<PAGE> 1
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED JULY 31, 2000
Seeks to provide 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 TARGET EQUITY FUND
KEMPER WORLDWIDE
2004 FUND
"... The broad correction in global equity markets that began in the second half
of the period posed several challenges, including persistent bouts of heightened
volatility that whipped the markets. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
10
COUNTRY CONCENTRATIONS
11
LARGEST HOLDINGS
12
PORTFOLIO OF INVESTMENTS
20
FINANCIAL STATEMENTS
23
FINANCIAL HIGHLIGHTS
24
NOTES TO FINANCIAL STATEMENTS
27
REPORT OF INDEPENDENT
AUDITORS
28
TAX INFORMATION
AT A GLANCE
TERMS TO KNOW
KEMPER WORLDWIDE 2004 FUND
TOTAL RETURN*
FOR THE YEAR ENDED JULY 31, 2000 (UNADJUSTED FOR ANY SALES CHARGE)
<TABLE>
<S> <C> <C> <C>
KEMPER WORLDWIDE 2004 FUND 9.88%
........................................................
</TABLE>
RETURNS ARE HISTORICAL AND DO NOT REPRESENT FUTURE PERFORMANCE. INVESTMENT
RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT WHEN REDEEMED, SHARES MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST.
*TOTAL RETURN MEASURES NET INVESTMENT INCOME AND CAPITAL GAIN OR LOSS FROM
PORTFOLIO INVESTMENTS, ASSUMING REINVESTMENT OF ALL DIVIDENDS. DURING THE PERIOD
NOTED, SECURITIES PRICES FLUCTUATED. FOR ADDITIONAL INFORMATION, SEE THE FUND'S
PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND THE FINANCIAL HIGHLIGHTS
TABLE AT THE END OF THIS REPORT.
NET ASSET VALUE
<TABLE>
<CAPTION>
AS OF AS OF
7/31/00 7/31/99
.........................................................
<S> <C> <C> <C> <C>
KEMPER WORLDWIDE 2004 FUND $10.19 $10.32
.........................................................
</TABLE>
DIVIDEND REVIEW
DURING THE PERIOD ENDED JULY 31, 2000, KEMPER WORLDWIDE 2004 FUND MADE THE
FOLLOWING DISTRIBUTIONS PER SHARE:
<TABLE>
<CAPTION>
INCOME SHORT-TERM LONG-TERM
DIVIDEND CAPITAL GAIN CAPITAL GAIN
..............................................................
<S> <C> <C> <C> <C> <C>
KEMPER
WORLDWIDE
2004 FUND $0.39 $0.19 $0.58
..............................................................
</TABLE>
CURRENCY WEAKNESS A significant decline of a currency's value relative to other
currencies, such as the U.S. dollar. Trading or central bank intervention (or
the lack of intervention) may prompt weakness in the currency markets. For U.S.
investors who are investing overseas, a weakness in a foreign currency can have
the effect of reducing an investment's total return because the investment,
converted back into U.S. dollars, will require more of the foreign currency to
purchase dollars.
OVERWEIGHTING/UNDERWEIGHTING The allocation of assets -- usually in terms of
sector, industry or country -- within a portfolio relative to the portfolio's
benchmark index or investment universe.
RESTRUCTURING Implementation of major corporate changes aimed at greater
efficiency and adaptation to changing markets. Cost-cutting initiatives, debt
retirement, management realignments and the sale of noncore businesses are all
developments frequently associated with corporate restructuring.
<PAGE> 3
SCUDDER KEMPER INVESTMENTS, THE INVESTMENT MANAGER FOR KEMPER FUNDS, IS ONE OF
THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS IN THE
WORLD, MANAGING MORE THAN $290 BILLION IN ASSETS FOR INSTITUTIONAL AND CORPORATE
CLIENTS, RETIREMENT AND PENSION PLANS, INSURANCE COMPANIES, MUTUAL FUND
INVESTORS AND INDIVIDUALS. SCUDDER KEMPER INVESTMENTS OFFERS A FULL RANGE OF
INVESTMENT COUNSEL AND ASSET MANAGEMENT CAPABILITIES BASED ON A COMBINATION OF
PROPRIETARY RESEARCH AND DISCIPLINED, LONG-TERM INVESTMENT STRATEGIES.
ECONOMIC OVERVIEW
DEAR KEMPER FUNDS SHAREHOLDER,
When an irresistible force such as the ebullient U.S. economy meets an immovable
object, such as a determined Federal Reserve Board, the old song is right:
Something's gotta give. One possibility -- the economy could slow down as the
Fed has ordered. Or, if market volatility becomes truly distressful, the Fed
could back off, as it has in the past. A third possibility is that neither the
Fed nor the economy will give way until it's too late, which could lead to a
recession. Recent evidence suggests, however, that the economy probably will
slow down as ordered. The Fed decided to leave rates unchanged at both its June
and August meetings, and in his testimony before Congress in late July, Fed
Chairman Alan Greenspan said he believes a slowdown has indeed arrived.
Before explaining why we agree with the Fed that a slowdown is a good bet,
let's review how monetary policy works. Central bankers often sound like witch
doctors reading animal entrails, so it's understandable that many people are
confused about monetary policy. But monetary policy still works in the same way
it always has. First, it changes the price and availability of money. More
subtly, it alters people's perceptions about and confidence in the future,
thereby adjusting their willingness to take risks.
The Fed only started raising interest rates a little over year ago, and it
takes at least that long for higher rates to impact borrowers. There are two
reasons. First, interest rates on many existing loans are fixed. And, a family
who has just selected a dream house isn't going walk away if mortgage rates rise
a notch. Similarly, a company that has just approved an expansion program won't
stop cold because the prime rate is higher. So it's foolish to think that
America's economy has become less interest-sensitive because the economy roared
through the first several months of this year. Americans are more in hock than
ever, so higher interest rates will hurt more than ever. The sharp drop in
housing starts and auto sales from their February peak is probably the first
sign that higher rates are biting. They will bite harder in coming months. We
look for both housing starts and vehicle sales to continue to drop and to be
lower in 2001 than in 2000.
Confidence is harder to measure, but there are some early flutters of
weakness. It's true that consumers remain cheerily upbeat. But corporate bond
markets, the most sensitive barometer of business confidence and a vital source
of corporate funds, have been nervous. Investors are demanding a big premium
before they'll buy lower quality bonds, which means there's less new money for
companies to spend.
So far, companies have been able to get around the bond market stinginess by
turning to their bankers. Banks lent businesses 9 percent more from January
through July of this year than they did during the first seven months of 1999.
But some banks are beginning to worry, too. Bank examiners have been questioning
the quality of loans and the level of reserves. In response, more bankers are
tightening lending standards and raising rates. This is a textbook case of how
tighter monetary policy eventually slows an economy.
Aren't bond market and banker concerns overdone? As long as the economy keeps
growing at 3 percent or so, won't that guarantee such good profits that paying
the bills will be a cinch? Not necessarily. Profits are far more cyclical than
economic growth. Earnings actually fell during 1998, even though the economy
continued to roll. That was a global crisis, when foreign earnings fell sharply.
But take a look at the last "soft landing" during 1995. Revenue growth dipped
and pricing power fell, squeezing profits. The same thing is likely to happen
again in the coming slowdown -- and this time, tight labor markets could make it
even tougher for companies to control costs quickly. Assuming growth is between
2.5 percent and 3 percent by the end of 2001, we believe year-over-year profit
comparisons will have turned slightly negative.
A profit slowdown when new lines of credit are hard to come by will take its
toll on capital spending. We expect growth in business outlays for buildings and
equipment to slip from over 12 percent this year to around 8 percent in 2001.
That's still quite robust, and the "high-tech imperative" is the reason why.
Executives believe that they have no option but to keep up with the
technological revolution that is transforming the world. The fact that high-tech
gear keeps getting cheaper year after year and also helps save on expensive
labor makes the decision to buy it easy. Indeed, unit sales of computers and
peripherals to businesses have sustained growth rates in excess of 40 percent
since 1995. And the rush is on to lay down the infrastructure for the next
generation of wireless communications. We estimate that the telecommunications
sector will see unit growth of more than 30 percent this year, double the
average growth of the past six years. It's hard even for
3
<PAGE> 4
ECONOMIC GUIDEPOSTS
ECONOMIC ACTIVITY IS A KEY INFLUENCE ON INVESTMENT PERFORMANCE AND
SHAREHOLDER DECISION-MAKING. PERIODS OF RECESSION OR BOOM, INFLATION OR
DEFLATION, CREDIT EXPANSION OR CREDIT CRUNCH HAVE A SIGNIFICANT IMPACT ON
MUTUAL FUND PERFORMANCE.
THE FOLLOWING ARE SOME SIGNIFICANT ECONOMIC GUIDEPOSTS AND THEIR
INVESTMENT RATIONALE THAT MAY HELP YOUR INVESTMENT DECISION-MAKING. THE
10-YEAR TREASURY RATE AND THE PRIME RATE ARE PREVAILING INTEREST RATES.
THE OTHER DATA REPORT YEAR-TO-YEAR PERCENTAGE CHANGES.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (8/31/00) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 5.8 6.5 5.9 5.3
Prime rate (2) 9.5 8.75 8.25 8.5
Inflation rate (3)* 3.6 2.7 2.1 1.7
The U.S. dollar (4) 5.1 2.3 -5.7 8
Capital goods orders (5)* 13.2 11.4 8.4 6.4
Industrial production (5)* 5.8 5.2 4.6 3.2
Employment growth (6) 1.9 2 2.2 2.7
</TABLE>
(1) FALLING INTEREST RATES IN RECENT YEARS HAVE BEEN A BIG PLUS FOR FINANCIAL
ASSETS.
(2) THE INTEREST RATE THAT COMMERCIAL LENDERS CHARGE THEIR BEST BORROWERS.
(3) INFLATION REDUCES AN INVESTOR'S REAL RETURN. IN THE LAST FIVE YEARS,
INFLATION HAS BEEN AS HIGH AS 6 PERCENT. THE LOW, MODERATE INFLATION OF THE
LAST FEW YEARS HAS MEANT HIGH REAL RETURNS.
(4) CHANGES IN THE EXCHANGE VALUE OF THE DOLLAR IMPACT U.S. EXPORTERS AND THE
VALUE OF U.S. FIRMS' FOREIGN PROFITS.
(5) THESE INFLUENCE CORPORATE PROFITS AND EQUITY PERFORMANCE.
(6) AN INFLUENCE ON FAMILY INCOME AND RETAIL SALES.
*DATA AS OF 7/31/00.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
ECONOMIC OVERVIEW
superstars to sustain these stratospheric compound growth rates forever, and we
do expect some moderation next year. However, high-tech orders continue to
ratchet upwards, and the shortage in semiconductors and other components has
persisted long enough to cause major players to announce huge capacity
additions.
Another battle the Fed must win before it succeeds in slowing the economy is
bringing consumers to heel. Most families still feel better off than they were
last year and much richer than they were five years ago. That's a powerful
incentive to spend and enjoy. Indeed, total real consumption has been galloping
at a 5 percent rate or better since early 1998. But consumers are so important
to the economy that if they don't start spending less freely, there won't be a
slowdown. However, there is some evidence of moderation. Retailers have been
reporting sluggish summer sales, and the back-to-school season is getting off to
a slow start. This is music to the Fed's ears, because the policymakers would
like nothing better than to sit on the sidelines until well after the
Presidential election.
So what will the slowdown look like? It will be concentrated in retail sales,
housing starts and job creation slowed (at least that's where it has surfaced so
far). However, strength in high tech orders and capital equipment production
probably will help keep the slowdown from becoming too abrupt. We expect about
3.5 percent growth in the second half. That would still produce a hearty 5
percent growth for full year 2000. During 2001, the full impact of the Fed's
earlier tightening will probably rein growth in to just 3 percent.
Sincerely,
Kemper Distributors, Inc.
THE INFORMATION CONTAINED IN THIS PIECE HAS BEEN TAKEN FROM SOURCES BELIEVED TO
BE RELIABLE, BUT THE ACCURACY OF THE INFORMATION IS NOT GUARANTEED. THE OPINIONS
AND FORECASTS EXPRESSED ARE THOSE OF THE ECONOMIC ADVISORS OF SCUDDER KEMPER
INVESTMENTS, INC. AS OF SEPTEMBER 5, 2000, AND MAY NOT ACTUALLY COME TO PASS.
THIS INFORMATION IS SUBJECT TO CHANGE. NO PART OF THIS MATERIAL IS INTENDED AS
AN INVESTMENT RECOMMENDATION.
TO OBTAIN A KEMPER FUNDS PROSPECTUS, DOWNLOAD ONE FROM WWW.KEMPER.COM, TALK TO
YOUR FINANCIAL REPRESENTATIVE OR CALL SHAREHOLDER SERVICES AT (800) 621-1048.
THE PROSPECTUS CONTAINS MORE COMPLETE INFORMATION, INCLUDING MANAGEMENT FEES AND
EXPENSES. PLEASE READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
4
<PAGE> 5
DESPITE THE ROCKY MARKET DURING THE ANNUAL PERIOD
ENDED JULY 31, 2000 -- CHARACTERIZED FIRST BY
TECH-INSPIRED EUPHORIA AND THEN BY RISING INTEREST
RATES, EXTREME VOLATILITY AND CURRENCY
WEAKNESS -- KEMPER WORLDWIDE 2004 FUND, A PORTFOLIO
COMPRISED OF HIGH-QUALITY DOMESTIC BONDS (60
PERCENT) AND INTERNATIONAL EQUITIES (40 PERCENT),
SURPASSED THE 60/40 COMBINATION OF ITS BENCHMARK
INDICES. LEAD PORTFOLIO MANAGER IRENE CHENG AND
PORTFOLIO MANAGER MARC SLENDEBROEK EXPLAIN WHY THEY
BELIEVE THAT THE GROWING EQUITY CULTURE IN EUROPE
AND JAPAN, ALONG WITH STRIDES TOWARD GOVERNMENT AND
ECONOMIC REFORMS, COULD BODE WELL FOR FUTURE FUND
PERFORMANCE.
Q HOW DID KEMPER WORLDWIDE 2004 FUND PERFORM DURING THE ANNUAL PERIOD?
A Fund performance was positive despite considerable challenges. Throughout
the period, particularly in the latter half, the developed world equity markets
struggled with the euro exchange rate, extreme volatility, fluctuating liquidity
and dramatic movement in a fairly narrow band of stocks. Nevertheless, the fund
gained 9.88 percent (unadjusted for any sales charges) for the one-year period
ended July 31, 2000. We beat our benchmark, a 60/40 combination of our two
indices, the Lehman Brothers Government/Corporate Bond index and the MSCI EAFE
index, respectively, which returned a combined 7.14 percent for the same period.
The Lehman Brothers Government/Corporate Bond index is an unmanaged index
comprising intermediate and long-term government and investment-grade corporate
debt securities, while the Morgan Stanley Capital International Europe
Australasia Far East (MSCI EAFE) is an unmanaged index generally accepted as a
benchmark for major overseas markets.
Admittedly, our enthusiasm is tempered somewhat by the fund's relative
performance as compared with its peers. While the fund performed well against
some of our most capable competitors, overall it trailed Lipper's
balanced-target-maturity funds' average annual return of 12.76 percent for the
one-year period.
Over time, our goal, of course, is to outperform both the fund's benchmark and
its peer-group averages. We remain committed to our investment strategy and
believe wholeheartedly that over the long term, our investment discipline will
provide superior returns.
Q WHAT ARE SOME OF THE MAJOR ECONOMIC TRENDS AND POLITICAL EVENTS THAT
INFLUENCED PERFORMANCE?
A Given our focus on large, blue-chip companies in the more developed
economies, it's not surprising that Europe and Japan -- and, indirectly, the
United States -- continue to dominate in terms of portfolio influence. Let's
look at each separately.
In Japan, the fund's largest single-country exposure, macroeconomic conditions
and low levels of consumer confidence continue to be problematic. Ongoing
concern about the sustainability of the country's economic recovery continues to
be a central reason behind this fragile sentiment. The majority of the fund's
Japanese holdings were issued by companies with only limited
[CHENG PHOTO]
LEAD PORTFOLIO MANAGER IRENE CHENG JOINED SCUDDER KEMPER INVESTMENTS, INC. IN
1993. PRIOR TO JOINING THE COMPANY, SHE WORKED IN MERCHANT BANKING AS AN EQUITY
ANALYST, AND IN OPERATIONS, FINANCE AND CORPORATE PLANNING. CHENG RECEIVED A
BACHELOR'S DEGREE SUMMA CUM LAUDE FROM HARVARD/RADCLIFFE COLLEGE, A MASTER'S
DEGREE FROM THE MASSACHUSETTS INSTITUTE OF TECHNOLOGY AND AN M.B.A. FROM HARVARD
BUSINESS SCHOOL.
[SLENDEBROEK PHOTO]
PORTFOLIO MANAGER MARC SLENDEBROEK JOINED THE COMPANY IN 1994. HE IS A MEMBER OF
THE FIRM'S GLOBAL EQUITY GROUP, FOCUSING ON PORTFOLIO MANAGEMENT AND RESEARCH
FOR INTERNATIONAL EQUITY ACCOUNTS. SLENDEBROEK HOLDS A MASTER'S DEGREE IN CIVIL
LAW FROM THE UNIVERSITY OF LEIDEN IN THE NETHERLANDS.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE
MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
PERFORMANCE UPDATE
5
<PAGE> 6
PERFORMANCE UPDATE
exposure or correlation to the domestic economy, such as industrial firms and
companies experiencing significant restructuring.
The Japanese market fared well for most of the first half of the period. Soon
after the new year, though, when the worldwide appetite for technology stocks
weakened, the Japanese market began to retrace some of its gains. Because the
larger Japanese tech companies were competing in the global marketplace, the
performance of their stocks tended to be highly correlated with that of their
U.S. and European counterparts. This unwinding of domestic cross-holdings also
had an effect on the supply/ demand balance in the Japanese equity market.
European markets, which have a high correlation to those of the United States,
were influenced by the continued rise of U.S. interest rates and stock market
volatility. For the first half of the period, European markets experienced an
overwhelmingly positive investment environment. Accelerating economic growth, a
strong dollar exchange rate, and healthy merger and acquisition activity helped
fuel the market during that time. However, this enthusiastic sentiment turned
around abruptly as weakness in the U.S. equity market spread and the European
Central Bank sanctioned an interest-rate hike on the heels of the same move by
the U.S. Federal Reserve. Valuations proved unsustainable during the second half
of the period, particularly among the technology, media and telecommunications
sectors (commonly referred to as the megasector TMT). And despite the increasing
evidence of solid economic recovery all over the continent, the euro exchange
rate continued its negative trend.
Q HOW MUCH OF AN IMPACT DID ACCELERATING CONSOLIDATION ACTIVITY HAVE ON FUND
PERFORMANCE?
A Throughout the past year, in both Europe and Japan, corporate
restructuring and consolidation activity thrived. Notably, the acquisition of
Mannesmann, the German wireless company, by British telecommunications giant
Vodafone was among the first hostile cross-border mergers in continental Europe.
(The combined entity, Vodafone AirTouch, is our top equity holding at 1.1
percent as of July 31, 2000.) The $130 billion deal was considered a watershed
event, and the fact that the German government did not intervene was a wake-up
call to the rest of Europe. As a result, we believe European companies are
beginning to view takeovers as a real threat and are therefore beginning to pay
more attention to their stock performance and shareholder demands.
Another example is Renault's purchase of a controlling stake in Japanese
automaker Nissan, proving that even in Japan, the corporate environment is
changing. Nissan was struggling to survive a high debt burden, and deteriorating
operating performance was leading to a crisis situation. The current
restructuring program, under Renault's direction and guidance, is leading to
numerous plant closures and huge layoffs. Until recently, such tough and painful
measures were unheard of in the Japanese corporate culture.
Q HOW SIGNIFICANTLY WERE DEVELOPED WORLD MARKETS AFFECTED BY RISING U.S.
INTEREST RATES AND STOCK MARKET VOLATILITY?
A The impact was extremely significant for a number of reasons. First, the
United States is home to the largest economy in the world, and its consumers
have been the driving force behind global and economic growth over the past few
years. Second, many companies around the globe obtain financing, at least in
part, in U.S. dollars. When interest rates rise, borrowing money becomes more
expensive, and companies must grow earnings to compensate.
Finally, rising volatility and the sharp declines of the Nasdaq during the
second half of the period dramatically influenced technology markets around the
world. These are direct consequences of the increasing globalization of capital
markets in recent years, which has been further enhanced by the relaxation of
capital-flow restrictions around the world.
Q GIVEN THIS BACKDROP, HOW DID YOU POSITION THE PORTFOLIO THROUGHOUT THE
PERIOD?
A The fund entered the period with a TMT overweight. We balanced this
exposure with substantial investments in companies at the beginning of the
supply chain, such as industrial commodity stocks and companies undergoing
significant corporate restructuring. The fund was underweight in areas where we
felt that the competitive landscape was becoming increasingly
6
<PAGE> 7
PERFORMANCE UPDATE
harsh due to the impact of the Internet and the trend toward globalization.
Examples include the financial and retail sectors.
This strategy worked particularly well in the first half of the period with
our investments in TMT. In fact, these were by and large the only sectors that
showed absolute gains during a period when investors increased their focus on
the so-called new economy. Most other, old-economy stocks, including our
investments in companies undergoing significant restructuring and corporate
change, performed below expectations.
Of course, the broad correction in global equity markets that began in the
second half of the period posed several challenges, including persistent bouts
of heightened volatility that whipped the markets. TMT stocks suffered a
particularly sharp sell-off. Unrelenting concerns about interest-rate hikes in
the United States, Europe and even Japan, combined with uncertain growth
prospects in these markets, led to a more cautious overall investment
environment. Fortunately, we had initiated the process of selective profit
taking during the beginning of the second half of the period, following some
exceptional performance from a number of our TMT selections. Some of the
proceeds were put to work in stocks outside the TMT arena, where attractive
opportunities had surfaced due to recent declines in share prices.
We continue the process of reducing our exposure to those areas where
valuations had become less fundamentally grounded, particularly in TMT. Our
actions do not reflect a view that the technological innovation is about to end,
though. We continue to commit funds to this area, but we're placing greater
emphasis on blue-chip companies where we feel growth prospects are still
undervalued. Our increased stake in telecommunications infrastructure providers
is an example of this strategy.
We also reduced our exposure to the more economically sensitive areas of our
portfolio, as it became clearer that the central banks in the United States and,
to a lesser extent, Europe are committed to slowing economic growth. This
changed the risk/reward profile of some of our more cyclical holdings. The funds
were largely redeployed to European financials. Financials, banks in particular,
had declined significantly over the past couple years as further consolidation
hopes had died down, the Internet threatened the demise of traditional banking
models and interest rates were on the rise. We suspect that this news is now
fully discounted. In addition, there has been growing evidence that the
restructuring is once again picking up pace, and quality management has been
able to define promising strategies to use the Internet to its advantage.
Q WHAT ARE SOME OF THE KEY THEMES DRIVING INTERNATIONAL INVESTING TODAY, AND
HOW WILL THESE HELP SHAPE YOUR INVESTMENT STRATEGY GOING FORWARD?
A As we enter the beginning of a new fiscal year, Kemper Worldwide 2004 Fund
maintains its fixed-income cushion with the equity portion of the portfolio
remaining a blend of growth and value stocks, diversified by both country and
sector. In line with our strategic overlay, the equity portfolio is positioned
to reflect our views that:
- U.S. economic growth will slow, resulting in a global soft landing. As
noted, we have increased our exposure to European financials and maintain an
overweight position in technology in anticipation of this trend.
- Continental European economic growth will remain strong relative to Japan
and the United Kingdom. We remain underweight in the United Kingdom, as well
as overweight in France, Germany and, to a lesser extent, Japan.
- In Japan, the pace and sustainability of economic activity are less
predictable. Although we have increased our exposure to domestically oriented
companies such as real estate and pharmaceuticals, we remain concentrated in
technology-oriented and export-oriented companies.
- Corporate restructuring will remain healthy, resulting in increased
profitability in Europe, Japan and the Pacific Basin.
- The explosion in mobile telephony, Internet and PC applications is
sustainable and will likely result in continued growth in telecommunications
infrastructure, as well as a persistent shortage of memory and selected
components. With an eye toward valuation, we have selectively increased our
exposure to well-managed companies poised to benefit from these trends.
7
<PAGE> 8
PERFORMANCE UPDATE
We see two main risks over the next 12 months. The first is a potential
relapse in U.S. capital markets, driven perhaps by the excess leverage in the
U.S. economy finally becoming unsustainable. A downward spiral in U.S. equities
and a falling dollar would clearly not bode well for international markets. The
second potential risk is a pickup in inflation, which could result in continued
higher interest rates and a hard landing for the global economy. While neither
of these outcomes is likely in our opinion, we do expect persistent volatility
to rock markets as these concerns and others continue to dominate investor
sentiment.
8
<PAGE> 9
PERFORMANCE UPDATE
AVERAGE ANNUAL TOTAL RETURNS*
FOR PERIODS ENDED JULY 31, 2000
(ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
1- 5- LIFE
YEAR YEAR OF FUND
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
KEMPER WORLDWIDE 2004 FUND 4.42% 8.13% 8.63% (since 5/3/94)
..................................................................................................
</TABLE>
KEMPER WORLDWIDE 2004 FUND
Growth of an assumed $10,000 investment
in Worldwide 2004 Fund shares from
5/31/94 to 7/31/00
[LINE GRAPH]
<TABLE>
<CAPTION>
LEHMAN BROTHERS
KEMPER WORLDWIDE 2004 GOVERNMENT/CORPORATE
FUND1 EAFE INDEX+ BOND INDEX++
--------------------- ----------- --------------------
<S> <C> <C> <C>
5/31/94 9499 10000 10000
6/30/96 11596 11750 11774
12/31/98 15208 14663 14838
7/31/00 16582 17181 15282
</TABLE>
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.
*AVERAGE ANNUAL TOTAL RETURN MEASURES
NET INVESTMENT INCOME AND CAPITAL GAIN
OR LOSS FROM PORTFOLIO INVESTMENTS,
ASSUMING REINVESTMENT OF ALL
DIVIDENDS. AVERAGE ANNUAL TOTAL RETURN
REFLECTS ANNUALIZED CHANGE. DURING THE
PERIODS NOTED, SECURITIES PRICES
FLUCTUATED. FOR ADDITIONAL
INFORMATION, SEE THE PROSPECTUS,
STATEMENT OF ADDITIONAL INFORMATION
AND THE FINANCIAL HIGHLIGHTS TABLE AT
THE END OF THIS REPORT.
(1)PERFORMANCE INCLUDES REINVESTMENT OF
DIVIDENDS AND ADJUSTMENT FOR THE
MAXIMUM SALES CHARGE OF 5.0%. WHEN
COMPARING KEMPER WORLDWIDE 2004 FUND
WITH THE EAFE INDEX+ AND THE LEHMAN
BROTHERS GOVERNMENT/ CORPORATE BOND
INDEX++ YOU SHOULD NOTE THAT THE
FUND'S PERFORMANCE REFLECTS THE
MAXIMUM SALES CHARGE, WHILE NO SUCH
CHARGES ARE REFLECTED IN THE
PERFORMANCE OF THE INDICES.
+THE EAFE INDEX (MORGAN STANLEY CAPITAL
INTERNATIONAL EUROPE, AUSTRALASIA, FAR
EAST INDEX) IS AN UNMANAGED INDEX
GENERALLY ACCEPTED AS A BENCHMARK FOR
MAJOR OVERSEAS MARKETS. SOURCE IS
WIESENBERGER(R).
++THE LEHMAN BROTHERS GOVERNMENT/
CORPORATE BOND INDEX IS AN UNMANAGED
INDEX COMPRISING INTERMEDIATE- AND
LONG-TERM GOVERNMENT AND
INVESTMENT-GRADE CORPORATE DEBT
SECURITIES. SOURCE IS WIESENBERGER(R).
9
<PAGE> 10
COUNTRY CONCENTRATIONS
THE FUND'S COMMON STOCK GEOGRAPHIC DISTRIBUTION*
Representing 41.9 percent of the fund's total common stock on July 31, 2000
[BAR GRAPH]
<TABLE>
<S> <C>
Japan 10.5
France 8.3
United Kingdom 7.0
Germany 5.1
Italy 2.4
Netherlands 1.9
Switzerland 1.4
Korea 1.1
Canada 0.8
Hong Kong 0.7
Australia 0.6
Finland 0.6
Sweden 0.6
Spain 0.4
New Zealand 0.3
Singapore 0.2
</TABLE>
*Please see pages 12 through 19 for detailed listing.
10
<PAGE> 11
LARGEST HOLDINGS
YOUR FUND'S 20 LARGEST STOCK HOLDINGS*
Representing 13.5 percent of the fund's total common stock on July 31, 2000.
<TABLE>
<CAPTION>
HOLDINGS PERCENT
<S> <C> <C>
---------------------------------------------------------------------------
VODAFONE AIRTOUCH
UNITED KINGDOM
1. 1.1%
---------------------------------------------------------------------------
E. ON AG
GERMANY
2. 1.0%
---------------------------------------------------------------------------
TOTAL FINA ELF
FRANCE
3. 1.0%
---------------------------------------------------------------------------
AVENTIS
FRANCE
4. 0.9%
---------------------------------------------------------------------------
ALCATEL
FRANCE
5. 0.8%
---------------------------------------------------------------------------
STMICROELECTRONICS
FRANCE
6. 0.7%
---------------------------------------------------------------------------
SIEMENS
GERMANY
7. 0.7%
---------------------------------------------------------------------------
REUTERS GROUP
UNITED KINGDOM
8. 0.7%
---------------------------------------------------------------------------
SHELL TRANSPORT & TRADING
UNITED KINGDOM
9. 0.6%
---------------------------------------------------------------------------
ERICSSON LM "B"
SWEDEN
10. 0.6%
---------------------------------------------------------------------------
NOKIA
FINLAND
11. 0.6%
---------------------------------------------------------------------------
BP AMOCO
UNITED KINGDOM
12. 0.6%
---------------------------------------------------------------------------
KYOCERA
JAPAN
13. 0.6%
---------------------------------------------------------------------------
NESTLE
SWITZERLAND
14. 0.6%
---------------------------------------------------------------------------
SAMSUNG ELECTRONICS
KOREA
15. 0.6%
---------------------------------------------------------------------------
NEC CORP.
JAPAN
16. 0.5%
---------------------------------------------------------------------------
RIO TINTO
UNITED KINGDOM
17. 0.5%
---------------------------------------------------------------------------
ALLIANZ
GERMANY
18. 0.5%
---------------------------------------------------------------------------
MATSUSHITA ELECTRIC INDUSTRIAL CORP.
JAPAN
19. 0.5%
---------------------------------------------------------------------------
UBS
SWITZERLAND
20. 0.4%
---------------------------------------------------------------------------
</TABLE>
*Portfolio holdings are subject to change.
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
KEMPER WORLDWIDE 2004 FUND
Portfolio of Investments as of July 31, 2000
<TABLE>
<CAPTION>
SHORT TERM INVESTMENTS--1.3% PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C> <C> <C> <C>
Chase Euro Time Deposit, 6.375%, 08/01/2000
(Cost $318,000) $ 318,000 $ 318,000
<CAPTION>
BONDS--56.8%
<S> <C> <C> <C> <C> <C> <C>
CORPORATE OBLIGATIONS--0.0%
British Aerospace PLC, 7.45%, 11/30/2003
(Producer of military aircrafts) 1,400 2,036
-------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--56.8%
U.S. Treasury Separate Trading Registered
Interest and Principal, principal only,
11/15/2004 750,000 565,808
U.S. Treasury Separate Trading Registered
Interest and Principal, principal only,
11/15/2004 17,350,000 13,273,097
-------------------------------------------------------------------------------
13,838,905
-------------------------------------------------------------------------------
TOTAL BONDS
(Cost $12,995,186) 13,840,941
-------------------------------------------------------------------------------
<CAPTION>
COMMON STOCKS--41.9% NUMBER OF SHARES
<S> <C> <C> <C> <C> <C> <C>
AUSTRALIA--0.6%
Broken Hill Proprietary Co., Ltd.
(PETROLEUM, MINERAL AND STEEL EXPLORATION
AND PRODUCTION) 6,563 69,541
WMC Ltd.
(MINERAL EXPLORATION AND PRODUCTION) 12,500 56,050
Woodside Petroleum, Ltd.
(PRODUCER OF OIL AND GAS) 3,828 28,160
-------------------------------------------------------------------------------
153,751
--------------------------------------------------------------------------------------------------------------------------
CANADA--0.8%
Canadian National Railway Co.
(RAILROAD OPERATIONS) 2,800 86,606
Nortel Networks Corp.
(SUPPLIER OF NETWORKING SOLUTIONS AND
SERVICES) 1,300 96,688
-------------------------------------------------------------------------------
183,294
--------------------------------------------------------------------------------------------------------------------------
FINLAND--0.6%
Nokia Oyj
(INTERNATIONAL TELECOMMUNICATIONS COMPANY) 3,320 147,118
-------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
FRANCE--8.3%
AXA SA
(INSURANCE GROUP PROVIDING INSURANCE,
FINANCE AND REAL ESTATE SERVICES) 675 102,602
Accor SA
(OPERATOR OF HOTELS, TRAVEL AGENCIES AND
RESTAURANTS) 500 21,318
Alcatel
(MANUFACTURER OF TELECOMMUNICATIONS
EQUIPMENT) 2,605 192,190
Aventis SA
(MANUFACTURES LIFE SCIENCE PRODUCTS) 2,975 229,138
Banque Nationale de Paris
(BANK) 1,274 125,756
Bouygues SA
(CONGLOMERATE: PUBLIC WORKS, REAL ESTATE
AND INDUSTRIAL DEVELOPMENT, ENGINEERING
SERVICES, TELEVISION AND MOTION PICTURES) 1,180 72,675
</TABLE>
12 The accompanying notes are an integral part of the financial statements.
<PAGE> 13
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE
<S> <C> <C> <C> <C> <C> <C>
Christian Dior
(MANUFACTURER OF LUXURY PRODUCTS) 1,655 $ 101,240
Credit Lyonnais SA
(PROVIDER OF DIVERSIFIED BANKING SERVICES) 2,048 88,551
Dassault Systemes SA
(COMPUTER AIDED DESIGN, MANUFACTURING AND
ENGINEERING SOFTWARE) 416 34,701
Etablissements Economiques du Casino
Guichard-Perrachon SA
(OPERATOR OF SUPERMARKETS AND CONVENIENCE
STORES) 948 63,615
Eurotunnel SA
(DESIGNER, FINANCER AND CONSTRUCTOR OF A
TUNNEL THAT RUNS UNDER THE ENGLISH CHANNEL
AND CONNECTS ENGLAND TO FRANCE) 78,547 79,353
Lagardere S.C.A.
(HOLDING COMPANY WITH INTERESTS IN
PUBLISHING, DEFENSE, AUDIOVISUAL
PRODUCTION AND SERVICES,
TELECOMMUNICATIONS AND MEDIA) 846 54,770
Pinault-Printemps-Redoute SA
(OPERATOR OF DEPARTMENT STORES) 457 94,965
Rhodia SA
(DRUG MANUFACTURER AND CHEMICALS
SPECIALIST) 5,383 81,075
STMicroelectronics NV
(MANUFACTURER OF SEMICONDUCTOR INTEGRATED
CIRCUITS) 2,808 159,799
Schneider Electric SA
(MANUFACTURER OF ELECTRONIC COMPONENTS AND
AUTOMATED MANUFACTURING SYSTEMS) 845 57,682
Societe BIC SA
(MANUFACTURER OF OFFICE SUPPLIES) 1,826 94,776
Suez Lyonnaise des Eaux SA
(WATER AND ELECTRIC UTILITY) 757 123,837
Total Fina ELF SA "B"
(EXPLORER, DEVELOPER, PRODUCER,
TRANSPORTER AND MARKETER OF OIL AND
NATURAL GAS) 1,651 244,684
-------------------------------------------------------------------------------
2,022,727
--------------------------------------------------------------------------------------------------------------------------
GERMANY--5.1%
Allianz AG
(MULTI-LINE INSURANCE COMPANY) 342 128,378
Bayer AG
(CHEMICAL PRODUCER) 2,341 98,073
Celanese AG*
(MANUFACTURER AND DISTRIBUTOR OF
INDUSTRIAL CHEMICALS) 272 4,462
Commerzbank AG*
(PROVIDER OF BANKING SERVICES) 1,175 41,711
Deutsche Telekom AG*
(TELECOMMUNICATION SERVICES) 795 34,919
Dresdner Bank AG
(PROVIDER OF BANKING SERVICES) 1,394 64,343
E.On AG
(ELECTRIC UTILITY, DISTRIBUTOR OF OIL AND
CHEMICALS) 4,471 251,745
ERGO Versicherungs Gruppe AG
(INSURANCE PROVIDER) 437 48,402
Epcos AG*
(PRODUCER OF ELECTRONIC COMPONENTS AND
INTEGRATED CIRCUITS) 719 65,174
HypoVereinsbank AG
(BANK) 1,734 102,376
</TABLE>
The accompanying notes are an integral part of the financial statements. 13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE
<S> <C> <C> <C> <C> <C> <C>
Metro AG
(OPERATOR OF BUILDING, CLOTHING,
DEPARTMENT, ELECTRONIC AND FOOD STORES) 1,300 $ 53,980
Muenchener Rueckversicherungs-Gesellschaft
AG
(REGISTERED) (INSURANCE COMPANY) 358 118,457
SAP AG
(MANUFACTURER OF COMPUTER SOFTWARE) 273 61,233
Siemens AG
(ELECTRICAL ENGINEERING AND ELECTRONICS
COMPANY) 1,070 166,611
-------------------------------------------------------------------------------
1,239,864
--------------------------------------------------------------------------------------------------------------------------
HONG KONG--0.7%
China Telecom Ltd.*
(PROVIDER OF CELLULAR TELECOMMUNICATION
SERVICES) 8,000 63,602
Hutchison Whampoa, Ltd.
(DIVERSIFIED INVESTMENT HOLDING COMPANY) 5,400 75,129
Legend Holdings Ltd.
(MANUFACTURER OF COMPUTERS AND RELATED
PRODUCTS) 24,000 27,082
Li & Fung Ltd.
(EXPORTER OF CONSUMER PRODUCTS) 2,000 9,951
-------------------------------------------------------------------------------
175,764
--------------------------------------------------------------------------------------------------------------------------
ITALY--2.4%
Alleanza Assicurazioni SpA
(LIFE INSURANCE COMPANY) 3,100 38,645
Assicurazioni Generali SpA
(MULTI-LINE INSURANCE AND FINANCIAL
SERVICES COMPANY) 3,500 115,486
Banco Intesa SpA
(BANK) 19,546 86,233
Holding di Partecipazioni Industraili SpA
(HOLDING COMPANY) 20,600 26,711
Mediobanca SpA
(PROVIDER OF LOANS AND CREDIT TO
MANUFACTURING AND SERVICE FIRMS) 11,500 113,516
Riunione Adriatica di Sicurta SpA
(INSURANCE COMPANY) 5,900 66,715
San Paolo - IMI SpA
(PERSONAL, INVESTMENT AND COMMERCIAL
BANKING) 5,100 86,503
Seat Pagine Gialle SpA
(PUBLISHER OF TELECOMMUNICATIONS
DIRECTORIES) 12,300 42,865
Seat Pagine Gialle SpA--RNC
(PUBLISHER OF TELECOMMUNICATION
DIRECTORIES) 4,800 11,834
-------------------------------------------------------------------------------
588,508
--------------------------------------------------------------------------------------------------------------------------
JAPAN--10.5%
Advantest Corp.
(PRODUCER OF MEASURING INSTRUMENTS AND
SEMICONDUCTOR TESTING DEVICES) 300 50,101
Benesse Corp.
(PROVIDER OF EDUCATIONAL SERVICES) 1,000 50,274
Chugai Pharmaceutical Co., Ltd.
(PHARMACEUTICAL COMPANY) 5,000 91,088
DDI Corp.
(PROVIDER OF TELECOMMUNICATION SERVICES) 4 31,079
Daiwa Securities Group, Inc.
(PROVIDER OF BROKERAGE AND OTHER FINANCIAL
SERVICES) 5,000 54,570
East Japan Railway Co.
(RAILROAD OPERATIONS) 16 93,163
</TABLE>
14 The accompanying notes are an integral part of the financial statements.
<PAGE> 15
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE
<S> <C> <C> <C> <C> <C> <C>
Fuji Bank, Ltd.
(PROVIDER OF COMMERCIAL BANKING SERVICES) 12,000 $ 77,660
Fujisawa Pharmaceutical Co.
(MANUFACTURER AND MARKETER OF ANTIBIOTICS) 1,000 33,729
Fujitsu, Ltd.
(MANUFACTURER OF COMPUTERS) 4,000 112,614
Kyocera Corp.
(MANUFACTURER OF CERAMIC PACKAGING) 1,000 143,784
Matsushita Electric Industrial Co., Ltd.
(MANUFACTURER OF CONSUMER ELECTRONIC
PRODUCTS) 5,000 127,742
Mitsubishi Estate Co., Ltd.
(REAL ESTATE COMPANY) 6,000 59,726
Mitsui Fudosan Co., Ltd.
(REAL ESTATE COMPANY) 7,000 68,144
Murata Manufacturing Co., Ltd.
(MANUFACTURER OF CERAMIC APPLIED
ELECTRONIC COMPUTERS) 1,000 118,830
NEC Corp.
(MANUFACTURER OF TELECOMMUNICATION AND
COMPUTER EQUIPMENT) 5,000 133,455
NTT Mobile Communications Network, Inc.
(PROVIDER OF VARIOUS TELECOMMUNICATION
SERVICES AND EQUIPMENT) 4 100,548
Nikko Securities Co., Ltd.
(SECURITIES BROKER AND DEALER) 7,000 53,684
Nintendo Co., Ltd.
(MANUFACTURER OF GAME EQUIPMENT) 500 82,176
Nippon Telegraph & Telephone Corp.
(PROVIDER OF TELECOMMUNICATION SERVICES) 5 59,872
Nissan Motor Co., Ltd.
(MANUFACTURER OF MOTOR VEHICLES) 11,000 55,000
Nomura Securities Co., Ltd.
(FINANCIAL ADVISOR, SECURITIES BROKER AND
UNDERWRITER) 5,000 98,035
Ricoh Co., Ltd.
(MANUFACTURER OF COPIERS AND INFORMATION
EQUIPMENT) 3,000 53,254
Sakura Bank, Ltd.
(PROVIDER OF BANKING SERVICES) 16,000 92,870
Sankyo Co., Ltd.
(LEADING ETHICAL DRUG PRODUCER) 4,000 93,967
Sanyo Electric Co., Ltd.
(MANUFACTURER OF CONSUMER ELECTRONICS) 6,000 44,260
Softbank Corp.
(PROVIDER OF ELECTRONIC COMMERCE, SOFTWARE
AND PERIPHERAL HARDWARE EQUIPMENT) 200 16,728
Sony Corp.
(MANUFACTURER OF CONSUMER AND INDUSTRIAL
ELECTRONIC EQUIPMENT) 1,100 101,252
Sumitomo Electric Industries, Ltd.
(MANUFACTURER OF ELECTRIC WIRES AND
CABLES) 3,000 48,647
TDK Corp.
(MANUFACTURER OF MAGNETIC TAPES AND FLOPPY
DISCS) 900 112,706
Tokyo Electron Ltd.
(MANUFACTURER OF SEMICONDUCTOR PRODUCTION
EQUIPMENT) 1,000 108,318
</TABLE>
The accompanying notes are an integral part of the financial statements. 15
<PAGE> 16
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE
<S> <C> <C> <C> <C> <C> <C>
Toshiba Corp.
(MANUFACTURER OF ELECTRIC MACHINERY) 12,000 $ 105,850
Yamanouchi Pharmaceutical Co., Ltd.
(MANUFACTURES AND MARKETS A WIDE VARIETY
OF PHARMACEUTICALS) 2,000 93,967
-------------------------------------------------------------------------------
2,567,093
--------------------------------------------------------------------------------------------------------------------------
KOREA--1.1%
SK Telecom Co., Ltd.
(PROVIDER OF MOBILE TELECOMMUNICATIONS
SERVICES) 500 124,468
Samsung Electronics Co.
(ELECTRONICS MANUFACTURER) 520 137,363
-------------------------------------------------------------------------------
261,831
--------------------------------------------------------------------------------------------------------------------------
NETHERLANDS--1.9%
ABN AMRO Holding NV
(DIVERSIFIED FINANCIAL SERVICES) 4,500 109,234
Akzo Nobel NV
(PRODUCER AND MARKETER OF HEALTHCARE
PRODUCTS, COATINGS, CHEMICALS AND FIBERS) 1,030 45,814
Equant NV*
(PROVIDER OF INTERNATIONAL DATA NETWORK
SERVICES) 1,400 49,334
Gucci Group NV (New York Shares)
(DESIGNER AND PRODUCER OF PERSONAL LUXURY
ACCESSORIES AND APPAREL) 800 76,550
Koninklinjke Kpn NV*
(PROVIDER OF TELECOMMUNICATIONS SERVICES) 2,720 98,345
Laurus NV
(INTERNATIONAL FOOD RETAILER) 2,170 24,437
VNU NV
(INTERNATIONAL PUBLISHING COMPANY) 1,000 54,684
-------------------------------------------------------------------------------
458,398
--------------------------------------------------------------------------------------------------------------------------
NEW ZEALAND--0.3%
ASM Lithography Holding NV*
(DEVELOPER, MANUFACTURER AND MARKETER OF
PHOTOLITHOGRAPHY PROJECTIONS SYSTEMS) 1,590 61,527
-------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
SINGAPORE--0.2%
Chartered Semiconductor (ADR)*
(PROVIDER OF WAFER FABRICATION SERVICES TO
SEMICONDUCTOR SUPPLIERS) 500 36,000
-------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
SPAIN--0.4%
Telefonica SA
(PROVIDER OF TELECOMMUNICATION SERVICES) 4,405 92,679
-------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
SWEDEN--0.6%
Ericsson LM "B"
(PRODUCER OF ADVANCED SYSTEMS AND PRODUCTS
FOR WIRED AND MOBILE COMMUNICATIONS) 7,600 148,546
-------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
SWITZERLAND--1.4%
Nestle SA (Registered)*
(FOOD MANUFACTURER) 68 141,646
Roche Holding AG
(DEVELOPS AND MANUFACTURES PHARMACEUTICAL
AND CHEMICAL PRODUCTS) 7 65,756
</TABLE>
16 The accompanying notes are an integral part of the financial statements.
<PAGE> 17
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE
<S> <C> <C> <C> <C> <C> <C>
Schweizerische
Rueckversicherungs-Gesellschaft AG
(REGISTERED)
(LIFE, ACCIDENT AND HEALTH INSURANCE
COMPANY) 26 $ 54,595
UBS AG (Registered)
(PROVIDER OF BANKING AND ASSET MANAGEMENT
SERVICES) 594 85,584
-------------------------------------------------------------------------------
347,581
--------------------------------------------------------------------------------------------------------------------------
TAIWAN--0.0%
GigaMedia Ltd.*
(PROVIDER OF BROADBAND INTERNET ACCESS
SERVICES AND CONTENT) 900 6,525
-------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM--7.0%
ARM Holdings plc*
(DESIGNER OF RISC MICROPROCESSORS AND
RELATED TECHNOLOGY) 2,800 31,758
BAE SYSTEMS plc
(PRODUCER OF MILITARY AIRCRAFT) 12,985 87,608
BOC Group plc
(DIVERSIFIED CHEMICAL COMPANY) 4,130 61,302
BP Amoco plc
(INTEGRATED WORLD OIL COMPANY) 16,493 144,411
Billiton plc
(RESOURCE GROUP THAT EXPLORES, PRODUCES
AND MARKETS ALUMINUM AND OTHER METAL
PRODUCTS) 9,081 34,580
British Airways plc
(PROVIDER OF PASSENGER AND CARGO AIRLINE
SERVICES) 9,113 51,442
Cable and Wireless plc
(INTERNATIONAL TELECOMMUNICATION SERVICES
IN THE UNITED KINGDOM AND HONG KONG) 4,793 83,503
Diageo plc
(PRODUCER AND DISTRIBUTOR OF FOOD
PRODUCTS, BEER AND LIQUOR; OWNER OF FAST
FOOD RESTAURANTS) 9,200 80,830
Glaxo Wellcome plc
(PHARMACEUTICAL COMPANY) 1,726 49,737
Granada Media plc*
(PRODUCER OF TV PROGRAMS, FEATURE FILMS
AND MADE FOR TV MOVIES) 3,400 31,809
Prudential Corp. plc
(PROVIDER OF A BROAD RANGE OF FINANCIAL
SERVICES) 6,041 82,512
Reed International plc
(PUBLISHER OF SCIENTIFIC, PROFESSIONAL AND
BUSINESS TO BUSINESS MATERIALS) 14,489 115,894
Rentokil Initial plc
(ENVIRONMENTAL SERVICES COMPANY) 20,206 45,367
Reuters Group plc
(INTERNATIONAL NEWS AND INFORMATION
AGENCY) 8,281 158,797
Rio Tinto plc
(MINING COMPANY) 8,244 132,502
Shell Transport & Trading plc
(PETROLEUM COMPANY) 18,800 151,081
SmithKline Beecham plc
(MANUFACTURER OF ETHICAL DRUGS AND
HEALTHCARE PRODUCTS) 3,884 50,080
</TABLE>
The accompanying notes are an integral part of the financial statements. 17
<PAGE> 18
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE
<S> <C> <C> <C> <C> <C> <C>
Standard Chartered plc
(INTERNATIONAL BANKING GROUP) 4,067 $ 57,501
Vodafone AirTouch plc
(PROVIDER OF MOBILE TELECOMMUNICATION
SERVICES) 59,514 263,227
-------------------------------------------------------------------------------
1,713,941
-------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $9,054,349) 10,205,147
-------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100.0%
(Cost $22,367,535)(a) $24,364,088
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
* Non-income producing securities.
(a) The cost for federal income tax purposes was $22,384,523. At July 31, 2000,
net unrealized appreciation for all securities based on tax cost was
$1,979,565. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost of
$2,641,273, and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over market value of $661,708.
18 The accompanying notes are an integral part of the financial statements.
<PAGE> 19
PORTFOLIO OF INVESTMENTS
At July 31, 2000, the Fund's portfolio of investments had the following industry
diversification:
<TABLE>
<CAPTION>
VALUE $ PERCENT
--------------------------------------------------------------------------------------
<S> <C> <C>
Financial $ 2,258,451 9.3%
--------------------------------------------------------------------------------------
Technology 1,540,594 6.3%
--------------------------------------------------------------------------------------
Communications 1,344,594 5.5%
--------------------------------------------------------------------------------------
Manufacturing 1,240,348 5.1%
--------------------------------------------------------------------------------------
Energy 568,336 2.3%
--------------------------------------------------------------------------------------
Consumer Staples 532,590 2.2%
--------------------------------------------------------------------------------------
Health 478,324 2.0%
--------------------------------------------------------------------------------------
Service Industries 486,240 2.0%
--------------------------------------------------------------------------------------
Consumer Discretionary 353,679 1.5%
--------------------------------------------------------------------------------------
Utilities 375,582 1.5%
--------------------------------------------------------------------------------------
Metals & Minerals 292,673 1.2%
--------------------------------------------------------------------------------------
Durables 247,190 1.0%
--------------------------------------------------------------------------------------
Transportation 231,211 1.0%
--------------------------------------------------------------------------------------
Construction 152,028 0.6%
--------------------------------------------------------------------------------------
Media 103,307 0.4%
--------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 10,205,147 41.9%
--------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS 13,840,941 56.8%
--------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS 318,000 1.3%
--------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO $24,364,088 100.0%
--------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 19
<PAGE> 20
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
As of July 31, 2000
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $22,367,535) $24,364,088
---------------------------------------------------------------------------
Cash 624
---------------------------------------------------------------------------
Receivable for investments sold 43,076
---------------------------------------------------------------------------
Dividends receivable 5,671
---------------------------------------------------------------------------
Interest receivable 161
---------------------------------------------------------------------------
Foreign taxes recoverable 16,858
---------------------------------------------------------------------------
Other assets 6,941
---------------------------------------------------------------------------
TOTAL ASSETS 24,437,419
---------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased 15,087
---------------------------------------------------------------------------
Payable for Fund shares redeemed 6,114
---------------------------------------------------------------------------
Accrued management fee 12,733
---------------------------------------------------------------------------
Other accrued expenses and payables 56,263
---------------------------------------------------------------------------
Total liabilities 90,197
---------------------------------------------------------------------------
NET ASSETS, AT VALUE $24,347,222
---------------------------------------------------------------------------
NET ASSETS
Net assets consist of:
Undistributed net investment income $ 532,848
---------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on:
Investments 1,996,553
---------------------------------------------------------------------------
Foreign currency related transactions (872)
---------------------------------------------------------------------------
Accumulated net realized gain (loss) 1,775,838
---------------------------------------------------------------------------
Paid-in-capital 20,042,855
---------------------------------------------------------------------------
NET ASSETS, AT VALUE $24,347,222
---------------------------------------------------------------------------
NET ASSET VALUE
Net asset value and redemption price per share ($24,347,222
/ 2,388,175 outstanding shares of beneficial interest, $.01
par value, unlimited number of shares authorized) $10.19
---------------------------------------------------------------------------
</TABLE>
20 The accompanying notes are an integral part of the financial statements.
<PAGE> 21
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Year ended July 31, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $8,446) $ 212,512
--------------------------------------------------------------------------
Interest 1,105,088
--------------------------------------------------------------------------
Total Income 1,317,600
--------------------------------------------------------------------------
Expenses:
Management fee 160,883
--------------------------------------------------------------------------
Services to shareholders 54,620
--------------------------------------------------------------------------
Custodian fees 43,507
--------------------------------------------------------------------------
Administrative services fees 66,653
--------------------------------------------------------------------------
Auditing 12,503
--------------------------------------------------------------------------
Legal 2,524
--------------------------------------------------------------------------
Trustees' fees and expenses 12,695
--------------------------------------------------------------------------
Reports to shareholders 25,637
--------------------------------------------------------------------------
Other 11,515
--------------------------------------------------------------------------
Total expenses, before expense reductions 390,537
--------------------------------------------------------------------------
Expense reductions (2,753)
--------------------------------------------------------------------------
Total expenses, after expense reductions 387,784
--------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 929,816
--------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments 2,069,917
--------------------------------------------------------------------------
Foreign currency related transactions 420
--------------------------------------------------------------------------
2,070,337
--------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
on:
Investments (373,014)
--------------------------------------------------------------------------
Foreign currency related transactions (872)
--------------------------------------------------------------------------
(373,886)
--------------------------------------------------------------------------
Net gain (loss) on investment transactions 1,696,451
--------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $2,626,267
--------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 21
<PAGE> 22
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31, 2000 JULY 31, 1999
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $ 929,816 994,171
------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions 2,070,337 2,007,628
------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
transactions during the period (373,886) (2,703,119)
------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 2,626,267 298,680
------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (950,433) (1,119,736)
------------------------------------------------------------------------------------------------------
Net realized gains (1,876,497) (3,091,020)
------------------------------------------------------------------------------------------------------
Fund share transactions:
Reinvestment of distributions 2,692,128 4,216,049
------------------------------------------------------------------------------------------------------
Cost of shares redeemed (5,954,063) (5,563,644)
------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions (3,261,935) (1,347,595)
------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (3,462,598) (5,259,671)
------------------------------------------------------------------------------------------------------
Net assets at beginning of period 27,809,820 33,069,491
------------------------------------------------------------------------------------------------------
NET ASSETS AT END OF PERIOD (including undistributed net
investment income of $532,848 and $554,464, respectively) $24,347,222 $27,809,820
------------------------------------------------------------------------------------------------------
OTHER INFORMATION
Shares outstanding at beginning of period 2,694,309 2,809,229
------------------------------------------------------------------------------------------------------
Shares issued to shareholders in reinvestment of
distributions 278,131 408,007
------------------------------------------------------------------------------------------------------
Shares redeemed (584,265) (522,927)
------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund Shares (306,134) (114,920)
------------------------------------------------------------------------------------------------------
Shares outstanding at end of period 2,388,175 2,694,309
------------------------------------------------------------------------------------------------------
</TABLE>
22 The accompanying notes are an integral part of the financial statements.
<PAGE> 23
FINANCIAL HIGHLIGHTS
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
FOR THE
ONE MONTH ENDED YEAR ENDED
YEAR ENDED JULY 31, JULY 31, JUNE 30,
------------------------ --------------- -------------
2000 1999 1998 1997 1997 1996
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $10.32 11.77 11.60 11.13 10.60 9.96
--------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) 0.36(a) .35(a) .42 .03 .42 .36
--------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment
transactions 0.67 (.22) .77 .44 .71 .63
--------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.03 .13 1.19 .47 1.13 .99
--------------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (0.39) (.42) (.49) -- (.44) (.35)
--------------------------------------------------------------------------------------------------------------------
Net realized gains on investment transactions (0.77) (1.16) (.53) -- (.16) --
--------------------------------------------------------------------------------------------------------------------
Total distributions (1.16) (1.58) (1.02) -- (.60) (.35)
--------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.19 10.32 11.77 11.60 11.13 10.60
--------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%)(B) 9.88 1.12 11.17 4.22** 11.08 10.05
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) $ 24 28 33 36 35 38
--------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.46 1.30 1.19 1.19* 1.19 1.32
--------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.45 1.30 1.19 1.19* 1.19 1.32
--------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) 3.49 3.28 3.49 3.20* 3.63 3.60
--------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 31 62 27 30* 25 50
--------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total return does not reflect the effect of any sales charges.
* Annualized
** Not annualized
The accompanying notes are an integral part of the financial statements. 23
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1 SIGNIFICANT
ACCOUNTING POLICIES Kemper Worldwide 2004 Fund (the "Fund") is a
diversified series of Kemper Target Equity Fund
(the "Trust") which is registered under the
Investment Company Act of 1940, as amended (the
"1940 Act"), as an open-end management investment
company organized as a Massachusetts business
trust. 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 a total return, a combination
of capital growth and income.
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. This assurance
is further backed by an agreement entered into by
Scudder Kemper Investments, Inc., the Fund's
investment manager. Fund shares are sold during a
limited offering period, and are redeemable on a
continuous basis.
The Fund's financial statements are prepared in
accordance with accounting principles generally
accepted in the United States which require the use
of management estimates. The policies described
below are followed consistently by the Fund in the
preparation of its financial statements.
SECURITY VALUATION. Investments are stated at value
determined as of the close of regular trading on
the New York Stock Exchange. Securities which are
traded on U.S. or foreign stock exchanges are
valued at the most recent sale price reported on
the exchange on which the security is traded most
extensively. If no sale occurred, the security is
then valued at the calculated mean between the most
recent bid and asked quotations. If there are no
such bid and asked quotations, the most recent bid
quotation is used. Securities quoted on the Nasdaq
Stock Market ("Nasdaq"), for which there have been
sales, are valued at the most recent sale price
reported. If there are no such sales, the value is
the most recent bid quotation. Securities which are
not quoted on Nasdaq but are traded in another
over-the-counter market are valued at the most
recent sale price, or if no sale occurred, at the
calculated mean between the most recent bid and
asked quotations on such market. If there are no
such bid and asked quotations, the most recent bid
quotation shall be used.
Portfolio debt securities purchased with an
original maturity greater than sixty days are
valued by pricing agents approved by the officers
of the Trust, whose quotations reflect
broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents
are unable to provide such quotations, the most
recent bid quotation supplied by a bona fide market
maker shall be used. Money market instruments
purchased with an original maturity of sixty days
or less are valued at amortized cost.
All other securities are valued at their fair value
as determined in good faith by the Valuation
Committee of the Board of Trustees.
FOREIGN CURRENCY TRANSLATIONS. The books and
records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and
liabilities denominated in a foreign currency are
translated into U.S. dollars at the prevailing
exchange rates at period end. Purchases and sales
of investment securities,
24
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS
income and expenses are translated into U.S.
dollars at the prevailing exchange rates on the
respective dates of the transactions.
Net realized and unrealized gains and losses on
foreign currency transactions represent net gains
and losses between trade and settlement dates on
securities transactions, the disposition of forward
foreign currency exchange contracts and foreign
currencies, and the difference between the amount
of net investment income accrued and the U.S.
dollar amount actually received. That portion of
both realized and unrealized gains and losses on
investments that results from fluctuations in
foreign currency exchange rates is not separately
disclosed but is included with net realized and
unrealized gains and losses on investment
securities.
REPURCHASE AGREEMENTS. The Fund may enter into
repurchase agreements with certain banks and
broker/dealers whereby the Fund, through its
custodian or sub-custodian bank, receives delivery
of the underlying securities, the amount of which
at the time of purchase and each subsequent
business day is required to be maintained at such a
level that the market value is equal to at least
the principal amount of the repurchase price plus
accrued interest.
FEDERAL INCOME TAXES. The Fund's policy is to
comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to
regulated investment companies and to distribute
all of its taxable income to its shareholders.
Accordingly, the Fund paid no federal income taxes
and no federal income tax provision was required.
DISTRIBUTION OF INCOME AND GAINS. Distributions of
net investment income, if any, are made annually.
Net realized gains from investment transactions, in
excess of available capital loss carryforwards,
would be taxable to the Fund if not distributed,
and, therefore, will be distributed to shareholders
at least annually.
The timing and characterization of certain income
and capital gains distributions are determined
annually in accordance with federal tax regulations
which may differ from generally accepted accounting
principles. These differences relate primarily to
certain securities sold at a loss. As a result, net
investment income (loss) and net realized gain
(loss) on investment transactions for a reporting
period may differ significantly from distributions
during such period. Accordingly, the Fund may
periodically make reclassifications among certain
of its capital accounts without impacting the net
asset value of the Fund.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date. Interest income is recorded on
the accrual basis. Dividend income is recorded on
the ex-dividend date. Certain dividends from
foreign securities may be recorded subsequent to
the ex-dividend date as soon as the Fund is
informed of such dividends. Realized gains and
losses from investment transactions are recorded on
an identified cost basis.
Original issue discounts are accreted for both tax
and financial reporting purposes.
EXPENSES. Expenses arising in connection with a
specific Fund are allocated to that Fund. Other
Trust expenses are allocated between the Funds in
proportion to their relative net assets.
25
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
2 PURCHASES & SALES
OF SECURITIES For the year ended July 31, 2000, investment
transactions (excluding short-term instruments) are
as follows:
Purchases $ 8,071,844
Proceeds from sales 14,779,000
--------------------------------------------------------------------------------
3 TRANSACTIONS
WITH AFFILIATES MANAGEMENT AGREEMENT. The Fund has a management
agreement with Scudder Kemper Investments, Inc.
(Scudder Kemper). The Fund pays a monthly
investment management fee of 1/12 of the annual
rate of .60% of average daily net assets. The Fund
incurred a management fee of $160,883 for the year
ended July 31, 2000. In addition, during the year
ended July 31, 2000, the Adviser reimbursed the
Fund $81,190 for losses incurred in connection with
certain portfolio transactions.
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with Kemper
Distributors, Inc. (KDI). 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 provided these services and pays these firms
based on assets of fund accounts the firms service.
Administrative services fees incurred by the Fund
for the year ended July 31, 2000 are $66,653 of
which $16,914 is unpaid at July 31, 2000.
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
Kemper Service Company (KSvC) is the shareholder
service agent of the Fund. Under the agreement,
KSvC incurred shareholder services fees of $40,432
for the year ended July 31, 2000, of which $8,472
is unpaid at July 31, 2000.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. For the year ended July 31, 2000,
the Fund made no payments to its officers and
incurred trustees' fees of $12,695 to independent
trustees.
--------------------------------------------------------------------------------
4 EXPENSE OFF-SET
ARRANGEMENTS The Fund has entered into arrangements with its
custodian and transfer agent whereby credits
realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's
expenses. During the year ended July 31, 2000, the
Fund's custodian and transfer agent fees were
reduced by $784 and $1,969, respectively, under
these arrangements.
--------------------------------------------------------------------------------
5 LINE OF CREDIT The Fund and several Kemper funds (the
"Participants") share in a $750 million revolving
credit facility with Chase Manhattan Bank for
temporary or emergency purposes, including the
meeting of redemption requests that otherwise might
require the untimely disposition of securities. The
Participants are charged an annual commitment fee
that is allocated, pro rata based upon net assets,
among each of the Participants. Interest is
calculated based on the market rates at the time of
the borrowing. The Fund may borrow up to a maximum
of 33 percent of its assets under the agreement.
26
<PAGE> 27
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER WORLDWIDE 2004 FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper Worldwide 2004 Fund as of July
31, 2000, and the related statements of operations for the year then ended, and
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the fiscal periods since 1996. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of investments
owned as of July 31, 2000, by correspondence with the custodian. 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
Worldwide 2004 Fund at July 31, 2000, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the fiscal periods
since 1996 to conformity with accounting principles generally accepted in the
United States.
ERNST & YOUNG LLP
Chicago, Illinois
September 11, 2000
27
<PAGE> 28
TAX INFORMATION
TAX INFORMATION (UNAUDITED)
The Fund paid distributions of $0.58 per share from net long-term capital gains
during its year ended July 31, 2000 of which 100% represents 20% rate gains.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$536,000 as capital gain dividends for its year ended July 31, 2000.
For corporate shareholders, 9% of the income dividends paid during the Fund's
fiscal year ended July 31, 2000 qualified for the dividends received deduction.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your account, please call 1-800-Scudder.
28
<PAGE> 29
NOTES
29
<PAGE> 30
NOTES
30
<PAGE> 31
NOTES
31
<PAGE> 32
<TABLE>
<S> <C> <C>
TRUSTEES OFFICERS
JAMES E. AKINS MARK S. CASADY WILLIAM F. TRUSCOTT
Trustee President Vice President
JAMES R. EDGAR PHILIP J. COLLORA LINDA J. WONDRACK
Trustee Vice President and Vice President
Secretary
ARTHUR R. GOTTSCHALK JOHN R. HEBBLE MAUREEN E. KANE
Trustee Treasurer Assistant Secretary
FREDERICK T. KELSEY IRENE CHENG CAROLINE PEARSON
Trustee Vice President Assistant Secretary
THOMAS W. LITTAUER TRACY MCCORMICK BRENDA LYONS
Chairman, Trustee and Vice President Assistant Treasurer
Vice President
FRED B. RENWICK ANN M. MCCREARY
Trustee Vice President
JOHN G. WEITHERS KATHRYN L. QUIRK
Trustee Vice President
</TABLE>
<TABLE>
<S> <C>
.............................................................................................
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
.............................................................................................
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 219557
Kansas City, MO 64121
.............................................................................................
TRANSFER AGENT STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, MA 02110
.............................................................................................
CUSTODIAN THE CHASE MANHATTAN BANK
Chase Metro Tech Center
Brooklyn, NY 11245
.............................................................................................
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
.............................................................................................
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606
www.kemper.com
</TABLE>
TRUSTEES&OFFICERS
[KEMPER FUNDS LOGO] Long-term investing in a short-term world(SM)
Printed on recycled paper in the U.S.A.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Target Equity Fund Prospectus.
KWF - 2 (9/20/00) 1120260
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
