-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, l9km2QaXF1ehC7rTPt2t1rqJOObVf5T0ih+8wrV0M8bQLg98ufZr1bUwa4+3CoOP BA80Xy+WLLke+lPbrJWTIQ== 0000950124-95-002021.txt : 199507110000950124-95-002021.hdr.sgml : 19950711 ACCESSION NUMBER: 0000950124-95-002021 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950430 FILED AS OF DATE: 19950710 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KEMPER INTERNATIONAL FUND CENTRAL INDEX KEY: 0000350562 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 363124258 STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-03136 FILM NUMBER: 95552757 BUSINESS ADDRESS: STREET 1: 120 S LASALLE ST CITY: CHICAGO STATE: IL ZIP: 60603 BUSINESS PHONE: 3127811121 FORMER COMPANY: FORMER CONFORMED NAME: KEMPER INTERNATIONAL FUND INC DATE OF NAME CHANGE: 19870127 N-30D 1 SAR - KEMPER INTERNATIONAL FUND 1 Kemper International Fund Semiannual Report to Shareholders For the Period Ended April 30, 1995 Seeking total return, a combination of capital growth and income, principally through an internationally diversified portfolio of equity securities [KEMPER LOGO] 2 DEAR SHAREHOLDER: We are pleased to provide you with an overview of the performance of your fund for the six-month period ended April 30, 1995. In addition, following the economic overview is a question and answer interview with your fund's Portfolio Manager. - ---------------------------- PERFORMANCE REVIEW
- ---------------------------------------------------------- Total Return Performance* FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 1995 (UNADJUSTED FOR ANY SALES CHARGE) Kemper International Fund A -4.84% Kemper International Fund B -5.24% Kemper International Fund C -5.33% Lipper International Funds Category Average -4.55% - ----------------------------------------------------------
Returns are historical and do not represent future performance. Returns and net asset value fluctuate. Shares are redeemable at current net asset value, which may be more or less than original cost. When comparing Kemper International Fund A to all other International funds in its Lipper** category for the following time periods ended April 30, 1995, this fund ranked:
1-YEAR 5-YEAR 10-YEAR 84 of 183 35 of 52 10 of 19
- --------------------------------------- GENERAL ECONOMIC OVERVIEW Comfortable with the pace of economic growth and the level of interest rates, investors enjoyed generally positive performance in both the fixed-income and stock markets in the first five months of 1995. But as we enter the summer months, we are seeing a decided weakening in the economy and heightened uncertainty. What effect has the recent economic growth had on price inflation? Have higher interest rates slowed the economy so much that a recession is now a true threat--and will the Federal Reserve Board now reverse itself and start to ease rates? Of course, these are the questions that only time will answer. At Kemper, we believe that economic growth in the second quarter will be flat or possibly even negative. Such a scenario is more severe than the press-heralded "soft landing" and could conceivably set the scene for lower interest rates. At this point--before the release of second quarter data--we believe we have seen only signs of a slowdown, not a recession. We think that the Fed is not likely to alter direction quickly. Against this backdrop, we believe that the opportunities for investors will be concentrated in high quality investments. Companies can no longer count on the economy to provide an above average earnings boost. Rather, stocks that have proven themselves with a pattern of consistent earnings are likely to attract investor support. Specifically, industries that produce more consistent earnings, such as consumer nondurables, technology and selected capital goods can be expected to do well. Picking the right sectors to invest in will be the key challenge for equity investors during the next few quarters. We look for the fixed-income markets to continue their strong performance as they tend to do well during periods of slow growth and low inflation. Leading international economies are lagging the U.S. economy. Japan and Germany, whose economies typically follow U.S. growth, are not as robust as in past cycles. This phenomenon makes international investing very complex currently. Moreover, conditions in emerging market countries underline the importance of careful research and experience in understanding how these markets work. We are calm about what has been described as a dollar crisis. While it's true that the dollar has depreciated against the Japanese yen and many European currencies, we note that the dollar has appreciated in value against the currency of Canada and Mexico, two of our largest trading partners. Political leadership also has some bearing on the progress of the economy and the state of the financial markets. In the months preceding a presidential election year, it has not been uncommon for incumbents to attempt to stimulate growth. Given our Republican Congress and Democratic President, however, we do not consider this a foregone conclusion as we move closer to 1996. 1 3 With that as an economic backdrop, we encourage you to read the following detailed report of your fund, including an interview with your fund's portfolio manager. Thank you for your continued support. We appreciate the opportunity to serve your investment needs. Sincerely, [SIG] Stephen B. Timbers Chief Investment and Executive Officer June 13, 1995 - -------------------- Stephen Timbers is Chief Executive Officer and is also Chief Investment Officer of Kemper Financial Services, Inc. (KFS). KFS and its affiliates manage approximately $60 billion in [PHOTO] assets, including $42 billion in retail mutual funds. Timbers is a graduate of Yale - -------------------- University and holds an M.B.A. from Harvard University. * Total return measures net investment income and capital gain or loss from portfolio investments, assuming reinvestment of all dividends. During the period 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. **Lipper Analytical Services, Inc. performance and rankings are based upon changes in net asset value with all dividends reinvested and do not include the effect of sales charges and, if they had, results may have been less favorable. Performance and rankings are historical and do not reflect future performance. 2 4 Q&A AN INTERVIEW WITH PORTFOLIO MANAGER DENNIS FERRO - ----------- Dennis Ferro is an Executive Vice-President of Kemper Financial Services, Inc. and Director of International Equities as well as [PHOTO] Vice-President and Portfolio Manager of the Kemper International Fund. Dennis holds an M.B.A. in finance from St. John's University in New York and a bachelor's degree from Villanova University in - ----------- Pennsylvania. He is a Chartered Financial Analyst. Q: IN GENERAL, HOW WOULD YOU CHARACTERIZE THE LAST SIX MONTHS? A: It was a difficult but important period. Interest rates peaked in the United States during the fourth quarter of 1994, and the subsequent decline of rates boosted the performance of the U.S. equity market. Just as the U.S. stock market was becoming more attractive to investors, a litany of events influenced the performance of international markets. The devaluation of the Mexican peso resulted in a sharp decline in Mexican and other Latin American stock markets, an earthquake shook Japan and brought into question its economic recovery and the well established Barings Bank of London collapsed in a wake of improprieties. But most important during the period was the decline of the U.S. dollar. While we had not expected the dollar to be especially strong, we were surprised by the breadth of its weakness during the last six months. Q: WHAT WAS YOUR RESPONSE TO THESE EVENTS? A: I'll elaborate on just a few of the changes that we made as events unfolded. Fortunately, we had the insight to significantly reduce the fund's Mexican holdings before the peso fell. Our entire Latin American position had been curtailed, in fact. In our last report to shareholders six months ago, we singled Latin America out as a region that offered significant potential. While we continue to believe that Latin America promises higher than average growth over the long term, we have re-evaluated its short-term prospects. Despite the great strides that many countries are making in adopting free market systems, some markets are currently wrestling with inflation, trade balance and currency challenges. We expect the fund to have little to no exposure to Latin America for the near term. The fund's investment in Japan changed quite a bit as we continued to assess opportunities there. Six months ago, we expected Japan's economic recovery to finally show some momentum. Our plan was to gradually increase our Japanese holdings as economic factors supported our growth forecasts. We had as much as 31 percent of the fund invested in Japan in January, the time of the Kobe earthquake. The earthquake represented an immediate setback to the economy but, again, the strength of the yen relative to the U.S. dollar is what concerned us more about Japan. The subsequent reduction of our holdings, to 21 percent by the end of April, reflects our revised expectations. The growth we expected in Japan is not going to materialize to the extent we had hoped. We had what I'll call "residual" exposure in both Latin America and Japan - which hurt fund performance when these markets stumbled - but overall we're pleased that we acted to cut back when we did. Q: YOU'VE CUT BACK ON LATIN AMERICAN AND JAPANESE HOLDINGS - WHICH REGIONS PICKED UP THE SLACK? A: Our priority in making those moves was to dampen the amplitude of the swings of overseas markets. Toward that end, over the past six months we moved to the more stable markets in Europe where the fiscal and inflationary environments are investor-friendly and markets continue to be reasonably valued. Specifically, our investments in France, Netherlands and Switzerland significantly contributed to performance over this reporting period. Q: DENNIS, YOU'VE BEEN FOLLOWING INTERNATIONAL MARKETS FOR YEARS. DID YOU LEARN ANYTHING NEW IN THE LAST SIX MONTHS? A: Well, just that currency strength creates market weakness. Of course, we've always known that, but the pace with which markets reacted to currency changes was a surprise. And it confirmed for us the importance of being flexible and fast-acting in our decisions. Markets can be volatile and they are always reacting to economic fundamentals. But this period demonstrated what happens when economic fundamentals change so quickly and dramatically that they challenge long-term expectations. Germany is an example of the way in which 3 5 dramatic and quick currency moves can influence earnings forecasts and competitiveness. At its highest, the fund had 8 percent of its assets invested in German companies. That was in November, when Germany was leading the European recovery. Since then, the German mark has gained significant strength and forecasts for economic growth and corporate earnings have been cut back as a result. German manufacturing and industry is extremely sensitive to weaker currencies. Because the country's prospects have changed so dramatically, we've cut the fund's exposure in half. Q: MOVING AWAY FROM THE GEOGRAPHY OF THE HOLDINGS, WHICH INDUSTRIES DID YOU FAVOR? A: We continued to invest in telecommunications, with our exposure focused on equipment suppliers in fast-growing companies. Nokia in Finland and Ericsson in Sweden are two examples. It's been said that half the world has yet to make its first telephone call - so you can see the growth potential for this industry. We like the pharmaceutical industry, particularly as it consolidates. Two of our favorites are the British company Glaxo PLC, which just acquired Wellcome PLC in the United Kingdom, and Roche Holdings, a Swiss company that has announced an expanded business arrangement with Genentech, based in the U.S. Finally, consumer retail in Europe has shown promise. The European recovery is about a full year behind the U.S.'s. We look for consumer spending to pick up as inflation remains low and Europeans find that their strong currencies will result in lower prices for imported goods. Q: WHAT DO YOU EXPECT THE NEXT SIX MONTHS OR SO TO BRING? A: There's no question that the first quarter of 1995 was tumultuous. But in April international markets started to catch up and show good performance. The economic expansion is continuing overseas, and we are finding attractive opportunities in stocks that we expect to demonstrate good, sustainable growth. On a country basis, we are especially optimistic about the United Kingdom. The UK, which exports technology, automobiles and a cross section of basic products, seems to be improving its competitiveness in world markets. We also like our prospects in Sweden, where machinery and high value-added exporters are positioned to do well. Q: WHAT COULD THREATEN YOUR FORECAST? A: Naturally, there are no guarantees. I can think of a few factors - all of which I assign a low probability to - that could threaten the assumptions we're making: - - a continued dramatic decline of the U.S. dollar - - an escalation of trade tensions between U.S. and Japan - - another negative surprise in Latin America - - the potential for oil prices to spike up due to tensions in the Mideast. 4 6 Dennis Ferro on... - - INTERNATIONAL INVESTING "World growth is continuing at an attractive rate. Remember that two-thirds of the world's equity market opportunity is outside the United States, and opportunities are continually increasing as overseas industrialization continues". - - VOLATILITY "We believe that investors use Kemper International Fund as a 'core' international investment. Our mission is to seek to provide the benefits of diversification in non-U.S. markets but with reduced volatility." Morgan Stanley Capital International World Index is an unmanged index that is a generally accepted benchmark for the global market. - - KEMPER INTERNATIONAL FUND'S PERFORMANCE COMPARED TO ITS BENCHMARK "While the fund and the EAFE, which is a weighted index, are in the same international markets, there are often significant differences between the levels of investment. When the fund has more invested in a given country than the weights reflected in the EAFE index, we describe it as overweighted. Our recent above-index investment in Europe, for example, helped the fund's performance. However, the fund had significantly less (21 percent versus 45 percent at the end of April) invested in Japanese holdings than the EAFE. This underweighting explains part of the difference between the performance and volatility of the fund and its benchmark". - - THE VALUE OF THE DOLLAR "Currencies are always going to fluctuate, and there will be periods of time when volatility seems excessive. However, value should prevail. The U.S. competitive position is strong and while future currency trends cannot be guaranteed, over the long term, it's reasonable to expect that the dollar can reverse its current trend and appreciate against our major trading partners. It's in the U.S.' best interests to promote a healthy trade environment". INTERNATIONAL DIVERSIFICATION CAN REDUCE RISK, INCREASE RETURN POTENTIAL An investor can actually increase the return potential and possibly reduce the overall risk of his or her portfolio over the long term, according to a study by Merrill Lynch. The graph below makes a compelling argument for some exposure to international markets. According to this data, the investor with as much as 30 percent invested in the Morgan Stanley Capital International World (Excluding the U.S.) Index and 70 percent of his or her portfolio invested in the Standard & Poor's 500 was exposed to lower risk and higher return from 1970 through March 1995 than an investor 100 percent invested in the S&P 500. Of course, this information is historical and does not represent future performance of the indices or any Kemper mutual fund. Also, there is no guarantee that any particular portfolio strategy will reduce risk or result in a profit. Investors may not make direct investments in any of these indices. RISK RETURN FRONTIER - S & P 500 VS. MSCI WORLD INDEX ($) 12/31/70 - 3/31/95
RISK/RETURN AVG. 12 MO. PRICE RETURN RISK 1 8.44% 15.20% 2 8.56% 15.16% 3 8.64% 15.10% 4 8.80% 15.12% 5 8.92% 15.21% 6 9.00% 15.36% 7 9.12% 15.57% 8 9.24% 15.82% 9 9.35% 16.12% 10 9.44% 16.48% 11 9.56% 16.88%
RISK (STANDARD DEVIATION OF AVERAGE 12 MONTH PRICE RETURNS) Source: Merrill Lynch International Quantitative Analysis, MSCI The EAFE is an unmanaged index that is a generally accepted benchmark for major overseas markets. The Standard & Poor's 500 index is an unmanaged index considered to be generally representative of the U.S. stock market. Investors may not make direct investments in any of these indices. 5 7 PORTFOLIO OF INVESTMENTS April 30, 1995 (Dollars in thousands)
Number of Shares Value --------- -------- COMMON STOCKS CONTINENTAL EUROPE FINLAND-3.6% ----------------------------------------------------------- Oy Nokia AB Telecommunications company 332,000 $ 13,570 ----------------------------------------------------------- FRANCE-4.2% ----------------------------------------------------------- Carrefour S.A. Food retailer 20,000 10,045 ----------------------------------------------------------- L'Oreal S.A. Consumer products and services 10,566 2,786 ----------------------------------------------------------- (a)Technip S.A. Oil company 50,000 2,995 ----------------------------------------------------------- 15,826 GERMANY-3.6% ----------------------------------------------------------- Mannesmann, A.G. Construction and engineering company 22,000 5,984 ----------------------------------------------------------- Veba, A.G. Electric utility 21,000 7,839 ----------------------------------------------------------- 13,823 IRELAND-2.1% ----------------------------------------------------------- (a)Allied Irish Banks PLC Banking 880,000 4,059 ----------------------------------------------------------- Greencore Group PLC Food producer 565,633 4,011 ----------------------------------------------------------- 8,070 NETHERLANDS-13.2% ----------------------------------------------------------- Aalberts Industries N.V. Hardware company 55,800 2,989 ----------------------------------------------------------- ABN Amro Bank Banking 148,500 5,722 ----------------------------------------------------------- Hagemeyer N.V. Trading company 63,048 5,453 ----------------------------------------------------------- Koninklijke Ahold Food retailer and distributor 130,000 4,481 ----------------------------------------------------------- Koninklijke PTT Netherland N.V. Commercial services 153,000 5,343 ----------------------------------------------------------- PolyGram N.V. Music recording company 225,000 12,722 ----------------------------------------------------------- Unilever N.V. Food processing 54,400 7,293 ----------------------------------------------------------- Wolters Kluwer Multinational publishing organization 74,145 6,044 ----------------------------------------------------------- 50,047 SPAIN-1.3% ----------------------------------------------------------- Repsol S.A. Oil and gas producer 150,000 4,776 ----------------------------------------------------------- (a)Tipel, S.A. Leather skins manufacturer 73,500 10 ----------------------------------------------------------- 4,786 SWEDEN-7.7% ----------------------------------------------------------- Astra AB Pharmaceutical company 300,000 8,752 ----------------------------------------------------------- Atlas Copco Industrial machinery manufacturer 320,000 4,404 ----------------------------------------------------------- Number of Shares Value --------- -------- ----------------------------------------------------------- LM Ericsson "B" Telecommunications equipment manufacturer 200,000 $ 13,239 ----------------------------------------------------------- Gambro AB Pharmaceutical company 200,000 2,601 ----------------------------------------------------------- 28,996 SWITZERLAND-5.6% ----------------------------------------------------------- Nestle S.A. Food processor 5,500 5,389 ----------------------------------------------------------- Roche Holdings AG Pharmaceutical company 2,632 15,868 ----------------------------------------------------------- 21,257 ----------------------------------------------------------- TOTAL CONTINENTAL EUROPE-41.3% 156,375 ----------------------------------------------------------- PACIFIC REGION HONG KONG-2.5% ----------------------------------------------------------- Hong Kong Telecommunications Ltd. Telecommunication services 1,174,800 2,300 ----------------------------------------------------------- HSBC Holdings PLC Banking 192,000 2,227 ----------------------------------------------------------- Hutchison Whampoa Ltd. Diversified holding company 500,000 2,171 ----------------------------------------------------------- New World Development Co., Ltd. Investment holding and property investment company 490,000 1,273 ----------------------------------------------------------- Peregrine Investment Holdings Investment banking 1,229,000 1,294 ----------------------------------------------------------- Wai Kee Holdings, with warrants expiring 1996 Construction company 2,118,000 338 ----------------------------------------------------------- 9,603 JAPAN-20.8% ----------------------------------------------------------- Amada Co. Ltd. Equipment manufacturer 210,000 2,244 ----------------------------------------------------------- Bridgestone Corp. Manufacturer of rubber related products 120,000 1,942 ----------------------------------------------------------- DDI Corp. Telecommunications company 416 3,664 ----------------------------------------------------------- Daifuku Co., Ltd. Manufacturer of diversified machinery 150,000 1,964 ----------------------------------------------------------- Fuji Bank Ltd. Banking 190,000 4,568 ----------------------------------------------------------- Fujisawa Pharmaceutical Pharmaceutical company 400,000 5,142 ----------------------------------------------------------- JMS Co. Ltd. Medical equipment supplier 222,000 1,747 ----------------------------------------------------------- Keiyo Company Ltd. Retailer 145,000 1,681 ----------------------------------------------------------- Kurita Water Industries Water treatment equipment and chemicals manufacturer 100,000 2,440 ----------------------------------------------------------- Kyocera Corporation Electronics manufacturer 36,000 2,785 ----------------------------------------------------------- Marui Co., Ltd. Retailer 210,000 3,224 ----------------------------------------------------------- Mitsubishi Heavy Industries Industrial machinery manufacturer 500,000 3,630 -----------------------------------------------------------
6 8 (Dollars in thousands)
Number of Shares Value --------- -------- ----------------------------------------------------------- Nippon Paper Industries Paper company 225,000 $ 1,749 ----------------------------------------------------------- Nippondenso Co., Ltd. Automotive components manufacturer and supplier 110,000 2,212 ----------------------------------------------------------- Nissan Motor Co., Ltd. Automobile manufacturer 550,000 4,019 ----------------------------------------------------------- (a)Nisshin Steel Co., Ltd. Steel manufacturer 600,000 3,014 ----------------------------------------------------------- (a)NKK Corp. Steel manufacturer 1,353,000 3,784 ----------------------------------------------------------- Omron Corp. Electronics manufacturer 150,000 2,946 ----------------------------------------------------------- Sanyo Shinpan Finance Co. Consumer finance company 14,000 1,145 ----------------------------------------------------------- Seven-Eleven Japan Co., Ltd. Convenience retailer 52,500 3,780 ----------------------------------------------------------- Sharp Corporation Electronics manufacturer 90,000 1,478 ----------------------------------------------------------- Sumitomo Bank Ltd. Banking 240,000 5,199 ----------------------------------------------------------- Sumitomo Corporation Wholesaler 350,000 3,478 ----------------------------------------------------------- Sumitomo Trust & Banking Banking 360,000 5,442 ----------------------------------------------------------- Tokyo Electron Ltd. Electronics manufacturer 61,000 1,902 ----------------------------------------------------------- (a)Ube Industries, Ltd. Diversified company 900,000 3,728 ----------------------------------------------------------- 78,907 MALAYSIA-1.9% ----------------------------------------------------------- Hume Industries Bhd Steel and concrete manufacturer 348,000 1,388 ----------------------------------------------------------- Resorts World Bhd Operation of tourist resorts 422,000 2,222 ----------------------------------------------------------- Road Builder Holdings Construction company 343,000 789 ----------------------------------------------------------- (a)Technology Resources Industries Telecommunications company 1,037,000 2,646 ----------------------------------------------------------- 7,045 PHILIPPINES ----------------------------------------------------------- (a)Universal Robina Corporation Food manufacturer 154,000 85 ----------------------------------------------------------- SINGAPORE-2.6% ----------------------------------------------------------- DBS Land Ltd. Real estate 99,000 1,058 ----------------------------------------------------------- Keppel Corporation Limited Conglomerate holding company 500,000 4,055 ----------------------------------------------------------- Singapore Press Holdings Publisher 270,000 4,650 ----------------------------------------------------------- 9,763 ----------------------------------------------------------- TOTAL PACIFIC REGION-27.8% 105,403 ----------------------------------------------------------- Number of Shares Value --------- -------- COMMONWEALTH COUNTRIES AUSTRALIA-3.9% ----------------------------------------------------------- Australian and New Zealand Banking Group Ltd. Financial services 1,563,500 $ 5,781 ----------------------------------------------------------- CSL Ltd. Plasma producer 843,900 1,714 ----------------------------------------------------------- Tabcorp Holdings Ltd. Entertainment and gaming 1,768,700 4,055 ----------------------------------------------------------- (a)TNT Ltd. Transportation and logistics 2,100,000 3,010 ----------------------------------------------------------- 14,560 CANADA-1.1% ----------------------------------------------------------- Magna International, "A" Automobile parts company 123,400 4,233 ----------------------------------------------------------- NEW ZEALAND-.2% ----------------------------------------------------------- Lion Nathan Ltd. Beer and soft drink manufacturer 310,000 676 ----------------------------------------------------------- UNITED KINGDOM-15.4% ----------------------------------------------------------- British Petroleum Co., PLC Petroleum mining and production company 1,016,790 7,323 ----------------------------------------------------------- Dixons Group PLC Electronics retailer 1,400,000 5,419 ----------------------------------------------------------- Glaxo Wellcome PLC Pharmaceutical company 750,000 8,865 ----------------------------------------------------------- LLoyds Bank PLC Banking 600,000 6,175 ----------------------------------------------------------- Manweb PLC Electric utility company 550,000 5,966 ----------------------------------------------------------- Reed International PLC Publisher 440,000 5,665 ----------------------------------------------------------- (a)Telewest Communications Communications utility 1,078,000 2,671 ----------------------------------------------------------- Tesco PLC Food retailer 1,200,000 5,397 ----------------------------------------------------------- Tomkins PLC Industrial manufacturer 1,400,000 5,272 ----------------------------------------------------------- Vodafone Group PLC Cellular telephone services 1,792,977 5,612 ----------------------------------------------------------- 58,365 ----------------------------------------------------------- TOTAL COMMONWEALTH COUNTRIES-20.6% 77,834 ----------------------------------------------------------- LATIN AMERICA AND EMERGING MARKETS CHILE-.7% ----------------------------------------------------------- (a)Provida Corporation, ADR Financial services 130,500 2,789 ----------------------------------------------------------- VENEZUELA ----------------------------------------------------------- Electricidad de Caracas Electric utility company 960 1 ----------------------------------------------------------- TOTAL LATIN AMERICA AND EMERGING MARKETS-.7% 2,790 -----------------------------------------------------------
7 9 (Dollars in thousands)
Principal Amount Value --------- -------- - ----------------------------------------------------------- TOTAL COMMON STOCKS-90.4% (Cost: $307,111) $342,402 - ----------------------------------------------------------- MONEY MARKET INSTRUMENTS Yield-5.97% to 6.00% Due-May 1995 - ----------------------------------------------------------- Caterpillar Finance $ 2,000 1,999 - ----------------------------------------------------------- ConAgra 16,300 16,296 - ----------------------------------------------------------- General Motors Acceptance Corp. 19,000 18,983 - ----------------------------------------------------------- Value -------- - ----------------------------------------------------------- TOTAL MONEY MARKET INSTRUMENTS-9.9% (Cost $37,266) $ 37,278 - ----------------------------------------------------------- TOTAL INVESTMENTS-100.3% (Cost $344,377) 379,680 - ----------------------------------------------------------- LIABILITIES, LESS CASH AND OTHER ASSETS-(.3)% (1,007) - ----------------------------------------------------------- NET ASSETS-100% $378,673 - -----------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (a) Non-income producing security. (b) Based on the cost of investments of $344,377,000 for federal income tax purposes at April 30, 1995, the aggregate gross unrealized appreciation was $46,094,000, the aggregate gross unrealized depreciation was $10,791,000 and the net unrealized appreciation of investments was $35,303,000. (c) At April 30, 1995, the Fund's portfolio of investments had the following diversification (dollars in thousands):
Value % ------------------------------------------------------- Automobiles, Parts and Service $10,464 2.8 ------------------------------------------------------- Chemicals, Medical Equipment and Pharmaceuticals 44,689 11.8 ------------------------------------------------------- Communications 43,702 11.5 ------------------------------------------------------- Construction and Building Materials 7,111 1.9 ------------------------------------------------------- Consumer Products and Services 34,533 9.1 ------------------------------------------------------- Diversified 9,954 2.6 ------------------------------------------------------- Electrical and Electronics 9,111 2.4 ------------------------------------------------------- Energy Sources 15,094 4.0 ------------------------------------------------------- Financial Services 46,732 12.3 ------------------------------------------------------- Food and Beverages 27,499 7.3 ------------------------------------------------------- Industrial Products and Services 31,129 8.2 ------------------------------------------------------- Paper Products 1,749 .5 ------------------------------------------------------- Publishing 16,359 4.3 ------------------------------------------------------- Retailing 27,460 7.3 ------------------------------------------------------- Transportation 3,010 .8 ------------------------------------------------------- Utilities 13,806 3.6 ------------------------------------------------------- TOTAL COMMON STOCKS 342,402 90.4 ------------------------------------------------------- MONEY MARKET INSTRUMENTS 37,278 9.9 ------------------------------------------------------- TOTAL INVESTMENTS 379,680 100.3 ------------------------------------------------------- LIABILITIES, LESS CASH AND OTHER ASSETS (1,007) (.3) ------------------------------------------------------- NET ASSETS $378,673 100.0 =======================================================
8 10 STATEMENT OF ASSETS AND LIABILITIES April 30, 1995 (in thousands)
ASSETS - ------------------------------------------------------ Investments, at value (Cost: $344,377) $379,680 - ------------------------------------------------------ Cash 12,087 - ------------------------------------------------------ Receivable for: Fund shares sold 63 - ------------------------------------------------------ Investments sold 5,294 - ------------------------------------------------------ Dividends and interest 1,393 - ------------------------------------------------------ Total assets 398,517 - ------------------------------------------------------ LIABILITIES AND NET ASSETS - ------------------------------------------------------ Payable for: Fund shares redeemed 425 - ------------------------------------------------------ Investments purchased 18,455 - ------------------------------------------------------ Management fee 228 - ------------------------------------------------------ Distribution services fee 21 - ------------------------------------------------------ Administrative services fee 65 - ------------------------------------------------------ Custodian and transfer agent fees and related expenses 611 - ------------------------------------------------------ Other 39 - ------------------------------------------------------ Total liabilities 19,844 - ------------------------------------------------------ Net assets $378,673 ====================================================== ANALYSIS OF NET ASSETS - ------------------------------------------------------ Excess of amounts received from issuance of shares over amounts paid on redemptions of shares on account of capital $354,952 - ------------------------------------------------------ Accumulated net realized loss on sales of investments and foreign currency transactions (12,010) - ------------------------------------------------------ Unrealized appreciation of investments and other foreign denominated assets and liabilities 35,144 - ------------------------------------------------------ Undistributed net investment income 587 - ------------------------------------------------------ Net assets applicable to shares outstanding $378,673 ====================================================== THE PRICING OF SHARES - ------------------------------------------------------ CLASS A SHARES Net asset value and redemption price per share ($342,984,229 + 34,620,215 shares outstanding) $9.91 ====================================================== Maximum offering price per share (net asset value, plus 6.10% of net asset value or 5.75% of offering price) $10.51 ====================================================== CLASS B SHARES Net asset value and redemption price (subject to contingent deferred sales charge) per share ($34,388,000 + 3,499,419 shares outstanding) $9.83 ====================================================== CLASS C SHARES Net asset value and redemption price per share ($1,300,418 + 132,375 shares outstanding) $9.82 ======================================================
See accompanying Notes to Financial Statements. STATEMENT OF OPERATIONS Six months ended April 30, 1995 (in thousands)
INVESTMENT INCOME - ------------------------------------------------------ Dividends $ 2,774 - ------------------------------------------------------ Interest 924 - ------------------------------------------------------ 3,698 - ------------------------------------------------------ Less foreign taxes withheld 273 - ------------------------------------------------------ Total investment income 3,425 - ------------------------------------------------------ EXPENSES - ------------------------------------------------------ Management fee 1,372 - ------------------------------------------------------ Administrative services fee 392 - ------------------------------------------------------ Distribution services fees 112 - ------------------------------------------------------ Custodian and transfer agent fees and related expenses 1,098 - ------------------------------------------------------ Professional fees 37 - ------------------------------------------------------ Reports to shareholders 18 - ------------------------------------------------------ Trustees' fees and other 49 - ------------------------------------------------------ Total expenses 3,078 - ------------------------------------------------------ Net investment income 347 - ------------------------------------------------------ NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS - ------------------------------------------------------ Net realized loss on investments and foreign currency transactions (10,795) - ------------------------------------------------------ Net change in balance of unrealized appreciation of investments and other foreign denominated assets and liabilities (11,368) - ------------------------------------------------------ Net loss on investments (22,163) - ------------------------------------------------------ Net decrease in net assets resulting from operations $(21,816) ======================================================
9 11 STATEMENT OF CHANGES IN NET ASSETS (in thousands)
Six months Year ended ended April 30, October 31, 1995 1994 --------------- ----------- OPERATIONS - ---------------------------------------------------------- Net investment income $ 347 7 - ---------------------------------------------------------- Net realized (loss) gain on investments and foreign currency transactions (10,795) 25,062 - ---------------------------------------------------------- Net change in unrealized appreciation and other foreign denominated assets and liabilities (11,368) 2,606 - ---------------------------------------------------------- Net (decrease) increase in net assets resulting from operations (21,816) 27,675 - ---------------------------------------------------------- Net equalization (charges) credits (523) 641 - ---------------------------------------------------------- Distribution from net realized gain on investments (24,455) (8,297) - ---------------------------------------------------------- Net increase from capital share transactions 7,185 108,365 - ---------------------------------------------------------- Total (decrease) increase in net assets (39,609) 128,384 - ---------------------------------------------------------- NET ASSETS - ---------------------------------------------------------- Beginning of period 418,282 289,898 - ---------------------------------------------------------- End of period (including undistributed net investment income of $587 in 1995 and $763 in 1994) $ 378,673 418,282 ==========================================================
NOTES TO FINANCIAL STATEMENTS 1. DESCRIPTION OF THE FUND Kemper International Fund currently offers three classes of shares. Class A shares are sold to investors subject to an initial sales charge. Class B shares are sold without an initial sales charge but are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions. Class B shares automatically convert to Class A shares six years after issuance. Class C shares are sold without an initial or a contingent deferred sales charge but are subject to higher ongoing expenses than Class A shares and do not convert into another class. The Fund may offer, to a limited group of investors, Class I shares (none sold at April 30, 1995) which are not subject to initial or contingent deferred sales charges and have lower ongoing expenses than other classes. Each share represents an identical interest in the investments of the Fund and has the same rights. 2. SIGNIFICANT ACCOUNTING POLICIES INVESTMENT VALUATION Investments are stated at value. Any portfolio securities that are primarily traded on a domestic securities exchange are valued at the last sale price on that exchange or, if there is no recent last sale price available, at the last current bid quotation. Portfolio securities that are primarily traded on foreign securities exchanges are generally valued at the preceding closing values of such securities on their respective exchanges where primarily traded. A security that is listed or traded on more than one exchange is valued at the quotation on the exchange determined to be the primary market for such security by the Board of Trustees or its delegates. All other securities not so traded are valued at the last current bid quotation if market quotations are available. Fixed income securities are valued by using market quotations, or independent pricing services that use prices provided by market makers or estimates of market values obtained from yield data relating to instruments or securities with similar characteristics. Equity options are valued at the last sale price unless the bid price is higher or the asked price is lower, in which event such bid or asked price is used. Exchange traded fixed income options are valued at the last sale price unless there is no sale price, in which event prices provided by market makers are used. Over-the-counter traded fixed income options are valued based upon current prices provided by market makers. Financial futures and options thereon are valued at the settlement price established each day by the board of trade or exchange on which they are traded. Forward foreign currency contracts and foreign currencies are valued at the forward and current exchange rates, respectively, prevailing on the day of valuation. Other securities and assets are valued at fair value as determined in good faith by the Board of Trustees. CURRENCY TRANSLATION The books and records of the Fund are maintained in U.S. dollars. All assets and liabilities initially expressed in foreign currency values are converted into U.S. dollar values at the mean between the bid and offered 10 12 quotations of such currencies against U.S. dollars as last quoted by a recognized dealer. If such quotations are not readily available, the rate of exchange is determined in good faith by the Board of Trustees. Income and expenses and purchases and sales of investments are translated into U.S. dollars at the rate of exchange prevailing on the respective dates of such transactions. The Fund includes that portion of the results of operations resulting from changes in foreign exchange rates with net realized and unrealized gain (loss) on investments, as appropriate. INVESTMENT TRANSACTIONS AND INVESTMENT INCOME Investment transactions are accounted for on the trade date (date the order to buy or sell is executed). Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as soon as the information is available to the Fund. Interest income is recorded on the accrual basis and includes amortization of money market instrument premium and discount. Realized gains and losses from investment transactions are reported on an identified cost basis. Realized and unrealized gains and losses on financial futures, options and forward foreign currency contracts are included in net realized and unrealized gain (loss) on investments, as appropriate. FUND SHARE VALUATION Fund shares are sold and redeemed on a continuous basis at net asset value (plus an initial sales charge on most sales of Class A shares). Proceeds payable on redemption of Class B shares will be reduced by the amount of any applicable contingent deferred sales charge. On each day the New York Stock Exchange is open for trading, the net asset value per share is determined as of the earlier of 3:00 p.m. Chicago time or the close of the Exchange. The net asset value per share is determined separately for each class by dividing the Fund's net assets attributable to that class by the number of shares of the class outstanding. Because of the need to obtain prices as of the close of trading on various exchanges throughout the world, the calculation of net asset value does not take place contemporaneously with the determination of the prices of the majority of the portfolio securities. FEDERAL INCOME TAXES AND DIVIDENDS TO SHAREHOLDERS The Fund has complied with the special provisions of the Internal Revenue Code available to investment companies for the six months ended April 30, 1995. The Fund may make an election under the Internal Revenue Code so that shareholders may claim a tax credit or deduction for their share of foreign taxes paid by the Fund. Net realized capital gains, if any, reduced by capital loss carryovers will be distributed at least annually. Differences in dividends per share are due to different class expenses. Dividends payable to its shareholders are recorded by the Fund on the ex-dividend date. Distributions are determined in accordance with income tax principles which may treat certain transactions differently from generally accepted accounting principles. EQUALIZATION ACCOUNTING A portion of proceeds from sales and cost of redemptions of Fund shares is credited or charged to undistributed net investment income so that income per share available for distribution is not affected by sales or redemptions of shares. 3. TRANSACTIONS WITH AFFILIATES MANAGEMENT AGREEMENT The Fund has a management agreement with 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 gradually to .62% of average daily net assets in excess of $12.5 billion. The Fund incurred a management fee of $1,372,000 for the six months ended April 30, 1995. UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT The Fund has an underwriting and distribution services agreement with Kemper Distributors, Inc. (KDI). Before February 1, 1995, KFS was the Fund's principal underwriter and distributor. As principal underwriter for the Fund, KDI (as successor to KFS) retained commissions of $42,000 for the six months ended April 30, 1995 for sales of Class A shares, after allowing $352,000 as commissions to firms of which $58,000 was paid to firms affiliated with KDI. For distribution services, the Fund pays KDI a fee of .75% of average daily net assets of the Class B and Class C shares. Pursuant to the agreement, KDI enters into related selling group agreements with various firms that provide distribution services to investors. KDI compensates these firms at various rates for sales of Class B and Class C shares. During the six months ended April 30, 1995, the Fund incurred a distribution services fee for Class B and Class C shares of $112,000, and KDI paid $284,000 for commissions and distribution fees to firms, including $53,000 to firms affiliated with KDI. In addition, KDI received $31,000 of contingent deferred sales charges. ADMINISTRATIVE SERVICES AGREEMENT The Fund has an administrative services agreement with KDI. Before February 1, 1995, KFS was the Fund's administrator. For providing information and administrative services to shareholders, the Fund pays KDI a fee at an annual rate of up to .25% of average daily net assets. 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. For the six months ended April 30, 1995, the Fund incurred an administrative services fee of $392,000 and KDI (as successor to KFS) paid $399,000 to firms, including $81,000 that was paid to firms affiliated with KDI. CUSTODIAN AND TRANSFER AGENT AGREEMENT The Fund has a custodian agreement and a transfer agent agreement with Investors Fiduciary Trust Company (IFTC), which was 50% owned by KFS until January 31, 1995, when KFS completed the sale of 11 13 IFTC to a third party. For the six months ended April 30, 1995, the Fund incurred custodian and transfer agent fees of $723,000 (excluding related expenses). Pursuant to a services agreement with IFTC, Kemper Service Company (KSvC), an affiliate of KFS, is the shareholder service agent of the Fund. For the six months ended April 30, 1995, IFTC remitted shareholder service fees of $723,000 to KSvC. OFFICERS AND TRUSTEES Certain officers or trustees of the Fund are also officers or directors of KFS. During the six months ended April 30, 1995, the Fund made no payments to its officers and incurred trustees' fees of $6,000 to independent trustees. 4. INVESTMENT TRANSACTIONS Investment transactions for the six months ended April 30, 1995 (excluding short term instruments) are as follows (in thousands): Purchases $199,741 - ------------------------------------------------------ Proceeds from sales 216,031 - ------------------------------------------------------
5. CAPITAL SHARE TRANSACTIONS The following table summarizes the activity in capital shares of the Fund (in thousands):
Six months ended Year ended April 30, October 31, 1995 1994 ----------------- ------------------ Shares Amount Shares Amount ------ -------- ------- -------- Shares sold: Class A 4,494 $ 44,543 20,528 $217,366 - ---------------------------------------------------------- Class B 1,953 19,786 3,185 34,449 - ---------------------------------------------------------- Class C 154 1,578 76 814 - ---------------------------------------------------------- Shares issued in reinvestment of dividends: Class A 2,263 21,733 774 8,085 - ---------------------------------------------------------- Class B 184 1,755 1 14 - ---------------------------------------------------------- Class C 7 71 -- -- - ---------------------------------------------------------- Shares redeemed: Class A (7,126) (69,643) (13,841) (145,844) - ---------------------------------------------------------- Class B (1,156) (11,630) (600) (6,469) - ---------------------------------------------------------- Class C (100) (1,008) (5) (50) - ---------------------------------------------------------- Conversion of shares: Class A 52 492 15 167 - ---------------------------------------------------------- Class B (52) (492) (15) (167) - ---------------------------------------------------------- Net increase from capital share transactions $ 7,185 $108,365 - ----------------------------------------------------------
12 14 FINANCIAL HIGHLIGHTS
Class A ---------------------------------------------------------- Six months ended April 30, Year ended October 31, 1995 1994 1993 1992 1991 ---------- ----- ----- ----- ----- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $11.13 10.56 8.17 8.76 9.52 - -------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income .01 -- .03 .22 .13 - -------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments and foreign currency transactions (.57) .86 2.54 (.67) .31 - -------------------------------------------------------------------------------------------------------------------------- Total from investment operations (.56) .86 2.57 (.45) .44 - -------------------------------------------------------------------------------------------------------------------------- Less dividends: Distribution from net investment income -- -- .18 -- .11 - -------------------------------------------------------------------------------------------------------------------------- Distribution from net realized gain on investments .66 .29 -- .14 1.09 - -------------------------------------------------------------------------------------------------------------------------- Total dividends .66 .29 .18 .14 1.20 - -------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 9.91 11.13 10.56 8.17 8.76 ========================================================================================================================== TOTAL RETURN (%): (4.84) 8.32 32.08 (5.17) 5.38 ========================================================================================================================== RATIOS TO AVERAGE NET ASSETS (%): Expenses 1.59 1.54 1.69 1.36 1.41 - -------------------------------------------------------------------------------------------------------------------------- Net investment income .41 .02 .37 2.61 1.42 ==========================================================================================================================
Class B Class C ---------------------------- ---------------------------- Six months May 31, Six months May 31, ended 1994 to ended 1994 to April 30, October 31, April 30, October 31, 1995 1994 1995 1994 ---------- ----------- ---------- ----------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $11.09 10.58 11.09 10.58 - ---------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment loss (.02) (.04) (.02) (.04) - ---------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments and foreign currency transactions (.58) .55 (.59) .55 - ---------------------------------------------------------------------------------------------------------------------------- Total from investment operations (.60) .51 (.61) .51 - ---------------------------------------------------------------------------------------------------------------------------- Less distribution from net realized gain on investments .66 -- .66 -- - ---------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 9.83 11.09 9.82 11.09 ============================================================================================================================ TOTAL RETURN (%): (5.24) 4.82 (5.33) 4.82 ============================================================================================================================ RATIOS TO AVERAGE NET ASSETS (%): Expenses 2.50 2.58 2.44 2.52 - ---------------------------------------------------------------------------------------------------------------------------- Net investment loss (.50) (.97) (.44) (.91) ============================================================================================================================
Six months ended April 30, Year ended October 31, 1995 1994 1993 1992 1991 ---------- ------- ------- ------- ------- SUPPLEMENTAL DATA FOR ALL CLASSES: Net assets at end of period (in thousands) $378,673 418,282 289,898 165,890 184,946 - ------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (%) 117 103 156 143 209 ==========================================================================================================================
NOTE: Ratios have been determined on an annualized basis. Total return is not annualized and does not reflect the effect of any sales charges. 13 15 [KEMPER LOGO] KEMPER FINANCIAL SERVICES, INC. 120 SOUTH LASALLE STREET CHICAGO, IL 60603 KEMPER INTERNATIONAL FUND Trustees Officers STEPHEN B. TIMBERS JOHN E. PETERS President and Trustee Vice President DAVID W. BELIN DENNIS H. FERRO Trustee Vice President LEWIS A. BURNHAM PHILIP J. COLLORA Trustee Vice President and Secretary DONALD L. DUNAWAY Trustee ROBERT B. HOFFMAN CHARLES F. CUSTER Trustee Vice President and Assistant Secretary DONALD R. JONES JEROME L. DUFFY Trustee Treasurer DAVID B. MATHIS ELIZABETH C. WERTH Trustee Assistant Secretary SHIRLEY D. PETERSON Trustee WILLIAM P. SOMMERS Trustee - ----------------------------------------------------------- Legal Counsel Custodian and Transfer Agent VEDDER, PRICE, KAUFMAN INVESTORS FIDUCIARY TRUST & KAMMHOLZ COMPANY 222 North LaSalle Street 127 West 10th Street Chicago, IL 60601 Kansas City, MO 64105 Shareholder Service Agent Foreign Custodian KEMPER SERVICE COMPANY THE CHASE MANHATTAN BANK, N.A. P.O. Box 419557 Chase MetroTech Center Kansas City, MO 64141 Brooklyn, NY 11245 800-621-1048 Investment Manager KEMPER FINANCIAL SERVICES, INC. Principal Underwriter KEMPER DISTRIBUTORS, INC. 120 South LaSalle Street Chicago, IL 60603 [RECYCLE LOGO] PRINTED ON RECYCLED PAPER KIF-3 (6/95) This report is not to be distributed unless preceded 239700 or accompanied by a Kemper International Funds prospectus. Printed in the U.S.A. -----END PRIVACY-ENHANCED MESSAGE-----