<PAGE> 1
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED JANUARY 31, 1999
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 KEMPER RETIREMENT FUND SERIES I, II, III, IV, V AND VI
"...Given the challenges of the market climate, we are
very pleased with the fund's performance... Our stock
selection was strong, and translated into good gains. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
Economic Overview
5
Performance Update
10
Largest Holdings
12
Portfolio Of Investments
18
Financial Statements
22
Notes To Financial
Statements
26
Financial Highlights
29
Shareholders' Meeting
AT A GLANCE
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KEMPER RETIREMENT FUND SERIES I-VI
TOTAL RETURNS*
- --------------------------------------------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED JANUARY 31, 1999
(UNADJUSTED FOR ANY SALES CHARGE)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SERIES I 8.87%
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SERIES II 7.78%
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SERIES III 8.95%
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SERIES IV 9.22%
- --------------------------------------------------------------------------------
SERIES V 10.16%
- --------------------------------------------------------------------------------
SERIES VI 10.55%
- --------------------------------------------------------------------------------
</TABLE>
RETURNS ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH
MORE OR LESS THAN ORIGINAL COST.
*TOTAL RETURN MEASURES NET INVESTMENT INCOME AND CAPITAL GAIN OR LOSS FROM
PORTFOLIO INVESTMENTS, ASSUMING REINVESTMENT OF ALL DIVIDENDS. DURING THE
PERIOD NOTED, SECURITIES PRICES FLUCTUATED. FOR ADDITIONAL INFORMATION, SEE
THE PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION AND THE FINANCIAL
HIGHLIGHTS AT THE END OF THIS REPORT.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
1/31/99 7/31/98
- --------------------------------------------------------------------------------
<S> <C> <C>
SERIES I $10.49 $10.80
- --------------------------------------------------------------------------------
SERIES II $12.13 $12.41
- --------------------------------------------------------------------------------
SERIES III $10.38 $10.52
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SERIES IV $10.68 $10.68
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SERIES V $10.12 $10.17
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SERIES VI $11.40 $11.25
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</TABLE>
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DIVIDEND REVIEW
- --------------------------------------------------------------------------------
DURING THE SIX-MONTH PERIOD ENDED JANUARY 31, 1999, KEMPER RETIREMENT FUND
SERIES I-VI PAID THE FOLLOWING DIVIDENDS PER SHARE:
<TABLE>
<CAPTION>
INCOME SHORT-TERM LONG-TERM
DIVIDEND CAPITAL GAIN CAPITAL GAIN
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SERIES I $0.38 $0.34 $0.49
- --------------------------------------------------------------------------------
SERIES II $0.50 $0.23 $0.47
- --------------------------------------------------------------------------------
SERIES III $0.37 $0.26 $0.41
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SERIES IV $0.33 $0.26 $0.36
- --------------------------------------------------------------------------------
SERIES V $0.33 $0.27 $0.44
- --------------------------------------------------------------------------------
SERIES VI $0.46 $0.22 $0.32
- --------------------------------------------------------------------------------
</TABLE>
TERMS TO KNOW
CONSUMER NONDURABLES STOCKS The stocks from a variety of industries, including
food, restaurants, retail, services and entertainment. Consumer nondurable
companies produce goods or services that tend to be consumed or replaced within
a relatively short period of time. In contrast, consumer durables (such as autos
and furniture) are held for longer periods of time. Due to the steadier demand
for consumer nondurables, stocks in this sector are often considered more
defensive in nature.
GRAY MONDAY On Monday, October 27, 1997, turmoil in Southeast Asian markets
triggered a one-day drop of seven percent in the U.S. equity market.
IMF AND G7 NATIONS Two international groups focusing on international economics
and monetary policy. The International Monetary Fund (IMF) is an agency of the
United Nations. The Group of Seven (G7) is an economic alliance of seven leading
nations, including the United States.
TWO-TIER MARKET Describes a security market in which the majority of gains are
earned by a small group of companies. In 1998, a two-tier market existed in
which only the largest growth-style stocks enjoyed particularly robust gains.
<PAGE> 3
ECONOMIC OVERVIEW
[SILVIA PHOTO]
DR. JOHN E. SILVIA IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.
HIS PRIMARY RESPONSIBILITIES INCLUDE ANALYSIS, MODELING AND FORECASTING OF
ECONOMIC DEVELOPMENTS AND FEDERAL RESERVE ACTIVITY THAT AFFECT FINANCIAL
MARKETS, ESPECIALLY INTEREST RATE TRENDS. THIS EFFORT INCLUDES CLOSE
COLLABORATION WITH BOTH INCOME AND EQUITY MUTUAL FUND MANAGERS AND PENSION FUND
MANAGERS.
SILVIA HOLDS A BACHELOR'S DEGREE AND PH.D. IN ECONOMICS FROM NORTHEASTERN
UNIVERSITY IN BOSTON AND A MASTER'S DEGREE IN ECONOMICS FROM BROWN UNIVERSITY IN
PROVIDENCE, R.I. PRIOR TO HIS CAREER AT SCUDDER KEMPER, HE WAS WITH THE HARRIS
BANK AND ALSO TAUGHT AT INDIANA UNIVERSITY.
SCUDDER KEMPER INVESTMENTS, INC. IS THE INVESTMENT MANAGER FOR KEMPER FUNDS. IT
IS ONE OF THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS
IN THE WORLD, MANAGING MORE THAN $280 BILLION IN ASSETS FOR INSTITUTIONAL AND
CORPORATE CLIENTS, RETIREMENT AND PENSION PLANS, INSURANCE COMPANIES, MUTUAL
FUND INVESTORS AND INDIVIDUALS. SCUDDER KEMPER INVESTMENTS OFFERS A FULL RANGE
OF INVESTMENT COUNSEL AND ASSET MANAGEMENT CAPABILITIES BASED ON A COMBINATION
OF PROPRIETARY RESEARCH AND DISCIPLINED, LONG-TERM INVESTMENT STRATEGIES.
DEAR KEMPER FUNDS SHAREHOLDER:
If you think the first quarter of 1999 has seemed rather anticlimactic compared
to 1998, you're not alone. The year began with a quiet bang in the U.S. stock
market, with the Dow Jones Industrial Average hitting an all-time high of 9643
points in the first week of January. While stock market volatility has
continued, it seems to be phasing investors less and less. Even global events
are being taken in stride. Europe's Economic and Monetary Union (EMU) was
launched without much notice. And when Brazil's economy recently took a turn for
the worse, Wall Street was only mildly concerned. Also contributing to today's
laid-back attitude -- the impeachment trial of President Clinton has all but
fizzled into obscurity without significantly affecting the U.S. economy or
markets.
Indeed, the U.S. economy looks good. The fundamentals by which we measure the
state of the economy remain strong. We continue to see solid consumer spending
growth, continued investment spending and low inflation. This suggests that
there are no internal problems for continued U.S. economic growth.
Additionally, we can expect the Federal Reserve Board to keep short-term
interest rates steady. On February 3, the Fed left interest rates unchanged. It
is likely that this "hands-off" approach will continue at the Fed's March 30
meeting, particularly if U.S. inflation remains in check and there is a degree
of financial instability in the international arena.
The U.S. budget surplus for 1998 came in at $60 billion, with another budget
surplus of between $80 billion and $100 billion expected for fiscal 1999. Growth
in the nation's gross domestic product (GDP), which represents the total value
of all goods and services produced within the U.S. economy, has remained steady.
GDP, driven by consumer spending, is expected to grow at an annualized rate of
approximately 3 to 3.5 percent in 1999. We also anticipate modest capital
spending growth and inventory growth.
The consumer price index (CPI) remains in the vicinity of 2 percent. However,
energy prices, which were down 6 to 7 percent last year and helped keep the CPI
down, are unlikely to remain so low this year. For 1999, inflation should
register at 2 to 2.5 percent.
Employment growth has slowed to 2 percent, but combined with real wage growth
of between 2 percent and 2.5 percent, produces real income growth between 4
percent and 5 percent. In addition, gains in household net worth, which tends to
fuel consumer spending, are on the rise. Banks appear to be only a little less
willing to lend in 1999, so the threat of a general credit crunch is minimal. As
a result of all these factors, consumer spending should continue to grow this
year.
On a less positive note, corporate profits have slowed in 1999, growing at a
rate of 1 percent to 3 percent on a year-over-year basis. As a result, we may
see a slowdown in capital spending this year. The current U.S. account deficit
is rising, which suggests the U.S. economy is increasingly dependent on foreign
capital inflows to finance its economic activity. This is acceptable as long as
foreign money continues to flow in. But if foreign investors, particularly the
Japanese, no longer wish to invest in the United States, we can expect pressure
on interest rates and the dollar, as well as increased uncertainty and market
volatility.
Given the events of the last two years, investors may be comforted by the fact
that the U.S. markets and economy have withstood the test of tumultuous times.
While certain countries, such as Malaysia, Indonesia, Brazil and Russia, are
still suffering from economic crises, others, including the Philippines, South
Korea, Thailand and China, continue to recover and grow. As long as the Fed and
the Group of Eight leading industrial nations (G8) are committed to avoiding
recession on national and global levels respectively, investors have a good
chance of experiencing a more stable economic environment.
At home, there has been somewhat of a slowdown in manufacturing, as reduced
U.S. exports reflect foreign economic turmoil. But the global impact of the
Asian crisis still has not hit the U.S. as hard as some analysts expected.
Indeed, Asian turmoil has not affected U.S. export
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 (2/28/99) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate(1) 5 5.34 5.57 6.42
Prime rate(2) 7.75 8.5 8.5 8.25
Inflation rate(3) 1.6 1.68 1.63 3.04
The U.S. dollar(4) -1.53 8.17 5.05 7.67
Capital goods orders(5)* 5.53 3.05 12.61 3.93
Industrial production(5)* 1.72 2.71 5.92 6.44
Employment growth(6) 2.23 2.69 2.78 2.47
</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, 1999.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
volumes as much as it has lowered import prices and helped reduce global
interest rates.
Ultimately, Europe's recently inaugurated EMU is likely to bring more
flexibility and growth potential for the region. European equities may be the
beneficiaries of increased spending, as governments seek to ease fiscal and
monetary policy, foster growth and reduce unemployment. It's going to be
interesting to watch as the monetary union continues to evolve. One lesson for
investors -- particularly those with international holdings -- is to diversify.
With the democratization of the world, the globalization of trade and more free
market economies at our fingertips, international markets are becoming more and
more attractive. But if you subscribe to the concept of international
investment, be cautious -- don't put all of your investment eggs in one basket
(i.e. country or region).
Other key elements to watch in 1999: the race for the next presidency and
information technology preparedness for the year 2000. And remember, while it is
nearly impossible to predict the next big crisis, preparedness through
diversification and risk management are key.
Thank you for choosing to invest with Kemper Funds. We appreciate the
opportunity to serve your investment needs.
Sincerely,
/S/ John E. Silvia
John E. Silvia
THE INFORMATION CONTAINED IN THIS PIECE HAS BEEN TAKEN FROM SOURCES BELIEVED TO
BE RELIABLE, BUT THE ACCURACY OF THE INFORMATION IS NOT GUARANTEED. THE OPINIONS
AND FORECASTS EXPRESSED ARE THOSE OF DR. JOHN E. SILVIA AS OF MARCH 8, 1999, AND
MAY NOT ACTUALLY COME TO PASS. THIS INFORMATION IS SUBJECT TO CHANGE. NO PART OF
THIS MATERIAL IS INTENDED AS AN INVESTMENT RECOMMENDATION.
4
<PAGE> 5
PERFORMANCE UPDATE
[McCORMICK PHOTO]
TRACY MCCORMICK JOINED SCUDDER KEMPER INVESTMENTS, INC. IN 1994 AND IS A
MANAGING DIRECTOR. SHE IS ALSO A VICE PRESIDENT AND PORTFOLIO MANAGER OF KEMPER
RETIREMENT FUND SERIES. MCCORMICK 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.
DESPITE A CHALLENGING MARKET CLIMATE DURING THE SEMIANNUAL PERIOD, LEAD
PORTFOLIO MANAGER TRACY MCCORMICK LED KEMPER RETIREMENT FUND TO GOOD GAINS.
BELOW, MCCORMICK PROVIDES AN OVERVIEW OF MARKET CONDITIONS, HER STOCK-SELECTION
DISCIPLINE AND WHERE SHE'S FINDING THE MOST COMPELLING OPPORTUNITIES.
Q BEFORE WE DISCUSS KEMPER RETIREMENT FUND, COULD YOU PROVIDE US WITH AN
OVERVIEW OF THE MARKET CONDITIONS?
A Volatility, the flight to perceived quality, the Russian debt default and
a technology stock rally were among the most notable elements influencing the
market. Let's examine these factors in greater detail.
Global economic volatility continued to be par for the course. As we entered
the fiscal year on August 1, 1998, the markets were already grappling with
uncertainty. Investors were concerned about the strength of domestic corporate
earnings and overall economic growth, both domestic and global. From October
1997 -- when Asian economic turmoil precipitated the Gray Monday correction (see
Terms To Know) -- investors had become preoccupied with the idea of a "safe
haven." They bid the stock prices of a handful of domestic mega-cap growth
stocks up to tremendously high levels, while fleeing from smaller-cap stocks and
stocks with perceived exposure to Asia. This emotional response resulted in a
narrow, "two-tier" market (see Terms To Know) that continued throughout the
semiannual period.
One of the most significant events in recent market history occurred when the
Russian government defaulted on its debt. This triggered a full market meltdown.
While financial services stocks were among the hardest hit, stocks of all types
felt the heat. Plans developed by the G7 nations and the IMF (see Terms To Know)
buoyed the market's optimism, however. Investor confidence was further bolstered
when the Federal Reserve cut interest rates, and the central banks of 30 other
countries followed suit. Nevertheless, uncertainty about Asia, Brazil and Latin
America still cast a shadow across the global economy. As in late 1997 and early
1998, investors flocked back to the mega-cap growth favorites.
After suffering throughout most of 1998, technology came roaring back in
December and January. Propelled by investors' heady enthusiasm about the
Internet, the technology sector drove the market in the final months of the
semiannual period, with both established stocks and more speculative issues
thriving.
In summary, large-cap growth stocks fared much better than the overall market.
The Standard and Poor's 500 Index, a benchmark for large-cap stocks, gained
15.02 percent, far exceeding the 2.40 percent earned by the Russell 2000, a
small-cap index. We emphasize, however, that an elite group of stocks claims
disproportionate representation for the large-cap growth gains.
Q THE MARKET CERTAINLY HAS EXPERIENCED PLENTY OF UPS AND DOWNS LATELY. HOW
DID THE KEMPER RETIREMENT FUND PERFORM IN THIS CLIMATE?
A Given the challenges of the market climate, we are very pleased with the
fund's performance.
5
<PAGE> 6
PERFORMANCE UPDATE
For the six months ending January 31, 1999, the returns of the portfolios ranged
from 7.78 percent to 10.55 percent (unadjusted for any sales charge). (See page
1 for more information.) Our stock selection was strong, and translated into
good gains.
The portfolios did trail the S&P 500 index, but we caution investors not to
compare apples to oranges. Due to the fund's structure as a guaranteed, target
maturity offering, only a portion of assets are invested in stocks. In order to
provide the guaranteed return of principal, we invest the remainder of assets
(between 37 percent and 58 percent) in zero-coupon U.S. Treasury bonds. We're
therefore limited in our ability to participate in the equity markets.
The fund's recent performance underscores the essential risk/return tradeoff
of its structure. In exchange for the guaranteed return of principal, we
encourage investors to have realistic expectations about the amount of
growth-stock exposure that the portfolios offer.
Q COULD YOU EXPLAIN WHAT ZERO-COUPON BONDS ARE, AND WHAT ROLE THEY PLAYED
DURING THE SEMIANNUAL PERIOD?
A Zero-coupon bonds make no periodic payments of interest and are sold at a
deep discount to their face value. At maturity, the buyer receives the face
value of the bond. The fund invests in U.S. Treasury Bonds, so this payment is
guaranteed. However, prior to maturity, the principal value of the zero-coupon
bonds is susceptible to volatility, particularly during periods of shifting
interest rates.
Typically, zero-coupon bonds carry lower price tags when interest rates are
high. That's because accrued interest makes up the difference between the price
at purchase and the face value at maturity. Because each was launched in a
different interest-rate climate, the weightings of stocks and bonds varies among
the portfolios.
Following the Russian debt default in August, the zero-coupon bonds provided a
degree of stability during the turmoil that rocked the equity markets. In the
final months of the semiannual period, the zero-coupon exposure prevented the
fund's full participation in the strong equity markets.
Q YOU'VE NOTED THAT MANY INVESTORS FLED TO THE PERCEIVED "SAFE HAVEN" OF
MEGA-CAP GROWTH STOCKS. IN SUCH A VOLATILE CLIMATE, DID YOU MODIFY YOUR
INVESTMENT STRATEGY?
A Rain or shine, we adhere to our growth-at-a-reasonable-price discipline.
To find attractively valued large-cap growth stocks, we follow a
research-intensive, bottom-up stock-picking strategy. We rely on our independent
analysis, not on the quickly changing and often emotional views of Wall Street.
Our approach is rigorous: we tear apart balance sheets and pour over stock-
price and industry trends. But for us, analyzing the numbers is just one part of
the process. Before we buy a stock, we must have a high degree of confidence in
the company's management, their products and their strategy. Our goal is to
uncover stocks with a catalyst for potential growth. These catalysts include
forward-thinking new management, innovative products, restructurings and
strategic repositionings.
To a degree, the market's flight to perceived quality did hurt the fund's
relative performance. Our valuation discipline discouraged us from investing in
the high-priced stocks that were driving the market, and placed many quality
growth stocks outside of our reach.
Q WOULD YOU SHARE SOME EXAMPLES THAT TYPIFY YOUR STOCK-SELECTION STRATEGY?
A Oracle is a leading designer of computer software products. The stock was
battered in late 1997 and through 1998. Conventional wisdom was against the
company: A large percentage of its sales are international, and many investors
were concerned that the growth of database demand was slowing. We, however, saw
Oracle as an attractively valued opportunity, and we purchased it late in the
summer of 1998. We found the requisite catalyst: Under the guidance of new upper
management, Oracle was focusing on exciting software applications. Our analysis
suggested that through their database management programming, Oracle could
benefit greatly from an increase in Web-based computing. So far, our research
and insight have served the fund in good stead.
Our decision to build the fund's stake in Household International also
highlights key elements of our research-intensive approach. Household
International's operations include finance and banking, as well as insurance. In
1998, the firm acquired Beneficial, another financial services company. We had
owned Beneficial prior to the acquisition, but began to cut back on the fund's
exposure to Household International until we could see a clear post-merger story
emerge. This proved extremely wise, as we sidestepped losses when the stock
declined. Last fall, I visited the company and met with its management. The
story was intact, and the merger was playing out as anticipated. Management's
6
<PAGE> 7
PERFORMANCE UPDATE
more focused approach to credit cards and secured-lending was extremely
compelling, and we left our meeting with a high degree of conviction. This,
combined with our independent analysis of company fundamentals and balance
sheets, led us to bolster the fund's position, and the stock has been an
excellent performer during the semiannual period.
Q HOW DO YOU DECIDE WHEN TO SELL A STOCK?
A We use the same rigorously researched, growth-at-a-reasonable-price
strategy to sell stocks. We monitor and track each stock in the portfolio
extremely carefully, alert to any changes in price and fundamentals. We'll sell
stocks when their prices reach the pre-established targets that we set for them.
This sort of selling, often referred to as "profit taking," requires discipline
and long-term focus. Even if a company offers great potential, we won't want to
remain invested in it if its price exceeds its long-term growth prospects.
We also eliminate stocks from the portfolio when we believe that fundamentals
are deteriorating, or when the catalyst that originally attracted us to the
company shows signs of fading. So, here, too, we're keeping a close eye about
what's going on at the company, including changes in strategic directions, or
departures of key employees.
Q COULD YOU PROVIDE US WITH EXAMPLES OF BOTH THE PROFIT-TAKING AND
CATALYST-FADING SCENARIOS?
A ALZA provides a good example of our profit-taking sell strategy. We
purchased ALZA in 1997. Although the stock didn't enjoy abundant publicity at
that time, ALZA had a sound product pipeline of drug delivery systems. In late
1998, the company began to attract greater attention from Wall Street and its
stock price rose. Additionally, it began to enter a new stage in its operations.
At this juncture, we began to take profits, eventually eliminating it from the
portfolio.
In contrast, we sold Alcatel when we saw signals that the original catalyst
was beginning to fade. Alcatel is a French telecommunications firm that
initially seemed well poised to benefit from the expansion of the European
telecommunications industry. However, our analysis of the firm began to cast
doubt on the company's long-term merits. Alcatel issued disappointing earnings
announcements, and it became apparent to us that the firm's management did not
have a good grasp of the infrastructure needs of European companies.
Q ALTHOUGH THE FUND'S STOCK HOLDINGS TURNED IN COMPELLING GAINS OVERALL,
WERE THERE AREAS THAT DIDN'T WORK OUT AS WELL AS EXPECTED?
A Energy stocks continued to fight against the tide of poor investor
sentiment. An oversupply of cheaply priced crude oil took a toll on oil-service
companies. However, we don't believe that this climate will last forever, so the
fund continues to have modest energy-stock exposure. Within the fund's oil-stock
exposure, we are favoring quality companies with leadership status.
Impeded by regulatory concerns, railroad stocks have also faced an uphill
climb. Nonetheless, we do believe that some railroad stocks, such as Canadian
National Railway and Norfolk Southern, continue to offer attractively priced
earnings-growth potential. We also believe that railroad stocks could benefit
the fund should economic growth accelerate.
Q YOU'VE MENTIONED THAT TOWARD THE END OF THE SEMIANNUAL PERIOD, TECHNOLOGY
STOCKS DROVE THE STOCK MARKET. WHAT SORT OF TECHNOLOGY EXPOSURE DOES THE FUND
HAVE?
A Technology stocks are well represented in the portfolio. We prefer
quality, established companies over less-tested issues. Stocks that we're
backing with special conviction include Cisco Systems, Oracle and Texas
Instruments. Through hardware, software, and component operations, these
companies are fueling the growth of the Internet, while also offering
demonstrated histories of earnings growth -- something that most of the
fledgling ".com" companies just don't offer.
Q GIVEN THE CHALLENGES OF THE PAST SIX MONTHS, HOW HAVE YOU STRUCTURED THE
REMAINDER OF THE EQUITY HOLDINGS?
A In addition to technology stocks, consumer nondurables stocks (see Terms
To Know) are another important theme in the portfolio. We've found appealing
media stocks that satisfy our GARP criteria, including Time Warner and Univision
Communication, both broadcasting/entertainment stocks, and Young & Rubicam, an
advertising firm.
Relative to the S&P 500 index, the fund is overweighted in food stocks. We're
finding valuations we like, as well as compelling catalysts. For instance,
through its acquisition of American Stores, Albertson's is taking a leading role
in the grocery industry's consolidation. Meanwhile, we feel that H.J. Heinz
Co.'s new, more-aggressive management could be a catalyst for improved long-term
growth. We've also backed McCormick & Co. with conviction. Our research
indicates that the stock is attractively valued relative to its long-term growth
potential.
7
<PAGE> 8
PERFORMANCE UPDATE
McCormick & Co. faces a low level of competition, further bolstering its appeal.
Within the utilities sector, we've gravitated to telecommunications stocks.
These stocks tend to offer better growth than gas or electric utilities. We like
AT&T quite a bit. Under new Chief Executive Officer Michael Armstrong, the
company really seems to be taking off, making strategic acquisitions and
building relationships with cable and wireless companies. Other
telecommunications holdings give the fund exposure to rapidly growing regional
bell operators (Cincinnati Bell) and long-distance providers (MCI WorldCom).
We're finding fewer attractively priced choices within the health care sector.
Nonetheless, some stocks have met our criteria. The fund holds pharmaceutical
powerhouses Pfizer and Eli Lilly & Co. We also believe that Medtronic, a medical
technology firm, offers high upside potential. Medtronic struggled in the past
to meet earnings expectations, but we believe that the strong new-product cycles
and recent acquisitions are good potential catalysts for rapid earnings growth.
In the financial services group, the fund had been more heavily weighted in
insurance stocks than it is now. Our research suggests that in order to bolster
their earnings-growth numbers, the insurance industry would have to begin
another round of consolidation. The fund is invested more heavily in money-
center banks than it had been at the start of the semiannual period. After the
August market correction, we took advantage of attractive valuations within the
money-center bank group to build positions.
Q AS THE FUND ENTERS THE SECOND HALF OF THE FISCAL YEAR, HOW DO YOU FEEL
ABOUT THE MARKET CLIMATE?
A When it comes to the short-term stock market activity, no one can
guarantee what's coming around the bend. There's every reason to believe that
short-term volatility will continue, however.
That said, I think that there are still ample opportunities for long-term
investors. It's just a question of knowing where to seek those opportunities.
Discipline and thorough research continue to direct our pursuit, and we place
high confidence in these guides.
8
<PAGE> 9
(For more information on individual holdings, see the next page)
9
<PAGE> 10
LARGEST HOLDINGS
THE FUNDS' LARGEST STOCK HOLDINGS*
Percentage based on the funds' total common stock holdings on January 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
HOLDINGS SERIES I SERIES II SERIES III SERIES IV SERIES V SERIES VI
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
CISCO SYSTEMS 3.0% 3.6% 2.8% 2.9% 3.0% 3.0%
- --------------------------------------------------------------------------------------------
TEXAS INSTRUMENTS 2.8% 2.3% 2.5% 2.5% 3.3% 2.5%
- --------------------------------------------------------------------------------------------
MICROSOFT 2.2% 2.1% 2.0% 2.4% 2.1% 1.7%
- --------------------------------------------------------------------------------------------
HEWLETT-PACKARD 2.1% 2.4% 1.6% 1.7% 1.7% 2.1%
- --------------------------------------------------------------------------------------------
MOTOROLA 2.0% 1.7% 1.9% 1.5% 2.0% 1.6%
- --------------------------------------------------------------------------------------------
MEDTRONIC 2.0% 1.8% 1.7% 1.8% 2.0% 1.9%
- --------------------------------------------------------------------------------------------
ABBOTT 1.9% 2.2% 2.0% 2.1% 1.9% 2.2%
LABORATORIES
- --------------------------------------------------------------------------------------------
RAYTHEON 1.8% 1.6% 1.6% 1.5% 1.6% 1.8%
- --------------------------------------------------------------------------------------------
MCI WORLDCOM 1.7% 1.7% 1.9% 1.9% 1.7% 1.8%
- --------------------------------------------------------------------------------------------
GENERAL ELECTRIC 1.7% 1.8% 1.9% 2.1% 2.0% 2.0%
- --------------------------------------------------------------------------------------------
</TABLE>
*The funds' holdings are subject to change.
10
<PAGE> 11
LARGEST HOLDINGS
DESCRIPTION OF YOUR FUNDS' LARGEST HOLDINGS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
HOLDINGS
- -----------------------------------------------------------------------------
<S> <C>
CISCO SYSTEMS Largest, most comprehensive supplier of routing
systems that direct the flow of data between
local area networks.
- -----------------------------------------------------------------------------
TEXAS A high technology company with sales or
INSTRUMENTS manufacturing operations in more than 30
countries. Products and services include
semiconductors, defense electronic systems,
software productivity tools, computer
peripheral products and consumer products.
- -----------------------------------------------------------------------------
MICROSOFT Develops, markets and supports a variety of
microcomputer software, operating systems,
language and application programs, related
books and peripheral devices.
- -----------------------------------------------------------------------------
HEWLETT-PACKARD Produces computer and electronic equipment,
including computer systems, printers, scanners,
and data-storage devices.
- -----------------------------------------------------------------------------
MOTOROLA Manufactures electronic communications
equipment and components.
- -----------------------------------------------------------------------------
MEDTRONIC Develops, manufactures, and markets therapeutic
medical devices designed to improve
cardiovascular and neurological health.
- -----------------------------------------------------------------------------
ABBOTT LABORATORIES Engaged in the discovery, development,
manufacture and sale of a diversified line of
health care products and services.
- -----------------------------------------------------------------------------
RAYTHEON A diversified technology-based company active
in electronics, aircraft products, and energy
and environmental services.
- -----------------------------------------------------------------------------
MCI WORLDCOM One of the largest long distance
telecommunications companies in the world,
offering domestic and international voice, data
and video products and services.
- -----------------------------------------------------------------------------
GENERAL ELECTRIC Operates in major businesses including power
generators, appliances, lighting, plastics,
medical systems, aircraft engines, financial
services and broadcasting.
- -----------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
KEMPER RETIREMENT FUND
SERIES I THROUGH SERIES VI
Portfolio of Investments at January 31, 1999 (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
OBLIGATIONS--37.2%,
52.5%, 48.6%, 54.2%,
48.8% AND 57.8%
U.S. Treasury, zero coupon, 1999
through 2006 $41,600 $40,146 $89,900 $83,782
(Cost: $38,872, $79,664, $54,355,
$66,074, $53,949 and $37,933)
--------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
NUMBER OF NUMBER OF
COMMON STOCKS SHARES VALUE SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMUNICATIONS--5.4% 4.3%, 4.6%,
4.2%, 4.4%
AND 3.8%
AT&T Corp. 11,000 998 13,000 1,180
Ameritech Corp. 8,000 521 8,000 521
Bell Atlantic Corp. 12,500 750 14,000 840
Cincinnati Bell, Inc. 29,000 589 34,000 691
Frontier Corp. 20,000 722 22,000 795
(a)MCI WorldCom, Inc. 14,000 1,116 16,000 1,276
SBC Communications, Inc. 11,200 605 16,000 864
US West, Inc. 8,000 493 10,000 617
----------------------------------------------------------------------------------
5,794 6,784
- -------------------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--3.8%,
2.8%, 3.2%, 3.0%, 3.2%
AND 2.7%
Dayton Hudson Corp. 7,000 446 9,500 606
Dollar General Corp. 8,000 200 9,000 224
Home Depot 13,000 785 13,000 785
May Department Stores Co. 14,000 845 15,900 960
(a)Mirage Resorts, Inc. 24,000 342 32,000 458
Newell Co. 18,100 752 17,700 736
Wal-Mart Stores, Inc. 8,000 688 8,000 688
----------------------------------------------------------------------------------
4,058 4,457
- -------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--5.4%, 4.1%,
4.5%, 4.1%, 4.5%
AND 3.9%
Albertson's, Inc. 11,500 701 13,000 793
Coca-Cola Co. 11,000 720 11,000 720
ConAgra, Inc. 17,200 559 17,200 559
Dean Foods Co. 6,100 238 6,900 269
Dial Corp. 20,800 568 22,800 623
H.J. Heinz Co. 13,000 732 15,600 878
McCormick & Co. 30,000 883 31,000 913
PepsiCo 18,000 703 21,000 820
Procter & Gamble Co. 8,000 727 10,000 909
----------------------------------------------------------------------------------
5,831 6,484
- -------------------------------------------------------------------------------------------------------------------------
DURABLES--.8%, .6%, .7%, .6%, .7%
AND .6%
Federal-Mogul Corp. 15,000 889 17,000 1,007
----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
ENERGY--2.5%, 1.9%, 2.1%, 1.9%,
2.1% AND 1.7%
Chevron Corp. 9,600 718 8,400 628
(a)Conoco, Inc. "A" 14,200 283 16,300 325
Mobil Corp. 6,400 561 9,800 859
Royal Dutch Petroleum Co. 11,000 441 11,000 441
Texaco 8,500 403 9,500 450
Unocal Corp. 11,000 314 11,000 314
----------------------------------------------------------------------------------
2,720 3,017
</TABLE>
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
SERIES III SERIES IV SERIES V SERIES VI
- ----------------------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$68,100 $ 59,303 $84,200 $ 69,965 $83,700 $ 63,717 $60,400 $42,723
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
11,000 998 11,000 998 11,000 998 6,000 545
8,000 521 6,000 391 8,000 521 4,000 261
12,500 750 12,500 750 12,500 750 5,500 330
28,000 569 28,000 569 29,000 589 14,000 284
19,000 686 16,800 607 20,000 722 10,000 361
14,000 1,116 14,000 1,116 14,000 1,116 7,000 558
9,800 529 9,400 508 11,000 594 5,700 308
7,000 432 7,000 432 8,000 493 3,000 185
- --------------------------------------------------------------------------------------------
5,601 5,371 5,783 2,832
- --------------------------------------------------------------------------------------------
6,500 414 7,000 446 8,000 510 4,000 255
7,000 175 7,000 175 8,000 200 4,000 100
13,000 785 13,000 785 13,000 785 6,500 392
9,900 598 9,900 598 13,800 833 6,600 398
31,000 444 31,000 444 31,000 444 15,000 215
18,100 752 16,100 669 18,100 752 8,600 357
8,000 688 8,000 688 8,000 688 3,000 258
- --------------------------------------------------------------------------------------------
3,856 3,805 4,212 1,975
- --------------------------------------------------------------------------------------------
10,500 641 10,500 641 11,500 701 5,800 354
11,000 720 9,000 588 11,000 720 5,000 327
17,200 559 17,200 559 17,200 559 11,400 371
6,100 238 6,100 238 6,100 238 2,600 101
20,700 565 20,800 568 20,800 568 9,900 270
10,400 586 10,400 586 13,000 732 6,500 366
28,000 824 26,000 765 30,000 883 14,000 412
16,000 625 16,000 625 18,000 703 8,000 313
8,000 727 8,000 727 8,000 727 4,000 364
- --------------------------------------------------------------------------------------------
5,485 5,297 5,831 2,878
- --------------------------------------------------------------------------------------------
13,000 770 13,000 770 15,000 889 7,000 415
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
8,400 628 8,400 628 9,600 718 3,600 269
12,700 253 12,200 243 14,000 279 6,800 136
6,600 579 6,400 561 7,000 614 3,800 333
11,000 441 10,000 401 10,000 401 5,500 220
7,200 341 7,200 341 9,500 450 4,000 190
11,000 314 11,000 314 11,000 314 5,000 143
- --------------------------------------------------------------------------------------------
2,556 2,488 2,776 1,291
</TABLE>
13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
(Dollars in thousands)
[CAPTION]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
SERIES I SERIES II
- -------------------------------------------------------------------------------------------------------------------------
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FINANCE--7.8%, 6.0%,
6.4%, 5.9%, 6.5% AND 5.4%
American Express Co. 5,000 $ 514 5,000 $ 514
American International
Group, Inc. 7,000 721 7,000 721
BancBoston Corp. 10,000 369 12,000 443
BankAmerica Corp. 11,184 748 14,579 975
Chase Manhattan Corp. 9,000 692 9,000 692
CIGNA Corp. 7,500 618 7,800 643
Citigroup, Inc. 12,500 701 14,000 785
Compass Bancshares 11,600 413 11,800 420
Federal National Mortgage
Association 6,500 474 8,000 583
First Security Corporation
of Utah 15,600 318 19,000 387
First Tennessee National
Corp. 10,000 366 10,000 366
Household International 19,946 876 21,919 963
Jefferson-Pilot Corp. 11,000 833 15,500 1,174
MGIC Investment Corp. 9,600 352 11,400 418
UNUM Life Insurance Company
of America 7,000 423 8,000 483
----------------------------------------------------------------------------------
8,418 9,567
- -------------------------------------------------------------------------------------------------------------------------
HEALTH CARE--8.5%, 7.1% 7.3%,
6.5%, 7.3% AND 6.5%
Abbott Laboratories 27,000 1,254 36,000 1,672
American Home Products Corp. 10,100 593 14,500 851
Baxter International, Inc. 10,000 709 11,000 780
Becton Dickinson & Co. 22,000 787 26,000 929
Bristol-Myers Squibb Co. 8,000 1,026 11,000 1,410
Eli Lilly & Co. 10,000 937 12,000 1,124
Glaxo Wellcome PLC (ADR) 7,000 475 7,000 475
Medtronic, Inc. 15,909 1,268 16,735 1,334
Pfizer, Inc. 5,000 643 5,000 643
Schering-Plough Corp. 12,000 654 16,000 872
SmithKline Beecham Group PLC (ADR) 8,000 543 12,000 814
Warner-Lambert Co. 5,000 361 6,000 433
----------------------------------------------------------------------------------
9,250 11,337
- -------------------------------------------------------------------------------------------------------------------------
MANUFACTURING--3.1%, 2.4%,
2.6%, 2.5%, 2.7% AND 2.3%
Emerson Electric Co. 13,400 780 16,800 978
General Electric Co. 10,600 1,112 12,600 1,321
Raytheon Co. "A" 20,524 1,144 21,948 1,224
Tyco International Ltd. 49 4 54 4
Waste Management, Inc. 6,000 300 7,000 350
----------------------------------------------------------------------------------
3,340 3,877
- -------------------------------------------------------------------------------------------------------------------------
MEDIA--5.5%, 4.3%,
4.6%, 4.1%, 4.5% AND 3.8%
(a)CBS Corp. 30,600 1,040 29,000 986
(a)Infinity Broadcasting
Corp. 11,900 329 15,900 440
(a)Jacor Communications "A" 6,000 419 8,000 557
R.R. Donnelley & Sons Co. 24,800 936 28,100 1,059
(a)Tele-Comm Liberty Media
Group "A" 18,000 972 20,000 1,080
Time Warner, Inc. 10,400 650 12,400 775
Tribune Co. 8,000 511 10,000 639
(a)Univision Communication
Inc. 10,500 471 15,400 691
(a)Young & Rubicam 16,300 654 16,300 654
----------------------------------------------------------------------------------
5,982 6,881
</TABLE>
14
<PAGE> 15
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
SERIES III SERIES IV SERIES V SERIES VI
- -----------------------------------------------------------------------------------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
4,000 $ 412 4,000 $ 412 5,000 $ 514 2,500 $ 257
6,000 618 6,000 618 7,000 721 3,300 339
9,184 614 9,184 614 11,184 748 5,526 369
10,000 369 10,000 369 10,000 369 4,000 148
9,000 692 9,000 692 9,000 692 4,000 308
7,800 643 7,800 643 7,800 643 3,900 321
13,000 729 13,000 729 13,000 729 6,500 364
8,600 306 8,600 306 8,600 306 4,800 171
5,800 422 4,200 307 6,500 474 2,500 182
15,600 318 15,600 318 15,600 318 8,000 163
10,000 366 10,000 366 10,000 366 5,000 183
17,932 789 17,932 789 19,932 876 9,313 409
9,500 720 9,500 720 12,500 948 6,000 454
9,100 332 9,600 352 9,600 352 4,100 150
7,000 423 7,000 423 7,000 423 3,000 181
- -----------------------------------------------------------------------------------------------
7,753 7,658 8,479 3,999
- -----------------------------------------------------------------------------------------------
26,000 1,207 26,000 1,207 27,000 1,254 15,000 697
9,600 563 8,600 504 9,600 563 6,000 352
10,000 709 10,000 709 10,000 709 5,000 355
22,000 787 16,000 572 22,000 787 8,000 286
8,000 1,026 8,000 1,026 8,000 1,026 4,500 577
10,000 937 8,000 748 12,000 1,124 6,000 562
7,000 475 6,000 406 7,000 475 3,000 204
13,083 1,043 13,083 1,043 15,909 1,268 7,541 601
5,000 643 5,000 643 5,000 643 2,500 322
12,000 654 12,000 654 12,000 654 7,600 414
8,000 543 8,000 543 10,000 676 4,000 271
5,000 361 5,000 361 5,000 361 2,000 144
- -----------------------------------------------------------------------------------------------
8,948 8,416 9,540 4,785
- -----------------------------------------------------------------------------------------------
13,200 768 13,200 768 13,800 803 6,400 372
10,800 1,133 11,800 1,238 12,600 1,321 6,000 629
17,299 964 15,899 886 19,024 1,061 9,812 547
85 7 10 1 -- --
6,000 300 6,000 300 6,000 300 3,000 150
- -----------------------------------------------------------------------------------------------
3,172 3,193 3,485 1,698
- -----------------------------------------------------------------------------------------------
28,000 952 21,000 712 30,600 1,040 12,600 428
11,900 329 11,900 329 11,900 329 6,400 177
6,500 453 6,500 453 7,000 487 3,000 209
19,300 727 19,300 727 23,700 893 12,300 464
18,000 972 18,000 972 18,000 972 8,000 432
9,400 588 9,400 588 10,400 650 5,200 325
8,000 511 8,000 511 8,000 511 4,000 256
10,500 471 10,500 471 10,500 471 5,500 247
16,300 654 14,100 566 14,100 566 6,300 253
- -----------------------------------------------------------------------------------------------
5,657 5,329 5,919 2,791
</TABLE>
15
<PAGE> 16
PORTFOLIO OF INVESTMENTS
(Dollars in thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
SERIES I SERIES II
- -------------------------------------------------------------------------------------------------------------------------
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TECHNOLOGY--15.3%,
12.2%, 12.0%, 11.1%,
12.8% AND 10.5%
(a)Applied Materials, Inc. 11,000 $ 696 12,000 $ 759
Automatic Data Processing 12,000 511 14,000 596
Cisco Systems 17,250 1,928 24,000 2,682
Compaq Computer 10,000 476 13,200 629
(a)Convergys Corp. 29,000 522 34,000 612
Hewlett-Packard Co. 17,400 1,364 22,800 1,787
Intel Corp. 3,500 493 3,500 493
International Business
Machines 5,500 1,008 6,500 1,191
(a)Intuit 7,000 640 8,000 728
Linear Technology Corp. 7,000 712 9,000 916
(a)Microsoft Corp. 8,000 1,400 9,000 1,575
Motorola 18,000 1,300 18,000 1,300
Oracle Corp. 18,600 1,029 20,800 1,151
(a)Seagate Technology 18,000 731 22,000 895
(a)Sun Microsystems 7,300 816 10,300 1,152
Texas Instruments 18,300 1,808 17,600 1,740
Xerox Corp. 3,400 422 3,400 422
(a)Xilinx, Inc. 8,000 663 10,000 829
----------------------------------------------------------------------------------
16,519 19,457
- -------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--1.7%, 1.2%, 1.2%,
1.1%, 1.3%
AND 1.0%
CSX Corp. 8,000 322 9,000 362
Canadian National Railway
Co. 11,000 584 11,000 584
Norfolk Southern Corp. 32,000 882 35,600 981
----------------------------------------------------------------------------------
1,788 1,927
----------------------------------------------------------------------------------
TOTAL COMMON STOCKS--59.8%, 46.9%, 49.2%,
45.0%, 50.0%, 42.2%
(Cost: $49,015, $55,615, $45,744, $44,001,
$49,491 and $23,826) 64,589 74,795
----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MONEY MARKET
INSTRUMENTS--3.0%, .6%,
2.2%, .8%, 1.2% AND --%
(b)Repurchase agreement
Investors Fiduciary Trust Co.,
dated 1/29/99, 4.00%, due
2/1/99 $ 239 239 $ -- --
Other
Yield--2.44% to 4.27%
Due--February, 1999 3,000 2,999 1,000 999
----------------------------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS
(Cost: $3,238, $999, $2,715,
$999, $1,608 and $--) 3,238 999
----------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $91,125, $136,278, $102,814, $111,074,
$105,048 and $61,759) $107,973 $159,576
----------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Repurchase agreements are fully collateralized by U.S. Treasury or U.S.
Government agency securities. The collateral is monitored daily by the fund
so that its market value exceeds the carrying value of the repurchase
agreement.
Based on the cost of investments for federal income tax purposes at January 31,
1999, 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 $91,125 $136,278 $102,814 $111,074 $105,048 $61,759
- ---------------------------------------------------------------------------------------------------------------------------
Gross unrealized appreciation 17,782 24,333 20,082 18,911 26,528 12,591
- ---------------------------------------------------------------------------------------------------------------------------
Gross unrealized depreciation 934 1,035 931 856 964 448
- ---------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation 16,848 23,298 19,151 18,055 25,564 12,143
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
16
<PAGE> 17
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
SERIES III SERIES IV SERIES V SERIES VI
- -----------------------------------------------------------------------------------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
9,000 $ 569 8,000 $ 506 11,000 $ 696 4,000 $ 253
11,000 468 11,000 468 12,000 511 5,000 213
15,000 1,676 15,000 1,676 17,250 1,928 8,250 922
10,000 476 10,000 476 10,000 476 6,000 286
28,000 504 28,000 504 29,000 522 14,000 252
12,400 972 12,400 972 14,400 1,129 8,500 666
3,000 423 3,000 423 3,500 493 2,000 282
6,000 1,099 6,000 1,099 6,500 1,191 3,000 550
6,000 546 6,000 546 7,000 640 3,500 319
7,000 712 7,000 712 6,000 610 3,000 305
7,000 1,225 8,000 1,400 8,000 1,400 3,000 525
16,000 1,156 12,000 867 18,000 1,300 7,000 506
16,400 907 16,400 907 18,600 1,029 8,200 454
17,000 692 17,000 692 17,000 692 10,000 407
7,000 783 7,000 783 7,000 783 4,000 447
14,800 1,463 14,800 1,463 21,900 2,165 7,900 781
3,400 422 3,400 422 3,400 422 2,000 248
6,600 547 5,600 466 8,500 704 4,000 332
- -----------------------------------------------------------------------------------------------
14,640 14,382 16,691 7,748
- -----------------------------------------------------------------------------------------------
6,000 241 6,000 241 8,000 322 3,000 121
11,000 584 10,000 531 9,000 478 3,500 186
24,800 684 24,800 684 32,000 882 16,700 460
- -----------------------------------------------------------------------------------------------
1,509 1,456 1,682 767
- -----------------------------------------------------------------------------------------------
59,947 58,165 65,287 31,179
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 717 717 $ -- -- $ 609 609 $ -- --
2,000 1,998 1,000 999 1,000 999 -- --
- -----------------------------------------------------------------------------------------------
2,715 999 1,608 --
- -----------------------------------------------------------------------------------------------
$121,965 $129,129 $130,612 $73,902
- -----------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 18
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
January 31, 1999 (unaudited)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES
--------------------------------------------------------------------
I II III IV V VI
- ------------------------------------------------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investments, at value (Cost: $91,125,
$136,278, $102,814, $111,074, $105,048
and $61,759) $107,973 159,576 121,965 129,129 130,612 73,902
- ------------------------------------------------------------------------------------------------------------------
Cash -- -- -- -- -- 350
- ------------------------------------------------------------------------------------------------------------------
Receivable for:
Investments sold 1,334 1,275 1,082 905 1,260 505
- ------------------------------------------------------------------------------------------------------------------
Dividends and interest 63 72 61 59 64 31
- ------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 109,370 160,923 123,108 130,093 131,936 74,788
- ------------------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
Cash overdraft 24 548 -- 704 200 --
- ------------------------------------------------------------------------------------------------------------------
Payable for:
Investments purchased 1,262 1,414 1,262 1,262 1,262 615
- ------------------------------------------------------------------------------------------------------------------
Fund shares redeemed 30 67 162 187 16 52
- ------------------------------------------------------------------------------------------------------------------
Management fee 43 63 50 51 52 30
- ------------------------------------------------------------------------------------------------------------------
Administrative services fee 29 39 30 29 31 13
- ------------------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and
related expenses 29 60 49 60 29 38
- ------------------------------------------------------------------------------------------------------------------
Trustees' fees and other 46 35 19 32 73 49
- ------------------------------------------------------------------------------------------------------------------
Total liabilities 1,463 2,226 1,572 2,325 1,663 797
- ------------------------------------------------------------------------------------------------------------------
NET ASSETS $107,907 158,697 121,536 127,768 130,273 73,991
- ------------------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
Paid-in capital $ 91,173 135,713 102,436 109,832 104,751 62,341
- ------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on
investments (371) (844) (344) (459) (403) (83)
- ------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 16,848 23,298 19,151 18,055 25,564 12,143
- ------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) 257 530 293 340 361 (410)
- ------------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING $107,907 158,697 121,536 127,768 130,273 73,991
- ------------------------------------------------------------------------------------------------------------------
THE PRICING OF SHARES
- ------------------------------------------------------------------------------------------------------------------
Shares outstanding 10,286 13,083 11,705 11,960 12,874 6,490
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE (net assets / shares outstanding) $ 10.49 12.13 10.38 10.68 10.12 11.40
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
18
<PAGE> 19
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Six months ended January 31, 1999 (unaudited)
(IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
SERIES
I II III IV V VI
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME
- -----------------------------------------------------------------------------------------------------------------------------
Interest $1,802 3,241 2,098 2,037 2,130 1,244
- ------------------------------------------------------------------------------------------------------------------------------
Dividends 367 410 336 322 365 174
- ------------------------------------------------------------------------------------------------------------------------------
Total investment income 2,169 3,651 2,434 2,359 2,495 1,418
- ------------------------------------------------------------------------------------------------------------------------------
Expenses:
Management fee 258 387 292 310 313 178
- ------------------------------------------------------------------------------------------------------------------------------
Administrative services fee 129 194 146 155 157 86
- ------------------------------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 44 72 62 69 66 38
- ------------------------------------------------------------------------------------------------------------------------------
Professional fees 12 18 14 14 15 8
- ------------------------------------------------------------------------------------------------------------------------------
Reports to shareholders 18 26 18 24 19 18
- ------------------------------------------------------------------------------------------------------------------------------
Trustees' fees and other 27 34 26 32 40 23
- ------------------------------------------------------------------------------------------------------------------------------
Total expenses 488 731 558 604 610 351
- ------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,681 2,920 1,876 1,755 1,885 1,067
- ------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------------------------------------------------------------------------------
Net realized loss on sales of investments (427) (758) (357) (386) (287) (73)
- ------------------------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation
on investments 7,499 9,407 8,539 9,652 10,538 6,173
- ------------------------------------------------------------------------------------------------------------------------------
Net gain on investments 7,072 8,649 8,182 9,266 10,251 6,100
- ------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $8,753 11,569 10,058 11,021 12,136 7,167
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
SERIES I SERIES II
- ------------------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
JANUARY 31, ENDED JANUARY 31, ENDED
1999 JULY 31, 1999 JULY 31,
(UNAUDITED) 1998 (UNAUDITED) 1998
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- ------------------------------------------------------------------------------------------------------------------
Net investment income $ 1,681 3,705 2,920 6,273
- ------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) (427) 11,237 (758) 12,702
- ------------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation 7,499 (7,635) 9,407 (8,609)
- ------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 8,753 7,307 11,569 10,366
- ------------------------------------------------------------------------------------------------------------------
Distribution from net investment income (3,553) (3,920) (6,057) (6,567)
- ------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain (7,757) (12,075) (8,476) (14,360)
- ------------------------------------------------------------------------------------------------------------------
Total dividends to shareholders (11,310) (15,995) (14,533) (20,927)
- ------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital
share transactions 4,125 (2,090) 3,224 (4,385)
- ------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,568 (10,778) 260 (14,946)
- ------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
Beginning of period 106,339 117,117 158,437 173,383
- ------------------------------------------------------------------------------------------------------------------
END OF PERIOD $107,907 106,339 158,697 158,437
- ------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME
(LOSS) AT END OF PERIOD $ 257 2,129 530 3,667
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
20
<PAGE> 21
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
SERIES III SERIES IV SERIES V SERIES VI
- ---------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR
JANUARY 31, ENDED JANUARY 31, ENDED JANUARY 31, ENDED JANUARY 31, ENDED
1999 JULY 31, 1999 JULY 31, 1999 JULY 31, 1999 JULY 31,
(UNAUDITED) 1998 (UNAUDITED) 1998 (UNAUDITED) 1998 (UNAUDITED) 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1,876 4,139 1,755 3,891 1,885 4,156 1,067 2,290
- ---------------------------------------------------------------------------------------------------------
(357) 10,444 (386) 10,153 (287) 11,794 (73) 4,581
- ---------------------------------------------------------------------------------------------------------
8,539 (6,524) 9,652 (4,798) 10,538 (6,015) 6,173 (1,054)
- ---------------------------------------------------------------------------------------------------------
10,058 8,059 11,021 9,246 12,136 9,935 7,167 5,817
- ---------------------------------------------------------------------------------------------------------
(3,972) (4,303) (3,676) (4,220) (3,914) (4,539) (2,773) (2,370)
- ---------------------------------------------------------------------------------------------------------
(7,192) (11,501) (6,908) (10,945) (8,413) (12,545) (3,257) (4,917)
- ---------------------------------------------------------------------------------------------------------
(11,164) (15,804) (10,584) (15,165) (12,327) (17,084) (6,030) (7,287)
- ---------------------------------------------------------------------------------------------------------
4,558 (1,269) 2,914 (5,594) 4,578 (4,096) 2,367 (1,214)
- ---------------------------------------------------------------------------------------------------------
3,452 (9,014) 3,351 (11,513) 4,387 (11,245) 3,504 (2,684)
- ---------------------------------------------------------------------------------------------------------
118,084 127,098 124,417 135,930 125,886 137,131 70,487 73,171
- ---------------------------------------------------------------------------------------------------------
121,536 118,084 127,768 124,417 130,273 125,886 73,991 70,487
- ---------------------------------------------------------------------------------------------------------
293 2,389 340 2,261 361 2,390 (410) 1,296
- ---------------------------------------------------------------------------------------------------------
</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 SECURITY VALUATION. Investments are stated at
value. Portfolio securities which are traded on
U.S. or foreign stock exchanges are valued at the
most recent sale price reported on the exchange on
which the security is traded most extensively. If
no sale occurred, the security is then valued at
the calculated mean between the most recent bid and
asked quotations. If there are no such bid and
asked quotations, the most recent bid quotation is
used. Securities quoted on the Nasdaq Stock Market
(Nasdaq), for which there have been sales, are
valued at the most recent sale price reported on
the Nasdaq. If there are no such sales, the value
is the most recent bid quotation. Securities which
are not quoted on the Nasdaq but are traded in
another over-the-counter market are valued at the
most recent sale price on such market. If no sale
occurred, the security is then valued at the
calculated mean between the most recent bid and
asked quotations. If there are no such bid and
asked quotations, the most recent bid quotation
shall be used.
Portfolio debt securities are valued by pricing
agents approved by the officers of the fund, which
quotations reflect broker/dealer-supplied
valuations and electronic data processing
techniques. If the pricing agents are unable to
provide such quotations, the most recent bid
quotation supplied by a bona fide market maker
shall be used. All other securities are valued at
their fair market value as determined in good faith
by the Valuation Committee of the Board of
Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date. Dividend income is recorded on
the exdividend 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.
22
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS
EXPENSES. Expenses arising in connection with a
series of the trust are allocated to that series.
Other trust expenses are allocated among the series
in proportion to their relative net assets.
FUND SHARE VALUATION. Fund shares were sold during
limited offering periods which ended during the
years 1990 through 1997, and are redeemed on a
continuous basis. Fund shares were sold and are
redeemed at net asset value (plus a commission on
most sales). On each day the New York Stock
Exchange is open for trading, the net asset value
per share is determined as of the close of the
Exchange by dividing the total value of each fund's
investments and other assets, less liabilities, by
the respective number of shares outstanding.
FEDERAL INCOME TAXES. Each fund's policy is to
comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to
regulated investment companies, and to distribute
all of its taxable income to its shareholders.
Accordingly, each fund paid no federal income taxes
and no federal income tax provision was required.
DIVIDENDS TO SHAREHOLDERS. The funds declare and
pay dividends of any net investment income and net
realized capital gains annually, which are recorded
on the ex-dividend date. Dividends are determined
in accordance with income tax principles which may
treat certain transactions differently from
generally accepted accounting principles.
- --------------------------------------------------------------------------------
3
TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The funds have a management
agreement with Scudder Kemper Investments, Inc.
(Scudder Kemper) and pay a monthly investment
management fee of 1/12 of the annual rate of .50%
of average daily net assets. The funds incurred a
management fee of $1,738,000 for the six months
ended January 31, 1999.
ZURICH/B.A.T MERGER. On September 7, 1998, Zurich
Insurance Company (Zurich), majority owner of
Scudder Kemper, entered into an agreement with
B.A.T Industries p.l.c. (B.A.T) pursuant to which
the financial services businesses of B.A.T were
combined with Zurich's businesses to form a new
global insurance and financial services company
known as Zurich Financial Services. Upon
consummation of the transaction, the funds'
investment management agreement with Scudder Kemper
was deemed to have been assigned and, therefore,
terminated. The Board of Trustees of the funds has
approved a new investment management agreement with
Scudder Kemper, which is substantially identical to
the former investment management agreement, except
for the dates of execution and termination.
Shareholders approved the new investment management
agreement through a proxy solicitation that
concluded in mid-December.
ADMINISTRATIVE SERVICES AGREEMENT. The trust has an
administrative services agreement with Kemper
Distributors, Inc. (KDI). For providing information
and administrative services to shareholders, the
funds pay KDI a fee at an annual rate of up to .25%
of average daily net assets. KDI in turn has
various agreements with financial services firms
that provide these services and pays these firms
based on assets of fund accounts the firms service.
Administrative services fees paid by the funds to
KDI for the six months ended January 31, 1999 are
$867,000, of which $2,000 was paid by KDI to
affiliates.
23
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS
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 $223,000 for the six
months ended January 31, 1999.
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, 1999, the funds made no payments to their
officers and incurred trustees' fees of $65,000 to
independent trustees.
- --------------------------------------------------------------------------------
4
INVESTMENT
TRANSACTIONS For the six months ended January 31, 1999,
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 $31,025 35,401 29,624 28,616 31,217 14,899
Proceeds from sales 35,111 38,824 33,582 33,149 34,851 16,148
</TABLE>
- --------------------------------------------------------------------------------
5
CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the funds (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 1999 JULY 31, 1998
------------------ -------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
SERIES I
- -------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of dividends 1,088 $ 10,887 1,563 $ 15,719
- -------------------------------------------------------------------------------------------------------
Shares redeemed (647) (6,762) (1,595) (17,809)
- -------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital share transactions $ 4,125 $ (2,090)
- -------------------------------------------------------------------------------------------------------
SERIES II
- -------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of dividends 1,200 $ 14,022 1,810 $ 21,124
- -------------------------------------------------------------------------------------------------------
Shares redeemed (887) (10,798) (1,999) (25,509)
- -------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital share transactions $ 3,224 $ (4,385)
- -------------------------------------------------------------------------------------------------------
SERIES III
- -------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of dividends 1,092 $ 10,897 1,693 $ 16,384
- -------------------------------------------------------------------------------------------------------
Shares redeemed (609) (6,339) (1,684) (17,653)
- -------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital share transactions $ 4,558 $ (1,269)
- -------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 1999 JULY 31, 1998
---------------- -------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
SERIES IV
- -----------------------------------------------------------------------------------------------------
Shares issued in reinvestment of dividends 1,000 $10,296 1,532 $ 15,350
- -----------------------------------------------------------------------------------------------------
Shares redeemed (693) (7,382) (1,932) (20,944)
- -----------------------------------------------------------------------------------------------------
Net increase (decrease) from capital share transactions $ 2,914 $ (5,594)
- -----------------------------------------------------------------------------------------------------
SERIES V
- -----------------------------------------------------------------------------------------------------
Shares issued in reinvestment of dividends 1,228 $11,944 1,782 $ 16,939
- -----------------------------------------------------------------------------------------------------
Shares redeemed (729) (7,366) (2,031) (21,035)
- -----------------------------------------------------------------------------------------------------
Net increase (decrease) from capital share transactions $ 4,578 $ (4,096)
- -----------------------------------------------------------------------------------------------------
SERIES VI
- -----------------------------------------------------------------------------------------------------
Shares issued in reinvestment of dividends 534 $ 5,871 696 $ 7,349
- -----------------------------------------------------------------------------------------------------
Shares redeemed (308) (3,504) (757) (8,563)
- -----------------------------------------------------------------------------------------------------
Net increase (decrease) from capital share transactions $ 2,367 $ (1,214)
- -----------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 26
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
SERIES I
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR MONTH
ENDED ENDED ENDED YEAR ENDED JUNE 30,
JANUARY 31, JULY 31, JULY 31, ---------------------------
1999 1998 1997 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.80 11.86 11.24 11.46 11.19 10.67
- ------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .19 .40 .03 .42 .44 .45
- ------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain .71 .25 .59 1.48 1.03 1.20
- ------------------------------------------------------------------------------------------------------------
Total from investment operations .90 .65 .62 1.90 1.47 1.65
- ------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .38 .42 -- .44 .44 .41
- ------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .83 1.29 -- 1.68 .76 .72
- ------------------------------------------------------------------------------------------------------------
Total dividends 1.21 1.71 -- 2.12 1.20 1.13
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.49 10.80 11.86 11.24 11.46 11.19
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 8.87% 6.56 5.52 18.43 13.91 17.03
- ------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------------------------------
Expenses .93% .94 .84 .93 .95 .97
- ------------------------------------------------------------------------------------------------------------
Net investment income 3.29% 3.30 3.38 3.60 3.68 3.96
- ------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------
Net assets at end of period (in
thousands) $107,907 106,339 117,117 111,810 107,303 106,482
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 53% 80 86 94 71 63
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
SERIES II
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR MONTH
ENDED ENDED ENDED YEAR ENDED JUNE 30,
JANUARY 31, JULY 31, JULY 31, ---------------------------
1999 1998 1997 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.41 13.38 12.77 13.01 12.94 12.30
- ------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .25 .52 .05 .56 .58 .60
- ------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain .67 .23 .56 1.29 .77 1.25
- ------------------------------------------------------------------------------------------------------------
Total from investment operations .92 .75 .61 1.85 1.35 1.85
- ------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .50 .54 -- .59 .57 .57
- ------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .70 1.18 -- 1.50 .71 .64
- ------------------------------------------------------------------------------------------------------------
Total dividends 1.20 1.72 -- 2.09 1.28 1.21
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.13 12.41 13.38 12.77 13.01 12.94
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 7.78% 6.46 4.78 15.56 10.92 16.52
- ------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------------------------------
Expenses .93% .94 .90 .92 .94 .96
- ------------------------------------------------------------------------------------------------------------
Net investment income 3.78% 3.80 3.98 4.08 4.16 4.54
- ------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------
Net assets at end of period (in
thousands) $158,697 158,437 173,383 167,170 168,425 173,337
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 43% 57 67 70 54 47
- ------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE FOR ALL SERIES: Total return does not reflect the effect of any sales
charges. Data for the period ended January 31, 1999 is unaudited.
26
<PAGE> 27
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
SERIES III
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR MONTH
ENDED ENDED ENDED YEAR ENDED JUNE 30,
JANUARY 31, JULY 31, JULY 31, ---------------------------
1999 1998 1997 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.52 11.33 10.75 10.95 10.75 9.87
- ------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .18 .39 .04 .42 .43 .44
- ------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain .72 .27 .54 1.22 .78 1.24
- ------------------------------------------------------------------------------------------------------------
Total from investment operations .90 .66 .58 1.64 1.21 1.68
- ------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .37 .40 -- .43 .44 .43
- ------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .67 1.07 -- 1.41 .57 .37
- ------------------------------------------------------------------------------------------------------------
Total dividends 1.04 1.47 -- 1.84 1.01 .80
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.38 10.52 11.33 10.75 10.95 10.75
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 8.95% 6.68 5.40 16.38 11.72 18.37
- ------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------------------------------
Expenses .96% .95 .83 .95 .96 1.00
- ------------------------------------------------------------------------------------------------------------
Net investment income 3.23% 3.36 3.63 3.61 3.67 4.14
- ------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------
Net assets at end of period (in
thousands) $121,536 118,084 127,098 122,334 121,488 124,681
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 47% 67 79 74 59 52
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
SERIES IV
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR MONTH
ENDED ENDED ENDED YEAR ENDED JUNE 30,
JANUARY 31, JULY 31, JULY 31, ---------------------------
1999 1998 1997 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.68 11.28 10.69 10.70 10.07 8.83
- ------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .16 .35 .03 .39 .40 .39
- ------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain .79 .38 .56 1.17 .64 1.22
- ------------------------------------------------------------------------------------------------------------
Total from investment operations .95 .73 .59 1.56 1.04 1.61
- ------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .33 .37 -- .38 .41 .37
- ------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .62 .96 -- 1.19 -- --
- ------------------------------------------------------------------------------------------------------------
Total dividends .95 1.33 -- 1.57 .41 .37
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.68 10.68 11.28 10.69 10.70 10.07
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 9.22% 7.27 5.52 15.73 10.47 18.95
- ------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------------------------------
Expenses .97% .98 .88 .96 .95 .97
- ------------------------------------------------------------------------------------------------------------
Net investment income 2.84% 2.98 3.22 3.35 3.46 4.01
- ------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------
Net assets at end of period (in
thousands) $127,768 124,417 135,930 131,225 138,858 152,179
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 43% 59 66 66 52 45
- ------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 28
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
SERIES V
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR MONTH
ENDED ENDED ENDED YEAR ENDED JUNE 30,
JANUARY 31, JULY 31, JULY 31, ---------------------------
1999 1998 1997 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 10.17 10.86 10.22 10.20 9.53 8.15
- ------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .16 .35 .03 .39 .39 .28
- ------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain .83 .39 .61 1.22 .64 1.31
- ------------------------------------------------------------------------------------------------------------
Total from investment operations .99 .74 .64 1.61 1.03 1.59
- ------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .33 .38 -- .39 .36 .21
- ------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .71 1.05 -- 1.20 -- --
- ------------------------------------------------------------------------------------------------------------
Total dividends 1.04 1.43 -- 1.59 .36 .21
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.12 10.17 10.86 10.22 10.20 9.53
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 10.16% 7.76 6.26 17.14 10.95 19.97
- ------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------------------------------
Expenses .97% .99 .94 .96 .96 1.07
- ------------------------------------------------------------------------------------------------------------
Net investment income 3.01% 3.16 3.34 3.59 3.64 4.01
- ------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------
Net assets at end of period (in
thousands) $130,273 125,886 137,131 130,675 129,747 134,937
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 48% 66 76 79 58 73
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
SERIES VI
SIX MONTHS YEAR MONTH YEAR ENDED MAY 1
ENDED ENDED ENDED JUNE 30, TO
JANUARY 31, JULY 31, JULY 31, --------------- JUNE 30,
1999 1998 1997 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 11.25 11.57 10.86 9.83 9.26 9.00
- ------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .19 .38 .03 .33 .24 .06
- ------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain .96 .50 .68 1.26 .57 .20
- ------------------------------------------------------------------------------------------------------------
Total from investment operations 1.15 .88 .71 1.59 .81 .26
- ------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .46 .39 -- .28 .13 --
- ------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .54 .81 -- .28 .11 --
- ------------------------------------------------------------------------------------------------------------
Total dividends 1.00 1.20 -- .56 .24 --
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.40 11.25 11.57 10.86 9.83 9.26
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 10.55% 8.32 6.54 16.64 8.79 2.89
- ------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------------------------------
Expenses .98% 1.01 1.00 1.02 1.27 1.09
- ------------------------------------------------------------------------------------------------------------
Net investment income 2.99% 3.18 3.43 3.43 3.47 3.91
- ------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------
Net assets at end of period (in
thousands) $73,991 70,487 73,171 69,392 49,689 7,189
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 39% 54 65 74 34 --
- ------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE> 29
SHAREHOLDERS' MEETING
SPECIAL SHAREHOLDERS' MEETING
On December 17, 1998, a special shareholders' meeting was held and adjourned to
January 15, 1999. Kemper Retirement Fund Series shareholders were asked to vote
on two separate issues: approval of the new Investment Management Agreement
between the fund and Scudder Kemper Investments, Inc., and to modify or
eliminate certain policies and to eliminate the shareholder approval
requirements as to certain other matters. The following are the results.
SERIES I
- --------------------------------------------------------
1) Approval of the new Investment Management Agreement between the fund and
Scudder Kemper Investments, Inc. This item was approved.
For Against Abstain
5,660,336 173,508 312,369
2) To modify or eliminate certain policies and to eliminate the shareholder
approval requirements as to certain other matters. These items were approved.
Investment objectives
For Against Abstain
4,130,456 502,358 503,146
Investment policies
For Against Abstain
4,133,317 499,497 503,146
Diversification
For Against Abstain
4,130,695 502,119 503,146
Borrowing
For Against Abstain
4,120,933 511,881 503,146
Senior securities
For Against Abstain
4,135,898 496,916 503,146
Concentration
For Against Abstain
4,135,898 496,916 503,146
Underwriting of securities
For Against Abstain
4,135,898 496,916 503,146
Investment in real estate
For Against Abstain
4,135,898 496,916 503,146
Purchase of commodities
For Against Abstain
4,128,254 504,560 503,146
Lending
For Against Abstain
4,129,495 503,319 503,146
Margin purchases and short sales
For Against Abstain
4,134,548 498,266 503,146
Purchases of securities of related issuers
For Against Abstain
4,128,254 504,560 503,146
Pledging of assets
For Against Abstain
4,128,711 504,103 503,146
Purchases of securities
For Against Abstain
4,135,898 496,916 503,146
Purchases of options and warrants
For Against Abstain
4,134,607 498,207 203,146
Investment for the purpose of exercising control of management
For Against Abstain
4,133,407 499,407 503,146
Investment in mineral exploration
For Against Abstain
4,125,633 507,181 503,146
29
<PAGE> 30
SHAREHOLDERS' MEETING
SERIES II
- --------------------------------------------------------
1) Approval of the new Investment Management Agreement between the fund and
Scudder Kemper Investments, Inc. This item was approved.
For Against Abstain
[S] [C] [C]
6,914,270 95,629 387,358
2) To modify or eliminate certain policies and to eliminate the shareholder
approval requirements as to certain other matters. These items were approved.
Investment objectives
For Against Abstain
5,616,511 355,055 834,664
Investment policies
For Against Abstain
5,610,899 358,010 837,322
Diversification
For Against Abstain
5,617,383 351,526 837,322
Borrowing
For Against Abstain
5,609,991 358,918 837,322
Senior securities
For Against Abstain
5,624,272 344,637 837,322
Concentration
For Against Abstain
5,621,087 347,822 837,322
Underwriting of securities
For Against Abstain
5,627,946 340,962 837,322
Investment in real estate
For Against Abstain
5,621,316 347,593 837,322
Purchase of commodities
For Against Abstain
5,613,217 355,692 837,322
Lending
For Against Abstain
5,611,471 357,437 837,322
Margin purchases and short sales
For Against Abstain
5,603,502 365,407 837,322
Purchases of securities of related issuers
For Against Abstain
5,611,804 357,105 837,322
Pledging of assets
For Against Abstain
5,603,492 365,417 837,322
Purchases of securities
For Against Abstain
5,618,537 350,371 837,322
Purchases of options and warrants
For Against Abstain
5,620,535 348,373 837,322
Investment for the purpose of exercising control of management
For Against Abstain
5,608,497 360,411 837,322
Investment in mineral exploration
For Against Abstain
5,598,811 370,097 837,322
30
<PAGE> 31
SHAREHOLDERS' MEETING
SERIES III
- --------------------------------------------------------
1) Approval of the new Investment Management Agreement between the fund and
Scudder Kemper Investments, Inc. This item was approved.
For Against Abstain
6,147,995 103,402 318,748
2) To modify or eliminate certain policies and to eliminate the shareholder
approval requirements as to certain other matters. These items were approved.
Investment objectives
Broker
For Against Abstain Non-Votes
4,461,238 279,567 487,454 1,341,887
Investment policies
Broker
For Against Abstain Non-Votes
4,464,571 276,233 487,454 1,341,887
Diversification
Broker
For Against Abstain Non-Votes
4,468,590 272,214 487,454 1,341,887
Borrowing
Broker
For Against Abstain Non-Votes
4,457,279 283,526 487,454 1,341,887
Senior securities
Broker
For Against Abstain Non-Votes
4,468,590 272,214 487,454 1,341,887
Concentration
Broker
For Against Abstain Non-Votes
4,464,415 276,390 487,454 1,341,887
Underwriting of securities
Broker
For Against Abstain Non-Votes
4,470,946 269,859 487,454 1,341,887
Investment in real estate
Broker
For Against Abstain Non-Votes
4,464,895 275,909 487,454 1,341,887
Purchase of commodities
Broker
For Against Abstain Non-Votes
4,464,024 276,781 487,454 1,341,887
Lending
Broker
For Against Abstain Non-Votes
4,466,284 274,521 487,454 1,341,887
Margin purchases and short sales
Broker
For Against Abstain Non-Votes
4,452,243 288,562 487,454 1,341,887
Purchases of securities of related issuers
Broker
For Against Abstain Non-Votes
4,463,504 277,301 487,454 1,341,887
Pledging of assets
Broker
For Against Abstain Non-Votes
4,458,890 281,915 487,454 1,341,887
Purchases of securities
Broker
For Against Abstain Non-Votes
4,459,276 281,528 487,454 1,341,887
Purchases of options and warrants
Broker
For Against Abstain Non-Votes
4,459,276 281,528 487,454 1,341,887
Investment for the purpose of exercising control of management
Broker
For Against Abstain Non-Votes
4,461,649 279,155 487,454 1,341,887
Investment in mineral exploration
Broker
For Against Abstain Non-Votes
4,451,449 289,356 487,454 1,341,887
31
<PAGE> 32
SHAREHOLDERS' MEETING
SERIES IV
- --------------------------------------------------------
1) Approval of the new Investment Management Agreement between the fund and
Scudder Kemper Investments, Inc. This item was approved.
For Against Abstain
7,068,311 70,185 345,197
2) To modify or eliminate certain policies and to eliminate the shareholder
approval requirements as to certain other matters. These items were approved.
Investment objectives
For Against Abstain
5,408,802 301,098 717,138
Investment policies
For Against Abstain
5,400,273 307,177 719,588
Diversification
For Against Abstain
5,404,421 303,029 719,588
Borrowing
For Against Abstain
5,400,289 307,161 719,588
Senior securities
For Against Abstain
5,404,744 302,706 719,588
Concentration
For Against Abstain
5,404,893 302,558 719,588
Underwriting of securities
For Against Abstain
5,402,070 305,380 719,588
Investment in real estate
For Against Abstain
5,395,873 311,577 719,588
Purchase of commodities
For Against Abstain
5,400,240 307,210 719,588
Lending
For Against Abstain
5,401,320 306,130 719,588
Margin purchases and short sales
For Against Abstain
5,395,612 311,838 719,588
Purchases of securities of related issuers
For Against Abstain
5,401,102 306,348 719,588
Pledging of assets
For Against Abstain
5,399,016 308,434 719,588
Purchases of securities
For Against Abstain
5,404,421 303,029 719,588
Purchases of options and warrants
For Against Abstain
5,402,684 304,766 719,588
Investment for the purpose of exercising control of management
For Against Abstain
5,394,353 313,097 719,588
Investment in mineral exploration
For Against Abstain
5,393,942 313,508 719,588
32
<PAGE> 33
SHAREHOLDERS' MEETING
SERIES V
- --------------------------------------------------------
1) Approval of the new Investment Management Agreement between the fund and
Scudder Kemper Investments, Inc. This item was approved.
For Against Abstain
6,922,299 101,666 344,824
2) To modify or eliminate certain policies and to eliminate the shareholder
approval requirements as to certain other matters. These items were approved.
Investment objectives
For Against Abstain
5,409,515 352,932 810,761
Investment policies
For Against Abstain
5,406,993 355,455 810,761
Diversification
For Against Abstain
5,410,102 352,346 810,761
Borrowing
For Against Abstain
5,404,690 357,758 810,761
Senior securities
For Against Abstain
5,410,102 352,346 810,761
Concentration
For Against Abstain
5,409,605 352,842 810,761
Underwriting of securities
For Against Abstain
5,410,102 352,346 810,761
Investment in real estate
For Against Abstain
5,406,946 355,502 810,761
Purchase of commodities
For Against Abstain
5,401,282 361,165 810,761
Lending
For Against Abstain
5,410,102 352,346 810,761
Margin purchases and short sales
For Against Abstain
5,403,794 358,653 810,761
Purchases of securities of related issuers
For Against Abstain
5,406,024 356,423 810,761
Pledging of assets
For Against Abstain
5,405,886 356,561 810,761
Purchases of securities
For Against Abstain
5,409,294 353,153 810,761
Purchases of options and warrants
For Against Abstain
5,407,447 355,001 810,761
Investment for the purpose of exercising control of management
For Against Abstain
5,406,877 355,571 810,761
Investment in mineral exploration
For Against Abstain
5,393,030 369,418 810,761
33
<PAGE> 34
SHAREHOLDERS' MEETING
SERIES VI
- --------------------------------------------------------
1) Approval of the new Investment Management Agreement between the fund and
Scudder Kemper Investments, Inc. This item was approved.
For Against Abstain
3,626,626 71,624 184,400
2) To modify or eliminate certain policies and to eliminate the shareholder
approval requirements as to certain other matters. These items were approved.
Investment objectives
For Against Abstain
2,813,181 165,907 431,930
Investment policies
For Against Abstain
2,813,181 165,907 431,930
Diversification
For Against Abstain
2,814,305 164,784 431,930
Borrowing
For Against Abstain
2,812,798 166,290 431,930
Senior securities
For Against Abstain
2,813,181 165,907 431,930
Concentration
For Against Abstain
2,814,305 164,784 431,930
Underwriting of securities
For Against Abstain
2,812,798 166,290 431,930
Investment in real estate
For Against Abstain
2,814,305 164,784 431,930
Purchase of commodities
For Against Abstain
2,810,659 168,429 431,930
Lending
For Against Abstain
2,803,977 175,111 431,930
Margin purchases and short sales
For Against Abstain
2,803,376 175,712 431,930
Purchases of securities of related issuers
For Against Abstain
2,814,016 165,072 431,930
Pledging of assets
For Against Abstain
2,812,908 166,180 431,930
Purchases of securities
For Against Abstain
2,814,305 164,784 431,930
Purchases of options and warrants
For Against Abstain
2,814,051 165,037 431,930
Investment for the purpose of exercising control of management
For Against Abstain
2,814,051 165,037 431,930
Investment in mineral exploration
For Against Abstain
2,811,036 168,052 431,930
34
<PAGE> 35
NOTES
35
<PAGE> 36
TRUSTEES & OFFICERS
<TABLE>
<S> <C> <C>
TRUSTEES OFFICERS
DANIEL PIERCE MARK S. CASADY LINDA J. WONDRACK
Chairman and Trustee President Vice President
PHILLIP J. COLLORA
JAMES E. AKINS Vice President MAUREEN E. KANE
Trustee and Secretary Assistant Secretary
ARTHUR R. GOTTSCHALK JOHN R. HEBBLE CAROLINE PEARSON
Trustee Treasurer Assistant Secretary
FREDERICK T. KELSEY TRACY MCCORMICK ELIZABETH C. WERTH
Trustee Vice President Assistant Secretary
THOMAS W. LITTAUER ANN M. MCCREARY BRENDA LYONS
Trustee and Vice President Vice President Assistant Treasurer
FRED B. RENWICK KATHRYN L. QUIRK
Trustee Vice President
JOHN B. TINGLEFF CORNELIA SMALL
Trustee Vice President
JOHN G. WELTHERS
Trustee
</TABLE>
<TABLE>
<S> <C>
.............................................................................................
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
.............................................................................................
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 419557
Kansas City, MO 64141
.............................................................................................
CUSTODIAN AND STATE STREET BANK & TRUST
TRANSFER AGENT 225 Franklin Street
Boston, MA 02110
INVESTORS FIDUCIARY TRUST COMPANY
801 Pennsylvania Avenue
Kansas City, MO 64105
</TABLE>
[KEMPER FUNDS LOGO] Long-term investing in a short-term world(SM)
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
Printed on recycled paper in the U.S.A.
KRF - 3 (3/24/99) 1068900
