund Class C 10.7
Lipper International Funds Category Average* 14.17
</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.
NET ASSET VALUE
<TABLE>
<CAPTION>
AS OF AS OF
4/30/00 10/31/99
.........................................................
<S> <C> <C> <C> <C>
KEMPER INTERNATIONAL FUND
CLASS A $13.34 $12.85
.........................................................
KEMPER INTERNATIONAL FUND
CLASS B $12.90 $12.50
.........................................................
KEMPER INTERNATIONAL FUND
CLASS C $12.92 $12.51
.........................................................
</TABLE>
KEMPER INTERNATIONAL FUND
LIPPER RANKINGS AS OF 4/30/00*
COMPARED WITH ALL OTHER FUNDS IN THE LIPPER INTERNATIONAL FUNDS CATEGORY
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
..........................................................................................
<S> <C> <C> <C> <C> <C>
1-YEAR #282 of 648 funds #297 of 648 funds #295 of 648 funds
..........................................................................................
5-YEAR #91 of 253 funds #121 of 253 funds #120 of 253 funds
..........................................................................................
10-YEAR #28 of 44 funds N/A N/A
..........................................................................................
15-YEAR #10 of 19 funds N/A N/A
..........................................................................................
</TABLE>
DIVIDEND REVIEW
DURING THE PERIOD, KEMPER INTERNATIONAL FUND PAID THE FOLLOWING DIVIDENDS PER
SHARE:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
.................................................................................................
<S> <C> <C> <C> <C> <C>
LONG-TERM CAPITAL GAIN $0.67 $0.67 $0.67
.................................................................................................
</TABLE>
INVESTMENT IN FOREIGN SECURITIES PRESENTS SPECIAL RISK CONSIDERATIONS INCLUDING
FLUCTUATING CURRENCY EXCHANGE RATES, GOVERNMENT REGULATIONS AND DIFFERENCES IN
LIQUIDITY.
*LIPPER, INC. RETURNS AND RANKINGS ARE BASED UPON CHANGES IN NET ASSET VALUE
WITH ALL DIVIDENDS REINVESTED AND DO NOT INCLUDE THE EFFECT OF SALES CHARGES; IF
SALES CHARGES HAD BEEN INCLUDED, RESULTS MIGHT HAVE BEEN LESS FAVORABLE.
TERMS TO KNOW
YOUR FUND'S STYLE
MORNINGSTAR INTERNATIONAL EQUITY STYLE BOX(TM)
<TABLE>
<S> <C>
[MORNINGSTAR EQUITY STYLE Morningstars International Equity Style Box(TM)
BOX] placement is based on a fund's price-to-earnings
and price-to-cash-flow ratios relative to the
MSCI EAFE, as well as the size of the companies
in which it invests, or median market capitaliza-
tion. The style box represents a snapshot of a
fund's port- folio on a single day, but it's not
exact because a portfolio changes from day to
day. A longer-term view is represented by the
fund's Morningstar category, which is based on
actual investment style as measured by the fund's
underlying holdings over the past three years.
</TABLE>
CURRENCY WEAKNESS A significant decline of a currency's value relative to other
currencies, such as the U.S. dollar. Weakness may be prompted by trading or
central bank intervention (or the lack of intervention) in the currency markets.
For U.S. investors who are investing overseas, a weakness in a foreign currency
can have the effect of reducing an investment's total return because the
investment, converted back into U.S. dollars, will require more of the foreign
currency to purchase dollars.
OVERWEIGHTING/UNDERWEIGHTING The allocation of assets -- usually in terms of
sector, industry or country -- within a portfolio relative to the portfolio's
benchmark index or investment universe.
RESTRUCTURING Implementation of major corporate changes aimed at greater
efficiency and adaptation to changing markets. Cost-cutting initiatives, debt
retirement, management realignments and the sale of noncore businesses are all
developments frequently associated with corporate restructuring.
<PAGE> 3
ECONOMIC OVERVIEW
SCUDDER KEMPER INVESTMENTS, THE INVESTMENT MANAGER FOR KEMPER FUNDS, IS ONE OF
THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS IN THE
WORLD, MANAGING MORE THAN $290 BILLION IN ASSETS FOR INSTITUTIONAL AND CORPORATE
CLIENTS, RETIREMENT AND PENSION PLANS, INSURANCE COMPANIES, MUTUAL FUND
INVESTORS AND INDIVIDUALS. SCUDDER KEMPER INVESTMENTS OFFERS A FULL RANGE OF
INVESTMENT COUNSEL AND ASSET MANAGEMENT CAPABILITIES BASED ON A COMBINATION OF
PROPRIETARY RESEARCH AND DISCIPLINED, LONG-TERM INVESTMENT STRATEGIES.
DEAR KEMPER FUNDS SHAREHOLDER,
As we enter summer, there isn't much to complain about. For all the yammering
about the "new" economy, the old economy is doing pretty well. Consumers may
hanker for a new GPS handset or a Palm Pilot, but they lust after a suburban
mansion with a garage big enough to hold their luxury car and SUV -- and state
and local governments are laying old-fashioned asphalt almost as fast as
businesses are building the information superhighway. Satisfying both old and
new desires got the economy off to a fast start in the new century -- GDP growth
rose at an annual rate of more than 5 percent in the first quarter. Even with a
modest slowdown possible in the second half, growth for the year 2000 is likely
to be close to 5 percent.
So everyone is happy, right? Well, almost everyone. Consumers seldom have felt
so confident; businesspeople seldom have behaved so expansively. But there's
still one grump: Federal Reserve Board Chairman Alan Greenspan, who's become
increasingly worried that rapid growth will bring on inflation, and raised
interest rates by half a percentage point (0.50%) accordingly on May 16. The
Fed's move puts the benchmark federal funds rate at 6.5 percent, its highest
level since February 1991, and the more symbolic discount rate at 6.0 percent.
Despite Greenspan's attempt to slow spending by raising interest rates,
consumers are still splurging, and they show few signs of stopping. We know this
because shoppers are buying the big-ticket items they usually purchase early in
a cycle -- items such as personal computers, mobile phones, jewelry, fancy
kitchen appliances, exercise equipment and big boats. Why are consumers still
buying despite Greenspan's attempts to slow their splurging? There are three
answers: deflation, wealth and easy credit.
Falling prices have made big-ticket items almost irresistible. Since 1997,
prices of kitchen appliances have fallen 4.5 percent, TVs and VCRs 16 percent
and sporting equipment 6.5 percent. Even auto showrooms no longer produce
sticker shock, and drivers have responded with gusto, buying a record 16.9
million cars and light trucks in 1999. 2000 is likely to be the first year in
which automotive sales top 17 million.
Some of that spending has been made possible by stock market gains: Wall
Street has handed out windfalls to almost anyone holding equities in the past
few years. But consumers who don't own stocks are also spending, thanks to a
decade of debt. Young, poor or new to America? In the 1990s, it didn't matter;
lenders still loved you. While high-income families have been borrowing less,
those lower on the income scale have been borrowing more.
But it's not just consumers that Greenspan is concerned about; businesses are
splurging as well. During 1999, businesses increased spending on computers and
peripherals by 35 percent and spending on communications equipment by 25 percent
(both after adjusting for price declines). Far from slowing down this year, we
expect investment in these two categories to accelerate -- to 40 percent growth
for computers and 30 percent growth for communications equipment.
And just like consumers, businesses are borrowing to buy. You may think that
with booming sales, entrepreneurs are cash-rich and can afford it. But while
1999 saw economy-wide earnings jump 10 percent and profits of Standard and
Poor's (S&P) 500 companies leap nearly 14 percent, internal cash covered less
than 84 percent of capital spending. With the exception of 1998, that's the
lowest on record. Last year alone, corporate debt shot up by more than 11
percent to $560 billion. And new economy companies are no exception; they have
more debt than most people realize, issuing more than half of all convertible
bonds.
All this debt could cause problems. Although we've increased our 2001
inflation outlook to nearly 3 percent -- an entire percentage point higher than
our prediction three months ago -- we're not particularly worried about
inflation. It's the heavy borrowing we're concerned about. Debt continues to
exceed income growth, and when Greenspan succeeds in slowing the economy with
higher interest rates (which he will succeed in doing), all of the debt American
consumers and businesses are taking on could be tricky to handle. Private
financial obligations must be paid with personal income and corporate profits.
When the economy slows, personal income stagnates and corporate profits often
fall -- which makes it harder to pay off those debts. Consumers and businesses
may have to sell their assets to pay off the debt, and they may risk going into
default.
That being the case, a gradual economic slowdown may be in everyone's best
interest. But "gradual" is the key. Both the old and new economy have a lot
riding on the Fed's ability to rein in growth softly and smoothly, because
abrupt slowdowns encourage consumers and businesses to sell assets -- and
perhaps risk bankruptcy -- to pay off debt, as described above.
A gradual slowdown seems to be what the Fed is seeking, but for all of
Greenspan's semi-tough talk, some indicators suggest that monetary policy has
actually been lax. Broad money and credit creation have vastly exceeded
economic activity since 1995, and no central bank can allow that to continue
indefinitely without creating
3
<PAGE> 4
ECONOMIC OVERVIEW
ECONOMIC GUIDEPOSTS
ECONOMIC ACTIVITY IS A KEY INFLUENCE ON INVESTMENT PERFORMANCE AND
SHAREHOLDER DECISION-MAKING. PERIODS OF RECESSION OR BOOM, INFLATION OR
DEFLATION, CREDIT EXPANSION OR CREDIT CRUNCH HAVE A SIGNIFICANT IMPACT ON
MUTUAL FUND PERFORMANCE.
THE FOLLOWING ARE SOME SIGNIFICANT ECONOMIC GUIDEPOSTS AND THEIR
INVESTMENT RATIONALE THAT MAY HELP YOUR INVESTMENT DECISION-MAKING. THE
10-YEAR TREASURY RATE AND THE PRIME RATE ARE PREVAILING INTEREST RATES.
THE OTHER DATA REPORT YEAR-TO-YEAR PERCENTAGE CHANGES.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (5/31/00) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 6.40 6.00 5.50 5.60
Prime rate (2) 9.50 8.50 7.75 8.50
Inflation rate (3)* 3.00 2.60 2.30 1.50
The U.S. dollar (4) 4.30 -0.70 -0.90 6.40
Capital goods orders (5)* 17.00 12.30 2.50 14.50
Industrial production (5)* 6.10 3.70 2.90 5.20
Employment growth (6) 2.60 2.20 2.30 2.60
</TABLE>
(1) FALLING INTEREST RATES IN RECENT YEARS HAVE BEEN A BIG PLUS FOR FINANCIAL
ASSETS.
(2) THE INTEREST RATE THAT COMMERCIAL LENDERS CHARGE THEIR BEST BORROWERS.
(3) INFLATION REDUCES AN INVESTOR'S REAL RETURN. IN THE LAST FIVE YEARS,
INFLATION HAS BEEN AS HIGH AS 6 PERCENT. THE LOW, MODERATE INFLATION OF THE
LAST FEW YEARS HAS MEANT HIGH REAL RETURNS.
(4) CHANGES IN THE EXCHANGE VALUE OF THE DOLLAR IMPACT U.S. EXPORTERS AND THE
VALUE OF U.S. FIRMS' FOREIGN PROFITS.
(5) THESE INFLUENCE CORPORATE PROFITS AND EQUITY PERFORMANCE.
(6) AN INFLUENCE ON FAMILY INCOME AND RETAIL SALES.
*DATA AS OF 4/30/00.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
inflation. If we begin to see higher core inflation, the Fed will have to deal
with all that money it's created in a less gradualist manner -- and that could
get tricky. Financial turmoil accompanied each of the Fed's last two efforts to
slow the economy down. In 1994, there was a bond market meltdown that resulted
in a Mexican debt crisis. After a more timid Fed tightening in 1997, crises in
Asia were followed by problems with Russian debt, Brazilian debt and a large
American hedge fund. We don't think this is a coincidence: The global debt
market is so vast and interconnected that it's highly vulnerable to a rise in
the cost of its basic raw material -- short-term funds.
Let's hope, then, that the Fed can slow the economy without upsetting the
financial applecart, because that could affect everyone. After all, the old
economy and the new economy are wedded in many ways. Much of the money that
flows to IPOs is available because mature industries have borrowed to carry out
mergers and share buybacks. Old economy companies are the biggest customers of
new economy products. And e-commerce sites are all about moving traditional
goods over old-fashioned highways. Despite a lot of talk about old and new,
we're all in this economy together.
Happily, financial markets got some better news along that front in late May
and early June. A range of economic data, from retail sales to mortgage
applications to the all-important employment report, began to point to somewhat
softer economic growth. If the Fed believes that the economy is finally slowing
in response to its tightening, the end of the rate hikes could be in sight.
Markets certainly were willing to believe, and they staged a strong relief rally
in late May and early June. While we don't expect a quick end to market
volatility, a slowdown in growth would be most welcome, and would make the
outlook for both stocks and bonds better for the remainder of the year.
Sincerely,
Scudder Kemper Investments Economics Group
THE INFORMATION CONTAINED IN THIS PIECE HAS BEEN TAKEN FROM SOURCES BELIEVED TO
BE RELIABLE, BUT THE ACCURACY OF THE INFORMATION IS NOT GUARANTEED. THE OPINIONS
AND FORECASTS EXPRESSED ARE THOSE OF THE ECONOMIC ADVISORS OF SCUDDER KEMPER
INVESTMENTS, INC. AS OF JUNE 6, 2000, AND MAY NOT ACTUALLY COME TO PASS. THIS
INFORMATION IS SUBJECT TO CHANGE. NO PART OF THIS MATERIAL IS INTENDED AS AN
INVESTMENT RECOMMENDATION.
TO OBTAIN A KEMPER FUNDS PROSPECTUS, DOWNLOAD ONE FROM WWW.KEMPER.COM, TALK TO
YOUR FINANCIAL REPRESENTATIVE OR CALL SHAREHOLDER SERVICES AT (800) 621-1048.
THE PROSPECTUS CONTAINS MORE COMPLETE INFORMATION, INCLUDING MANAGEMENT FEES AND
EXPENSES. PLEASE READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
4
<PAGE> 5
PERFORMANCE UPDATE
[IRENE 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.
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.
DESPITE A TUMULTUOUS INVESTMENT ENVIRONMENT MARKED
BY RISING INTEREST RATES, EXTREME VOLATILITY AND
CURRENCY WEAKNESS, KEMPER INTERNATIONAL FUND EASILY
SURPASSED THE BENCHMARK INDEX. LEAD PORTFOLIO
MANAGER IRENE CHENG EXPLAINS WHY SHE BELIEVES THAT
THE GROWING EQUITY CULTURE IN EUROPE AND JAPAN,
ALONG WITH STRIDES TOWARD GOVERNMENT AND ECONOMIC
REFORMS, SHOULD BODE WELL FOR FUTURE FUND
PERFORMANCE.
Q HOW DID KEMPER INTERNATIONAL FUND PERFORM DURING THE SEMIANNUAL PERIOD?
A Fund performance was extremely positive despite considerable challenges.
Throughout the six-month period, the developed world equity markets struggled
with the euro exchange rate, extreme volatility, fluctuating liquidity and
dramatic movement in a fairly narrow band of stocks. Nevertheless, the fund
gained 11.06 percent (Class A shares, unadjusted for any sales charges) for the
six months ended April 30, 2000. We beat our benchmark, the MSCI EAFE index,
which rose 6.84 percent for the period. The MSCI EAFE (Morgan Stanley Capital
International Europe Australasia Far East) is an unmanaged index generally
accepted as a benchmark for major overseas markets.
Admittedly, our enthusiasm is tempered somewhat by the fund's relative
performance as compared with its peers. While the fund performed well against
some of our most capable and aggressive competitors, overall it trailed Lipper's
international equity group's average annual return of 14.17 percent.
Over time, our goal, of course, is to outperform both the fund's benchmark and
its peer-group averages. We remain committed to our long-term investment
strategy and believe wholeheartedly that over the long term, our investment
discipline will provide superior returns.
The fund entered the period with an overweight in TMT (technology, media and
telecommunications) sectors. We balanced this exposure to this often
fast-growing but also inherently more uncertain group of stocks with substantial
investments in companies at the beginning of the supply chain, such as
industrial commodity stocks and companies undergoing significant corporate
restructuring. The fund was underweight in areas where we felt that the
competitive landscape was becoming increasingly harsh due to the impact of the
Internet and the trend toward globalization. Examples include the financial and
retail sectors.
This strategy worked particularly well with regard to our investments in TMT.
In fact, these were by and large the only sectors that showed absolute gains
during a period when investors increased their focus on the so-called new
economy. Most other old-economy stocks, including our investments in companies
undergoing significant restructuring and corporate change, performed below
expectations.
Following some exceptional performance in a number of our TMT selections, we
initiated the process of selective profit-taking during the second half of the
semiannual period. Some of the proceeds were put to work in stocks outside the
TMT arena, where
5
<PAGE> 6
PERFORMANCE UPDATE
attractive opportunities had surfaced due to recent declines in share prices.
Q WHAT ARE SOME OF THE MAJOR ECONOMIC TRENDS AND POLITICAL EVENTS THAT
SHAPED THE DEVELOPED MARKETS THROUGHOUT THE PERIOD?
A Given our focus on large, blue-chip companies in the more developed
economies, the United States, Europe and Japan continue to dominate in terms of
investment opportunities. Let's look at each separately. In Japan, the fund's
largest single-country exposure, macroeconomic conditions and low levels of
consumer confidence continue to be problematic. Ongoing concern about the
sustainability of the country's economic recovery continues to be a central
reason behind this fragile sentiment. The majority of the fund's Japanese
holdings were issued by companies with only limited exposure or correlation to
the domestic economy, such as industrial firms and companies experiencing
significant restructuring.
The Japanese market fared well in November and December of 1999. Soon after
the new year, though, when the worldwide appetite for technology stocks
weakened, the Japanese market began to retrace some of its gains. It's important
to realize that because the larger Japanese tech companies were competing in the
global marketplace, the performance of their stocks tended to be highly
correlated with that of their U.S. and European counterparts. This continued
unwinding of domestic cross-holdings also had an effect on the supply-demand
balance in the Japanese equity market. As a result, performance of the yen has
been relatively flat.
European markets, which have a high correlation to those of the United States,
were influenced by the continued rise of U.S. interest rates and stock market
volatility. For the first three months of the semiannual period, European
markets experienced a sharp run-up due to an overwhelmingly positive investment
environment. Accelerating economic growth, a strong dollar exchange rate, and
healthy merger and acquisition activity helped fuel the market during that time.
However, this enthusiastic sentiment turned around abruptly as weakness in the
U.S. equity market spread and the European Central Bank sanctioned an
interest-rate hike on the heels of the same move by the U.S. Federal Reserve.
Valuations proved unsustainable, particularly in Internet stocks, during the
second half of the period. And despite the increasing evidence of solid economic
recovery all over the continent, the euro exchange rate continued its negative
trend.
Q HOW MUCH OF AN IMPACT DID ACCELERATING CONSOLIDATION ACTIVITY HAVE ON FUND
PERFORMANCE?
A For the semiannual period, in both Europe and Japan, industrial
reorganization continued through corporate restructuring, and consolidation
activity thrived. Notably, the acquisition of Mannesmann, the German wireless
company, by British telecommunications giant Vodafone, was among the first
hostile cross-border mergers in Europe. The $130 billion deal was considered a
watershed event, and the fact that the German government did not intervene was a
wake-up call to the rest of Europe. As a result, we believe European companies
are beginning to view takeovers as a real threat and are therefore beginning to
pay more attention to their stock performance and shareholder demands.
Further, Renault's purchase of a controlling stake in Japanese automaker
Nissan proved that even in Japan, the corporate environment is changing. Unlike
Mannesmann, however, Nissan was struggling to survive a high debt burden, and
deteriorating operating performance was leading to a crisis situation. The
current restructuring program, under Renault's direction and guidance, is
leading to numerous plant closures and huge layoffs. Until recently, such tough
and painful measures were unheard of in the Japanese corporate culture.
Q HOW SIGNIFICANTLY WERE DEVELOPED WORLD MARKETS AFFECTED BY RISING U.S.
INTEREST RATES AND STOCK MARKET VOLATILITY?
A The impact was extremely significant for a number of reasons. First, the
United States is home to the largest economy in the world, and its consumers
have been the driving force behind global and economic growth over the past few
years. Second, many companies around the globe obtain financing, at least in
part, in U.S. dollars. When interest rates rise, borrowing money becomes more
expensive, and companies must grow earnings to compensate.
Finally, rising volatility and the sharp declines of the Nasdaq had a "tsunami
effect" on technology markets throughout the world. These are the direct
consequences of the increasing globalization of capital markets in recent years,
which has
6
<PAGE> 7
PERFORMANCE UPDATE
been further enhanced by the relaxation of capital-flow restrictions around the
world.
Q WHAT WORKED ESPECIALLY WELL FOR THE FUND?
A Although the fund has little direct exposure to Internet stocks, many of
our top holdings are companies whose businesses are closely tied to the
Internet. Over the period, the performance of several of our holdings has been
nothing short of impressive. We saw outstanding returns from both Mannesmann and
Vodafone; from Nokia, a Finnish manufacturer of telecommunication networks and
equipment; from France's ST Microelectronics; and from Seat-Pagine Gialle, the
Italian publisher and business portal operator for the Internet.
Q WERE THERE ANY DISAPPOINTMENTS?
A We really haven't experienced many disappointments with respect to
individual names, particularly since we repositioned the portfolio during the
latter half of the previous fiscal semiannual period. The performance of some
industrial commodity stocks, such as Rio Tinto out of the United Kingdom, did
not meet our expectations despite a price strengthening among its products.
Q WHAT ARE SOME OF THE KEY THEMES DRIVING INTERNATIONAL INVESTING TODAY, AND
HOW WILL THESE HELP SHAPE YOUR INVESTMENT STRATEGY GOING FORWARD?
A On a short-term basis, international market volatility is the predominant
theme. Given the likelihood of further interest-rate hikes in both the United
States and Europe, and persistent questions regarding continuing progress on
economic reform in Japan, we expect markets to continue to experience some
turbulence. That said, a turnaround in Japan would be very positive for the
international investing arena in general.
Over the long term, we believe that the markets will return to more normal
levels. The growing equity culture in both Europe and Japan should have an
enormous impact on the profitability of companies there. In addition, European
governments are making meaningful strides toward deregulation, and companies are
working hard to improve earnings growth. In Japan, the past 12 months have been
extremely positive from a corporate perspective. Japanese industrial technology
stocks remain a meaningful part of the portfolio despite the fact that we
recently took some profits there, and we continue to search for opportunities to
broaden our exposure in Japan.
While there has been tremendous progress in the developed world markets in
recent years, they are vulnerable to volatility. We remind shareholders that in
times of market turbulence like these, it is especially important to stay
focused on long-term performance.
7
<PAGE> 8
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, 2000, and
the percentage of the Fund's equity holdings on April 30, 2000.
<TABLE>
<CAPTION>
HOLDINGS COUNTRY PERCENT
<S> <C> <C> <C>
------------------------------------------------------------------------------------
1. VODAFONE AIRTOUCH PLC United Kingdom 2.8%
------------------------------------------------------------------------------------
2. TOTAL FINA ELF SA France 2.5%
------------------------------------------------------------------------------------
3. NOKIA OYJ Finland 2.3%
------------------------------------------------------------------------------------
4. EPCOS AG Germany 1.9%
------------------------------------------------------------------------------------
5. STMICROELECTRONICS NV France 1.9%
------------------------------------------------------------------------------------
6. REUTERS GROUP PLC United Kingdom 1.8%
------------------------------------------------------------------------------------
7. NTT MOBILE COMMUNICATIONS NETWORK, Japan 1.8%
INC.
------------------------------------------------------------------------------------
8. SEAT PAGINE GIALLE SPA Italy 1.7%
------------------------------------------------------------------------------------
9. VIVENDI France 1.7%
------------------------------------------------------------------------------------
10. NEC CORP. Japan 1.7%
------------------------------------------------------------------------------------
11. SAMSUNG ELECTRONICS CO. Korea 1.7%
------------------------------------------------------------------------------------
12. ERICSSON AB Sweden 1.6%
------------------------------------------------------------------------------------
13. AVENTIS SA France 1.6%
------------------------------------------------------------------------------------
14. SIEMENS AG Germany 1.6%
------------------------------------------------------------------------------------
15. NOMURA SECURITIES CO., LTD Japan 1.6%
------------------------------------------------------------------------------------
16. TOSHIBA CORP. Japan 1.4%
------------------------------------------------------------------------------------
17. MURATA MANUFACTURING CO., LTD Japan 1.4%
------------------------------------------------------------------------------------
18. SK TELECOM CO., LTD Korea 1.4%
------------------------------------------------------------------------------------
19. BP AMOCO PLC United Kingdom 1.4%
------------------------------------------------------------------------------------
20. SHELL TRANSPORT & TRADING PLC United Kingdom 1.3%
------------------------------------------------------------------------------------
</TABLE>
*Portfolio holdings are subject to change.
8
<PAGE> 9
PORTFOLIO OF INVESTMENTS
KEMPER INTERNATIONAL FUND
Portfolio of Investments at April 30, 2000 (unaudited)
<TABLE>
<CAPTION>
SHORT-TERM NOTES--7.4% PRINCIPAL AMOUNT*** VALUE
<S> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY
OBLIGATIONS--7.3%
Federal Home Loan Bank, 5.88%, 05/01/2000**
(Cost $48,000,000) $48,000,000 $ 48,000,000
-------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
FIXED TIME DEPOSITS--.1%
Chase Euro Time Deposit, 5.75%, 5/1/2000 572,000 572,000
-------------------------------------------------------------------------------------
TOTAL SHORT-TERM NOTES
(Cost: $48,572,000) 48,572,000
-------------------------------------------------------------------------------------
<CAPTION>
BONDS--0.0%
<S> <C> <C> <C> <C> <C> <C>
UNITED KINGDOM--0%
British Aerospace PLC,
7.45%, 11/30/2003
(PRODUCER OF MILITARY AIRCRAFTS) GBP 76,707 115,508
-------------------------------------------------------------------------------------
TOTAL BONDS
(Cost: $120,570) 115,508
-------------------------------------------------------------------------------------
<CAPTION>
CONVERTIBLE BONDS--.1% SHARES
<S> <C> <C> <C> <C> <C> <C>
FRANCE--.1%
Lafarge Convertible, 03/20/2001
(PRODUCER OF BUILDING MATERIALS) 10,606 816,850
-------------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS
(Cost: $775,701) 816,850
-------------------------------------------------------------------------------------
<CAPTION>
COMMON STOCKS--92.5% SHARES
<S> <C> <C> <C> <C> <C> <C>
AUSTRALIA--1.4%
Broken Hill Proprietary Co., Ltd.
(PETROLEUM, MINERAL AND STEEL
EXPLORATION AND PRODUCTION) 409,300 4,405,471
WMC Ltd.
(MINERAL EXPLORATION AND PRODUCTION) 742,300 3,080,624
Woodside Petroleum, Ltd.
(PRODUCER OF OIL AND GAS) 229,000 1,415,537
-------------------------------------------------------------------------------------
8,901,632
-----------------------------------------------------------------------------------------------------------------------------------
CANADA--.8%
Canadian National Railway Co.
(RAILROAD OPERATOR) 189,700 5,294,341
-------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
FINLAND--2.2%
Nokia Oyj
(INTERNATIONAL TELECOMMUNICATIONS
COMPANY) 249,600 14,321,258
-------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
FRANCE--17.7%
AXA S.A.
(INSURANCE GROUP PROVIDING INSURANCE,
FINANCE AND REAL ESTATE SERVICES) 38,846 5,761,127
Alcatel SA
(MANUFACTURER OF TRANSPORTATION,
TELECOMMUNICATION AND ENERGY EQUIPMENT) 30,950 7,176,423
Aventis S.A.
(MANUFACTURES LIFE SCIENCE PRODUCTS) 179,196 9,858,047
Banque Nationale de Paris
(BANK) 43,842 3,544,046
Christian Dior SA
(FASHION HOUSE) 25,275 6,009,939
Dassault Systemes S.A.
(COMPUTER AIDED DESIGN, MANUFACTURING
AND ENGINEERING SOFTWARE) 61,457 4,727,689
</TABLE>
The accompanying notes are an integral part of the financial statements. 9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C> <C> <C> <C> <C>
Etablissements Economiques du Casino
Guichard-Perrachon S.A.
(OPERATOR OF SUPERMARKETS AND
CONVENIENCE STORES) 59,516 $ 3,663,782
Eurotunnel SA*
(DESIGNER, FINANCER AND CONSTRUCTOR OF
A TUNNEL THAT RUNS UNDER THE ENGLISH
CHANNEL AND CONNECTS ENGLAND TO FRANCE) 4,754,834 4,928,871
LVMH (Louis Vuitton Moet Hennessy)
(PRODUCER OF WINES, SPIRITS AND LUXURY
PRODUCTS) 7,309 3,067,828
Lafarge SA*
(PRODUCER OF CEMENT, CONCRETE AND
AGGREGATES) 44,761 3,707,877
Lafarge Warrant warrants (expire 3/20/2001)
(PRODUCER OF BUILDING MATERIALS) 10,606 55,935
Pinault-Printemps-Redoute SA
(OPERATOR OF DEPARTMENT STORES) 29,569 5,966,246
Rhodia SA
(DRUG MANUFACTURER AND CHEMICALS
SPECIALIST) 302,932 5,619,304
STMicroelectronics N.V.
(MANUFACTURER OF SEMICONDUCTOR
INTEGRATED CIRCUITS) 59,448 11,346,369
Schneider Electric SA
(MANUFACTURER OF ELECTRONIC COMPONENTS
AND AUTOMATED MANUFACTURING SYSTEMS) 48,913 3,202,315
Societe BIC SA
(MANUFACTURER OF OFFICE SUPPLIES) 104,065 4,144,632
Suez Lyonnaise des Eaux S.A.
(WATER AND ELECTRIC UTILITY) 48,270 7,571,355
Total Fina ELF S.A. "B"
(EXPLORER, DEVELOPER, PRODUCER,
TRANSPORTER AND MARKETER OF OIL AND
GAS) 100,041 15,182,440
Usinor S.A.
(PRODUCER OF FLAT STEEL AND STAINLESS
STEEL SHEETS) 170,898 2,245,495
Vivendi
(PROVIDER OF INDUSTRIAL SERVICES) 104,481 10,336,498
-------------------------------------------------------------------------------------
118,116,218
-----------------------------------------------------------------------------------------------------------------------------------
GERMANY--11.5%
Allianz AG
(MULTI-LINE INSURANCE COMPANY) 19,535 7,522,705
Bayer AG
(CHEMICAL PRODUCER) 144,899 6,001,516
Celanese AG*
(MANUFACTURER AND DISTRIBUTOR OF
INDUSTRIAL CHEMICALS) 15,396 303,091
Commerzbank AG
(PROVIDER OF BANKING SERVICES) 73,180 2,768,171
Deutsche Telekom AG
(TELECOMMUNICATION SERVICES) 46,354 2,971,553
ERGO Versicherungs Gruppe AG
(INSURANCE PROVIDER) 24,325 2,488,356
Epcos AG*
(PRODUCER OF ELECTRONIC COMPONENTS AND
INTEGRATED CIRCUITS) 82,084 11,606,362
HypoVereinsbank
(BANK) 101,416 6,280,017
</TABLE>
10 The accompanying notes are an integral part of the financial statements.
<PAGE> 11
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C> <C> <C> <C> <C>
Muenchener Rueckversicherungs-Gesellschaft
AG
(REGISTERED) (INSURANCE COMPANY) 21,639 $ 6,316,106
SAP AG
(MANUFACTURER OF COMPUTER SOFTWARE) 5,468 3,216,918
Siemens AG
(ELECTRICAL ENGINEERING AND ELECTRONICS
COMPANY) 65,622 9,684,455
Thyssen Krupp AG
(MANUFACTURER OF BUILDING AND
INDUSTRIAL STEEL MATERIALS) 234,696 4,908,409
VEBA AG
(ELECTRIC UTILITY, DISTRIBUTOR OF OIL
AND CHEMICALS) 88,424 4,369,955
VIAG AG
(PROVIDER OF ELECTRICAL POWER AND
NATURAL GAS SERVICES, ALUMINUM) 311,561 6,006,012
-------------------------------------------------------------------------------------
74,443,626
-----------------------------------------------------------------------------------------------------------------------------------
HONG KONG--1.1%
China Telecommunications Ltd.*
(PROVIDER OF CELLULAR TELECOMMUNICATION
SERVICES) 258,000 1,846,619
Hutchison Whampoa, Ltd.
(DIVERSIFIED INVESTMENT HOLDING
COMPANY) 206,000 2,988,535
Legend Holdings Ltd.
(MANUFACTURER AND DISTRIBUTOR OF
PERSONAL COMPUTERS) 1,288,000 1,496,502
Li & Fung Ltd.
(EXPORTER OF CONSUMER PRODUCTS) 180,000 702,520
-------------------------------------------------------------------------------------
7,034,176
-----------------------------------------------------------------------------------------------------------------------------------
ITALY--4.1%
Assicurazioni Generali
(MULTI-LINE INSURANCE AND FINANCIAL
SERVICES COMPANY) 163,400 4,650,542
Banco Intesa SpA
(BANK) 1,210,600 4,458,234
Gruppo Editoriale L'Espresso
(PUBLISHER) 298,880 4,212,460
Mediaset SpA
(BROADCASTING AND TELEVISION NETWORKS) 197,700 3,208,870
Seat Pagine Gialle SpA
(PUBLISHER OF TELECOMMUNICATIONS
DIRECTORIES) 2,373,200 10,422,903
-------------------------------------------------------------------------------------
26,953,009
-----------------------------------------------------------------------------------------------------------------------------------
JAPAN--24.7%
Advantest Corp.
(PRODUCER OF MEASURING INSTRUMENTS AND
SEMICONDUCTOR TESTING DEVICES) 20,700 4,725,582
Benesse Corp.
(PROVIDER OF EDUCATIONAL SERVICES) 21,200 1,846,970
Chugai Pharmaceutical Co., Ltd.
(PHARMACEUTICAL COMPANY) 172,000 3,305,248
DDI Corp.
(PROVIDER OF TELECOMMUNICATION
SERVICES) 259 2,967,110
Daiwa Securities Group Inc.
(PROVIDER OF BROKERAGE AND OTHER
FINANCIAL SERVICES) 457,000 6,966,463
East Japan Railway Co.
(RAILROAD OPERATOR) 822 4,860,310
Fuji Bank, Ltd.
(PROVIDER OF COMMERCIAL BANKING
SERVICES) 700,000 5,820,399
</TABLE>
The accompanying notes are an integral part of the financial statements. 11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C> <C> <C> <C> <C>
Fujisawa Pharmaceutical Co.
(MANUFACTURER AND MARKETER OF
ANTIBIOTICS) 49,000 $ 1,833,426
Fujitsu Support and Service Inc.
(PROVIDER OF INFORMATION SERVICES) 16,000 2,365,115
Fujitsu, Ltd.
(MANUFACTURER OF COMPUTERS) 213,000 6,021,619
Kyocera Corp.
(MANUFACTURER OF CERAMIC PACKAGING) 40,000 6,677,753
Matsushita Electric Industrial Co., Ltd.
(MANUFACTURER OF CONSUMER ELECTRONIC
PRODUCTS) 270,000 7,134,146
Mitsubishi Estate Co., Ltd.
(REAL ESTATE COMPANY) 43,000 482,677
Mitsui Fudosan Co., Ltd.
(REAL ESTATE COMPANY) 42,000 426,053
Murata Manufacturing Co., Ltd.
(MANUFACTURER OF CERAMIC APPLIED
ELECTRONIC COMPUTERS) 44,000 8,536,585
NEC Corp.
(MANUFACTURER OF TELECOMMUNICATION AND
COMPUTER EQUIPMENT) 377,000 10,240,022
NSK Ltd.
(MANUFACTURER OF BEARINGS AND MOTOR
VEHICLE MACHINE PARTS) 377,000 2,901,340
NTT Mobile Communications Network, Inc.
(PROVIDER OF VARIOUS TELECOMMUNICATION
SERVICES AND EQUIPMENT) 326 10,872,690
Nikko Securities Co., Ltd.
(SECURITIES BROKER AND DEALER) 543,000 6,396,203
Nintendo Co., Ltd.
(MANUFACTURER OF GAME EQUIPMENT) 31,100 5,171,840
Nippon Telegraph & Telephone Corp.
(PROVIDER OF TELECOMMUNICATION
SERVICES) 335 4,147,265
Nissan Motor Co., Ltd.
(MANUFACTURER OF MOTOR VEHICLES) 1,169,000 5,302,836
Nomura Securities Co., Ltd.
(FINANCIAL ADVISOR, SECURITIES BROKER
AND UNDERWRITER) 379,000 9,524,021
Ricoh Co., Ltd.
(MANUFACTURER OF COPIERS AND
INFORMATION EQUIPMENT) 192,000 4,044,346
SOFTBANK CORP.*
(PROVIDER OF E-COMMERCE AND PERIPHERAL
HARDWARE EQUIPMENT) 10,200 2,516,075
Sakura Bank, Ltd.
(PROVIDER OF BANKING SERVICES) 859,000 6,015,540
Sankyo Co., Ltd.
(LEADING ETHICAL DRUG PRODUCER) 245,000 5,387,103
Sony Corp.
(MANUFACTURER OF CONSUMER ELECTRONIC
PRODUCTS) 32,300 3,730,137
Sony Corp.
(MANUFACTURER OF CONSUMER AND
INDUSTRIAL ELECTRONIC EQUIPMENT) 27,500 3,152,947
TDK Corp.
(MANUFACTURER OF MAGNETIC TAPES AND
FLOPPY DISCS) 600 80,211
</TABLE>
12 The accompanying notes are an integral part of the financial statements.
<PAGE> 13
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C> <C> <C> <C> <C>
THK Co., Ltd.
(MANUFACTURER OF LINEAR MOTION SYSTEMS
FOR INDUSTRIAL MACHINERY) 13,900 $ 584,303
Tokyo Electron Ltd.
(MANUFACTURER OF SEMICONDUCTOR
PRODUCTION EQUIPMENT) 38,000 6,182,373
Toshiba Corp.
(MANUFACTURER OF ELECTRIC MACHINERY) 913,000 8,839,837
Yamanouchi Pharmaceutical Co., Ltd.
(MANUFACTURES AND MARKETS A WIDE
VARIETY OF PHARMACEUTICALS) 90,000 4,747,783
-------------------------------------------------------------------------------------
163,806,328
-----------------------------------------------------------------------------------------------------------------------------------
KOREA--2.8%
SK Telecom Co., Ltd.
(PROVIDER OF MOBILE TELECOMMUNICATIONS
AND PAGING SERVICES) 32,100 8,533,003
Samsung Electronics Co.
(MANUFACTURER OF ELECTRONICS) 37,850 10,232,034
-------------------------------------------------------------------------------------
18,765,037
-----------------------------------------------------------------------------------------------------------------------------------
NETHERLANDS--3.9%
Akzo Nobel NV
(PRODUCER AND MARKETER OF HEALTHCARE
PRODUCTS, COATINGS, CHEMICALS AND
FIBERS) 70,690 2,894,457
Equant N.V.*
(PROVIDER OF INTERNATIONAL DATA NETWORK
SERVICES) 73,113 5,660,913
Fortis (NL) NV
(PROVIDER OF BANKING AND INSURANCE
SERVICES) 84,880 2,134,837
Gucci Group N.V. (New York Shares)
(DESIGNER AND PRODUCER OF PERSONAL
LUXURY ACCESSORIES AND APPAREL) 52,200 4,574,025
Koninklijke KPN NV
(PROVIDER OF TELECOMMUNICATION
SERVICES) 55,980 5,642,555
Laurus NV
(INTERNATIONAL FOOD RETAILER) 124,520 1,330,406
United Pan-Europe Communications N.V.*
(OWNER AND OPERATOR OF BROADBAND
COMMUNICATIONS NETWORKS) 88,440 3,219,152
-------------------------------------------------------------------------------------
25,456,345
-----------------------------------------------------------------------------------------------------------------------------------
NEW ZEALAND--.6%
ASM Lithography Holding N.V.*
(DEVELOPER, MANUFACTURER AND MARKETER
OF PHOTOLITHOGRAPHY PROJECTIONS
SYSTEMS) 96,090 3,757,110
-------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
SPAIN--.9%
Telefonica S.A.
(PROVIDER OF TELECOMMUNICATION
SERVICES) 252,871 5,628,824
-------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
SWEDEN--1.5%
Telefonektiebolaget LM Ericsson AB "B"
(MANUFACTURER OF TELECOMMUNICATIONS
EQUIPMENT) 110,800 9,885,991
-------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
SWITZERLAND--1.7%
Nestle SA (Registered)
(FOOD MANUFACTURER) 3,914 6,904,120
Roche Holding AG
(DEVELOPS AND MANUFACTURES
PHARMACEUTICAL AND CHEMICAL PRODUCTS) 417 4,357,764
-------------------------------------------------------------------------------------
11,261,884
</TABLE>
The accompanying notes are an integral part of the financial statements. 13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C> <C> <C> <C> <C>
TAIWAN--2.7%
Asustek Computer Inc.
(MANUFACTURER OF COMPUTER MOTHERBOARDS) 288,000 $ 3,191,110
Far Eastern Textile Ltd.
(MANUFACTURER OF NATURAL AND SYNTHETIC
TEXTILE PRODUCTS) 1,558,000 2,393,398
GigaMedia Ltd.*
(PROVIDER OF BROADBAND INTERNET ACCESS
SERVICES AND CONTENT) 51,900 1,245,600
Hon Hai Precision Industry Co., Ltd.*
(MANUFACTURER OF ELECTRONIC CONNECTORS
AND CABLE ASSEMBLIES) 132,000 1,272,757
Taiwan Semiconductor Manufacturing* Co.
(MANUFACTURER OF INTEGRATED CIRCUITS) 667,000 4,294,787
United Microelectronics Corp., Ltd.*
(MANUFACTURER OF INTEGRATED CIRCUITS) 1,536,000 5,196,143
-------------------------------------------------------------------------------------
17,593,795
-----------------------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM--14.9%
ARM Holdings PLC
(DESIGNER OF RISC MICROPROCESSORS AND
RELATED TECHNOLOGY) 169,245 1,707,783
BOC Group PLC
(DIVERSIFIED CHEMICAL COMPANY) 278,284 4,566,325
BP Amoco PLC
(INTEGRATED WORLD OIL COMPANY) 985,967 8,487,259
Billiton PLC*
(RESOURCE GROUP THAT EXPLORES, PRODUCES
AND MARKETS ALUMINUM AND OTHER METAL
PRODUCTS) 555,317 2,060,357
British Aerospace PLC
(PRODUCER OF MILITARY AIRCRAFT) 792,783 4,861,329
Cable and Wireless PLC
(INTERNATIONAL TELECOMMUNICATION
SERVICES IN THE UNITED KINGDOM AND HONG
KONG) 194,834 3,224,226
Glaxo Wellcome PLC
(PHARMACEUTICAL COMPANY) 106,540 3,283,044
Prudential Corp. PLC
(PROVIDER OF A BROAD RANGE OF FINANCIAL
SERVICES) 419,918 6,421,024
Reed International PLC
(PUBLISHER OF SCIENTIFIC, PROFESSIONAL
AND BUSINESS TO BUSINESS MATERIALS) 500,230 3,471,209
Rentokil Initial PLC
(ENVIRONMENTAL SERVICES COMPANY) 969,132 2,651,646
Reuters Group PLC
(INTERNATIONAL NEWS AND INFORMATION
AGENCY) 621,677 11,108,200
Rio Tinto PLC
(MINING COMPANY) 524,635 8,144,432
Royal & Sun Alliance Insurance Group plc
(INSURANCE COMPANY) 868,926 4,856,114
Shell Transport & Trading PLC
(PETROLEUM COMPANY) 997,996 8,153,132
Siebe PLC
(MANUFACTURER OF SPECIALTY MACHINERY
AND EQUIPMENT) 135,391 651,561
</TABLE>
14 The accompanying notes are an integral part of the financial statements.
<PAGE> 15
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C> <C> <C> <C> <C>
SmithKline Beecham PLC
(MANUFACTURER OF ETHICAL DRUGS AND
HEALTHCARE PRODUCTS) 239,794 $ 3,275,854
Standard Chartered PLC
(INTERNATIONAL BANKING GROUP) 342,115 4,604,630
Vodafone AirTouch PLC
(PROVIDER OF MOBILE TELECOMMUNICATION
SERVICES) 3,699,656 16,885,434
-------------------------------------------------------------------------------------
98,413,559
-------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost $517,231,048) 609,633,133
-------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100%
(Cost $566,699,319)(a) $659,137,491
-------------------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
* Non-income producing security.
** Annualized yield at time of purchase; not a coupon rate.
*** Principal amount is stated in U.S. dollars unless otherwise specified.
(a) The cost for federal income tax purpose was $566,699,319. At April 30,
2000, net unrealized appreciation for all securities based on tax cost was
$92,438,172. This consists of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $131,855,785 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$39,417,613.
The accompanying notes are an integral part of the financial statements. 15
<PAGE> 16
FINANCIAL STATEMENTS
STATEMENT OF ASSETS & LIABILITIES
as of April 30, 2000 (unaudited)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value, (cost $566,699,319) $659,137,491
----------------------------------------------------------------------------
Foreign currency, at value, (cost $172,101) 171,755
----------------------------------------------------------------------------
Receivable for investments sold 5,315,043
----------------------------------------------------------------------------
Dividends receivable 1,174,814
----------------------------------------------------------------------------
Interest receivable 3,983
----------------------------------------------------------------------------
Receivable for Fund shares sold 7,427,658
----------------------------------------------------------------------------
Foreign taxes recoverable 527,309
----------------------------------------------------------------------------
Other assets 13,000
----------------------------------------------------------------------------
TOTAL ASSETS 673,771,053
----------------------------------------------------------------------------
LIABILITIES
Due to custodian bank 25,145
----------------------------------------------------------------------------
Payable for investments purchased 10,692,262
----------------------------------------------------------------------------
Payable for Fund shares redeemed 5,435,277
----------------------------------------------------------------------------
Accrued management fee 407,305
----------------------------------------------------------------------------
Other accrued expenses 829,680
----------------------------------------------------------------------------
Total liabilities 17,389,669
----------------------------------------------------------------------------
NET ASSETS, AT VALUE $656,381,384
----------------------------------------------------------------------------
NET ASSETS
Net assets consist of:
Undistributed net investment income (loss) $ 2,569,963
----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on:
Investment securities 92,438,172
----------------------------------------------------------------------------
Foreign currency related transactions (103,192)
----------------------------------------------------------------------------
Accumulated net realized gain (loss) 80,533,853
----------------------------------------------------------------------------
Paid-in capital 480,942,588
----------------------------------------------------------------------------
NET ASSETS, AT VALUE $656,381,384
----------------------------------------------------------------------------
NET ASSETS VALUE
CLASS A SHARES
Net asset value and redemption price per share ($438,193,582
/ 32,845,003 shares outstanding of beneficial interest, $.01
par value, unlimited number of shares authorized) $13.34
----------------------------------------------------------------------------
Maximum offering price per share (100/94.25 of $13.34) $14.15
----------------------------------------------------------------------------
CLASS B SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share ($160,850,829 /
12,468,509 shares outstanding of beneficial interest, $.01
par value, unlimited number of shares authorized) $12.90
----------------------------------------------------------------------------
CLASS C SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge) per share ($42,171,568 /
3,264,812 shares outstanding of beneficial interest, $.01
par value, unlimited number of shares authorized) $12.92
----------------------------------------------------------------------------
CLASS I SHARES
Net asset value, offering and redemption price ($15,165,405
/ 1,118,673 shares outstanding of beneficial interest, $.01
par value, unlimited number of shares authorized) $13.56
----------------------------------------------------------------------------
</TABLE>
16 The accompanying notes are an integral part of the financial statements.
<PAGE> 17
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Six months ended April 30, 2000 (unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $359,523) $ 7,734,093
---------------------------------------------------------------------------
Interest 518,477
---------------------------------------------------------------------------
Total income 8,252,570
---------------------------------------------------------------------------
Expenses:
Management fee 2,506,609
---------------------------------------------------------------------------
Services to shareholders 1,201,129
---------------------------------------------------------------------------
Custodian fees 195,196
---------------------------------------------------------------------------
Distribution services fees 764,208
---------------------------------------------------------------------------
Administrative service fees 807,385
---------------------------------------------------------------------------
Auditing 43,316
---------------------------------------------------------------------------
Legal 6,553
---------------------------------------------------------------------------
Trustees' fees and expenses 14,978
---------------------------------------------------------------------------
Registration fees 34,399
---------------------------------------------------------------------------
Interest expense 148,564
---------------------------------------------------------------------------
Total expenses before expense reductions 5,722,337
---------------------------------------------------------------------------
Expense reductions (34,595)
---------------------------------------------------------------------------
Total expenses, after expense reductions 5,687,742
---------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 2,564,828
---------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments 83,118,572
---------------------------------------------------------------------------
Foreign currency related transactions 434,307
---------------------------------------------------------------------------
83,552,879
---------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
on:
Investments (3,428,271)
---------------------------------------------------------------------------
Foreign currency related transactions (99,520)
---------------------------------------------------------------------------
(3,527,791)
---------------------------------------------------------------------------
Net gain (loss) on investment transactions 80,025,088
---------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $82,589,916
---------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 17
<PAGE> 18
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, 2000 OCTOBER 31,
(UNAUDITED) 1999
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $ 2,564,828 (1,941,420)
---------------------------------------------------------------------------------------------------------
Net realized gain (loss) 83,552,879 77,529,702
---------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
transaction (3,527,791) 66,099,771
---------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 82,589,916 141,688,053
---------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net realized gains
---------------------------------------------------------------------------------------------------------
Class A (29,538,931) (61,942,641)
---------------------------------------------------------------------------------------------------------
Class B (10,480,765) (20,233,947)
---------------------------------------------------------------------------------------------------------
Class C (2,464,720) (4,003,851)
---------------------------------------------------------------------------------------------------------
Class I (1,108,329) (2,276,359)
---------------------------------------------------------------------------------------------------------
Fund share transactions:
Proceeds from shares sold 1,423,764,707 2,746,263,541
---------------------------------------------------------------------------------------------------------
Reinvestment of distributions 41,357,202 81,048,234
---------------------------------------------------------------------------------------------------------
Cost of shares redeemed (1,505,948,416) (2,827,016,270)
---------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions (40,826,507) 295,505
---------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (1,829,336) 53,526,760
---------------------------------------------------------------------------------------------------------
Net assets at beginning of period 658,210,720 604,683,960
---------------------------------------------------------------------------------------------------------
NET ASSETS AT END OF PERIOD (including undistributed net
investment income of $2,569,963 and $5,135, respectively) $ 656,381,384 658,210,720
---------------------------------------------------------------------------------------------------------
</TABLE>
18 The accompanying notes are an integral part of the financial statements.
<PAGE> 19
FINANCIAL HIGHLIGHTS
The following tables include selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
CLASS A
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
2000 ---------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $12.85 12.10 12.68 11.96 10.59 11.13
----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .07(a) (0.01) 0.04 -- 0.04 0.07
----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions 1.38 2.57 0.01 1.52 1.50 0.05
----------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.45 2.56 0.05 1.52 1.54 0.12
----------------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- -- (0.08) (0.12) (0.12) --
----------------------------------------------------------------------------------------------------------------------
Net realized gains on investment transactions (.96) (1.81) (0.55) (0.68) (0.05) (0.66)
----------------------------------------------------------------------------------------------------------------------
Total distributions (.96) (1.81) (0.63) (0.80) (0.17) (0.66)
----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.34 12.85 12.10 12.68 11.96 10.59
----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN % (B) 11.06** 23.47(C) 0.45 13.49 14.70 1.69
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 438,194 464,213 424,431 409,470 352,961 308,175
----------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.46* 1.59 1.64 1.57 1.64 1.57
----------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.45* 1.59 1.64 1.57 1.64 1.57
----------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) .96* (0.12) 0.36 0.16 0.34 0.83
----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 108* 140 105 76 104 114
----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
2000 ---------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $12.50 11.90 12.50 11.81 10.46 11.09
-----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .01 (0.11) (0.08) (0.12) (0.06) (0.02)
-----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions 1.35 2.52 0.03 1.51 1.47 0.05
-----------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.36 2.41 (0.05) 1.39 1.41 0.03
-----------------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- -- -- (0.02) (0.01) --
-----------------------------------------------------------------------------------------------------------------------
Net realized gains on investment transactions (.96) (1.81) (0.55) (0.68) (0.05) (0.66)
-----------------------------------------------------------------------------------------------------------------------
Total distributions (.96) (1.81) (0.55) (0.70) (0.06) (0.66)
-----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.90 12.50 11.90 12.50 11.81 10.46
-----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN % (B) 10.63** 22.50(C) (0.37) 12.32 13.59 0.84
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 160,851 138,518 137,224 143,144 96,369 42,270
-----------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 2.25* 2.44 2.62 2.57 2.53 2.50
-----------------------------------------------------------------------------------------------------------------------
Ratio of expenses after reductions (%) 2.24* 2.43 2.62 2.57 2.53 2.50
-----------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) .17* (0.96) (0.62) (0.84) (0.55) (0.10)
-----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 108* 140 105 76 104 114
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
2000 ------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $12.51 11.91 12.51 11.81 10.46 11.09
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .02(a) (0.10) (0.08) (0.09) (0.06) (0.02)
-------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment
transactions 1.35 2.51 0.03 1.49 1.47 0.05
-------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.37 2.41 (0.05) 1.40 1.41 0.03
-------------------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- -- -- (0.02) (0.01) --
-------------------------------------------------------------------------------------------------------------------------
Net realized gains on investment transactions (.96) (1.81) (0.55) (0.68) (0.05) (0.66)
-------------------------------------------------------------------------------------------------------------------------
Total distributions (.96) (1.81) (0.55) (0.70) (0.06) (0.66)
-------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.92 12.51 11.91 12.51 11.81 10.46
-------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN % (B) 10.70** 22.49(C) (0.37) 12.45 13.59 0.84
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 42,172 40,895 26,337 16,658 7,320 2,152
-------------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 2.15* 2.33 2.55 2.49 2.50 2.50
-------------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 2.13* 2.32 2.55 2.49 2.50 2.50
-------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) .28* (0.85) (0.55) (0.76) (0.52) (0.10)
-------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 108* 140 105 76 104 114
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS I
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31, JULY 3 TO
2000 ------------------------------------ OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $13.01 12.16 12.72 11.99 10.61 10.09
------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .10(a) 0.05 0.11 0.07 0.10 0.04
------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions 1.41 2.61 0.03 1.53 1.48 0.48
------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.51 2.66 0.14 1.60 1.58 0.52
------------------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- -- (0.15) (0.19) (0.15) --
------------------------------------------------------------------------------------------------------------------------
Net realized gains on investment transactions (.96) (1.81) (0.55) (0.68) (0.05) --
------------------------------------------------------------------------------------------------------------------------
Total distributions (.96) (1.81) (0.70) (0.87) (0.20) --
------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.56 13.01 12.16 12.72 11.99 10.61
------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (B) 11.40** 24.25(C) 1.18 14.19 15.19 5.15**
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ in thousands) 15,165 14,585 16,692 18,797 15,593 12,111
------------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) .92* 1.03 1.00 1.04 1.10 0.85*
------------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .92* 1.02 1.00 1.04 1.10 0.85*
------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) 1.49* 0.45 1.00 0.69 0.88 1.32*
------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 108* 140 105 76 104 114*
------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not annualized
(a) Based on monthly average shares outstanding during the period.
(b) Total return does not reflect the effect of any sales charges.
(c) If the adviser had not reimbursed the Fund, the total return would have been
lower.
20
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1 SIGNIFICANT
ACCOUNTING POLICIES 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 a
contingent deferred sales charge payable upon
certain redemptions. Class B shares automatically
convert to Class A shares six years after issuance.
Class C shares are offered without an initial sales
charge but are subject to higher ongoing expenses
than Class A shares and a contingent deferred sales
charge payable upon certain redemptions within one
year of purchase. Class C shares do not convert
into another class. Class I shares are offered to a
limited group of investors, are not subject to
initial or contingent deferred sales charges 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.
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. Money market instruments
purchased with an original maturity of sixty days
or less are valued at amortized cost. All other
securities are valued at their fair value as
determined in good faith by the Valuation Committee
of the Board of Trustees.
Portfolio debt securities purchased with an
original maturity of greater than sixty days are
valued by pricing agents approved by the officers
of the Corporation, whose quotations reflect
broker/dealer-supplied valuations and electronic
21
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS
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.
All other securities are valued at their fair value
as determined in good faith by the Valuation
Committee of the Board of Trustees.
FOREIGN CURRENCY 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
rates of exchange. 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 income accrued and the U.S. dollar
amount actually received. That portion of both
realized and unrealized gains and losses on
investments that result from fluctuations in
foreign currency exchange rates is not separately
disclosed but is included with the net realized and
unrealized gains and losses on investment
securities.
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.
Net realized gains from investment transactions, in
excess of available capital loss carryforwards,
would be taxable to the Fund if not distributed,
and, therefore, will be distributed to shareholders
at least annually.
The timing and characterization of certain income
and capital gains distributions are determined
annually in accordance with federal tax regulations
which may differ from generally accepted accounting
principles. As a result, net investment income
(loss) and net realized gain (loss) on investment
transactions for a reporting period may differ
significantly from distributions during such
period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital
accounts without impacting the net asset value of
the Fund.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date. Interest income is recorded on
the accrual basis. Dividend income is recorded on
the ex-dividend date. Realized gains and losses
from investment transactions are recorded on an
identified cost basis. All discounts are accreted
for both tax and financial reporting purposes.
--------------------------------------------------------------------------------
2 PURCHASE & SALES OF
SECURITIES For the six months ended April 30, 2000, investment
transactions (excluding short-term instruments) are
as follows:
Purchases $359,745,175
Proceeds from sales 421,531,483
22
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
3 TRANSACTIONS WITH MANAGEMENT AGREEMENT. The Fund has a management
AFFILIATES 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 $2,506,609 for the six
months ended April 30, 2000. 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 six
months ended April 30, 2000, Scudder Kemper paid
$1,203,608 in sub-advisory fees to Scudder
Investments (U.K.) Ltd.
UNDERWRITING AND DISTRIBUTION SERVICES
AGREEMENT. The Fund has an underwriting and
distribution services agreement with Kemper
Distributors, Inc. ("KDI"). Underwriting
commissions retained by KDI in connection with the
distribution of Class A shares for the six months
ended April 30, 2000 are $4,492.
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
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 charge
("CDSC") from redemptions of Class B and Class C
shares. Distribution fees and CDSC received by KDI
for the six months ended April 30, 2000 are
$1,025,967, of which $238,150 was unpaid at April
30, 2000.
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 were paid by
KDI for the six months ended April 30, 2000 are
$807,385 of which $93,575 was unpaid at April 30,
2000.
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 $792,320
for the six months ended April 30, 2000, of which
$255,699 was unpaid at April 30, 2000.
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, 2000, the Fund made no payments to is officers
and incurred trustees' fees of $14,978 to
independent trustees.
23
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
4
CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2000 (UNAUDITED) OCTOBER 31, 1999
------------------------------ -------------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 89,445,406 $ 1,254,925,653 204,100,882 $ 2,385,885,630
------------------------------------------------------------------------------------------
Class B 4,008,035 54,311,740 4,540,058 52,194,727
------------------------------------------------------------------------------------------
Class C 8,126,384 110,427,713 26,282,751 302,284,272
------------------------------------------------------------------------------------------
Class I 287,087 4,099,601 475,723 5,898,912
------------------------------------------------------------------------------------------
SHARES REDEEMED IN REINVESTMENT OF DIVIDENDS
Class A 1,998,990 27,825,967 5,044,534 55,843,046
------------------------------------------------------------------------------------------
Class B 754,415 10,184,729 1,807,855 19,579,064
------------------------------------------------------------------------------------------
Class C 165,547 2,238,181 309,305 3,349,772
------------------------------------------------------------------------------------------
Class I 78 1,108,325 203,974 2,276,352
------------------------------------------------------------------------------------------
SHARES REDEEMED
Class A (94,979,521) (1,345,163,297) (208,883,469) (2,452,807,682)
------------------------------------------------------------------------------------------
Class B (3,066,963) (42,131,306) (5,963) (67,875,174)
------------------------------------------------------------------------------------------
Class C (8,296,938) (113,318,671) (25,534,217) (294,933,593)
------------------------------------------------------------------------------------------
Class I (368,409) (5,335,142) (930,779) (11,399,821)
CONVERSION OF SHARES
Class A 244,565 3,522,906 809,624 9,452,588
------------------------------------------------------------------------------------------
Class B (310,575) (3,522,906) (829,614) (9,452,589)
------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) FROM
CAPITAL SHARE TRANSACTIONS $ (40,826,507) $ 295,505
------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
5
EXPENSE OFF-SET
ARRANGEMENTS The Fund has entered into arrangements with its
custodian and transfer agent 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
and transfer agent fees were reduced by $27,531 and
$7,064, respectively, under these arrangements.
--------------------------------------------------------------------------------
6
LINE OF CREDIT The Fund and several Kemper Funds (the "the
Participants") share in a $750 million revolving
credit facility for temporary or emergency
purposes, including the meeting of redemptions
requests that otherwise might require the untimely
disposition of securities. The Participants are
changed 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 this
agreement.
--------------------------------------------------------------------------------
7
BORROWINGS The weighted average outstanding daily balance of
all loans (based on the number of days the loans
were outstanding) was approximately $14,506,333,
with an average interest rate of 6.14%. Interest
expense for the six months ended April 30, 2000 is
$148,564. The maximum borrowings outstanding during
the six months ended April 30, 2000 is $51,900,000.
24
<PAGE> 25
NOTES
25
<PAGE> 26
NOTES
26
<PAGE> 27
NOTES
27
<PAGE> 28
<TABLE>
<S> <C> <C>
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
LINDA C. COUGHLIN BRENDA LYONS
Trustee JOHN R. HEBBLE Assistant Treasurer
Treasurer
DONALD L. DUNAWAY
Trustee IRENE T. CHENG
Vice President
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 WILLIAM F. TRUSCOTT
Vice President
SHIRLEY D. PETERSON
Trustee LINDA J. WONDRACK
Vice President
WILLIAM P. SOMMERS
Trustee
</TABLE>
<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 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
</TABLE>
TRUSTEES&OFFICERS
[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 Equity Fund prospectus.
KIF - 3 (6/25/00) 11141510
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
