<PAGE> 1
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED JULY 31, 1998
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
[LOGO}
Seeks to provide long-term capital growth with guaranteed return of investment
on the maturity date to investors who reinvest all dividends and hold their
shares to the maturity date.
KEMPER TARGET EQUITY FUND
KEMPER RETIREMENT FUND
SERIES I, II, III, IV, V AND VI
"...We add value through our ability to get ahead
of conventional Wall Street wisdom, and uncover
stocks with great growth potential the
market is overlooking. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
10
LARGEST HOLDINGS
12
PORTFOLIO OF
INVESTMENTS
20
REPORT OF
INDEPENDENT AUDITORS
22
FINANCIAL STATEMENTS
26
NOTES TO
FINANCIAL STATEMENTS
30
FINANCIAL HIGHLIGHTS
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER RETIREMENT FUND SERIES I-VI
TOTAL RETURNS*
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED JULY 31, 1998
(UNADJUSTED FOR ANY SALES CHARGE)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
SERIES I 6.56%
- --------------------------------------------------------------------------------
SERIES II 6.46%
- --------------------------------------------------------------------------------
SERIES III 6.68%
- --------------------------------------------------------------------------------
SERIES IV 7.27%
- --------------------------------------------------------------------------------
SERIES V 7.76%
- --------------------------------------------------------------------------------
SERIES VI 8.32%
- --------------------------------------------------------------------------------
</TABLE>
Returns are historical and do not guarantee future performance. Investment
returns and principal values will fluctuate. So that shares when redeemed may be
worth 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.
NET ASSET VALUE
<TABLE>
<CAPTION>
AS OF AS OF
7/31/98 7/31/97
- --------------------------------------------------------------------------------
<S> <C> <C>
SERIES I $10.80 $11.86
- --------------------------------------------------------------------------------
SERIES II $12.41 $13.38
- --------------------------------------------------------------------------------
SERIES III $10.52 $11.33
- --------------------------------------------------------------------------------
SERIES IV $10.68 $11.28
- --------------------------------------------------------------------------------
SERIES V $10.17 $10.86
- --------------------------------------------------------------------------------
SERIES VI $11.25 $11.57
- --------------------------------------------------------------------------------
</TABLE>
DIVIDEND REVIEW
DURING THE YEAR ENDED JULY 31, 1998, KEMPER RETIREMENT FUND SERIES I-VI PAID
THE FOLLOWING DIVIDENDS PER SHARE:
<TABLE>
<CAPTION>
INCOME SHORT-TERM LONG-TERM
DIVIDEND CAPITAL GAIN CAPITAL GAIN
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SERIES I $0.42 $0.78 $0.51
- --------------------------------------------------------------------------------
SERIES II $0.54 $0.69 $0.49
- --------------------------------------------------------------------------------
SERIES III $0.40 $0.61 $0.46
- --------------------------------------------------------------------------------
SERIES IV $0.37 $0.57 $0.39
- --------------------------------------------------------------------------------
SERIES V $0.38 $0.60 $0.45
- --------------------------------------------------------------------------------
SERIES VI $0.39 $0.56 $0.25
- --------------------------------------------------------------------------------
</TABLE>
Terms to KNOW
BLUE CHIP STOCK: Stock of a large, well known, high quality company with an
established record of making money and paying dividends.
GRAY MONDAY: The name used to identify Monday, October 27, 1997. On that day,
turmoil in Southeast Asian markets triggered a one-day drop of 7 percent in the
U.S. equity market.
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 to its face value. The buyer of such a bond receives the
rate of return by the gradual appreciation of the security due to accrual of
interest. The security is redeemed at face value at maturity.
<PAGE> 3
ECONOMIC OVERVIEW
[SILVIA PHOTO]
DR. JOHN E. SILVIA IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.
HIS PRIMARY RESPONSIBILITIES INCLUDE ANALYSIS, MODELING AND FORECASTING OF
ECONOMIC DEVELOPMENTS AND FEDERAL RESERVE ACTIVITY THAT AFFECT FINANCIAL
MARKETS, ESPECIALLY INTEREST RATE TRENDS. THIS EFFORT INCLUDES CLOSE
COLLABORATION WITH BOTH INCOME AND EQUITY MUTUAL FUND MANAGERS AND PENSION FUND
MANAGERS.
SILVIA HOLDS A BACHELOR OF ARTS AND PH.D. IN ECONOMICS FROM NORTHEASTERN
UNIVERSITY IN BOSTON AND HAS A MASTER'S DEGREE IN ECONOMICS FROM BROWN
UNIVERSITY IN PROVIDENCE, R.I. PRIOR TO HIS CAREER AT SCUDDER KEMPER, HE WAS
WITH THE HARRIS BANK AND ALSO TAUGHT AT INDIANA UNIVERSITY.
SCUDDER KEMPER INVESTMENTS, INC. IS THE INVESTMENT MANAGER FOR KEMPER FUNDS. IT
IS ONE OF THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS
WORLDWIDE, MANAGING MORE THAN $218 BILLION IN ASSETS GLOBALLY FOR MUTUAL FUND
INVESTORS, RETIREMENT AND PENSION PLANS, INSTITUTIONAL AND CORPORATE CLIENTS,
INSURANCE COMPANIES AND PRIVATE, FAMILY AND INDIVIDUAL ACCOUNTS. IT IS ONE OF
THE 10 LARGEST MUTUAL FUND COMPLEXES IN THE UNITED STATES.
DEAR SHAREHOLDERS,
It's been a bumpy ride for many investors in the third quarter of 1998. Economic
and political instability in Russia, terrorist bombings and U.S. retaliation
overseas, lingering effects of the "contagion" in Asia, not to mention weak
corporate profits and political scandal in the United States were responsible
for considerable uncertainty and market volatility. A series of market dips and
drops continued to fuel the debate about whether we would finally see the end of
our long-running bull market -- or even plummet into a recession.
But investors who are riding out the stock market's abrupt short-term
adjustments should find comfort in the fact that economic fundamentals continue
to favor financial assets in the U.S. -- particularly Treasury bonds. In a
nutshell, the nation's economy remains strong despite its slowdown in the second
half of the year. Short-term interest rates are expected to remain low -- the
federal funds rate is holding at 5.5 percent and will most likely stay put or
could even move lower during the remainder of the year. There are no major tax
or regulatory threats waiting in the wings. And our economy continues to draw
investors from around the world, although perhaps not as fervently as last year.
The nation's gross domestic product (GDP), which represents the total value of
all goods and services produced within the U.S. economy, grew at an annualized
rate of 1.4 percent in the second quarter of 1998. While this was the slowest
growing quarter in the last three years, it was much stronger than consensus.
Slower growth can be attributed to several one-time factors, including a
domestic correction in inventory levels and the General Motors strike, which has
since been resolved, as well as the long-term loss of trade with Asia.
Real capital spending and employment growth have remained solid. Consumer
confidence remains fairly high. Home sales remain robust. Economic policy
continues to support the nation's fiscal budget surplus projection of $65
billion.
As far as inflation goes, there are two tales to be told. Prices for consumer
goods, as measured by the consumer price index (CPI), are steady. Compare this
to prices for services, which have risen between 3 and 4 percent. For investors,
this difference in pricing flexibility translates into a difference in profit
expectations. Profits of domestic, service firms should be much stronger than
commodity producers dependent on export markets.
Across the Atlantic, Europe's economy appears to be growing at an even pace as
the region progresses toward the Economic and Monetary Union (EMU) slated for
January 1, 1999. One effect of the union may be a slight rise in short-term
interest rates in Europe -- not because there will be an overt change in policy,
but simply because of the convergence of some very disparate interest rates. The
average rate will likely be higher than the relatively attractive rate the
German Central Bank currently offers, for example.
In Asia, which has been making headlines around the world for more than a year
now, the latest news is from Japan, which recently installed a new prime
minister as well as a new finance minister. Much discussion will be focused on
changes in Japan's economic policy, particularly in terms of taxation and
banking reform -- and patience is in order. Most of the changes in taxation will
impact Japan in the first half of 1999. But as far as banking reform goes, those
of us familiar with bank reform in the U.S. know that this will be a two- to
five-year process. Certainly, investors are looking to Japan to spark recovery
for Asia as a whole, which continues to suffer from the "contagion" of low
currency values, seriously reduced consumer spending and general economic
malaise.
Indeed, while its full effects remain to be seen -- and felt -- by the
majority of American businesses and individuals, the Asian economic crisis has
contributed to the general uncertainty of the emotion-driven U.S. markets.
Whether it's an economic crisis abroad or political scandal at home, current
events move the investors who move the markets.
One might conclude that, as a result of 1998's slow corporate profit growth
and turmoil in Russia and Asia, the psychology of the markets is
shifting -- even some of Wall Street's most resolute bulls appear to be
reconsidering their long-held convictions. But with the economy's strong
3
<PAGE> 4
ECONOMIC OVERVIEW
- --------------------------------------------------------------------------------
ECONOMIC GUIDEPOSTS
- --------------------------------------------------------------------------------
Economic activity is a key influence on investment performance and shareholder
decision-making. Periods of recession or boom, inflation or deflation, credit
expansion or credit crunch have a significant impact on mutual fund
performance.
The following are some significant economic guideposts and their
investment rationale that may help your investment decision-making. The 10-year
Treasury rate and the prime rate are prevailing interest rates. The other data
report year-to-year percentage changes.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (8/31/98) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1)* 5.46 5.57 6.3 6.64
PRIME RATE(2)* 8.5 8.5 8.5 8.25
INFLATION RATE(3)* 1.68 1.44 2.22 2.88
THE U.S. DOLLAR(4) 8.19 4.88 8.76 3.32
CAPITAL GOODS ORDERS(5)* 2.81 8.1 8.2 8.2
INDUSTRIAL PRODUCTION(5)* 1.82 4.31 5.03 3.3
EMPLOYMENT GROWTH(6) 2.68 2.57 2.6 2.13
</TABLE>
(1) Falling interest rates in recent years have been a big plus for financial
assets.
(2) The interest rate that commercial lenders charge their best borrowers.
(3) Inflation reduces an investor's real return. In the last five years,
inflation has been as high as 6 percent. The low, moderate inflation of the
last few years has meant high real returns.
(4) Changes in the exchange value of the dollar impact U.S. exporters and the
value of U.S. firms' foreign profits.
(5) These influence corporate profits and equity performance.
(6) An influence on family income and retail sales.
* Data as of July 31, 1998.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
fundamentals in place, that outlook may be premature. In any case, prudent
investors are wise to watch for the following economic warning signs: inflation
in the form of rising wages and/or prices; residual fallout from Asia, which
could appear in the form of reduced sales and earnings for American businesses;
and a continued widening of our trade deficit, an imbalance caused by heightened
American demand for foreign goods and services. In the months to come, investors
are likely to maintain their bias in favor of investments that have historically
been considered more conservative: larger capitalization stocks, U.S. Treasuries
and only the highest-grade corporate bonds.
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
/s/ John E. Silvia
JOHN E. SILVIA
September 1, 1998
4
<PAGE> 5
PERFORMANCE UPDATE
[MCCORMICK CHESTER PHOTO]
TRACY MCCORMICK CHESTER JOINED SCUDDER KEMPER INVESTMENTS, INC. IN 1994 AND
SERVES AS A MANAGING DIRECTOR. SHE IS ALSO A VICE PRESIDENT AND PORTFOLIO
MANAGER OF KEMPER RETIREMENT FUND SERIES. MCCORMICK CHESTER RECEIVED BOTH HER
BACHELOR'S 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.
WITHIN A FROTHY MARKET, THE PORTFOLIOS OF KEMPER
RETIREMENT FUND KEPT ABOVE WATER, EARNING
RESPECTABLE RETURNS. LEAD PORTFOLIO MANAGER TRACY
MCCORMICK CHESTER DISCUSSES THE CHALLENGES AND
OPPORTUNITIES PRESENTED BY THE MARKET.
Q THROUGHOUT THE PAST YEAR, THE NEWS HAS BEEN FULL OF STORIES OF MARKET
VOLATILITY. AGAINST WHAT BACKDROP DID THE FUND EARN ITS GAINS?
A The past year has certainly reminded us what shorter-term volatility is
all about. As we entered the fiscal year, the domestic markets were enjoying a
period of strong performance. However, on October 27, 1997, the U.S. equity
market declined 7 percent. This one-day drop, now referred to as "Gray Monday,"
was triggered by currency turmoil in Southeast Asia. Although American companies
had been posting solid earnings for the past few years, the collapse in Asia
cast a ripple of doubt through the U.S. markets. Investors began to question the
sustainability of domestic growth and corporate earnings.
The U.S. equity market bounced back with surprising speed. On the global
front, the International Monetary Fund developed various bailout plans for Asia.
Additionally, many American companies announced strong earnings. There was a
collective sigh of relief, and investors returned to the market with renewed
vigor.
Despite the first quarter rally, market volatility has continued to be a
dominant theme, however. Investors have been extremely jittery; and companies
that have fallen short of earnings expectations have felt the very sharp sting
of Wall Street's disapprobation. And although small company and technology
stocks have borne the brunt of the volatility, no sector has remained unscathed.
As the fund's fiscal year end wound down, it was apparent that the clouds of the
Asian contagion have not cleared. July was marked by particularly strong
downside volatility, as investors reacted negatively to disappointing earnings
announcements.
Q COULD YOU SUMMARIZE HOW THE EQUITY PORTION OF THE FUND WAS POSITIONED?
A The fund's equity allocation is invested in common stocks. Within the
equity allocation, we favor domestic large-company stocks issued by established
companies. This served us in good stead, as the market has favored large-cap
stocks over their smaller peers. The portfolio is well diversified across market
sectors. This diversification can serve to help mitigate volatility. As the
fiscal year concluded, the fund's four largest allocations were in technology,
finance, consumer nondurables and health care stocks.
In the fall of 1997, we adopted a more defensive stance. Concerned that
technology stocks might be due for a dip after their very strong rally last
summer, we reduced the fund's exposure to that sector. This helped to limit the
fund's exposure to Asia and shielded it from some of the more dramatic stock
implosions. However, our more cautious outlook may have clipped performance in
the first quarter's rally.
5
<PAGE> 6
PERFORMANCE UPDATE
Q HOW DO YOU IDENTIFY STOCKS THAT HAVE THE CHARACTERISTICS TO DELIVER STRONG
LONG-TERM PERFORMANCE?
A Intensive research and disciplined adherence to growth-at-the-right price
(GARP) are cornerstones of our stock evaluation process. We seek to add value
through our ability to get ahead of conventional Wall Street wisdom, and uncover
stocks with great growth potential the market is overlooking. Shareholders have
benefitted from our early recognition of changing conditions, both within
specific companies and across industries. Through this intensive research
process, we hone in on companies undergoing management or other structural
changes and on firms launching new products. On an industry level, we seek out
those areas poised for significant events, such as consolidations.
We seek out companies that have sustainable earnings growth, and good market
positions or potential. We don't let ourselves get carried away by the market's
vicissitudes. Because we adhere strictly to a growth-at-the-right price
discipline, we may miss out on some short-term gains when the market favors
high-flyers, as it has for much of the past year. By searching out stocks with
good fundamentals and sensible valuations, we believe that we'll generate
healthy, long-term return potential. And, our strict discipline gets us out of
stocks before their valuations get too high.
Q COULD YOU GIVE US SOME EXAMPLES?
A Our attentiveness to company and market trends led us to several companies
undergoing restructuring. For instance, the fund owns Stanley Works, a global
hardware firm that boasts a strong franchise and new management, and R.R.
Donnelley & Sons, a publishing firm that is also benefiting from restructuring.
Another good example of where our research paid off is ALZA, a pharmaceutical
manufacturer. We saw the potential of its drug delivery technology before the
company came into the spotlight, and added it before it attracted the Wall
Street buzz. This year, we've seen the stock post significant gains. However, in
keeping with our disciplined strategy, as ALZA's valuations rise, we are paring
the fund's position.
Our research also drew us to Alcatel Alsthom (ADR), an attractively valued
American depository receipt from a French telecommunications company. Alcatel
Alsthom has been making positive strategic moves, such as spinning off
divisions. In many ways, Alcatel Alsthom harkens back to what Lucent
Technologies was two years ago.
Q WHAT DIDN'T TURN OUT AS WELL AS EXPECTED?
A We were surprised by how speedily the market bounced back in the first
quarter of the year. In hindsight, we perhaps missed opportunities to purchase
some stocks at low prices. We anticipated that money-center banks would be more
susceptible to the effects of the Asian turmoil, and instead favored
high-quality regional banks. Money-center banks performed better than expected,
however.
The fund's returns have also been hindered by its exposure to energy stocks,
such as Chevron Corp. Supply and demand concerns have plagued oil services
stocks for many months. However, we believe that many of these stocks still
offer the opportunity for price appreciation.
The fund's performance relative to the S&P 500 Index has trailed due to the
"flight to quality" we've seen since Gray Monday. In this uncertain market
climate, nervous investors have raced to the perceived security offered by
blue-chip stocks -- the sort of stocks that Kemper Retirement Fund favors. The
prices of these stocks have risen dramatically, and have been pushed well beyond
the range that we feel is appropriate and sustainable.
Because of our valuation discipline, the fund was sidelined for some portions
of the market's upward momentum. For instance, we've been limited in our
selection of consumer nondurable stocks, a sector that has been quite profitable
over the past year. We've also had to hunt for health care stocks that meet our
valuation parameters.
However, that's certainly not to say that we've been left out in the cold. As
prices of stocks have returned to sounder levels, we've reaped rewards within
both sectors, while maintaining our GARP focus.
Q WHERE HAVE YOU BEEN FINDING OPPORTUNITIES?
A We're continuing to find good values in the insurance industry. We think
that insurance stocks could hold considerable potential. The insurance industry
is trending toward consolidation; and as bank deregulation continues, insurance
stocks will continue to gain appeal. During the reporting period, the
portfolios' larger holdings included American General Corp. and Jefferson-Pilot
Corp., two stocks we backed with particular conviction. During the year, we also
initiated a position in Torchmark, a provider of insurance and financial
services, including direct response marketing for banks.
6
<PAGE> 7
PERFORMANCE UPDATE
We think that the telecommunications sector will continue to thrive in the
current economic climate. The portfolios include long-distance carriers such as
Sprint and WorldCom, as well as regional bell operators including Ameritech and
SBC Communications. The fund also holds Cincinnati Bell, a nicely diversified
company with direct marketing billing as well as regional telecommunications
services.
Large, established technology firms are well represented in the portfolio.
Based on valuations, we're favoring component- and PC-based companies over
software firms. We think that many of the firms in these subsectors have
addressed the impact of the Asian turmoil, and that their stock prices are
reasonable. We're sticklers for demonstrated growth potential and quality
operations. The fund's technology exposure is anchored by some of the
most-tested names in the industry, including Texas Instruments, Computer
Sciences Corp., Sun Microsystems and International Business Machines.
Q WHAT IMPACT DID BONDS HAVE ON PERFORMANCE?
A In keeping with its structure as a guaranteed target maturity fund, the
portfolios include sizable stakes in zero-coupon Treasury bonds. These bonds
provide stability, and can offer a degree of shelter when the equity markets
tumble. For instance, fixed income exposure helped the portfolios during the
most severe pockets of the Asia turbulence. However, because of its large bond
stake, the fund won't always fully participate during equity rallies, such as
the first quarter's. And although they did provide stability during the Asian
turmoil, zero coupon bonds are not without volatility, particularly when
interest rates move.
Q HOW HAS THE RECENT MARKET CLIMATE HIGHLIGHTED THE ROLE THAT KEMPER
RETIREMENT FUND COULD FILL IN A PORTFOLIO?
A Volatility is an inherent part of investing, and cannot be sidestepped.
However, Kemper Retirement Fund offers more conservative investors a chance to
participate in the equity markets without jeopardizing their principal
investment. Investors who remain in the fund until its maturity date and adhere
to a disciplined reinvestment approach are guaranteed the return of their
principal. In a volatile environment such as the one we've seen in the past
year, this fund offers an added degree of security. We believe that it is
important to keep a long-term focus, and this fund encourages that discipline.
Q THE PAST YEAR HAS CERTAINLY HAD ITS SHARE OF UPS AND DOWNS. IS THERE ANY
SIGN OF THE TURMOIL LETTING UP?
A We continue to be positive about the long-term growth prospects for the
U.S. markets. Inflation is low, the economy is slowing and interest rates remain
low. However, short-term volatility will continue, and investors need to be
prepared for ups and downs. Downside volatility can be frustrating, but it also
opens up new opportunities as stock prices dip. We believe that our research
capabilities put us in a very good position to use the market's short-term
fluctuations to the long-term advantage of shareholders. By sticking to a
stock-by-stock approach, we are confident that our focus on well-researched,
large-cap companies will continue to provide shareholders with the opportunity
to reap the long-term potential of the equity market.
7
<PAGE> 8
PERFORMANCE UPDATE
AVERAGE ANNUAL TOTAL RETURNS*
FOR PERIODS ENDED JULY 31, 1998 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
1-YEAR 5-YEAR LIFE OF FUND
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SERIES I 1.26% 10.16% 13.05% (since 2/5/90)
- ------------------------------------------------------------------------------------------------------
SERIES II 1.16% 8.63% 12.64% (since 9/10/90)
- ------------------------------------------------------------------------------------------------------
SERIES III 1.31% 9.33% 10.56% (since 3/10/92)
- ------------------------------------------------------------------------------------------------------
SERIES IV 1.94% 8.88% 9.22% (since 1/15/93)
- ------------------------------------------------------------------------------------------------------
SERIES V 2.38% n/a 9.55% (since 11/15/93)
- ------------------------------------------------------------------------------------------------------
SERIES VI 2.89% n/a 11.67% (since 5/1/95)
- ------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Kemper Retirement Fund - Series I
- --------------------------------------------------------------------------------
Growth of an assumed $10,000
investment in Series I shares from
2/5/90 to 7/31/98
<TABLE>
[LINE GRAPH]
2/5/90 12/31/93 12/31/96 7/31/98
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kemper Retirement Fund(1) 10000 17386 23076 28313
9863 16713 22986
10717 15951 25181
9831 16414 26682
10686 16298 26687
12195 17383 28784
12000 18667 28811
13357 19434
15319 20169
14415 20818
14109 21264
14920 22228
15611
16191
16574
17642
Russell 1000 Growth Fund(+) 10000 15228 18030 20631
10023 14752 17875
10384 14568 18525
10446 16640 19174
10978 14694 19790
11274 15426 20089
11445 15427 20615
12103 16742
12749 17522
12558 17112
13066 17192
13705 17495
13715
14353
14784
15273
Lehman Brothers Gov't/Corp.
Bond Index(++) 10000 16542 25282 33143
10472 15814 25417
11491 15654 30224
9775 16657 32495
10848 16983 32988
12781 18599 31918
12689 20429 33383
13554 22295
15309 23300
14553 22884
14394 23015
15028 23843
16078
15942
15694
15928
- -----------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Kemper Retirement Fund - Series II
- --------------------------------------------------------------------------------
Growth of an assumed $10,000
investment in Series II shares from
9/30/90 to 7/31/98
<TABLE>
[LINE GRAPH]
9/30/90 12/31/93 12/31/96 7/31/98
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kemper Retirement Fund(1) 10000 16241 21556 25998
10322 15607 23308
11783 15937 24531
11631 15824 24636
12897 16878 26208
14642 18185 26333
13821 18789
13765 19550
14631 19860
15090 20171
15825 20930
16268 21647
17260
16977
Russell 1000 Growth Index(+) 10000 14121 17111 19750
10509 13946 17733
10793 14015 18355
10956 14066 18944
11586 14767 19231
12204 15725 19734
12021 16028
12508 16773
13119 16380
13129 16457
13740 16748
14152 17260
14620
14578
Lehman Brothers Gov't/Corp.
Bond Index(++) 10000 16179 25229 32898
11096 15538 30001
13088 16732 32255
12951 16858 32744
13866 18462 31682
15662 20279 33117
14888 22120
14726 23128
15374 22715
16447 22845
16309 23667
16056 25095
16294
16924
</TABLE>
- --------------------------------------------------------------------------------
Kemper Retirement Fund - Series III
- --------------------------------------------------------------------------------
Growth of an assumed $10,000
investment in Series III shares from
3/31/92 to 7/31/98
<TABLE>
[LINE GRAPH]
3/31/92 12/31/94 12/31/96 7/31/98
- -----------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
Kemper Retirement Fund(1) 9496 11881 15464 18880
9549 12914 16792
10147 13394 17760
10547 14020 17875
11070 14204 19077
11455 14428 19167
12203 15021
11982 15620
11363
10910
11131
11112
Russell 1000 Growth Index(+) 10000 12284 14234 16430
10405 13082 14752
10913 13332 15269
10922 13953 15759
11430 13627 15998
11773 13691 16416
12162 13932
12127 14358
11747
11601
11659
11701
Lehman Brothers Gov't/Corp.
Bond Index(++) 10000 12780 17465 22774
9891 14038 20768
10326 15313 22329
11048 16010 22667
10954 15725 21932
10784 15814 22925
10944 16384
11387 17372
10866
10757
11583
11670
- -----------------------------------------------------------------------------------------
</TABLE>
Past performance does not guarantee future performance. Investment returns and
principal value fluctuate. So that when shares are redeemed they may be worth
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 the Russell 1000(R) Growth Index,+ you should note that the fund's
performance reflects the maximum sales charge, while no such charges are
reflected in the performance of the 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 Lehman Brothers Government/Corporate Bond Index is an unmanaged index
comprised of intermediate and long-term government and investment grade
corporate debt securities. Source is Towers Data Systems.
8
<PAGE> 9
PERFORMANCE UPDATE
[LINE GRAPH]
- --------------------------------------------------------------------------------
Kemper Retirement Fund - Series IV
- --------------------------------------------------------------------------------
Growth of an assumed $10,000
investment is Series IV shares from
1/31/93 to 7/31/98
<TABLE>
<CAPTION>
1/31/93 12/31/95 12/31/97 7/31/98
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kemper 10000 12202 15302 16197
9664 12214 16273
10042 12364 16409
10640 12838
10421 13359
9803 13185
9409 14309
9569 15126
9569
10236
11192
11592
Russell 10000 12503 14122 14722
10242 12211 14336
10550 12268 14711
10899 12484
10867 12886
10526 12755
10396 13219
10447 13683
10485
11008
11722
11947
Lehman 10000 14226 20141 20236
10032 13972 19488
9876 14052 20370
10022 14558
10410 15436
9951 15518
9958 18453
10292 19840
10369
11356
12473
13606
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
Kemper Retirement Fund - Series V
- --------------------------------------------------------------------------------
Growth of an assumed $10,000
investment in Series V shares from
11/30/93 to 7/31/98
<TABLE>
<CAPTION>
11/30/93 12/31/95 12/31/97 7/31/98
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kemper 9500 11404 14597 15479
9553 11382 15601
9000 11540 15723
8670 12004
8809 12540
8841 12328
9474 13518
10401 14391
10794
Russell 10000 11556 13052 13607
10044 11285 13250
9729 11339 13596
9608 11539
9656 11892
9691 11789
10174 12218
10834 12646
11042
Lehman 10000 13785 19517 19609
10173 13539 18884
9739 13616 19739
9341 14106
10062 14958
10146 15037
11070 17882
12087 17882
13184 19225
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
Kemper Retirement Fund - Series VI
- --------------------------------------------------------------------------------
Growth of an assumed $10,000
investment in Series VI shares from
5/1/95 to 7/31/98
<TABLE>
<CAPTION>
5/1/95 12/31/96 12/31/97 7/31/98
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kemper 10000 11563 13505 14319
9778 11335 14319
10106 12409 14510
10725 13220
10573
10638
11049
Russell 10000 11527 12652 13190
10502 11428 12844
10703 11844 13180
11202 12259
10940
10991
11185
Lehman 10000 13302 17356 17438
10748 13372 16793
11725 15902 17553
12259 17097
12040
12109
12545
</TABLE>
<PAGE> 10
LARGEST HOLDINGS
THE FUND'S LARGEST STOCK HOLDINGS*
Percentages based on the fund's total common stock holdings
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
HOLDINGS SERIES I SERIES II SERIES III SERIES IV SERIES V SERIES VI
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
ABBOTT LABORATORIES 2.4% 2.6% 2.8% 2.9% 2.4% 2.8%
- --------------------------------------------------------------------------------------
TEXAS INSTRUMENTS 2.1% 1.7% 1.9% 2.0% 2.4% 1.9%
- --------------------------------------------------------------------------------------
JEFFERSON-PILOT 2.0% 2.2% 2.1% 2.1% 2.2% 2.0%
- --------------------------------------------------------------------------------------
MAY DEPARTMENT STORES 2.0% 2.0% 1.7% 1.8% 2.0% 1.8%
- --------------------------------------------------------------------------------------
TEXTRON 1.9% 1.6% 1.7% 1.8% 1.8% 1.8%
- --------------------------------------------------------------------------------------
COMPUTER SCIENCES
CORP. 1.9% 2.0% 1.7% 2.1% 1.9% 3.0%
- --------------------------------------------------------------------------------------
SUN MICROSYSTEMS 1.9% 1.8% 1.8% 1.6% 1.9% 1.8%
- --------------------------------------------------------------------------------------
AMERICAN HOME
PRODUCTS 1.9% 2.0% 1.7% 1.6% 1.6% 1.7%
- --------------------------------------------------------------------------------------
INTERNATIONAL
BUSINESS MACHINES 1.9% 1.6% 1.9% 2.0% 1.9% 2.1%
- --------------------------------------------------------------------------------------
RAYTHEON 1.8% 1.8% 1.7% 1.6% 1.7% 2.0%
- --------------------------------------------------------------------------------------
</TABLE>
*The fund's holdings are subject to change.
10
<PAGE> 11
LARGEST HOLDINGS
DESCRIPTION OF YOUR FUND'S LARGEST HOLDINGS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
HOLDINGS
- --------------------------------------------------------------------------------------------
<S> <C>
ABBOTT LABORATORIES Engaged in the discovery, development, manufacture
and sale of a broad and diversified line of health
care products and services.
- --------------------------------------------------------------------------------------------
TEXAS INSTRUMENTS A high technology company with sales or
manufacturing operations in more than 30 countries.
Products and services include semiconductors,
defense electronic systems, software productivity
tools, computer and peripheral products and
consumer products.
- --------------------------------------------------------------------------------------------
JEFFERSON-PILOT Writes life, health and accident insurance and
annuities.
- --------------------------------------------------------------------------------------------
MAY DEPARTMENT STORES Owns and operates retail department stores and
self-service shoe stores.
- --------------------------------------------------------------------------------------------
TEXTRON A global, multi-industry company with operations in
aircraft technology, automotive component
manufacturing and financial services.
- --------------------------------------------------------------------------------------------
COMPUTER SCIENCES A major developer and systems integrator of
computers and communication systems, and a provider
of information technology and outsourcing
consulting.
- --------------------------------------------------------------------------------------------
SUN MICROSYSTEMS Provides high performance workstations.
- --------------------------------------------------------------------------------------------
AMERICAN HOME PRODUCTS Engaged in the manufacture and marketing of health
care products, including pharmaceuticals, consumer
health care products and medical supplies.
- --------------------------------------------------------------------------------------------
INTERNATIONAL BUSINESS MACHINES Manufactures computers and computer-related
products.
- --------------------------------------------------------------------------------------------
RAYTHEON A diversified technology based company active in
electronics, aircraft products, appliances, and
energy and environmental services.
- --------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
KEMPER RETIREMENT FUND
SERIES I THROUGH SERIES VI
Portfolio of Investments at July 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES I SERIES II
- -------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT
OBLIGATIONS--38.5%, 53.7%,
50.4%, 55.9%, 49.1%
AND 57.8% -------------------------------------------------------------------------------------
U.S. Treasury, zero coupon,
1999 through 2006
(Cost: $39,281, $80,936,
$55,602, $68,037, $54,506
and $38,191) $43,900 $40,959 $94,900 $85,005
-------------------------------------------------------------------------------------
NUMBER NUMBER
OF SHARES VALUE OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS
COMMUNICATION--4.5%,
3.4%, 4.0%, 3.7%,
3.8% AND 3.2% (a)AirTouch Communications, Inc. 8,000 470 9,000 529
(a)American Tower Systems Corp. 300 7 500 12
Ameritech Corp. 8,000 393 8,000 393
Cincinnati Bell Inc. 29,000 932 34,000 1,092
Frontier Corp. 15,000 503 16,000 537
SBC Communications, Inc. 12,200 499 17,000 695
Sprint Corp. 10,000 700 10,000 700
(a)US West, Inc. 10,000 534 10,000 534
(a)WorldCom, Inc. 14,000 740 16,000 846
-------------------------------------------------------------------------------------
4,778 5,338
- -------------------------------------------------------------------------------------------------------------------------------
CONSUMER
DISCRETIONARY--3.3%,
2.4%, 2.7%, 2.5%,
2.8% AND 2.3%
(a)Consolidated Stores Corp. 10,000 336 12,000 404
May Department Stores 19,000 1,220 20,900 1,342
(a)Mirage Resorts, Inc. 26,000 559 30,000 645
Newell Companies Inc. 14,100 726 13,700 706
(a)Proffitt's, Inc. 20,000 630 24,000 756
-------------------------------------------------------------------------------------
3,471 3,853
- -------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--3.6%,
2.6%, 3.1%, 2.9%,
3.1% AND 2.5%
Dial Corp. 16,000 382 18,000 430
General Mills, Inc. 8,000 495 8,000 495
Gillette Co. 5,000 262 5,000 262
H.J. Heinz Co. 15,000 827 17,600 970
McCormick & Company, Inc. 28,000 908 29,000 941
Procter & Gamble Co. 9,000 714 10,000 794
Sara Lee Corp. 5,000 251 5,000 251
-------------------------------------------------------------------------------------
3,839 4,143
</TABLE>
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SERIES III SERIES IV SERIES V SERIES VI
- --------------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
<S> <C> <C> <C> <C> <C> <C> <C>
$72,200 $59,503 $89,200 $69,553 $87,600 $61,817 $62,800 $40,720
- --------------------------------------------------------------------------------------
NUMBER NUMBER NUMBER NUMBER
OF SHARES VALUE OF SHARES VALUE OF SHARES VALUE OF SHARES VALUE
- --------------------------------------------------------------------------------------
8,000 470 8,000 470 8,000 470 3,000 176
400 10 400 10 400 10 200 5
8,000 393 8,000 393 8,000 393 4,000 197
28,000 900 28,000 900 29,000 932 14,000 450
16,000 537 14,000 470 16,000 537 8,000 268
11,800 482 10,400 425 11,000 451 6,200 253
9,000 630 9,000 630 10,000 700 5,000 350
10,000 534 10,000 534 10,000 534 4,000 213
14,000 740 14,000 740 14,000 740 7,000 370
- --------------------------------------------------------------------------------------
4,696 4,572 4,767 2,282
- --------------------------------------------------------------------------------------
10,000 336 10,000 336 10,000 336 5,000 168
14,900 956 14,900 956 18,800 1,207 8,100 520
28,000 602 28,000 602 28,000 602 14,000 301
14,100 726 12,100 623 14,100 726 6,600 340
20,000 630 20,000 630 22,000 693 10,000 315
- --------------------------------------------------------------------------------------
3,250 3,147 3,564 1,644
- --------------------------------------------------------------------------------------
16,000 382 16,000 382 16,000 382 5,000 119
8,000 495 8,000 495 8,000 495 4,000 248
5,000 262 5,000 262 5,000 262 2,000 105
12,400 684 12,400 684 15,000 827 7,500 413
26,000 844 24,000 778 28,000 908 12,000 389
9,000 714 9,000 714 9,000 714 5,000 397
5,000 251 5,000 251 5,000 251 2,000 100
- --------------------------------------------------------------------------------------
3,632 3,566 3,839 1,771
</TABLE>
13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES I SERIES II
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER NUMBER
OF SHARES VALUE OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DURABLES--2.8%,
2.1%, 2.3%, 2.1%,
2.3% AND 1.8%
Dana Corp. 10,000 $ 497 11,000 $ 547
Federal-Mogul Corp. 13,000 782 15,000 902
Goodyear Tire & Rubber Co. 5,900 360 6,700 408
Stanley Works 17,700 773 20,800 909
(a)Tellabs, Inc. 7,000 527 7,000 527
-------------------------------------------------------------------------------------
2,939 3,293
- -------------------------------------------------------------------------------------------------------------------------------
ENERGY--2.5%,
1.8%, 2.0%, 1.9%,
2.1% AND 1.8%
Chevron Corp. 9,600 793 8,400 694
Mobil Corp. 10,400 725 14,600 1,019
Royal Dutch Petroleum Co. 9,000 459 9,000 459
Texaco Inc. 12,000 730 12,000 730
-------------------------------------------------------------------------------------
2,707 2,902
- -------------------------------------------------------------------------------------------------------------------------------
FINANCE--11.0%,
8.2%, 9.1%, 8.4%,
9.4% AND 7.5%
AFLAC, Inc. 7,700 265 7,700 265
American Express Company 5,000 552 5,000 552
American General Corp. 10,000 683 10,000 683
Associates First Capital Corp. 10,000 777 11,000 855
Cigna Corp. 13,500 892 13,800 912
Compass Bancshares Inc. 10,600 440 10,800 448
Federal National Mortgage
Association 10,000 620 12,000 744
First Chicago NBD Corp. 13,000 1,090 16,000 1,341
First Security Corp. 15,000 330 15,000 330
First Tennessee National Corp. 10,000 314 10,000 314
Household International, Inc. 13,946 694 21,919 1,090
Jefferson-Pilot Corp. 22,000 1,240 26,500 1,494
Marsh & McLennan Companies, Inc. 7,000 427 7,000 427
Mellon Bank Corp. 4,000 269 4,000 269
Morgan Stanley, Dean Witter,
Discover Co. 5,000 435 8,000 696
NationsBank Corp. 13,000 1,037 13,000 1,037
Torchmark Corp. 24,000 1,052 22,000 964
Travelers Group, Inc. 8,000 536 9,000 603
-------------------------------------------------------------------------------------
11,653 13,024
</TABLE>
14
<PAGE> 15
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SERIES III SERIES IV SERIES V SERIES VI
- --------------------------------------------------------------------------------------------
NUMBER NUMBER NUMBER NUMBER
OF SHARES VALUE OF SHARES VALUE OF SHARES VALUE OF SHARES VALUE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10,000 $ 497 8,000 $ 398 10,000 $ 497 3,500 $ 174
11,000 661 11,000 661 13,000 782 6,000 361
5,900 360 4,900 299 5,900 360 3,500 213
15,250 666 15,250 666 17,800 778 7,000 306
7,000 527 7,000 527 7,000 527 3,000 226
- --------------------------------------------------------------------------------------------
2,711 2,551 2,944 1,280
- --------------------------------------------------------------------------------------------
8,400 694 8,400 694 9,600 793 3,600 297
9,600 670 10,400 725 10,000 697 5,400 377
9,000 459 8,000 408 8,000 408 5,000 255
9,000 547 9,000 547 12,000 730 5,000 304
- --------------------------------------------------------------------------------------------
2,370 2,374 2,628 1,233
- --------------------------------------------------------------------------------------------
7,700 265 7,700 265 7,700 265 3,900 134
4,000 441 4,000 441 5,000 552 2,500 276
8,000 546 8,000 546 10,000 683 5,000 342
10,000 777 8,000 622 10,000 777 3,600 280
13,800 912 13,800 912 13,800 912 6,900 456
8,600 357 8,600 357 10,600 440 4,300 178
9,000 558 7,000 434 10,000 620 4,000 248
12,000 1,006 12,000 1,006 13,000 1,090 6,000 503
15,000 330 15,000 330 15,000 330 7,000 154
10,000 314 10,000 314 10,000 314 5,000 157
17,932 892 17,932 892 17,932 892 8,813 438
20,500 1,156 20,500 1,156 23,500 1,325 10,000 564
7,000 427 7,000 427 7,000 427 3,000 183
4,000 269 4,000 269 4,000 269 2,000 135
5,000 435 5,000 435 5,000 435 3,000 261
9,000 718 9,000 718 12,000 957 4,900 391
20,000 876 18,000 789 22,000 964 8,000 350
8,000 536 8,000 536 8,000 536 4,000 268
- --------------------------------------------------------------------------------------------
10,815 10,449 11,788 5,318
</TABLE>
15
<PAGE> 16
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES I SERIES II
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER NUMBER
OF SHARES VALUE OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
HEALTH CARE--8.2%,
6.3%, 6.7%, 6.1%,
6.7% AND 5.7%
Abbott Laboratories 35,000 $1,455 43,000 $1,787
ALZA Corp. 12,000 474 8,700 338
American Home Products Corp. 22,000 1,133 26,000 1,339
Bausch & Lomb, Inc. 10,000 511 12,000 613
Becton, Dickinson & Co. 10,000 826 10,000 826
Bristol-Myers Squibb Co. 8,000 911 11,000 1,253
Eli Lilly & Co. 11,000 740 11,000 740
(a)HEALTHSOUTH Corp. 24,000 603 25,000 628
Medtronic, Inc. 6,000 372 6,000 372
Merck & Co., Inc. 3,000 370 4,000 493
Schering-Plough Corp. 8,000 774 10,000 967
(a)Wellpoint Health Networks Inc. 9,200 564 10,100 619
-------------------------------------------------------------------------------------
8,733 9,975
- -------------------------------------------------------------------------------------------------------------------------------
MANUFACTURING--5.5%,
4.2%, 4.6%, 4.3%,
4.7% AND 4.2%
Bowater, Inc. 10,000 460 10,000 460
Emerson Electric Co. 13,400 796 16,800 999
General Electric Co. 10,600 947 12,600 1,125
Monsanto Co. 14,000 793 16,000 906
PPG Industries, Inc. 9,500 602 12,000 760
Raytheon Co. 20,624 1,118 22,748 1,232
Textron, Inc. 16,000 1,182 15,000 1,108
-------------------------------------------------------------------------------------
5,898 6,590
- -------------------------------------------------------------------------------------------------------------------------------
MEDIA--3.2%,
2.3%, 2.6%, 2.2%,
2.6% AND 2.2%
CBS Corp. 26,000 882 25,000 848
R.R. Donnelley & Sons Co. 24,800 1,054 28,100 1,194
(a)Univision Communications Inc. 20,500 748 25,400 927
Walt Disney Co. 9,000 310 12,000 413
(a)Young & Rubicam Inc. 12,000 362 12,000 362
-------------------------------------------------------------------------------------
3,356 3,744
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SERIES III SERIES IV SERIES V SERIES VI
- -----------------------------------------------------------------------------------------
NUMBER NUMBER NUMBER NUMBER
OF SHARES VALUE OF SHARES VALUE OF SHARES VALUE OF SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
37,000 $1,538 37,000 $1,538 35,000 $1,455 19,000 $ 790
6,900 268 4,400 171 8,700 338 3,000 117
18,000 927 17,000 875 19,000 978 9,500 489
10,000 511 8,000 409 10,000 511 5,000 256
10,000 826 8,000 661 10,000 826 4,000 331
6,000 684 7,000 798 8,000 911 4,000 456
11,000 740 11,000 740 11,000 740 5,000 336
19,000 477 19,000 477 24,000 603 9,000 226
4,000 248 4,000 248 6,000 372 3,000 186
3,000 370 3,000 370 3,000 370 1,000 123
8,000 774 8,000 774 8,000 774 4,800 464
9,200 564 9,200 564 9,200 564 4,000 245
- -----------------------------------------------------------------------------------------
7,927 7,625 8,442 4,019
- -----------------------------------------------------------------------------------------
8,000 368 8,000 368 10,000 460 4,000 184
13,200 785 13,200 785 13,800 820 6,400 380
10,800 965 11,800 1,054 12,600 1,125 6,000 536
14,000 793 14,000 793 14,000 793 7,000 396
9,000 570 9,000 570 9,500 602 5,500 349
17,499 948 15,499 840 18,624 1,009 10,312 559
13,000 960 13,000 960 15,000 1,108 7,000 517
- -----------------------------------------------------------------------------------------
5,389 5,370 5,917 2,921
- -----------------------------------------------------------------------------------------
24,000 814 18,000 611 28,000 950 9,500 322
19,300 820 19,300 820 23,700 1,007 12,300 523
20,500 748 20,500 748 20,500 748 9,500 347
9,000 310 9,000 310 9,000 310 6,000 207
12,000 362 10,000 301 10,000 301 4,000 120
- -----------------------------------------------------------------------------------------
3,054 2,790 3,316 1,519
- -----------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 18
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES I SERIES II
- ------------------------------------------------------------------------------------------------------------------------------
NUMBER NUMBER
OF SHARES VALUE OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TECHNOLOGY--11.6%,
9.0%, 9.1%, 8.5%,
9.8% AND 8.3% Alcatel Alsthom (ADR) 21,000 $ 823 26,000 $ 1,019
(a)Analog Devices, Inc. 33,000 710 38,333 824
(a)Cadence Design Systems 12,800 369 19,700 568
Inc.
(a)Cisco Systems, Inc. 9,500 910 14,000 1,340
(a)Computer Sciences Corp. 18,000 1,152 21,000 1,344
GM-Hughes Electronics Corp. 8,000 341 11,000 469
Gartner Group, Inc. 18,000 551 16,000 490
Hewlett-Packard Co. 18,400 1,021 23,800 1,321
International Business 8,500 1,126 8,500 1,126
Machines Corp.
Linear Technology Corp. 7,000 419 9,000 538
Microsoft Corp. 5,000 551 6,000 661
Motorola Inc. 10,000 523 10,000 523
(a)Parametric Technology 26,000 354 31,000 422
Corp.
(a)Seagate Technology, Inc. 15,000 341 16,000 364
(a)Sterling Commerce, Inc. 5,000 198 8,000 317
(a)Sun Microsystems, Inc. 24,300 1,148 26,300 1,243
(a)Teradyne Inc. 12,000 275 14,000 321
Texas Instruments, Inc. 21,300 1,263 19,600 1,163
(a)Xilinx Inc. 6,000 225 6,000 225
------------------------------------------------------------------------------------
12,300 14,278
- ------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--1.0%, .8%,
.8%, .7%, .8%
AND .7% Canadian National Railway 7,000 369 7,000 369
Norfolk Southern Corp. 25,000 747 28,000 837
------------------------------------------------------------------------------------
1,116 1,206
------------------------------------------------------------------------------------
TOTAL COMMON STOCKS--57.2%, 43.1%, 47.0%, 43.3%,
48.1% AND 40.2%
(Cost: $53,119, $58,524, $48,812, 60,790 68,346
$46,957, $52,855 and $24,890)
------------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE
MONEY MARKET
INSTRUMENTS--4.3%,
3.1%, 2.5%, --,
2.4% AND 2.2% Yield--4.75% to 5.62%
Due--August 1998
(Cost: $4,550, $4,998, $ 4,551 4,550 $ 5,000 4,998
$2,973, $--, $2,999 and
$1,570)
------------------------------------------------------------------------------------
TOTAL INVESTMENTS--100%, 99.9%,
99.9%, 99.2%, 99.6% AND 100.2%
(Cost: $96,950, $144,458, $107,387, 106,299 158,349
$114,994, $110,360 and $64,651)
------------------------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS 40 88
LIABILITIES --.1%, .1%, .8%, .4% AND
(.2%)
------------------------------------------------------------------------------------
NET ASSETS--100% $106,339 $158,437
------------------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIOS OF INVESTMENTS
(a) Non-income producing security.
Based on the cost of investments for federal income tax purposes at July 31,
1998, the unrealized appreciation and depreciation on investments is as follows
(in thousands):
<TABLE>
<CAPTION>
SERIES I SERIES II SERIES III SERIES IV SERIES V SERIES VI
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cost of investments for federal income tax
purposes $96,950 $144,458 $107,387 $114,994 $110,360 $64,651
- ----------------------------------------------------------------------------------------------------------------------------
Gross unrealized appreciation 10,904 15,559 12,097 9,835 16,543 6,673
- ----------------------------------------------------------------------------------------------------------------------------
Gross unrealized depreciation 1,555 1,668 1,485 1,432 1,517 703
- ----------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation 9,349 13,891 10,612 8,403 15,026 5,970
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
18
<PAGE> 19
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SERIES III SERIES IV SERIES V SERIES VI
- ---------------------------------------------------------------------------------------------
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 $ 823 21,000 $ 823 21,000 $ 823 10,000 $ 392
32,000 688 28,000 602 34,000 731 13,666 294
8,700 251 8,700 251 10,500 303 5,700 164
8,000 766 8,000 766 9,500 910 4,500 431
15,000 960 18,000 1,152 18,000 1,152 13,500 864
6,000 256 6,000 256 8,000 341 4,500 192
14,000 429 14,000 429 18,000 551 8,000 245
15,400 855 15,400 855 17,400 966 9,000 500
8,000 1,060 8,000 1,060 8,500 1,126 4,500 596
7,000 419 7,000 419 6,000 360 3,000 179
4,000 441 5,000 551 5,000 551 -- --
10,000 523 5,000 261 10,000 523 4,500 235
23,000 313 23,000 313 26,000 354 11,000 150
15,000 341 15,000 341 15,000 341 7,000 159
4,000 158 4,000 158 5,000 198 3,000 119
20,700 978 18,000 851 24,300 1,148 10,800 510
11,000 252 11,000 252 12,000 275 6,000 138
17,800 1,056 17,800 1,056 24,900 1,477 8,900 528
4,600 173 4,600 173 6,000 225 3,700 139
- ---------------------------------------------------------------------------------------------
10,742 10,569 12,355 5,835
- ---------------------------------------------------------------------------------------------
7,000 369 5,000 263 5,000 263 2,000 106
19,000 568 19,000 568 25,000 747 13,500 403
- ---------------------------------------------------------------------------------------------
937 831 1,010 509
- ---------------------------------------------------------------------------------------------
55,523 53,844 60,570 28,331
- ---------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$2,974 2,973 -- -- $3,000 2,999 $1,570 1,570
- ---------------------------------------------------------------------------------------------
117,999 123,397 125,386 70,621
- ---------------------------------------------------------------------------------------------
85 1,020 500 (134)
- ---------------------------------------------------------------------------------------------
$118,084 $124,417 $125,886 $70,487
- ---------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER TARGET EQUITY FUND--
KEMPER RETIREMENT FUND SERIES I, II, III, IV, V AND VI
We have audited the accompanying statement of assets and liabilities,
including the portfolios of investments, of Kemper Target Equity Fund--Kemper
Retirement Fund Series I, II, III, IV, V and VI as of July 31, 1998, the related
statement of operations for the year then ended, the statement of changes in net
assets for the year then ended, the month ended July 31, 1997 and the year ended
June 30, 1997, and the financial highlights for each of the fiscal periods since
1994. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of July
31, 1998, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of Kemper Target Equity Fund--Kemper Retirement Fund Series I, II, III, IV, V
and VI at July 31, 1998, the results of their operations, the changes in their
net assets and the financial highlights for the periods referred to above in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
September 17, 1998
20
<PAGE> 21
[THIS PAGE INTENTIONALLY LEFT BLANK.]
21
<PAGE> 22
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES
---------------------------------------------------------
I II III IV V VI
- -------------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investments, at value (Cost: $96,950, $144,458,
$107,387, $114,994, $110,360, $64,651) $106,299 158,349 117,999 123,397 125,386 70,621
- -------------------------------------------------------------------------------------------------------------
Cash -- -- -- 878 379 9
- -------------------------------------------------------------------------------------------------------------
Receivable for:
Investments sold 523 523 523 629 523 122
- -------------------------------------------------------------------------------------------------------------
Dividends and interest 59 71 58 56 61 29
- -------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 106,881 158,943 118,580 124,960 126,349 70,781
- -------------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- -------------------------------------------------------------------------------------------------------------
Cash overdraft 106 36 1 -- -- --
- -------------------------------------------------------------------------------------------------------------
Payable for:
Investments purchased 300 300 300 300 300 150
- -------------------------------------------------------------------------------------------------------------
Fund shares redeemed 22 11 77 105 10 51
- -------------------------------------------------------------------------------------------------------------
Management fee 44 64 48 51 52 29
- -------------------------------------------------------------------------------------------------------------
Administrative services fee 23 34 25 26 28 7
- -------------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related
expenses 1 2 2 6 -- 15
- -------------------------------------------------------------------------------------------------------------
Trustees' fees and other 46 59 43 55 73 42
- -------------------------------------------------------------------------------------------------------------
Total liabilities 542 506 496 543 463 294
- -------------------------------------------------------------------------------------------------------------
NET ASSETS $106,339 158,437 118,084 124,417 125,886 70,487
- -------------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -------------------------------------------------------------------------------------------------------------
Paid-in capital $ 87,048 132,489 97,878 106,918 100,173 59,974
- -------------------------------------------------------------------------------------------------------------
Undistributed net realized gain on investments 7,813 8,390 7,205 6,835 8,297 3,247
- -------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 9,349 13,891 10,612 8,403 15,026 5,970
- -------------------------------------------------------------------------------------------------------------
Undistributed net investment income 2,129 3,667 2,389 2,261 2,390 1,296
- -------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $106,339 158,437 118,084 124,417 125,886 70,487
- -------------------------------------------------------------------------------------------------------------
THE PRICING OF SHARES
- -------------------------------------------------------------------------------------------------------------
Shares outstanding 9,845 12,770 11,222 11,653 12,375 6,264
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
(net assets / shares outstanding) $ 10.80 12.41 10.52 10.68 10.17 11.25
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
22
<PAGE> 23
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES
-------------------------------------------------------------------
I II III IV V VI
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME
- ----------------------------------------------------------------------------------------------------------------------------
Interest $ 3,860 6,813 4,494 4,354 4,566 2,595
- ----------------------------------------------------------------------------------------------------------------------------
Dividends 902 1,024 817 815 895 422
- ----------------------------------------------------------------------------------------------------------------------------
Total investment income 4,762 7,837 5,311 5,169 5,461 3,017
- ----------------------------------------------------------------------------------------------------------------------------
Expenses:
Management fee 560 825 615 651 657 358
- ----------------------------------------------------------------------------------------------------------------------------
Administrative services fee 271 408 303 321 326 174
- ----------------------------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related
expenses 121 179 145 180 194 104
- ----------------------------------------------------------------------------------------------------------------------------
Professional fees 42 63 47 50 55 28
- ----------------------------------------------------------------------------------------------------------------------------
Reports to shareholders 35 52 35 48 35 36
- ----------------------------------------------------------------------------------------------------------------------------
Trustees' fees and other 28 37 27 28 38 27
- ----------------------------------------------------------------------------------------------------------------------------
Total expenses 1,057 1,564 1,172 1,278 1,305 727
- ----------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 3,705 6,273 4,139 3,891 4,156 2,290
- ----------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain on sales of investments 11,237 12,702 10,444 10,153 11,794 4,581
- ----------------------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation on investments (7,635) (8,609) (6,524) (4,798) (6,015) (1,054)
- ----------------------------------------------------------------------------------------------------------------------------
Net gain on investments 3,602 4,093 3,920 5,355 5,779 3,527
- ----------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 7,307 10,366 8,059 9,246 9,935 5,817
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE> 24
FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES I SERIES II
YEAR MONTH YEAR YEAR MONTH YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JULY 31, JULY 31, JUNE 30, JULY 31, JULY 31, JUNE 30,
1998 1997 1997 1998 1997 1997
- ---------------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 3,705 325 3,911 6,273 567 6,817
- ---------------------------------------------------------------------------------------------------------
Net realized gain 11,237 1,687 11,460 12,702 2,057 13,354
- ---------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (7,635) 4,076 3,032 (8,609) 5,363 3,964
- ---------------------------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 7,307 6,088 18,403 10,366 7,987 24,135
- ---------------------------------------------------------------------------------------------------------
Distribution from net investment income (3,920) -- (3,911) (6,567) -- (7,159)
- ---------------------------------------------------------------------------------------------------------
Distribution from net realized gain (12,075) -- (14,931) (14,360) -- (18,195)
- ---------------------------------------------------------------------------------------------------------
Total dividends to shareholders (15,995) -- (18,842) (20,927) -- (25,354)
- ---------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital
share transactions (2,090) (781) 4,946 (4,385) (1,774) (36)
- ---------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (10,778) 5,307 4,507 (14,946) 6,213 (1,255)
- ---------------------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------------------
Beginning of period 117,117 111,810 107,303 173,383 167,170 168,425
- ---------------------------------------------------------------------------------------------------------
END OF PERIOD $106,339 117,117 111,810 158,437 173,383 167,170
- ---------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME AT
END OF PERIOD $ 2,129 2,354 2,029 3,667 3,972 3,405
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
24
<PAGE> 25
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SERIES III SERIES IV SERIES V SERIES VI
YEAR MONTH YEAR YEAR MONTH YEAR YEAR MONTH YEAR YEAR MONTH YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
JULY 31, JULY 31, JUNE 30, JULY 31, JULY 31, JUNE 30, JULY 31, JULY 31, JUNE 30, JULY 31, JULY 31, JUNE 30,
1998 1997 1997 1998 1997 1997 1998 1997 1997 1998 1997 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4,139 380 4,371 3,891 361 4,517 4,156 375 4,644 2,290 207 2,070
- ---------------------------------------------------------------------------------------------------------------------------------
10,444 1,502 11,164 10,153 1,398 10,377 11,794 1,804 11,793 4,581 729 3,804
- ---------------------------------------------------------------------------------------------------------------------------------
(6,524) 4,705 2,920 (4,798) 5,420 4,714 (6,015) 6,041 4,036 (1,054) 3,575 3,566
- ---------------------------------------------------------------------------------------------------------------------------------
8,059 6,587 18,455 9,246 7,179 19,608 9,935 8,220 20,473 5,817 4,511 9,440
- ---------------------------------------------------------------------------------------------------------------------------------
(4,303) -- (4,464) (4,220) -- (4,509) (4,539) -- (4,663) (2,370) -- (1,591)
- ---------------------------------------------------------------------------------------------------------------------------------
(11,501) -- (14,623) (10,945) -- (14,118) (12,545) -- (14,346) (4,917) -- (1,589)
- ---------------------------------------------------------------------------------------------------------------------------------
(15,804) -- (19,087) (15,165) -- (18,627) (17,084) -- (19,009) (7,287) -- (3,180)
- ---------------------------------------------------------------------------------------------------------------------------------
(1,269) (1,823) 1,478 (5,594) (2,474) (8,614) (4,096) (1,764) (536) (1,214) (732) 13,443
- ---------------------------------------------------------------------------------------------------------------------------------
(9,014) 4,764 846 (11,513) 4,705 (7,633) (11,245) 6,456 928 (2,684) 3,779 19,703
- ---------------------------------------------------------------------------------------------------------------------------------
127,098 122,334 121,488 135,930 131,225 138,858 137,131 130,675 129,747 73,171 69,392 49,689
- ---------------------------------------------------------------------------------------------------------------------------------
118,084 127,098 122,334 124,417 135,930 131,225 125,886 137,131 130,675 70,487 73,171 69,392
- ---------------------------------------------------------------------------------------------------------------------------------
2,389 2,563 2,183 2,261 2,599 2,238 2,390 2,779 2,404 1,296 1,379 1,172
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE
FUND Kemper Retirement Fund Series I, II, III, IV, V and
VI (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
Series VI May 15, 2006
</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 Scudder Kemper Investments, Inc.,
the Funds' investment manager.
- --------------------------------------------------------------------------------
2 SIGNIFICANT
ACCOUNTING POLICIES SECURITY VALUATION. Portfolio securities which are
traded on U.S. or foreign stock exchanges are
valued at the most recent sale price reported on
the exchange on which the security is traded most
extensively. If no sale occurred, the security is
then valued at the calculated mean between the most
recent bid and asked quotations. If there are no
such bid and asked quotations, the most recent bid
quotation is used. Securities quoted on the Nasdaq
Stock Market ("Nasdaq"), for which there have been
sales, are valued at the most recent sale price
reported on Nasdaq. If there are no such sales, the
value is the most recent bid quotation. Securities
which are not quoted on Nasdaq but are traded in
another over-the-counter market are valued at the
most recent sale price on such market. If no sale
occurred, the security is then valued at the
calculated mean between the most recent bid and
asked quotations. If there are no such bid and
asked quotations, the most recent bid quotation
shall be used.
Portfolio debt securities other than money market
securities with an original maturity over sixty
days are valued by pricing agents approved by the
officers of the Fund, which quotations reflect
broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents
are unable to provide such quotations, the most
recent bid quotation supplied by a bona fide market
maker shall be used. Money market instruments
purchased with an original maturity of sixty days
or less are valued at amortized cost. All other
securities are valued at their fair market value as
determined in good faith by the Valuation Committee
of the Board of Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on the
trade date. Dividend income is recorded on the ex-
dividend date, and interest income is recorded on
the accrual basis. Interest income includes
discount amortization of fixed income securities.
Realized gains and losses from investment
transactions are reported on an identified cost
basis.
26
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS
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 1997, 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 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's policy is to
comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to
regulated investment companies, and to distribute
all of its taxable income to its shareholders.
Accordingly, each Fund paid no federal income taxes
and no federal income tax provision was required.
DIVIDENDS TO SHAREHOLDERS. The Trust declares and
pays dividends of any net investment income and net
realized capital gains annually, which are recorded
on the ex-dividend date. Dividends are determined
in accordance with income tax principles which may
treat certain transactions differently from
generally accepted accounting principles.
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The Funds have a management
agreement with Scudder Kemper Investments, Inc.
(Scudder Kemper) and pay a management fee of 1/12
of the annual rate of .50% of average daily net
assets. The Funds incurred a management fee of
$3,666,000 for the year ended July 31, 1998.
ADMINISTRATIVE SERVICES AGREEMENT. The Trust has an
administrative services agreement with Kemper
Distributors, Inc. (KDI). For providing information
and administrative services to shareholders, the
Funds pay 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 firms service.
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>
Year ended
July 31, 1998 $1,803,000 1,791,000 21,000
</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 Funds. Under the agreement,
KSvC received shareholder services fees of $519,000
for the year ended July 31, 1998.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Trust are also officers or directors of
Scudder Kemper. During the year ended July 31,
1998, the Funds made no payments to their officers
and incurred trustees' fees of $145,000 to
independent trustees.
27
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the year ended July 31, 1998, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
<TABLE>
<CAPTION>
SERIES I SERIES II SERIES III SERIES IV SERIES V SERIES VI
-------- --------- ---------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Purchases $ 89,124 95,663 82,794 80,342 87,687 40,552
Proceeds from sales 101,453 114,928 94,382 95,678 102,545 45,784
</TABLE>
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Funds (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED MONTH ENDED YEAR ENDED
JULY 31, 1998 JULY 31, 1997 JUNE 30, 1997
-------------------- -------------------- --------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SERIES I
- ----------------------------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of dividends 1,563 $ 15,719 -- $ -- 1,818 $ 18,601
- ----------------------------------------------------------------------------------------------------------------------------
Shares redeemed (1,595) (17,809) (66) (781) (1,235) (13,655)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital share
transactions $ (2,090) $ (781) $ 4,946
- ----------------------------------------------------------------------------------------------------------------------------
SERIES II
- ----------------------------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of dividends 1,810 $ 21,124 -- $ -- 2,129 $ 25,117
- ----------------------------------------------------------------------------------------------------------------------------
Shares redeemed (1,999) (25,509) (135) (1,774) (1,983) (25,153)
- ----------------------------------------------------------------------------------------------------------------------------
Net decrease from capital share transactions $ (4,385) $ (1,774) $ (36)
- ----------------------------------------------------------------------------------------------------------------------------
SERIES III
- ----------------------------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of dividends 1,693 $ 16,384 -- $ -- 1,937 $ 19,255
- ----------------------------------------------------------------------------------------------------------------------------
Shares redeemed (1,684) (17,653) (164) (1,823) (1,658) (17,777)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital share
transactions $ (1,269) $ (1,823) $ 1,478
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
YEAR ENDED MONTH ENDED YEAR ENDED
JULY 31, 1998 JULY 31, 1997 JUNE 30, 1997
-------------------- ------------------- --------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C>
SERIES IV
- ------------------------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of
dividends 1,532 $15,350 -- $ -- 1,866 $ 18,506
- ------------------------------------------------------------------------------------------------------------------------
Shares redeemed (1,932) (20,944) (226) (2,474) (2,563) (27,120)
- ------------------------------------------------------------------------------------------------------------------------
Net decrease from capital share
transactions $(5,594) $(2,474) $ (8,614)
- ------------------------------------------------------------------------------------------------------------------------
SERIES V
- ------------------------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of
dividends 1,782 $16,939 -- $ -- 2,001 $ 18,814
- ------------------------------------------------------------------------------------------------------------------------
Shares redeemed (2,031) (21,035) (167) (1,764) (1,929) (19,350)
- ------------------------------------------------------------------------------------------------------------------------
Net decrease from capital share
transactions $(4,096) $(1,764) $ (536)
- ------------------------------------------------------------------------------------------------------------------------
SERIES VI
- ------------------------------------------------------------------------------------------------------------------------
Shares sold -- $ -- -- $ -- 1,919 $ 19,497
- ------------------------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of
dividends 696 7,349 -- -- 311 3,125
- ------------------------------------------------------------------------------------------------------------------------
Shares redeemed (757) (8,563) (65) (732) (894) (9,179)
- ------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital
share transactions $(1,214) $ (732) $ 13,443
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 30
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SERIES I
YEAR MONTH
ENDED ENDED YEAR ENDED JUNE 30,
JULY 31, JULY 31, -------------------------------------------
1998 1997 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.86 11.24 11.46 11.19 10.67 12.57
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .40 .03 .42 .44 .45 .42
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .25 .59 1.48 1.03 1.20 (.78)
- ----------------------------------------------------------------------------------------------------------------------
Total from investment operations .65 .62 1.90 1.47 1.65 (.36)
- ----------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .42 -- .44 .44 .41 .40
- ----------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain 1.29 -- 1.68 .76 .72 1.14
- ----------------------------------------------------------------------------------------------------------------------
Total dividends 1.71 -- 2.12 1.20 1.13 1.54
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.80 11.86 11.24 11.46 11.19 10.67
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 6.56% 5.52 18.43 13.91 17.03 (3.76)
- ----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ----------------------------------------------------------------------------------------------------------------------
Expenses .94% .84 .93 .95 .97 .91
- ----------------------------------------------------------------------------------------------------------------------
Net investment income 3.30% 3.38 3.60 3.68 3.96 3.32
- ----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $106,339 117,117 111,810 107,303 106,482 103,764
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 80% 86 94 71 63 59
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SERIES II
YEAR MONTH
ENDED ENDED YEAR ENDED JUNE 30,
JULY 31, JULY 31, --------------------------------------------
1998 1997 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $13.38 12.77 13.01 12.94 12.30 13.95
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .52 .05 .56 .58 .60 .56
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .23 .56 1.29 .77 1.25 (1.04)
- ----------------------------------------------------------------------------------------------------------------------
Total from investment operations .75 .61 1.85 1.35 1.85 (.48)
- ----------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .54 -- .59 .57 .57 .58
- ----------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain 1.18 -- 1.50 .71 .64 .59
- ----------------------------------------------------------------------------------------------------------------------
Total dividends 1.72 -- 2.09 1.28 1.21 1.17
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.41 13.38 12.77 13.01 12.94 12.30
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 6.46% 4.78 15.56 10.92 16.52 (4.07)
- ----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ----------------------------------------------------------------------------------------------------------------------
Expenses .94% .90 .92 .94 .96 .90
- ----------------------------------------------------------------------------------------------------------------------
Net investment income 3.80% 3.98 4.08 4.16 4.54 3.91
- ----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $158,437 173,383 167,170 168,425 173,337 173,055
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 57% 67 70 54 47 44
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE FOR ALL SERIES: Total return does not reflect the effect of any sales
charges.
30
<PAGE> 31
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SERIES III
YEAR MONTH
ENDED ENDED YEAR ENDED JUNE 30,
JULY 31, JULY 31, --------------------------------------------
1998 1997 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.33 10.75 10.95 10.75 9.87 10.72
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .39 .04 .42 .43 .44 .40
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .27 .54 1.22 .78 1.24 (.88)
- ----------------------------------------------------------------------------------------------------------------------
Total from investment operations .66 .58 1.64 1.21 1.68 (.48)
- ----------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .40 -- .43 .44 .43 .37
- ----------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain 1.07 -- 1.41 .57 .37 --
- ----------------------------------------------------------------------------------------------------------------------
Total dividends 1.47 -- 1.84 1.01 .80 .37
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.52 11.33 10.75 10.95 10.75 9.87
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 6.68% 5.40 16.38 11.72 18.37 (4.76)
- ----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ----------------------------------------------------------------------------------------------------------------------
Expenses .95% .83 .95 .96 1.00 .95
- ----------------------------------------------------------------------------------------------------------------------
Net investment income 3.36% 3.63 3.61 3.67 4.14 3.59
- ----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $118,084 127,098 122,334 121,488 124,681 123,132
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 67% 79 74 59 52 47
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SERIES IV
YEAR MONTH
ENDED ENDED YEAR ENDED JUNE 30,
JULY 31, JULY 31, --------------------------------------------
1998 1997 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.28 10.69 10.70 10.07 8.83 9.57
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .35 .03 .39 .40 .39 .26
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .38 .56 1.17 .64 1.22 (.85)
- ----------------------------------------------------------------------------------------------------------------------
Total from investment operations .73 .59 1.56 1.04 1.61 (.59)
- ----------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .37 -- .38 .41 .37 .15
- ----------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .96 -- 1.19 -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Total dividends 1.33 -- 1.57 .41 .37 .15
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.68 11.28 10.69 10.70 10.07 8.83
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 7.27% 5.52 15.73 10.47 18.95 (6.31)
- ----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ----------------------------------------------------------------------------------------------------------------------
Expenses .98% .88 .96 .95 .97 .97
- ----------------------------------------------------------------------------------------------------------------------
Net investment income 2.98% 3.22 3.35 3.46 4.01 3.43
- ----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $124,417 135,930 131,225 138,858 152,179 146,655
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 59% 66 66 52 45 51
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE> 32
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SERIES V
YEAR MONTH NOVEMBER 15,
ENDED ENDED YEAR ENDED JUNE 30, 1993 TO
JULY 31, JULY 31, --------------------------- JUNE 30,
1998 1997 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.86 10.22 10.20 9.53 8.15 9.00
- ----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .35 .03 .39 .39 .28 .15
- ----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .39 .61 1.22 .64 1.31 (1.00)
- ----------------------------------------------------------------------------------------------------------------
Total from investment operations .74 .64 1.61 1.03 1.59 (.85)
- ----------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .38 -- .39 .36 .21 --
- ----------------------------------------------------------------------------------------------------------------
Distribution from net realized gain 1.05 -- 1.20 -- -- --
- ----------------------------------------------------------------------------------------------------------------
Total dividends 1.43 -- 1.59 .36 .21 --
- ----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.17 10.86 10.22 10.20 9.53 8.15
- ----------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 7.76% 6.26 17.14 10.95 19.97 (9.44)
- ----------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ----------------------------------------------------------------------------------------------------------------
Expenses .99% .94 .96 .96 1.07 1.29
- ----------------------------------------------------------------------------------------------------------------
Net investment income 3.16% 3.34 3.59 3.64 4.01 3.13
- ----------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $125,886 137,131 130,675 129,747 134,937 64,275
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 66% 76 79 58 73 35
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SERIES VI
YEAR MONTH MAY 1
ENDED ENDED TO
JULY 31, JULY 31, YEAR ENDED JUNE 30 JUNE 30,
1998 1997 1997 1996 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.57 10.86 9.83 9.26 9.00
- -------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .38 .03 .33 .24 .06
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gain .50 .68 1.26 .57 .20
- -------------------------------------------------------------------------------------------------
Total from investment operations .88 .71 1.59 .81 .26
- -------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .39 -- .28 .13 --
- -------------------------------------------------------------------------------------------------
Distribution from net realized gain .81 -- .28 .11 --
- -------------------------------------------------------------------------------------------------
Total dividends 1.20 -- .56 .24 --
- -------------------------------------------------------------------------------------------------
Net asset value, end of period $11.25 11.57 10.86 9.83 9.26
- -------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 8.32% 6.54 16.64 8.79 2.89
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------------------
Expenses 1.01% 1.00 1.02 1.27 1.09
- -------------------------------------------------------------------------------------------------
Net investment income 3.18% 3.43 3.43 3.47 3.91
- -------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $70,487 73,171 69,392 49,689 7,189
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 54% 65 74 34 --
- -------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE> 33
TAX INFORMATION
Kemper Retirement Fund--Series I, II, III, IV, V and VI paid distributions of
$.51, $.49, $.46, $.39, $.45 and $.25 per share, respectively, from net
long-term capital gains during the year ended July 31, 1998, of which 37%, 39%,
35%, 36%, 38%, and 36% represent 20% rate gains, respectively.
Pursuant to Section 852 of the Internal Revenue Code, Kemper Retirement
Fund--Series I, II, III, IV, V and VI designate $6,062,000, $7,604,000,
$5,870,000, $5,465,000, $6,735,000, and $2,485,000, respectively, as capital
gain dividends for the year ended July 31, 1998, of which 84%, 83%, 83%, 81%,
85%, and 79% represent 20% rate gains, respectively.
For corporate shareholders of Kemper Retirement Fund--Series I, II, III, IV, V
and VI, 10%, 9%, 9%, 9%, 9%, and 9%, respectively, of the income earned during
the year ended July 31, 1998 qualified for the dividends received deduction.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your Kemper Fund account, please call 1-800-621-1048.
33
<PAGE> 34
NOTES
34
<PAGE> 35
NOTES
35
<PAGE> 36
TRUSTEES & OFFICERS
DANIEL PIERCE
Chairman and Trustee
JAMES E. AKINS
Trustee
ARTHUR R. GOTTSCHALK
Trustee
FREDERICK T. KELSEY
Trustee
FRED B. RENWICK
Trustee
JOHN B. TINGLEFF
Trustee
EDMOND D. VILLANI
Trustee
JOHN G. WEITHERS
Trustee
MARK S. CASADY
President
PHILIP J. COLLORA
Vice President and
Secretary
JOHN R. HEBBLE
Treasurer
TRACY MCCORMICK CHESTER
Vice President
JERARD K. HARTMAN
Vice President
THOMAS W. LITTAUER
Vice President
ANN M. MCCREARY
Vice President
KATHRYN L. QUIRK
Vice President
STEVEN H. REYNOLDS
Vice President
LINDA J. WONDRACK
Vice President
MAUREEN E. KANE
Assistant Secretary
CAROLINE PEARSON
Assistant Secretary
ELIZABETH C. WERTH
Assistant Secretary
BRENDA LYONS
Assistant Treasurer
<TABLE>
<S> <C>
..........................................................................................................
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
..........................................................................................................
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 419557
Kansas City, MO 64141
..........................................................................................................
CUSTODIAN AND INVESTORS FIDUCIARY TRUST COMPANY
TRANSFER AGENT 801 Pennsylvania Avenue
Kansas City, MO 64105
..........................................................................................................
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
..........................................................................................................
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606
www.kemper.com
</TABLE>
[KEMPER LOGO]
KEMPER FUNDS LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
Printed on recycled paper in the U.S.A.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Target Equity Fund prospectus.
KRF - 2 (9/98) 1055600
