<PAGE> 1
Kemper Target Equity Fund
Kemper Retirement Fund Series V
Semiannual Report to Shareholders
For the Period Ended
December 31, 1994
Provides a guaranteed return of
investment on the designated
maturity date to investors who
reinvest all dividends and
hold their shares to the maturity date,
and seeks to provide long-term
growth of capital
[KEMPER MUTUAL FUNDS LOGO]
<PAGE> 2
DEAR SHAREHOLDER:
We are pleased to provide you with an economic overview and the performance of
your Fund for the six-month period ended December 31, 1994. In addition,
following the economic overview is a question and answer interview with your
fund's Portfolio Manager.
- -------------------------------
PERFORMANCE AND DIVIDEND REVIEW
<TABLE>
<CAPTION>
TOTAL RETURN*
For Periods Ended December 31, 1994
(not adjusted for any sales charge)
SIX MONTHS ONE YEAR
---------- --------
<S> <C> <C>
Series V 1.97% -7.46%
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS*
For the Periods Ended December 31, 1994
(adjusted for the maximum sales charge of 5.00%)
ONE YEAR LIFE OF FUND
--------- ------------
<S> <C> <C>
Series V -12.06% -10.92% (since 11/15/93)
</TABLE>
Returns are historical and do not represent future performance. Returns and net
asset value fluctuate. Shares are redeemable at current net asset value, which
may be more or less than original cost.
- ---------------
DIVIDEND REVIEW
For the six-month period ended December 31, 1994, Series V paid $.21 per share
in income dividends.
* Total return and average annual total return measure net
investment income and capital gain or loss from portfolio investments, assuming
reinvestment of all dividends. Average annual total return reflects annualized
change while total return reflects aggregate change. During the periods noted,
securities prices fluctuated. For additional information, see the Prospectus
and Statement of Additional Information and the Financial Highlights at the end
of this report.
- -------------------------
GENERAL ECONOMIC OVERVIEW
The momentum of the 1994 economic expansion produced some of the most positive
economic reports we've seen in years. Income, consumer spending, construction
spending and hiring all were at high levels as we closed the pages on 1994 and
progressed through the first month of 1995.
It was almost a year ago that the Federal Reserve Board initiated its series of
rate hikes intended to cool down the economy. As you'll note in the accompanying
graphs, the high 6.3 percent increase in gross domestic product (GDP) in the
fourth quarter of 1993 provoked the Fed's first rate increase in February of
1994. The government raised rates five additional times in 1994, yet the economy
continued to expand at relatively high rates. The economy's ability to produce a
fourth quarter 1994 GDP of 4.5% one year after steadily rising rates virtually
assured that the Fed would raise rates again in February.
Several measures indicate the strength and stability of today's economy compared
to the early 1990s: consumers are not in as much debt as they were just three or
four years ago, nonfinancial corporations have a much lower level of debt
relative to their cash flow, and the federal budget deficit relative to its
gross domestic product (GDP) is lower than it was earlier in the decade.
As the new year unfolds, a slowdown in housing and auto sales may be offset
somewhat by accelerated activity in other sectors of the economy. For example,
while it's true that manufacturers today do not have the same incentive they
once had to accumulate inventories, we expect inventories to continue to build.
Products are needed both in this country and overseas, where many economies are
in the early phase of economic recovery. Nonresidential construction may also
start to pick up.
1
<PAGE> 3
STRONG ECONOMIC GROWTH...
Data show the annual rate of increase in the U.S. gross domestic product by
quarter
<TABLE>
<CAPTION>
4Q1993 1Q1994 2Q1994 3Q1994 4Q1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
6.30 3.30 4.10 4.00 4.50
</TABLE>
Source: Commerce Department
PROVOKED A SERIES OF INTEREST RATE HIKES
The Federal Reserve Board started raising the Federal Funds (short-term)
interest rates in February 1994 and raised rates six times since.
<TABLE>
<CAPTION>
BEFORE
RATE
HIKES 2/4/94 3/22/94 4/18/94 5/17/94 8/16/94 11/15/94 2/1/95
- ----- ------ ------- ------- ------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
3.00 3.25 3.50 3.75 4.25 4.75 5.50 6.00
</TABLE>
OUR OUTLOOK
While we believe that higher interest rates will help economic growth decline to
closer to 3 percent, this will probably still be too much growth for the Federal
Reserve. As a consequence, we expect the Fed to raise rates as appropriate until
growth slows to 2.5 percent to 2.75 percent. Alan Greenspan, chairman of the
Federal Reserve, has made it quite clear that this is the level of growth the
Fed associates with moderate inflation. Long-term rates may rise but not to the
same extent as short-term rates.
We expect the economy to slow significantly this year--but we do not expect a
recession. Inflation will likely increase gradually, ranging between 3.5 percent
and 4.0 percent in the next six months. The Federal Reserve's commitment to
fighting inflation should be a long-term positive for financial assets.
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
/s/ Sandy A. Lincoln
Sandy A. Lincoln
Chief Investment Officer
February 3, 1995
Sandy Lincoln is Chief Investment Officer of
Kemper Financial Services, Inc. In this
[PHOTO] capacity, he oversees more than $60 billion
in assets managed, including $42 billion in
retail mutual funds. Lincoln is a graduate of
Valparaiso University in Indiana and holds an
M.B.A. in finance from Loyola University of Chicago.
2
<PAGE> 4
Q & A
A PERFORMANCE
REVIEW AND
AN INTERVIEW
WITH PORTFOLIO MANAGER
TRACY McCORMICK CHESTER
- --------------------------------------------------------------------------------
Tracy McCormick Chester joined Kemper Financial Services,
[PHOTO] Inc. (KFS) in 1994 and is Portfolio Manager of Kemper
Retirement Fund Series V. Ms. McCormick Chester received
both her B.A. and M.B.A. degrees from Michigan State
University.
- --------------------------------------------------------------------------------
- ---------
Q: RISING INTEREST RATES SPARKED VOLATILITY IN BOTH THE STOCK AND BOND MARKETS
DURING THE FIRST HALF OF 1994. DID THE ENVIRONMENT IMPROVE DURING THE SECOND
HALF OF THE YEAR?
A: Despite four interest rate hikes between February and May, the economy
continued to grow at a pace that exceeded the Federal Reserve Board's target
range of 2.5 to 3.0 percent. Concerned that such growth would fuel rising
inflation, the Fed made additional increases in August and again in November.
While this action should result in slower growth during 1995, higher rates and
fears of inflation fostered general uncertainty in the markets through
year-end.
- --------
Q: HOW WAS THE RETIREMENT FUND SERIES AFFECTED?
A: During the first half of the year, the market favored cyclical stocks which
tend to report higher earnings in periods of rapid economic growth. As interest
rates began to rise, we also saw a strong sell-off in growth stocks, which
generally trade at higher multiples. Both of these factors had a negative
impact on the equity portion of the portfolio. However, this environment also
enabled us to purchase some quality growth companies at very reasonable prices.
During the second half of the year, as the market began to equate higher
interest rates with slower economic growth, the steady earnings potential
associated with growth stocks became more attractive. As shown in the first
table, total return figures for the second half of the year show a marked
improvement over the one year figure. Growth stocks began to enjoy a return to
favor that in our view should continue into 1995.
Rising interest rates caused the market value of each fund's zero-coupon bonds
to decline, which also contributed to each fund's negative return for the
calendar year. Since the maturities of a fund's zero-coupon bonds are
unmanaged, no adjustments were made to this portion of the portfolio. However,
as discussed in the fund's last shareholder report, although there may
be periods of volatility, the value of these bonds will gradually rise
over time until they reach value at maturity. This too should help fund
performance as we go forward.
- --------
Q: SINCE BECOMING PORTFOLIO MANAGER OF THE RETIREMENT FUND SERIES LAST JULY,
WHAT INVESTMENT STRATEGIES HAVE YOU EMPHASIZED?
A: First, we re-established the fund's focus on quality growth companies,
eliminating some smaller, less liquid holdings. We also developed a more
broadly diversified portfolio, representing more industries and more companies
within each sector. In the past, we've seen relatively large positions in a
single industry or company contribute to strong gains for the fund.
Unfortunately, such exposure also made us vulnerable to equally painful
declines. With broader diversification, we should see more consistent
performance with less volatility. Finally, anticipating additional interest
rate hikes in early 1995, we gave the portfolio a more defensive posture to
help cushion the fund from further market volatility. We've added some
consumer non-durable stocks, such as Campbell's and SmithKline Beecham, and
reduced our position in technology, taking profits in stocks such as Oracle,
Tellabs and 3Com which enjoyed strong performance in 1994 but now appear to be
overvalued. Although implementing these adjustments entailed higher portfolio
turnover during recent months, and a modest increase in fund expenses, we
believe the fund is now more favorably positioned for the next phase of the
economic cycle.
- --------
Q: WHAT IS YOUR OUTLOOK FOR 1995?
A: We anticipate more market volatility during the first half of the year, until
economic growth falls to more modest levels and interest rates stabilize. The
Retirement Fund Series will remain somewhat defensive for the short-term, but
overall we anticipate a much more favorable environment for growth stocks which
should benefit the fund.
3
<PAGE> 5
KEMPER RETIREMENT FUND SERIES V
PORTFOLIO OF INVESTMENTS December 31, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
Principal
Amount or
Number of
Shares Value
--------- --------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS
- ---------------------------------------------------------------
U.S. Treasury Cubes
Zero Coupon, 2004 $ 10,050 $ 4,618
- ---------------------------------------------------------------
U.S. Treasury Strips
Zero Coupon, 2004 107,550 49,869
- ---------------------------------------------------------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS-53.8%
(Cost: $58,097) 54,487
- ---------------------------------------------------------------
COMMON STOCKS
CHEMICALS-.6%
- ---------------------------------------------------------------
Air Products & Chemicals 5,700 shs. 254
- ---------------------------------------------------------------
PPG Industries Inc. 11,000 408
- ---------------------------------------------------------------
662
COMMUNICATIONS AND MEDIA-1.5%
- ---------------------------------------------------------------
Comcast Cellular Corporation 24,000 377
- ---------------------------------------------------------------
Readers Digest Association, Inc. 9,000 442
- ---------------------------------------------------------------
Singapore Press Holdings 1,000 18
- ---------------------------------------------------------------
Tribune Co. 3,500 192
- ---------------------------------------------------------------
(a)Viacom International Inc. "A" 1,280 53
- ---------------------------------------------------------------
(a)Viacom International Inc. VCR 16,000 18
- ---------------------------------------------------------------
(a)Viacom International Inc. "B" 9,698 394
- ---------------------------------------------------------------
1,494
CONSTRUCTION-.1%
- ---------------------------------------------------------------
DBS Land Ltd. 5,000 15
- ---------------------------------------------------------------
Road Builder Holdings 4,000 22
- ---------------------------------------------------------------
Wai Kee Holdings 74,000 17
- ---------------------------------------------------------------
54
CONSUMER PRODUCTS AND SERVICES-5.8%
- ---------------------------------------------------------------
Campbell Soup Company 12,000 529
- ---------------------------------------------------------------
Coca-Cola Enterprises 11,500 592
- ---------------------------------------------------------------
ConAgra Inc. 10,300 322
- ---------------------------------------------------------------
Corning Corporation 17,100 511
- ---------------------------------------------------------------
CPC International Inc. 7,200 383
- ---------------------------------------------------------------
(a)CUC International Inc. 12,500 419
- ---------------------------------------------------------------
Gillette Company 4,000 299
- ---------------------------------------------------------------
PepsiCo Inc. 14,000 508
- ---------------------------------------------------------------
Philip Morris Companies Inc. 10,600 610
- ---------------------------------------------------------------
Procter & Gamble Company 6,200 384
- ---------------------------------------------------------------
Sara Lee Corporation 26,000 657
- ---------------------------------------------------------------
Seagram Company 14,000 413
- ---------------------------------------------------------------
Service Corporation International 8,000 222
- ---------------------------------------------------------------
5,849
DRUGS AND HEALTH CARE-5.7%
- ---------------------------------------------------------------
Abbott Laboratories 21,000 685
- ---------------------------------------------------------------
(a)Biogen Corporation 11,300 472
- ---------------------------------------------------------------
Columbia/HCA Healthcare 9,600 350
- ---------------------------------------------------------------
Forest Laboratories, Inc. 6,000 280
- ---------------------------------------------------------------
(a)Foundation Health Corporation 5,000 155
- ---------------------------------------------------------------
(a)Integrated Health Services 4,000 158
- ---------------------------------------------------------------
<CAPTION>
Number of
Shares Value
--------- --------
<S> <C> <C>
- ---------------------------------------------------------------
Johnson & Johnson 5,800 $ 318
- ---------------------------------------------------------------
Eli Lily & Company 9,900 650
- ---------------------------------------------------------------
Meditrust 4,000 121
- ---------------------------------------------------------------
Merck & Co., Inc. 7,400 282
- ---------------------------------------------------------------
Roche Holdings Genuss Chein 12 58
- ---------------------------------------------------------------
(a)R.P. Scherer Corporation 4,000 182
- ---------------------------------------------------------------
Shering-Plough Corporation 4,000 296
- ---------------------------------------------------------------
Smithkline Beecham PLC 21,000 719
- ---------------------------------------------------------------
United Healthcare Corporation 7,000 316
- ---------------------------------------------------------------
U.S. Healthcare Inc. 5,000 206
- ---------------------------------------------------------------
(a)Ventritex Inc. 7,500 203
- ---------------------------------------------------------------
Warner Lambert Company 4,000 308
- ---------------------------------------------------------------
5,759
ELECTRONICS AND ELECTRICAL
EQUIPMENT-3.5%
- ---------------------------------------------------------------
AMP, Inc 5,100 371
- ---------------------------------------------------------------
Brown Boveri 60 52
- ---------------------------------------------------------------
(a)EMC Corporation 13,000 281
- ---------------------------------------------------------------
Emerson Electric Co. 12,000 750
- ---------------------------------------------------------------
Ericsson "B" 1,500 83
- ---------------------------------------------------------------
Hewlett Packard Company 4,600 459
- ---------------------------------------------------------------
Intel Corporation 9,000 575
- ---------------------------------------------------------------
Kyocera Corporation 1,400 104
- ---------------------------------------------------------------
Linear Technology Corporation 3,000 149
- ---------------------------------------------------------------
Matsushita Electric Industrial Co.
Ltd. 4,000 66
- ---------------------------------------------------------------
Motorola Inc. 6,000 347
- ---------------------------------------------------------------
Nokia Telecom 467 69
- ---------------------------------------------------------------
Phillips N.V. 2,700 80
- ---------------------------------------------------------------
Sharp Corporation 4,000 72
- ---------------------------------------------------------------
Toyko Electron 3,000 93
- ---------------------------------------------------------------
3,551
ENERGY AND RELATED SERVICES-1.2%
- ---------------------------------------------------------------
British Petroleum Co., PLC 12,847 86
- ---------------------------------------------------------------
Enron, Corp. 12,900 393
- ---------------------------------------------------------------
Mobil Corporation 3,800 320
- ---------------------------------------------------------------
Noble Affiliates Inc. 14,700 364
- ---------------------------------------------------------------
Repsol S.A., ADR 1,600 43
- ---------------------------------------------------------------
1,206
ENTERTAINMENT AND RESTAURANTS-.7%
- ---------------------------------------------------------------
Genting BHD 2,000 17
- ---------------------------------------------------------------
McDonald's Corporation 11,500 336
- ---------------------------------------------------------------
Polygram N.V. 600 28
- ---------------------------------------------------------------
(a)Promus Companies, Inc. 6,000 186
- ---------------------------------------------------------------
Walt Disney Company 4,700 217
- ---------------------------------------------------------------
784
FINANCIAL SERVICES-2.8%
- ---------------------------------------------------------------
Aalberts Industries, N.V. 500 24
- ---------------------------------------------------------------
Bankers Life Holding Corporation 2,600 49
- ---------------------------------------------------------------
Boatmen's Bancshares 10,000 271
- ---------------------------------------------------------------
</TABLE>
See accompanying Notes to Portfolio of Investments.
4
<PAGE> 6
(Dollars in thousands)
<TABLE>
<CAPTION>
Number of
Shares Value
--------- --------
<S> <C> <C>
- ---------------------------------------------------------------
First Data Corporation 12,000 $ 568
- ---------------------------------------------------------------
First USA Inc. 9,000 296
- ---------------------------------------------------------------
General Reinsurance Corporation 2,500 309
- ---------------------------------------------------------------
Hagemeyer N.V. 300 24
- ---------------------------------------------------------------
Kansas City Southern Industries 4,000 123
- ---------------------------------------------------------------
Keppel Corporation Limited 7,000 60
- ---------------------------------------------------------------
(a)Lloyds Bank PLC 2,200 19
- ---------------------------------------------------------------
MGIC Investment Corporation 1,500 50
- ---------------------------------------------------------------
NationsBank Corporation 5,800 262
- ---------------------------------------------------------------
Providian Corp. 13,000 401
- ---------------------------------------------------------------
Sanyo Shinpan Finance Co. 900 87
- ---------------------------------------------------------------
Siam City Bank 28,500 36
- ---------------------------------------------------------------
SunAmerica Corp. 2,000 73
- ---------------------------------------------------------------
Tokio Marine & Fire Insurance Co.
Ltd. 7,000 86
- ---------------------------------------------------------------
Veba, AG 200 70
- ---------------------------------------------------------------
2,808
MANUFACTURING AND METALS-1.9%
- ---------------------------------------------------------------
(a)Amada Co., Ltd 3,000 38
- ---------------------------------------------------------------
Atlas Copco 6,600 84
- ---------------------------------------------------------------
(a)Automotive Industries Holding,
Inc., "A" 7,000 142
- ---------------------------------------------------------------
Federal Signal Corporation 9,000 183
- ---------------------------------------------------------------
General Electric Company 12,000 612
- ---------------------------------------------------------------
Honda Motor Co. Ltd. 4,000 71
- ---------------------------------------------------------------
Maderas y Sinteticos Sociedad
Anonima MASISA, ADR 1,100 28
- ---------------------------------------------------------------
Newell Company 15,000 315
- ---------------------------------------------------------------
Nucor Corporation 4,000 222
- ---------------------------------------------------------------
Sandvik AB 1,569 25
- ---------------------------------------------------------------
TriMas Corporation 9,000 180
- ---------------------------------------------------------------
1,900
OFFICE EQUIPMENT AND COMPUTERS-3.1%
- ---------------------------------------------------------------
Adobe Systems Incorporated 10,500 312
- ---------------------------------------------------------------
Alco Standard Corporation 6,700 420
- ---------------------------------------------------------------
(a)Cisco Systems, Inc. 4,500 158
- ---------------------------------------------------------------
General Motors Corporation, "E" 10,700 412
- ---------------------------------------------------------------
(a)Microsoft Corporation 9,500 581
- ---------------------------------------------------------------
(a)Novell Inc. 15,000 257
- ---------------------------------------------------------------
(a)Parametic Technology Corporation 7,500 259
- ---------------------------------------------------------------
(a)Silicon Graphics, Inc. 17,000 525
- ---------------------------------------------------------------
(a)Viking Office Products 7,000 214
- ---------------------------------------------------------------
3,138
RETAILING-2.5%
- ---------------------------------------------------------------
Carrefour S.A. 90 37
- ---------------------------------------------------------------
Harcourt General 9,700 342
- ---------------------------------------------------------------
Home Depot, Inc. 17,700 814
- ---------------------------------------------------------------
Keiyo Company Ltd. 4,000 61
- ---------------------------------------------------------------
Tandy Corporation 5,000 251
- ---------------------------------------------------------------
Wal-Mart Stores, Inc. 50,000 1,063
- ---------------------------------------------------------------
2,568
<CAPTION>
Number of
Shares or
Principal
Amount Value
--------- --------
<S> <C> <C>
TELECOMMUNICATIONS-1.8%
---------------------------------------------------------------
(a)ADC Telecommunications, Inc. 5,000 $ 250
- ---------------------------------------------------------------
American Telephone and Telegraph
Company 14,800 744
- ---------------------------------------------------------------
DDI Corporation 10 86
- ---------------------------------------------------------------
(a)DSC Communications Corporation 8,000 287
- ---------------------------------------------------------------
Southwestern Bell Corp. 10,000 404
- ---------------------------------------------------------------
Technology Resource, Ltd. 8,900 28
- ---------------------------------------------------------------
(a)Telewest Communications 2,000 5
- ---------------------------------------------------------------
Vodafone Group PLC 23,700 79
- ---------------------------------------------------------------
1,883
TRANSPORTATION-.6%
- ---------------------------------------------------------------
Conrail Inc. 7,800 394
- ---------------------------------------------------------------
(a)TNT Ltd. Holdings 14,500 25
- ---------------------------------------------------------------
Van Ommeren 1,800 47
- ---------------------------------------------------------------
(a)Wisconsin Central Transportation
Corporation 4,000 165
- ---------------------------------------------------------------
631
UTILITIES-.1%
- ---------------------------------------------------------------
Manweb PLC 1,500 20
- ---------------------------------------------------------------
TOTAL COMMON STOCKS-31.9%
(Cost: $31,918) 32,307
- ---------------------------------------------------------------
CONVERTIBLE CORPORATE OBLIGATIONS
- ---------------------------------------------------------------
Argosy Inc., 12.00%, 2001 $ 367 345
- ---------------------------------------------------------------
Thermo Electron, 5.00%, 2001 300 322
- ---------------------------------------------------------------
TOTAL CONVERTIBLE CORPORATE
OBLIGATIONS-.7%
(Cost: $669) 667
- ---------------------------------------------------------------
MONEY MARKET INSTRUMENTS
Yield-6.02% to 6.15%
Due-January 1995
- ---------------------------------------------------------------
B.A.T. Capital Corporation 3,500 3,497
- ---------------------------------------------------------------
ESC Securitization, Inc. 3,000 2,998
- ---------------------------------------------------------------
Greyhound Financial Corporation 2,000 1,997
- ---------------------------------------------------------------
NNW Utility Funding I, Inc. 3,000 2,998
- ---------------------------------------------------------------
A. H. Robbins 2,000 1,998
- ---------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS-13.3%
(Cost: $13,488) 13,488
- ---------------------------------------------------------------
TOTAL INVESTMENTS-99.7%
(Cost: $104,172) 100,949
- ---------------------------------------------------------------
CASH AND OTHER ASSETS,
LESS LIABILITIES-.3% 256
- ---------------------------------------------------------------
NET ASSETS-100% $101,205
- ---------------------------------------------------------------
</TABLE>
See accompanying Notes to Portfolio of Investments.
5
<PAGE> 7
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
Based on the cost of investments of $104,172,000 for federal income tax purposes
at December 31, 1994 the aggregate gross unrealized appreciation was $1,985,000,
the aggregate gross unrealized depreciation was $5,208,000 and the net
unrealized depreciation of investments was $3,223,000.
See accompanying Notes to Financial Statements.
6
<PAGE> 8
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
(in thousands)
<TABLE>
<S> <C>
ASSETS
- -------------------------------------------------------
Investments, at value
(Cost: $104,172) $100,949
- -------------------------------------------------------
Cash 241
- -------------------------------------------------------
Receivable for:
Fund shares sold 678
- -------------------------------------------------------
Investments sold 227
- -------------------------------------------------------
Dividends and interest 61
- -------------------------------------------------------
Total assets 102,156
- -------------------------------------------------------
LIABILITIES AND NET ASSETS
- -------------------------------------------------------
Payable for:
Fund shares redeemed 13
- -------------------------------------------------------
Investments purchased 826
- -------------------------------------------------------
Management fee 41
- -------------------------------------------------------
Administrative services fee 19
- -------------------------------------------------------
Custodian and transfer agent fees and
related expenses 48
- -------------------------------------------------------
Other 4
- -------------------------------------------------------
Total liabilities 951
- -------------------------------------------------------
Net assets applicable to 12,496 shares
outstanding, no par value, equivalent to
$8.10 per share $101,205
=======================================================
ANALYSIS OF NET ASSETS
- -------------------------------------------------------
Excess of amounts received from issuance
of shares over amounts paid on
redemptions of shares on account of
capital $107,030
- -------------------------------------------------------
Accumulated net realized loss on sales
of investments (2,602)
- -------------------------------------------------------
Unrealized depreciation of investments (3,223)
- -------------------------------------------------------
Net assets applicable to shares
outstanding $101,205
=======================================================
THE PRICING OF SHARES
- -------------------------------------------------------
Net asset value and redemption price per
share
($101,205 / 12,496 shares outstanding) $ 8.10
=======================================================
Maximum offering price per share (net
asset value, plus 5.26% of net asset
value or 5.00% of offering price) $ 8.53
=======================================================
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS
Six months ended December 31, 1994
(in thousands)
<TABLE>
<CAPTION>
INVESTMENT INCOME
- -------------------------------------------------------
<S> <C>
Interest $ 2,002
- -------------------------------------------------------
Dividends 206
- -------------------------------------------------------
Total investment income 2,208
- -------------------------------------------------------
EXPENSES
- -------------------------------------------------------
Management fee 213
- -------------------------------------------------------
Administrative services fee 95
- -------------------------------------------------------
Custodian and transfer agent fees and related
expenses 135
- -------------------------------------------------------
Professional fees 12
- -------------------------------------------------------
Reports to shareholders 15
- -------------------------------------------------------
Trustees' fees and other 8
- -------------------------------------------------------
Total expenses 478
- -------------------------------------------------------
Net investment income 1,730
=======================================================
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
- -------------------------------------------------------
Net realized loss on sales of investments (1,956)
- -------------------------------------------------------
Net change in unrealized depreciation of
investments 1,584
- -------------------------------------------------------
Net increase in net assets resulting from
operations $ 1,358
=======================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
<TABLE>
<CAPTION>
Six Months November 15,
ended 1993 to
December 31, June 30,
OPERATIONS 1994 1994
------------ -------------
<S> <C> <C>
- ----------------------------------------------------------
Net investment income $ 1,730 $ 727
- ----------------------------------------------------------
Net realized loss on
investments (1,956) (646)
- ----------------------------------------------------------
Net change in unrealized
depreciation 1,584 (4,807)
- ----------------------------------------------------------
Net increase (decrease) in
net assets resulting from
operations 1,358 (4,726)
- ----------------------------------------------------------
Distribution from net
investment income (2,532) --
- ----------------------------------------------------------
Net increase from capital
share transactions 38,104 68,901
- ----------------------------------------------------------
Total increase in net assets 36,930 64,175
- ----------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------
Beginning of period 64,275 100
- ----------------------------------------------------------
End of period (including
undistributed net investment
income of $727 at
June 30, 1994) $101,205 64,275
==========================================================
</TABLE>
7
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF THE FUND
Kemper Target Equity Fund (the Trust) is an open-end, management investment
company that may issue shares in one or more series. The Trust was organized as
a business trust under the laws of Massachusetts. Currently, the Trust includes
six series. The objectives of Kemper Retirement Fund Series V (the Fund), the
fifth series, are to provide a guaranteed return of investment on the Maturity
Date (November 15, 2004) to investors who reinvest all dividends and hold their
shares to the Maturity Date, and to provide long-term growth of capital. The
assurance that investors who reinvest all dividends and hold their shares until
the Maturity Date will receive at least their original investment on the
Maturity Date is provided by the principal amount of the zero coupon U.S.
Treasury Bonds in the Fund's portfolio, as well as by a guarantee from Kemper
Financial Services, Inc. (KFS), the Fund's investment manager.
INVESTMENT VALUATION
Investments are stated at value. Portfolio securities that are traded on a
domestic securities exchange or securities listed on the NASDAQ National Market
are valued at the last sale price on the exchange or market where primarily
traded or listed or, if there is no recent sale, at the last current bid
quotation. Portfolio securities that are primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on their respective exchanges where primarily traded. Securities not
so traded or listed are valued at the last current bid quotation if market
quotations are available. Fixed income securities are valued by using market
quotations, or independent pricing services that use prices provided by market
makers or estimates of market values obtained from yield data relating to
instruments or securities with similar characteristics. Options are valued at
the last sale price unless the bid price is higher or the asked price is lower,
in which event such bid or asked price is used. Financial futures and options
thereon are valued at the settlement price established each day by the board of
trade or exchange on which they are traded. Forward foreign currency contracts
are valued at the forward rates prevailing on the day of valuation. Other
securities and assets are valued at fair value as determined in good faith by
the Board of Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date (date the order to
buy or sell is executed). Dividend income is recorded on the ex-dividend date,
and interest income is recorded on the accrual basis. Interest income includes
premium and discount amortization on money market instruments; it also includes
original issue and market discount amortization on long-term fixed income
securities. Realized gains and losses from investment transactions are reported
on an identified cost basis. Gains and losses on premiums from expired options
are recognized on date of expiration.
EXPENSES
Expenses arising in connection with a series of the Trust are allocated to that
series. Other Trust expenses are allocated among the series in proportion to
their relative net assets.
FUND SHARE VALUATION
Fund shares are sold to the public during a limited offering period, which
currently is expected to last until May, 1995 (Offering Period). The Offering
Period may be extended or shortened at the option of the Fund. Fund shares are
redeemed on a continuous basis. Fund shares are sold and redeemed at net asset
value (plus a commission on most sales). On each day the New York Stock Exchange
is open for trading, the net asset value per share is determined as of the
earlier of 3:00 p.m. Chicago time or the close of the Exchange by dividing the
total value of the Fund's investments and other assets, less liabilities, by the
respective number of shares outstanding.
FEDERAL INCOME TAXES AND DIVIDENDS TO SHAREHOLDERS
The Fund has complied with the special provisions of the Internal Revenue Code
available to investment companies, during the six months ended December 31,
1994. The accumulated net realized loss on sales of investments for federal
income tax purposes at December 31, 1994, amounting to approximately $2,602,000,
is available to offset future taxable gains. If not applied, the loss carryover
expires during the period 2001 through 2003.
Dividends payable to its shareholders are reported by the Fund on the
ex-dividend date.
2. TRANSACTIONS WITH AFFILIATES
The Trust has a management agreement and an underwriting agreement with KFS. For
management services and facilities furnished to the Fund, the Trust pays a fee
at an annual rate of .50% of average daily net assets. The Fund incurred a
management fee of $213,000 for the six months ended December 31, 1994. As
principal underwriter for the Fund, KFS retained commissions of $193,000 for the
six months ended December 31, 1994, after allowing $1,875,000 as commissions to
retail firms of which $286,000 was paid to firms affiliated with KFS.
The Trust has an administrative services agreement with KFS. For providing
information and administrative services to shareholders, the Fund pays KFS a fee
at an annual rate of up to .25% of average daily net assets.
KFS in turn pays financial services firms that provide these services a fee of
up to .25% of assets of Fund accounts the firms service. The administrative
services fee payable by the Fund to KFS equals the service fees paid by KFS to
such firms. For the six months ended
8
<PAGE> 10
December 31, 1994, the Fund incurred an administrative services fee of $95,000,
all of which KFS paid to firms, including $13,000 that was paid to firms
affiliated with KFS.
Effective February 1, 1995, KFS transferred all of its duties and
responsibilities as principal underwriter and administrator to Kemper
Distributors, Inc., a wholly-owned subsidiary of KFS.
The Trust has a custodian agreement and a transfer agent agreement with
Investors Fiduciary Trust Company (IFTC), which was 50% owned by KFS until
January 31, 1995, when KFS completed the sale of IFTC to a third party. For the
six months ended December 31, 1994, the Fund incurred custodian and transfer
agent fees of $85,000 (excluding related expenses). Pursuant to a services
agreement with IFTC, Kemper Service Company (KSvC), an affiliate of KFS, is
the shareholder service agent of the Trust. For the six months ended December
31, 1994, IFTC remitted shareholder service fees of $71,000 to KSvC with respect
to the Fund.
Certain officers or trustees of the Trust are also officers or directors of KFS.
During the six months ended December 31, 1994, the Trust made no direct payments
to its officers and the Fund incurred trustees' fees of $7,000 to independent
trustees.
3. INVESTMENT TRANSACTIONS
For the six months ended December 31, 1994, investment transactions (excluding
money market instruments) are as follows (in thousands):
<TABLE>
<S> <C>
Purchases $ 65,125
- -------------------------------------------------------------
Sales 31,449
- -------------------------------------------------------------
</TABLE>
4. CAPITAL SHARE TRANSACTIONS
The following table summarizes the activity in capital shares of the Fund (in
thousands):
<TABLE>
<CAPTION>
Six Months November 15,
ended 1993 to
December 31, June 30,
1994 1994
------------------ ------------------
Shares Amount Shares Amount
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares sold 4,659 $38,588 8,027 $70,165
- ---------------------------------------------------------------------------------------------------------------------------------
Shares issued in reinvestments of dividends 299 2,420 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
4,958 41,008 8,027 70,165
- ---------------------------------------------------------------------------------------------------------------------------------
Less shares redeemed 351 2,904 149 1,264
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase from capital share transactions 4,607 $38,104 7,878 $68,901
- ---------------------------------------------------------------------------------------------------------------------------------
=================================================================================================================================
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months
ended November 15,
December 31, 1993 to June
1994 30, 1994
------------- ------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 8.15 9.00
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .17 .15
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments (.01) (1.00)
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .16 (.85)
- --------------------------------------------------------------------------------------------------------------------------------
Less dividends from net investment income .21 --
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.10 8.15
================================================================================================================================
TOTAL RETURN (%): 1.97 (9.44)
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 1.12 1.29
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income 4.06 3.13
- --------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $ 101,205 64,275
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 85 35
================================================================================================================================
</TABLE>
NOTE: Ratios have been determined on an annualized basis. Total return is not
annualized and does not reflect the effect of sales charges. Per share data was
determined based on average shares outstanding.
9
<PAGE> 11
[KEMPER MUTUAL FUNDS LOGO]
KEMPER FINANCIAL SERVICES, INC.
120 South LaSalle Street
Chicago, IL 60603
KEMPER TARGET EQUITY FUND--
KEMPER RETIREMENT FUND SERIES V
<TABLE>
<S> <C>
Trustees Officers
CHARLES M. KIERSCHT SANDY A. LINCOLN
President and Trustee Vice President
ARTHUR R. GOTTSCHALK JOHN E. PETERS
Trustee Vice President
FREDERICK T. KELSEY TRACY MCCORMICK CHESTER
Trustee Vice President
STEPHEN B. TIMBERS JAMES H. COXON
Vice President Vice President
and Trustee
DENNIS H. FERRO
JOHN B. TINGLEFF Vice President
Trustee
FRANK D. KORTH
JOHN G. WEITHERS Vice President
Trustee
PHILIP J. COLLORA
Vice President and
Assistant Secretary
CHARLES F. CUSTER
Vice President and
Assistant Secretary
JEROME L. DUFFY
Treasurer
ELIZABETH C. WERTH
Assistant Secretary
</TABLE>
- -----------------------------------------------------------
<TABLE>
<S> <C>
Legal Counsel Custodian and Transfer Agent
VEDDER, PRICE, KAUFMAN INVESTORS FIDUCIARY
& KAMMHOLZ TRUST COMPANY
222 North LaSalle Street 127 West 10th Street
Chicago, IL 60601 Kansas City, MO 64105
Shareholder Service Agent
KEMPER SERVICE COMPANY
P.O. Box 419557
Kansas City, MO 64141
800-621-1048
</TABLE>
Investment Manager
KEMPER FINANCIAL SERVICES, INC.
Principal Underwriter
KEMPER DISTRIBUTORS, INC.
120 South LaSalle Street
Chicago, IL 60603
[LOGO]
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