N-30D 1 n-30d.txt SEMI ANNUAL REPORT DATED 4/30/00 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] 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] 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
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
AS OF AS OF 4/30/00 10/31/99 ......................................................... 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 .........................................................
KEMPER INTERNATIONAL FUND LIPPER RANKINGS AS OF 4/30/00* COMPARED WITH ALL OTHER FUNDS IN THE LIPPER INTERNATIONAL FUNDS CATEGORY
CLASS A CLASS B CLASS 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 ..........................................................................................
DIVIDEND REVIEW DURING THE PERIOD, KEMPER INTERNATIONAL FUND PAID THE FOLLOWING DIVIDENDS PER SHARE:
CLASS A CLASS B CLASS C ................................................................................................. LONG-TERM CAPITAL GAIN $0.67 $0.67 $0.67 .................................................................................................
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) [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.
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. 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 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]
NOW (5/31/00) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO ------------- ------------ ---------- ----------- 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
(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 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 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 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 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.
HOLDINGS COUNTRY PERCENT ------------------------------------------------------------------------------------ 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% ------------------------------------------------------------------------------------
*Portfolio holdings are subject to change. 8 9 PORTFOLIO OF INVESTMENTS KEMPER INTERNATIONAL FUND Portfolio of Investments at April 30, 2000 (unaudited)
SHORT-TERM NOTES--7.4% PRINCIPAL AMOUNT*** VALUE 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 ------------------------------------------------------------------------------------- BONDS--0.0% 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 ------------------------------------------------------------------------------------- CONVERTIBLE BONDS--.1% SHARES FRANCE--.1% Lafarge Convertible, 03/20/2001 (PRODUCER OF BUILDING MATERIALS) 10,606 816,850 ------------------------------------------------------------------------------------- TOTAL CONVERTIBLE BONDS (Cost: $775,701) 816,850 ------------------------------------------------------------------------------------- COMMON STOCKS--92.5% SHARES 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
The accompanying notes are an integral part of the financial statements. 9 10 PORTFOLIO OF INVESTMENTS
SHARES VALUE 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
10 The accompanying notes are an integral part of the financial statements. 11 PORTFOLIO OF INVESTMENTS
SHARES VALUE 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
The accompanying notes are an integral part of the financial statements. 11 12 PORTFOLIO OF INVESTMENTS
SHARES VALUE 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
12 The accompanying notes are an integral part of the financial statements. 13 PORTFOLIO OF INVESTMENTS
SHARES VALUE 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
The accompanying notes are an integral part of the financial statements. 13 14 PORTFOLIO OF INVESTMENTS
SHARES VALUE 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
14 The accompanying notes are an integral part of the financial statements. 15 PORTFOLIO OF INVESTMENTS
SHARES VALUE 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 -------------------------------------------------------------------------------------
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 16 FINANCIAL STATEMENTS STATEMENT OF ASSETS & LIABILITIES as of April 30, 2000 (unaudited) 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 ----------------------------------------------------------------------------
16 The accompanying notes are an integral part of the financial statements. 17 FINANCIAL STATEMENTS STATEMENT OF OPERATIONS Six months ended April 30, 2000 (unaudited) 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 ---------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 17 18 FINANCIAL STATEMENTS STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2000 OCTOBER 31, (UNAUDITED) 1999 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 ---------------------------------------------------------------------------------------------------------
18 The accompanying notes are an integral part of the financial statements. 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.
CLASS A SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 2000 --------------------------------------------------- (UNAUDITED) 1999 1998 1997 1996 1995 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 ----------------------------------------------------------------------------------------------------------------------
CLASS B SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 2000 --------------------------------------------------- (UNAUDITED) 1999 1998 1997 1996 1995 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 -----------------------------------------------------------------------------------------------------------------------
19 20 FINANCIAL HIGHLIGHTS
CLASS C SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 2000 ------------------------------------------------ (UNAUDITED) 1999 1998 1997 1996 1995 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 -------------------------------------------------------------------------------------------------------------------------
CLASS I SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, JULY 3 TO 2000 ------------------------------------ OCTOBER 31, (UNAUDITED) 1999 1998 1997 1996 1995 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* ------------------------------------------------------------------------------------------------------------------------
* 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 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 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 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 24 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 4 CAPITAL SHARE TRANSACTIONS The following table summarizes the activity in capital shares of the Fund:
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2000 (UNAUDITED) OCTOBER 31, 1999 ------------------------------ ------------------------------- SHARES AMOUNT SHARES AMOUNT 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 ------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 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 25 NOTES 25 26 NOTES 26 27 NOTES 27 28 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
............................................................................................. 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
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)