<PAGE> 1
Kemper Target Equity Fund
Kemper Worldwide 2004 Fund
Semiannual Report to Shareholders
For The Period Ended
December 31, 1994
Provides a guaranteed return of
investment on the designated maturity
date to investors who reinvest all
dividends and hold their shares to
the maturity date, and seeks to
provide a total return, a combination
of capital growth and income
[KEMPER MUTUAL FUNDS LOGO]
<PAGE> 2
DEAR SHAREHOLDER:
We are pleased to provide you with an economic overview and the performance of
your Fund for the six-month period ended December 31, 1994. In addition,
following the economic overview is a question and answer interview with your
fund's Portfolio Manager.
- -------------------------------
PERFORMANCE AND DIVIDEND REVIEW
Total Return*
For Periods Ended December 31, 1994
(not adjusted for any sales charge)
<TABLE>
<CAPTION>
Six
Months
-------
<S> <C>
Kemper Worldwide 2004 Fund 0.45%
</TABLE>
Total Return*
For the Periods Ended December 31, 1994
(adjusted for the maximum sales charge of 5.00%)
<TABLE>
<CAPTION>
Life of Fund
--------------------
<S> <C>
Kemper Worldwide 2004 Fund -6.48% (since 5/3/94)
</TABLE>
Returns are historical and do not represent future performance. Returns and net
asset value fluctuate. Shares are redeemable at current net asset value, which
may be more or less than original cost.
- ---------------
DIVIDEND REVIEW
For the six-month period ended December 31, 1994, Worldwide 2004 Fund paid $.12
per share in income dividends.
* Total return and average annual total return measure net investment income and
capital gain or loss from portfolio investments, assuming reinvestment of all
dividends. Average annual total return reflects annualized change while total
return reflects aggregate change. During the periods noted, securities prices
fluctuated. For additional information, see the Prospectus and Statement of
Additional Information and the Financial Highlights at the end of this report.
- -------------------------
GENERAL ECONOMIC OVERVIEW
The momentum of the 1994 economic expansion produced some of the most positive
economic reports we've seen in years. Income, consumer spending, construction
spending and hiring all were at high levels as we closed the pages on 1994 and
progressed through the first month of 1995.
It was almost a year ago that the Federal Reserve Board initiated its series of
rate hikes intended to cool down the economy. As you'll note in the accompanying
graphs, the high 6.3 percent increase in gross domestic product (GDP) in the
fourth quarter of 1993 provoked the Fed's first rate increase in February of
1994. The government raised rates five additional times in 1994, yet the economy
continued to expand at relatively high rates. The economy's ability to produce a
fourth quarter 1994 GDP of 4.5% one year after steadily rising rates virtually
assured that the Fed would raise rates again in February.
Several measures indicate the strength and stability of today's economy compared
to the early 1990s: consumers are not in as much debt as they were just three or
four years ago, nonfinancial corporations have a much lower level of debt
relative to their cash flow, and the federal budget deficit relative to its
gross domestic product (GDP) is lower than it was earlier in the decade.
As the new year unfolds, a slowdown in housing and auto sales may be offset
somewhat by accelerated activity in other sectors of the economy. For example,
while it's true that manufacturers today do not have the same incentive they
once had to accumulate inventories, we expect inventories to continue to build.
Products are needed both in this country and overseas, where many economies are
in the early phase of economic recovery. Nonresidential construction may also
start to pick up.
1
<PAGE> 3
STRONG ECONOMIC GROWTH...
Data show the annual rate of increase in the U.S. gross domestic product by
quarter
<TABLE>
<CAPTION>
4Q1993 1Q1994 2Q1994 3Q1994 4Q1994
- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
6.30 3.30 4.10 4.00 4.50
</TABLE>
Source: Commerce Department
PROVOKED A SERIES OF INTEREST RATE HIKES
The Federal Reserve Board started raising the Federal Funds (short-term)
interest rates in February 1994 and raised rates six times since.
<TABLE>
<CAPTION>
BEFORE
RATE
HIKES 2/4/94 3/22/94 4/18/94 5/17/94 8/16/94 11/15/94 2/1/95
- ------ ------ ------- ------- ------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
3.00 3.25 3.50 3.75 4.25 4.75 5.50 6.00
</TABLE>
OUR OUTLOOK
While we believe that higher interest rates will help economic growth decline to
closer to 3 percent, this will probably still be too much growth for the Federal
Reserve. As a consequence, we expect the Fed to raise rates as appropriate until
growth slows to 2.5 percent to 2.75 percent. Alan Greenspan, chairman of the
Federal Reserve, has made it quite clear that this is the level of growth the
Fed associates with moderate inflation. Long-term rates may rise but not to the
same extent as short-term rates.
We expect the economy to slow significantly this year--but we do not expect a
recession. Inflation will likely increase gradually, ranging between 3.5 percent
and 4.0 percent in the next six months. The Federal Reserve's commitment to
fighting inflation should be a long-term positive for financial assets.
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
/s/ Sandy A. Lincoln
Sandy A. Lincoln
Chief Investment Officer
February 3, 1995
Sandy Lincoln is Chief Investment Officer of
Kemper Financial Services, Inc. In this capacity,
[PHOTO] he oversees more than $60 billion in assets
managed, including $42 billion in retail mutual
funds. Lincoln is a graduate of Valparaiso
University in Indiana and holds an M.B.A. in
finance from Loyola University of Chicago.
2
<PAGE> 4
Q & A
INTRODUCING
KEMPER'S NEW
WORLDWIDE
2004 FUND
PORTFOLIO
MANAGER
DENNIS FERRO
- --------------------------------------------------------------------------------
[PHOTO] Dennis Ferro joined Kemper Financial Services,
Inc. (KFS) in 1994 and is now an Executive Vice
President of KFS and the Portfolio Manager of Kemper
Worldwide 2004 Fund. Dennis holds an M.B.A. in finance
from St. John's University in New York and a bachelor's
degree from Villanova University in Pennsylvania. He is
a Chartered Financial Analyst.
- --------------------------------------------------------------------------------
- ----------
Q: HOW DID THE INTERNATIONAL MARKETS PERFORM THROUGH 1994?
A: A number of European economies rebounded during 1994, boosted by strong
export orders for capital goods. The telecommunications, technology and office
automation sectors in particular have benefited from rapid expansion and strong
equipment demand. Japan's economy bottomed earlier in the year and we began to
see some attractive opportunities in that market as well. Despite some
short-term corrections and volatility throughout the international market,
demand for capital goods and industrial commodities has generally been strong,
while low inflation and interest rates are contributing to positive profit
reports.
- ----------
Q: WHAT COUNTRIES OR REGIONS HAVE YOU FOCUSED ON FOR THE WORLDWIDE 2004 FUND?
A: Through the year, we've placed particular emphasis on countries such as
Germany, Sweden and the Netherlands, which have been enjoying strong export
growth. We've also increased our position in Japan which, thanks to strong
external demand and an extended period of low interest rates, has been
experiencing very positive growth that should continue through 1995.
- ----------
Q: THE DEVALUATION OF THE MEXICAN PESO CAUSED A GREAT DEAL OF TURMOIL IN THE
LATIN AMERICAN MARKETS AND SIGNIFICANT LOSSES FOR MANY INTERNATIONAL INVESTORS.
HOW WAS THE WW2004 FUND AFFECTED?
A: Essentially it wasn't. As part of an overall strategy to scale back our
exposure to emerging markets, we had reduced our Mexican exposure earlier in
the fourth quarter. Our analysts had identified several factors -- a flat
consumer sector, a significant rise in offshore debt and increasing political
tensions -- that pointed to a rising risk profile. By late December, when the
crisis occurred, we had essentially eliminated the fund's holdings in Mexico
and sharply reduced our exposure to Brazil, Argentina and Chile. We believe
this episode clearly illustrates the importance of a strong analytical team,
which happens to be one of this fund's primary strengths.
- ----------
Q: WHAT IS YOUR STRATEGY GOING FORWARD?
A: With interest rates expected to rise throughout the international market
place, we will focus on companies with strong balance sheets and good cash
flows -- and those that we believe are less sensitive to the whims of the bond
market. We are particularly interested in businesses that have strong long-term
growth characteristics or have restructured themselves to be market leaders
during a period of high growth and high competition.
In geographic terms, we intend to continue to focus on the larger, more mature
markets of Europe and Japan -- especially those poised to gain from strong
international trade. For the short-term, fiscal concerns in Spain, political
uncertainties in Italy and a poor economic picture in Belgium dictate
underweightings in those markets. We'll also remain underweighted in the Latin
American markets, which depend greatly on foreign capital for growth. We think
it will be some time before investors develop sufficient confidence to bring
meaningful capital back to these markets. We will, however, explore
opportunities in other emerging markets such as Singapore and Malaysia which
have been experiencing strong infrastructure development but have less
political turmoil and more liquidity than other markets in the region.
- ----------
Q: WHAT IS YOUR OUTLOOK FOR 1995?
A: With a number of countries in the early phase of economic expansion, there
is considerable room for the international markets to outperform the domestic
stock market. The economic indicators necessary for continued growth meet our
expectations and we see the potential for higher corporate profits than
currently projected. Inflation remains low and interest rates outside the U.S.
are not expected to create meaningful problems. While future market conditions
can not be predicted with certainty, we anticipate another positive year for
international investors and the Worldwide 2004 Fund.
3
<PAGE> 5
PORTFOLIO OF INVESTMENTS December 31, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
Principal
Amount
or
Number
of
Shares Value
-------- -------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS
-----------------------------------------------------------------------
U.S. Treasury Strips, zero coupon, $24,650 $11,429
2004
-----------------------------------------------------------------------
U.S. Treasury Cubes, zero coupon, 750 345
2004
-----------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS-51.0%
(Cost: $11,890) 11,774
-----------------------------------------------------------------------
COMMON STOCKS
CONTINENTAL EUROPE
FINLAND-1.1%
-----------------------------------------------------------------------
Nokia Telecom 1,700shs. 250
Telecommunications company
-----------------------------------------------------------------------
FRANCE-2.2%
-----------------------------------------------------------------------
Carrefour S.A. 500 207
Food retailer
-----------------------------------------------------------------------
(a)Technip 2,400 110
Oil company
-----------------------------------------------------------------------
Total Cie Francais 3,200 186
Oil company
-----------------------------------------------------------------------
503
GERMANY-1.1%
-----------------------------------------------------------------------
Mannesmann, A.G. 330 90
Diversified manufacturing company
-----------------------------------------------------------------------
Veba, A.G. 450 157
Holding company
-----------------------------------------------------------------------
247
IRELAND-.8%
-----------------------------------------------------------------------
(a)Waterford Wedgewood PLC 220,000 194
Fine china/crystal manufacturer
-----------------------------------------------------------------------
NETHERLANDS-1.8%
-----------------------------------------------------------------------
Hagemeyer N.V. 2,000 163
Trading company
-----------------------------------------------------------------------
Phillips N.V. 6,000 178
Electronics company
-----------------------------------------------------------------------
Van Ommeren 2,500 66
Shipping company
-----------------------------------------------------------------------
407
SPAIN-.6%
-----------------------------------------------------------------------
Repsol S.A., ADR 4,800 130
Oil and gas producer
-----------------------------------------------------------------------
SWEDEN-2.0%
-----------------------------------------------------------------------
Atlas Copco 15,000 192
Industrial machinery manufacturer
-----------------------------------------------------------------------
<CAPTION>
Number
of
Shares Value
-------- -------
<S> <C> <C>
-----------------------------------------------------------------------
Ericsson "B" 3,400 $ 188
Telecommunications equipment
manufacturer
-----------------------------------------------------------------------
Sandvik AB 5,230 84
Manufacturing company
-----------------------------------------------------------------------
464
SWITZERLAND-2.4%
-----------------------------------------------------------------------
Brown Boveri 200 172
Engineering and construction company
-----------------------------------------------------------------------
Roche Holdings Genuss Chein 80 387
Chemicals and pharmaceuticals company
-----------------------------------------------------------------------
559
-----------------------------------------------------------------------
TOTAL CONTINENTAL EUROPE-12.0% 2,754
-----------------------------------------------------------------------
PACIFIC REGION
HONG KONG-.4%
-----------------------------------------------------------------------
Hong Kong Telecommunications 24,800 47
Telecommunications company
-----------------------------------------------------------------------
Wai Kee Holdings, 176,000 41
with warrants expiring 1996
Construction company
-----------------------------------------------------------------------
88
JAPAN-14.9%
------------------------------------------------------------------------
(a)Amada Co., Ltd. 17,000 213
Equipment manufacturer
------------------------------------------------------------------------
Bridgestone Corporation 10,000 156
Manufacturer of rubber related
products
------------------------------------------------------------------------
DDI Corp. 20 172
Telecommunications company
------------------------------------------------------------------------
Fujitsu Limited 16,000 162
Computer components manufacturer
------------------------------------------------------------------------
Honda Motor Co. Ltd. 10,000 178
Automobile company
------------------------------------------------------------------------
Kyocera Corporation 2,000 148
Electronics manufacturer
------------------------------------------------------------------------
Marui Co., Ltd. 7,000 128
Department Store
------------------------------------------------------------------------
Matsushita Electric Industrial Co. 10,000 164
Ltd.
Consumer electronics and office
equipment manufacturer
------------------------------------------------------------------------
Nippondenso Co. Ltd. 3,000 63
Automotive components manufacturer
and supplier
------------------------------------------------------------------------
Nissan Motor Co. Ltd. 25,000 206
Automobile company
------------------------------------------------------------------------
Omron Corp. 16,000 295
Control components manufacturer
------------------------------------------------------------------------
</TABLE>
4
<PAGE> 6
(Dollars in thousands)
<TABLE>
<CAPTION>
Number
of
Shares Value
-------- -------
<S> <C> <C>
------------------------------------------------------------
Sanyo Shinpan Finance Co. 2,000 $ 193
Consumer finance company
------------------------------------------------------------
Schimachu 1,000 36
Furniture manufacturer and retailer
------------------------------------------------------------
Seven Eleven Japan Co., Ltd. 3,000 241
Convenience retailer
------------------------------------------------------------
Sharp Corporation 10,000 180
Electronics manufacturer
------------------------------------------------------------
Sumitomo Bank Ltd. 10,000 191
Banking
------------------------------------------------------------
Sumitomo Corporation 15,000 153
General Trading Firm
------------------------------------------------------------
Tokio Marine & Fire Insurance Co. 14,000 171
Ltd.
Insurance company
------------------------------------------------------------
Tokyo Electron 6,000 187
Electronics manufacturing company
------------------------------------------------------------
(a)Ube Industries, Ltd. 50,000 193
Diversified manufacturing company
------------------------------------------------------------
3,430
MALAYSIA-1.1%
------------------------------------------------------------
Genting BHD 2,000 17
Entertainment Industry
------------------------------------------------------------
Road Builder Holdings 24,000 131
Construction company
------------------------------------------------------------
(a)Technology Resource, Ltd. 30,000 96
Telecommunications company
------------------------------------------------------------
244
SINGAPORE-3.2%
------------------------------------------------------------
City Developments 21,000 117
Property development company
------------------------------------------------------------
DBS Land Ltd. 36,000 107
Property development company
------------------------------------------------------------
Keppel Corporation Limited 20,000 170
Conglomerate holding company
------------------------------------------------------------
Singapore Press Holdings 10,000 182
Publishing Company
------------------------------------------------------------
United Overseas Bank 16,000 169
Banking
------------------------------------------------------------
745
THAILAND-.7%
------------------------------------------------------------
Siam City Bank 132,000 168
Banking
------------------------------------------------------------
TOTAL PACIFIC REGION-20.3% 4,675
------------------------------------------------------------
<CAPTION>
Number
of
Shares
or
Principal
Amount Value
-------- -------
<S> <C> <C>
------------------------------------------------------------
LATIN AMERICA AND EMERGING MARKETS
CHILE-1.5%
------------------------------------------------------------
Maderas y Sinteticos Sociedad Anonima 10,600 $ 270
MASISA, ADR
Wood products manufacturer
------------------------------------------------------------
(a)Provida Corporation, ADR 4,800 90
Financial Services
------------------------------------------------------------
360
MEXICO-.1%
------------------------------------------------------------
(a)Corporacion Geo, ADR 800 17
Building company
------------------------------------------------------------
TOTAL LATIN AMERICA AND
EMERGING MARKETS-1.6% 377
------------------------------------------------------------
COMMONWEALTH
UNITED KINGDOM-4.7%
------------------------------------------------------------
British Petroleum Co., PLC 28,104 187
Petroleum mining and production
company
------------------------------------------------------------
Lloyds Bank PLC 19,000 164
Banking
------------------------------------------------------------
Manweb PLC 22,000 300
Electric utility company
------------------------------------------------------------
The RTZ Corporation PLC 14,400 187
Mining company
------------------------------------------------------------
(a)Telewest Communications 27,000 72
Telecommunications company
------------------------------------------------------------
Vodafone Group PLC 55,900 185
Cellular telephone services
------------------------------------------------------------
1,095
------------------------------------------------------------
TOTAL COMMON STOCKS-38.6%
(Cost: $8,847) 8,901
------------------------------------------------------------
MONEY MARKET INSTRUMENTS-6.9%
Yield-6.10%
Due-January 1995
------------------------------------------------------------
NNW Utility Funding I, Inc.
(Cost: $1,599) $ 1,600 1,599
------------------------------------------------------------
TOTAL INVESTMENTS-96.5%
(Cost: $22,336) 22,274
------------------------------------------------------------
CASH AND OTHER ASSETS,
LESS LIABILITIES-3.5% 817
------------------------------------------------------------
NET ASSETS-100% $23,091
------------------------------------------------------------
</TABLE>
5
<PAGE> 7
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
Based on the cost of investments of $22,336,000 for federal income tax purposes
at December 31, 1994, the aggregate gross unrealized appreciation was $378,000,
the aggregate gross unrealized depreciation was $440,000 and the net unrealized
depreciation of investments was $62,000.
At December 31, 1994, the Fund's portfolio of investments had the following
diversification (dollars in thousands):
<TABLE>
<CAPTION>
Value %
------- ------
<S> <C> <C>
Automobiles, Parts and Services $ 447 1.9%
- ------------------------------------------------------------------------------------------------------------------
Chemicals, Medical Equipment and Pharmaceutical 387 1.7%
- ------------------------------------------------------------------------------------------------------------------
Communications 1,172 5.1%
- ------------------------------------------------------------------------------------------------------------------
Construction and Building Materials 361 1.6%
- ------------------------------------------------------------------------------------------------------------------
Consumer Products and Services 367 1.6%
- ------------------------------------------------------------------------------------------------------------------
Diversified 763 3.3%
- ------------------------------------------------------------------------------------------------------------------
Electrical and Electronics 857 3.7%
- ------------------------------------------------------------------------------------------------------------------
Energy Sources 800 3.5%
- ------------------------------------------------------------------------------------------------------------------
Financial Services 1,146 4.9%
- ------------------------------------------------------------------------------------------------------------------
Food and Beverages 207 .9%
- ------------------------------------------------------------------------------------------------------------------
Industrial Products and Services 1,054 4.5%
- ------------------------------------------------------------------------------------------------------------------
Publishing 182 .8%
- ------------------------------------------------------------------------------------------------------------------
Real Estate and Property Development 224 1.0%
- ------------------------------------------------------------------------------------------------------------------
Retailing 405 1.8%
- ------------------------------------------------------------------------------------------------------------------
Transportation 229 1.0%
- ------------------------------------------------------------------------------------------------------------------
Utilities 300 1.3%
- ------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 8,901 38.6%
- ------------------------------------------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS 1,599 6.9%
- ------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS 11,774 51.0%
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS 22,274 96.5%
- ------------------------------------------------------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES 817 3.5%
- ------------------------------------------------------------------------------------------------------------------
NET ASSETS $23,091 100.0%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
6
<PAGE> 8
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
(in thousands)
<TABLE>
<S> <C>
ASSETS
- -------------------------------------------------------
Investments, at value
(Cost: $22,336) $ 22,274
- -------------------------------------------------------
Cash 454
- -------------------------------------------------------
Receivable for:
Fund shares sold 175
- -------------------------------------------------------
Investments sold 670
- -------------------------------------------------------
Dividends and Interest 5
- -------------------------------------------------------
Total assets 23,578
- -------------------------------------------------------
LIABILITIES AND NET ASSETS
- -------------------------------------------------------
Payable for:
Investments purchased 464
- -------------------------------------------------------
Management fee 11
- -------------------------------------------------------
Administrative services fee 5
- -------------------------------------------------------
Other 7
- -------------------------------------------------------
Total liabilities 487
- -------------------------------------------------------
Net assets applicable to 2,582
shares outstanding, no par value,
equivalent to $8.94 per share $ 23,091
- -------------------------------------------------------
ANALYSIS OF NET ASSETS
- -------------------------------------------------------
Excess of amounts received from
issuance of shares over amounts
paid on redemptions of shares
on account of capital $ 23,621
- -------------------------------------------------------
Accumulated net realized loss on sales of
investments and foreign currency transactions (466)
- -------------------------------------------------------
Unrealized depreciation of investments
and foreign currency transactions (64)
- -------------------------------------------------------
Net assets applicable to shares outstanding $ 23,091
- -------------------------------------------------------
THE PRICING OF SHARES
- -------------------------------------------------------
Net asset value and redemption price per share
($23,091 / 2,582 shares outstanding) $8.94
- -------------------------------------------------------
Maximum offering price per share
(net asset value, plus 5.26% of net
asset value or 5.00% of offering price) $9.41
- -------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements
STATEMENT OF OPERATIONS
Six months ended December 31, 1994
(in thousands)
<TABLE>
<S> <C>
INVESTMENT INCOME
- ------------------------------------------------------
Interest $ 343
- ------------------------------------------------------
Dividends 30
- ------------------------------------------------------
373
EXPENSES
- ------------------------------------------------------
Management fee 48
- ------------------------------------------------------
Administrative service fee 16
- ------------------------------------------------------
Custodian and transfer agent fees and related
expenses 23
- ------------------------------------------------------
Professional fees 6
- ------------------------------------------------------
Reports to shareholders 4
- ------------------------------------------------------
Trustees' fees and other 10
- ------------------------------------------------------
Total expenses 107
- ------------------------------------------------------
Net investment income 266
- ------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
- ------------------------------------------------------
Net realized loss on sales of investments and
foreign currency transactions (463)
- ------------------------------------------------------
Net change in balance of unrealized
depreciation of investments and foreign
currency transactions 9
- ------------------------------------------------------
Net loss on investments (454)
- ------------------------------------------------------
Net decrease in net assets resulting
from operations $(188)
- ------------------------------------------------------
</TABLE>
7
<PAGE> 9
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
<TABLE>
<CAPTION>
Six months May 3, 1994
ended to
December 31, June 30,
1994 1994
------------- ------------
<S> <C> <C>
OPERATIONS
- ------------------------------------------------------------
Net investment income $ 266 12
- ------------------------------------------------------------
Net realized loss on sales of
investments and foreign
currency transactions (463) (3)
- ------------------------------------------------------------
Net change in unrealized
depreciation and foreign
currency transactions 9 (73)
- ------------------------------------------------------------
Net decrease in net assets
resulting from operations (188) (64)
- ------------------------------------------------------------
Less distribution from net
investment income (301) --
- ------------------------------------------------------------
Net increase from capital share
transactions 17,680 5,864
- ------------------------------------------------------------
Total increase in net assets 17,191 5,800
- ------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------
Beginning of period $ 5,900 100
- ------------------------------------------------------------
End of period (including
undistributed net investment
income of $9 at June 30, 1994) $23,091 5,900
- ------------------------------------------------------------
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF THE FUND
Kemper Target Equity Fund (the Trust) is an open-end, management investment
company that may issue shares in one or more series. The Trust was organized as
a business trust under the laws of Massachusetts. Currently, the Trust includes
six series. The objectives of Kemper Worldwide 2004 Fund (the Fund), the sixth
series, are to provide a guaranteed return of investment on the Maturity Date
(November 15, 2004) to investors who reinvest all dividends and hold their
shares to the Maturity Date, and to provide total return, a combination of
capital growth and income. The Fund pursues its objectives by investing a
portion of its assets in zero coupon U.S. Treasury Obligations and the balance
of its assets primarily in an internationally diversified portfolio of foreign
securities. 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 Fund's portfolio, as well as by a
guarantee from Kemper Financial Services, Inc. (KFS), the Fund's investment
manager.
INVESTMENT VALUATION
Investments are stated at value. Any portfolio securities that are primarily
traded on a domestic securities exchange are valued at the last sale price on
that exchange or, if there is no recent last sale price available, at the last
current bid quotation. Portfolio securities that are primarily traded on foreign
securities exchanges are generally valued at the preceding closing values of
such securities on their respective exchanges where primarily traded. A security
that is listed or traded on more than one exchange is valued at the quotation on
the exchange determined to be the primary market for such security by the Board
of Trustees or its delegates. All other securities not so traded are valued at
the last current bid quotation if market quotations are available. Fixed income
securities are valued by using market quotations, or independent pricing
services that use prices provided by market makers or estimates of market values
obtained from yield data relating to instruments or securities with similar
characteristics. Equity options are valued at the last sale price unless the bid
price is higher or the asked price is lower, in which event such bid or asked
price is used. Exchange traded fixed income options are valued at the last sale
price unless there is no sale price, in which event prices provided by market
makers are used. Over-the-counter traded fixed income options are valued based
upon current prices provided by market makers. Financial futures and options
thereon are valued at the settlement price established each day by the board of
trade or exchange on which they are traded. Forward foreign currency contracts
and foreign currencies are valued at the forward and current exchange rates,
respectively, prevailing on the day of valuation. Other securities and assets
are valued at fair value as determined in good faith by the Board of Trustees.
8
<PAGE> 10
CURRENCY TRANSLATION
The books and records of the Fund are maintained in U.S. dollars. All assets and
liabilities initially expressed in foreign currency values are converted into
U.S. dollar values at the mean between the bid and offered quotations of such
currencies against U.S. dollars as last quoted by a recognized dealer. If such
quotations are not readily available, the rate of exchange is determined in good
faith by the Board of Trustees. Income and expenses and purchases and sales of
investments are translated into U.S. dollars at the rate of exchange prevailing
on the respective dates of such transactions. The Fund includes that portion of
the results of operations resulting from changes in foreign exchange rates with
the net realized and unrealized gain or loss from investments, as appropriate.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date (date the order to
buy or sell is executed). Dividend income is recorded on the ex-dividend date,
except that certain dividends from foreign securities are recorded as soon as
the information is available to the Fund. Interest income is recorded on the
accrual basis and includes amortization of money market instrument premium and
discount. Realized gains and losses from investment transactions are reported on
an identified cost basis.
EXPENSES
Expenses arising in connection with a series of the Trust are allocated to that
series. Other Trust expenses are allocated among the series in proportion to
their relative net assets.
FUND SHARE VALUATION
Fund shares are sold to the public during a limited offering period, which
currently is expected to last until September 30, 1995 (Offering Period). The
Offering Period may be extended or shortened at the option of the Fund. Fund
shares are redeemed on a continuous basis. Fund shares are sold and redeemed at
net asset value (plus a commission on most sales). On each day the New York
Stock Exchange is open for trading, the net asset value per share is determined
as of the earlier of 3:00 p.m. Chicago time or the close of the Exchange by
dividing the total value of the Fund's investments and other assets, less
liabilities, by the number of Fund shares outstanding.
FEDERAL INCOME TAXES AND DIVIDENDS TO SHAREHOLDERS
The Trust has complied with the special provisions of
the Internal Revenue Code available to investment
companies, during the six months ended December 31, 1994. The accumulated net
realized loss on sales of investments for federal income tax purposes at
December 31, 1994, amounting to approximately $460,000, is available to offset
future taxable gains if not applied, the loss carryover expires in 2003.
Dividends payable to its shareholders are recorded by the Fund on the
ex-dividend date.
2. TRANSACTIONS WITH AFFILIATES
The Trust has a management agreement and an underwriting agreement with KFS. For
management services and facilities furnished, the Fund pays a fee at the annual
rate of .60% of average daily net assets. The Fund incurred a management fee of
$48,000 for the six months ended December 31, 1994. As principal underwriter for
the Fund, KFS retained commissions of $87,000 for the six months ended December
31, 1994 after allowing $906,000 as commissions to retail firms of which
$232,000 was paid to firms affiliated with KFS.
The Trust has an administrative services agreement with KFS. For providing
information and administrative services to shareholders, the Fund pays KFS a fee
at an annual rate of up to .25% of average daily net assets. KFS in turn pays
financial services firms that provide these services a fee of up to .25% of
assets of Fund accounts the firms service. The administrative services fee
payable by the Fund to KFS equals the service fees paid by KFS to such firms.
For the six months ended December 31, 1994, the Fund incurred an administrative
service fee of $16,000, all of which KFS paid to firms, including $5,000 that
was paid to firms affiliated with KFS.
Effective February 1, 1995, KFS transferred all of its duties and
responsibilities as principal underwriter and administrator to Kemper
Distributors, Inc., a wholly-owned subsidiary of KFS.
The Trust has a custodian agreement and a transfer agent agreement with
Investors Fiduciary Trust Company (IFTC), which was 50% owned by KFS until
January 31, 1995, when KFS completed the sale of IFTC to a third party. For the
six months ended December 31, 1994, the Fund incurred custodian and transfer
agent fees of $21,000 (excluding related expenses). Pursuant to a services
agreement with IFTC, Kemper Service Company (KSvC), an affiliate of KFS, is the
shareholder service agent of the Trust. For the six months ended December 31,
1994, IFTC remitted shareholder service fees of $20,000 to KSvC with respect to
the Fund.
Certain officers or trustees of the Fund are also officers or directors of KFS.
During the six months ended December 31, 1994, the Fund made no direct payments
to its officers and incurred trustees' fees of $5,000 to independent trustees.
3. INVESTMENT TRANSACTIONS
For the six months ended December 31, 1994, investment transactions (excluding
money market instruments) are as follows (in thousands):
<TABLE>
<S> <C>
Purchases $23,206
- --------------------------------------------------------------------------------
Proceeds from sales 6,775
- --------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 11
4. CAPITAL SHARE TRANSACTIONS
The following table summarizes the activity in capital shares of the Fund (in
thousands):
<TABLE>
<CAPTION>
Six months
ended May 3, 1994
December 31, to
1994 June 30, 1994
---------------- ---------------
Shares Amount Shares Amount
------- ------- ------ ------
<S> <C> <C> <C> <C>
Shares sold 1,971 $18,080 645 $5,883
- -----------------------------------------------------------
Shares issued in
reinvestment of
dividends 33 296 -- --
- -----------------------------------------------------------
2,004 18,376 645 5,883
- -----------------------------------------------------------
Less shares redeemed 76 696 2 19
- -----------------------------------------------------------
Net increase from
capital share
transactions 1,928 $17,680 643 $5,864
- -----------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six months
ended May 3,
December 31, 1994 to
PER SHARE OPERATING PERFORMANCE: 1994 June 30, 1994
------------ -------------
<S> <C> <C>
Net asset value, beginning of period $9.02 9.00
- ---------------------------------------------------------------------------------------------------------------------
Net investment income .10 .02
- ---------------------------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments and foreign currency transactions (.06) --
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations .04 .02
- ---------------------------------------------------------------------------------------------------------------------
Less distribution from net investment income .12 --
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.94 9.02
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%): .45 .22
- ---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 1.28 1.32
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 3.34 2.59
- ---------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $ 23,091 5,900
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 87 --
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Ratios have been determined on an annualized basis. Total return is not
annualized and does not reflect the effect of any sales charges.
10
<PAGE> 12
[KEMPER MUTUAL FUNDS LOGO]
KEMPER FINANCIAL SERVICES, INC.
120 SOUTH LASALLE STREET
CHICAGO, IL 60603
KEMPER TARGET EQUITY FUND
KEMPER WORLDWIDE 2004 FUND
<TABLE>
<S> <C>
Trustees Officers
CHARLES M. KIERSCHT SANDY A. LINCOLN
President and Trustee Vice President
ARTHUR R. GOTTSCHALK JOHN E. PETERS
Trustee Vice President
FREDERICK T. KELSEY TRACY MCCORMICK CHESTER
Trustee Vice President
JOHN B. TINGLEFF JAMES H. COXON
Trustee Vice President
JOHN G. WEITHERS DENNIS H. FERRO
Trustee Vice President
STEPHEN B. TIMBERS FRANK D. KORTH
Vice President Vice President
and Trustee
CHARLES F. CUSTER
Vice President and
Assistant Secretary
PHILIP J. COLLORA
Vice President and
Assistant Secretary
JEROME L. DUFFY
Treasurer
ELIZABETH C. WERTH
Assistant Secretary
</TABLE>
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Legal Counsel Custodian and Transfer Agent
VEDDER, PRICE, KAUFMAN INVESTORS FIDUCIARY TRUST
& KAMMHOLZ COMPANY
222 North LaSalle Street 127 West 10th Street
Chicago, IL 60601 Kansas City, MO 64105
Shareholder Service Agent Foreign Custodian
KEMPER SERVICE COMPANY THE CHASE MANHATTAN BANK, N.A.
P.O. Box 419557 Chase MetroTech Center
Kansas City, MO 64141 Brooklyn, NY 11245
800-621-1048
</TABLE>
Investment Manager
KEMPER FINANCIAL SERVICES, INC.
Principal Underwriter
KEMPER DISTRIBUTORS, INC.
120 South LaSalle Street
Chicago, IL 60603
(LOGO)
PRINTED ON RECYCLED PAPER
236280
This report is not to be distributed unless preceded
or accompanied by a Kemper Worldwide 2004 Fund prospectus.
KWF4-3 (2/95) Printed in the U.S.A.
