<PAGE> 1
Kemper Target Equity Fund
Kemper Worldwide 2004 Fund
Annual Report to Shareholders
For the Year Ended
June 30, 1995
Provides a guaranteed return of
investment on the designated maturity
date to investors who reinvest all
dividends and hold their shares to
the maturity date, and seeks to
provide a total return, a combination
of capital growth and income
[KEMPER LOGO]
<PAGE> 2
DEAR SHAREHOLDER:
We are pleased to provide you with an economic overview and the performance of
your fund for the year ended June 30, 1995. In addition, following the economic
overview is a question and answer interview with your fund's Portfolio Manager.
--------------------------------------------
PERFORMANCE & DIVIDEND REVIEW
<TABLE>
<CAPTION>
--------------------------------------------------------
TOTAL RETURN*
For the Year Ended June 30, 1995
(not adjusted for any sales charge)
<S> <C>
KEMPER WORLDWIDE 2004 FUND 11.91%
--------------------------------------------------------
</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.
<TABLE>
<CAPTION>
------------------------------------------------------------
DIVIDENDS PAID DURING THE
YEAR ENDED JUNE 30, 1995
INCOME DIVIDENDS
-----------------
<S> <C>
Kemper Worldwide 2004 Fund $0.12
------------------------------------------------------------
</TABLE>
GENERAL ECONOMIC OVERVIEW
Investors enjoyed generally positive performance in both the fixed-income and
equity markets in the first six months of 1995. At this midpoint in the year,
the returns of most leading securities markets are significantly higher than
they were at the same time in 1994.
But recently, several events occurred to challenge the markets:
- Early in July, the Federal Reserve Board acknowledged that economic growth had
slowed so much that a recession might now be possible. In response, the
Federal Reserve eased short-term interest rates by a small but symbolic 25
basis points. This action was significant because, since February 1994, the
Fed had been raising interest rates to slow down what was considered high
enough growth to rekindle troublesome inflation.
- Then, midway into July, the stock market took a brief tumble. After a two-day
period of anxiety, the market recovered and finished the month well ahead. But
such a sudden, severe mini-correction served to remind investors that the
current bull market will probably come to an end someday and that some sectors
may be overextended today.
- Finally, the late July release of the gross domestic product (GDP) revealed
that growth in the economy in the second quarter was almost nonexistent. The
economy has not experienced such a low real GDP change (0.5%) in four years.
Proof of the economic slowdown was good news for investors who worry about
runaway growth and its inevitable result, inflation. At the same time, we were
pleased to see economic data that suggest that certain sectors of the economy,
such as housing and foreign trade, are poised for growth in the third and
fourth quarters. These should help provide momentum and keep us clear of a
recession. In fact, we anticipate 2% to 3% real GDP growth for the next few
quarters. Nevertheless, additional action by the Federal Reserve to lower
interest rates would not surprise us.
MOST MARKETS ARE HAVING A MUCH BETTER YEAR THAN IN 1994
Data show the 1994 and 1995 six-month comparative total returns for the
domestic and international equity and U.S. and non-U.S. bond markets.
<TABLE>
<CAPTION>
U.S. Non-U.S.
U.S. International Treasury Government
Stocks(1) Stocks(2) Bonds(3) Bonds(4)
<S> <C> <C> <C> <C>
First six months of 1995 20.19% 2.76% 11.19% 20.03%
First six months of 1994 -3.38% 8.92% -4.04% 3.68%
</TABLE>
1 Standard & Poor's 500, an unmanaged index of common stocks that is generally
considered representative of the U.S. stock market.
2 Morgan Stanley Capital International EAFE Index, an unmanaged index that is
generally considered a measure of international equities in 15 major world
markets excluding the U.S. and Canada.
3 Salomon Brothers Treasury Index, including Treasury issues with a maturity of
one year or longer.
4 Salomon Brothers World Government, Non-U.S. Governments, Index, including the
performance of leading government bond markets excluding the U.S. (unmanaged).
This information is historical and does not represent future performance of
these asset classes or past or future performance of any Kemper fund. Investors
may not make direct investments in these unmanaged indices.
As we view the remainder of 1995, we believe that the opportunities for common
stock investors will be increasingly concentrated in higher quality investments.
Companies cannot necessarily count on the economy to provide above average
earnings support. Rather, stocks that have proven themselves with a pattern of
consistent earnings are likely to attract investor support. Specifically,
sectors that produce more consistent earnings, such as health care, consumer
nondurables, selected technology and selected capital goods can be
1
<PAGE> 3
expected to do well. Picking the right sectors to invest in will be the key
challenge for equity investors during the next few quarters.
In addition, we look for the fixed-income markets to continue their positive
performance, as they tend to do well during periods of slow growth and low
inflation.
Leading international economies are lagging the U.S. economy. Japan and Germany,
whose economies typically follow U.S. growth, are not as robust as in past
cycles. This phenomenon makes international investing very complex currently.
Moreover, conditions in emerging market countries underline the importance of
careful research and experience in understanding how these markets work.
Nevertheless, the same fundamentals that have driven markets higher in the U.S.
are to be found in many foreign countries currently.
Political leadership also has some bearing on the progress of the economy and
the state of the financial markets. In the months preceding a presidential
election year, it has been common for incumbents to attempt to stimulate growth.
Given our Republican Congress and Democratic President, however, we do not
consider this a foregone conclusion as we move closer to 1996.
With that as an economic backdrop, we encourage you to read the following
detailed report of your fund, including a question-and-answer interview with
your fund's portfolio manager. Thank you for your continued support. We
appreciate the opportunity to serve your investment needs.
Sincerely,
[SIG]
Stephen B. Timbers
Chief Investment and Executive Officer
July 31, 1995
[PHOTO] Stephen Timbers is Chief Executive Officer and
is also Chief Investment Officer of Kemper
Financial Services, Inc. (KFS). KFS and its
affiliates manage approximately $60 billion in
assets, including $42 billion in retail mutual
funds. Timbers is a graduate of Yale
University and holds an M.B.A. from Harvard
University.
* 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.
2
<PAGE> 4
[PHOTO OF DENNIS FERRO]
Q
&
A
AN INTERVIEW WITH PORTFOLIO
MANAGER
DENNIS FERRO
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 GLOBAL MARKETS PERFORM DURING THE FIRST HALF OF 1995?
A: The U.S. stock market rallied on strong earnings reports, declining
interest rates and dramatic leadership by the technology sector. European
markets performed well for many of the same reasons although there were a few
exceptions such as Italy. Japan continued to be plagued by fundamental
problems as the sputtering economy, fragile banking sector and strong yen all
weighed on the market. The most significant factor for the international
markets during the period was probably the surprising weakness of the dollar
against other major currencies.
Q: AT THE BEGINNING OF THE YEAR, THE FUND HAD APPROXIMATELY 39% OF ITS EQUITY
WEIGHTING IN JAPAN. HOW DID THIS EXPOSURE AFFECT THE FUND?
A: As I mentioned in the fund's last report (dated December 31, 1994)
Japan's economy appeared to have bottomed in 1994 and we had positioned the
fund to participate in its recovery. Of course the Kobe earthquake, which
occurred in January, presented an immediate setback. But what proved to be
more problematic was the strength of the yen against the dollar. This put
tremendous pressure on the pricing ability and earnings of Japanese
companies. Although we've significantly reduced the fund's Japanese position
to approximately 15% as of June 30, our exposure did affect performance.
Q: WHAT STRATEGIES HELPED THE FUND DURING THIS PERIOD?
A: We benefited from a relatively high weighting in European countries,
particularly Sweden, Switzerland and the Netherlands, which enjoyed strong
export growth. Given the dollar's weakness, our decision not to hedge the
portfolio was also beneficial.
In terms of industry exposure, telecommunications, technology and selected
financial stocks were the strongest performers. Nokia (Finland) and Ericsson
(Sweden), telecommunications companies with strong exposure throughout
Europe, continued to post impressive gains. Our defensive positions in
pharmaceutical stocks (Roche Holdings, Astra AB, and Glaxo Wellcome) have
also served us well. Going forward, however, we may trim those
positions in favor of growth stocks with a cyclical component such as
retailers.
Finally, the fund's zero-coupon bond component, which accounted for about
59% of total assets as of June 30, posted some strong gains as bond yields
declined.
Q: WHAT COUNTRIES OR REGIONS DO YOU CURRENTLY FAVOR?
A: We continue to like northern Europe, where economic expansion continues and
valuations are still reasonable. We're optimistic about the United Kingdom,
which is improving its competitiveness in the world markets. More recently
we've added to our positions in Ireland, and found some attractive
opportunities in Australia and New Zealand, which has been one of the
strongest economies in dollar terms.
As a counterbalance to our underweighted position in Japan, we've expanded
positions in Singapore, Malaysia and Hong Kong. Since these countries tend
to be sensitive to U.S. interest rates, they responded quite well to the
drop in rates that occurred during the second quarter.
We remain underweighted in Spain and Italy which are still struggling with
political and fiscal issues, and continue to underweight the emerging
markets that represent significantly higher degrees of risk.
3
<PAGE> 5
Q: THE LATIN AMERICAN MARKETS HAVE SHOWN IMPROVEMENT RECENTLY. WILL THE FUND
BE RE-ESTABLISHING A POSITION IN THIS REGION?
A: Fortunately, we had the foresight to eliminate our Latin American position
prior to the fall of the peso. Now, aside from a small position in Chile
which is self-financing and essentially independent of events in Mexico, or
the U.S. for that matter, we're still wary. We've seen some modest rallies,
but there are still political and fiscal uncertainties that concern us. At
this time our fundamental research simply doesn't support our re-entry into
those markets, at least not in the near future.
Q: WHAT IS YOUR OUTLOOK FOR THE REST OF THE YEAR?
A: In Europe, the environment is one of reasonable growth and low inflation
with little competition from the bond markets. Unemployment is gradually
abating and we anticipate increased consumer spending as inflation remains
low and strong currencies result in lower prices for imported goods. We'll
remain cautious with regard to Japan, and continue to monitor Latin America
for fundamental improvements.
Overall, we continue to see strong potential in the international markets.
Our data indicates that economic growth should outpace that of the U.S.
through the end of the decade, creating an excellent growth opportunity
for long-term investors.
4
<PAGE> 6
Average Annual Total Returns* 1
Year Life of Fund
For Periods Ended 6/30/95
(adjusted for the maximum sales
charge of 5.00%)
Kemper Worldwide 2004 Fund 6.36% 5.65% (since 5/3/94)
Past performance is not predictive of future performance. Returns and net asset
value fluctuate. Shares are redeemable at current net asset value, which may be
more or less than original cost.
CONSUMER PRICE INDEX
Dividends and Capital Gains Reinvested
<TABLE>
<CAPTION>
--------------- COST OF SHARES -------------- -------------------- VALUE OF SHARES -------------------
Annual Cumulative Total Annual From From
Cumulative Income Income Investment Cap Gain From Cap Gains Sub- Dividend Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Total Reinvested Value Held
-------- ---------- --------- --------- ---------- --------- ---------- ---------- ----- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/30/94 10,000 0 0 10,000 0 10,041 0 10,041 0 10,041 68
9/30/94 10,000 0 0 10,000 0 10,136 0 10,136 0 10,136 68
12/31/94 10,000 0 0 10,000 0 10,156 0 10,156 0 10,156 68
3/31/95 10,000 0 0 10,000 0 10,271 0 10,271 0 10,271 68
6/30/95 10,000 0 0 10,000 0 10,346 0 10,346 0 10,346 68
6/30/95 10,000 0 0 10,000 0 10,346 0 10,346 0 10,346 68
</TABLE>
KEMPER WORLDWIDE 2004 FUND
Dividends and Capital Gains Reinvested
<TABLE>
<CAPTION>
--------------- COST OF SHARES -------------- -------------------- VALUE OF SHARES -------------------
Annual Cumulative Total Annual From From
Cumulative Income Income Investment Cap Gain From Cap Gains Sub- Dividend Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Total Reinvested Value Held
-------- ---------- --------- --------- ---------- --------- ---------- ---------- ----- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/30/94 10,000 0 0 10,000 0 9,525 0 9,525 0 9,525 1,056
9/30/94 10,000 0 0 10,000 0 9,620 0 9,620 0 9,620 1,056
12/31/94 10,000 127 127 10,127 0 9,440 0 9,440 127 9,567 1,070
3/31/95 10,000 0 127 10,127 0 9,725 0 9,725 131 9,856 1,070
6/30/95 10,000 0 127 10,127 0 10,518 0 10,518 141 10,659 1,070
</TABLE>
EUROPE-AUSTRALASIA-FAR EAST INDEX+DV
Dividends and Capital Gains Reinvested
<TABLE>
<CAPTION>
--------------- COST OF SHARES -------------- -------------------- VALUE OF SHARES -------------------
Annual Cumulative Total Annual From From
Cumulative Income Income Investment Cap Gain From Cap Gains Sub- Dividend Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Total Reinvested Value Held
-------- ---------- --------- --------- ---------- --------- ---------- ---------- ----- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/30/94 10,000 0 0 10,000 0 10,087 0 10,087 0 10,087 4
9/30/94 10,000 0 0 10,000 0 10,104 0 10,104 0 10,104 4
12/31/94 10,000 0 0 10,000 0 10,008 0 10,008 0 10,008 4
3/31/95 10,000 0 0 10,000 0 10,202 0 10,202 0 10,202 4
6/30/95 10,000 0 0 10,000 0 10,284 0 10,284 0 10,284 4
</TABLE>
1 Includes reinvestment of dividends and adjustment for the maximum sales
charge of 5.00%. When comparing the Kemper Worldwide 2004 Fund to the EAFE
Index, you should also note that the fund's performance reflects the
maximum sales charge of 5.00%, while no such charges are reflected in the
performance of the index.
The special risk considerations associated with an investment in the fund,
including risks related to foreign investments are discussed in the
prospectus. Risks associated with foreign securities, including fluctuating
exchange rates, government regulations and differences in liquidity, may
affect your investment.
* Average annual total return measures net investment income and
capital gain or loss from portfolio investments, assuming reinvestment of
all dividends. Average annual total return reflects annualized change 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.
** The EAFE Index (Morgan Stanley Capital International Europe, Australia, Far
East Index) is an unmanaged index generally accepted as a bench mark
for major overseas markets. Source is Towers Data Systems.
*** The Consumer Price Index is a statistical measure of change, over time, in
the prices of goods and services in major expenditure groups for all urban
consumers. Source is Towers Data Systems.
5
<PAGE> 7
PORTFOLIO OF INVESTMENTS June 30, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Principal
Amount or
Number of
Shares Value
--------- -------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS-58.7%
---------------------------------------------------------
U.S. Treasury,
zero coupon, 2004
(Cost: $15,961) $32,500 $18,027
---------------------------------------------------------
COMMON STOCKS
CONTINENTAL EUROPE
FINLAND-1.6%
---------------------------------------------------------
Oy Nokia AB
Telecommunications company 8,560shs. 500
---------------------------------------------------------
FRANCE-1.6%
---------------------------------------------------------
Carrefour S.A.
Food retailer 500 256
---------------------------------------------------------
L'Oreal S.A.
Consumer products and services 500 126
---------------------------------------------------------
Technip S.A.
Oil company 1,900 118
---------------------------------------------------------
500
GERMANY-.9%
---------------------------------------------------------
Mannesmann AG
Construction and engineering
company 330 101
---------------------------------------------------------
Veba AG
Diversified company 450 177
---------------------------------------------------------
278
IRELAND-2.7%
---------------------------------------------------------
(a)Allied Irish Banks PLC
Banking 30,000 141
---------------------------------------------------------
Greencore Group PLC
Food producer 34,600 261
---------------------------------------------------------
Independent Newspapers Ltd.
Publisher 27,000 148
---------------------------------------------------------
Irish Life Assurance PLC
Life assurance and pension
policies 80,000 266
---------------------------------------------------------
Kerry Group PLC
Food processing 3,370 22
---------------------------------------------------------
838
ITALY-.3%
---------------------------------------------------------
Sirti SpA
Telecommunications company 9,575 71
---------------------------------------------------------
NETHERLANDS-4.6%
---------------------------------------------------------
ABN Amro Bank
Banking 3,495 135
---------------------------------------------------------
Getronics NV
Information systems 3,900 191
---------------------------------------------------------
Hagemeyer N.V.
Trading company 4,620 206
---------------------------------------------------------
Koninklijke Ahold
Food retailer and distributor 4,000 143
---------------------------------------------------------
Koninklijke PTT Netherland N.V.
Commercial services 3,689 132
---------------------------------------------------------
<CAPTION>
Number of
Shares Value
--------- -------
<S> <C> <C>
PolyGram NV
Music recording company 5,000 $ 295
---------------------------------------------------------
Wolters Kluwer
Multinational publishing
organization 3,400 300
---------------------------------------------------------
1,402
SPAIN-.9%
---------------------------------------------------------
Banco Bilbao Vizcaya
Banking 3,948 114
---------------------------------------------------------
Repsol S.A.
Oil and gas producer 4,800 151
---------------------------------------------------------
265
SWEDEN-3.7%
---------------------------------------------------------
Astra AB
Pharmaceutical company 12,500 386
---------------------------------------------------------
Atlas Copco AB
Industrial machinery manufacturer 15,000 208
---------------------------------------------------------
LM Ericsson "B"
Telecommunications equipment
manufacturer 20,400 406
---------------------------------------------------------
H & M Hennes & Mauritz AB
Retailing 2,410 141
---------------------------------------------------------
1,141
SWITZERLAND-3.2%
---------------------------------------------------------
Roche Holdings AG
Pharmaceutical company 65 419
---------------------------------------------------------
Union Bank of Switzerland
Banking 320 331
---------------------------------------------------------
Zehnder Holdings AG
Climate control equipment
manufacturer 315 230
---------------------------------------------------------
980
---------------------------------------------------------
TOTAL CONTINENTAL EUROPE-19.5% 5,975
---------------------------------------------------------
PACIFIC REGION
HONG KONG-2.3%
---------------------------------------------------------
CITIC Pacific Ltd.
Financial services 30,000 75
---------------------------------------------------------
Hong Kong Telecommunications Ltd.
Telecommunication services 87,200 173
---------------------------------------------------------
HSBC Holdings PLC
Banking 8,128 104
---------------------------------------------------------
Hutchison Whampoa Ltd.
Diversified holding company 22,000 106
---------------------------------------------------------
New World Development Co., Ltd.
Investment holding and property
investment company 37,437 125
---------------------------------------------------------
Peregrine Investment Holdings
Investment banking 93,000 132
---------------------------------------------------------
715
JAPAN-6.1%
---------------------------------------------------------
Amada Co., Ltd.
Equipment manufacturer 2,000 17
---------------------------------------------------------
</TABLE>
6
<PAGE> 8
(Dollars in thousands)
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -------
<S> <C> <C>
Bridgestone Corp.
Manufacturer of rubber related
products 5,000 $ 74
---------------------------------------------------------
Fuji Bank Ltd.
Banking 14,000 282
---------------------------------------------------------
Fujisawa Pharmaceutical
Pharmaceutical company 15,000 157
---------------------------------------------------------
Kyocera Corp.
Electronics manufacturer 2,000 165
---------------------------------------------------------
Marui Co., Ltd.
Retailer 7,000 111
---------------------------------------------------------
Nippondenso Co., Ltd.
Automotive components
manufacturer and supplier 3,000 55
---------------------------------------------------------
Omron Corp.
Electronics manufacturer 5,000 96
---------------------------------------------------------
Sanyo Shinpan Finance Co., Ltd.
Consumer finance company 400 29
---------------------------------------------------------
Seven Eleven Japan Co., Ltd.
Convenience retailer 2,000 143
---------------------------------------------------------
Sharp Corp.
Electronics manufacturer 6,000 79
---------------------------------------------------------
Sumitomo Bank Ltd.
Banking 10,000 173
---------------------------------------------------------
Sumitomo Corp.
Wholesaler 15,000 136
---------------------------------------------------------
Sumitomo Trust & Banking
Banking 10,000 121
---------------------------------------------------------
Tokyo Electron Ltd.
Electronics manufacturer 2,000 68
---------------------------------------------------------
(a)Ube Industries, Ltd.
Diversified company 50,000 174
---------------------------------------------------------
1,880
MALAYSIA-.6%
---------------------------------------------------------
Genting Berhad
Entertainment company 2,000 20
---------------------------------------------------------
Resorts World Bhd
Operator of tourist resorts 14,000 82
---------------------------------------------------------
Road Builder
Construction company 10,000 33
---------------------------------------------------------
Telekom Malaysia
Telecommunications company 6,000 46
---------------------------------------------------------
181
SINGAPORE-1.4%
---------------------------------------------------------
Fraser & Neave Ltd.
Beer and soft drink manufacturer 11,000 127
---------------------------------------------------------
Keppel Corp. Ltd.
Conglomerate holding company 14,000 114
---------------------------------------------------------
<CAPTION>
Number of
Shares Value
--------- -------
<S> <C> <C>
Singapore Press Holdings
Publisher 12,000 $ 179
---------------------------------------------------------
420
---------------------------------------------------------
TOTAL PACIFIC REGION-10.4% 3,196
---------------------------------------------------------
COMMONWEALTH COUNTRIES
AUSTRALIA-2.1%
---------------------------------------------------------
Australian and New Zealand
Banking Group Ltd.
Financial services 101,700 360
---------------------------------------------------------
Tabcorp Holdings Ltd.
Entertainment and gaming 145,200 301
---------------------------------------------------------
661
NEW ZEALAND-.7%
---------------------------------------------------------
Lion Nathan Ltd.
Beer and soft drink manufacturer 101,800 201
---------------------------------------------------------
UNITED KINGDOM-6.5%
---------------------------------------------------------
British Petroleum
Petroleum mining and production
company 35,555 255
---------------------------------------------------------
Commercial Union PLC
Holding company 9,000 84
---------------------------------------------------------
Dixons Group PLC
Electronics retailer 40,000 163
---------------------------------------------------------
Glaxo Wellcome PLC
Pharmaceutical company 30,000 368
---------------------------------------------------------
LLoyds Bank PLC
Banking 10,000 99
---------------------------------------------------------
Reed International PLC
Publisher 20,000 281
---------------------------------------------------------
(a)Telewest Communications
Communications utility 162,000 420
---------------------------------------------------------
Tesco PLC
Food retailer 40,861 189
---------------------------------------------------------
Tomkins PLC
Industrial manufacturer 40,000 143
---------------------------------------------------------
2,002
---------------------------------------------------------
TOTAL COMMONWEALTH COUNTRIES-9.3% 2,864
---------------------------------------------------------
LATIN AMERICA AND EMERGING MARKETS
CHILE-.4%
---------------------------------------------------------
(a)Provida Corporation, ADR
Financial services 4,800 129
---------------------------------------------------------
TOTAL COMMON STOCKS-39.6%
(Cost: $11,290) 12,164
---------------------------------------------------------
</TABLE>
7
<PAGE> 9
(Dollars in thousands)
<TABLE>
<CAPTION>
Principal
Amount Value
--------- -------
<S> <C> <C>
MONEY MARKET INSTRUMENTS-2.6%
Yield-6.45%
Due-July 1995
------------------------------------------------------
Enron Corp.
(Cost: $799) $ 800 $ 799
------------------------------------------------------
TOTAL INVESTMENTS-100.9%
(Cost: $28,050) 30,990
------------------------------------------------------
LIABILITIES, LESS CASH AND
OTHER ASSETS-(.9)% (291
------------------------------------------------------
NET ASSETS-100% $30,699
======================================================
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
Based on the cost of investments of $28,050,000 for federal income tax purposes
at June 30, 1995, the aggregate gross unrealized appreciation was $3,249,000,
the aggregate gross unrealized depreciation was $309,000 and the net unrealized
appreciation of investments was $2,940,000.
At June 30, 1995, the Fund's portfolio of investments had the following industry
diversification (dollars in thousands):
<TABLE>
<CAPTION>
VALUE %
------- -----
<S> <C> <C>
Financial Services $ 2,700 8.8
-------------------------------------------------------------------------------------------------------------------
Consumer Products and Services 1,489 4.9
-------------------------------------------------------------------------------------------------------------------
Chemicals, Medical Equipment and Pharmaceuticals 1,330 4.3
-------------------------------------------------------------------------------------------------------------------
Communications 1,196 3.9
-------------------------------------------------------------------------------------------------------------------
Publishing 908 3.0
-------------------------------------------------------------------------------------------------------------------
Retailing 890 2.9
-------------------------------------------------------------------------------------------------------------------
Food and Beverages 867 2.8
-------------------------------------------------------------------------------------------------------------------
Industrial Products and Services 598 1.9
-------------------------------------------------------------------------------------------------------------------
Diversified 571 1.9
-------------------------------------------------------------------------------------------------------------------
Energy Sources 524 1.7
-------------------------------------------------------------------------------------------------------------------
Utilities 420 1.4
-------------------------------------------------------------------------------------------------------------------
Electrical and Electronics 408 1.3
-------------------------------------------------------------------------------------------------------------------
Construction and Building Materials 134 .4
-------------------------------------------------------------------------------------------------------------------
Automobiles, Parts and Service 129 .4
-------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 12,164 39.6
-------------------------------------------------------------------------------------------------------------------
TOTAL U. S. GOVERNMENT OBLIGATIONS 18,027 58.7
-------------------------------------------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS 799 2.6
-------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS 30,990 100.9
-------------------------------------------------------------------------------------------------------------------
LIABILITIES, LESS CASH AND OTHER ASSETS (291) (.9)
-------------------------------------------------------------------------------------------------------------------
NET ASSETS $30,699 100.0
===================================================================================================================
</TABLE>
8
<PAGE> 10
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER TARGET EQUITY FUND--
KEMPER WORLDWIDE 2004 FUND
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Kemper Target Equity Fund--Kemper Worldwide
2004 Fund as of June 30, 1995, and the related statements of operations, changes
in net assets and the financial highlights for the year then ended and for the
period from May 3, 1994 (initial public offering) to June 30, 1994. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of June
30, 1995, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Kemper
Target Equity Fund--Kemper Worldwide 2004 Fund at June 30, 1995 and the results
of its operations, the changes in its net assets and the financial highlights
for the year then ended and for the period from May 3, 1994 to June 30, 1994 in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
August 11, 1995
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995
(in thousands)
<TABLE>
<S> <C>
ASSETS
-------------------------------------------------------
Investments, at value
(Cost: $28,050) $ 30,990
-------------------------------------------------------
Cash 93
-------------------------------------------------------
Receivable for:
Fund shares sold 88
-------------------------------------------------------
Investments sold 502
-------------------------------------------------------
Dividends and interest 49
-------------------------------------------------------
Total assets 31,722
-------------------------------------------------------
LIABILITIES AND NET ASSETS
-------------------------------------------------------
Payable for:
Fund shares redeemed 19
-------------------------------------------------------
Investments purchased 960
-------------------------------------------------------
Management fee 15
-------------------------------------------------------
Administrative services fee 6
-------------------------------------------------------
Custodian and transfer agent fees
and related expenses 16
-------------------------------------------------------
Other 7
-------------------------------------------------------
Total liabilities 1,023
-------------------------------------------------------
Net assets applicable to 3,082
shares outstanding, no par value,
equivalent to $9.96 per share $ 30,699
=======================================================
ANALYSIS OF NET ASSETS
-------------------------------------------------------
Excess of amounts received from
issuance of shares over amounts
paid on redemptions of shares
on account of capital $ 28,207
-------------------------------------------------------
Accumulated net realized loss on sales of
investments and foreign currency transactions (890)
-------------------------------------------------------
Net unrealized appreciation on investments
and assets and liabilities in foreign
currencies 2,891
-------------------------------------------------------
Undistributed net investment income 491
-------------------------------------------------------
Net assets applicable to shares outstanding $ 30,699
=======================================================
THE PRICING OF SHARES
-------------------------------------------------------
Net asset value and redemption price per share
($30,699 / 3,082 shares outstanding) $ 9.96
=======================================================
Maximum offering price per share
(net asset value, plus 5.26% of net
asset value or 5.00% of offering price) $10.48
=======================================================
</TABLE>
See accompanying Notes to Financial Statements
9
<PAGE> 11
STATEMENT OF OPERATIONS
Year ended June 30, 1995
(in thousands)
<TABLE>
<S> <C>
INVESTMENT INCOME
------------------------------------------------------
Interest $ 910
------------------------------------------------------
Dividends 175
------------------------------------------------------
1,085
EXPENSES
------------------------------------------------------
Management fee 129
------------------------------------------------------
Administrative services fee 49
------------------------------------------------------
Custodian and transfer agent fees and related
expenses 63
------------------------------------------------------
Professional fees 10
------------------------------------------------------
Reports to shareholders 10
------------------------------------------------------
Trustees' fees and other 15
------------------------------------------------------
Total expenses 276
------------------------------------------------------
Net investment income 809
------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
------------------------------------------------------
Net realized loss on sales of investments and
foreign currency transactions (916)
------------------------------------------------------
Change in net unrealized appreciation on
investments and assets and liabilities in
foreign currencies 2,964
------------------------------------------------------
Net gain on investments 2,048
------------------------------------------------------
Net increase in net assets resulting
from operations $2,857
======================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
<TABLE>
<CAPTION>
May 3, 1994
Year ended to
June 30, June 30,
1995 1994
----------- ------------
<S> <C> <C>
OPERATIONS
---------------------------------------------------------
Net investment income $ 809 12
---------------------------------------------------------
Net realized loss (916) (3)
---------------------------------------------------------
Change in net unrealized
appreciation (depreciation) 2,964 (73)
---------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations 2,857 (64)
---------------------------------------------------------
Distribution from net investment
income (301) --
---------------------------------------------------------
Net increase from capital share
transactions 22,243 5,864
---------------------------------------------------------
Total increase in net assets 24,799 5,800
---------------------------------------------------------
NET ASSETS
---------------------------------------------------------
Beginning of period 5,900 100
---------------------------------------------------------
End of period (including
undistributed net investment
income of $491 in 1995 and $9 in
1994) $30,699 5,900
=========================================================
</TABLE>
10
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE FUND
Kemper Worldwide 2004 Fund (the Fund) is a 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 Fund 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.
2. SIGNIFICANT ACCOUNTING POLICIES
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.
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 (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; it also includes original issue and market discount amortization on
long-term fixed income securities. Realized gains and losses from investment
transactions are reported on an identified cost basis. Gains and losses on
premiums from expired options are recognized on date of expiration. Realized and
unrealized gains and losses on financial futures, options and forward foreign
currency contracts are included in net realized and unrealized gain (loss) on
investments, as appropriate.
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
11
<PAGE> 13
by dividing the total value of the Fund's investments and other assets, less
liabilities, by the number of shares outstanding.
FEDERAL INCOME TAXES AND DIVIDENDS TO SHAREHOLDERS
The Fund has complied with the special provisions of the Internal Revenue Code
available to investment companies and therefore no federal income tax provision
is required. The accumulated net realized loss on sales of investments for
federal income tax purposes at June 30, 1995, amounting to approximately
$885,000, is available to offset future taxable gains. If not applied, the loss
carryover expires during the period 2003 through 2004.
Dividends payable to its shareholders are recorded by the Fund on the
ex-dividend date.
Distributions are determined in accordance with income tax principles which may
treat certain transactions differently from generally accepted accounting
principles.
3. TRANSACTIONS WITH AFFILIATES
MANAGEMENT AGREEMENT
The Trust has a management agreement with KFS and the Fund pays a management fee
at an annual rate of .60% of average daily net assets. The Fund incurred a
management fee of $129,000 for the year ended June 30, 1995.
UNDERWRITING AGREEMENT
The Trust has an underwriting agreement with Kemper Distributors, Inc. (KDI).
Before February 1, 1995, KFS was the Trust's principal underwriter. As principal
underwriter for the Fund, KDI (as successor to KFS) retained commissions of
$119,000 for the year ended June 30, 1995 after allowing $1,286,000 as
commissions to firms of which $328,000 was paid to firms affiliated with KDI.
ADMINISTRATIVE SERVICES AGREEMENT
The Trust has an administrative services agreement with KDI. Before February 1,
1995, KFS was the Trust's administrator. For providing information and
administrative services to shareholders, the Fund pays KDI a fee at an annual
rate of up to .25% of average daily net assets. KDI in turn has various
agreements with financial services firms that provide these services and pays
these firms based on assets of Fund accounts the firms service. For the year
ended June 30, 1995, the Fund incurred an administrative services fee of
$49,000, all of which KDI (as successor to KFS) paid to firms, including $14,000
that was paid to firms affiliated with KDI.
CUSTODIAN AND TRANSFER AGENT AGREEMENT
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
year ended June 30, 1995, the Fund incurred custodian and transfer agent fees of
$44,000 (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 year ended June 30, 1995, IFTC remitted
shareholder service fees of $40,000 to KSvC with respect to the Fund.
OFFICERS AND TRUSTEES
Certain officers or trustees of the Trust are also officers or directors of KFS.
During the year ended June 30, 1995, the Trust made no payments to its officers
and the Fund incurred trustees' fees of $15,000 to independent trustees.
4. INVESTMENT TRANSACTIONS
For the year ended June 30, 1995, investment transactions (excluding short-term
instruments) are as follows (dollars in thousands):
Purchases $38,806
--------------------------------------------------------------------------------
Proceeds from sales 15,437
--------------------------------------------------------------------------------
5. CAPITAL SHARE TRANSACTIONS
The following table summarizes the activity in capital shares of the Fund (in
thousands):
<TABLE>
<CAPTION>
May 3, 1994
Year ended to
June 30, 1995 June 30, 1994
---------------- ---------------
Shares Amount Shares Amount
------- ------- ------ ------
<S> <C> <C> <C> <C>
Shares sold 2,657 $24,385 645 $5,883
-----------------------------------------------------------
Shares issued in
reinvestment of
dividends 32 290 -- --
-----------------------------------------------------------
2,689 24,675 645 5,883
-----------------------------------------------------------
Less shares redeemed 261 2,432 2 19
-----------------------------------------------------------
Net increase from
capital share
transactions 2,428 $22,243 643 $5,864
===========================================================
</TABLE>
12
<PAGE> 14
6. FORWARD FOREIGN CURRENCY CONTRACTS
In order to protect itself against a decline in the value of particular foreign
currencies against the U.S. Dollar, the Fund has entered into forward contracts
to deliver foreign currency in exchange for U.S. Dollars as described below. The
Fund bears the market risk that arises from changes in foreign exchange rates,
and accordingly, the unrealized loss on these contracts is reflected in the
accompanying financial statements. The Fund also bears the credit risk if the
counterparty fails to perform under the contract. At June 30, 1995, the Fund had
outstanding forward foreign currency contracts as follows:
<TABLE>
<CAPTION>
Contract Unrealized
Foreign Currency amount in Loss
to be delivered U.S. Dollars Settlement at 6/30/95
(in thousands) (in thousands) Date (in thousands)
<S> <C> <C> <C>
----------------------------------------------------------------------------------------
759 French Francs $ 150 July 1995 $ 7
----------------------------------------------------------------------------------------
102,600 Japanese Yen 1,200 July 1995 9
----------------------------------------------------------------------------------------
924 Netherland Guilders 575 July 1995 22
----------------------------------------------------------------------------------------
328 Swiss Francs 275 July 1995 10
----------------------------------------------------------------------------------------
Net unrealized loss $ 48
----------------------------------------------------------------------------------------
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
May 3,
Year ended 1994 to
PER SHARE OPERATING PERFORMANCE: June 30, 1995 June 30, 1994
------------- -------------
<S> <C> <C>
Net asset value, beginning of period $ 9.02 9.00
-----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .27 .02
-----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain .79 --
-----------------------------------------------------------------------------------------------------------------
Total from investment operations 1.06 .02
-----------------------------------------------------------------------------------------------------------------
Less distribution from net investment income .12 --
-----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.96 9.02
-----------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%): 11.91 .22
=================================================================================================================
RATIOS TO AVERAGE NET ASSETS (%):
Expenses 1.29 1.32
-----------------------------------------------------------------------------------------------------------------
Net investment income 3.77 2.59
=================================================================================================================
SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $30,699 5,900
-----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 75 --
=================================================================================================================
</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.
13
<PAGE> 15
(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
STEPHEN B. TIMBERS JOHN E. PETERS
President and Trustee Vice President
ARTHUR R. GOTTSCHALK TRACY M. CHESTER
Trustee Vice President
FREDERICK T. KELSEY C. BETH COTNER
Trustee Vice President
DAVID B. MATHIS DENNIS H. FERRO
Trustee Vice President
JOHN B. TINGLEFF PHILIP J. COLLORA
Trustee Vice President and
Secretary
JOHN G. WEITHERS
Trustee CHARLES F. CUSTER
Vice President and
Assistant Secretary
JEROME L. DUFFY
Treasurer
ELIZABETH C. WERTH
Assistant Secretary
---------------------------------------------------------------
Legal Counsel Custodian and Transfer Agent
VEDDER, PRICE, KAUFMAN INVESTORS FIDUCIARY
& KAMMHOLZ TRUST 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
Investment Manager Independent Auditors
KEMPER FINANCIAL ERNST & YOUNG LLP
SERVICES, INC. 233 South Wacker Drive
Chicago, IL 60606
Principal Underwriter
KEMPER DISTRIBUTORS, INC.
120 South LaSalle Street
Chicago, IL 60603
</TABLE>
(LOGO)
PRINTED ON RECYCLED PAPER
241720
This report is not to be distributed unless preceded
or accompanied by a Kemper Worldwide 2004 Fund prospectus.
KWF4-2 (8/95) Printed in the U.S.A.
