<PAGE> 1
SEMI-ANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED JANUARY 31, 1998
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
Provides 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
KMEPER RETIREMENT FUND
SERIES I, II, III, IV, V AND VI
"...The last six months showed investors the
wisdom of maintaining a long-term perspective. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
8
LARGEST HOLDINGS
10
PORTFOLIO OF
INVESTMENTS
18
FINANCIAL STATEMENTS
22
NOTES TO
FINANCIAL STATEMENTS
26
FINANCIAL HIGHLIGHTS
29
SHAREHOLDERS' MEETING
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER RETIREMENT FUND SERIES I-VI
TOTAL RETURNS*
- --------------------------------------------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED JANUARY 31, 1998
(UNADJUSTED FOR ANY SALES CHARGE)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SERIES I 1.72%
- --------------------------------------------------------------------------------
SERIES II 2.34%
- --------------------------------------------------------------------------------
SERIES III 2.72%
- --------------------------------------------------------------------------------
SERIES IV 3.16%
- --------------------------------------------------------------------------------
SERIES V 3.41%
- --------------------------------------------------------------------------------
SERIES VI 4.08%
- --------------------------------------------------------------------------------
</TABLE>
RETURNS ARE HISTORICAL AND DO NOT REPRESENT FUTURE PERFORMANCE. RETURNS AND NET
ASSET VALUE FLUCTUATE. SHARES ARE REDEEMABLE AT CURRENT NET ASSET VALUE, WHICH
MAY BE MORE OR LESS THAN ORIGINAL COST.
*TOTAL RETURN MEASURES NET INVESTMENT INCOME AND CAPITAL GAIN OR LOSS FROM
PORTFOLIO INVESTMENTS, ASSUMING REINVESTMENT OF ALL DIVIDENDS. DURING THE PERIOD
NOTED, SECURITIES PRICES FLUCTUATED. FOR ADDITIONAL INFORMATION, SEE THE
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION AND THE FINANCIAL HIGHLIGHTS
AT THE END OF THIS REPORT.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
1/31/98 7/31/97
- --------------------------------------------------------------------------------
<S> <C> <C>
SERIES I $10.31 $11.86
- --------------------------------------------------------------------------------
SERIES II $11.93 $13.38
- --------------------------------------------------------------------------------
SERIES III $10.13 $11.33
- --------------------------------------------------------------------------------
SERIES IV $10.27 $11.28
- --------------------------------------------------------------------------------
SERIES V $ 9.76 $10.86
- --------------------------------------------------------------------------------
SERIES VI $10.81 $11.57
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
DURING THE SIX MONTH PERIOD ENDED JANUARY 31, 1998, KEMPER RETIREMENT FUND
SERIES I-VI MADE THE FOLLOWING DISTRIBUTIONS 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
CORRECTION A reverse movement, usually downward, in the price of a group of
stocks or the overall market. Corrections are to be expected over a long term.
P/E RATIO The price of a stock divided by its earnings per share. The P/E ratio,
also known as the MULTIPLE, is a measure of how much an investor is paying for a
company's earning power.
VOLATILITY Characteristic of a security, commodity or market to rise or fall
sharply in price within a short period of time.
ZERO-COUPON BOND A bond that makes no periodic interest payments but instead is
sold at a deep discount from its face value. The buyer of such a bond receives
the rate of return by the gradual appreciation of the security due to 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. HE IS ALSO A MEMBER OF THE INVESTMENT POLICY AND STRATEGY COMMITTEE
FOR KEMPER FUNDS.
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 ADVISOR FOR KEMPER FUNDS. IT
IS ONE OF THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS
WORLDWIDE, MANAGING MORE THAN $200 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,
Despite ongoing stock market volatility, the economic climate for mutual fund
investors has been fairly positive in the first quarter of 1998. Steady U.S.
economic growth bolstered by stable interest rates has created a positive
environment for both equity and fixed-income investing -- and we expect this to
continue.
The U.S. economy, as measured by the gross domestic product (GDP) growth
rate, in the fourth quarter of 1997 grew 3.9 percent. With 3.8 percent GDP
growth for all of 1997, the economy produced $7.19 trillion of output. For the
first quarter of 1998, we estimate the economy to grow at a 3.4 percent rate,
representing a modest slowdown. Momentum for the year, in fact, should slip to a
rate of 2.5 percent.
Although the economy will continue to slow in the months ahead, the outlook
is still positive. Employment growth is expected to remain steady. Both bonds
and equities have continued to perform well, thereby boosting consumer
confidence and spending. The housing market has been noteworthy, with new home
sales reaching an all-time high for this point in the economic cycle and housing
starts remain high relative to demographic trends.
Output prices, as measured by the Consumer Price Index (CPI), remain stable
at 1.5 to 2 percent year over year. When the rate of inflation remains stable
and as low as it has, the risk of higher interest rates is reduced and the real
return on financial assets grows. It is unlikely that the Fed will raise
interest rates in the second quarter.
Seemingly in defiance of our diplomatic struggles with Iraq, political
scandal at home and a few major earnings disappointments particularly in the
technology sector, the market managed to hit several new heights in the first
quarter. U.S. corporate profit growth and earnings continued to boost stock
prices, making the market all the more attractive to investors.
Much of the market activity in the first quarter can be attributed to
today's service-based economy. With the arrival of annual and holiday bonuses
at the end of the fourth quarter -- compensation for a good year's work -- the
first quarter has established itself as a time for American employees to either
spend or stash away these lump sum earnings in Individual Retirement Accounts
(IRAs) and other investments.
One factor that affected the U.S. market in 1997 appears to be having a
diminished influence in the new year. The East Asian market crisis now appears
for most Asian countries to be subsiding. East Asia's economic difficulties did
not affect global production or employment nearly as much as the markets had
anticipated. Consequently, most investors did not feel the serious repercussions
that had been feared. Obviously, investors with heavy concentrations in the
region suffered the largest losses. But the markets were anticipating a greater
global impact -- and this has not yet come to pass. Further impacts may occur or
orders on shipments already made may find no ultimate buyer. Then again, as we
move into the second quarter of 1998, many East Asian countries appear to have
already recovered from the crisis. Some Asian currencies have stabilized and
several Asian stock markets have rebounded. Korea and Malaysia are two countries
where this has happened. The perception of an Asian "contagion" or flu
throughout the region is fading fast -- and investors in general seem to be
staying in the game.
At the end of February, the U.S. federal budget deficit essentially
vanished. Recent efforts to reduce the deficit, combined with higher federal
revenues due to the robust economy, have left us with a budget surplus for
fiscal 1998. This stable fiscal environment is characterized by a reduction
in Treasury financing, which tends to have a downward effect on interest rates.
Lower interest rates fuel consumer spending, which clearly benefits the
marketplace in the form of higher corporate revenues and earnings. One result
of higher earnings is higher stock prices, which can ultimately benefit
investors.
The last time the U.S. enjoyed a budget surplus was 1969. After nearly 30
years of being in the red, we very well may notice a new shift in psychology
about the Treasury market and the issuance of Treasury securities. In the past,
investors worried about deficits that were out of control and expected higher
interest rates on Treasuries. High interest rates are the bane of fixed-income
investing, so a balanced budget can be expected to have a positive effect.
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 (2/28/98) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1) 5.57 6.21 6.69 6.27
PRIME RATE(2) 8.5 8.5 8.3 8.25
INFLATION RATE(3)* 1.57 2.72 3.03 2.72
THE U.S. DOLLAR(4)* 9.32 10.1 7.67 0.82
CAPITAL GOODS ORDERS(5)* 13.77 11.53 5.8 11.19
INDUSTRIAL PRODUCTION(5)* 5.47 5.03 4.57 2.93
EMPLOYMENT GROWTH(6) 2.6 2.31 2.14 1.83
</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 January 31, 1998.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
On the global front, current economic fundamentals tend to favor the U.S.,
with the dollar continuing to be a safe haven for investors. International
investors want to participate in U.S. economic growth, which, at 3.8 percent for
1997, was better than the economic growth in both Europe and Japan. Europe's
1997 growth rate remained fairly steady at 2 to 3 percent. Japan experienced a
growth rate last year of 1 percent. U.S. real interest rates have also been more
attractive than those of most other countries, enticing foreign investors to buy
U.S. Treasuries.
We anticipate the positive economic environment to continue into the second
quarter of 1998. The budget surplus should hold for at least the near term.
President Clinton's initiatives for increased spending and more tax credits
haven't come to fruition. In fact, proponents of spending control have continued
to squelch spending programs on Capitol Hill. All the while, fiscal policy has
remained steady.
With solid economic growth, lower interest rates, low inflation and a
record-setting stock market, it is no wonder that investor expectations are
high. But, are investors expecting too much?
It is important to recognize that although from a macroeconomic perspective
the economy is strong, there are some microeconomic challenges that could
threaten in the months to come. These include health care reform and shifts in
the political landscape at home and continuing conflicts or new developments
abroad. For example, the European Monetary Union (EMU) appears to be proceeding
as we would expect. But within six months to a year after the EMU is
established, tensions may indeed mount as countries try to adapt to the new
structure. Each of these issues could affect our strong, yet reactive
marketplace. Be sure to stay tuned.
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
/s/ JOHN E. SILVIA
JOHN E. SILVIA
March 12, 1998
4
<PAGE> 5
PERFORMANCE UPDATE
[CHESTER PHOTO]
TRACY MCCORMICK CHESTER JOINED SCUDDER KEMPER INVESTMENTS, INC. IN 1994 AND IS A
MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS AND VICE PRESIDENT AND PORTFOLIO
MANAGER OF KEMPER RETIREMENT FUND SERIES. MCCORMICK CHESTER RECEIVED BOTH HER
B.A. AND M.B.A. DEGREES FROM MICHIGAN STATE UNIVERSITY.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
THE FIRST HALF OF THE FISCAL YEAR WAS ONE OF THE STOCK MARKET'S MORE VOLATILE
PERIODS IN RECENT MEMORY. YET, PORTFOLIO MANAGER TRACY MCCORMICK CHESTER
REGISTERED A SOLID RETURN BY FOCUSING ON SOLID GROWTH COMPANIES SELLING AT
ATTRACTIVE PRICES.
Q HOW WOULD YOU DESCRIBE THE PERFORMANCE OF THE STOCK MARKET OVER THE LAST
SIX MONTHS?
A There's really only one word that describes it: volatile. Over the last 36
months or so, the market has advanced so routinely that people may have
forgotten that it isn't always smooth sailing. They were reminded of the
market's capricious nature over the last six months. The final quarter of 1997
saw global stock markets gyrate widely, including a 6.87 percent decline for the
S&P 500 Index on October 27.
For the most part, this volatility was prompted by the free-fall of
currencies in nearly all Southeast Asian countries. The troubles in Asian
economies cast doubt on whether the strong earnings of American companies would
continue at the strong pace that had underpinned the bull market of the last
couple of years. As the currencies of Thailand, Singapore, Malaysia and other
countries came under fire, the U.S. stock market felt the impact. However,
during the ensuing months, investors had a chance to digest the news. As a
result of the bailout plans proposed by the International Monetary Fund,
and the fact that many American companies posted solid earnings, concerns over
the effects of the Asian crisis began to fade. In fact, as January 1998 drew to
a close, the U.S. stock market was again chugging ahead toward new record
highs.
In short, the last six months showed investors the wisdom of maintaining a
long-term perspective.
Q HOW DID THE FUND PERFORM IN COMPARISON?
A Overall, the fund performed extremely well. In fact, two Series (Series V
and Series VI) actually outperformed the Russell 1000 Growth Index, which you
wouldn't expect from portfolios invested substantially in zero coupon bonds.
The portfolios' bond positions were helped by a flight to stable assets
during the Asian turbulence. It was this relative outperformance of bonds that
accounts for the somewhat "backward" returns of the portfolios over the first
six months of the fiscal year. The fund Series that had more bond holdings
tended to perform better than those with more stock exposure. Normally, you
would expect the older Series that have increased stock exposure to be the best
performers.
5
<PAGE> 6
PERFORMANCE UPDATE
Q WAS THE TURMOIL IN ASIA THE PRIMARY IMPETUS BEHIND YOUR TRADING FOR THE
PERIOD?
A We have relatively little international exposure, but Asia did prompt us
to adopt a slightly more defensive position--right now, no one knows just how
big an impact it will have on the earnings of American companies. Most of our
Asia-influenced moves were made in two sectors: technology and finance.
We maintained an overweighted position in finance, but avoided big
money-center banks that have greater exposure to Asian currency problems.
Instead, we concentrated on strong regional banks with good franchises that are
good candidates for a takeover. By the late fourth quarter, many of these stocks
had run up strongly and we began to trim positions.
We continue to have a healthy representation in the insurance sector,
where valuations are more reasonable and we are intrigued by some of the
consolidation potential. If money center banks really come under pressure, we
might look at them again, but right now it seems a little premature. Toward the
end of the period we began building a position in REITs (real estate investment
trusts) which should help provide additional income for the fund.
Before the Asian problems surfaced, we'd already begun to adopt a somewhat
defensive position in technology stocks due to their strong summer rally. This
helped us avoid some of the more spectacular flame-outs when the Asian
difficulties put the sector under extreme pressure. After such substantial price
declines, we felt most of the danger was out of the better technology stocks, so
we've began buying again in November. We concentrated on our favorite stocks
such as Hewlett-Packard, Sun Microsystems, Teradyne and Gartner Group.
Overall, we treated the widespread price decline in the last quarter of
1997 as an opportunity to reduce positions in more vulnerable companies and
boost positions in our higher confidence stocks. For the most part, that
strategy has been vindicated as the market has rebounded and was moving toward
new highs at the end of January.
Q HAVE ANY OTHER FACTORS INFLUENCED YOUR POSITIONING OF THE FUND?
A Asia was the main thing. Otherwise, we've been applying our normal
philosophy of "bottom up" stock selection. Rather than focus on economic
conditions or entire sectors, we tend to choose stocks based on their individual
merits, and seek those that offer above-average growth prospects, but are
selling at what we believe to be attractive prices. To do that, we set upper and
lower price targets on stocks. If a stock falls below a certain price level, we
buy. If it rallies above a certain price level, we sell. In this way, we hope to
benefit from most of the ride up, but avoid most of the ride down.
When the market is volatile, that usually gives us opportunities to buy
good stocks on a dip. Unfortunately, that disciplined approach to valuations
worked against us occasionally during the last few months. The expensive stocks
just got more expensive, and the less expensive stocks got less expensive.
Q WHY WAS THAT?
A The problems experienced by Pacific Rim economies made many investors
nervous. The response was a flight to big, brand-name stocks that people
believed were safer, and they would pay any price to do so. The lofty valuations
that resulted made us hesitant to buy companies like Coke or Pfizer. We believe
that there's not a lot of upside in stocks priced that highly, and they are
susceptible to a big plunge on any bad news. Regardless, the market continued to
bid them up, and we didn't participate as fully as we would have liked.
Q WHAT AREAS DO YOU THINK OFFER CURRENTLY THE MOST ATTRACTIVELY PRICED
STOCKS?
A The areas we're looking at are retail stocks and hotel/gaming stocks. They
are attractively valued right now and may benefit from improved business as
mortgage refinancing gives consumers more money to spend. Our major holdings
include Stanley Works (strong franchise and excellent management), R.R.
Donnelley & Sons (a dominant player in printing and another talented management
team) and Harcourt General (a major force in specialty retailing through its
majority ownership of the Neiman Marcus Group).
6
<PAGE> 7
PERFORMANCE UPDATE
Q THE MARKET POSTED 20 PERCENT PLUS GAINS FOR THE THIRD YEAR IN A ROW IN
1997. DO YOU THINK THIS PERFORMANCE WILL CONTINUE?
A I'm not much of a prognosticator when it comes to the market. But the
economy's growth, coupled with an environment of low inflation and low interest
rates, offers many individual COMPANIES the potential to experience such gains.
We intend to maintain strict attention to valuations and try to find these kinds
of companies when they are priced attractively.
There are still many stocks that are not among the darlings of the S&P 500
that offer solid growth potential at attractive prices. At some point, the
market is going to recognize these bargains, and that's when this fund will
benefit the most.
7
<PAGE> 8
LARGEST HOLDINGS
THE FUNDS' LARGEST STOCK HOLDINGS*
Percentages based on the funds' total common stock holdings on January 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
HOLDINGS SERIES I SERIES II SERIES III SERIES IV SERIES V SERIES VI
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AMERICAN HOME
PRODUCTS 2.6% 2.2% 2.6% 2.4% 2.3% 2.2%
- --------------------------------------------------------------------------------------
ALZA 2.2% 1.7% 2.0% 1.8% 2.0% 1.6%
- --------------------------------------------------------------------------------------
ANALOG DEVICES 2.2% 2.2% 2.4% 2.3% 2.3% 2.1%
- --------------------------------------------------------------------------------------
ABBOTT LABORATORIES 2.2% 2.0% 2.2% 2.2% 2.2% 2.1%
- --------------------------------------------------------------------------------------
AMERICAN GENERAL 2.1% 2.0% 2.0% 2.0% 2.0% 2.0%
- --------------------------------------------------------------------------------------
SUN MICROSYSTEMS 2.1% 2.0% 2.0% 1.7% 2.1% 2.0%
- --------------------------------------------------------------------------------------
HEWLETT-PACKARD 2.1% 2.3% 2.0% 2.0% 2.0% 2.0%
- --------------------------------------------------------------------------------------
STANLEY WORKS 2.0% 1.9% 1.9% 2.0% 2.0% 2.0%
- --------------------------------------------------------------------------------------
CSX 1.9% 2.8% 1.9% 1.9% 1.9% 1.8%
- --------------------------------------------------------------------------------------
JEFFERSON-PILOT 1.8% 2.2% 1.9% 1.9% 2.0% 2.0%
- --------------------------------------------------------------------------------------
</TABLE>
*THE FUNDS' HOLDINGS ARE SUBJECT TO CHANGE.
8
<PAGE> 9
LARGEST HOLDINGS
DESCRIPTION OF THE FUNDS' LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
HOLDINGS
- --------------------------------------------------------------------------------------------
<S> <C>
AMERICAN HOME PRODUCTS Manufactures and markets health care products.
- --------------------------------------------------------------------------------------------
ALZA Engaged in the development commercialization of
innovative pharmaceutical products using advanced
drug delivery technologies to add medical and
economic value to drug therapies.
- --------------------------------------------------------------------------------------------
ANALOG DEVICES Designs, manufactures and sells precision
electronic components and sub-systems for signal
processing applications.
- --------------------------------------------------------------------------------------------
ABBOTT LABORATORIES Engaged in the discovery, development, manufacture
and sale of a broad and diversified line of health
care products and services.
- --------------------------------------------------------------------------------------------
AMERICAN GENERAL A leading provider of annuities, consumer loans and
life insurance.
- --------------------------------------------------------------------------------------------
SUN MICROSYSTEMS Supplies high performance work stations.
- --------------------------------------------------------------------------------------------
HEWLETT-PACKARD Manufactures computers and computer-related
products.
- --------------------------------------------------------------------------------------------
STANLEY WORKS A worldwide producer of tools, hardware and
speciality hardware for consumer, home improvement,
industrial and professional use.
- --------------------------------------------------------------------------------------------
CSX A transportation company involved in rails,
shipping and trucking worldwide.
- --------------------------------------------------------------------------------------------
JEFFERSON-PILOT Writes life, health and accident insurance and
annuities.
- --------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
KEMPER RETIREMENT FUND
SERIES I THROUGH SERIES VI
PORTFOLIOS OF INVESTMENTS AT JANUARY 31, 1998 (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES I SERIES II
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT U.S. Treasury, zero coupon,
OBLIGATIONS--39.8%, 1999 through 2006
54.8%, 51.4%, 56.2%, (Cost: $41,700, $84,277,
50.5% AND 58.4% $58,337, $71,230, $57,708
and $39,451) $48,700 $44,312 $102,800 $89,854
-------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER NUMBER
COMMON STOCKS OF SHARES VALUE OF SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BASIC INDUSTRIES--1.5%, Betz Dearborn, Inc. 6,400 369 8,500 490
1.1%, 1.3%, 1.2%, Imperial Chemical Industries,
1.3% AND 1.1% PLC 10,000 609 11,000 670
PPG Industries 11,500 660 12,000 689
-------------------------------------------------------------------------------------
1,638 1,849
- ---------------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--4.7%, Emerson Electric Co. 8,400 508 11,800 714
3.8%, 3.8%, 3.7%, Federal-Mogul Corp. 16,000 720 18,000 810
4.1% AND 3.6% General Electric Co. 10,600 821 12,600 977
Lockheed Martin 5,000 520 7,000 728
Raytheon Co. 17,624 913 19,748 1,023
Sundstrand Corp. 20,000 1,089 23,000 1,252
U.S. Industries 22,000 617 28,000 786
-------------------------------------------------------------------------------------
5,188 6,290
- ---------------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--6.2%, CBS Corp. 20,000 599 20,000 599
4.6%, 5.0%, 4.6%, Dillard Department Stores 10,000 351 12,000 422
5.2% AND 4.5% Harcourt General 14,000 746 16,000 853
J.C. Penney Co. 13,400 903 15,700 1,058
May Department Stores Co. 19,000 999 20,900 1,099
(a)MGM Grand 20,000 716 22,000 788
(a)Midas, Inc. 2,333 37 2,333 37
(a)Mirage Resorts 8,000 185 9,000 208
R.R. Donnelley & Sons 28,800 1,075 32,100 1,198
Stanley Works 28,700 1,270 29,800 1,319
-------------------------------------------------------------------------------------
6,881 7,581
</TABLE>
10
<PAGE> 11
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>
$78,600 $63,368 $96,200 $73,326 $96,300 $66,323 $67,000 $42,235
- --------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------
NUMBER NUMBER NUMBER NUMBER
OF SHARES VALUE OF SHARES VALUE OF SHARES VALUE OF SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5,500 317 5,900 340 6,400 369 3,500 202
10,000 609 10,000 609 10,000 609 5,000 304
11,000 631 11,000 631 11,500 660 5,500 316
- --------------------------------------------------------------------------------------
1,557 1,580 1,638 822
- --------------------------------------------------------------------------------------
8,200 496 8,200 496 8,800 532 4,200 254
14,000 630 14,000 630 16,000 720 7,000 315
10,800 837 11,800 915 12,600 977 6,000 465
5,000 520 5,000 520 5,000 520 2,500 260
13,499 699 13,499 699 18,624 965 9,812 509
17,000 925 17,000 925 19,000 1,034 9,600 523
21,000 589 21,000 589 22,000 617 10,500 295
- --------------------------------------------------------------------------------------
4,696 4,774 5,365 2,621
- --------------------------------------------------------------------------------------
18,000 539 16,000 479 22,000 659 6,500 195
8,000 281 7,000 246 10,000 351 5,000 176
14,000 746 13,000 693 14,000 746 6,500 347
13,000 876 13,000 876 13,400 903 7,000 472
14,900 783 14,900 783 18,800 988 8,100 426
20,000 716 20,000 716 20,000 716 11,000 394
2,000 32 2,000 32 2,000 32 1,000 16
8,000 185 8,000 185 8,000 185 4,000 92
23,300 869 23,300 869 27,700 1,034 14,300 533
24,250 1,073 24,250 1,073 28,800 1,274 13,300 589
- --------------------------------------------------------------------------------------
6,100 5,952 6,888 3,240
</TABLE>
11
<PAGE> 12
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>
CONSUMER STAPLES--5.4%, General Mills 6,000 $ 447 7,000 $ 521
4.2%, 4.4%, 4.2%, Gillette Co. 5,000 494 5,000 494
4.4% AND 4.0% H.J. Heinz Co. 10,000 554 12,000 665
International Flavors &
Fragrances 19,000 800 20,000 843
Kimberly-Clark Corp. 9,000 470 12,000 626
McCormick & Co. 20,000 584 23,000 671
Newell Co. 5,000 205 5,000 205
PepsiCo 20,200 728 20,200 728
Procter & Gamble Co. 5,000 392 6,000 470
Seagram Co., Ltd. 10,000 341 11,000 375
Service Corp. International 10,000 390 13,000 507
Unilever N.V., ADR 6,000 342 10,000 571
Whitman Corp. 14,000 233 14,000 233
-------------------------------------------------------------------------------------
5,980 6,909
- ---------------------------------------------------------------------------------------------------------------------------
ENERGY--2.3%, AMOCO Corp. 6,000 488 6,000 488
1.8%, 1.7%, 1.7%, Baker Hughes, Inc. 10,000 386 11,000 424
1.9% AND 1.6% Chevron Corp. 5,000 374 5,000 374
Enron Corp. 10,000 414 10,000 414
Hussman International 7,000 95 7,000 95
Mobil Corp. 8,400 572 12,600 858
Unocal Corp. 7,000 241 8,000 275
-------------------------------------------------------------------------------------
2,570 2,928
- ---------------------------------------------------------------------------------------------------------------------------
FINANCE--7.3%, American Express Co. 5,000 418 5,000 418
5.8%, 6.0%, 5.5%, American General Corp. 23,000 1,297 25,000 1,409
6.2% AND 5.3% Beneficial Corp. 8,000 621 9,000 699
Compass Bancshares 12,600 545 12,800 554
Federal National Mortgage
Association 5,000 309 7,000 432
First Chicago NBD Corp. 8,000 597 10,000 746
First Union Corp. 8,300 399 12,800 615
Fleet Financial Group, Inc. 8,000 573 8,300 594
Jefferson-Pilot Corp. 14,000 1,144 17,000 1,389
Mellon Bank Corp. 5,000 303 5,000 302
Morgan Stanley, Dean Witter,
Discover & Co. 8,000 467 11,000 642
NationsBank 10,000 600 12,000 720
PNC Bank Corp., N.A. 8,000 413 8,000 413
Safeco Corp. 9,000 449 10,000 499
-------------------------------------------------------------------------------------
8,135 9,432
</TABLE>
12
<PAGE> 13
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>
5,000 $ 372 5,000 $ 372 5,000 $ 372 3,000 $ 223
4,000 395 4,000 395 5,000 494 2,000 198
8,000 444 8,000 444 10,000 554 5,000 277
18,000 758 17,000 716 19,000 800 9,000 379
9,000 470 9,000 470 9,000 470 5,000 261
18,000 525 18,000 525 20,000 584 10,000 292
5,000 205 5,000 205 5,000 205 2,000 82
17,000 613 17,000 613 18,200 656 7,700 278
5,000 392 5,000 392 5,000 392 3,000 235
9,000 307 9,000 307 9,000 307 4,000 136
11,000 429 11,000 429 11,000 429 5,500 214
6,000 342 6,000 342 6,000 342 3,500 200
12,000 200 12,000 200 12,000 200 6,000 100
- -----------------------------------------------------------------------------------------
5,452 5,410 5,805 2,875
- -----------------------------------------------------------------------------------------
4,000 325 5,000 407 6,000 488 2,500 203
8,000 308 8,000 308 9,000 347 4,000 154
5,000 374 5,000 374 5,000 374 2,000 150
8,000 331 8,000 331 10,000 414 4,000 166
6,000 82 6,000 82 6,000 82 3,000 41
7,600 518 8,400 572 8,000 545 4,400 300
5,000 172 5,000 172 5,000 172 3,000 103
- -----------------------------------------------------------------------------------------
2,110 2,246 2,422 1,117
- -----------------------------------------------------------------------------------------
4,000 335 4,000 335 5,000 418 2,500 209
20,000 1,128 19,000 1,071 22,000 1,240 10,000 564
8,000 621 8,000 621 8,000 621 4,000 311
10,600 458 10,600 458 12,600 545 4,300 186
4,000 247 4,000 247 5,000 309 3,000 185
8,000 597 8,000 597 8,000 597 4,000 298
8,300 399 8,300 399 8,300 399 4,100 197
7,000 501 7,000 501 8,000 573 4,500 322
13,000 1,062 13,000 1,062 15,000 1,225 7,000 572
5,000 302 5,000 302 5,000 302 2,000 121
8,000 467 6,000 350 8,000 467 4,000 233
8,000 480 8,000 480 10,000 600 4,000 240
8,000 413 8,000 413 8,000 413 4,000 206
8,000 400 8,000 400 9,000 449 4,000 200
- -----------------------------------------------------------------------------------------
7,410 7,236 8,158 3,844
</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>
HEALTH CARE--8.7%, Abbott Laboratories 19,000 $ 1,345 20,000 $ 1,416
6.2%, 6.6%, 6.2%, ALZA Corp. 39,200 1,397 34,200 1,218
7.1% AND 5.7% American Home Products Corp. 17,000 1,622 16,000 1,527
Baxter International 15,000 835 16,000 891
Bristol-Myers Squibb Co. 8,000 797 11,000 1,096
(a)Crescendo Pharmaceutical
Corp. 1,760 20 1,710 20
Glaxo Wellcome, PLC, ADR 9,000 484 9,000 484
(a)HEALTHSOUTH Corp. 24,000 538 25,000 561
McKesson Corp. 6,000 287 8,000 383
Medtronic, Inc. 6,000 306 6,000 306
Merck & Co. 4,500 528 5,400 633
(a)Tenet Healthcare Corp. 27,700 956 28,600 987
United Healthcare Corp. 12,000 615 14,000 718
---------------------------------------------------------------------------------
9,730 10,240
-----------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--14.4%, AMP, Inc. 16,000 640 19,000 760
11.2%, 11.6%, 10.7%, (a)Analog Devices 47,000 1,387 52,333 1,544
11.9% AND 10.1% (a)Cadence Design Systems 23,400 655 32,600 913
(a)Cisco Systems 13,500 851 18,000 1,135
Computer Associates
International 9,000 479 10,500 558
(a)Computer Sciences Corp. 10,000 849 9,000 764
Diebold 9,600 478 10,000 497
(a)Gartner Group 16,000 597 16,000 597
GM-Hughes Electronics Corp. 17,000 589 19,000 658
Harris Corp. 16,000 762 18,000 857
Hewlett-Packard Co. 21,400 1,284 26,800 1,608
Intel Corp. 4,000 324 6,000 486
International Business Machines 11,000 1,086 11,000 1,085
Linear Technology Corp. 7,000 464 9,000 596
(a)Microsoft Corp. 2,500 373 3,000 448
(a)National Semiconductor Corp. 23,000 647 27,000 759
(a)Parametric Technology Corp. 20,000 1,015 22,500 1,142
Pitney Bowes, Inc. 10,000 459 12,000 551
(a)Sterling Commerce, Inc. 18,000 654 21,000 763
(a)Sun Microsystems 27,000 1,294 29,200 1,400
(a)Teradyne 10,000 395 12,000 474
(a)Xilinx, Inc. 18,000 683 18,000 683
---------------------------------------------------------------------------------
15,965 18,278
</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>
17,000 $ 1,204 17,000 $ 1,204 19,000 $ 1,345 8,500 $ 602
31,400 1,119 27,400 976 34,200 1,218 12,900 459
15,000 1,432 14,000 1,336 15,000 1,432 6,500 620
13,000 724 13,000 724 15,000 835 8,000 445
6,000 598 7,000 698 8,000 798 4,000 399
1,370 16 1,370 16 1,510 18 545 6
8,000 430 8,000 431 9,000 484 4,500 242
19,000 426 19,000 426 24,000 539 9,000 202
5,000 239 5,000 239 6,000 287 3,000 144
4,000 204 4,000 204 6,000 306 3,000 153
4,500 528 4,500 528 4,500 528 1,800 211
22,000 759 22,000 759 27,700 956 11,100 383
10,000 513 10,000 513 12,000 615 5,200 267
- --------------------------------------------------------------------------------------------
8,192 8,054 9,361 4,133
- --------------------------------------------------------------------------------------------
16,000 640 16,000 640 16,000 640 8,000 320
46,000 1,357 42,000 1,239 48,000 1,416 20,666 610
18,000 504 18,000 504 20,400 571 10,000 280
12,000 757 12,000 757 13,500 851 6,000 378
9,000 479 7,500 399 9,000 479 6,000 319
8,000 679 8,000 679 10,000 849 4,500 382
9,100 453 9,100 453 9,600 478 4,500 224
14,000 522 14,000 522 16,000 597 8,000 299
15,000 519 15,000 519 17,000 589 8,000 277
14,000 667 14,000 667 16,000 762 8,000 381
18,400 1,104 18,400 1,104 20,400 1,224 9,500 570
4,000 324 4,000 324 4,000 324 2,000 162
10,500 1,036 10,500 1,036 11,000 1,086 6,000 592
7,000 464 7,000 464 6,000 398 3,000 199
2,000 298 2,500 373 2,500 373 -- --
22,000 619 22,000 619 22,000 619 10,500 295
18,500 939 18,500 939 20,000 1,015 9,000 457
8,000 367 8,000 367 10,000 459 5,000 229
15,000 545 14,000 508 16,000 581 6,500 236
23,000 1,103 20,000 959 27,000 1,294 12,000 575
9,000 356 9,000 356 10,000 395 5,000 198
15,600 592 15,600 592 18,000 683 7,200 273
- --------------------------------------------------------------------------------------------
14,324 14,020 15,683 7,256
</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>
TRANSPORTATION--2.9%, Canadian Pacific, Ltd. 23,000 $ 622 22,000 $ 595
2.1%, 2.3%, 2.2%,
2.4% AND 2.1% CSX Corp. 22,000 1,166 24,000 1,272
(a)Federal Express Corp. 8,000 520 9,000 586
Norfolk Southern Corp. 30,000 947 33,000 1,042
--------------------------------------------------------------------------------
3,255 3,495
----------------------------------------------------------------------------------------------------------------------
UTILITIES--2.7%, 2.1%, (a)AirTouch Communications 8,000 351 9,000 395
2.3%, 2.2%, 2.3%
AND 1.9% AT&T 12,000 751 15,000 939
Cincinnati Bell, Inc. 16,000 574 16,000 574
SBC Communications, Inc. 12,600 980 14,000 1,089
Sprint Corp. 6,000 356 6,000 356
--------------------------------------------------------------------------------
3,012 3,353
--------------------------------------------------------------------------------
TOTAL COMMON STOCKS--56.1%, 42.9%, 45.0%, 42.2%,
46.8% AND 39.9%
(Cost: $53,863, $59,950, $47,962,
$47,476, $53,130 and $25,200) 62,354 70,355
<CAPTION>
--------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MONEY MARKET Yield--5.52% to 5.80%
INSTRUMENT--4.5%, Due--February and
2.2%, 4.6%, .7%, March 1998
2.9% AND 1.4% (Cost: $4,991, $3,586,
$5,693, $994, $3,790 and
$999) $5,000 4,991 $3,600 3,586
--------------------------------------------------------------------------------
TOTAL INVESTMENTS--100.4%,
99.9%, 101.0%, 99.1%, 100.2%
AND 99.7% (Cost: $100,554,
$147,813, $111,992,
$119,700, $114,628 and
$65,650) 111,657 163,795
--------------------------------------------------------------------------------
LIABILITIES, LESS CASH AND OTHER
ASSETS--(.4%), .1%,
(1.0%), .9%, (.2%) AND .3% (441) 197
--------------------------------------------------------------------------------
NET ASSETS--100% $111,216 $163,992
--------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------
NOTES TO PORTFOLIOS OF INVESTMENTS
- --------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments for federal income tax purposes at January 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 $100,554 $147,813 $111,992 $119,700 $114,628 $65,650
- ---------------------------------------------------------------------------------------------------------------------------
Gross unrealized appreciation 12,104 17,094 13,405 10,546 17,911 6,854
- ---------------------------------------------------------------------------------------------------------------------------
Gross unrealized depreciation 1,001 1,112 784 919 966 463
- ---------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation 11,103 15,982 12,621 9,627 16,945 6,391
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
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>
18,000 $ 487 18,000 $ 487 20,000 $ 541 9,000 $ 243
20,000 1,060 20,000 1,060 22,000 1,166 10,000 530
8,000 520 8,000 520 8,000 521 5,000 325
24,000 758 24,000 758 30,000 947 13,500 426
- ------------------------------------------------------------------------------------------------
2,825 2,825 3,175 1,524
- ------------------------------------------------------------------------------------------------
8,000 351 8,000 351 8,000 351 3,000 132
13,000 814 13,000 814 12,000 751 6,000 376
15,000 538 15,000 538 16,000 574 6,000 215
11,400 886 11,700 910 12,000 933 6,100 474
5,000 297 5,000 297 6,000 356 3,000 178
- ------------------------------------------------------------------------------------------------
2,886 2,910 2,965 1,375
- ------------------------------------------------------------------------------------------------
55,552 55,007 61,460 28,807
- ------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$5,700 5,693 $1,000 994 $3,800 3,790 $1,000 999
- ------------------------------------------------------------------------------------------------
124,613 129,327 131,573 72,041
- ------------------------------------------------------------------------------------------------
(1,183) 1,169 (213) 218
- ------------------------------------------------------------------------------------------------
$123,430 $130,496 $131,360 $72,259
- ------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 18
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES
---------------------------------------------------------
I II III IV V VI
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
- -------------------------------------------------------------------------------------------------------------
Investments, at value (Cost: $100,554, $147,813,
$111,992, $119,700, $114,628 and $65,650) $111,657 163,795 124,613 129,327 131,573 72,041
- -------------------------------------------------------------------------------------------------------------
Cash 5 993 -- 682 310 31
- -------------------------------------------------------------------------------------------------------------
Receivable for:
Investments sold 1,311 1,432 1,197 2,164 1,243 1,190
- -------------------------------------------------------------------------------------------------------------
Dividends and interest 49 57 45 45 47 24
- -------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 113,022 166,277 125,855 132,218 133,173 73,286
- -------------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- -------------------------------------------------------------------------------------------------------------
Cash overdraft -- -- 713 -- -- --
- -------------------------------------------------------------------------------------------------------------
Payable for:
Investments purchased 1,683 2,081 1,591 1,591 1,632 884
- -------------------------------------------------------------------------------------------------------------
Fund shares redeemed 31 78 19 22 81 60
- -------------------------------------------------------------------------------------------------------------
Management fee 46 68 54 54 54 30
- -------------------------------------------------------------------------------------------------------------
Administrative services fee 17 25 20 21 22 13
- -------------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related
expenses 17 20 16 22 15 36
- -------------------------------------------------------------------------------------------------------------
Trustees' fees 12 13 12 12 9 4
- -------------------------------------------------------------------------------------------------------------
Total liabilities 1,806 2,285 2,425 1,722 1,813 1,027
- -------------------------------------------------------------------------------------------------------------
NET ASSETS $111,216 163,992 123,430 130,496 131,360 72,259
- -------------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -------------------------------------------------------------------------------------------------------------
Paid-in capital $ 97,328 144,716 108,104 118,234 111,264 64,675
- -------------------------------------------------------------------------------------------------------------
Undistributed net realized gain on investments 2,474 2,733 2,352 2,257 2,751 1,015
- -------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 11,103 15,982 12,621 9,627 16,945 6,391
- -------------------------------------------------------------------------------------------------------------
Undistributed net investment income 311 561 353 378 400 178
- -------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $111,216 163,992 123,430 130,496 131,360 72,259
- -------------------------------------------------------------------------------------------------------------
THE PRICING OF SHARES
- -------------------------------------------------------------------------------------------------------------
Shares outstanding 10,782 13,751 12,188 12,708 13,455 6,682
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
(NET ASSETS divided by SHARES OUTSTANDING) $ 10.31 11.93 10.13 10.27 9.76 10.81
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
18
<PAGE> 19
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JANUARY 31, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES
------------------------------------------------------------------
I II III IV V VI
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------------------------------
Interest $ 1,951 3,431 2,278 2,230 2,351 1,331
- ------------------------------------------------------------------------------------------------------------------------------
Dividends 456 510 408 411 449 208
- ------------------------------------------------------------------------------------------------------------------------------
Total investment income 2,407 3,941 2,686 2,641 2,800 1,539
- ------------------------------------------------------------------------------------------------------------------------------
Expenses:
Management fee 281 415 311 328 330 178
- ------------------------------------------------------------------------------------------------------------------------------
Administrative services fee 130 195 147 156 158 84
- ------------------------------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 56 85 68 87 80 53
- ------------------------------------------------------------------------------------------------------------------------------
Professional fees 28 43 31 34 33 17
- ------------------------------------------------------------------------------------------------------------------------------
Reports to shareholders 24 30 23 25 20 27
- ------------------------------------------------------------------------------------------------------------------------------
Trustees' fees and other 10 16 12 13 18 11
- ------------------------------------------------------------------------------------------------------------------------------
Total expenses 529 784 592 643 639 370
- ------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,878 3,157 2,094 1,998 2,161 1,169
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain on sales of investments 5,908 7,055 5,601 5,584 6,253 2,351
- ------------------------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation on investments (5,881) (6,518) (4,515) (3,574) (4,096) (633)
- ------------------------------------------------------------------------------------------------------------------------------
Net gain on investments 27 537 1,086 2,010 2,157 1,718
- ------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,905 3,694 3,180 4,008 4,318 2,887
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
------------------------------------------------------------------------
SERIES I SERIES II
- ---------------------------------------------------------------------------------------------------------------
SIX MONTHS ONE SIX MONTHS ONE
ENDED MONTH YEAR ENDED MONTH YEAR
JANUARY 31, ENDED ENDED JANUARY 31, ENDED ENDED
1998 JULY 31, JUNE 30, 1998 JULY 31, JUNE 30,
(UNAUDITED) 1997 1997 (UNAUDITED) 1997 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 1,878 325 3,911 3,157 567 6,817
- ---------------------------------------------------------------------------------------------------------------
Net realized gain 5,908 1,687 11,460 7,055 2,057 13,354
- ---------------------------------------------------------------------------------------------------------------
Change in net unrealized
appreciation (5,881) 4,076 3,032 (6,518) 5,363 3,964
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 1,905 6,088 18,403 3,694 7,987 24,135
- ---------------------------------------------------------------------------------------------------------------
Distribution from net
investment income (3,921) -- (3,911) (6,568) -- (7,159)
- ---------------------------------------------------------------------------------------------------------------
Distribution from net realized
gain (12,075) -- (14,931) (14,359) -- (18,195)
- ---------------------------------------------------------------------------------------------------------------
Total dividends to shareholders (15,996) -- (18,842) (20,927) -- (25,354)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) from
capital share transactions 8,190 (781) 4,946 7,842 (1,774) (36)
- ---------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS (5,901) 5,307 4,507 (9,391) 6,213 (1,255)
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 117,117 111,810 107,303 173,383 167,170 168,425
- ---------------------------------------------------------------------------------------------------------------
END OF PERIOD $111,216 117,117 111,810 163,992 173,383 167,170
- ---------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT
INCOME AT END OF PERIOD $ 311 2,354 2,029 561 3,972 3,405
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
20
<PAGE> 21
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
SERIES III SERIES IV SERIES V SERIES VI
- -----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ONE SIX MONTHS ONE SIX MONTHS ONE SIX MONTHS
ENDED MONTH YEAR ENDED MONTH YEAR ENDED MONTH YEAR ENDED
JANUARY 31, ENDED ENDED JANUARY 31, ENDED ENDED JANUARY 31, ENDED ENDED JANUARY 31,
1998 JULY 31, JUNE 30, 1998 JULY 31, JUNE 30, 1998 JULY 31, JUNE 30, 1998
(UNAUDITED) 1997 1997 (UNAUDITED) 1997 1997 (UNAUDITED) 1997 1997 (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2,094 380 4,371 1,998 361 4,517 2,161 375 4,644 1,169
- -----------------------------------------------------------------------------------------------------------------------
5,601 1,502 11,164 5,584 1,398 10,377 6,253 1,804 11,793 2,351
- -----------------------------------------------------------------------------------------------------------------------
(4,515) 4,705 2,920 (3,574) 5,420 4,714 (4,096) 6,041 4,036 (633)
- -----------------------------------------------------------------------------------------------------------------------
3,180 6,587 18,455 4,008 7,179 19,608 4,318 8,220 20,473 2,887
- -----------------------------------------------------------------------------------------------------------------------
(4,304) -- (4,464) (4,219) -- (4,509) (4,540) -- (4,663) (2,370)
- -----------------------------------------------------------------------------------------------------------------------
(11,501) -- (14,623) (10,945) -- (14,118) (12,544) -- (14,346) (4,916)
- -----------------------------------------------------------------------------------------------------------------------
(15,805) -- (19,087) (15,164) -- (18,627) (17,084) -- (19,009) (7,286)
- -----------------------------------------------------------------------------------------------------------------------
8,957 (1,823) 1,478 5,722 (2,474) (8,614) 6,995 (1,764) (536) 3,487
- -----------------------------------------------------------------------------------------------------------------------
(3,668) 4,764 846 (5,434) 4,705 (7,633) (5,771) 6,456 928 (912)
- -----------------------------------------------------------------------------------------------------------------------
127,098 122,334 121,488 135,930 131,225 138,858 137,131 130,675 129,747 73,171
- -----------------------------------------------------------------------------------------------------------------------
123,430 127,098 122,334 130,496 135,930 131,225 131,360 137,131 130,675 72,259
- -----------------------------------------------------------------------------------------------------------------------
353 2,563 2,183 378 2,599 2,238 400 2,779 2,404 178
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
--------------
SERIES VI
--------------
ONE
MONTH YEAR
ENDED ENDED
JULY 31, JUNE 30,
1997 1997
--------------------------
<S> <C> <C>
207 2,070
--------------------------
729 3,804
--------------------------
3,575 3,566
--------------------------
4,511 9,440
--------------------------
-- (1,591)
--------------------------
-- (1,589)
--------------------------
-- (3,180)
--------------------------
(732) 13,443
--------------------------
3,779 19,703
--------------------------
69,392 49,689
--------------------------
73,171 69,392
--------------------------
1,379 1,172
--------------------------
</TABLE>
21
<PAGE> 22
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 INVESTMENT VALUATION. Investments are stated at
value. Portfolio securities that are traded on a
domestic securities exchange or securities listed
on the NASDAQ National Market are valued at the
last sale price on the exchange or market where
primarily traded or listed or, if there is no
recent sale, at the last current bid quotation.
Portfolio securities that are primarily traded on
foreign securities exchanges are generally valued
at the preceding closing values of such securities
on their respective exchanges where primarily
traded. Securities not so traded or listed are
valued at the last current bid quotation if market
quotations are available. Fixed income securities
are valued by using market quotations, or
independent pricing services that use prices
provided by market makers or estimates of market
values obtained from yield data relating to
instruments or securities with similar
characteristics. Equity options are valued at the
last sale price unless the bid price is higher or
the asked price is lower, in which event such bid
or asked price is used. Financial futures and
options thereon are valued at the settlement price
established each day by the board of trade or
exchange on which they are traded. Forward foreign
currency contracts are valued at the forward rates
prevailing on the day of valuation. Other
securities and assets are valued at fair value as
determined in good faith by the Board of Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on the
trade date (date the order to buy or sell is
executed). Dividend income is recorded on the
ex-dividend date, and interest income is recorded
on the accrual basis. Interest income includes
discount amortization on fixed income securities.
Realized gains and losses from investment
transactions are reported on an identified cost
basis.
EXPENSES. Expenses arising in connection with a
series of the Trust are allocated to that series.
Other Trust expenses are allocated among the series
in proportion to their relative net assets.
FUND SHARE VALUATION. Fund shares were sold during
limited offering periods which ended during the
years 1990 through 1997, and are redeemed on a
22
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS
continuous basis. Fund shares were sold and are
redeemed at net asset value (plus a commission on
most sales). On each day the New York Stock
Exchange is open for trading, the net asset value
per share is determined as of the earlier of 3:00
p.m. Chicago time or the close of the Exchange by
dividing the total value of each Fund's investments
and other assets, less liabilities, by the
respective number of shares outstanding.
FEDERAL INCOME TAXES. Each Fund has complied with
the special provisions of the Internal Revenue Code
available to investment companies during the six
months ended January 31, 1998.
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 INVESTMENT MANAGER COMBINATION. Effective December
31, 1997, Zurich Insurance Company, the parent of
Zurich Kemper Investments, Inc. (ZKI), acquired a
majority interest in Scudder, Stevens & Clark, Inc.
(Scudder), another major investment manager. As a
result of this transaction, the operations of ZKI
were combined with Scudder to form a new global
investment organization named Scudder Kemper
Investments, Inc. (Scudder Kemper). The transaction
resulted in the termination of the Funds'
investment management agreement with ZKI, however,
a new investment management agreement between the
Funds and Scudder Kemper was approved by the Funds'
Board of Trustees and by the Funds' Shareholders.
The new management agreement, which was effective
December 31, 1997, is the same in all material
respects as the previous management agreement,
except that Scudder Kemper is the new investment
adviser to the Funds. In addition, the names of the
Funds' principal underwriter and shareholder
service agent were changed to Kemper Distributors,
Inc. (KDI) and Kemper Service Company (KSvC),
respectively.
MANAGEMENT AGREEMENT. The Funds have a management
agreement with Scudder Kemper and pay a management
fee at an annual rate of .50% of average daily net
assets. The Funds incurred a management fee of
$1,843,000 for the six months ended January 31,
1998.
ADMINISTRATIVE SERVICES AGREEMENT. The Trust has an
administrative services agreement with 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>
Six months ended
January 31, 1998 $870,000 887,000 12,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Trust's transfer agent,
KSvC is the shareholder service agent for the
Funds. Under the agreement, KSvC received
shareholder services fees of $288,000 for the six
months ended January 31, 1998.
23
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Trust are also officers or directors of
Scudder Kemper. During the six months ended January
31, 1998, the Funds made no payments to their
officers and incurred trustees' fees of $56,000 to
independent trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the six months ended January 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 $48,784 52,371 43,894 43,536 47,841 22,491
Proceeds from sales 52,621 61,222 48,754 50,591 53,681 23,923
</TABLE>
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Funds (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED ONE MONTH ENDED YEAR ENDED
JANUARY 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 1,557 $ 15,648 -- $ -- 1,818 $ 18,601
- ----------------------------------------------------------------------------------------------------------------------------
Shares redeemed (652) (7,458) (66) (781) (1,235) (13,655)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital share
transactions 905 $ 8,190 (66) $ (781) 583 $ 4,946
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
SERIES II
- ----------------------------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of dividends 1,786 $ 20,831 -- $ -- 2,129 $ 25,117
- ----------------------------------------------------------------------------------------------------------------------------
Shares redeemed (994) (12,989) (135) (1,774) (1,983) (25,153)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital share
transactions 792 $ 7,842 (135) $ (1,774) 146 $ (36)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
SERIES III
- ----------------------------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of dividends 1,600 $ 15,724 -- $ -- 1,937 $ 19,255
- ----------------------------------------------------------------------------------------------------------------------------
Shares redeemed (625) (6,767) (164) (1,823) (1,658) (17,777)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital share
transactions 975 $ 8,957 (164) $ (1,823) 279 $ 1,478
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED ONE MONTH ENDED YEAR ENDED
JANUARY 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 1,510 $15,111 -- $ -- 1,866 $ 18,506
- -----------------------------------------------------------------------------------------------------------------------
Shares redeemed (855) (9,389) (226) (2,474) (2,563) (27,120)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital
share transactions 655 $5,722 (226) $(2,474) (697) $ (8,614)
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
SERIES V
- -----------------------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of
dividends 1,782 $16,939 -- $ -- 2,001 $ 18,814
- -----------------------------------------------------------------------------------------------------------------------
Shares redeemed (951) (9,944) (167) (1,764) (1,929) (19,350)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital
share transactions 831 $6,995 (167) $(1,764) 72 $ (536)
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
SERIES VI
- -----------------------------------------------------------------------------------------------------------------------
Shares sold -- $ -- -- $ -- 1,919 $ 19,497
- -----------------------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of
dividends 688 7,239 -- -- 311 3,125
- -----------------------------------------------------------------------------------------------------------------------
Shares redeemed (331) (3,752) (65) (732) (894) (9,179)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital
share transactions 357 $3,487 (65) $ (732) 1,336 $ 13,443
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 26
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
SERIES I
-----------------------------------------------------------------------
SIX MONTHS ONE MONTH
ENDED ENDED YEAR ENDED JUNE 30,
JANUARY 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 .21 .03 .42 .44 .45 .42
- -----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.05) .59 1.48 1.03 1.20 (.78)
- -----------------------------------------------------------------------------------------------------------------------
Total from investment operations .16 .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 $10.31 11.86 11.24 11.46 11.19 10.67
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 1.72% 5.52 18.43 13.91 17.03 (3.76)
- -----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------------------------------------
Expenses .91% .84 .93 .95 .97 .91
- -----------------------------------------------------------------------------------------------------------------------
Net investment income 3.34% 3.38 3.60 3.68 3.96 3.32
- -----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $111,216 117,117 111,810 107,303 106,482 103,764
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 83% 86 94 71 63 59
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Average commission rates paid per share on stock transactions for the six months
ended January 31, 1998, the one month period ended July 31, 1997 and the years
ended June 30, 1997 and June 30, 1996 were $.0590, $.0601, $.0590 and $.0586,
respectively.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
SERIES II
-----------------------------------------------------------------------
SIX MONTHS ONE MONTH
ENDED ENDED YEAR ENDED JUNE 30,
JANUARY 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 .27 .05 .56 .58 .60 .56
- -----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) -- .56 1.29 .77 1.25 (1.04)
- -----------------------------------------------------------------------------------------------------------------------
Total from investment operations .27 .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 $11.93 13.38 12.77 13.01 12.94 12.30
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 2.34% 4.78 15.56 10.92 16.52 (4.07)
- -----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------------------------------------
Expenses .92% .90 .92 .94 .96 .90
- -----------------------------------------------------------------------------------------------------------------------
Net investment income 3.81% 3.98 4.08 4.16 4.54 3.91
- -----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $163,992 173,383 167,170 168,425 173,337 173,055
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 58% 67 70 54 47 44
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Average commission rates paid per share on stock transactions for the six months
ended January 31, 1998, the one month period ended July 31, 1997 and the years
ended June 30, 1997 and June 30, 1996 were $.0589, $.0602, $.0590 and $.0585,
respectively.
- --------------------------------------------------------------------------------
NOTE FOR ALL SERIES: Total return does not reflect the effect of any sales
charges.
Data for the period ended January 31, 1998 is unaudited.
26
<PAGE> 27
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
------------------------------------------------------------------------
SERIES III
-----------------------------------------------------------------------
SIX MONTHS ONE MONTH
ENDED ENDED YEAR ENDED JUNE 30,
JANUARY 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 .20 .04 .42 .43 .44 .40
- -----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .07 .54 1.22 .78 1.24 (.88)
- -----------------------------------------------------------------------------------------------------------------------
Total from investment operations .27 .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 $10.13 11.33 10.75 10.95 10.75 9.87
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 2.72% 5.40 16.38 11.72 18.37 (4.76)
- -----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------------------------------------
Expenses .93% .83 .95 .96 1.00 .95
- -----------------------------------------------------------------------------------------------------------------------
Net investment income 3.40% 3.63 3.61 3.67 4.14 3.59
- -----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $123,430 127,098 122,334 121,488 124,681 123,132
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 67% 79 74 59 52 47
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Average commission rates paid per share on stock transactions for the six
months ended January 31, 1998, the one month period ended July 31, 1997 and
the years ended June 30, 1997 and June 30, 1996 were $.0589, $.0602, $.0590 and
$.0585, respectively.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------------------------------------------------
SERIES IV
------------------------------------------------------------------------
SIX MONTHS ONE MONTH
ENDED ENDED YEAR ENDED JUNE 30,
JANUARY 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 $11.28 10.69 10.70 10.07 8.83 9.57
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .18 .03 .39 .40 .39 .26
- -----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .14 .56 1.17 .64 1.22 (.85)
- -----------------------------------------------------------------------------------------------------------------------
Total from investment operations .32 .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 $10.27 11.28 10.69 10.70 10.07 8.83
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 3.16% 5.52 15.73 10.47 18.95 (6.31)
- -----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------------------------------------
Expenses .95% .88 .96 .95 .97 .97
- -----------------------------------------------------------------------------------------------------------------------
Net investment income 3.04% 3.22 3.35 3.46 4.01 3.43
- -----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $130,496 135,930 131,225 138,858 152,179 146,655
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 62% 66 66 52 45 51
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Average commission rates paid per share on stock transactions for the six
months ended January 31, 1998, the one month period ended July 31, 1997 and
the years ended June 30, 1997 and June 30, 1996 were $.0589, $.0602, $.0590 and
$.0586, respectively.
- --------------------------------------------------------------------------------
27
<PAGE> 28
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
SERIES V
------------------------------------------------------------------------------
SIX MONTHS ONE MONTH NOVEMBER 15,
ENDED ENDED YEAR ENDED JUNE 30, 1993 TO
JANUARY 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 .19 .03 .39 .39 .28 .15
- -------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .14 .61 1.22 .64 1.31 (1.00)
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations .33 .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 $ 9.76 10.86 10.22 10.20 9.53 8.15
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 3.41% 6.26 17.14 10.95 19.97 (9.44)
- -------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------------------------------------------
Expenses .94% .94 .96 .96 1.07 1.29
- -------------------------------------------------------------------------------------------------------------------------
Net investment income 3.27% 3.34 3.59 3.64 4.01 3.13
- -------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $131,360 137,131 130,675 129,747 134,937 64,275
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 68% 76 79 58 73 35
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
Average commission rates paid per share on stock transactions for the six
months ended January 31, 1998, the one month period ended July 31, 1997 and
the years ended June 30, 1997 and June 30, 1996 were $.0590, $.0602, $.0590 and
$.0587, respectively.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------------------------------
SERIES VI
------------------------------------------------------
SIX MONTHS ONE MONTH YEAR ENDED
ENDED ENDED JUNE 30, MAY 1 TO
JANUARY 31, JULY 31, --------------- 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 .20 .03 .33 .24 .06
- ----------------------------------------------------------------------------------------------------
Net realized and unrealized gain .24 .68 1.26 .57 .20
- ----------------------------------------------------------------------------------------------------
Total from investment operations .44 .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 $10.81 11.57 10.86 9.83 9.26
- ----------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 4.08% 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 3.28% 3.43 3.43 3.47 3.91
- ----------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $72,259 73,171 69,392 49,689 7,189
- ----------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 59% 65 74 34 --
- ----------------------------------------------------------------------------------------------------
</TABLE>
Average commission rates paid per share on stock transactions for the six
months ended January 31, 1998, the one month period ended July 31, 1997
and the years ended June 30, 1997 and June 30, 1996 were $.0589, $.0603, $.0586
and $.0582, respectively.
- --------------------------------------------------------------------------------
28
<PAGE> 29
SHAREHOLDERS' MEETING
SPECIAL SHAREHOLDERS' MEETING
On December 3, 1997, a special shareholders' meeting was held. Kemper Target
Equity Fund-Kemper Retirement Fund Series I-VI shareholders were asked to vote
on three separate issues: election of the eight members to the Board of
Trustees, ratification of Ernst & Young LLP as independent auditors and approval
of a new investment management agreement.
1) Election of Trustees
<TABLE>
<CAPTION>
For Withheld
<S> <C> <C>
James E. Atkins 39,454,675 591,508
Arthur R. Gottschalk 39,451,750 594,433
Frederick T. Kelsey 39,456,557 589,626
Daniel Pierce 39,458,148 588,035
Fred B. Renwick 39,480,893 565,290
John B. Tingleff 39,483,670 562,512
Edmond D. Villani 39,454,386 591,796
John B. Weithers 39,475,301 570,882
</TABLE>
2) Ratification of the selection of Ernst & Young LLP as independent auditors
for the fund
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
38,794,530 359,686 891,966
</TABLE>
3) Approval of new investment management agreement with Scudder Kemper
Investments, Inc.
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C> <C>
Series I 5,561,880 159,318 191,894 109,300
Series II 6,775,305 142,458 243,481 120,527
Series III 5,928,122 117,696 263,157 87,354
Series IV 6,584,879 77,291 251,409 285,963
Series V 6,903,792 66,436 266,965 164,514
Series VI 3,473,215 36,283 99,322 86,863
</TABLE>
29
<PAGE> 30
NOTES
30
<PAGE> 31
NOTES
31
<PAGE> 32
TRUSTEES AND OFFICERS
TRUSTEES OFFICERS
DANIEL PIERCE MARK S. CASADY
Chairman and Trustee President
JAMES E. AKINS PHILIP J. COLLORA
Trustee Vice President,
Secretary and Treasurer
ARTHUR R. GOTTSCHALK
Trustee TRACY MCCORMICK CHESTER
Vice President
FREDERICK T. KELSEY
Trustee JERARD K. HARTMAN
Vice President
FRED B. RENWICK
Trustee THOMAS W. LITTAUER
Vice President
JOHN B. TINGLEFF
Trustee ANN M. MCCREARY
Vice President
EDMOND D. VILLANI
Trustee KATHRYN L. QUIRK
Vice President
JOHN G. WEITHERS
Trustee LINDA J. WONDRACK
Vice President
JOHN R. HEBBLE
Assistant Treasurer
MAUREEN E. KANE
Assistant Secretary
CAROLINE PEARSON
Assistant Secretary
ELIZABETH C. WERTH
Assistant Secretary
- --------------------------------------------------------------------------------
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
Kansas City, MO 64105
- --------------------------------------------------------------------------------
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606
www.kemper.com
[KEMPER FUNDS LOGO]
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
Printed on recycled paper in the U.S.A.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Target Equity Fund prospectus.
KRF - 3 (3/98) 1044930
