<PAGE> 1
Kemper International Bond Fund
ANNUAL REPORT TO SHAREHOLDERS FOR
THE PERIOD ENDED DECEMBER 31, 1995
SEEKING TOTAL RETURN, A COMBINATION OF INCOME AND CAPITAL APPRECIATION,
PRINCIPALLY THROUGH A PORTFOLIO OF INVESTMENT GRADE FOREIGN DEBT SECURITIES
"It was a remarkable [world bond market] performance when you consider that
the year started in a mood of both nervousness and disappointment..."
<PAGE> 2
Table of
Contents
3
Performance Update
5
World Market
Performance
6
Portfolio of
Investments
7
Report of
Independent Auditors
8
Financial Statements
10
Notes to
Financial Statements
13
Financial Highlights
At A Glance
- -------------------------------------------------------------------------------
TOTAL RETURN*
- -------------------------------------------------------------------------------
FROM FEBRUARY 1, 1995, THROUGH DECEMBER 31, 1995:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
<S> <C>
KEMPER INTERNATIONAL
BOND FUND 6.56%
- -------------------------------------------------------------------------------
</TABLE>
Return is historical and does not represent future performance. Returns and net
asset value fluctuate. Shares are redeemable at current net asset value, which
may be more or less than original cost.
* Total return measures net investment income and capital gain or loss from
portfolio investments, assuming reinvestment of all dividends. 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.
- -------------------------------------------------------------------------------
NET ASSET VALUE
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AS OF AS OF
12/31/95 2/1/95
- -------------------------------------------------------------------------------
<S> <C> <C>
KEMPER INTERNATIONAL
BOND FUND $9.03 $9.00
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
DIVIDEND REVIEW
- -------------------------------------------------------------------------------
THE FOLLOWING TABLE SHOWS PER SHARE DIVIDEND INFORMATION FOR THE FUND FROM
FEBRUARY 1, 1995, THROUGH DECEMBER 31, 1995.
<TABLE>
<CAPTION>
KEMPER
INTERNATIONAL
BOND FUND
- -------------------------------------------------------------------------------
<S> <C>
11 Month Income $0.41
Short-Term Capital Gain $0.15
- -------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
Performance Update
[JOHNS PHOTO]
GORDON JOHNS JOINED KEMPER FINANCIAL SERVICES, INC. IN 1988 AND IS THE
MANAGING DIRECTOR OF KEMPER INVESTMENT MANAGEMENT COMPANY LIMITED, LONDON, AND
IS PORTFOLIO MANAGER OF KEMPER INTERNATIONAL BOND FUND. JOHNS GRADUATED WITH A
B.A. IN LAW FROM BALLIOL COLLEGE, OXFORD.
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.
WITH BOTH INTEREST RATES AND INFLATION LOW, MOST WORLD BOND MARKETS RALLIED IN
1995. BELOW PORTFOLIO MANAGER GORDON JOHNS DESCRIBES HOW HE POSITIONED KEMPER
INTERNATIONAL BOND FUND TO TAKE FULL ADVANTAGE.
Q GORDON, HOW WOULD YOU CHARACTERIZE THE WORLD GOVERNMENT BOND MARKETS'
PERFORMANCE IN 1995?
A Nineteen of the 20 government markets tracked by Salomon Brothers**
produced double-digit returns, in U.S. dollar terms, in 1995. As strong as the
U.S. bond market was in 1995, its performance was the fifth weakest of the 20
government markets.
That should provide some perspective on how strong other government
markets were, as both interest rates and inflation remained under control in
most markets and for most of the year.
It was a remarkable performance when you consider that the year started
in a mood of both nervousness and disappointment from 1994.
**THE SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX IS AN UNMANAGED INDEX THAT
IS GENERALLY CONSIDERED REPRESENTATIVE OF WORLD GOVERNMENT BOND MARKETS. THIS
INDEX SERVES AS A BENCHMARK TO WHICH WORLD INCOME BOND FUNDS COMPARE THEIR
PERFORMANCE.
Q YET WERE THERE MARKETS TO AVOID IN 1995?
A Japan, which was the bottom-performer with a return of 9.6 percent in
U.S. dollar terms, is the most obvious. As a general guide, we'll have a
minimum of approximately 15 percent of the portfolio invested in Japan. Japan
is the largest weighting in the J.P. Morgan Government Bond Index ex-U.S., and
we think that a minimum in Japan is prudent. We maintained a minimum level
through most of the year. Japan in 1995 was plagued by many economic and
fundamental problems. However, its outlook had improved slightly by the end of
the year.
On the other hand, we also avoided Sweden and perhaps shouldn't have.
Sweden's economy was in serious trouble early in 1995, and we did not
anticipate its quick recovery. But, growth picked up, government revenue rose
and the result was a massive bond rally. Sweden was the best-performing market
last year, returning 34.8 percent.
Q WAS IT A TYPICAL YEAR -- OR WAS THERE ANYTHING THAT 1995 TAUGHT YOU
ABOUT WORLD BOND MARKETS?
A World markets are dynamic, always changing. What surprised us last year
was the unpredictability of the currency. Our investment assumptions always must
consider currency fluctuations, of course. But the speed of the changes
surprised us in 1995.
In April, one dollar was worth 79.85 yen. But in just five months, the
dollar shot to 104.55 yen -- an increase of 31 percent, which is a fairly
dramatic change in a short time. For the year, our underweighted position in
the yen was beneficial to the fund.
Another surprise to us all was the moderate level of activity last
3
<PAGE> 4
Performance Update
year. Consumers around the world did not go shopping, which means that
consumers did very little to stimulate economic growth.
Q WHAT CAN SHAREHOLDERS EXPECT IN 1996?
A For the long term, we are encouraged by what we are calling a newfound
fiscal rectitude. From Canada to New Zealand and also in Europe, governmental
leaders are taking a more responsible attitude toward budget deficits. Bond
markets take heart from apparently serious intentions to reduce deficits and
rein in spending.
For 1996, we think that the world background is generally benign for
bond investors. Having enjoyed outstanding values in the first half of 1995,
we have had a relatively cautious outlook since the summer. Overall, we believe
markets will represent fair value.
Q HOW, THEN, ARE YOU POSITIONING THE FUND -- AND WHAT ARE THE RISKS TO
YOUR STRATEGY?
A Our view of the dollar has shifted in the last several months. We have
now hedged 20 percent of the fund into U.S. dollars and also have a 10 percent
position in New Zealand dollars.
Slow growth made 1995's rallies possible in Europe. But slow growth
keeps government revenues down, which makes it difficult to reduce the
deficit. And, of course, such slow growth cannot help unemployment, which
continues to be quite high in some countries.
Finally, prospects for Japan seem mixed. The economy could grow quite
sharply in the first part of 1996, which could in itself set back bond markets.
We assess the political and currency attributes of each market on an
ongoing basis, in an attempt to help maintain relatively strong and stable
performance. In general, we believe that foreign bond markets and foreign
currencies still represent significant opportunities.
- --------------------------------------------------------------------------------
GROWTH OF AN ASSUMED $10,000 INVESTMENT IN
KEMPER INTERNATIONAL BOND FUND FROM 2/1/95 THROUGH 12/31/95
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2/1/95 6/30/95 12/31/95
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- -KEMPER INTERNATIONAL
BOND FUND(1) $10,000 $10,467 $10,656
- -J.P. MORGAN GOVERNMENT
BOND INDEX+ $10,000 $11,671 $11,846
</TABLE>
1 Performance includes reinvestment of dividends.
The special risk considerations associated with an investment in the fund,
including risks related to foreign investments and to a non-diversified
investment company, are discussed in the prospectus. Risks associated with
foreign securities, including fluctuating exchange rates, government
regulations and differences in liquidity, may affect your investment. As a
non-diversified investment company, the fund may invest more than 5% of its
assets in the securities of a particular foreign government.
+ The J.P. Morgan Government Bond Index is an unmanaged index on a U.S. dollar
total return basis with all dividends reinvested and is comprised of domestic
government bonds from 15 countries. Source is Bloomberg.
4
<PAGE> 5
World Market Performance
ALL MARKETS BUT JAPAN RETURNED 10% OR BETTER
THE GRAPH BELOW PRESENTS THE ONE-YEAR RETURNS OF 20 GOVERNMENT BOND MARKETS
TRACKED BY SALOMON BROTHERS FOR THE PERIOD ENDING DECEMBER 29, 1995, EXPRESSED
IN U.S. DOLLAR TERMS.
<TABLE>
<S> <C>
Sweden 34.83%
Denmark 30.56%
Finland 30.51%
Spain 29.48%
Switzerland 29.17%
Netherlands 28.39%
Portugal 27.89%
France 27.69%
Belgium 27.15%
Germany 25.91%
Norway 24.93%
Austria 24.38%
Canada 23.45%
Ireland 21.44%
Italy 19.96%
United States 18.3%
New Zealand 15.96%
United Kingdom 15.62%
Australia 14.94%
Japan 9.57%
</TABLE>
5
<PAGE> 6
KEMPER INTERNATIONAL BOND FUND
Portfolio of Investments at December 31, 1995
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
GOVERNMENT OBLIGATIONS (75.8%) LOCAL CURRENCY U.S. DOLLAR
CURRENCY AND CORPORATE OBLIGATIONS (19.4%) PRINCIPAL VALUE
BRITISH POUND--14.0%
United Kingdom, 10.00%, 2003 772 $1,390
- -----------------------------------------------------------------------------------------------------------------
FRENCH FRANC--22.8%
Kingdom of Denmark, 5.50%, 1999 2,500 506
French Treasury, 8.50%, 2002 2,100 480
Republic of Portugal, 7.70%, 2005 1,000 217
Kingdom of Spain, 6.50%, 2001 2,850 590
--------------------------------------------------------------------------------
1,793
European Investment Bank, 8.75%, 2002 2,100 483
--------------------------------------------------------------------------------
2,276
- -----------------------------------------------------------------------------------------------------------------
GERMAN
DEUTSCHEMARK--16.8%
Republic of Austria, 6.875%, 2000 600 451
Kingdom of Belgium, 7.00%, 2002 500 372
Republic of Finland, 8.25%, 2002 500 393
Federal Republic of Germany, 8.375%, 2001 575 460
--------------------------------------------------------------------------------
1,676
- -----------------------------------------------------------------------------------------------------------------
JAPANESE YEN--14.6%
Export-Import Bank of Japan, 4.375%, 2003 45,000 478
IBRD, 4.75%, 2004 48,000 529
KFW, 6.00%, 1999 40,000 451
--------------------------------------------------------------------------------
1,458
- -----------------------------------------------------------------------------------------------------------------
NETHERLANDS
GUILDER--19.2%
Dutch State Loan
8.25%, 2002 1,650 1,180
6.50%, 2003 1,125 735
--------------------------------------------------------------------------------
1,915
- -----------------------------------------------------------------------------------------------------------------
NEW ZEALAND
DOLLAR--7.8%
Government of New Zealand, 6.50%, 2000 1,225 776
-----------------------------------------------------------------------------
TOTAL INVESTMENTS--95.2%
(Cost: $9,445) 9,491
-----------------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES--4.8% 473
-----------------------------------------------------------------------------
NET ASSETS--100% $9,964
-----------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
The Fund is a non-diversified investment company and may invest a relatively
high percentage of its assets in the obligations of a limited number of issuers.
Based on the cost of investments of $9,445,000 for federal income tax purposes
at December 31, 1995, the aggregate gross unrealized appreciation was $191,000,
the aggregate gross unrealized depreciation was $145,000 and the net unrealized
appreciation was $46,000.
See accompanying Notes to Financial Statements.
6
<PAGE> 7
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER INTERNATIONAL BOND FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper International Bond Fund as of
December 31, 1995, the related statements of operations and changes in net
assets and the financial highlights for the period from February 1, 1995
(initial public offering) to December 31, 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 audit.
We conducted our audit 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
December 31, 1995, 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 audit provides 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 Bond Fund at December 31, 1995, the results of its operations, the
changes in its net assets and the financial highlights for the period from
February 1, 1995 to December 31, 1995 in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
February 16, 1996
7
<PAGE> 8
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
(in thousands)
ASSETS
<TABLE>
<S> <C>
Investments, at value
(Cost: $9,445) $ 9,491
- -------------------------------------------------------------------------------------------------------
Cash 190
- -------------------------------------------------------------------------------------------------------
Receivable for:
Investments sold 92
- -------------------------------------------------------------------------------------------------------
Interest 255
- -------------------------------------------------------------------------------------------------------
TOTAL ASSETS 10,028
- -------------------------------------------------------------------------------------------------------
</TABLE>
LIABILITIES AND NET ASSETS
<TABLE>
<S> <C>
Payable for:
Investments purchased 51
- -------------------------------------------------------------------------------------------------------
Management fee 6
- -------------------------------------------------------------------------------------------------------
Other 7
- -------------------------------------------------------------------------------------------------------
Total liabilities 64
- -------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO 1,104 SHARES OUTSTANDING,
NO PAR VALUE, EQUIVALENT TO $9.03 PER SHARE $ 9,964
- -------------------------------------------------------------------------------------------------------
</TABLE>
ANALYSIS OF NET ASSETS
<TABLE>
<S> <C>
Paid-in capital $ 9,583
- -------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (20)
- -------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and assets and liabilities in foreign currencies 39
- -------------------------------------------------------------------------------------------------------
Undistributed net investment income 362
- -------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $ 9,964
- -------------------------------------------------------------------------------------------------------
</TABLE>
THE PRICING OF SHARES
<TABLE>
<S> <C>
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($9,964 / 1,104 shares outstanding) $9.03
- -------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
8
<PAGE> 9
STATEMENT OF OPERATIONS
For the period from February 1, 1995
(initial public offering) to December 31, 1995
(in thousands)
NET INVESTMENT INCOME
<TABLE>
<S> <C>
Interest income $428
- -------------------------------------------------------------------------------------------------------
Expenses:
Management fee 46
- -------------------------------------------------------------------------------------------------------
Professional fees 19
- -------------------------------------------------------------------------------------------------------
Trustees' fees and other 17
- -------------------------------------------------------------------------------------------------------
Total expenses 82
- -------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 346
- -------------------------------------------------------------------------------------------------------
</TABLE>
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
<TABLE>
<S> <C>
Net realized gain on sales of investments and foreign currency transactions 54
- -------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation on investments and
assets and liabilities in foreign currencies 39
- -------------------------------------------------------------------------------------------------------
Net gain on investments 93
- -------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $439
- -------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the period from February 1, 1995
(initial public offering) to December 31, 1995
(in thousands)
<TABLE>
<CAPTION>
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
<S> <C>
Net investment income $ 346
- --------------------------------------------------------------------------------------------------------
Net realized gain 54
- --------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation 39
- --------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 439
- --------------------------------------------------------------------------------------------------------
Net equalization credits 525
- --------------------------------------------------------------------------------------------------------
Distribution from net investment income (427)
- --------------------------------------------------------------------------------------------------------
Distribution from net realized gain (156)
- --------------------------------------------------------------------------------------------------------
Total dividends to shareholders (583)
- --------------------------------------------------------------------------------------------------------
Net increase from capital share transactions 9,483
- --------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 9,864
- --------------------------------------------------------------------------------------------------------
</TABLE>
NET ASSETS
<TABLE>
<S> <C>
Beginning of period 100
- --------------------------------------------------------------------------------------------------------
END OF PERIOD (including undistributed net investment income of $362) $9,964
- --------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE FUND Kemper International Bond Fund is an open-end
management investment company organized as a
business trust under the laws of Massachusetts.
Shares of the Fund are offered primarily for
investment by institutions and high net worth
individuals. Shares are offered at net asset value
and the minimum initial investment is $1 million.
- --------------------------------------------------------------------------------
2 SIGNIFICANT ACCOUNTING
POLICIES INVESTMENT VALUATION. Investments are stated at
value. Fixed income securities are valued by using
market quotations, or independent pricing services
that use prices provided by market makers or
estimates of market values obtained from yield data
relating to instruments or securities with similar
characteristics. Portfolio securities that are
traded on a domestic securities exchange are valued
at the last sale price on the exchange where
primarily traded or, if there is no recent sale, at
the last current bid quotation. Portfolio
securities that are primarily traded on foreign
securities exchanges are generally valued at the
preceding closing values of such securities on
their respective exchanges where primarily traded.
Securities not so traded are valued at the last
current bid quotation if market quotations are
available. Exchange traded options are valued at
the last sale price unless there is no sale price,
in which event prices provided by market makers are
used. Over-the-counter traded options are valued
based upon prices provided by market makers.
Financial futures and options thereon are valued at
the settlement price established each day by the
board of trade or exchange on which they are
traded. Forward foreign currency contracts and
foreign currencies are valued at the forward and
current exchange rates, respectively, prevailing on
the day of valuation. Other securities and assets
are valued at fair value as determined in good
faith by the Board of Trustees.
CURRENCY TRANSLATION. The books and records of the
Fund are maintained in U.S. dollars. All assets and
liabilities initially expressed in foreign currency
values are converted into U.S. dollar values at the
mean between the bid and offered quotations of such
currencies against U.S. dollars as last quoted by a
recognized dealer. If such quotations are not
readily available, the rate of exchange is
determined in good faith by the Board of Trustees.
Income and expenses and purchases and sales of
investments are translated into U.S. dollars at the
rate of exchange prevailing on the respective dates
of such transactions. The Fund includes that
portion of the results of operations resulting from
changes in foreign exchange rates with net realized
and unrealized gain or loss from investments and
foreign currency transactions, as appropriate.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on the
trade date (date the order to buy or sell is
executed). Interest income includes premium and
discount amortization on money market instruments
and discount amortization on long-term fixed income
securities. Realized gains and losses from
investment transactions are reported on an
identified cost basis.
FUND SHARE VALUATION. Fund shares are sold and
redeemed on a continuous basis at net asset value.
On each day the New York Stock Exchange is
10
<PAGE> 11
open for trading, the net asset value per share is
determined as of the earlier of 3:00 p.m. Chicago
time or the close of the Exchange by dividing the
net assets by the number of outstanding shares.
Because of the need to obtain prices as of the
close of trading on various exchanges throughout
the world, the calculation of net asset value does
not take place contemporaneously with the
determination of the prices of the Fund's foreign
securities.
FEDERAL INCOME TAXES. The Fund has complied with
the special provisions of the Internal Revenue Code
available to investment companies and therefore no
federal income tax provision is required.
DIVIDENDS TO SHAREHOLDERS. The Fund declares and
pays dividends of net investment income and any net
realized capital gains annually, which are recorded
on the ex-dividend date. Dividends to shareholders
are determined in accordance with income tax
principles which may treat certain transactions
differently from generally accepted accounting
principles. These differences are primarily due to
differing treatments for certain transactions such
as foreign currency transactions.
EQUALIZATION ACCOUNTING. A portion of proceeds from
sales and cost of redemptions of Fund shares is
credited or charged to undistributed net investment
income so that income per share available for
distribution is not affected by sales or
redemptions of shares.
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The Fund has a management
agreement with Kemper Financial Services, Inc.
(KFS) and pays a management fee at an annual rate
of .75% of the first $250 million of average daily
net assets declining to .62% of average daily net
assets in excess of $12.5 billion. The Fund
incurred a management fee of $46,000 for the period
ended December 31, 1995.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of KFS.
During the period ended December 31, 1995, the Fund
made no direct payments to its officers and
incurred trustees' fees of $13,000 to independent
trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the period ended December 31, 1995, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $31,024
Proceeds from sales 21,747
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund for the period ended
December 31, 1995 (in thousands):
<TABLE>
<CAPTION>
SHARES AMOUNT
--------------------------------------------------------------------------
<S> <C> <C>
Shares sold 2,314 $20,425
--------------------------------------------------------------------------
Shares issued in reinvestment of dividends 64 582
--------------------------------------------------------------------------
2,378 21,007
--------------------------------------------------------------------------
Shares redeemed (1,285) (11,524)
--------------------------------------------------------------------------
NET INCREASE FROM CAPITAL SHARE TRANSACTIONS $ 9,483
--------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
- --------------------------------------------------------------------------------
6 FORWARD FOREIGN
CURRENCY TRANSACTIONS In order to protect itself against a decline in the
value of a particular foreign currency against
another currency, the Fund has entered into forward
contracts to deliver or receive foreign currency in
exchange for U.S. Dollars as described below. The
Fund bears the market risk that arises from changes
in foreign exchange rates, and accordingly, the
unrealized gain (loss) on these contracts is
reflected in the accompanying financial statements.
The Fund also bears the credit risk if the
counterparty fails to perform under the contract.
At December 31, 1995, the Fund had outstanding
forward foreign currency contracts as follows (in
thousands):
<TABLE>
<CAPTION>
IN
FOREIGN CURRENCY EXCHANGE SETTLEMENT UNREALIZED
TO DELIVER/RECEIVE FOR DATE GAIN (LOSS)
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------
Sales contracts 900 British pounds $1,400 February 1996 $ 4
---------------------------------------------------------------------------------------------------------------
2,650 Dutch guilders 1,695 February 1996 37
--------------------------------------------------------------------------------------------
11,500 French francs 2,320 October 1996 (37)
--------------------------------------------------------------------------------------------
2,500 German marks 1,777 January 1996 27
--------------------------------------------------------------------------------------------
304 New Zealand dollars 197 March 1996 ( 1)
---------------------------------------------------------------------------------------------------------------
Purchase contracts 500 Australian dollars 369 August 1996 ( 1)
---------------------------------------------------------------------------------------------------------------
10,850 Danish krone 1,959 December 1996 9
--------------------------------------------------------------------------------------------
4,200 Finnish markka 1,003 April 1996 (32)
--------------------------------------------------------------------------------------------
620 Irish punts 987 June 1996 7
--------------------------------------------------------------------------------------------
1,100,000 Italian lire 661 November 1996 5
--------------------------------------------------------------------------------------------
6,190 Norwegian krone 1,006 January 1996 (26)
--------------------------------------------------------------------------------------------
74,000 Portuguese escudos 500 January 1996 ( 6)
--------------------------------------------------------------------------------------------
120,000 Spanish pesetas 958 September 1996 7
---------------------------------------------------------------------------------------------
TOTAL $( 7)
--------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 13
For the period from February 1, 1995 (initial public offering) to December 31,
1995
<TABLE>
<CAPTION>
PER SHARE OPERATING PERFORMANCE
<S> <C>
Net asset value, beginning of period $9.00
- -------------------------------------------------------------------
Net investment income .47
- -------------------------------------------------------------------
Net realized and unrealized gain .12
- -------------------------------------------------------------------
Total from investment operations .59
- -------------------------------------------------------------------
Less dividends:
Distribution from net investment income .41
- -------------------------------------------------------------------
Distribution from net realized gain .15
- -------------------------------------------------------------------
Total dividends .56
- -------------------------------------------------------------------
Net asset value, end of period $9.03
- -------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 6.56%
ANNUALIZED RATIOS TO AVERAGE NET ASSETS
Expenses 1.34%
- -------------------------------------------------------------------
Net investment income 5.66%
- -------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets at end of period (in thousands) $9,964
- -------------------------------------------------------------------
Portfolio turnover rate (annualized) 332%
- -------------------------------------------------------------------
</TABLE>
NOTE: Net investment income per share was determined based on average shares
outstanding.
13
<PAGE> 14
TRUSTEES AND OFFICERS
TRUSTEES
STEPHEN B. TIMBERS
President and Trustee
JAMES E. AKINS
Trustee
ARTHUR R. GOTTSCHALK
Trustee
FREDERICK T. KELSEY
Trustee
FRED B. RENWICK
Trustee
JOHN B. TINGLEFF
Trustee
JOHN G. WEITHERS
Trustee
OFFICERS
JOHN E. PETERS
Vice President
J. PATRICK BEIMFORD, JR.
Vice President
GORDON K. JOHNS
Vice President
PHILIP J. COLLORA
Vice President and
Secretary
CHARLES F. CUSTER
Vice President and
Assistant Secretary
JEROME DUFFY
Treasurer
ELIZABETH C. WERTH
Assistant Secretary
- --------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICE AGENT KEMPER SERVICE COMPANY
P.O. Box 419557
Kansas City, MO 64141
- --------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
127 West 10th Street
Kansas City, MO 64105
- --------------------------------------------------------------------------------
FOREIGN CUSTODIAN THE CHASE MANHATTAN BANK, N.A.
Chase Metro Tech Center
Brooklyn, NY 11245
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
- --------------------------------------------------------------------------------
INVESTMENT MANAGER KEMPER FINANCIAL SERVICES, INC.
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
120 South LaSalle Street
Chicago, IL 60603
(LOGO)K
Printed on recycled paper.
KIBF - 2 (2/96) LOGO
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