<PAGE> 1
Kemper Target Equity Fund
Kemper Retirement Fund Series I, II, III and IV
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 I 2.18% -6.26%
Series II 1.39% -6.79%
Series III 1.85% -7.26%
Series IV 1.70% -8.18%
</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 I -10.93% 10.46% (since 2/5/90)
Series II -11.43% 10.82% (since 9/10/90)
Series III -11.90% 4.06% (since 3/10/90)
Series IV -12.73% -1.91% (since 1/15/93)
</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 I paid $.41 per share
in income dividends and $.72 per share in long-term capital gain dividends;
Series II paid $.57 per share in income dividends and $.64 per share in
long-term capital gain dividends; Series III paid $.43 per share in income
dividends and $.37 per share in long-term capital gains; and Series IV paid $.37
per share in income dividends.
* Total return and average annual total return measures 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, Inc.
[PHOTO] (KFS) in 1994 and is Portfolio Manager of Kemper Retirement Fund
Series I-IV. 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 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 Retirement Fund Series last shareholder report, although
there may be periods of volatility the value of these bonds will gradually rise
over time until they reach face 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 Series 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 funds.
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 funds 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 are
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
Series will remain somewhat defensive for the short-term, but overall we
anticipate a much more favorable environment for growth stocks which should
benefit each fund.
3
<PAGE> 5
KEMPER RETIREMENT FUND SERIES I
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-50.1%
------------------------------------------------------------
U.S. Treasury Strips
Zero Coupon, 1999
(Cost: $47,479) $ 72,300 $49,758
------------------------------------------------------------
COMMON STOCKS
CHEMICALS-1.3%
------------------------------------------------------------
Air Products & Chemicals 9,000shs. 402
------------------------------------------------------------
PPG Industries Inc. 25,000 928
------------------------------------------------------------
1,330
COMMUNICATIONS AND MEDIA-1.9%
------------------------------------------------------------
Comcast Cellular Corporation 30,000 471
------------------------------------------------------------
Readers Digest Association, Inc. 11,000 540
------------------------------------------------------------
Singapore Press Holdings 2,000 36
------------------------------------------------------------
Tribune Co. 8,000 438
------------------------------------------------------------
(a)Viacom International Inc. "A" 1,200 50
------------------------------------------------------------
(a)Viacom International Inc. VCR 15,000 17
------------------------------------------------------------
(a)Viacom International Inc. "B" 9,092 369
------------------------------------------------------------
1,921
CONSTRUCTION-.1%
------------------------------------------------------------
DBS Land Ltd. 8,000 24
------------------------------------------------------------
Road Builder Holdings 7,000 38
------------------------------------------------------------
Wai Kee Holdings 118,000 27
------------------------------------------------------------
89
CONSUMER PRODUCTS AND SERVICES-8.0%
------------------------------------------------------------
Campbell Soup Company 12,000 530
------------------------------------------------------------
Coca-Cola Enterprises 18,000 927
------------------------------------------------------------
ConAgra Inc. 16,400 513
------------------------------------------------------------
Corning Corporation 22,000 657
------------------------------------------------------------
CPC International Inc. 12,500 666
------------------------------------------------------------
(a)CUC International Inc. 15,000 502
------------------------------------------------------------
Gillette Company 8,000 598
------------------------------------------------------------
PepsiCo Inc. 17,000 616
------------------------------------------------------------
Philip Morris Companies Inc. 12,900 742
------------------------------------------------------------
Procter & Gamble Company 9,200 570
------------------------------------------------------------
Sara Lee Corporation 33,000 833
------------------------------------------------------------
Seagram Company 17,000 501
------------------------------------------------------------
Service Corporation International 10,000 277
------------------------------------------------------------
7,932
DRUGS AND HEALTH CARE-8.8%
------------------------------------------------------------
Abbott Laboratories 32,000 1,044
------------------------------------------------------------
(a)Biogen Corporation 15,300 639
------------------------------------------------------------
Columbia/HCA Healthcare 10,000 365
------------------------------------------------------------
Forest Laboratories, Inc. 12,000 560
------------------------------------------------------------
(a)Foundation Health Corporation 5,500 171
------------------------------------------------------------
(a)Integrated Health Services 9,000 356
------------------------------------------------------------
Johnson & Johnson 11,500 630
------------------------------------------------------------
Eli Lilly & Company 12,700 833
------------------------------------------------------------
Meditrust 13,600 411
------------------------------------------------------------
<CAPTION>
Number of
Shares Value
---------- -------
<S> <C> <C>
------------------------------------------------------------
Merck & Co., Inc. 14,500 $ 553
------------------------------------------------------------
Roche Holdings Genuss Chein 24 116
------------------------------------------------------------
(a)R. P. Scherer Corporation 5,000 227
------------------------------------------------------------
Schering-Plough Corporation 5,000 370
------------------------------------------------------------
Smithkline Beecham PLC 27,000 925
------------------------------------------------------------
United Healthcare Corporation 6,000 271
------------------------------------------------------------
U.S. Healthcare Inc. 5,000 206
------------------------------------------------------------
(a)Ventritex Inc. 15,000 405
------------------------------------------------------------
Warner Lambert Company 8,000 616
------------------------------------------------------------
8,698
ELECTRONICS AND ELECTRICAL
EQUIPMENT-4.9%
------------------------------------------------------------
AMP, Inc 6,500 473
------------------------------------------------------------
Brown Boveri 100 86
------------------------------------------------------------
(a)EMC Corporation 13,000 281
------------------------------------------------------------
Emerson Electric Co. 17,000 1,063
------------------------------------------------------------
Ericsson "B" 2,400 133
------------------------------------------------------------
Hewlett Packard Company 5,800 579
------------------------------------------------------------
Intel Corporation 12,000 767
------------------------------------------------------------
Kyocera Corporation 1,700 126
------------------------------------------------------------
Linear Technology Corporation 8,000 396
------------------------------------------------------------
Matsushita Electric Industrial Co.
Ltd. 5,000 82
------------------------------------------------------------
Motorola Inc. 8,000 463
------------------------------------------------------------
Nokia Telecom 733 108
------------------------------------------------------------
Phillips N.V. 4,200 124
------------------------------------------------------------
Sharp Corporation 5,000 90
------------------------------------------------------------
Toyko Electron 4,000 124
------------------------------------------------------------
4,895
ENERGY AND RELATED SERVICES-1.6%
------------------------------------------------------------
British Petroleum Co., PLC 19,873 132
------------------------------------------------------------
Enron, Corp. 15,800 482
------------------------------------------------------------
Mobil Corporation 6,200 522
------------------------------------------------------------
Noble Affiliates Inc. 18,800 465
------------------------------------------------------------
Repsol S.A., ADR 2,500 68
------------------------------------------------------------
1,669
ENTERTAINMENT AND RESTAURANTS-1.4%
------------------------------------------------------------
Genting BHD 3,000 26
------------------------------------------------------------
McDonald's Corporation 19,000 556
------------------------------------------------------------
Polygram N.V. 900 42
------------------------------------------------------------
(a)Promus Companies, Inc. 8,250 256
------------------------------------------------------------
Walt Disney Company 11,000 507
------------------------------------------------------------
1,387
FINANCIAL SERVICES-4.3%
------------------------------------------------------------
Aalberts Industries, N.V. 800 39
------------------------------------------------------------
Bankers Life Holding Corporation 10,500 199
------------------------------------------------------------
Boatmen's Bancshares 17,000 461
------------------------------------------------------------
First Data Corporation 12,000 569
------------------------------------------------------------
First USA Inc. 9,000 296
------------------------------------------------------------
</TABLE>
4
<PAGE> 6
(Dollars in thousands)
<TABLE>
<CAPTION>
Number of
Shares Value
---------- -------
<S> <C> <C>
------------------------------------------------------------
General Reinsurance Corporation 2,400 $ 297
------------------------------------------------------------
Hagemeyer N.V. 500 41
------------------------------------------------------------
Kansas City Southern Industries 6,100 188
------------------------------------------------------------
Keppel Corporation 11,000 93
------------------------------------------------------------
(a)Lloyds Bank PLC 4,400 38
------------------------------------------------------------
MGIC Investment Corporation 15,000 497
------------------------------------------------------------
NationsBank Corporation 10,000 451
------------------------------------------------------------
Providian Corp. 15,000 463
------------------------------------------------------------
Sanyo Shinpan Finance Co. 1,300 125
------------------------------------------------------------
Siam City Bank 43,800 56
------------------------------------------------------------
SunAmerica Corp. 5,000 181
------------------------------------------------------------
Tokio Marine & Fire Insurance Co.
Ltd. 11,000 134
------------------------------------------------------------
Veba, AG 350 122
------------------------------------------------------------
4,250
MANUFACTURING AND METALS-3.3%
------------------------------------------------------------
(a)Amada Co., Ltd 9,000 113
------------------------------------------------------------
Atlas Copco 10,100 129
------------------------------------------------------------
(a)Automotive Industries Holding,
Inc., "A" 11,600 235
------------------------------------------------------------
Federal Signal Corporation 16,000 326
------------------------------------------------------------
General Electric Company 24,000 1,224
------------------------------------------------------------
Honda Motor Co. Ltd. 6,000 106
------------------------------------------------------------
Maderas y Sinteticos Sociedad
Anonima MASISA, ADR 1,700 43
------------------------------------------------------------
Newell Company 23,000 483
------------------------------------------------------------
Nucor Corporation 4,700 261
------------------------------------------------------------
Sandvik AB 2,615 42
------------------------------------------------------------
TriMas Corporation 15,000 300
------------------------------------------------------------
3,262
OFFICE EQUIPMENT AND COMPUTERS-3.9%
------------------------------------------------------------
Adobe Systems Incorporated 13,000 387
------------------------------------------------------------
Alco Standard Corporation 9,000 565
------------------------------------------------------------
(a)Cisco Systems, Inc. 8,000 281
------------------------------------------------------------
General Motors Corporation, "E" 16,300 628
------------------------------------------------------------
(a)Microsoft Corporation 8,000 489
------------------------------------------------------------
(a)Novell Inc. 16,000 274
------------------------------------------------------------
(a)Parametic Technology Corporation 7,300 252
------------------------------------------------------------
(a)Silicon Graphics, Inc. 18,000 556
------------------------------------------------------------
(a)Viking Office Products 16,000 490
------------------------------------------------------------
3,922
RETAILING-3.5%
------------------------------------------------------------
Carrefour S.A. 185 77
------------------------------------------------------------
Harcourt General 11,900 419
------------------------------------------------------------
<CAPTION>
Number of
Shares or
Principal
Amount Value
---------- -------
<S> <C> <C>
------------------------------------------------------------
Home Depot, Inc. 28,000 $ 1,288
------------------------------------------------------------
Keiyo Company Ltd. 7,000 107
------------------------------------------------------------
Tandy Corporation 5,000 251
------------------------------------------------------------
Wal-Mart Stores, Inc. 61,000 1,296
------------------------------------------------------------
3,438
TELECOMMUNICATIONS-2.7%
------------------------------------------------------------
(a)ADC Telecommunications, Inc. 9,000 450
------------------------------------------------------------
American Telephone and Telegraph
Company 18,800 945
------------------------------------------------------------
DDI Corporation 10 86
------------------------------------------------------------
(a)DSC Communications Corporation 15,400 552
------------------------------------------------------------
Southwestern Bell Corp. 12,800 517
------------------------------------------------------------
Technology Resource, Ltd. 13,900 44
------------------------------------------------------------
(a)Telewest Communications 3,000 8
------------------------------------------------------------
Vodafone Group PLC 36,300 120
------------------------------------------------------------
2,722
TRANSPORTATION-1.0%
------------------------------------------------------------
Conrail Inc. 9,800 495
------------------------------------------------------------
(a)TNT Ltd. Holdings 22,300 38
------------------------------------------------------------
Van Ommeren 2,800 74
------------------------------------------------------------
(a)Wisconsin Central Transportation
Corporation 8,600 355
------------------------------------------------------------
962
UTILITIES-.1%
------------------------------------------------------------
Manweb PLC 3,000 41
------------------------------------------------------------
TOTAL COMMON STOCKS-46.8%
(Cost: $43,856) 46,518
------------------------------------------------------------
CONVERTIBLE CORPORATE OBLIGATIONS
------------------------------------------------------------
Argosy Inc., 12.00%, 2001 $ 586 551
------------------------------------------------------------
Comcast Corporation, 1.125%, 2007 1,352 531
------------------------------------------------------------
Thermo Electron, 5.00%, 2001 500 536
------------------------------------------------------------
TOTAL CONVERTIBLE CORPORATE
OBLIGATIONS-1.6%
(Cost: $1,875) 1,618
------------------------------------------------------------
TOTAL INVESTMENTS-98.5%
(Cost: $93,210) 97,894
------------------------------------------------------------
CASH AND OTHER ASSETS, LESS
LIABILITIES-1.5% 1,502
------------------------------------------------------------
NET ASSETS-100% $99,396
------------------------------------------------------------
</TABLE>
See accompanying Notes to Portfolio of Investments.
5
<PAGE> 7
KEMPER RETIREMENT FUND SERIES II
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-64.0%
------------------------------------------------------------
U.S. Treasury Strips
Zero Coupon, 2000
(Cost: $103,930) $161,700 $104,869
------------------------------------------------------------
COMMON STOCKS
CHEMICALS-1.0%
------------------------------------------------------------
Air Products & Chemicals 10,800 shs. 482
------------------------------------------------------------
PPG Industries Inc. 30,000 1,114
------------------------------------------------------------
1,596
COMMUNICATIONS AND MEDIA-1.4%
------------------------------------------------------------
Comcast Cellular Corporation 35,000 549
------------------------------------------------------------
Readers Digest Association, Inc. 13,000 639
------------------------------------------------------------
Singapore Press Holdings 2,000 36
------------------------------------------------------------
Tribune Co. 10,000 548
------------------------------------------------------------
(a)Viacom International Inc. "A" 1,440 60
------------------------------------------------------------
(a)Viacom International Inc. VCR 18,000 20
------------------------------------------------------------
(a)Viacom International Inc. "B" 10,910 443
------------------------------------------------------------
2,295
CONSTRUCTION-.1%
------------------------------------------------------------
DBS Land Ltd. 10,000 30
------------------------------------------------------------
Road Builder Holdings 8,000 44
------------------------------------------------------------
Wai Kee Holdings 144,000 34
------------------------------------------------------------
108
CONSUMER PRODUCTS AND SERVICES-5.7%
------------------------------------------------------------
Campbell Soup Company 14,000 618
------------------------------------------------------------
Coca-Cola Enterprises 21,000 1,081
------------------------------------------------------------
ConAgra Inc. 19,700 616
------------------------------------------------------------
Corning Corporation 26,000 777
------------------------------------------------------------
CPC International Inc. 14,700 783
------------------------------------------------------------
(a)CUC International Inc. 17,500 586
------------------------------------------------------------
Gillette Company 9,000 673
------------------------------------------------------------
PepsiCo Inc. 21,000 761
------------------------------------------------------------
Philip Morris Companies Inc. 15,600 897
------------------------------------------------------------
Procter & Gamble Company 10,900 676
------------------------------------------------------------
Sara Lee Corporation 39,000 985
------------------------------------------------------------
Seagram Company 21,000 620
------------------------------------------------------------
Service Corporation International 12,000 333
------------------------------------------------------------
9,406
DRUGS AND HEALTH CARE-6.3%
------------------------------------------------------------
Abbott Laboratories 38,200 1,246
------------------------------------------------------------
(a)Biogen Corporation 18,300 764
------------------------------------------------------------
Columbia/HCA Healthcare 11,700 427
------------------------------------------------------------
Forest Laboratories, Inc. 14,000 653
------------------------------------------------------------
(a)Foundation Health Corporation 6,000 186
------------------------------------------------------------
(a)Integrated Health Services 11,200 443
------------------------------------------------------------
Johnson & Johnson 13,500 739
------------------------------------------------------------
Eli Lilly & Company 15,000 984
------------------------------------------------------------
<CAPTION>
Number of
Shares Value
--------- --------
<S> <C> <C>
------------------------------------------------------------
Meditrust 16,000 $ 484
------------------------------------------------------------
Merck & Co., Inc. 17,300 659
------------------------------------------------------------
Roche Holdings Genuss Chein 24 116
------------------------------------------------------------
(a)R. P. Scherer Corporation 6,000 272
------------------------------------------------------------
Schering-Plough Corporation 6,000 444
------------------------------------------------------------
Smithkline Beecham PLC 32,000 1,096
------------------------------------------------------------
United Healthcare Corporation 7,600 343
------------------------------------------------------------
U.S. Healthcare Inc. 5,550 229
------------------------------------------------------------
(a)Ventritex Inc. 19,500 527
------------------------------------------------------------
Warner Lambert Company 9,500 732
------------------------------------------------------------
10,344
ELECTRONICS AND ELECTRICAL
EQUIPMENT-3.7%
------------------------------------------------------------
AMP, Inc 7,500 546
------------------------------------------------------------
Brown Boveri 100 86
------------------------------------------------------------
(a)EMC Corporation 18,000 389
------------------------------------------------------------
Emerson Electric Co. 21,000 1,312
------------------------------------------------------------
Ericsson "B" 2,900 160
------------------------------------------------------------
Hewlett Packard Company 7,000 699
------------------------------------------------------------
Intel Corporation 14,500 926
------------------------------------------------------------
Kyocera Corporation 1,800 133
------------------------------------------------------------
Linear Technology Corporation 10,000 495
------------------------------------------------------------
Matsushita Electric Industrial Co.
Ltd. 7,000 115
------------------------------------------------------------
Motorola Inc. 10,500 608
------------------------------------------------------------
Nokia Telecom 867 128
------------------------------------------------------------
Phillips N.V. 5,100 151
------------------------------------------------------------
Sharp Corporation 6,000 108
------------------------------------------------------------
Toyko Electron 5,000 155
------------------------------------------------------------
6,011
ENERGY AND RELATED SERVICES-1.2%
------------------------------------------------------------
British Petroleum Co., PLC 24,289 162
------------------------------------------------------------
Enron, Corp. 19,700 601
------------------------------------------------------------
Mobil Corporation 7,300 615
------------------------------------------------------------
Noble Affiliates Inc. 22,500 557
------------------------------------------------------------
Repsol S.A., ADR 3,100 84
------------------------------------------------------------
2,019
ENTERTAINMENT AND RESTAURANTS-1.0%
------------------------------------------------------------
Genting BHD 3,000 26
------------------------------------------------------------
McDonald's Corporation 22,000 643
------------------------------------------------------------
Polygram N.V. 1,100 51
------------------------------------------------------------
(a)Promus Companies, Inc. 11,050 343
------------------------------------------------------------
Walt Disney Company 13,000 600
------------------------------------------------------------
1,663
FINANCIAL SERVICES-3.0%
------------------------------------------------------------
Aalberts Industries, N.V. 1,000 48
------------------------------------------------------------
Bankers Life Holding Corporation 12,900 245
------------------------------------------------------------
Boatmen's Bancshares 20,500 556
------------------------------------------------------------
</TABLE>
6
<PAGE> 8
(Dollars in thousands)
<TABLE>
<CAPTION>
Number of
Shares Value
--------- --------
<S> <C> <C>
------------------------------------------------------------
First Data Corporation 15,000 $ 711
------------------------------------------------------------
First USA Inc. 8,000 263
------------------------------------------------------------
General Reinsurance Corporation 2,800 345
------------------------------------------------------------
Hagemeyer N.V. 600 49
------------------------------------------------------------
Kansas City Southern Industries 8,900 275
------------------------------------------------------------
Keppel Corporation Limited 14,000 119
------------------------------------------------------------
(a)Lloyds Bank PLC 4,400 38
------------------------------------------------------------
MGIC Investment Corporation 17,000 563
------------------------------------------------------------
NationsBank Corporation 11,200 505
------------------------------------------------------------
Providian Corp. 16,000 494
------------------------------------------------------------
Sanyo Shinpan Finance Co. 1,600 154
------------------------------------------------------------
Siam City Bank 53,700 68
------------------------------------------------------------
SunAmerica Corp. 6,500 236
------------------------------------------------------------
Tokio Marine & Fire Insurance Co.
Ltd. 14,000 171
------------------------------------------------------------
Veba, AG 400 139
------------------------------------------------------------
4,979
MANUFACTURING AND METALS-2.2%
------------------------------------------------------------
(a)Amada Co., Ltd 11,000 138
------------------------------------------------------------
Atlas Copco 12,400 158
------------------------------------------------------------
(a)Automotive Industries Holding,
Inc., "A" 13,500 273
------------------------------------------------------------
Federal Signal Corporation 19,000 387
------------------------------------------------------------
General Electric Company 24,000 1,224
------------------------------------------------------------
Honda Motor Co. Ltd. 8,000 142
------------------------------------------------------------
Maderas y Sinteticos Sociedad
Anonima MASISA, ADR 2,100 54
------------------------------------------------------------
Newell Company 27,400 576
------------------------------------------------------------
Nucor Corporation 4,800 266
------------------------------------------------------------
Sandvik AB 3,128 50
------------------------------------------------------------
TriMas Corporation 18,000 360
------------------------------------------------------------
3,628
OFFICE EQUIPMENT AND COMPUTERS-2.9%
------------------------------------------------------------
Adobe Systems Incorporated 16,000 476
------------------------------------------------------------
Alco Standard Corporation 10,000 627
------------------------------------------------------------
(a)Cisco Systems, Inc. 9,500 334
------------------------------------------------------------
General Motors Corporation, "E" 19,400 747
------------------------------------------------------------
(a)Microsoft Corporation 9,500 581
------------------------------------------------------------
(a)Novell Inc. 19,000 325
------------------------------------------------------------
(a)Parametic Technology Corporation 8,500 293
------------------------------------------------------------
(a)Silicon Graphics, Inc. 22,400 692
------------------------------------------------------------
(a)Viking Office Products 20,400 625
------------------------------------------------------------
4,700
RETAILING-2.4%
------------------------------------------------------------
Carrefour S.A. 185 77
------------------------------------------------------------
Gap Inc. 400 12
------------------------------------------------------------
Harcourt General 14,500 511
------------------------------------------------------------
<CAPTION>
Number of
Shares or
Principal
Amount Value
--------- --------
<S> <C> <C>
------------------------------------------------------------
Home Depot, Inc. 32,900 $ 1,513
------------------------------------------------------------
Keiyo Company Ltd. 8,000 122
------------------------------------------------------------
Tandy Corporation 4,000 201
------------------------------------------------------------
Wal-Mart Stores, Inc. 68,000 1,445
------------------------------------------------------------
3,881
TELECOMMUNICATIONS-2.0%
------------------------------------------------------------
(a)ADC Telecommunications, Inc. 11,000 550
------------------------------------------------------------
American Telephone and Telegraph
Company 22,300 1,120
------------------------------------------------------------
DDI Corporation 10 86
------------------------------------------------------------
(a)DSC Communications Corporation 19,600 703
------------------------------------------------------------
Southwestern Bell Corp. 15,000 606
------------------------------------------------------------
Technology Resource, Ltd. 22,900 73
------------------------------------------------------------
(a)Telewest Communications 4,000 11
------------------------------------------------------------
Vodafone Group PLC 44,400 147
------------------------------------------------------------
3,296
TRANSPORTATION-.7%
------------------------------------------------------------
Conrail Inc. 12,000 606
------------------------------------------------------------
(a)TNT Ltd. Holdings 27,300 47
------------------------------------------------------------
Van Ommeren 3,400 89
------------------------------------------------------------
(a)Wisconsin Central Transportation
Corporation 10,000 413
------------------------------------------------------------
1,155
UTILITIES-.1%
------------------------------------------------------------
Manweb PLC 3,000 41
------------------------------------------------------------
TOTAL COMMON STOCKS-33.7%
(Cost: $52,011) 55,122
------------------------------------------------------------
CONVERTIBLE CORPORATE OBLIGATIONS
------------------------------------------------------------
Argosy Inc., 12.00%, 2001 $ 879 826
------------------------------------------------------------
Comcast Corporation, 1.125%, 2007 2,254 885
------------------------------------------------------------
Thermo Electron, 5.00%, 2001 600 643
------------------------------------------------------------
TOTAL CONVERTIBLE CORPORATE
OBLIGATIONS-1.4%
(Cost: $2,793) 2,354
------------------------------------------------------------
TOTAL INVESTMENTS-99.1%
(Cost: $158,734) 162,345
------------------------------------------------------------
CASH AND OTHER ASSETS, LESS
LIABILITIES-.9% 1,469
------------------------------------------------------------
NET ASSETS-100% $163,814
------------------------------------------------------------
</TABLE>
See accompanying Notes to Portfolios of Investments.
7
<PAGE> 9
KEMPER RETIREMENT FUND SERIES III
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-59.7%
-------------------------------------------------------------
U.S. Treasury Strips
Zero Coupon, 2002
(Cost: $71,328) $ 120,600 $ 69,745
-------------------------------------------------------------
COMMON STOCKS
CHEMICALS-1.0%
-------------------------------------------------------------
Air Products & Chemicals 8,700shs. 388
-------------------------------------------------------------
PPG Industries Inc. 20,000 742
-------------------------------------------------------------
1,130
COMMUNICATIONS AND MEDIA-1.5%
-------------------------------------------------------------
Comcast Cellular Corporation 28,000 439
-------------------------------------------------------------
Readers Digest Association, Inc. 11,000 540
-------------------------------------------------------------
Singapore Press Holdings 2,000 36
-------------------------------------------------------------
Tribune Co. 7,200 394
-------------------------------------------------------------
(a)Viacom International Inc. "A" 960 40
-------------------------------------------------------------
(a)Viacom International Inc. VCR 12,000 14
-------------------------------------------------------------
(a)Viacom International Inc. "B" 7,273 295
-------------------------------------------------------------
1,758
CONSTRUCTION-.1%
-------------------------------------------------------------
DBS Land Ltd. 8,000 24
-------------------------------------------------------------
Road Builder Holdings 6,000 33
-------------------------------------------------------------
Wai Kee Holdings 112,000 26
-------------------------------------------------------------
83
CONSUMER PRODUCTS AND SERVICES-6.4%
-------------------------------------------------------------
Campbell Soup Company 11,000 485
-------------------------------------------------------------
Coca-Cola Enterprises 16,500 850
-------------------------------------------------------------
ConAgra Inc. 15,700 491
-------------------------------------------------------------
Corning Corporation 22,000 657
-------------------------------------------------------------
CPC International Inc. 12,000 639
-------------------------------------------------------------
(a)CUC International Inc. 14,000 469
-------------------------------------------------------------
Gillette Company 7,600 568
-------------------------------------------------------------
PepsiCo Inc. 16,000 580
-------------------------------------------------------------
Philip Morris Companies Inc. 12,400 713
-------------------------------------------------------------
Procter & Gamble Company 8,700 539
-------------------------------------------------------------
Sara Lee Corporation 31,000 783
-------------------------------------------------------------
Seagram Company 16,000 472
-------------------------------------------------------------
Service Corporation International 10,000 278
-------------------------------------------------------------
7,524
DRUGS AND HEALTH CARE-7.1%
-------------------------------------------------------------
Abbott Laboratories 30,300 989
-------------------------------------------------------------
(a)Biogen Corporation 14,600 610
-------------------------------------------------------------
Columbia/HCA Healthcare 9,500 347
-------------------------------------------------------------
Forest Laboratories, Inc. 11,000 513
-------------------------------------------------------------
(a)Foundation Health Corporation 5,000 155
-------------------------------------------------------------
(a)Integrated Health Services 8,800 348
-------------------------------------------------------------
Johnson & Johnson 11,000 602
-------------------------------------------------------------
Eli Lilly & Company 12,400 814
-------------------------------------------------------------
Meditrust 12,600 381
-------------------------------------------------------------
<CAPTION>
Number of
Shares Value
--------- ---------
<S> <C> <C>
------------------------------------------------------------
Merck & Co., Inc. 13,800 $ 526
-------------------------------------------------------------
Roche Holdings Genuss Chein 24 116
-------------------------------------------------------------
(a)R. P. Scherer Corporation 5,000 227
-------------------------------------------------------------
Schering-Plough Corporation 5,200 385
-------------------------------------------------------------
Smithkline Beecham PLC 27,000 925
-------------------------------------------------------------
United Healthcare Corporation 5,100 230
-------------------------------------------------------------
U.S. Healthcare Inc. 4,200 173
-------------------------------------------------------------
(a)Ventritex Inc. 15,000 405
-------------------------------------------------------------
Warner Lambert Company 7,500 577
-------------------------------------------------------------
8,323
ELECTRONICS AND ELECTRICAL
EQUIPMENT-4.0%
-------------------------------------------------------------
AMP, Inc 5,900 429
-------------------------------------------------------------
Brown Boveri 100 86
-------------------------------------------------------------
(a)EMC Corporation 13,000 281
-------------------------------------------------------------
Emerson Electric Co. 16,500 1,031
-------------------------------------------------------------
Ericsson "B" 2,300 127
-------------------------------------------------------------
Hewlett Packard Company 5,600 559
-------------------------------------------------------------
Intel Corporation 11,500 735
-------------------------------------------------------------
Kyocera Corporation 1,700 126
-------------------------------------------------------------
Linear Technology Corporation 8,000 396
-------------------------------------------------------------
Matsushita Electric Industrial Co.
Ltd. 5,000 82
-------------------------------------------------------------
Motorola Inc. 8,000 463
-------------------------------------------------------------
Nokia Telecom 667 98
-------------------------------------------------------------
Phillips N.V. 4,000 118
-------------------------------------------------------------
Sharp Corporation 5,000 90
-------------------------------------------------------------
Toyko Electron 4,000 124
-------------------------------------------------------------
4,745
ENERGY AND RELATED SERVICES-1.4%
-------------------------------------------------------------
British Petroleum Co., PLC 1,869 126
-------------------------------------------------------------
Enron, Corp. 15,800 482
-------------------------------------------------------------
Mobil Corporation 5,800 489
-------------------------------------------------------------
Noble Affiliates Inc. 18,000 446
-------------------------------------------------------------
Repsol S.A., ADR 2,400 65
-------------------------------------------------------------
1,608
ENTERTAINMENT AND RESTAURANTS-1.1%
-------------------------------------------------------------
Genting BHD 2,000 17
-------------------------------------------------------------
McDonald's Corporation 18,000 527
-------------------------------------------------------------
Polygram N.V. 900 42
-------------------------------------------------------------
(a)Promus Companies, Inc. 7,950 246
-------------------------------------------------------------
Walt Disney Company 9,600 443
-------------------------------------------------------------
1,275
FINANCIAL SERVICES-3.5%
-------------------------------------------------------------
Aalberts Industries, N.V. 800 39
-------------------------------------------------------------
Bankers Life Holding Corporation 9,600 182
-------------------------------------------------------------
Boatmen's Bancshares 16,500 448
-------------------------------------------------------------
First Data Corporation 12,000 569
-------------------------------------------------------------
First USA Inc. 9,000 296
-------------------------------------------------------------
General Reinsurance Corporation 2,000 248
-------------------------------------------------------------
</TABLE>
8
<PAGE> 10
(Dollars in thousands)
<TABLE>
<CAPTION>
Number of
Shares Value
--------- ---------
<S> <C> <C>
-------------------------------------------------------------
Hagemeyer N.V. 500 $ 41
-------------------------------------------------------------
Kansas City Southern Industries 6,100 188
-------------------------------------------------------------
Keppel Corporation Limited 10,000 85
-------------------------------------------------------------
(a)Lloyds Bank PLC 4,400 38
-------------------------------------------------------------
MGIC Investment Corporation 13,500 447
-------------------------------------------------------------
NationsBank Corporation 9,000 406
-------------------------------------------------------------
Providian Corp. 15,000 463
-------------------------------------------------------------
Sanyo Shinpan Finance Co. 1,300 125
-------------------------------------------------------------
Siam City Bank 41,600 53
-------------------------------------------------------------
SunAmerica Corp. 4,600 167
-------------------------------------------------------------
Tokio Marine & Fire Insurance Co.
Ltd. 11,000 134
-------------------------------------------------------------
Veba, AG 300 105
-------------------------------------------------------------
4,034
MANUFACTURING AND METALS-2.5%
-------------------------------------------------------------
(a)Amada Co., Ltd 8,000 100
-------------------------------------------------------------
Atlas Copco 9,600 123
-------------------------------------------------------------
(a)Automotive Industries Holding,
Inc., "A" 9,600 194
-------------------------------------------------------------
Federal Signal Corporation 14,000 285
-------------------------------------------------------------
General Electric Company 20,000 1,020
-------------------------------------------------------------
Honda Motor Co. Ltd. 6,000 106
-------------------------------------------------------------
Maderas y Sinteticos Sociedad
Anonima MASISA, ADR 1,600 41
-------------------------------------------------------------
Newell Company 22,000 462
-------------------------------------------------------------
Nucor Corporation 4,000 222
-------------------------------------------------------------
Sandvik AB 2,353 37
-------------------------------------------------------------
TriMas Corporation 14,500 290
-------------------------------------------------------------
2,880
OFFICE EQUIPMENT AND COMPUTERS-3.2%
-------------------------------------------------------------
Adobe Systems Incorporated 13,000 387
-------------------------------------------------------------
Alco Standard Corporation 9,000 565
-------------------------------------------------------------
(a)Cisco Systems, Inc. 7,800 274
-------------------------------------------------------------
General Motors Corporation, "E" 14,800 570
-------------------------------------------------------------
(a)Microsoft Corporation 8,000 489
-------------------------------------------------------------
(a)Novell Inc. 15,000 257
-------------------------------------------------------------
(a)Parametic Technology Corporation 7,500 259
-------------------------------------------------------------
(a)Silicon Graphics, Inc. 17,000 525
-------------------------------------------------------------
(a)Viking Office Products 16,400 502
-------------------------------------------------------------
3,828
RETAILING-2.8%
-------------------------------------------------------------
Carrefour S.A. 185 77
-------------------------------------------------------------
Harcourt General 11,900 419
-------------------------------------------------------------
Home Depot, Inc. 26,200 1,205
-------------------------------------------------------------
Keiyo Company Ltd. 6,000 91
-------------------------------------------------------------
Tandy Corporation 5,000 251
-------------------------------------------------------------
Wal-Mart Stores, Inc. 59,000 1,254
-------------------------------------------------------------
3,297
<CAPTION>
Number of
Shares or
Principal
Amount Value
--------- ---------
<S> <C> <C>
TELECOMMUNICATIONS-2.2%
-------------------------------------------------------------
(a)ADC Telecommunications, Inc. 8,500 $ 425
-------------------------------------------------------------
American Telephone and Telegraph
Company 18,000 905
-------------------------------------------------------------
DDI Corporation 10 86
-------------------------------------------------------------
(a)DSC Communications Corporation 14,400 517
-------------------------------------------------------------
Southwestern Bell Corp. 12,000 485
-------------------------------------------------------------
Technology Resource, Ltd. 12,900 41
-------------------------------------------------------------
(a)Telewest Communications 4,000 11
-------------------------------------------------------------
Vodafone Group PLC 34,500 114
-------------------------------------------------------------
2,584
TRANSPORTATION-.8%
-------------------------------------------------------------
Conrail Inc. 9,600 485
-------------------------------------------------------------
(a)TNT Ltd. Holdings 21,200 36
-------------------------------------------------------------
Van Ommeren 2,700 71
-------------------------------------------------------------
(a)Wisconsin Central Transportation
Corporation 8,200 338
-------------------------------------------------------------
930
UTILITIES-.1%
-------------------------------------------------------------
Manweb PLC 3,000 41
-------------------------------------------------------------
TOTAL COMMON STOCKS-37.7%
(Cost: $41,635) 44,040
-------------------------------------------------------------
CONVERTIBLE CORPORATE OBLIGATIONS
-------------------------------------------------------------
Argosy Inc., 12.00%, 2001 $ 586 551
-------------------------------------------------------------
Comcast Corporation, 1.125%, 2007 1,217 478
-------------------------------------------------------------
Thermo Electron, 5.00%, 2001 500 536
-------------------------------------------------------------
TOTAL CONVERTIBLE CORPORATE
OBLIGATIONS-1.3%
(Cost: $1,797) 1,565
-------------------------------------------------------------
MONEY MARKET INSTRUMENTS-.9%
Yield-6.15%
Due-January 1995
-------------------------------------------------------------
Greyhound Financial Corporation
(Cost: $998) 1,000 998
-------------------------------------------------------------
TOTAL INVESTMENTS-99.6%
(Cost: $115,758) 116,348
-------------------------------------------------------------
CASH AND OTHER ASSETS,
LESS LIABILITIES-.4% 518
-------------------------------------------------------------
NET ASSETS-100% $ 116,866
-------------------------------------------------------------
</TABLE>
See accompanying Notes to Portfolio of Investments.
9
<PAGE> 11
KEMPER RETIREMENT FUND SERIES IV
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, 2003 $ 5,200 $ 2,747
---------------------------------------------------------------
U.S. Treasury Strips
Zero Coupon, 2003 165,100 87,891
---------------------------------------------------------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS-64.1%
(Cost: $104,967) 90,638
---------------------------------------------------------------
COMMON STOCKS
CHEMICALS-.8%
---------------------------------------------------------------
Air Products & Chemicals 9,300shs. 415
---------------------------------------------------------------
PPG Industries Inc. 20,000 743
---------------------------------------------------------------
1,158
COMMUNICATIONS AND MEDIA-1.3%
---------------------------------------------------------------
Comcast Cellular Corporation 30,000 471
---------------------------------------------------------------
Readers Digest Association, Inc. 11,000 540
---------------------------------------------------------------
Singapore Press Holdings 2,000 36
---------------------------------------------------------------
Tribune Co. 7,700 421
---------------------------------------------------------------
(a)Viacom International Inc. "A" 1,224 51
---------------------------------------------------------------
(a)Viacom International Inc. VCR 15,300 17
---------------------------------------------------------------
(a)Viacom International Inc. "B" 9,274 377
---------------------------------------------------------------
1,913
CONSTRUCTION-.1%
---------------------------------------------------------------
DBS Land Ltd. 8,000 24
---------------------------------------------------------------
Road Builder Holdings 7,000 38
---------------------------------------------------------------
Wai Kee Holdings 118,000 27
---------------------------------------------------------------
89
CONSUMER PRODUCTS AND SERVICES-5.7%
---------------------------------------------------------------
Campbell Soup Company 12,000 530
---------------------------------------------------------------
Coca-Cola Enterprises 18,300 942
---------------------------------------------------------------
ConAgra Inc. 16,400 513
---------------------------------------------------------------
Corning Corporation 22,700 678
---------------------------------------------------------------
CPC International Inc. 12,500 666
---------------------------------------------------------------
(a)CUC International Inc. 15,000 503
---------------------------------------------------------------
Gillette Company 8,400 628
---------------------------------------------------------------
PepsiCo Inc. 18,000 653
---------------------------------------------------------------
Philip Morris Companies Inc. 13,000 748
---------------------------------------------------------------
Procter & Gamble Company 9,200 570
---------------------------------------------------------------
Sara Lee Corporation 33,000 833
---------------------------------------------------------------
Seagram Company 18,000 531
---------------------------------------------------------------
Service Corporation International 10,000 278
---------------------------------------------------------------
8,073
DRUGS AND HEALTH CARE-6.0%
---------------------------------------------------------------
Abbott Laboratories 32,500 1,060
---------------------------------------------------------------
(a)Biogen Corporation 15,600 651
---------------------------------------------------------------
Columbia/HCA Healthcare 10,000 365
---------------------------------------------------------------
Forest Laboratories, Inc. 12,000 560
---------------------------------------------------------------
(a)Foundation Health Corporation 5,000 155
---------------------------------------------------------------
<CAPTION>
Number of
Shares Value
--------- ---------
<S> <C> <C>
--------------------------------------------------------------
(a)Integrated Health Services 8,200 $ 324
--------------------------------------------------------------
Johnson & Johnson 11,700 641
--------------------------------------------------------------
Eli Lilly & Company 12,700 833
--------------------------------------------------------------
Meditrust 12,000 363
--------------------------------------------------------------
Merck & Co., Inc. 14,900 568
--------------------------------------------------------------
Roche Holdings Genuss Chein 24 116
--------------------------------------------------------------
(a)R. P. Scherer Corporation 5,000 227
--------------------------------------------------------------
Schering-Plough Corporation 5,500 407
--------------------------------------------------------------
Smithkline Beecham PLC 25,000 856
--------------------------------------------------------------
United Healthcare Corporation 4,200 189
--------------------------------------------------------------
U.S. Healthcare Inc. 5,000 206
--------------------------------------------------------------
(a)Ventritex Inc. 15,500 418
--------------------------------------------------------------
Warner Lambert Company 8,200 631
--------------------------------------------------------------
8,570
ELECTRONICS AND ELECTRICAL
EQUIPMENT-3.5%
--------------------------------------------------------------
AMP, Inc 5,900 429
--------------------------------------------------------------
Brown Boveri 100 86
--------------------------------------------------------------
(a)EMC Corporation 13,000 281
--------------------------------------------------------------
Emerson Electric Co. 17,000 1,063
--------------------------------------------------------------
Ericsson "B" 2,400 133
--------------------------------------------------------------
Hewlett Packard Company 5,900 589
--------------------------------------------------------------
Intel Corporation 12,500 798
--------------------------------------------------------------
Kyocera Corporation 1,700 126
--------------------------------------------------------------
Linear Technology Corporation 7,000 347
--------------------------------------------------------------
Matsushita Electric Industrial Co.
Ltd. 5,000 82
--------------------------------------------------------------
Motorola Inc. 9,400 544
--------------------------------------------------------------
Nokia Telecom 733 108
--------------------------------------------------------------
Phillips N.V. 4,200 124
--------------------------------------------------------------
Sharp Corporation 5,000 90
--------------------------------------------------------------
Toyko Electron 4,000 124
--------------------------------------------------------------
4,924
ENERGY AND RELATED SERVICES-1.2%
--------------------------------------------------------------
British Petroleum Co., PLC 19,873 132
--------------------------------------------------------------
Enron, Corp. 16,700 509
--------------------------------------------------------------
Mobil Corporation 6,200 522
--------------------------------------------------------------
Noble Affiliates Inc. 18,800 465
--------------------------------------------------------------
Repsol, S.A., ADR 2,500 68
--------------------------------------------------------------
1,696
ENTERTAINMENT AND RESTAURANTS-1.0%
--------------------------------------------------------------
Genting BHD 3,000 26
--------------------------------------------------------------
McDonald's Corporation 19,000 556
--------------------------------------------------------------
Polygram N.V. 900 42
--------------------------------------------------------------
Promus Companies, Inc. 7,550 234
--------------------------------------------------------------
Walt Disney Company 11,000 507
--------------------------------------------------------------
1,365
FINANCIAL SERVICES-2.9%
--------------------------------------------------------------
Aalberts Industries, N.V. 800 39
--------------------------------------------------------------
Bankers Life Holding Corporation 10,100 192
--------------------------------------------------------------
</TABLE>
10
<PAGE> 12
(Dollars in thousands)
<TABLE>
<CAPTION>
Number of
Shares Value
--------- ---------
<S> <C> <C>
--------------------------------------------------------------
Boatmen's Bancshares 17,000 $ 461
--------------------------------------------------------------
First Data Corporation 12,000 569
--------------------------------------------------------------
First USA Inc. 9,000 296
--------------------------------------------------------------
General Reinsurance Corporation 2,500 309
--------------------------------------------------------------
Hagemeyer N.V. 500 41
--------------------------------------------------------------
Kansas City Southern Industries 7,000 216
--------------------------------------------------------------
Keppel Corporation Limited 11,000 93
--------------------------------------------------------------
(a)Lloyds Bank PLC 4,400 38
--------------------------------------------------------------
MGIC Investment Corporation 12,000 398
--------------------------------------------------------------
NationsBank Corporation 10,000 451
--------------------------------------------------------------
Providian Corp. 15,000 463
--------------------------------------------------------------
Sanyo Shinpan Finance Co. 1,300 125
--------------------------------------------------------------
Siam City Bank 43,800 56
--------------------------------------------------------------
SunAmerica Corp. 4,900 178
--------------------------------------------------------------
Tokio Marine & Fire Insurance Co.
Ltd. 11,000 134
--------------------------------------------------------------
Veba, AG 350 122
--------------------------------------------------------------
4,181
MANUFACTURING AND METALS-2.1%
--------------------------------------------------------------
(a)Amada Co., Ltd 9,000 113
--------------------------------------------------------------
Atlas Copco 10,100 129
--------------------------------------------------------------
(a)Automotive Industries Holding,
Inc., "A" 10,100 205
--------------------------------------------------------------
Federal Signal Corporation 19,000 387
--------------------------------------------------------------
General Electric Company 20,000 1,020
--------------------------------------------------------------
Honda Motor Co. Ltd. 6,000 106
--------------------------------------------------------------
Maderas y Sinteticos Sociedad
Anonima MASISA, ADR 1,700 43
--------------------------------------------------------------
Newell Company 23,000 483
--------------------------------------------------------------
Nucor Corporation 3,000 167
--------------------------------------------------------------
Sandvik AB 2,615 42
--------------------------------------------------------------
TriMas Corporation 15,000 300
--------------------------------------------------------------
2,995
OFFICE EQUIPMENT AND COMPUTERS-2.8%
--------------------------------------------------------------
Adobe Systems Incorporated 13,000 387
--------------------------------------------------------------
Alco Standard Corporation 9,000 565
--------------------------------------------------------------
(a)Cisco Systems, Inc. 8,100 285
--------------------------------------------------------------
General Motors Corporation, "E" 16,100 620
--------------------------------------------------------------
(a)Microsoft Corporation 8,000 489
--------------------------------------------------------------
(a)Novell Inc. 17,000 291
--------------------------------------------------------------
(a)Parametic Technology Corporation 9,000 311
--------------------------------------------------------------
(a)Silicon Graphics, Inc. 17,500 540
--------------------------------------------------------------
(a)Viking Office Products 16,000 490
--------------------------------------------------------------
3,978
RETAILING-2.4%
--------------------------------------------------------------
Carrefour S.A. 185 77
--------------------------------------------------------------
Harcourt General 11,900 419
--------------------------------------------------------------
Home Depot, Inc. 28,000 1,288
--------------------------------------------------------------
<CAPTION>
Number of
Shares or
Principal
Amount Value
--------- ---------
<S> <C> <C>
--------------------------------------------------------------
Keiyo Company Ltd. 7,000 $ 107
--------------------------------------------------------------
Tandy Corporation 5,000 251
--------------------------------------------------------------
Wal-Mart Stores, Inc. 61,000 1,296
--------------------------------------------------------------
3,438
TELECOMMUNICATIONS-2.2%
--------------------------------------------------------------
(a)ADC Telecommunications, Inc. 9,500 475
--------------------------------------------------------------
American Telephone and Telegraph
Company 19,000 955
--------------------------------------------------------------
DDI Corporation 10 86
--------------------------------------------------------------
(a)DSC Communications Corporation 24,000 861
--------------------------------------------------------------
Southwestern Bell Corp. 13,000 525
--------------------------------------------------------------
Technology Resource, Ltd. 13,900 44
--------------------------------------------------------------
(a)Telewest Communications 4,000 11
--------------------------------------------------------------
Vodafone Group PLC 36,300 120
--------------------------------------------------------------
3,077
TRANSPORTATION-.7%
--------------------------------------------------------------
Conrail Inc. 10,100 510
--------------------------------------------------------------
(a)TNT Ltd. Holdings 22,300 38
--------------------------------------------------------------
Van Ommeren 2,800 73
--------------------------------------------------------------
(a)Wisconsin Central Transportation
Corporation 8,000 330
--------------------------------------------------------------
951
UTILITIES-.1%
--------------------------------------------------------------
Manweb PLC 3,000 41
--------------------------------------------------------------
TOTAL COMMON STOCKS-32.8%
(Cost: $44,843) 46,449
--------------------------------------------------------------
CONVERTIBLE CORPORATE OBLIGATIONS
--------------------------------------------------------------
Argosy Inc., 12.00%, 2001 $ 586 551
--------------------------------------------------------------
Comcast Corporation, 1.125%, 2007 1,352 531
--------------------------------------------------------------
Thermo Electron, 5.00%, 2001 500 536
--------------------------------------------------------------
TOTAL CONVERTIBLE CORPORATE
OBLIGATIONS-1.1%
(Cost: $1,875) 1,618
--------------------------------------------------------------
MONEY MARKET INSTRUMENTS-1.8%
Yield-6.02%
Due-January 1995
--------------------------------------------------------------
Cooper Industries, Inc.
(Cost: $2,497) 2,500 2,498
--------------------------------------------------------------
TOTAL INVESTMENTS-99.8%
(Cost: $154,182) 141,203
--------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-.2% 306
--------------------------------------------------------------
NET ASSETS-100% $ 141,509
--------------------------------------------------------------
</TABLE>
See accompanying Notes to Portfolio of Investments.
11
<PAGE> 13
(Dollars in thousands)
NOTES TO PORTFOLIOS OF INVESTMENTS
(a) Non-income producing security.
Based on the cost of investments for federal income tax purposes at December 31,
1994, the unrealized appreciation and depreciation of investments is as follows:
<TABLE>
<CAPTION>
Series I Series II Series III Series IV
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Cost of investments for federal income tax purposes $93,210,000 158,734,000 115,758,000 154,182,000
- ---------------------------------------------------------------------------------------------------------------------------------
Gross unrealized appreciation 6,657,000 6,122,000 4,026,000 3,369,000
- ---------------------------------------------------------------------------------------------------------------------------------
Gross unrealized depreciation 1,973,000 2,511,000 3,436,000 16,348,000
- ---------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) 4,684,000 3,611,000 590,000 (12,979,000)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
12
<PAGE> 14
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1994
(in thousands)
<TABLE>
<CAPTION>
SERIES
ASSETS SERIES I SERIES II III SERIES IV
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------
Investments, at value
(Cost: $93,210, $158,734,
$115,758 and $154,182) $ 97,894 162,345 116,348 141,203
- --------------------------------------------------------------------
Cash 917 923 172 --
- --------------------------------------------------------------------
Receivable for:
Shares issued in
reinvestment of
dividends 151 197 59 88
- --------------------------------------------------------------------
Investments sold 540 628 441 548
- --------------------------------------------------------------------
Dividends and
interest 92 110 85 94
- --------------------------------------------------------------------
Total assets 99,594 164,203 117,105 141,933
- --------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- --------------------------------------------------------------------
Cash overdraft -- -- -- 66
- --------------------------------------------------------------------
Payable for:
Fund shares redeemed 34 167 50 52
- --------------------------------------------------------------------
Investments
purchased 78 78 78 166
- --------------------------------------------------------------------
Management fee 41 68 49 59
- --------------------------------------------------------------------
Administrative
services fee 20 33 24 29
- --------------------------------------------------------------------
Custodian and
transfer agent fees
and related expenses 12 30 25 43
- --------------------------------------------------------------------
Other 13 13 13 9
- --------------------------------------------------------------------
Total liabilities 198 389 239 424
- --------------------------------------------------------------------
Net assets $ 99,396 163,814 116,866 141,509
- --------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- --------------------------------------------------------------------
Excess of amounts
received from issuance
of shares over amounts
paid on redemptions of
shares on account of
capital $ 94,312 159,195 115,709 158,437
- --------------------------------------------------------------------
Undistributed net
realized gain (loss)
on sales of
investments 105 811 567 (3,949)
- --------------------------------------------------------------------
Unrealized
appreciation
(depreciation) of
investments 4,684 3,611 590 (12,979)
- --------------------------------------------------------------------
Undistributed net
investment income 295 197 -- --
- --------------------------------------------------------------------
Net assets applicable
to shares
outstanding $ 99,396 163,814 116,866 141,509
- --------------------------------------------------------------------
THE PRICING OF SHARES
- --------------------------------------------------------------------
Shares outstanding, no
par value 10,178 14,548 12,638 16,441
- --------------------------------------------------------------------
Net asset value and
redemption price per
share (net assets
/ shares outstanding) $9.77 11.26 9.25 8.61
- --------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENTS OF OPERATIONS
Six months ended December 31, 1994
(in thousands)
<TABLE>
<CAPTION>
SERIES
INVESTMENT INCOME I SERIES II SERIES III SERIES IV
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------
Dividends $ 336 396 314 333
- --------------------------------------------------------------------------
Interest 2,214 4,328 2,856 3,373
- --------------------------------------------------------------------------
Total investment
income 2,550 4,724 3,170 3,706
- --------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------
Management fee 258 427 297 364
- --------------------------------------------------------------------------
Administrative
services fee 125 208 149 179
- --------------------------------------------------------------------------
Custodian and
transfer agent fees
and related
expenses 91 156 143 119
- --------------------------------------------------------------------------
Professional fees 16 27 19 23
- --------------------------------------------------------------------------
Reports to
shareholders 11 18 13 15
- --------------------------------------------------------------------------
Trustees' fees and
other 9 7 9 7
- --------------------------------------------------------------------------
Total expenses 510 843 630 707
- --------------------------------------------------------------------------
Net investment income 2,040 3,881 2,540 2,999
- --------------------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
- --------------------------------------------------------------------------
Net realized gain
(loss) on sales of
investments
(including options
purchased) 748 1,334 523 (1,801)
- --------------------------------------------------------------------------
Net change in
unrealized
appreciation or
depreciation of
investments (561) (2,803) (785) 1,327
- --------------------------------------------------------------------------
Net gain (loss) on
investments 187 (1,469) (262) (474)
- --------------------------------------------------------------------------
Net increase in net
assets resulting from
operations $2,227 2,412 2,278 2,525
- --------------------------------------------------------------------------
</TABLE>
13
<PAGE> 15
STATEMENTS OF CHANGES IN NET ASSETS
(in thousands)
<TABLE>
<CAPTION>
SERIES I SERIES II
------------------------ ------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30,
OPERATIONS 1994 1994 1994 1994
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Net investment income $ 2,040 3,938 3,881 7,701
- -----------------------------------------------------------------------------------------------------------------------
Net realized gain on investments 748 8,403 1,334 10,642
- -----------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (561) (15,948 ) (2,803) (25,035)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 2,227 (3,607 ) 2,412 (6,692)
- -----------------------------------------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------
Distribution from net investment income (3,758) (3,713 ) (7,527) (8,051)
- -----------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain on investments (6,596) (10,538 ) (8,450) (8,191)
- -----------------------------------------------------------------------------------------------------------------------
Total dividends to shareholders (10,354) (14,251 ) (15,977) (16,242)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital share transactions 3,759 (718 ) 4,324 (6,805)
- -----------------------------------------------------------------------------------------------------------------------
Total decrease in net assets (4,368) (18,576 ) (9,241) (29,739)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------
Beginning of period 103,764 122,340 173,055 202,794
- -----------------------------------------------------------------------------------------------------------------------
End of period $ 99,396 103,764 163,814 173,055
- -----------------------------------------------------------------------------------------------------------------------
Undistributed net investment income at end of period $ 295 1,715 197 3,604
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SERIES III SERIES IV
------------------------ ------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30,
OPERATIONS 1994 1994 1994 1994
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Net investment income $ 2,540 5,046 2,999 5,002
- -----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 523 5,988 (1,801) (1,751)
- -----------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (785) (16,904 ) 1,327 (16,596)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 2,278 (5,870 ) 2,525 (13,345)
- -----------------------------------------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------
Distribution from net investment income (5,017) (4,782 ) (5,859) (2,602)
- -----------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain on investments (4,317) -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Total dividends to shareholders (9,334) (4,782 ) (5,859) (2,602)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital share transactions 790 (9,848 ) (1,812) 100,720
- -----------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (6,266) (20,500 ) (5,146) 84,773
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------
Beginning of period 123,132 143,632 146,655 61,882
- -----------------------------------------------------------------------------------------------------------------------
End of period $116,866 123,132 141,509 146,655
- -----------------------------------------------------------------------------------------------------------------------
Undistributed net investment income at end of period $ -- 2,499 -- 2,797
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
14
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF THE FUNDS
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 I, Series II, Series
III and Series IV (the Funds), the first four series, are to provide a
guaranteed return of investment on the Maturity Date (November 15, 1999 for
Series I, August 15, 2000 for Series II, February 15, 2002 for Series III and
February 15, 2003 for Series IV) 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 Funds' portfolios, as well as by a guarantee from Kemper
Financial Services, Inc. (KFS), the Funds' 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 were sold to the public during a limited offering period for each
Fund, which ended in August 1990 for Series I, March 1992 for Series II, January
1993 for Series III and November 1993 for Series IV, and are redeemed on a
continuous basis. Fund shares were sold and are 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 each Fund's investments and other assets, less liabilities, by the
respective number of shares outstanding.
FEDERAL INCOME TAXES AND DIVIDENDS TO SHAREHOLDERS
Each 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 $3,949,000,
in Kemper Retirement Fund Series IV 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 recorded by each Fund on the
ex-dividend date.
2. TRANSACTIONS WITH AFFILIATES
The Trust has a management agreement with KFS. For management services and
facilities furnished to each Fund, the Trust pays a fee at an annual rate of
.50% of average daily net assets. The Funds incurred a management fee of
$1,346,000 for the six months ended December 31, 1994.
The Trust has an administrative services agreement with KFS. For providing
information and administrative services to shareholders, the Funds pay 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 Funds to KFS equals the service fees paid by KFS to such firms.
For the six months ended December 31, 1994, the Funds incurred an
15
<PAGE> 17
administrative services fee of $661,000, all of which KFS paid to firms,
including $105,000 that was paid to firms affiliated with KFS. Effective
February 1, 1995, KFS transferred all of its duties and responsibilities as
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 Funds incurred custodian and transfer
agent fees of $302,000 (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 $244,000 to KSvC with respect to
the Funds.
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 Funds incurred trustees' fees of $28,000 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>
<CAPTION>
Series Series Series
Series I II III IV
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------
Purchases $ 35,192 43,325 34,429 36,252
- ------------------------------------------------------------------
Proceeds from sales 31,081 41,222 31,000 31,408
- ------------------------------------------------------------------
</TABLE>
4. CAPITAL SHARE TRANSACTIONS
The following tables summarize the activity in capital shares of the Funds (in
thousands):
<TABLE>
<CAPTION>
Six months ended Year ended
December 31, 1994 June 30, 1994
----------------------- -----------------------
SERIES I Shares Amount Shares Amount
------ -------- ------ --------
<S> <C> <C> <C> <C>
Shares issued in reinvestment of dividends 1,041 $ 10,155 1,217 $ 14,015
- ---------------------------------------------------------------------------------------------------------------------------------
Less shares redeemed 588 6,396 1,228 14,733
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital
share transactions 453 $ 3,759 (11) $ (718)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Six months ended Year ended
December 31, 1994 June 30, 1994
----------------------- -----------------------
SERIES II Shares Amount Shares Amount
------ -------- ------ --------
<S> <C> <C> <C> <C>
Shares issued in reinvestment of dividends 1,394 $ 15,683 1,216 $ 16,187
- ---------------------------------------------------------------------------------------------------------------------------------
Less shares redeemed 911 11,359 1,691 22,992
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital
share transactions 483 $ 4,324 (475) $ (6,805)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 18
<TABLE>
<CAPTION>
Six months ended Year ended
December 31, 1994 June 30, 1994
--------------------- ----------------------
SERIES III Shares Amount Shares Amount
------ ------ ------ -------
<S> <C> <C> <C> <C>
Shares issued in reinvestment of dividends 1,005 $9,284 447 $ 4,798
- ---------------------------------------------------------------------------------------------------------------------------------
Less shares redeemed 857 8,494 1,368 14,646
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital
share transactions 148 $ 790 (921) $(9,848)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Six months ended Year ended
December 31, 1994 June 30, 1994
---------------------- ------------------------
SERIES IV Shares Amount Shares Amount
------ ------- ------ ---------
<S> <C> <C> <C> <C>
Shares sold -- $ -- 11,183 $ 110,536
- ---------------------------------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of dividends 663 5,703 258 2,508
- ---------------------------------------------------------------------------------------------------------------------------------
663 5,703 11,441 113,044
- ---------------------------------------------------------------------------------------------------------------------------------
Less shares redeemed 839 7,515 1,293 12,324
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital
share transactions (176) $(1,812) 10,148 $ 100,720
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six months
ended Year ended June 30, February 5,
December 31, ----------------------------------------------- 1990 to
SERIES I 1994 1994 1993 1992 1991 June 30, 1990
------------ -------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $10.67 12.57 12.01 11.05 10.16 9.00
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .21 .42 .41 .42 .41 .08
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments .02 (.78) 1.59 1.53 .77 1.08
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .23 (.36) 2.00 1.95 1.18 1.16
- -----------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .41 .40 .42 .45 .26 --
- -----------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain on
investments .72 1.14 1.02 .54 .03 --
- -----------------------------------------------------------------------------------------------------------------------------
Total dividends 1.13 1.54 1.44 .99 .29 --
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.77 10.67 12.57 12.01 11.05 10.16
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%): 2.18 (3.76) 17.47 17.58 11.97 12.89
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses .99 .91 .92 .92 1.09 1.17
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 3.96 3.32 3.19 3.37 4.21 3.78
- -----------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets at end of period (in
thousands) $ 99,396 103,764 122,340 116,041 108,782 77,427
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 62 59 61 57 106 62
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 19
<TABLE>
<CAPTION>
Six months
ended Year ended June 30, September 11,
December 31, ---------------------------------------- 1990 to
SERIES II 1994 1994 1993 1992 June 30, 1991
------------ ------------ ------- ------- --------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $12.30 13.95 12.40 10.75 9.00
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .31 .56 .53 .38 .20
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments (.14) (1.04) 1.67 1.59 1.63
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .17 (.48) 2.20 1.97 1.83
- -----------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .57 .58 .49 .25 .08
- -----------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain on
investments .64 .59 .16 .07 --
- -----------------------------------------------------------------------------------------------------------------------------
Total dividends 1.21 1.17 .65 .32 .08
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.26 12.30 13.95 12.40 10.75
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%): 1.39 (4.07) 18.18 18.35 20.45
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses .99 .90 .95 .93 1.16
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 4.54 3.91 3.83 3.98 3.75
- -----------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $163,814 173,055 202,794 187,438 78,638
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 49 44 51 51 64
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Six months
ended Year ended June 30,
December 31, ---------------------- March 10, 1992
SERIES III 1994 1994 1993 to June 30, 1992
------------ -------- ------- -----------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $9.87 10.72 9.10 9.00
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .23 .40 .29 .12
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (.05) (.88) 1.51 (.02)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .18 (.48) 1.80 .10
- -----------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .43 .37 .18 --
- -----------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain on investments .37 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total dividends .80 .37 .18 --
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.25 9.87 10.72 9.10
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%): 1.85 (4.76) 19.96 1.11
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 1.04 .95 .95 .97
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 4.18 3.59 3.46 3.95
- -----------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $116,866 123,132 143,632 62,536
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 53 47 59 12
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 20
<TABLE>
<CAPTION>
Six months
ended Year ended January 15, 1993
SERIES IV December 31, June 30, to
PER SHARE OPERATING PERFORMANCE: 1994 1994 June 30, 1993
------------ ---------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period $8.83 9.57 9.00
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .20 .26 .06
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on (loss) investments (.05) (.85) .51
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .15 (.59) .57
- ----------------------------------------------------------------------------------------------------------------------------
Less dividends from net investment income .37 .15 --
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.61 8.83 9.57
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%): 1.70 (6.31) 6.33
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses .97 .97 1.21
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income 4.12 3.43 2.87
- ----------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $141,509 146,655 61,882
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 45 51 31
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE FOR ALL SERIES: Ratios have been determined on an annualized basis. Total
return is not annualized and does not reflect the effect of any sales charges.
19
<PAGE> 21
[KEMPER MUTUAL FUNDS LOGO]
KEMPER FINANCIAL SERVICES, INC.
120 South LaSalle Street
Chicago, IL 60603
KEMPER TARGET EQUITY FUND--
KEMPER RETIREMENT FUND SERIES I, II, III AND IV
<TABLE>
<S> <C>
Trustees Officers
CHARLES M. KIERSCHT SANDY A. LINCOLN
President Vice President
and Trustee JOHN E. PETERS
ARTHUR R. GOTTSCHALK Vice President
Trustee TRACY MCCORMICK CHESTER
FREDERICK T. KELSEY Vice President
Trustee JAMES H. COXON
STEPHEN B. TIMBERS 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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