<PAGE> 1
Kemper Target Equity Fund
Kemper Retirement Fund Series I, II, III, IV and V
SEMIANNUAL REPORT TO SHAREHOLDERS
FOR THE PERIOD ENDED DECEMBER 31, 1995
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
"..Low Inflation and declining interest rates to a certain extent gave us the
best of both worlds -- strong performance for both the stock and bond portions
of the portfolios."
<PAGE> 2
Table of
Contents
3
General
Economic Overview
5
Performance Update
7
Terms to Know
10
Individual Holdings
11
Descriptions of
Individual Holdings
12
Portfolio of
Investments
20
Financial Statements
24
Notes to
Financial Statements
27
Financial Highlights
At A Glance
Total Returns*
For the six-month period ended December 31, 1995 (unadjusted for any sales
charge):
<TABLE>
<S> <C>
KEMPER RETIREMENT FUND
SERIES I 8.04%
KEMPER RETIREMENT FUND
SERIES II 7.51%
KEMPER RETIREMENT FUND
SERIES III 8.56%
KEMPER RETIREMENT FUND
SERIES IV 9.03%
KEMPER RETIREMENT FUND
SERIES V 9.64%
</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.
*Total return measures net investment income and capital gain or loss from
portfolio investments, assuming reinvestment of all dividends. During the
period noted, securities prices fluctuated. For additional information, see the
Prospectus and Statement of Additional Information and the Financial Highlights
at the end of this report.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
12/31/95 6/30/95
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER RETIREMENT FUND
SERIES I $10.87 $11.19
KEMPER RETIREMENT FUND
SERIES II $12.61 $12.94
KEMPER RETIREMENT FUND
SERIES III $10.64 $10.75
KEMPER RETIREMENT FUND
SERIES IV $10.56 $10.07
KEMPER RETIREMENT FUND
SERIES V $10.08 $9.53
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
DURING THE REPORTING PERIOD, KEMPER RETIREMENT FUND SERIES I-V PAID THE
FOLLOWING DIVIDENDS:
<TABLE>
<CAPTION>
INCOME SHORT-TERM LONG-TERM
DIVIDEND CAPITAL GAIN CAPITAL GAIN
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SERIES I $0.44 $0.31 $0.45
SERIES II $0.57 $0.27 $0.44
SERIES III $0.44 $0.23 $0.34
SERIES IV $0.41 -- --
SERIES V $0.36 -- --
- --------------------------------------------------------------------------------
</TABLE>
About Your Report
SHAREHOLDER REPORTS REVISED
Your fund's semiannual and annual reports are one of your best sources for
tracking the progress of your investment. This report includes several changes
that have been made in an effort to provide additional information to you as
well as explain significant changes to the fund during the six-month period
ended December 31, 1995. In addition, the performance update includes
commentary from your fund's portfolio manager on what might be expected in the
coming months.
Specifically, your report now includes:
- Terms you need to know related to your fund
- A look at your fund's largest individual holdings
If you have any comments about the revised format, please write to:
Kemper Funds
Shareholder Communications
120 South LaSalle Street
Chicago, IL 60603
<PAGE> 3
General Economic Overview
[TIMBERS PHOTO]
STEPHEN B. TIMBERS IS PRESIDENT, CHIEF EXECUTIVE AND CHIEF INVESTMENT OFFICER
OF KEMPER FINANCIAL SERVICES, INC. (KFS). KFS AND ITS AFFILIATES MANAGE
APPROXIMATELY $70 BILLION IN ASSETS, INCLUDING $43 BILLION IN RETAIL MUTUAL
FUNDS. TIMBERS IS A GRADUATE OF YALE UNIVERSITY AND HOLDS AN M.B.A. FROM
HARVARD UNIVERSITY.
DEAR SHAREHOLDER:
Last year -- a year in which both the equity and the fixed-income markets
produced strong above-average returns -- will be a difficult year to follow.
However, based on what we see a few months into the new year, we believe 1996
also will be capable of rewarding investors. Unlike last year, however, we
expect there will be more volatility from markets and a wider range of winners
and losers in 1996. This is the time for careful decision-making.
What has changed? We continue to experience low interest rates, an
acceptable rate of economic growth and low inflation. Although certain
government reports have been late in coming due to the federal government
shutdown, there's little in the economic data that suggests cause for concern.
Yet, this year we must begin to consider the possibility of a recession
within the next 24 months. We have enjoyed one of the longest economic
expansions in the 20th century. By virtue of the length of the expansion alone,
it is reasonable to expect an eventual slowdown or negative growth. Moreover, a
recession can be triggered by a surprise not forecastable by current available
data. It could take the form of political turmoil in the Middle East,
instability in Russia or even a further downturn in Japan's economic health. Any
type of surprise has the potential to reverse the growth we have become
accustomed to.
Having enjoyed an almost uninterrupted climb in 1995, the markets also
are vulnerable to correction. A key reason that stock prices have been rising is
that there have been large cash flows directed to the market. Whenever positive
liquidity is the driving force in the market -- as opposed to investors'
reactions to individual companies' fundamentals -- one has to be cautious.
Moreover, corporate earnings will not continue to grow at their
earlier, breakneck paces. In 1996, we expect profit growth to be in the
single-digit. Despite all, at this point early in the year, we think the stock
market has the potential to return close to its historical average of about 10
percent.+ Remember, of course, that in January alone the Standard & Poor's 500
Stock Index gained 3.4 percent. Our forecast assumes added stock market
volatility this year.
Our equities forecast assumes some help from the bond market. As you
know, the Federal Reserve Board has begun to ease short-term interest rates, and
we expect rates to drop further. The relationship between short and long-term
rates at this point in the economic cycle is an intriguing one, and one that
would argue against a recession forecast. Short-term interest rates are falling.
Yet, rates typically rise in an economy headed toward recession.
As is typical after a strong year in the domestic markets, many
investors will be looking overseas for superior return opportunities in 1996.
This move makes good sense to us, as well. Foreign economies' expansions often
follow the U.S. In fact, improvement abroad could help sustain this country's
expansion as it could boost the demand for exports.
The value of the dollar, having had a roller coaster year in 1995,
should settle down. Strength in foreign markets could boost those countries'
currencies, which would bring an end to the current dollar rally later this
year.
As we head toward the November presidential elections, we can expect
continued discussion from both political parties about balancing the federal
budget and related taxation issues. Frankly, we see the candidates as waging a
war in sameness -- there's really little difference between the Republican
primary platform and what President Bill Clinton has committed to about a
balanced budget. Economically as well as socially, the trend in government is
toward conservativism.
With that as an economic backdrop, we encourage you to read the
following detailed report of your fund, including an interview with your fund's
portfolio management. Thank you for your continued support. We appreciate the
opportunity to serve your investment needs.
Sincerely,
/s/ Stephen B. Timbers
Stephen B. Timbers
PRESIDENT, CHIEF INVESTMENT AND EXECUTIVE OFFICER
February 20, 1996
+SOURCE: BASED UPON THE AVERAGE OF THE STANDARD & POOR'S 500 STOCK INDEX SINCE
1928 (TOWERS DATA SYSTEMS). THIS DATA IS HISTORICAL AND DOES NOT REFLECT FUTURE
RESULTS. THE S&P 500 IS AN UNMANAGED INDEX GENERALLY REPRESENTATIVE OF THE U.S.
STOCK MARKET.
3
<PAGE> 4
General Economic Overview
ECONOMIC GUIDEPOSTS
Economic activity is a key influence on investment performance and shareholder
decision-making. Periods of recession or boom, inflation or deflation, credit
expansion or credit crunch have a significant impact on mutual fund
performance.
The following are some significant economic guideposts and their
investment rationale that may help your investment decision-making. The 10-year
Treasury rate and the prime rate are prevailing interest rates. The other data
report year-to-year percentage changes.
[BAR GRAPH]
<TABLE>
<CAPTION>
Now (1/31/96) 6 months ago 1 year ago 2 years ago
<S> <C> <C> <C> <C>
10-Year Treasury rate(1) 5.65 6.49 7.47 5.97
Prime rate(2) 8.50 8.75 9.00 6.00
Inflation rate(3) 2.60 2.90 2.87 2.52
The U.S. Dollar(4) -0.57 -4.11 -5.54 -0.07
Capital goods orders(5)* 11.63 7.10 23.00 15.48
Industrial production(6) 0.07 3.17 5.41 4.21
Employment growth(7) 1.18 2.03 3.15 2.49
</TABLE>
* Data as of December 31, 1995
1 Falling interest rates in recent years have been a big plus for financial
assets.
2 The interest rate that commercial lenders charge their best borrowers.
3 Inflation reduces an investor's real return. In the last five years,
inflation has been as high as 6%. The low, moderate inflation of the last few
years has meant high real returns.
4 Changes in the exchange value of the dollar impact U.S. exporters and the
value of U.S. firms' foreign profits.
5 These influence corporate profits and equity performance.
6 An influence on corporate profits and equity performance.
7 An influence on family income and retail sales.
SOURCE: ECONOMICS DEPARTMENT, KEMPER FINANCIAL SERVICES, INC.
4
<PAGE> 5
Performance Update
[MCCORMICK PHOTO]
Tracy McCormick Chester joined Kemper Financial Services, Inc. (KFS) in 1994
and is now a first vice president of KFS and vice president and the portfolio
manager of Kemper Retirement Fund Series. Ms. McCormick Chester received both
her B.A. and M.B.A. degrees from Michigan State University.
The views expressed in this report reflect those of the portfolio manager only
through the end of the period of the report, as stated on the cover. The
manager's views are subject to change at any time, based on market and other
conditions.
THE SECOND HALF OF 1995 WAS MARKED BY SLOWER CORPORATE EARNINGS GROWTH AND
DECLINING INTEREST RATES. PORTFOLIO MANAGER TRACY MCCORMICK CHESTER EXPLAINS
HOW THESE TRENDS INFLUENCED THE MARKETS AND HER STRATEGY FOR THE KEMPER
RETIREMENT FUND SERIES.
Q. DURING THE SECOND HALF OF 1995 -- THE PERIOD THIS REPORT COVERS -- WE
SAW INCREASING VOLATILITY FOR A NUMBER OF STOCKS. WHAT BROUGHT THIS ABOUT?
A. To a large extent, I think investors were reacting (and in some cases
OVER-reacting) to mixed economic data. Some reports suggested the economy would
maintain a "soft landing," others anticipated a strengthening economy, and a
few economists even began to warn about recession. Investors became confused
and the market became very rotational. Certain sectors were heavily favored one
week, then virtually ignored the next. In this environment some stocks
experienced striking price moves in both directions.
Keep in mind that the market had been very strong -- and grown
increasingly speculative -- since late 1994. By the fourth quarter of 1995
quite a few stocks were over-extended in terms of valuation. When some
disappointing earnings announcements began to emerge, investors wondered
whether the party might be over, and many chose to lock in their profits. This
was particularly true in the technology sector.
From our perspective, the slow down in corporate earnings reflected an
inventory correction rather than a slide toward recession. For example, the
strong performance of semiconductor and wireless telephone manufacturers had
been fueled by expectations of demand continuing to outpace supply. In the
third quarter, analysts began to question that assumption and, by the fourth
quarter, those concerns were validated by reports from several of those
companies. Sales were slowing, inventories were rising and it was apparent that
many companies were going to have to reduce prices. This, of course, translates
into smaller profit margins down the line.
Q. HOW DID YOU POSITION THE KEMPER RETIREMENT FUND SERIES FOR THIS
ENVIRONMENT?
A. We did our best to stay disciplined with regard to fundamentals. Even
though short-term prospects were not as dazzling as they had been, the
long-term picture is still positive for many of these companies. In cases
where a stock had enjoyed very strong gains and reached our price targets, it
was trimmed or eliminated; on the other hand, if a stock had taken a beating
but its fundamentals were still favorable, we took the opportunity to add to
our position.
Comparing the funds' top holdings as of December 31 with six months
earlier, there was a shift from consumer-oriented stocks like PepsiCo and
Johnson & Johnson in favor of more defensive stocks like pharmaceuticals
(Pharmacia & UpJohn), telecommunications (SBC, Cincinnati Bell) and energy
5
<PAGE> 6
Performance Update
(Mobil). During the first half of 1995, we'd placed an emphasis on large
companies like Philip Morris and Coca Cola that have significant multinational
exposure. Because the dollar was weak relative to the major foreign currencies,
these companies were enjoying strong sales overseas and added boost to profits
when their earnings were translated back into U.S. dollars. During the summer,
it became apparent that the dollar had bottomed and earnings growth for these
companies would come under pressure. We trimmed, and in some cases eliminated,
those positions.
Q. TECHNOLOGY STOCKS WERE THE TALK OF 1995 -- FOR THEIR STELLAR PERFORMANCE
THROUGH MOST OF THE YEAR AND SOME SHARP CORRECTIONS AT YEAR-END. HOW LARGE IS
THE KEMPER RETIREMENT FUND SERIES' TECHNOLOGY EXPOSURE, AND HOW DID THE
CORRECTION AMONG TECHNOLOGY STOCKS AFFECT PERFORMANCE?
A. I'd started to trim the funds' technology positions -- particularly
those in semiconductor and software companies -- in early summer. In our
analysis, most of these companies had become fully valued. When tech stocks
rallied in July and August, our reduced exposure did limit the funds' gains.
But for the rest of the period it served us quite well. Of course, it would
have been better to have an even lower exposure when tech stocks corrected at
year-end, but the impact on performance was far less severe than it could have
been. More recently, I've become a bit more positive on tech stocks. We're
seeing some better-quality companies trading at very reasonable valuations.
Q. HEALTH CARE AND FINANCIAL STOCKS WERE ALSO STRONG PERFORMERS IN 1995.
HOW WERE THE FUNDS POSITIONED IN THESE SECTORS?
A. As of December 31, the funds held between 4.4% and 6.2% in health care.
That's down a bit from earlier in the period. While these stocks definitely
contributed to performance in 1995, and I think the sector still offers some
potential, we're going to have to be selective. Again, it comes down to
fundamentals and discipline. In hindsight, a higher weighting in financials may
have boosted performance. But the funds' interest rate exposure is already
significant because of the zero-coupon bond component. In the interest of
diversification, I thought it was more prudent to try adding value in other
areas like basic industries (Monsanto) and aerospace (Boeing, Allied-Signal,
Textron) where there is little down-side potential and a lot of room for
growth.
Q. DO THE FUNDS OWN ANY FOREIGN STOCKS?
A. Not at this time. However, modest inflation and a trend toward lower
interest rates is making some of the overseas markets more attractive. I'm
currently working with our analysts to evaluate some possible opportunities.
Q. AS OF DECEMBER 31, ZERO-COUPON BONDS ACCOUNTED FOR BETWEEN 47%
(SERIES I) AND 64% (SERIES IV) OF THE FUNDS' ASSETS. HOW DID THESE BONDS
PERFORM DURING THE PERIOD?
A. Very well. Low inflation and declining interest rates to a certain
extent gave us the best of both worlds -- strong performance for both the stock
AND bond portions of the portfolios. Because zero coupon bonds don't make
periodic interest payments, their values are very sensitive to movements in
interest rates. When rates fall, as they did during 1995, the value of
zero-coupon bonds -- especially those with longer maturities -- tends to rise
rapidly. This is because they offer a fixed rate of reinvestment, which becomes
more attractive the farther rates fall.
Q. SINCE THE KEMPER RETIREMENT FUND SERIES PORTFOLIOS ARE COMPRISED OF
COMMON STOCKS AND ZERO-COUPON BONDS, HOW SHOULD SHAREHOLDERS EVALUATE THE FUNDS'
PROGRESS?
A. To evaluate their fund as a whole, shareholders will do best to look at
total return, which measures both realized and unrealized appreciation or
depreciation of the funds' holdings.
Performance of the funds' equity (stock) investments can be compared
with the Russell 1000(R) Growth Index. However, it's important to realize that
there will always be some variance in the performance of the funds and that
of the index. This is because of differences in the composition of the
6
<PAGE> 7
Performance Update
index, which is unmanaged, and the funds' portfolios.
The bond portion of the portfolios is unmanaged; those securities will
stay in the portfolios until maturity. But it's important to be aware of the
influence these securities have on the funds' total return. As I mentioned, the
value of a zero-coupon bond is very sensitive to changing interest rates. So if
we were to see rates climb back up, the value of these bonds would decline. But
as they get closer to maturity, at which time they'll attain their face value,
the influence of interest rates declines.
Competitive rankings, such as those provided by Lipper Analytical
Services are often helpful in measuring a fund's performance relative to funds
with similar investment objectives. However, since the concept of a target
equity fund is fairly new, Kemper Retirement Fund Series accounts for 6 of 13
funds in the category (as of December 31, 1995).
Q. WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS?
A. Generally positive. Continued low inflation and steady or declining
interest rates should favor the series' growth stock investments as well as
their bond holdings. We've positioned the Kemper Retirement Fund Series for
continued slow growth, with the potential for a positive bounce in the first
half of 1996. I think discussion of an impending recession is very much at odds
with an environment of low inflation and declining interest rates. Anything's
possible, but I just don't see recession as an immediate threat. Now if the
economy were to begin to overheat, we'd be in a difficult position. But based
on what I see right now, I don't consider that to be likely in the coming
months.
Terms to Know
CORRECTION A sharp, relatively short price decline that temporarily interrupts
a persistent upward trend in the market or the price of a stock. Technical
analysts note that markets do not move straight up or down and that corrections
are to be expected during any long-term move.
INDEX An unmanaged group of stocks that is considered representative of the
stock or bond markets. An index does not take into account any fees or expenses
related to the individual securities that it tracks. However, for performance
comparisons, the index is adjusted to reflect the reinvestment of dividends of
the securities in the index.
SECTOR A specific industry group.
TOTAL RETURN A fund's total return figure measures both the net investment
income generated by, and the effect of, any realized and unrealized
appreciation or depreciation of the underlying investments in its portfolio for
the period. Total return assumes the reinvestment of all dividends and it
represents the aggregate percentage or dollar value change over the period.
VOLATILITY Characteristic of a security, commodity or market to rise or fall
sharply in price within a short period of time. A stock may be volatile because
the outlook for the company is particularly uncertain or because of various
other reasons.
ZERO-COUPON BOND A bond that makes no periodic interest payments but instead
is sold at a deep discount from its face value. The buyer of such a bond
receives the rate of return by the gradual appreciation of the security due to
the accrual of interest. The security is redeemed at face value at maturity.
7
<PAGE> 8
Performance Update
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Average Annual Total Returns*
- -----------------------------------------------------------------------------------------------------
FOR PERIODS ENDED DECEMBER 31, 1995 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
LIFE OF
1-YEAR 5-YEAR FUND
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEMPER RETIREMENT FUND SERIES I 17.61% 12.38% 12.63% (SINCE 2/5/90)
- -----------------------------------------------------------------------------------------------------
KEMPER RETIREMENT FUND SERIES II 17.40 12.47 13.12 (SINCE 9/11/90)
- -----------------------------------------------------------------------------------------------------
KEMPER RETIREMENT FUND SERIES III 19.82 N/A 9.45 (SINCE 3/10/92)
- -----------------------------------------------------------------------------------------------------
KEMPER RETIREMENT FUND SERIES IV 21.18 N/A 7.18 (SINCE 1/15/93)
- -----------------------------------------------------------------------------------------------------
KEMPER RETIREMENT FUND SERIES V 22.49 N/A 5.99 (SINCE 11/15/93)
- -----------------------------------------------------------------------------------------------------
</TABLE>
[LINE GRAPH]
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Kemper Retirement Fund Series I from 1/31/90 to 12/31/95
- -----------------------------------------------------------------------------------------------------
1/31/90 12/31/91 12/31/93 12/31/95
<S> <C> <C> <C> <C>
- - KEMPER RETIREMENT FUND(1) $10,000 $15,319 $17,386 $20,169
- - WILSHIRE LARGE COMPANY GROWTH INDEX+ 10,000 15,309 16,542 23,770
- - RUSSELL 1000(R) GROWTH INDEX++ 10,000 15,890 16,742 23,300
- -----------------------------------------------------------------------------------------------------
</TABLE>
[LINE GRAPH]
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Kemper Retirement Fund Series II from 9/30/90 to 12/31/95
- -----------------------------------------------------------------------------------------------------
9/30/90 12/31/91 12/31/93 12/31/95
<S> <C> <C> <C> <C>
- - KEMPER RETIREMENT FUND(1) $10,000 $14,642 $16,977 $19,550
- - WILSHIRE LARGE COMPANY GROWTH INDEX+ 10,000 15,662 16,924 24,741
- - RUSSELL 1000(R) GROWTH INDEX++ 10,000 16,538 17,426 23,128
- -----------------------------------------------------------------------------------------------------
</TABLE>
[LINE GRAPH]
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Kemper Retirement Fund Series III from 3/31/92 to 12/31/95
- -----------------------------------------------------------------------------------------------------
3/31/92 12/31/93 12/31/95
<S> <C> <C> <C>
- - KEMPER RETIREMENT FUND(1) $10,000 $11,982 $14,020
- - WILSHIRE LARGE COMPANY GROWTH INDEX+ 10,000 11,367 15,481
- - RUSSELL 1000(R) GROWTH INDEX++ 10,000 11,228 16,010
- -----------------------------------------------------------------------------------------------------
</TABLE>
[LINE GRAPH]
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Kemper Retirement Fund Series IV from 1/31/93 to 12/31/95
- -----------------------------------------------------------------------------------------------------
11/30/93 12/31/94 12/31/95
<S> <C> <C> <C>
- - KEMPER RETIREMENT FUND(1) $10,000 $ 9,569 $12,202
- - WILSHIRE LARGE COMPANY GROWTH INDEX+ 10,000 10,410 14,226
- - RUSSELL 1000(R) GROWTH INDEX++ 10,000 10,053 14,273
- -----------------------------------------------------------------------------------------------------
</TABLE>
[LINE GRAPH]
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
KEMPER RETIREMENT FUND SERIES V from 11/30/93 to 12/31/95
- -----------------------------------------------------------------------------------------------------
11/30/93 12/31/94 12/31/95
<S> <C> <C> <C>
- - KEMPER RETIREMENT FUND(1) $10,000 $ 9,941 $11,404
- - WILSHIRE LARGE COMPANY GROWTH INDEX+ 10,000 10,146 14,334
- - RUSSELL 1000(R) GROWTH INDEX++ 10,000 10,403 13,785
- -----------------------------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of 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.
* 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. 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.
1 Performance includes reinvestment of dividends and adjustment for the maximum
sales charge of 5.0%. When comparing Kemper Retirement Fund Series to Russell
1000(R) Growth Index+ and Wilshire Large Company Growth Index, ++ you should
note that the funds' performance reflects the maximum sales charge, while no
such charges are reflected in the performance of the indices. Beginning next
year, we will stop showing the Wilshire Large Company Growth Index and will
only show the Russell 1000(R) Growth Index, a more readily available index.
+ The Russell 1000(R) Growth Index is an unmanaged index comprised of common
stocks of larger U.S. companies with greater than average growth orientation
and represents the universe of stocks from which "earnings/growth" money
managers typically select. Assumes reinvestment of dividends. Source is Lipper
Analytical Services, Inc.
++ The Wilshire Large Company Growth Index is an unmanaged index, which
generally represents the market for stocks of larger companies (selected on the
basis of sales growth, return on equity, and dividend payout). Source is
Wilshire Associates Incorporated.
8
<PAGE> 9
Special Shareholders' Meeting
SPECIAL SHAREHOLDERS' MEETING
On September 19, 1995, the results of the proxy solicitation were announced at
a special shareholder meeting. Kemper Target Equity Fund shareholders were
asked to vote on three separate issues: election of eight Trustees to the Board
of Trustees, ratification of Ernst & Young LLP as independent auditors and
approval of a new investment management agreement with Kemper Financial
Services, Inc. or its successor on the same terms as the current agreement. All
seven series of Kemper Target Equity Fund voted together on items one and two
which is why the number of votes is higher for those items. We are pleased to
report that all nominees were elected and all other items were approved.
Following are the results for each issue:
1) Election of Trustees
<TABLE>
<CAPTION>
For Withheld
<S> <C> <C>
James E. Akins 37,666,268 2,382,927
Arthur R. Gottschalk 37,676,278 2,374,917
Frederick T. Kelsey 37,662,263 2,386,932
David B. Mathis 37,770,396 2,278,799
Fred B. Renwick 37,690,297 2,358,898
Stephen B. Timbers 37,718,332 2,330,863
John B. Tingleff 37,762,386 2,286,809
John G. Weithers 38,014,696 2,034,499
</TABLE>
2) Ratification of the selection of Ernst & Young LLP as independent auditors
for the fund
For Against Abstain
37,794,664 521,615 1,732,910
3) Approval of new investment management agreement
For Against Abstain
Series I 5,413,119 154,775 372,349
Series II 7,356,465 138,655 434,460
Series III 6,137,650 142,586 479,511
Series IV 1,611,806 154,220 506,185
Series V 7,932,851 119,202 371,142
9
<PAGE> 10
Individual Holdings
THE FUNDS' LARGEST STOCK HOLDINGS
PERCENTAGES BASED ON FUNDS' TOTAL NET ASSETS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Holdings Series I Series II Series III Series IV Series V
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Monsanto Co. 1.35% 0.89% 0.96% 0.97% 1.15%
- -------------------------------------------------------------------------------
GM Hughes Electronics 1.13% 0.82% 0.89% 0.82% 0.89%
Corp.
- -------------------------------------------------------------------------------
SBC Communications, Inc. 0.93% -- -- -- --
- -------------------------------------------------------------------------------
Pharmacia & Upjohn Inc. 0.93% 0.61% 0.75% 0.67% 0.73%
- -------------------------------------------------------------------------------
Compaq Computer Corp. 0.92% 0.68% 0.79% 0.66% 0.73%
- -------------------------------------------------------------------------------
Cincinnati Bell 0.89% 0.61% 0.76% 0.64% 0.70%
- -------------------------------------------------------------------------------
Intel Corp. 0.85% 0.65% 0.73% 0.69% 0.69%
- -------------------------------------------------------------------------------
Fluor Corp. 0.85% 0.60% -- -- --
- -------------------------------------------------------------------------------
Mobil Corp. 0.84% 0.66% 0.68% 0.61% 0.65%
- -------------------------------------------------------------------------------
Walt Disney Co. 0.84% -- -- -- 0.65%
- -------------------------------------------------------------------------------
BMC Software -- 0.61% 0.67% 0.56% --
- -------------------------------------------------------------------------------
Allied-Signal -- -- 0.67% 0.56% --
- -------------------------------------------------------------------------------
Enron Corp. -- 0.60% 0.68% 0.57% 0.68%
- -------------------------------------------------------------------------------
Microsoft Corp. -- -- -- -- 0.66%
- -------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
Description of Individual Holdings
DESCRIPTION OF THE FUNDS' LARGEST STOCK HOLDINGS
Largest Holdings
- --------------------------------------------------------------------------------
Holdings
- --------------------------------------------------------------------------------
Monsanto Co. Manufactures and sells a wide variety of agricultural and
chemical products, man-made fiber, plastics and resin
products, prescription drugs and artificial sweeteners.
GM Hughes A world leader in the design, manufacture and marketing of
Electronics advanced electronic systems for automotive,
Corp. telecommunications and defense applications; a leading
manufacturer and private owner and operator of
commercial communications satellites.
SBC One of the world's leading diversified telecommunications
Communications, companies; provides innovative products and services over
Inc. its local network; also serves international markets
including England, Mexico, France, Chile, South Korea,
Israel and Australia.
Pharmacia Engaged in the discovery, development, manufacturing
& Upjohn Inc. and marketing of human pharmaceuticals, specialty chemicals
and animal health products.
Compaq Computer Designs, develops, manufactures and markets personal
Corp. computers for business and professional users.
Cincinnati Bell Provides telecommunications services, information systems
and marketing services.
Intel Corp. Designs, develops, manufactures and sells advanced
micro-computer components such as integrated circuits and
other related products.
Fluor Corp. Provides design engineering, construction, product
management, maintenance and tracking services to an
extensive range of industrial, community, natural resource,
energy and government clients worldwide.
Mobil Corp. Produces, transports, refines and markets petroleum and
natural gas and related products.
Walt Disney Co. Develops and produces family entertainment such as theme
parks and resorts, film, television and consumer products.
BMC Software Develops, markets and supports standard systems software
products to enhance IBM's database management and data
communications systems.
Allied-Signal Engaged in three segments which include aerospace,
automotive and engineered materials.
Enron Corp. Gathers, transports and markets natural gas.
Microsoft Designs, develops, markets and supports a variety of
Corp. micro-computer software, operating systems, language and
application programs, related books and
peripheral devices.
11
<PAGE> 12
Portfolios of Investments
KEMPER RETIREMENT FUND--
SERIES I THROUGH SERIES V
PORTFOLIOS OF INVESTMENTS AT DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
SERIES I
- ----------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. GOVERNMENT
OBLIGATIONS--47.1%,
62.2%, 58.5%,
63.6% AND 57.2%
U.S. Treasury, zero coupon, 1999 through 2004
(Cost: $44,876, $96,484, $65,835, $92,497 and
$66,737) $62,700 $51,118
==========================================================================================================
<CAPTION>
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS
ADVERTISING, BROADCASTING
AND PUBLISHING--2.5%,
1.8%, 2.0%, 1.8%
AND 1.9%
(a) Cox Communications Inc. 18,000 351
Harcourt General 12,000 503
Interpublic Group of Companies 10,000 434
Liberty Media Group "A" 20,000 538
Readers Digest Association, Inc. -- --
(a) Tele-Communications, International 15,000 298
(a) Viacom International "B" 11,192 529
=======================================================================
2,653
-----------------------------------------------------------------------
CHEMICALS--3.3%, 2.3%,
2.6%, 2.5% AND 2.8%
Air Products & Chemicals 8,000 422
B.F. Goodrich Co. 8,000 545
E.I. DuPont de Nemours & Co. 8,500 594
Monsanto Co. 12,000 1,470
Praxair, Inc. 15,300 514
=======================================================================
3,545
-----------------------------------------------------------------------
COMPUTER SOFTWARE,
ELECTRONIC DATA
PROCESSING AND
ELECTRONIC
COMPONENTS--7.6%,
5.6%, 6.4%, 5.6%
AND 6.2%
(a) Atmel Corporation 9,000 201
Bay Networks 4,500 185
(a) BMC Software 20,000 855
(a) Cisco Systems 4,000 299
(a) Compaq Computer Corp. 21,000 1,008
First Data Corporation 7,000 468
General Motors-Electronic Data Systems 9,300 484
Hewlett-Packard, Co. 7,600 637
Intel Corp. 16,400 931
Linear Technology Corp. 8,000 314
(a) LSI Logic Corp. 15,000 491
(a) Microsoft Corp. 9,000 790
(a) Parametric Technology Corp. 8,000 532
(a) Silicon Graphics Inc. 17,000 468
(a) Softkey International 8,000 185
(a) Sun Microsystems 8,400 383
=======================================================================
8,231
-----------------------------------------------------------------------
CONSUMER PRODUCTS AND
SERVICES--3.5%, 2.5%,
2.9%, 2.5% AND 2.9%
Gillette Co. 7,000 365
PepsiCo 12,500 698
Philip Morris Companies 8,100 733
Pioneer Hi-Bred International 3,000 167
Procter & Gamble Co. 7,000 581
Sara Lee Corp. 20,000 638
Warnaco Group 25,000 625
=======================================================================
3,807
-----------------------------------------------------------------------
</TABLE>
12
<PAGE> 13
Portfolios of Investments
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
SERIES II SERIES III SERIES IV SERIES V
- ----------------------------------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$138,700 $108,583 $103,400 $74,319 $141,400 $95,813 $129,700 $78,765
==========================================================================================================
<CAPTION>
NUMBER NUMBER NUMBER NUMBER
OF SHARES VALUE OF SHARES VALUE OF SHARES VALUE OF SHARES VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
20,000 390 18,000 351 18,000 351 18,000 351
14,000 586 10,000 419 12,000 503 12,000 503
12,000 521 10,000 434 10,000 434 10,000 434
22,000 591 20,000 538 20,000 538 20,000 538
-- -- -- -- -- -- 50 3
18,000 358 15,000 298 15,000 298 15,000 298
13,010 616 9,373 444 11,374 539 11,798 559
==========================================================================================================
3,062 2,484 2,663 2,686
- ----------------------------------------------------------------------------------------------------------
9,800 517 7,700 406 11,300 596 11,700 617
10,000 681 8,000 545 8,000 545 8,000 545
10,200 713 8,500 594 8,500 594 8,500 594
12,800 1,568 10,000 1,225 12,000 1,470 13,000 1,593
17,300 582 14,400 484 14,400 484 14,400 484
==========================================================================================================
4,061 3,254 3,689 3,833
- ----------------------------------------------------------------------------------------------------------
11,000 246 9,000 201 9,000 201 9,000 201
5,250 216 4,500 185 4,500 185 4,500 185
25,000 1,069 20,000 855 20,000 855 20,000 855
5,500 410 4,800 358 5,100 381 4,500 335
25,000 1,200 21,000 1,008 21,000 1,008 21,000 1,008
8,000 535 6,200 414 7,000 468 7,000 468
11,400 593 8,800 458 9,100 473 11,700 607
8,500 712 7,200 603 7,800 653 8,200 687
20,100 1,141 16,400 931 18,400 1,044 16,800 953
10,000 393 8,000 314 8,000 314 6,000 236
18,000 590 15,000 491 15,000 491 15,000 491
11,000 965 9,000 790 9,000 790 10,500 920
9,000 599 8,000 532 8,000 532 8,000 532
20,400 561 17,000 468 17,000 468 17,000 468
9,000 208 8,000 185 8,000 185 8,000 185
9,800 447 8,000 365 8,400 383 8,400 383
==========================================================================================================
9,885 8,158 8,431 8,514
- ----------------------------------------------------------------------------------------------------------
8,000 417 7,000 365 7,800 406 7,000 365
15,000 838 11,500 643 11,500 643 13,500 754
9,000 815 8,000 724 8,000 724 8,000 724
3,000 167 3,000 167 3,000 167 3,000 167
8,000 664 6,500 540 7,000 581 8,000 664
23,000 732 20,000 638 20,000 638 20,000 638
30,000 750 25,000 625 25,000 625 25,000 625
==========================================================================================================
4,383 3,702 3,784 3,937
- ----------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 14
Portfolios of Investments
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
SERIES I
- ------------------------------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DRUGS AND HEALTHCARE--
6.2%, 4.5%, 5.1%,
4.4% AND 5.0%
Astra AB 12,000 $ 467
Baxter International 15,000 628
(a) Boston Scientific Corp. 6,000 294
(a) Caremark International, Inc. 19,000 343
Columbia/HCA Healthcare Corp. 15,000 761
(a) Forest Laboratories 5,000 226
Guidant Corporation 6,967 294
Johnson & Johnson 4,000 343
Medtronic, Inc. 10,000 559
Merck & Co., Inc. 4,000 263
Pfizer 4,000 252
Pharmacia & Upjohn Inc. 26,100 1,011
(a) R. P. Scherer Corp. 14,200 698
SmithKline Beecham PLC 11,000 611
=======================================================================
6,750
-----------------------------------------------------------------------
ENERGY AND RELATED
SERVICES--3.0%, 2.3%,
2.5%, 2.2% AND 2.4%
Enron Corp. 22,800 869
Enron Oil & Gas Co. 15,000 360
Mobil Corp. 8,200 918
Noble Affiliates 9,800 293
Schlumberger Ltd. 12,000 831
=======================================================================
3,271
-----------------------------------------------------------------------
ENTERTAINMENT AND
RESTAURANTS--2.3%, 1.7%,
1.8%, 1.5% AND 1.8%
Carnival Corp. 20,000 488
(a) Circus Circus Enterprises 25,000 697
Walt Disney Co. 15,500 915
Wendy's International 20,000 425
=======================================================================
2,525
-----------------------------------------------------------------------
FINANCIAL SERVICES--3.1%,
2.3%, 2.4%, 2.2%
AND 2.4%
Bank of Boston 6,600 305
Boatmen's Bancshares 8,000 327
Dean Witter Discover 16,000 752
Marsh & McLennan Companies, Inc. 7,000 621
MBIA Inc. 10,000 750
Northern Trust Co. 10,000 560
=======================================================================
3,315
-----------------------------------------------------------------------
</TABLE>
15
<PAGE> 15
Portfolios of Investments
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
SERIES II SERIES III SERIES IV SERIES V
- --------------------------------------------------------------------------------------------------------
NUMBER NUMBER NUMBER NUMBER
OF SHARES VALUE OF SHARES VALUE OF SHARES VALUE OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
14,000 $ 546 10,000 $ 390 10,000 $ 390 12,000 $ 467
18,000 754 15,000 628 15,000 628 15,000 628
7,000 343 6,000 294 6,000 294 6,000 294
21,000 381 17,000 308 17,000 308 18,000 327
17,700 898 14,500 736 15,000 761 17,600 893
6,000 271 5,000 226 5,000 226 5,000 226
8,164 345 6,201 262 6,967 294 6,201 262
4,500 385 4,000 343 4,000 343 4,000 343
12,000 671 10,000 559 10,000 559 10,000 559
4,800 316 4,000 263 4,000 263 4,400 290
5,000 315 4,000 252 4,000 252 4,000 252
27,550 1,071 24,650 954 26,100 1,011 26,100 1,011
17,200 845 14,200 698 14,200 698 14,200 698
12,000 666 11,000 611 11,000 611 11,000 611
========================================================================================================
7,807 6,524 6,638 6,861
- --------------------------------------------------------------------------------------------------------
27,700 1,056 22,800 869 22,700 863 24,900 948
18,900 454 15,000 360 15,000 360 15,000 360
10,300 1,154 7,800 874 8,200 918 8,000 895
12,500 373 9,000 269 9,800 293 8,700 260
15,000 1,038 12,000 831 12,000 831 12,000 831
========================================================================================================
4,075 3,203 3,265 3,294
- --------------------------------------------------------------------------------------------------------
25,000 609 18,000 439 20,000 488 20,000 488
30,000 836 21,000 585 21,000 585 25,000 697
17,500 1,033 14,100 832 14,000 825 15,200 896
22,000 468 20,000 425 20,000 425 20,000 425
========================================================================================================
2,946 2,281 2,323 2,506
- --------------------------------------------------------------------------------------------------------
7,900 365 5,600 259 6,700 310 6,700 310
9,500 388 7,500 306 8,000 327 8,500 347
19,000 893 14,000 658 16,000 752 16,000 752
8,000 710 7,000 621 7,000 621 7,000 621
12,000 900 10,000 750 10,000 750 10,000 750
12,000 672 8,000 448 10,000 560 10,000 560
========================================================================================================
3,928 3,042 3,320 3,340
- --------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 16
Portfolios of Investments
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
SERIES I
- ------------------------------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MANUFACTURING--8.5%,
6.1%, 6.7%, 5.9%
AND 6.6%
Allied-Signal 18,000 $ 855
Armstrong World Industries 7,000 434
Boeing Co. 9,500 745
Emerson Electric Co. 9,000 736
Fluor Corp. 14,000 924
FMC Corp. 7,700 521
GM Hughes Electronics Corp. 25,000 1,228
General Electric Co. 9,000 648
Georgia-Pacific Corp. 6,000 412
Leggett & Platt Incorporated 25,000 606
Magna International Inc. 10,000 433
Shaw Industries 20,000 295
Textron Inc. 11,500 776
York International Corp. 11,900 559
========================================================================
9,172
------------------------------------------------------------------------
RETAILING--2.7%, 2.1%,
2.3%, 2.0% AND 2.3%
(a) Federated Department Stores 25,000 688
Gap Inc. -- --
Home Depot 5,000 239
May Department Stores Co. 16,000 676
(a) Office Depot 23,000 454
(a) OfficeMax 16,000 358
Pep Boys-Manny Moe & Jack 20,000 512
========================================================================
2,927
------------------------------------------------------------------------
TELECOMMUNICATIONS--
4.0%, 2.7%, 3.1%, 2.7%
AND 3.0%
(a) AirTouch Communications 30,000 848
AT&T 10,800 700
Cincinnati Bell 28,000 973
(a) DSC Communication 4,000 147
SBC Communications, Inc. 17,600 1,011
(a) Tellabs Operations 8,000 296
(a) WorldCom, Inc. 11,800 416
========================================================================
4,391
------------------------------------------------------------------------
TRANSPORTATION--.6%,
.5%, .5%, .4%
AND .5%
Union Pacific Corp. 9,500 627
(a) Wisconsin Central Transportation Corporation 700 46
========================================================================
673
========================================================================
TOTAL COMMON STOCKS--47.3%, 34.4%, 38.3%, 33.7% AND
37.8%
(Cost: $43,745, $51,345, $41,403, $43,231
and $44,900) 51,260
========================================================================
</TABLE>
16
<PAGE> 17
Portfolios of Investments
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
SERIES II SERIES III SERIES IV SERIES V
- ---------------------------------------------------------------------------------------------------------
NUMBER NUMBER NUMBER NUMBER
OF SHARES VALUE OF SHARES VALUE OF SHARES VALUE OF SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
21,000 $ 997 18,000 $ 855 18,000 $ 855 18,000 $ 855
9,000 558 7,000 434 7,000 434 7,000 434
11,200 878 8,300 650 9,000 705 10,000 783
10,000 818 8,500 695 9,000 736 9,200 752
16,000 1,055 11,000 726 12,000 792 12,000 792
10,500 710 7,900 534 8,100 548 8,000 541
29,000 1,425 23,000 1,131 25,000 1,228 25,000 1,228
10,000 720 9,000 648 9,000 648 9,000 648
7,000 480 4,000 274 4,000 274 6,000 412
29,000 703 25,000 606 25,000 606 25,000 606
12,000 519 10,000 433 10,000 433 10,000 433
22,000 325 20,000 295 20,000 295 20,000 295
13,000 878 11,000 743 11,000 743 11,500 776
14,700 690 10,900 512 11,900 559 11,900 559
=========================================================================================================
10,756 8,536 8,856 9,114
- ---------------------------------------------------------------------------------------------------------
29,000 798 25,000 688 25,000 688 25,000 688
400 17 -- -- -- -- -- --
7,900 378 5,200 246 7,000 335 6,700 324
19,000 803 14,000 592 16,000 676 18,000 761
28,000 553 23,000 454 22,000 436 28,000 553
19,300 432 16,000 358 16,000 358 16,000 358
25,000 641 20,000 512 20,000 512 20,000 512
=========================================================================================================
3,622 2,850 3,005 3,196
- ---------------------------------------------------------------------------------------------------------
36,000 1,017 30,000 848 30,000 848 30,000 848
12,300 796 10,000 648 11,000 714 10,800 700
31,000 1,076 28,000 973 28,000 973 28,000 973
5,000 184 4,000 147 4,000 147 4,000 147
13,000 748 10,400 598 11,700 673 13,000 748
10,000 370 8,000 296 8,000 296 8,000 296
14,200 501 11,800 416 11,800 416 11,800 416
=========================================================================================================
4,692 3,926 4,067 4,128
- ---------------------------------------------------------------------------------------------------------
11,500 759 9,500 627 9,500 627 9,500 627
800 53 600 39 700 46 700 46
=========================================================================================================
812 666 673 673
=========================================================================================================
60,029 48,626 50,714 52,082
=========================================================================================================
</TABLE>
17
<PAGE> 18
Portfolios Of Investments
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
SERIES I
- -----------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONVERTIBLE CORPORATE
OBLIGATIONS--1.1%,
.8%, .9%, .8%
AND .6%
Softkey International, 5.50%, 2000 $ 400 $ 297
Thermo Electron, 5.00%, 2001 500 845
==========================================================================
(Cost: $903, $1,004, $903, $903 and $702) 1,142
==========================================================================
- ------------------------------------------------------------------------------------------------------------
MONEY MARKET
INSTRUMENTS--3.3%,
1.4%, 1.2%, 1.0%
AND 3.6%
Yield--5.90% through 6.16%
Due--January 1996
(Cost: $3,597, $2,399, $1,499, $1,499 and $4,997) 3,600 3,598
==========================================================================
TOTAL INVESTMENTS--98.8%, 98.8%, 98.9%,
99.1% AND 99.2%
(Cost: $93,121, $151,232, $109,640, $138,130 and
$117,336) 107,118
==========================================================================
CASH AND OTHER ASSETS, LESS LIABILITIES--1.2%, 1.2%,
1.1%, .9% AND .8% 1,314
==========================================================================
NET ASSETS--100% $108,432
==========================================================================
</TABLE>
- -------------------------------------------------------------------------------
NOTES TO PORTFOLIOS OF INVESTMENTS
- -------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments for federal income tax purposes at December
31, 1995, the unrealized appreciation and depreciation on investments is as
follows:
<TABLE>
<CAPTION>
SERIES I
<S> <C>
-------------------------------------------------------------------------------------------------------------
Cost of investments for federal income tax purposes $ 93,121
-------------------------------------------------------------------------------------------------------------
Gross unrealized appreciation 14,919
-------------------------------------------------------------------------------------------------------------
Gross unrealized depreciation 922
-------------------------------------------------------------------------------------------------------------
Net unrealized appreciation 13,997
-------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
18
<PAGE> 19
Portfolios of Investments
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
SERIES II SERIES III SERIES IV SERIES V
- -------------------------------------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 400 $ 297 $ 400 $ 297 $ 400 $ 297 $ 400 $ 297
600 1,014 500 845 500 845 300 507
=============================================================================================================
1,311 1,142 1,142 804
=============================================================================================================
2,400 2,399 1,500 1,499 1,500 1,499 5,000 4,997
=============================================================================================================
172,322 125,586 149,168 136,648
=============================================================================================================
2,174 1,390 1,384 1,089
=============================================================================================================
$174,496 $126,976 $150,552 $137,737
=============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
SERIES II SERIES III SERIES IV SERIES V
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
$151,232 $109,640 $138,130 $117,336
- -----------------------------------------------------------------------------------------------------------
22,178 16,840 11,933 20,289
- -----------------------------------------------------------------------------------------------------------
1,088 894 895 977
- -----------------------------------------------------------------------------------------------------------
21,090 15,946 11,038 19,312
- -----------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
Finanicial Statements
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES
------------------------------------------------
I II III IV V
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
- -------------------------------------------------------------------------------------------------------------
Investments, at value
(Cost: $93,121, $151,232, $109,640, $138,130 and
$117,336) $107,118 172,322 125,586 149,168 136,648
Cash 369 280 222 25 66
Receivable for:
Investments sold 1,338 2,447 1,580 1,820 1,088
Dividends and interest 92 107 90 93 92
TOTAL ASSETS 108,917 175,156 127,478 151,106 137,894
=============================================================================================================
</TABLE>
- -----------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
Payable for:
Fund shares redeemed 16 39 13 48 32
Investments purchased 363 435 363 363 --
Management fee 45 73 53 63 57
Administrative services fee 22 36 26 31 28
Custodian and transfer agent
fees and related expenses 25 61 31 34 31
Other 14 16 16 15 9
Total liabilities 485 660 502 554 157
NET ASSETS $108,432 174,496 126,976 150,552 137,737
=============================================================================================================
</TABLE>
- -----------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
Paid-in capital $ 91,818 150,106 108,457 137,154 116,072
Undistributed net realized gain on investments 2,609 3,195 2,630 2,633 2,396
Net unrealized appreciation on investments 13,997 21,090 15,946 11,038 19,312
Undistributed net investment income 8 105 (57) (273) (43)
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $108,432 174,496 126,976 150,552 137,737
=============================================================================================================
</TABLE>
- -----------------------------------------------------------------------------
THE PRICING OF SHARES
- -----------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
SHARES OUTSTANDING, NO PAR VALUE 9,972 13,840 11,930 14,256 13,660
=============================================================================================================
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
(net assets divided by shares outstanding) $10.87 12.61 10.64 10.56 10.08
=============================================================================================================
</TABLE>
See accompanying Notes to Financial Statements.
20
<PAGE> 21
Financial Statements
STATEMENTS OF OPERATIONS
Six months ended December 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES
----------------------------------------------
I II III IV V
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME
- -----------------------------------------------------------------------------------------------------------
Dividends $ 375 439 359 374 385
Interest 2,092 3,953 2,527 2,928 2,696
Total investment income 2,467 4,392 2,886 3,302 3,081
Expenses:
Management fee 269 433 313 375 339
Administrative services fee 132 214 156 187 169
Custodian and transfer agent fees and related expenses 77 148 100 104 105
Professional fees 19 30 22 28 23
Reports to shareholders 14 22 16 18 7
Trustees' fees and other 15 14 15 14 16
Total expenses 526 861 622 726 659
NET INVESTMENT INCOME 1,941 3,531 2,264 2,576 2,422
===========================================================================================================
- -----------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- -----------------------------------------------------------------------------------------------------------
Net realized gain on sales of investments 7,392 9,206 6,889 6,473 6,598
Change in net unrealized appreciation on investments (956) (246) 1,186 3,862 3,558
Net gain on investments 6,436 8,960 8,075 10,335 10,156
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $8,377 12,491 10,339 12,911 12,578
===========================================================================================================
</TABLE>
21
<PAGE> 22
Financial Statements
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
---------------------------- ----------------------------
SERIES I SERIES II
---------------------------- ----------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30,
1995 1995 1995 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS, DIVIDENDS AND
CAPITAL SHARE ACTIVITY
- ------------------------------------------------------------------------------------------------------------
Net investment income $ 1,941 4,073 3,531 7,693
Net realized gain (loss) 7,392 2,405 9,206 3,240
Change in net unrealized appreciation (956) 9,708 (246) 14,922
Net increase in net assets resulting from
operations 8,377 16,186 12,491 25,855
Distribution from net investment
income (3,962) (3,759) (7,198) (7,527)
Distribution from net realized gain (6,844) (6,595) (8,965) (8,450)
Total dividends to shareholders (10,806) (10,354) (16,163) (15,977)
Net increase (decrease) from capital
share transactions 4,379 (3,114) 4,831 (9,596)
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,950 2,718 1,159 282
============================================================================================================
- ------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------
Beginning of period 106,482 103,764 173,337 173,055
END OF PERIOD $108,432 106,482 174,496 173,337
UNDISTRIBUTED NET INVESTMENT INCOME
AT END OF PERIOD $ 8 2,029 105 3,772
============================================================================================================
</TABLE>
See accompanying Notes to Financial Statements.
22
<PAGE> 23
Financial Statements
<TABLE>
<CAPTION>
- --------------------------- --------------------------- ---------------------------
SERIES III SERIES IV SERIES V
- --------------------------- --------------------------- ---------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30,
1995 1995 1995 1995 1995 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
2,264 5,003 2,576 5,865 2,422 4,118
6,889 1,948 6,473 (1,684) 6,598 (3,553)
1,186 13,385 3,862 21,482 3,558 20,561
10,339 20,336 12,911 25,663 12,578 21,126
(4,806) (5,019) (5,653) (5,860) (4,780) (2,533)
(6,226) (4,317) -- -- -- --
(11,032) (9,336) (5,653) (5,860) (4,780) (2,533)
2,988 (9,451) (8,885) (14,279) (4,998) 52,069
2,295 1,549 (1,627) 5,524 2,800 70,662
===========================================================================================
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
124,681 123,132 152,179 146,655 134,937 64,275
126,976 124,681 150,552 152,179 137,737 134,937
-- 2,485 -- 2,804 -- 2,315
===========================================================================================
</TABLE>
23
<PAGE> 24
Notes to Financial Statements
1 DESCRIPTION OF THE FUNDS Kemper Retirement Fund Series I, II, III, IV and V
(the Funds) are series of Kemper Target Equity Fund
(the Trust), an open-end, management investment
company, organized as a business trust under the
laws of Massachusetts. The objectives of the Funds
are to provide a guaranteed return of investment on
the Maturity Date to investors who reinvest all
dividends and hold their shares to the Maturity
Date, and to provide long-term growth of capital.
The Maturity Date for each Fund is as follows:
<TABLE>
<CAPTION>
FUND MATURITY DATE
---------- ------------------
<S> <C>
Series I November 15, 1999
Series II August 15, 2000
Series III February 15, 2002
Series IV February 15, 2003
Series V November 15, 2004
</TABLE>
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
obligations in the Funds' portfolios, as well as by
a guarantee from Kemper Financial Services, Inc.
(KFS), the Funds' investment manager.
2 SIGNIFICANT ACCOUNTING
POLICIES 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
24
<PAGE> 25
Notes to Financial Statements
long-term fixed income securities. Realized gains
and losses from investment transactions are
reported on an identified cost basis.
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 during
limited offering periods which ended during the
years 1990 through 1995, 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. Each Fund has complied with
the special provisions of the Internal Revenue Code
available to investment companies for the six
months ended December 31, 1995.
DIVIDENDS TO SHAREHOLDERS. The Trust declares and
pays dividends of net investment income and net
realized capital gains on an annual basis, which
are recorded on the ex-dividend date. Dividends are
determined in accordance with income tax principles
which may treat certain transactions differently
from generally accepted accounting principles.
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The Trust has a management
agreement with KFS and the Funds pay a management
fee at an annual rate of .50% of average daily net
assets. The Funds incurred a management fee of
$1,729,000 for the six months ended December 31,
1995.
ADMINISTRATIVE SERVICES AGREEMENT. The Trust has an
administrative services agreement with Kemper
Distributors, Inc. (KDI). For providing information
and administrative services to shareholders, the
Trust pays KDI a fee at an annual rate of up to
.25% of average daily net assets. KDI in turn has
various agreements with financial services firms
that provide these services and pays these firms
based on assets of Fund accounts the firm services.
Administrative services fees (ASF) paid are as
follows:
<TABLE>
<CAPTION>
ASF PAID BY KDI
ASF PAID BY ------------------------------
THE FUNDS TO KDI TO ALL FIRMS TO AFFILIATES
----------------- ------------- --------------
<S> <C> <C> <C>
Six months ended December 31,
1995 $ 858,000 848,000 65,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Trust's transfer agent,
Kemper Service Company (KSvC) is the shareholder
service agent. For the six months ended December
31, 1995, the transfer agent remitted shareholder
services fees to KSvC of $261,000 with respect to
the Funds.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Trust are also officers or directors of KFS.
During the six months ended December 31, 1995, the
Trust made no payments to its officers and the
Funds incurred trustees' fees of $50,000 to
independent trustees.
25
<PAGE> 26
Notes To Financial Statements
4 INVESTMENT TRANSACTIONS For the six months ended December 31, 1995,
investment transactions (excluding short-term
instruments) are as follows (in thousands):
<TABLE>
<CAPTION>
SERIES I SERIES II SERIES III SERIES IV SERIES V
-------- --------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Purchases $ 36,596 44,336 35,829 36,744 36,781
Proceeds from sales 41,853 53,124 42,344 47,666 45,014
</TABLE>
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Funds (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
DECEMBER 31, 1995 JUNE 30, 1995
------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SERIES I
-------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 987 $10,555 1,053 $ 10,275
-------------------------------------------------------------------------------
Less shares redeemed 533 6,176 1,260 13,389
-------------------------------------------------------------------------------
NET INCREASE (DECREASE) FROM
CAPITAL SHARE TRANSACTIONS 454 $ 4,379 (207) $ (3,114)
-------------------------------------------------------------------------------
SERIES II
-------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 1,274 $15,808 1,415 $ 15,925
-------------------------------------------------------------------------------
Less shares redeemed 828 10,977 2,086 25,521
-------------------------------------------------------------------------------
NET INCREASE (DECREASE) FROM
CAPITAL SHARE TRANSACTIONS 446 $ 4,831 (671) $ (9,596)
-------------------------------------------------------------------------------
SERIES III
-------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 1,052 $10,980 1,037 $ 9,388
-------------------------------------------------------------------------------
Less shares redeemed 721 7,992 1,919 18,839
-------------------------------------------------------------------------------
NET INCREASE (DECREASE) FROM
CAPITAL SHARE TRANSACTIONS 331 $ 2,988 (882) $ (9,451)
-------------------------------------------------------------------------------
SERIES IV
-------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 538 $ 5,561 680 $ 5,848
-------------------------------------------------------------------------------
Less shares redeemed 1,388 14,446 2,191 20,127
-------------------------------------------------------------------------------
NET DECREASE FROM CAPITAL SHARE
TRANSACTIONS (850) $(8,885) (1,511) $ (14,279)
-------------------------------------------------------------------------------
SERIES V
-------------------------------------------------------------------------------
Shares sold -- $ -- 7,150 $ 59,864
-------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 471 4,642 299 2,422
-------------------------------------------------------------------------------
Less shares redeemed 974 9,640 1,175 10,217
-------------------------------------------------------------------------------
NET INCREASE (DECREASE) FROM
CAPITAL SHARE TRANSACTIONS (503) $(4,998) 6,274 $ 52,069
===============================================================================
</TABLE>
26
<PAGE> 27
Financial Highlights
<TABLE>
<CAPTION>
-------------------------------------------------------------
SERIES I
-------------------------------------------------------------
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
1995 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.19 10.67 12.57 12.01 11.05
Income from investment operations:
Net investment income .23 .45 .42 .41 .42
Net realized and unrealized gain (loss) .65 1.20 (.78) 1.59 1.53
Total from investment operations .88 1.65 (.36) 2.00 1.95
Less dividends:
Distribution from net investment income .44 .41 .40 .42 .45
Distribution from net realized gain .76 .72 1.14 1.02 .54
Total dividends 1.20 1.13 1.54 1.44 .99
Net asset value, end of period $ 10.87 11.19 10.67 12.57 12.01
==========================================================================================================
TOTAL RETURN (NOT ANNUALIZED) 8.04% 17.03 (3.76) 17.47 17.58
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ----------------------------------------------------------------------------------------------------------
Expenses .97% .97 .91 .92 .92
Net investment income 3.61% 3.96 3.32 3.19 3.37
- ----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $108,432 106,482 103,764 122,340 116,041
Portfolio turnover rate (annualized) 69% 63 59 61 57
</TABLE>
27
<PAGE> 28
Financial Highlights
<TABLE>
<CAPTION>
-----------------------------------------------------------
SERIES II
-----------------------------------------------------------
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
1995 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.94 12.30 13.95 12.40 10.75
Income from investment operations:
Net investment income .30 .60 .56 .53 .38
Net realized and unrealized gain (loss) .65 1.25 (1.04) 1.67 1.59
Total from investment operations .95 1.85 (.48) 2.20 1.97
Less dividends:
Distribution from net investment income .57 .57 .58 .49 .25
Distribution from net realized gain .71 .64 .59 .16 .07
Total dividends 1.28 1.21 1.17 .65 .32
Net asset value, end of period $ 12.61 12.94 12.30 13.95 12.40
=====================================================================================================================
TOTAL RETURN (NOT ANNUALIZED) 7.51% 16.52 (4.07) 18.18 18.35
- ---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------------------
Expenses .99% .96 .90 .95 .93
Net investment income 4.08% 4.54 3.91 3.83 3.98
- ---------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $174,496 173,337 173,055 202,794 187,438
Portfolio turnover rate (annualized) 51% 47 44 51 51
</TABLE>
28
<PAGE> 29
Financial Highlights
<TABLE>
<CAPTION>
----------------------------------------------------------------
SERIES III
----------------------------------------------------------------
SIX MONTHS MARCH 10,
ENDED 1992 TO
DECEMBER 31, YEAR ENDED JUNE 30, JUNE 30,
1995 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.75 9.87 10.72 9.10 9.00
Income from investment operations:
Net investment income .22 .44 .40 .29 .12
Net realized and unrealized gain (loss) .68 1.24 (.88) 1.51 (.02)
Total from investment operations .90 1.68 (.48) 1.80 .10
Distribution from net investment income .44 .43 .37 .18 --
Distribution from net realized gain .57 .37 -- -- --
Total dividends 1.01 .80 .37 .18 --
Net asset value, end of period $ 10.64 10.75 9.87 10.72 9.10
======================================================================================================================
TOTAL RETURN (NOT ANNUALIZED) 8.56% 18.37 (4.76) 19.96 1.11
- ----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ----------------------------------------------------------------------------------------------------------------------
Expenses .99% 1.00 .95 .95 .97
Net investment income 3.62% 4.14 3.59 3.46 3.95
- ----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $126,976 124,681 123,132 143,632 62,536
Portfolio turnover rate (annualized) 56% 52 47 59 12
</TABLE>
29
<PAGE> 30
Financial Highlights
<TABLE>
<CAPTION>
----------------------------------------------------
SERIES IV
----------------------------------------------------
SIX MONTHS JANUARY 15,
ENDED 1993 TO
DECEMBER 31, YEAR ENDED JUNE 30, JUNE 30,
1995 1995 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.07 8.83 9.57 9.00
Income from investment operations:
Net investment income .21 .39 .26 .06
Net realized and unrealized gain (loss) .69 1.22 (.85) .51
Total from investment operations .90 1.61 (.59) .57
Less dividends from net investment income .41 .37 .15 --
Net asset value, end of period $ 10.56 10.07 8.83 9.57
==================================================================================================
TOTAL RETURN (NOT ANNUALIZED) 9.03% 18.95 (6.31) 6.33
- --------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------------------------
Expenses .97% .97 .97 1.21
Net investment income 3.44% 4.01 3.43 2.87
- --------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $150,552 152,179 146,655 61,882
Portfolio turnover rate (annualized) 48% 45 51 31
</TABLE>
30
<PAGE> 31
Financial Highlights
<TABLE>
<CAPTION>
--------------------------------------------
SERIES V
--------------------------------------------
SIX MONTHS NOVEMBER 15,
ENDED YEAR ENDED 1993 TO
DECEMBER 31, JUNE 30, JUNE 30,
1995 1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.53 8.15 9.00
Income from investment operations:
Net investment income .19 .28 .15
Net realized and unrealized gain (loss) .72 1.31 (1.00)
Total from investment operations .91 1.59 (.85)
Less dividends from net investment income .36 .21 --
Net asset value, end of period $ 10.08 9.53 8.15
=====================================================================================================
TOTAL RETURN (NOT ANNUALIZED) 9.64% 19.97 (9.44)
- -----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------------------
Expenses .97% 1.07 1.29
Net investment income 3.57% 4.01 3.13
- -----------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $137,737 134,937 64,275
Portfolio turnover rate (annualized) 54% 73 35
</TABLE>
NOTE FOR ALL SERIES: Total return does not reflect the effect of any sales
charges.
31
<PAGE> 32
Trustees And Officers
TRUSTEES
OFFICERS
STEPHEN B. TIMBERS
President and Trustee
JAMES E. AKINS
Trustee
ARTHUR R. GOTTSCHALK
Trustee
FREDERICK T. KELSEY
Trustee
FRED B. RENWICK
Trustee
JOHN B. TINGLEFF
Trustee
JOHN G. WEITHERS
Trustee
TRACY M. CHESTER
Vice President
DENNIS H. FERRO
Vice President
JOHN E. NEAL
Vice President
JOHN E. PETERS
Vice President
STEVEN H. REYNOLDS
Vice President
PHILIP J. COLLORA
Vice President and
Secretary
CHARLES F. CUSTER
Vice President and
Assistant Secretary
JEROME L. DUFFY
Treasurer
ELIZABETH C. WERTH
Assistant Secretary
- --------------------------------------------------------------------------------
LEGAL COUNSEL
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICE AGENT
KEMPER SERVICE COMPANY
P.O. Box 419557
Kansas City, MO 64141
- --------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT
INVESTORS FIDUCIARY TRUST COMPANY
127 West 10th Street
Kansas City, MO 64105
- --------------------------------------------------------------------------------
INVESTMENT MANAGER
KEMPER FINANCIAL SERVICES, INC.
PRINCIPAL UNDERWRITER
KEMPER DISTRIBUTORS, INC.
120 South LaSalle Street
Chicago, IL 60603
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