-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BxlP0EP0Sz7kgX6FhGIsOz7xN8FENmvMipm6fB2QtbMdCqsftjFzpWEnHOiM8WBp FhgI8INuXJfFkcYuzj5lSw== 0000950137-99-002341.txt : 19990701 0000950137-99-002341.hdr.sgml : 19990701 ACCESSION NUMBER: 0000950137-99-002341 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990430 FILED AS OF DATE: 19990630 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: SEC FILE NUMBER: 811-03136 FILM NUMBER: 99655801 BUSINESS ADDRESS: STREET 1: 222 SOUTH RIVERSIDE PLAZA CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3125371569 MAIL ADDRESS: STREET 1: 222 SOUTH RIVERSIDE PLAZA CITY: CHICAGO STATE: IL ZIP: 60606 FORMER COMPANY: FORMER CONFORMED NAME: KEMPER INTERNATIONAL FUND INC DATE OF NAME CHANGE: 19870127 N-30D 1 SEMI-ANNUAL REPORT DATED 4/30/99 1 SEMIANNUAL REPORT TO SHAREHOLDERS FOR THE PERIOD ENDED APRIL 30, 1999 LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM) [MORNINGSTAR RATINGS LOGO] Seeking total return, a combination of capital growth and income, principally through an internationally diversified portfolio of equity securities KEMPER INTERNATIONAL FUND "... Kemper International Fund looks quite different today than it did six months ago. The biggest move we've made has been gradually adding more Japanese and emerging market holdings while easing back our European position. ..." [KEMPER FUNDS LOGO] 2 Contents 3 Economic Overview 5 Performance Update 7 Terms to Know 8 Largest Holdings 9 Portfolio of Investments 15 Financial Statements 17 Notes to Financial Statements 21 Financial Highlights 23 Shareholders' Meeting AT A GLANCE - -------------------------------------------------------------------------------- KEMPER INTERNATIONAL FUND TOTAL RETURNS - -------------------------------------------------------------------------------- FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 1999 (UNADJUSTED FOR ANY SALES CHARGE) [BAR GRAPH] - -------------------------------------------------------------------------------- CLASS A 11.73% CLASS B 11.12% CLASS C 11.13% LIPPER INTERNATIONAL FUNDS CATEGORY AVERAGE* 15.11%
Returns and rankings are historical and do not guarantee future results. investment returns and principal values will fluctuate so that shares, when redeemed, may be worth more or less than original cost. * Lipper Analytical Services, Inc. returns and rankings are based upon changes in net asset value with all dividends reinvested and do not include the effect of sales charges and, if they had, results may have been less favorable.
- -------------------------------------------------------------------------------- NET ASSET VALUE - -------------------------------------------------------------------------------- AS OF AS OF 4/30/99 10/31/98 - -------------------------------------------------------------------------------- KEMPER INTERNATIONAL FUND CLASS A $11.62 $12.10 KEMPER INTERNATIONAL FUND CLASS B $11.33 $11.90 KEMPER INTERNATIONAL FUND CLASS C $11.34 $11.91 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- KEMPER INTERNATIONAL FUND LIPPER RANKINGS AS OF 4/30/99* - -------------------------------------------------------------------------------- COMPARED TO ALL OTHER FUNDS IN THE LIPPER INTERNATIONAL FUNDS CATEGORY
CLASS A CLASS B CLASS C - -------------------------------------------------------------------------------- 1-YEAR #468 of 565 funds #486 of 565 funds #485 of 565 funds - -------------------------------------------------------------------------------- 5-YEAR #74 of 175 funds N/A N/A - -------------------------------------------------------------------------------- 10-YEAR #22 of 37 funds N/A N/A - -------------------------------------------------------------------------------- 15-YEAR #10 of 14 funds N/A N/A - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- DIVIDEND REVIEW - -------------------------------------------------------------------------------- DURING THE SIX-MONTH PERIOD, KEMPER INTERNATIONAL FUND PAID THE FOLLOWING DIVIDEND PER SHARE:
CLASS A CLASS B CLASS C - -------------------------------------------------------------------------------- LONG-TERM CAPITAL GAIN $1.81 $1.81 $1.81 - --------------------------------------------------------------------------------
Investment in foreign securities presents special risk considerations including fluctuating currency exchange rates, government regulation and differences in liquidity. YOUR FUND'S STYLE - -------------------------------------------------------------------------------- MORNINGSTAR EQUITY STYLE BOX - -------------------------------------------------------------------------------- [MORNINGSTAR EQUITY STYLE BOX] Source: Morningstar, Inc. Chicago, IL. (312) 696-6000. The Equity Style Box placement is based on two variables: a fund's market capitalization relative to the movements of the market and a fund's valuation, which is calculated by comparing the stocks in the fund's portfolio with the most relevant of the three market-cap groups. The stylebox represents a snapshot of the fund's portfolio on a single day. It is not an exact assessment of risk and does not represent future performance. The fund's portfolio changes from day-to-day. A longer-term view is represented by the fund's Morningstar category, which is based on its actual investment style as measured by its underlying portfolio holdings over the past three years. Category placements of new funds are estimated. Morningstar has placed Kemper International Fund in the foreign stock category. Please consult the prospectus for a description of investment policies. 3 ECONOMIC OVERVIEW [SILVIA PHOTO] DR. JOHN E. SILVIA IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC. HIS PRIMARY RESPONSIBILITIES INCLUDE ANALYSIS, MODELING AND FORECASTING OF ECONOMIC DEVELOPMENTS AND FEDERAL RESERVE ACTIVITY THAT AFFECT FINANCIAL MARKETS, ESPECIALLY INTEREST RATE TRENDS. THIS EFFORT INCLUDES CLOSE COLLABORATION WITH BOTH INCOME AND EQUITY MUTUAL FUND MANAGERS AND PENSION FUND MANAGERS. SILVIA HOLDS A BACHELOR'S DEGREE AND PH.D. IN ECONOMICS FROM NORTHEASTERN UNIVERSITY IN BOSTON AND A MASTER'S DEGREE IN ECONOMICS FROM BROWN UNIVERSITY IN PROVIDENCE, R.I. PRIOR TO HIS CAREER AT SCUDDER KEMPER INVESTMENTS, HE WAS WITH THE HARRIS BANK AND ALSO TAUGHT AT INDIANA UNIVERSITY. 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 $280 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: In April, investor enthusiasm drove the market to its second milestone in a year -- the Dow Jones Industrial Average rose to 11,000 just a month after it broke 10,000 for the first time. In May, expectations of rising inflation and higher short-term interest rates led to a slowdown. But in early June, the market rallied again. What drove the market rallies, and what, at the same time, led to investor anxiety? Inflation worries have been seeping into the market for months. The growing conviction that Asian and Latin American economies are recovering is raising commodity prices, particularly oil. The price of West Texas Intermediate oil surged from less than $12 in February to almost $19 in early May. That alone almost guarantees a rise in the "headline" inflation rate this year, which is the rate of inflation as measured by the entire CPI. But it's important to note that the Federal Reserve Board looks primarily at the core inflation rate, which is the CPI minus food and energy -- and the core inflation rate looks at if it will remain low at about 2 percent this year. Investors should note, however, that the Federal Reserve Board also considers what will happen to inflation next year -- and all indications are that the Fed expects inflation to increase in 2000. As a result, the Fed is considering a change in monetary policy. Recent Fed policy has been reactive, not proactive, which means that the Fed tends to respond to inflation only when it picks up. That may change as the Fed tries to preemptively halt inflation momentum. Such a change in monetary policy would likely lead to an increase in short-term interest rates before the end of the year. However, the change is likely to be small. Because we don't see pressure toward sustained inflation, there's no reason for the Fed to want a sharp slowdown in the overall economy. The long-term economic situation, however, appears to be positive. The federal budget surplus continues to benefit from good revenue gains (which are based on good income gains, especially for households), good capital gains and continued restraint in federal spending. The surplus this year is expected to approach $100 billion. This positive environment is exactly what sometimes poses risk for investors, and is key to understanding recent volatility in the market. A strong economy has the potential to feed inflation fears and drive up interest rates. Indeed, recent market events illustrate the domino effect of investors reacting to positive economic news, which they consider troubling at this point, more than eight years into the economic expansion. In April, the steady stream of positive economic news led to a sell-off in the financial markets based on fears that the strong pace of economic growth would eventually lead to higher inflation. The benchmark 30-year Treasury bond yield rose, which pulled stocks lower. Where can we expect to go from here? The fundamentals by which we judge the health of the economy suggest continued growth as we move into the second half of 1999. For example, the gross domestic product (GDP), the value of all goods and services produced in the U.S., rose at an annual rate of 4.5 percent in the first quarter, following a tremendous fourth-quarter surge of 6 percent. This is very much in line with what we've grown accustomed to over the past year -- over the four quarters of 1998, the U.S. economy expanded by 4.3 percent. Some people aren't surprised at all by strong GDP growth that once would have alarmed them. That's partially because we've grown accustomed to a strong economy. But it's also because we've been able to absorb growth without driving up inflation. That's important for investors. If prices had been rising as the economy was growing, the Fed would have most likely raised short-term interest rates by now, and that would have changed the financial market outlook. However, we do see some vulnerability on the economic front. Trade is a weak spot in the economy right now. Exports of U.S. goods and services dropped in the first quarter while imports soared. This reflects the fact that the U.S. is one of the few countries financially fit enough to buy goods produced elsewhere in the world. But for as long as less vibrant international economies are unable to buy U.S. goods, the profitability of U.S. companies trying to export will be challenged. When you think about it, vulnerability in regard to the international economy is nothing new. Globally, the outlook is slightly more positive than it was a few months ago. For example, the European markets are slowing down, which has already led to the European Central Bank lowering interest rates in order to boost domestic spending. In many countries in Europe there are no fixed-rate mortgages, only adjustable-rate mortgages. When interest rates go down, mortgage payments are reduced and homeowners can spend money elsewhere. This has a huge impact on consumer spending, and will help European equities over time. Additionally, the situation in Japan remains unchanged. And, problems in the emerging markets haven't had the negative impact many people expected -- both the Mexican and Brazilian stock markets have actually risen in the past two months. 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 (5/31/99) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO ------------- ------------ ---------- ----------- 10 Year Treasury Rate(1) 5.54 5.34 5.57 6.42 Prime Rate(2) 7.75 8.5 8.5 8.25 Inflation Rate(3)* 2.28 1.68 1.63 3.04 The U.S. Dollar(4) -1.22 8.17 5.05 7.67 Capital goods orders(5)* 11.67 3.05 12.61 3.93 Industrial production (5)* 2.01 2.71 5.92 6.44 Employment growth(6) 2.14 2.67 2.76 2.44
(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 APRIL 30, 1999. SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC. But don't forget that international crises have the potential to affect the U.S. markets dramatically. An increase in military spending on Kosovo by the 11 European Monetary Union (EMU) countries could force them to spend less in other areas, which could have economic implications, including higher interest rates. That's because many European countries have small economies and little leeway in their budgets. Consequently, those countries finance unplanned military expenditures by selling government bonds -- which, in Europe's small bond market, typically raises interest rates. As an example, consider Italy, which recently asked for more leeway on its deficit targets. When leeway was granted, this led to a further sell-off in the eurodollar. The international situation alone, however, is by no means an indicator of a U.S. slowdown -- and without any such indications, complacency may be our greatest concern. It's easy to look at the current U.S. economic situation and behave as if no risk exists. But when you see the market soaring and are tempted to jump in, note that the bull market grew to records on the strength of just a few dozen stocks, while most other stock prices were flat or actually declined. In summary, there are concerns that the current economy is unsustainable and we soon could see an abrupt end. In many cases, however, people are looking for a slowdown because they are fearful growth will drive up inflation these are particularly older investors who are accustomed to inflation accompanying growth. But again, sustained inflation seems unlikely, so a sharp slowdown is not necessary. In the short term, we expect a modest economic slowdown but no recession. The best approach now, as in any market, is to diversify and invest for the long term. Thank you for your continued support. We appreciate the opportunity to serve your investment needs. Sincerely, /s/ JOHN E. SILVIA John E. Silvia 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 DR. JOHN SILVIA AS OF JUNE 9, 1999, AND MAY NOT ACTUALLY COME TO PASS. THIS INFORMATION IS SUBJECT TO CHANGE. NO PART OF THIS MATERIAL IS INTENDED AS AN INVESTMENT RECOMMENDATION. TO OBTAIN A KEMPER FUNDS PROSPECTUS, DOWNLOAD ONE FROM WWW.KEMPER.COM, TALK TO YOUR FINANCIAL REPRESENTATIVE OR CALL SHAREHOLDER SERVICES AT (800) 621-1048. THE PROSPECTUS CONTAINS MORE COMPLETE INFORMATION, INCLUDING MANAGEMENT FEES AND EXPENSES. PLEASE READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. 4 5 PERFORMANCE UPDATE [CHENG PHOTO] LEAD PORTFOLIO MANAGER IRENE CHENG IS A MEMBER OF THE FIRM'S GLOBAL EQUITY GROUP, FOCUSING ON PORTFOLIO MANAGEMENT AND RESEARCH FOR INTERNATIONAL EQUITY ACCOUNTS. PRIOR TO JOINING SCUDDER KEMPER INVESTMENTS IN 1993, CHENG SPENT THREE YEARS IN MERCHANT BANKING ACTIVITIES AT THE BLACKSTONE GROUP AND THREE YEARS AS AN EQUITY ANALYST AT SANFORD C. BERNSTEIN & CO. SHE ALSO HAS SEVERAL YEARS OF EXPERIENCE IN OPERATIONS, FINANCE AND CORPORATE PLANNING FOR EXXON CORPORATION. [SLENDERBROEK PHOTO] MARC SLENDEBROEK JOINED SCUDDER KEMPER INVESTMENTS IN 1994 AND IS BASED IN OUR LONDON OFFICE. AS A PORTFOLIO MANAGER OF KEMPER INTERNATIONAL FUND HE FOCUSES ON THE EUROPEAN REGION. PRIOR TO JOINING SCUDDER KEMPER INVESTMENTS, MARC WAS WITH KLEINWORT BENSON SECURITIES IN LONDON WHERE HE WAS MANAGER OF DUTCH RESEARCH. HE ALSO WORKED FOR ENSKILDA SECURITIES IN LONDON AS AN EQUITY ANALYST. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER CONDITIONS. THE INTERNATIONAL EQUITIES ENVIRONMENT LOOKS VERY DIFFERENT TODAY THAN IT DID SIX MONTHS AGO. PREVIOUSLY FOUNDERING JAPANESE AND EMERGING MARKETS ARE TURNING IN HUGE RETURNS, AND ECONOMIC AND POLITICAL ISSUES HAVE PUT THE PROMISING EUROPEAN REGION ON HOLD. KEMPER INTERNATIONAL FUND'S MANAGEMENT TEAM DISCUSSES THE REASONS FOR THE CHANGE, AND WHAT THEY SEE AHEAD. Q SIX MONTHS AGO, WE REPORTED ON AN INTERNATIONAL ENVIRONMENT THAT WAS EXTREMELY VOLATILE. MARKETS WERE SWINGING WILDLY AND WITHOUT OBVIOUS REASON. THE WORLD MARKETS HAVE CALMED DOWN A BIT SINCE THEN. CAN YOU DESCRIBE WHAT WAS HAPPENING IN INTERNATIONAL EQUITY MARKETS FROM NOVEMBER 1, 1998 THROUGH APRIL 30, 1999? A The irrational volatility seems to be behind us for the moment. The most dramatic development during the period has been the strong recovery in the Japanese market and in emerging markets worldwide. These two recoveries occurred for different reasons. The U.S. Federal Reserve Board cut interest rates in October and November, and European banks followed in December. On this news, Asian and Latin American emerging market governments cut their own rates. The ensuing flood of liquidity provided a big support to the emerging markets, which had been looking very poor just last summer. To share a few examples, for the six-month period Thailand's market is up 85.5 percent, Indonesia is up 75.1 percent, Singapore 58.1 percent and Mexico 45.2 percent.* Japan is up 25.3 percent over the period, quite a change from the mediocre and negative performance numbers that had been coming out of that country for the past four years. Despite record unemployment and a shrinking gross domestic product (GDP), investors poured money into the Japanese stock market in 1999. They are optimistic about a corporate restructuring trend and the Bank of Japan's loose monetary policy. We believe that Japan is in the early stages of a recovery from the recession that has been plaguing the country for the last several years.* * SOURCE FOR THE COUNTRY INDICES IS DATASTREAM AND FT/S&P WORLD INDICES. THESE INDICES PROVIDE A GENERAL REPRESENTATION OF THE PERFORMANCE OF THESE MARKETS. Q THE FUND WAS UP 11.73 PERCENT (CLASS A SHARES UNADJUSTED FOR ANY SALES CHARGES) FOR THE SIX-MONTH PERIOD, COMPARED TO A RETURN OF 15.44 PERCENT FOR THE MSCI EAFE INDEX** AND 15.11 PERCENT RETURN FOR ITS LIPPER PEER GROUP (SEE PAGE 2). WHAT CAUSED THIS RECENT UNDER-PERFORMANCE? A A primary reason the fund underperformed its peer group was its limited exposure to emerging markets. Kemper International Fund is not an emerging market fund and, therefore does not allocate a large percentage of assets in those markets. Some of our international fund peers do take large positions in these risky areas, and although those funds are generally more volatile than ours, the strategy served them well this period. That having been said, we certainly wish we had gotten into the emerging markets we do invest in, such as Mexico and Brazil, sooner than we did and had taken a stronger position. The recovery 5 6 PERFORMANCE UPDATE happened very quickly, and we were simply too conservative, trying to protect money instead of putting it into these markets that had performed so terribly up to this point. Because the EAFE has a very low weighting in emerging markets, it wasn't strongly affected by the run in those markets. Where the EAFE outperformed us was in its large weighting in the Japanese market. As mentioned, Japan is up more than 25 percent since October 31, 1998. We started the period with a 7 percent weighting, and brought that up to 20 percent by April 30. So although we are now positioned to take advantage of future appreciation in the market, and we do believe the market will continue its upward direction, we should have reached this weighting sooner. ** THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA, FAR EAST INDEX (MSCI EAFE) IS AN UNMANAGED INDEX THAT IS A GENERALLY ACCEPTED BENCHMARK FOR MAJOR OVERSEAS MARKETS. SOURCE IS LIPPER ANALYTICAL INC. Q WHERE IS THE FUND INVESTED TODAY, AND HOW HAVE THOSE WEIGHTINGS CHANGED SINCE OCTOBER 31, 1998? THE FOLLOWING CHART PROVIDES A CLEAR COMPARISON OF WHERE WE WERE INVESTED SIX MONTHS AGO BASED ON COMMON STOCKS, AND WHERE WE WERE AT THE END OF THE PERIOD COMPARED TO THE INDEX. (IN THE CHART BELOW, THE FUND IS ABBREVIATED AS KIF.)
10/31/98 4/30/99 4/30/99 KIF KIF EAFE - ------------------------------------------------------ UNITED KINGDOM 24% 19% 23% - ------------------------------------------------------ JAPAN 8% 22% 23% - ------------------------------------------------------ NETHERLANDS 15% 9% 6% - ------------------------------------------------------ AUSTRALIA 2% 9% 3% - ------------------------------------------------------ GERMANY 11% 5% 10% - ------------------------------------------------------ ITALY 7% 3% 5% - ------------------------------------------------------ FRANCE 12% 5% 9% - ------------------------------------------------------ SWITZERLAND 5% 5% 7% - ------------------------------------------------------ CANADA 4% 5% -- - ------------------------------------------------------ SPAIN 4% 4% 3% - ------------------------------------------------------ HONG KONG -- 3% 3% - ------------------------------------------------------ SINGAPORE -- 5% 1% - ------------------------------------------------------ TAIWAN -- 1% -- - ------------------------------------------------------
Kemper International Fund looks quite different today than it did six months ago. The biggest move we've made has been gradually adding more Japanese and emerging market holdings while easing back our European position. In Japan, the long awaited economic recovery appears to be finally underway. Most of the bad news affecting companies has already been discounted into stock prices, and we see some very attractive valuations. Corporate Japan is finally talking about restructuring in an American style and is beginning to pay attention to stockholders. We expect the Japanese recovery to happen gradually, so there will be investment opportunities there for some time to come. We've invested about 9 percent of the portfolio in Southeast Asia. Our move into Southeast Asia comes because of lower interest rates and a better outlook for global growth for these countries. Their performance has been dramatic since their turnaround began last fall, and we expect it to continue. For several years we have been overweighted in Europe, and early on in this period we held about 80 percent of the portfolio there, versus 73 percent of the EAFE. The positive outlook for Europe has gradually been eroded by several factors. The region has made little economic progress, and isn't likely to do so in the near future. Most economies have sharply decelerated due to a fall in exports to the Far East, a fall in business investments and little growth in consumer demand. The second reason for the anemic outlook is the changing political climate in the region. Recent elections have brought center-left or social democrat governments into power in all major European countries. Much needed reforms that could help business interests progress are likely to slow or be de-emphasized by the new governments. In fact, anti-business legislation seems to be the order of the day in some countries, and this has lead to a weakness in business confidence. Q IS THE SITUATION IN EUROPE SO GRAVE THAT YOU PLAN TO FURTHER CUT BACK THE FUND'S EXPOSURE, OR DOES OPPORTUNITY STILL EXIST? A European economies across the board have suffered recently, some worse than others. Germany has faced an exceptionally difficult time. But there are some compelling reasons to be hopeful about this region. As business confidence has weakened, the European currency has weakened against the U.S. dollar. This gives European companies a pricing advantage against their American competitors. If you look at the trade account deficit in the United States, you can see that it is having an effect. We're not abandoning European stocks, we're simply moving from a very overweight position to a more 6 7 PERFORMANCE UPDATE neutral one. We are focusing on sectors that can perform well in any economic environment. Business services outsourcing, telecommunications and pharmaceuticals are three areas we like. While we still see long-term opportunity in Europe, there are other areas of the world where we expect performance to be stronger in the short-term, and we want to employ our money where we see the most potential. We will build our position back up again if we spot some attractive stocks. Q CAN YOU TALK ABOUT SOME INDIVIDUAL STOCKS THAT HAVE DONE WELL FOR THE FUND, AND SOME THAT DIDN'T PERFORM? A In previous reports, we've discussed the trend in Europe toward hiring outside providers to execute certain tasks traditionally handled within the organization. During the six-month period we saw some terrific performance from our major outsourcing companies in both Europe and Japan. Fujitsu Support and Services, a Japanese information technology outsourcing firm and Bellsystem 24, a Japanese call center outsourcing firm, were both up substantially for the period. In Europe, Select Appointments, a UK temporary employment service firm, also performed very well. Some other top performers were Restaurant Brands, a fast food franchise holder in New Zealand, and Murata Manufacturing, a Japanese electronics components manufacturer. On the downside, Novartis, a Swiss pharmaceutical company that we have owned for a long time was down. Bayerische Vereinsbank, a large German bank holding company, also didn't perform well. The drop in the bank stock was induced by a real estate scandal that occurred some time ago but that has been recently revealed. We continue to hold Bayerische Vereinsbank, as it has a low valuation and we believe it will resume its growth track. Q WHAT DO YOU THINK INTERNATIONAL STOCKS CAN OFFER THAT INVESTORS CAN'T FIND IN THE U.S. MARKETS TODAY? A There is still tremendous opportunity around the world to benefit from the kind of corporate restructuring that we've seen in the United States for well over a decade. The same restructuring trend that helped boost the U.S. stock market so strongly in the 1980s and 1990s is now spreading around the globe. For the first time ever, companies are changing the entire focuses of their business and making shareholder value a prime consideration. European companies are a few years into the process, and it is just getting underway in Japan. It is especially surprising to find it occurring in some of the fast growth economies like Southeast Asia. Also, valuations outside of the United States seem to be more attractive today. That has been a result of the strong performance of the U.S. market pushing valuations up. TERMS TO KNOW CURRENCY DEVALUATION A significant decline of a currency's value relative to other currencies, such as the U.S. dollar. This 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 devaluation of a foreign currency can have the effect of reducing an investment's total return, because when investments are converted back into U.S. dollars it takes more of the foreign currency to purchase U.S. dollars. FUNDAMENTAL RESEARCH Analysis of a company's financial statements to project future stock price changes. Considers past records of sales and earnings as well as the future impact of products, consumer markets, and management in weighting a company's prospects. This is distinct from TECHNICAL ANALYSIS, which evaluates the attractiveness of a stock based on historical price and trading volume movements. SOURCE: SCUDDER KEMPER INVESTMENTS, INC. AND BARRON'S DICTIONARY OF FINANCE AND INVESTMENT TERMS 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, 1999 and the percentage of common stocks for each holding.
- -------------------------------------------------------------------------------------- HOLDINGS COUNTRY PERCENT - -------------------------------------------------------------------------------------- 1. AAPT LIMITED Australia 3.2% - -------------------------------------------------------------------------------------- 2. UBS Switzerland 2.9% - -------------------------------------------------------------------------------------- 3. ING GROEP Netherlands 2.5% - -------------------------------------------------------------------------------------- 4. FUJI BANK Japan 2.4% - -------------------------------------------------------------------------------------- 5. NOVARTIS Switzerland 2.4% - -------------------------------------------------------------------------------------- 6. VEDIOR Netherlands 2.4% - -------------------------------------------------------------------------------------- 7. NTT MOBILE COMMUNICATIONS Japan 2.3% - -------------------------------------------------------------------------------------- 8. BRITISH TELECOM United Kingdom 2.2% - -------------------------------------------------------------------------------------- 9. TELEFONICA Spain 2.1% - -------------------------------------------------------------------------------------- 10. OVERSEA-CHINESE BANKING CORP. Singapore 2.0% - -------------------------------------------------------------------------------------- 11. GLAXO WELLCOME United Kingdom 1.9% - -------------------------------------------------------------------------------------- 12. BAYERISCHE VEREINSBANK Germany 1.9% - -------------------------------------------------------------------------------------- 13. BELLSYSTEM 24 INC. Japan 1.9% - -------------------------------------------------------------------------------------- 14. CITY DEVELOPMENTS Singapore 1.9% - -------------------------------------------------------------------------------------- 15. BP AMOCO United Kingdom 1.8% - -------------------------------------------------------------------------------------- 16. BANK OF IRELAND Ireland 1.8% - -------------------------------------------------------------------------------------- 17. CABLE & WIRELESS OPTUS Australia 1.8% - -------------------------------------------------------------------------------------- 18. NIKKO SECURITIES CO. Japan 1.7% - -------------------------------------------------------------------------------------- 19. SUN HUNG KAI PROPERTIES Hong Kong 1.7% - -------------------------------------------------------------------------------------- 20. ROHM COMPANY Japan 1.7% - --------------------------------------------------------------------------------------
*Portfolio holdings are subject to change. 8 9 PORTFOLIO OF INVESTMENTS KEMPER INTERNATIONAL FUND Portfolio of Investments at April 30, 1999 (unaudited) (DOLLARS IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------- COMMON STOCKS NUMBER OF SHARES VALUE - ---------------------------------------------------------------------------------------------------------------------- EUROPE - ---------------------------------------------------------------------------------------------------------------------- UNITED KINGDOM--18.1% AstraZeneca Group PLC (HOLDING COMPANY THAT MANUFACTURE AND SELL SPECIALTY CHEMICALS) 198,318 $ 7,733 (a)BP Amoco PLC (MAJOR INTEGRATED WORLD OIL COMPANY) 531,514 10,089 British Telecom PLC (TELECOMMUNICATION SERVICES) 717,569 11,981 Compass Group PLC (INTERNATIONAL CATERING GROUP) 339,094 3,491 Glaxo Wellcome PLC (PHARMACEUTICAL COMPANY) 365,355 10,826 Hays PLC (BUSINESS SERVICES) 417,665 4,636 J Sainsbury plc (RETAIL DISTRIBUTOR OF FOOD THROUGH SUPERMARKETS) 895,000 5,683 Marks & Spencer, plc (RETAILER OF CONSUMER GOODS AND FOODS) 1,000,000 6,857 National Westminster Bank (PROVIDER OF BANKING AND FINANCIAL SERVICES) 221,151 5,318 (a)Orange plc (OPERATOR OF DIGITAL MOBILE TELEPHONE NETWORK) 523,600 7,075 Reed International PLC (PUBLISHER OF SCIENTIFIC, PROFESSIONAL AND BUSINESS TO BUSINESS MATERIALS) 921,850 8,386 Rentokil Initial PLC (ENVIRONMENTAL SERVICES COMPANY) 924,550 5,425 Select Appointments Holdings PLC (RECRUITMENT SERVICES COMPANY) 440,000 5,606 Unilever PLC (MANUFACTURER OF BRANDED AND PACKAGED CONSUMER GOODS, FOOD, DETERGENTS AND PERSONAL CARE PRODUCTS) 460,740 4,095 Vodafone Group plc (TELECOMMUNICATION SERVICES) 430,454 7,928 ---------------------------------------------------------------------------- 105,129 - ---------------------------------------------------------------------------------------------------------------------- NETHERLANDS--8.7% Aalberts Industries (CAPITAL GOODS AND COMPONENTS) 251,170 5,971 ING Groep NV (INSURANCE AND FINANCIAL SERVICES) 229,930 14,163 Koninklijke Ahold NV (INTERNATIONAL FOOD RETAILER) 143,156 5,316 Koninklijke Numico (NUTRITIONAL FOOD MANUFACTURER) 109,589 4,122 Nedcon Groep (MANUFACTURER OF RACKING SYSTEMS) 83,195 1,297
9 10 PORTFOLIO OF INVESTMENTS (DOLLARS IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - ---------------------------------------------------------------------------------------------------------------------- Unique International NV (OPERATOR OF RETAIL CLOTHING STORES, EMPLOYMENT AGENCIES, TECHNICAL TRADE SCHOOLS, ENGINEERING SERVICES) 250,711 $ 6,688 Vedior NV CVA (TEMPORARY EMPLOYMENT SERVICES) 580,287 13,059 ---------------------------------------------------------------------------- 50,616 - ---------------------------------------------------------------------------------------------------------------------- GERMANY--5.2% Allianz AG (MULTI-LINE INSURANCE COMPANY) 17,753 5,655 Bayerische Vereinsbank AG (COMMERCIAL BANK) 164,900 10,750 Gehe AG (PHARMACEUTICALS DISTRIBUTOR) 166,000 7,629 Mannesmann AG (DIVERSIFIED CONSTRUCTION AND TECHNOLOGY COMPANY) 48,800 6,424 ---------------------------------------------------------------------------- 30,458 - ---------------------------------------------------------------------------------------------------------------------- SWITZERLAND--5.0% Novartis AG (PHARMACEUTICAL COMPANY) 8,925 13,063 UBS AG (PROVIDER OF BANKING AND ASSET MANAGEMENT SERVICES) 47,090 15,988 ---------------------------------------------------------------------------- 29,051 - ---------------------------------------------------------------------------------------------------------------------- FRANCE--4.4% AXA SA (INSURANCE GROUP PROVIDING INSURANCE, FINANCE AND REAL ESTATE SERVICES) 59,903 7,734 Groupe Danone (PRODUCER OF PACKAGED FOODS AND BEVERAGES) 24,033 6,424 Sanofi SA (RESEARCHER AND MANUFACTURER OF HEALTH CARE PRODUCTS AND BEAUTY AIDS) 34,010 5,329 Television Francaise (TELEVISION BROADCASTING) 30,600 5,981 ---------------------------------------------------------------------------- 25,468 - ---------------------------------------------------------------------------------------------------------------------- SPAIN--3.8% Argentaria SA (BANK) 286,000 6,726 Compania Telefonica Nacional de Espana SA (TELECOMMUNICATION SERVICES) 245,640 11,510 Endesa S.A. (ELECTRIC POWER UTILITY) 167,938 3,733 Telefonica S.A. (Rights) (TELECOMMUNICATION SERVICES) 245,640 228 ---------------------------------------------------------------------------- 22,197
10 11 PORTFOLIO OF INVESTMENTS (DOLLARS IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - ---------------------------------------------------------------------------------------------------------------------- ITALY--3.3% Assicurazioni Generali (LIFE AND PROPERTY INSURANCE COMPANY) 156,425 $ 6,090 Istituto Bancario San Paolo di Torino (COMMERCIAL BANK) 367,580 5,515 Telecom Italia SpA (PROVIDER OF TELECOMMUNICATIONS, ELECTRONICS AND NETWORK CONSTRUCTION) 685,000 7,288 ---------------------------------------------------------------------------- 18,893 - ---------------------------------------------------------------------------------------------------------------------- IRELAND--1.7% Bank of Ireland PLC (BANK) 501,775 10,046 ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- SWEDEN--1.1% (a)Industri-Matematik International Corp. (SERVICE SOFTWARE APPLICATIONS) 56,780 106 Securitas AB (INSTALLS SECURITY SYSTEMS AND PROVIDER OF GUARD SERVICES) 408,800 6,057 (b)TeleLarm Care AB (ELECTRONIC SECURITY DEVICES) 4,088 48 ---------------------------------------------------------------------------- 6,211 ---------------------------------------------------------------------------- TOTAL EUROPEAN COUNTRIES--51.3% 298,069 - ---------------------------------------------------------------------------------------------------------------------- PACIFIC REGION - ---------------------------------------------------------------------------------------------------------------------- JAPAN--20.9% Asahi Glass Co., Ltd. (MANUFACTURER OF GLASS PRODUCTS) 928,000 7,101 Bellsystem 24, Inc. (TELEMARKETING FIRM) 27,000 10,646 Fuji Bank, Ltd. (PROVIDER OF COMMERCIAL AND INSTITUTIONAL BANKING SERVICES) 1,729,000 13,490 Fujisawa Pharmaceutical Co. (MANUFACTURER OF MARKETER OF ANTIBIOTICS) 360,000 5,907 Fujitsu Support and Service Inc. (PROVIDER OF INFORMATION SERVICES) 60,000 7,334 Murata Manufacturing Co., Ltd. (LEADING MANUFACTURER OF CERAMIC APPLIED ELECTRONIC COMPUTERS) 99,000 5,661 NTT Mobile Communication Network, Inc. (PROVIDER OF VARIOUS TELECOMMUNICATION SERVICES AND EQUIPMENT) 221 12,951 Nidec Corp. (MANUFACTURER OF SMALL-SCALE MOTORS FOR HARD DISC DRIVES) 44,500 5,774 Nikko Securities Co., Ltd. (SECURITIES BROKER AND DEALER) 1,630,000 9,347 Nippon Telegraph & Telephone Corp. (TELECOMMUNICATIONS SERVICES) 620 6,748 Rohm Company Ltd. (MAKER OF LINEAR ICS AND SEMICONDUCTORS) 77,000 9,283 Sanwa Bank, Ltd. (BANK) 617,000 6,922 Sony Corp. (MANUFACTURER OF CONSUMER ELECTRONIC PRODUCTS) 83,000 7,748
11 12 PORTFOLIO OF INVESTMENTS (DOLLARS IN THOUSANDS)
NUMBER OF SHARES VALUE - ---------------------------------------------------------------------------------------------------------------------- Sumitomo Trust & Banking Co., Ltd. (COMMERCIAL BANK) 1,255,000 $ 6,157 TDK Corp. (MANUFACTURER OF MAGNETIC TAPES AND FLOPPY DISCS) 78,600 5,942 ---------------------------------------------------------------------------- 121,011 - ---------------------------------------------------------------------------------------------------------------------- SINGAPORE--4.8% City Developments Ltd. (DEVELOPER OF RESIDENTIAL, INDUSTRIAL, RETAIL AND INVESTMENT PROPERTIES, OWNER AND OPERATOR OF HOTELS) 1,581,000 10,532 Oversea-Chinese Banking Corp., Ltd. (COMMERCIAL BANK) 1,164,000 10,911 Singapore Airlines Ltd. (SCHEDULED AIRLINE) 719,000 6,612 ---------------------------------------------------------------------------- 28,055 - ---------------------------------------------------------------------------------------------------------------------- HONG KONG--2.9% Dao Heng Bank Group Ltd. (COMMERCIAL BANK HOLDING COMPANY) 1,848,000 7,510 Sun Hung Kai Properties Ltd. (REAL ESTATE DEVELOPER AND FINANCE COMPANY) 1,065,000 9,309 ---------------------------------------------------------------------------- 16,819 - ---------------------------------------------------------------------------------------------------------------------- TAIWAN--.9% (a)Winbond Electronics Corp. (GDR) (DESIGNER, MANUFACTURER AND RETAILER OF INTEGRATED CIRCUITS AND RELATED PRODUCTS) 500,000 5,150 ---------------------------------------------------------------------------- TOTAL PACIFIC REGION--29.5% 171,035 - ---------------------------------------------------------------------------------------------------------------------- COMMONWEALTH COUNTRIES - ---------------------------------------------------------------------------------------------------------------------- AUSTRALIA--8.7% AAPT Limited (TELECOMMUNICATIONS CARRIER) 4,945,000 17,671 Cable & Wireless Optus Ltd. (PROVIDER OF COMMUNICATION AND TELECOMMUNICATION SERVICES) 4,450,000 10,012 St. George Bank Ltd. (COMMERCIAL BANK) 1,059,850 7,820 WMC Ltd. (MINERAL EXPLORATION AND PRODUCTION) 1,800,000 7,778 Westpac Banking Corp. (BANK) 902,000 6,886 ---------------------------------------------------------------------------- 50,167
12 13 PORTFOLIO OF INVESTMENTS (DOLLARS IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - ---------------------------------------------------------------------------------------------------------------------- CANADA--5.1% BCE, Inc. (TELECOMMUNICATION SERVICES) 167,000 $ 7,617 BioChem Pharma, Inc. (RESEARCH AND DEVELOPMENT OF THERAPEUTIC PRODUCTS) 226,000 4,690 Petro-Canada (OIL AND GAS COMPANY) 429,600 5,907 Rogers Communications Inc. "B" (CABLE TV OPERATOR IN CANADA, U.S. AND IRELAND) 320,200 5,996 Royal Bank of Canada (BANK) 115,000 5,608 ---------------------------------------------------------------------------- 29,818 - ---------------------------------------------------------------------------------------------------------------------- NEW ZEALAND--1.1% Restaurant Brands (FAST FOOD RESTAURANT CHAIN) 4,024,900 3,134 Sky City Ltd. (CASINO AND HOTEL OPERATOR) 1,324,000 3,307 ---------------------------------------------------------------------------- 6,441 ---------------------------------------------------------------------------- TOTAL COMMONWEALTH COUNTRIES--14.9% 86,426 ---------------------------------------------------------------------------- TOTAL COMMON STOCKS--95.7% (Cost: $478,596) 555,530 ----------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------------------------------------------------------- MONEY MARKET INSTRUMENTS--4.3% Yield -- 4.67% Due -- May 1999 (Cost: $24,938) $ 25,000 24,938 ---------------------------------------------------------------------------- TOTAL INVESTMENT PORTFOLIO--100% (Cost: $503,534) $580,468 ----------------------------------------------------------------------------
13 14 PORTFOLIO OF INVESTMENTS At April 30, 1999, the fund's portfolio of investments had the following industry diversification (dollars in thousands):
VALUE % - --------------------------------------------------------------------------------- Finance $182,478 31.5 - --------------------------------------------------------------------------------- Communications 101,058 17.4 - --------------------------------------------------------------------------------- Service Industries 67,836 11.7 - --------------------------------------------------------------------------------- Health Care 47,443 8.2 - --------------------------------------------------------------------------------- Manufacturing 33,676 5.8 - --------------------------------------------------------------------------------- Consumer Staples 26,814 4.6 - --------------------------------------------------------------------------------- Technology 26,766 4.6 - --------------------------------------------------------------------------------- Consumer Discretionary 23,363 4.0 - --------------------------------------------------------------------------------- Energy 15,996 2.8 - --------------------------------------------------------------------------------- Media 11,977 2.1 - --------------------------------------------------------------------------------- Metals and Minerals 7,778 1.3 - --------------------------------------------------------------------------------- Transportation 6,612 1.1 - --------------------------------------------------------------------------------- Utilities 3,733 0.6 - --------------------------------------------------------------------------------- TOTAL COMMON STOCKS 555,530 95.7 - --------------------------------------------------------------------------------- MONEY MARKET INSTRUMENTS 24,938 4.3 - --------------------------------------------------------------------------------- TOTAL INVESTMENTS $580,468 100.0 - ---------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS - -------------------------------------------------------------------------------- (a) Non-income producing. (b) Securities valued in good faith by the Valuation Committee of the Board of Trustees at fair value amounted to $48,000 (.01% of net assets). Their values have been estimated by the Valuation Committee in the absence of readily ascertainable market values. however, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the securities existed, and the difference could be material. The cost of these securities at April 30, 1999 aggregated $50,000. These securities may also have certain restrictions as to resale. Based on the cost of investments of $503,534,000 for federal income tax purposes at April 30, 1999, the gross unrealized appreciation was $95,291,000, the gross unrealized depreciation was $18,357,000 and the net unrealized appreciation on investments was $76,934,000. See accompanying notes to financial statements. 14 15 FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES April 30, 1999 (unaudited) (IN THOUSANDS) - ------------------------------------------------------------------------ ASSETS - ------------------------------------------------------------------------ Investments, at value (Cost: $503,534) $580,468 - ------------------------------------------------------------------------ Receivable for: Fund shares sold 120 - ------------------------------------------------------------------------ Dividends 1,111 - ------------------------------------------------------------------------ Foreign taxes 687 - ------------------------------------------------------------------------ Unrealized appreciation on forward currency exchange contracts 8 - ------------------------------------------------------------------------ TOTAL ASSETS 582,394 - ------------------------------------------------------------------------ - ------------------------------------------------------------------------ LIABILITIES - ------------------------------------------------------------------------ Cash overdraft 2,639 - ------------------------------------------------------------------------ Payable for: Investments purchased 6,201 - ------------------------------------------------------------------------ Fund shares redeemed 584 - ------------------------------------------------------------------------ Management fee 360 - ------------------------------------------------------------------------ Distribution services fee 105 - ------------------------------------------------------------------------ Administrative services fee 110 - ------------------------------------------------------------------------ Custodian and transfer agent fees and related expenses 817 - ------------------------------------------------------------------------ Trustees' fees and other 628 - ------------------------------------------------------------------------ Total liabilities 11,444 - ------------------------------------------------------------------------ NET ASSETS $570,950 - ------------------------------------------------------------------------ - ------------------------------------------------------------------------ ANALYSIS OF NET ASSETS - ------------------------------------------------------------------------ Paid-in capital $467,765 - ------------------------------------------------------------------------ Undistributed net realized gain on investments and foreign currency transactions 26,263 - ------------------------------------------------------------------------ Net unrealized appreciation (depreciation) on: Investments 76,934 - ------------------------------------------------------------------------ Foreign currency related transactions (12) - ------------------------------------------------------------------------ NET ASSETS APPLICABLE TO SHARES OUTSTANDING $570,950 - ------------------------------------------------------------------------ - ------------------------------------------------------------------------ THE PRICING OF SHARES - ------------------------------------------------------------------------ CLASS A SHARES Net asset value and redemption price per share ($396,092 / 34,078 shares outstanding) $11.62 - ------------------------------------------------------------------------ Maximum offering price per share (net asset value, plus 6.10% of net asset value or 5.75% of offering price) $12.33 - ------------------------------------------------------------------------ CLASS B SHARES Net asset value and redemption price (subject to contingent deferred sales charge) per share ($134,576 / 11,874 shares outstanding) $11.33 - ------------------------------------------------------------------------ CLASS C SHARES Net asset value and redemption price (subject to contingent deferred sales charge) per share ($26,739 / 2,358 shares outstanding) $11.34 - ------------------------------------------------------------------------ CLASS I SHARES Net asset value and redemption price per share ($13,543 / 1,154 shares outstanding) $11.74 - ------------------------------------------------------------------------
See accompanying Notes to Financial Statements. 15 16 FINANCIAL STATEMENTS STATEMENT OF OPERATIONS Six months ended April 30, 1999 (unaudited) (IN THOUSANDS) - ----------------------------------------------------------------------- INVESTMENT INCOME - ----------------------------------------------------------------------- Dividends (net of foreign taxes withheld of $397) $ 3,072 - ----------------------------------------------------------------------- Interest income 648 - ----------------------------------------------------------------------- Total investment income 3,720 - ----------------------------------------------------------------------- Expenses: Management fee 2,236 - ----------------------------------------------------------------------- Distribution services fee 621 - ----------------------------------------------------------------------- Administrative services fee 710 - ----------------------------------------------------------------------- Custodian and transfer agent fees and related expenses 1,837 - ----------------------------------------------------------------------- Professional fees 74 - ----------------------------------------------------------------------- Reports to shareholders 376 - ----------------------------------------------------------------------- Registration fees 108 - ----------------------------------------------------------------------- Trustees' fees and other 223 - ----------------------------------------------------------------------- Total expenses 6,185 - ----------------------------------------------------------------------- NET INVESTMENT LOSS (2,465) - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS - ----------------------------------------------------------------------- Net realized gain from: Investments 27,023 - ----------------------------------------------------------------------- Foreign currency related transactions 80 - ----------------------------------------------------------------------- 27,103 - ----------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) on: Investments 47,256 - ----------------------------------------------------------------------- Foreign currency related transactions (97) - ----------------------------------------------------------------------- 47,159 - ----------------------------------------------------------------------- Net gain on investments 74,262 - ----------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $71,797 - -----------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS For the six months ended April 30, 1999 (unaudited) and the year ended October 31, 1998 (IN THOUSANDS)
1999 1998 - ------------------------------------------------------------------------------------------- OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY - ------------------------------------------------------------------------------------------- Net investment income (loss) $ (2,465) 462 - ------------------------------------------------------------------------------------------- Net realized gain 27,103 88,163 - ------------------------------------------------------------------------------------------- Change in net unrealized appreciation 47,159 (74,800) - ------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 71,797 13,825 - ------------------------------------------------------------------------------------------- Distribution from net investment income -- (2,673) - ------------------------------------------------------------------------------------------- Distribution from net realized gain (88,452) (25,096) - ------------------------------------------------------------------------------------------- Total dividends to shareholders (88,452) (27,769) - ------------------------------------------------------------------------------------------- Net increase (decrease) from capital share transactions (17,079) 30,559 - ------------------------------------------------------------------------------------------- TOTAL INCREASE (DECREASE) IN NET ASSETS (33,734) 16,615 - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- NET ASSETS - ------------------------------------------------------------------------------------------- Beginning of period 604,684 588,069 - ------------------------------------------------------------------------------------------- END OF PERIOD $570,950 604,684 - -------------------------------------------------------------------------------------------
16 17 NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1 DESCRIPTION OF THE FUND Kemper International Fund is an open-end management investment company organized as a business trust under the laws of Massachusetts. The fund currently offers four 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 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 sold to a limited group of investors, are not subject to initial or contingent deferred sales charges and generally have lower ongoing expenses than other classes. Differences in class expenses will result in the payment of different per share income dividends by class. All shares of the fund have equal rights with respect to voting, dividends and assets, subject to class specific preferences. - -------------------------------------------------------------------------------- 2 SIGNIFICANT ACCOUNTING POLICIES SECURITY VALUATION. Investments are stated at value. Portfolio 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 on such market. 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 shall be used. Forward foreign currency exchange contracts are valued at the prevailing forward exchange rate of the underlying currencies on that day. 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 market 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. 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. Net realized and unrealized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward foreign currency exchange contracts, disposition of foreign currencies, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. That portion of both realized and unrealized 17 18 NOTES TO FINANCIAL STATEMENTS gains and losses on investments that result from fluctuations in foreign currency exchange rates is not separately disclosed. INVESTMENT TRANSACTIONS AND INVESTMENT INCOME. Investment transactions are accounted for on the trade date. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as soon as the information is available to the fund. Interest income is recorded on the accrual basis. Realized gains and losses from investment transactions are reported on an identified cost basis. 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 and Class C 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 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. 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. DIVIDENDS TO SHAREHOLDERS. The fund declares and pays dividends of net investment income and net realized capital gains annually, which are recorded on the ex-dividend date. Dividends are determined in accordance with income tax principles which may treat certain transactions differently from generally accepted accounting principles. These differences are primarily due to differing treatments for certain transactions such as foreign currency transactions. - -------------------------------------------------------------------------------- 3 TRANSACTIONS WITH AFFILIATES MANAGEMENT AGREEMENT. The fund has a management agreement with Scudder Kemper Investments, Inc. (Scudder Kemper) and pays a monthly investment management fee of 1/12 of the annual rate of .75% of the first $250 million of average daily net assets declining to .62% of average daily net assets in excess of $12.5 billion. The fund incurred a management fee of $2,236,000 for the six months ended April 30, 1999. Scudder Investments (U.K.) Ltd, an affiliate of Scudder Kemper serves as sub-advisor for the fund and is paid by Scudder Kemper for its services. UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT. The fund has an underwriting and distribution services agreement with Kemper Distributors, Inc. (KDI). Underwriting commissions retained by KDI in connection with the distribution of Class A for the six months ended April 30, 1999 are $44,000. For services under the distribution services agreement, the fund pays KDI a fee of .75% of average daily net assets of the Class B and Class C shares pursuant to separate Rule 12b-1 plans for the Class B and Class C shares. Pursuant to the agreement, KDI enters into related selling group agreements with various firms at various rates for sales of Class B and Class C shares. In addition, KDI receives any contingent deferred sales charges (CDSC) from redemptions of Class B and Class C shares. Distribution fees and CDSC received by KDI for the six months ended April 30, 1999 are $828,000. 18 19 NOTES TO FINANCIAL STATEMENTS ADMINISTRATIVE SERVICES AGREEMENT. The fund has an administrative services agreement with KDI. For providing information and administrative services to Class A, Class B and Class C shareholders, the fund pays KDI a fee at an annual rate of up to .25% of average daily net assets of each class. KDI in turn has various agreements with financial services firms that provide these services and pays these firms based on assets of fund accounts the firms service. Administrative services fees paid by the fund to KDI for the six months ended April 30, 1999 are $710,000, of which $1,000 was paid by KDI to affiliates. SHAREHOLDER SERVICES AGREEMENT. Pursuant to a services agreement with the fund's transfer agent, Kemper Service Company (KSvC) is the shareholder service agent of the fund. Under the agreement, KSvC received shareholder services fees of $922,000 for the six months ended April 30, 1999. OFFICERS AND TRUSTEES. Certain officers or trustees of the fund are also officers or directors of Scudder Kemper. For the six months ended April 30, 1999, the fund made no payments to its officers and incurred trustees' fees of $53,000 to independent trustees. - -------------------------------------------------------------------------------- 4 INVESTMENT TRANSACTIONS For the six months ended April 30, 1999, investment transactions (excluding short-term instruments) are as follows (in thousands): Purchases $317,404 Proceeds from sales 388,985 19 20 NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 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, 1999 OCTOBER 31, 1998 ------------------------ ------------------------ SHARES AMOUNT SHARES AMOUNT -------------------------------------------------------------------------------- SHARES SOLD -------------------------------------------------------------------------------- Class A 89,082 $ 1,022,437 99,055 $ 1,307,871 -------------------------------------------------------------------------------- Class B 2,457 27,974 6,108 79,630 -------------------------------------------------------------------------------- Class C 9,481 106,994 6,453 83,701 -------------------------------------------------------------------------------- Class I 270 3,451 837 11,244 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SHARES ISSUED IN REINVESTMENT OF DIVIDENDS -------------------------------------------------------------------------------- Class A 5,045 55,843 1,539 18,354 -------------------------------------------------------------------------------- Class B 1,808 19,575 504 5,970 -------------------------------------------------------------------------------- Class C 309 3,349 57 669 -------------------------------------------------------------------------------- Class I 204 2,276 81 964 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SHARES REDEEMED -------------------------------------------------------------------------------- Class A (95,568) (1,102,000) (98,869) (1,319,184) -------------------------------------------------------------------------------- Class B (3,455) (39,183) (5,480) (71,226) -------------------------------------------------------------------------------- Class C (9,644) (109,252) (5,630) (73,743) -------------------------------------------------------------------------------- Class I (693) (8,543) (1,023) (13,696) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- CONVERSION OF SHARES -------------------------------------------------------------------------------- Class A 455 5,259 1,040 13,786 -------------------------------------------------------------------------------- Class B (465) (5,259) (1,053) (13,781) -------------------------------------------------------------------------------- NET INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS $ (17,079) $ 30,559 --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 6 FORWARD FOREIGN CURRENCY CONTRACTS In order to protect itself against a decline in the value of a particular foreign currency against the U.S. dollar, the fund has entered into forward contracts to deliver foreign currency in exchange for U.S. dollars as described below. The fund bears the market risk that arises from changes in foreign exchange rates, and accordingly, the net unrealized gain or loss on those contracts are reflected in the accompanying financial statements. The fund also bears the credit risk (which is limited to the unrealized gain, if any) if the counterparty fails to perform under the contract. At April 30, 1999, the fund had the following forward foreign currency contracts outstanding with a settlement date in May 1999.
CONTRACT UNREALIZED FOREIGN CURRENCY AMOUNT IN GAIN AT TO BE DELIVERED U.S. DOLLARS 4/30/99 ----------------------------------------------------------------------------- 740,726,000 Japanese Yen $6,206,000 $8,000 -----------------------------------------------------------------------------
20 21 FINANCIAL HIGHLIGHTS
---------------------------------------------- CLASS A ---------------------------------------------- SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, --------------------------------- 1999 1998 1997 1996 1995 - ----------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE - ----------------------------------------------------------------------------------------- Net asset value, beginning of period $12.10 12.68 11.96 10.59 11.13 - ----------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (.03) .04 -- .04 .07 - ----------------------------------------------------------------------------------------- Net realized and unrealized gain 1.36 .01 1.52 1.50 .05 - ----------------------------------------------------------------------------------------- Total from investment operations 1.33 .05 1.52 1.54 .12 - ----------------------------------------------------------------------------------------- Less dividends: Distribution from net investment income -- .08 .12 .12 -- - ----------------------------------------------------------------------------------------- Distribution from net realized gain 1.81 .55 .68 .05 .66 - ----------------------------------------------------------------------------------------- Total dividends 1.81 .63 .80 .17 .66 - ----------------------------------------------------------------------------------------- Net asset value, end of period $11.62 12.10 12.68 11.96 10.59 - ----------------------------------------------------------------------------------------- TOTAL RETURN (NOT ANNUALIZED) 11.73% .45 13.49 14.70 1.69 - ----------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS (ANNUALIZED) - ----------------------------------------------------------------------------------------- Expenses 1.78% 1.64 1.57 1.64 1.57 - ----------------------------------------------------------------------------------------- Net investment income (loss) (.56)% .36 .16 .34 .83 - -----------------------------------------------------------------------------------------
---------------------------------------------- CLASS B ---------------------------------------------- SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, --------------------------------- 1999 1998 1997 1996 1995 - ----------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE - ----------------------------------------------------------------------------------------- Net asset value, beginning of period $11.90 12.50 11.81 10.46 11.09 - ----------------------------------------------------------------------------------------- Income from investment operations: Net investment loss (.09) (.08) (.12) (.06) (.02) - ----------------------------------------------------------------------------------------- Net realized and unrealized gain 1.33 .03 1.51 1.47 .05 - ----------------------------------------------------------------------------------------- Total from investment operations 1.24 (.05) 1.39 1.41 .03 - ----------------------------------------------------------------------------------------- Less dividends: Distribution from net investment income -- -- .02 .01 -- - ----------------------------------------------------------------------------------------- Distribution from net realized gain 1.81 .55 .68 .05 .66 - ----------------------------------------------------------------------------------------- Total dividends 1.81 .55 .70 .06 .66 - ----------------------------------------------------------------------------------------- Net asset value, end of period $11.33 11.90 12.50 11.81 10.46 - ----------------------------------------------------------------------------------------- TOTAL RETURN (NOT ANNUALIZED) 11.12% (.37) 12.32 13.59 .84 - ----------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS (ANNUALIZED) - ----------------------------------------------------------------------------------------- Expenses 2.88% 2.62 2.57 2.53 2.50 - ----------------------------------------------------------------------------------------- Net investment loss (1.66)% (.62) (.84) (.55) (.10) - -----------------------------------------------------------------------------------------
21 22 FINANCIAL HIGHLIGHTS
-------------------------------------------------- CLASS C -------------------------------------------------- SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, ------------------------------------- 1999 1998 1997 1996 1995 - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE - --------------------------------------------------------------------------------------------- Net asset value, beginning of period $11.91 12.51 11.81 10.46 11.09 - --------------------------------------------------------------------------------------------- Income from investment operations: Net investment loss (.09) (.08) (.09) (.06) (.02) - --------------------------------------------------------------------------------------------- Net realized and unrealized gain 1.33 .03 1.49 1.47 .05 - --------------------------------------------------------------------------------------------- Total from investment operations 1.24 (.05) 1.40 1.41 .03 - --------------------------------------------------------------------------------------------- Less dividends: Distribution from net investment income -- -- .02 .01 -- - --------------------------------------------------------------------------------------------- Distribution from net realized gain 1.81 .55 .68 .05 .66 - --------------------------------------------------------------------------------------------- Total dividends 1.81 .55 .70 .06 .66 - --------------------------------------------------------------------------------------------- Net asset value, end of period $11.34 11.91 12.51 11.81 10.46 - --------------------------------------------------------------------------------------------- TOTAL RETURN (NOT ANNUALIZED) 11.13% (.37) 12.45 13.59 .84 - --------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS (ANNUALIZED) - --------------------------------------------------------------------------------------------- Expenses 2.88% 2.55 2.49 2.50 2.50 - --------------------------------------------------------------------------------------------- Net investment loss (1.66)% (.55) (.76) (.52) (.10) - ---------------------------------------------------------------------------------------------
-------------------------------------------------------------------------- CLASS I -------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED OCTOBER 31, JULY 3 TO APRIL 30, --------------------------------------- OCTOBER 31, 1999 1998 1997 1996 1995 - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE - ---------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $12.16 12.72 11.99 10.61 10.09 - ---------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income .02 .11 .07 .10 .04 - ---------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain 1.37 .03 1.53 1.48 .48 - ---------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.39 .14 1.60 1.58 .52 - ---------------------------------------------------------------------------------------------------------------------- Less dividends: Distribution from net investment income -- .15 .19 .15 -- - ---------------------------------------------------------------------------------------------------------------------- Distribution from net realized gain 1.81 .55 .68 .05 -- - ---------------------------------------------------------------------------------------------------------------------- Total dividends 1.81 .70 .87 .20 -- - ---------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $11.74 12.16 12.72 11.99 10.61 - ---------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (NOT ANNUALIZED) 12.20% 1.18 14.19 15.19 5.15 - ---------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS (ANNUALIZED) - ---------------------------------------------------------------------------------------------------------------------- Expenses .95% 1.00 1.04 1.10 .85 - ---------------------------------------------------------------------------------------------------------------------- Net investment income .27% 1.00 .69 .88 1.32 - ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, ------------------------------------- 1999 1998 1997 1996 1995 - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA FOR ALL CLASSES - --------------------------------------------------------------------------------------------- Net assets at end of period (in thousands) $570,950 604,684 588,069 472,243 364,708 - --------------------------------------------------------------------------------------------- Portfolio turnover rate (annualized) 110% 105 76 104 114 - ---------------------------------------------------------------------------------------------
NOTES: Total return does not reflect the effect of any sales charges. Per share data was determined based on average shares outstanding for the years ended 1995, 1996, 1998 and the six months ended April 30, 1999, respectively. Data for the six months ended April 30, 1999 is unaudited. 22 23 SHAREHOLDERS' MEETING SPECIAL SHAREHOLDERS' MEETING On December 17, 1998, a special shareholders' meeting was held and adjourned to January 15, 1999. Kemper International Fund shareholders were asked to vote on three separate issues: approval of the new Investment Management Agreement between the fund and Scudder Kemper Investments, Inc., approval of the new Sub-Advisory Agreement for the fund with Scudder Investments (U.K.) Limited and to modify or eliminate certain policies and to eliminate the shareholder approval requirements as to certain other matters. The following are the results. 1) Approval of the new Investment Management Agreement between the fund and Scudder Kemper Investments, Inc. This item was approved.
For Against Abstain 26,605,477 642,479 984,821
2) To approve the new Sub-Advisory Agreement for the fund with Scudder Investments (U.K.). This item was approved.
For Against Abstain 26,387,250 491,413 1,354,115
3) To modify or eliminate certain policies and to eliminate the shareholder approval requirements as to certain other matters. These items were approved. Investment Objectives
For Against Abstain 21,850,625 1,376,506 2,199,343
Investment policies
For Against Abstain 21,847,725 1,379,293 2,199,456
Diversification
For Against Abstain 21,888,344 1,338,787 2,199,343
Borrowing
For Against Abstain 21,855,744 1,371,387 2,199,343
Senior securities
For Against Abstain 21,883,117 1,344,014 2,199,343
Concentration
For Against Abstain 21,879,254 1,347,877 2,199,343
Underwriting of securities
For Against Abstain 21,884,845 1,342,286 2,199,343
Investment in real estate
For Against Abstain 21,879,894 1,347,237 2,199,343
Purchase of commodities
For Against Abstain 21,873,770 1,353,361 2,199,343
Lending
For Against Abstain 21,874,304 1,352,827 2,199,343
Margin purchases and short sales
For Against Abstain 21,825,336 1,401,795 2,199,343
Pledging of assets
For Against Abstain 21,795,549 1,431,582 2,199,343
Purchases of options and warrants
For Against Abstain 21,856,215 1,370,916 2,199,343
23 24 TRUSTEES AND OFFICERS TRUSTEES OFFICERS DANIEL PIERCE MARK S. CASADY MAUREEN E. KANE Chairman and Trustee President Assistant Secretary JOHN W. BALLANTINE PHILIP J. COLLORA CAROLINE PEARSON Trustee Vice President and Assistant Secretary Secretary LEWIS A. BURNHAM ELIZABETH C. WERTH Trustee JOHN R. HEBBLE Assistant Secretary Treasurer DONALD L. DUNAWAY BRENDA LYONS Trustee ANN M. MCCREARY Assistant Treasurer Vice President ROBERT B. HOFFMAN Trustee KATHRYN L. QUIRK Vice President DONALD R. JONES Trustee CORNELIA SMALL Vice President THOMAS W. LITTAUER Trustee and Vice President LINDA J. WONDRACK Vice President SHIRLEY D. PETERSON Trustee 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 419557 Kansas City, MO 64141 - -------------------------------------------------------------------------------- CUSTODIAN THE CHASE MANHATTAN BANK Chase Metro Center Brooklyn, NY 11245 - -------------------------------------------------------------------------------- TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY 801 Pennsylvania Avenue Kansas City, MO 64105 - -------------------------------------------------------------------------------- PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC. 222 South Riverside Plaza Chicago, IL 60606 www.kemper.com [KEMPER FUNDS LOGO] Long-term investing in a short-term world(SM) Printed on recycled paper in the U.S.A. This report is not to be distributed unless preceded or accompanied by a Kemper Global and International Funds prospectus. KIF - 3(6/21/99) 1076840 -----END PRIVACY-ENHANCED MESSAGE-----